Democracies with a future: Degrowth and the democratic tradition

The interrogation of a possible connection between degrowth and democracy inspires some questions of political epistemology. Is degrowth a socio-economic project which can be simply proposed as an “issue” and a “goal” in the democratic representative system, without discussing forms and processes of the political institutions themselves? Is the degrowth perspective fully compatible with the democratic theories and practices as we currently know them?The perspective of degrowth allows a radical enlightenment of the blind spots of “really existing” democracies but also of the democratic theory. From a factual point of view, we need to acknowledge the existence of an historical connection between economic and political freedoms, since the claim for the autonomy of business has historically been a way to guarantee freedoms and civil rights to citizens, against the tyranny of the central political and religious authorities. Nevertheless, in the current configuration of market societies, the centre of the real power has largely moved from the political and institutional sphere to the economic one. Today the re-foundation of a democratic freedom and of new civil rights should be affirmed against a more and more pervasive economic tyranny. On this basis, a democratic re-foundation in the perspective of degrowth – which includes ecological, social and anthropological challenges – might be imagined.The second part of this paper will be devoted to the formulation of hypotheses about which foundations might be imagined for a radical reform of the democratic theory and institutions, building on degrowth perspective. From the point of view of the political system, degrowth represents a new “cleavage” if confronted with the historical ones on which classical democracies have been structured. From the point of view of the political organization, degrowth clashes with the traditional competitive electoral models; so I will illustrate some perspectives for a possible reconstruction. From the point of view of a theoretical and institutional re-foundation of democratic regimes, degrowth calls for a philosophical acknowledgement of ecological and social limits, in terms of the institution of a new socio-environmental public sphere which can lead to new constituent processes and to the invention of new deliberative arenas, accordingly introducing different space and time criteria, if compared to the ones we are used to.     

What economic democracy for degrowth? Some comments on the contribution of socialist models and Cuban agroecology

While degrowth is about reducing energy and material flows in the economy while sustaining basic human needs, capitalism fosters the opposite trend. How then is degrowth to be implemented on a large scale? In line with different critical intellectual traditions, we argue that degrowth is unlikely to occur within an economy based on capital accumulation and free market of assets. Our objective is then to preliminarily investigate the links between economic structures, democratic principles, and degrowth. We do this, firstly, by briefly exploring some of the main theoretical models of economic democracy in order to find out their potential for achieving sustainable degrowth. In our view, models of self-managed socialism have the best potential for this. Secondly, we intend to learn some empirical lessons from a countrywide experience: Cuban agroecology, today's largest real-life experience of agroecological “degrowth”. Our hypothesis is that the Cuban economy, which limits the private accumulation of capital and of productive assets, is in a better position for achieving forms of sustainable degrowth than capitalist economies, but that it would be even more so with more democracy. The Cuban agricultural system faces the challenge to free itself from the central planning tradition. This could be achieved by following the current process of giving increasing autonomy to small producers. Specifically, we argue that small-scale farmer cooperatives have the best potential for achieving the degrowth-oriented goals of agroecology.     

Economic democracy: A path for the future?

As opposed to political democracy and its attempts at power control in the public sector, the concentration of economic power, and its antidote, the concept of economic democracy, has received much less attention. In the paper, we first offer a definition of economic democracy as a “a system of checks and balances on economic power and support for the right of citizens to actively participate in the economy regardless of social status, race, gender, etc.” Based on our definition, we suggest six possible faces of economic democracy and look at their implications for the vision of a sustainable, equitable and non-growing society, as discussed within the degrowth movement: (1) Regulation of market mechanisms and corporate activities. Regulation is one of the most obvious paths to curbing economic power, hence we highlight the issue of deregulation vis a vis possible degrowth policies. A revision of the free-market paradigm is suggested. (2) Support for social enterprises. We discuss different forms of democratic governance within enterprises and suggest that co-operative approaches, common in social enterprises, are better suited to a degrowth economy. (3) Democratic money creation processes, including pluralist community currencies, are suggested to counter economic power caused by the practice of fractional banking. (4) Reclaiming the commons (especially in their original sense as communal land stewardship systems) both conceptually and physically is seen by us as an important aspect of enhancing economic democracy. (5) Redistribution of income and capital assets is discussed as another approach to achieving economic democracy. (6) Finally, inspired by Vandana Shiva, we suggest that a broader view of economic democracy would involve a diversity of production scales and modes, including small-scale, subsistence and self-employment.     

Variants of de-growth and deliberative democracy: A Habermasian proposal

This article intends to determine the relationship between variants of degrowth strategies and prospects for further democratization. In a first step, four variants of degrowth policies are distinguished. In a second step, a Habermasian approach to deliberative democracy will be outlined which will be enriched by some proposals for environmental democracy. Finally, a position on environmental deliberative democracy and degrowth orientation is presented.     

The Role of Real Options in Capital Budgeting: Theory and Practice1

Most discussions of capital budgeting take for granted that discounted cash flow (DCF) and real options valuation (ROV) are very different methods that are meant to be applied in different circumstances. Such discussions also typically assume that DCF is “easy” and ROV is “hard”—or at least dauntingly unfamiliar—and that, mainly for this reason, managers often use DCF and rarely ROV. This paper argues that all three assumptions are wrong or at least seriously misleading. DCF and ROV both assign a present value to risky future cash flows. DCF entails discounting expected future cash flows at the expected return on an asset of comparable risk. ROV uses “risk‐neutral” valuation, which means computing expected cash flows based on “risk‐neutral” probabilities and discounting these flows at the risk‐free rate. Using a series of single‐period examples, the author demonstrates that both methods, when done correctly, should provide the same answer. Moreover, in most ROV applications—those where there is no forward price or “replicating portfolio” of traded assets—a “preliminary” DCF valuation is required to perform the risk‐neutral valuation. So why use ROV at all? In cases where project risk and the discount rates are expected to change over time, the risk‐neutral ROV approach will be easier to implement than DCF (since adjusting cash flow probabilities is more straightforward than adjusting discount rates). The author uses multi‐period examples to illustrate further both the simplicity of ROV and the strong assumptions required for a typical DCF valuation. But the simplicity that results from discounting with risk‐free rates is not the only benefit of using ROV instead of—or together with—traditional DCF. The use of formal ROV techniques may also encourage managers to think more broadly about the flexibility that is (or can be) built into future business decisions, and thus to choose from a different set of possible investments. To the extent that managers who use ROV have effectively adopted a different business model, there is a real and important difference between the two valuation techniques. Consistent with this possibility, much of the evidence from both surveys and academic studies of managerial behavior and market pricing suggests that managers and investors implicitly take account of real options when making investment decisions.     

Bleached!: Managing coral catastrophe

Corals have recently emerged as both a sign and a measure of the imminent catastrophic future of life on earth and, as such, have become the focus of intense conservation management. Bleached! draws on in-depth interviews and participatory observations with coral scientists and managers to explore the management of the corals’ ecological catastrophe to come. The article starts by describing the unique life of corals, the importance of calculability in catastrophe management, and the coral scientists’ preoccupation with classifying, counting, and seeing in their attempt to comprehensibly monitor corals and anticipate their decline. Algorithmic models and elaborate temporal analyses are central to this governmental project of “knowing bleaching.” What happens after such bleaching events are foreseen is the topic of my next exploration, which highlights the emergence of yet more monitoring as the central coral conservation “action” in the face of the looming catastrophe. The “resilience” concept is of growing importance in the world of coral management. Since it underlines unpredictability and nonlinearity, resilience as well seems to fly in the face of any anticipatory action, instead scientifically justifying forms of inaction. Finally, Bleached! discusses the heated debates among coral scientists about whether to focus present actions on “buying time” for corals, or whether the only way to prevent or limit imminent coral catastrophe is to deal directly with the elephant in the room: the global regulation of climate change. I argue that, in the case of corals at least, scientific knowledge is not power. Quite the contrary, the real political story here seems to lie in the ways in which scientists’ knowledge is neutralized and prevented from having political effects, such that it does not lead to anticipatory action to restore the ecological order. As one of the prominent coral scientists I interviewed for this project put it: current conservation efforts are akin to reorganizing the chairs on the Titanic, rather than to changing the ship’s deadly course.     

Democracy,sustainability and dialogic accounting technologies: Taking pluralism seriously

There is wide-ranging recognition of the need for “new accountings” that foster democracy and facilitate more participatory forms of social organization. This is particularly evident in the sustainable development and social and environmental accounting literatures, with calls for more dialogic forms of accounting. However, there has been very little consideration of how “democracy” should be approached; and, in particular, the implications of any particular model of democracy for the kinds of accounting technologies that might be advocated. This paper seeks to contribute to the theoretical development of dialogic accounting and focuses on the sustainability arena for illustrative purposes. It draws on debates between deliberative and agonistic democrats in contemporary political theory to argue the case for an agonistic approach to dialogics; one that respects difference and takes interpretive and ideological conflicts seriously. In recognition of the ways in which power intrudes in social relations so as to deny heterogeneity and privilege certain voices, it seeks to promote a broadly critical pluralist approach. To this end, the paper proposes a set of key principles for dialogic accounting and draws on ecological economist Peter Söderbaum’s work on positional analysis applied to an existing accounting tool – the Sustainability Assessment Model (SAM) – to illustrate how such an approach might be operationalized. The paper also discusses limitations of the dialogic accounting concept and impediments to its implementation.     

Will the people united in cyberspace never be defeated? Reflections on the global multitude in the epoch of American Empire

This paper examines Hardt and Negri's (Empire, 2000, and Multitude, 2004) approach to the genealogy of modern resistance. It critically examines their three guiding principles for successful resistance. The first principle involves using a simple measure of efficacy regarding the specific historical situation. According to this principle every organisation must somehow grasp the possibilities offered by the current arrangement of opposing forces. The second principle requires all “forms” of political and military organization to equate with the current forms of economic and social production. According to this principle all forms of resistance movements must evolve in coordination with the evolution of economic forms. The third principle requires that democracy and freedom act as guides to the development of organizational forms of resistance.Hardt and Negri were certain that the most evolved, emblematic form of technocratic, cyberspace Empire contains “swarm intelligence” the instrument of its own destruction: “[T]he distributed networked structure provides the model for an absolutely democratic organisation that corresponds to the dominant forms of economic and social production and is also the most powerful weapon against the ruling power structure” [Hardt M, Negri A. Multitude: war and democracy in the age of empire. New York: Penguin Press; 2004, p. 88]. This paper proposes that such a sanguine appraisal of the forms and strategies of contemporary capitalism belies (or forecloses) hope for any type of resistance. The flexible, distributed “perfect union” expressed in the presumed symbiotic relationship between Empire and the Global Multitude has no clothes [see Passavant P, Dean J, editors. Empire's new clothes: reading Hardt and Negri. NewYork: Routledge; 2004] and resistance, especially the resistance involving the integration of the political and the economic, requires not integrative “swarm intelligence” but the relentless destruction of the enveloping falsifications and futile illusions of dis–embodied, virtual, networked, “global” capitalism and its uncivil appropriation of democracy and the commons.     

Can government intervention be both a curse and a blessing? Evidence from China's finance sector

Earlier work views government intervention as a “grabbing hand,” whereas more recent studies report that it acts as a “helping hand.” Can government intervention be both a curse and a blessing? This paper investigates this issue by investigating the impact of government intervention on firm financing and financial corruption in China, using the 2005 World Bank Investment Climate survey data. To do so, we first use instrumental variable estimations to confirm that government intervention promotes financial access and encourage corruption. Next, we adopt a mediator model to document that government intervention promotes firms' access to finance through informal payment. The mediation effect is significant for split samples that capture different type of political and economic climate. The policy implications of the findings are discussed.     

Towards a fair degrowth-society: Justice and the right to a ‘good life’ beyond growth

A critical scrutiny is presented of the ethical assumptions of growth and degrowth theories with respect to distributive justice and the normative conditions for a ‘good human life’. An argument is made in favor of Sen's and Nussbaum's ‘capabilities approach’ as the most suitable theoretical framework for addressing these questions. Since industrialization economic growth has played a key-role as an attraction pole, around which issues of social justice, political stability, and welfare protection seemed to gravitate. Accordingly, it is considered as a necessary condition for both intragenerational and intragenerational justice. These assumptions have been subjected to substantial critique by degrowth-thinkers, according to which economic growth is rather a threat than a condition for intragenerational and intergenerational justice. However, a theoretical underpinning of these assumptions is missing so far. In the paper I analyze the ethical and moral assumptions in both approaches by focusing on the theories of justice that are implicitly laid down as a background for their arguments (welfarism, resourcism, and the capabilities-approach). In a detailed analysis of the main critical points formulated by degrowth advocates I take the capabilities approach perspective and show why it can offer a more adequate normative underpinning for the conceptualization of a degrowth society.     

PREDICTING UNCERTAINTY AUDIT QUALIFICATIONS IN AUSTRALIA USING PUBLICLY AVAILABLE INFORMATION

This research project constructed a logit model to predict “subject to” qualified audit opinions using financial statement and market variables for 1,848 audit reports for Australian companies issued from 1984 to 1988. The model provided a better goodness of fit and was more efficient than two naive strategies for predicting “subject to” audit qualifications. The model explicitly incorporated the relative costs of Type II to Type I errors to account for the auditor's asymmetrical loss function. The model was reasonably accurate when a sensitivity analysis for the relative costs of Type II and Type I errors was considered. The accuracy rates for the estimation sample ranged from 70% to 95%. An inter-temporal holdout sample of 293 audit opinions for Australian firms issued during 1989 indicated that the model was useful for predicting “subject to” audit opinions. The accuracy rates for the holdout sample ranged from 72% to 90% over a range of relative Type II and Type I costs.     

The Museums' future

‘The Museums' Future’ argues that through the effects of the postmodernisation of museums, art has been ceded variously to culture, commerce, politics, values and to experience. In this scenario, political culture has surrendered to cultural politics.It asks whether a museum project of the future can be envisaged in which history and experience are not replaced entirely by spectacle, and memory is not banalized? Can the museum contribute to reconfigurations of the Subject and Other and to identity and difference without falling into the traps of a politics of identity? Can the museum find ways of reaffirming universal principles without running the risk of imposing a new order dominated by a single culture?     

River stories: Genealogies of a threatened inland river system

Most people now living in Australia's “bread basket”, the much-degraded Murray Darling Basin, are like my family, descendants of convicts or free settlers who came to the inland in the 19th or early 20th centuries. Our legacy includes the dispossession of indigenous peoples, species extinction and the ongoing degradation of the ecological communities which now sustain us. My own family's river stories which “begin” with a pair of impoverished Gaels who migrated with their offspring from the Scottish Highlands, can be considered paradigmatic. I re-narrate it in this essay in response to philosopher Alasdair MacIntyre's challenge—I can only answer the question ‘What am I to do?’ if I can answer the prior question ‘Of what story or stories do I find myself a part?’Some of these family stories I find myself part of, especially those that have been enacted within the catchment of the now-threatened Lachlan River, are very discomforting, but where do they “truly” begin? In seeking to understand my relationship with the river and its catchment, and with the indigenous peoples “my mob” displaced, I explore several possible “beginnings” and ask a further question: what stories do I want to be part of as co-author, co-narrator and protagonist. I then offer my own yet-to-be enacted “truth and reconciliation” stories about the future of the inland plains I love.     

Realizing the Potential of Real Options: Does Theory Meet Practice?

The idea of viewing corporate investment opportunities as “real options” has been around for over 25 years. Real options concepts and techniques now routinely appear in academic research in finance and economics, and have begun to influence scholarly work in virtually every business discipline, including strategy, organizations, management science, operations management, information systems, accounting, and marketing. Real options concepts have also made considerable headway in practice. Corporate managers are more likely to recognize options in their strategic planning process, and have become more proactive in designing flexibility into projects and contracts, frequently using real options vocabulary in their discussions. Thanks in part to the spread of real options thinking, today's strategic planners are more likely than their predecessors to recognize the “option” value of actions like the following: ? dividing up large projects into a number of stages; ? investing in the acquisition or production of information; ? introducing “modularity” in manufacturing and design; ? developing competing prototypes for new products; and ? investing in overseas markets. But if real options has clearly succeeded as a way of thinking, the application of real options valuation methods has been limited to companies in relatively few industries and has thus failed to live up to expectations created in the mid‐ to late‐1990s. Increased corporate acceptance and implementations of real options valuation techniques will require several changes coming together. On the theory side, we need more realistic models that better reflect differences between financial and real options, simple heuristic methods that can be more easily implemented (but that have been carefully benchmarked against more precise models), and better guidance on implementation issues such as the estimation of discount rates for the “optionless” underlying projects. On the practitioner side, we need user‐friendly real options software, more senior‐level buy‐in, more deliberate diffusion of real options knowledge throughout organizations, better alignment of managerial incentives with long‐term shareholder value, and better‐designed contracts to correct the misalignment of incentives across the value chain. If these challenges can be met, there will continue to be a steady if gradual diffusion of real options analysis throughout organizations over the next few decades, with real options eventually becoming not only a standard part of corporate strategic planning, but also the primary valuation tool for assessing the expected shareholder effect of large capital investment projects.     

Management control of public and not-for-profit activities

Traditional approaches to management control usually fail for public and not-for-profit activities.¹ The type of control applicable to such activities depends on four criteria: are objectives unambiguous, outputs measurable, effects of interventions known, and is the activity repetitive? Depending on where activities stand with regard to these criteria, the control applicable corresponds to one of six different types: routine, expert, trial-and-error, intuitive, judgemental, or political control. The first three types can be represented by cybernetic models; the other three ask for more complex and less deterministic models. For these, a “political” and a “garbage-can” model are described. Key elements in the latter models are the values and the culture of the actors. As an example, the topology for management control is applied to the area of budgeting, covering regular budgeting as well as such techniques as PPBS, MBO, and ZBB and distinguishing between investment budgets, operations budgets for input centers, and operations budgets for input-output centers. Coming back to management control in general, the paper discusses the consequences of choosing the wrong model for a given management control situation: it distinguishes between “Type I” and “Type II” errors. It finally relates management control to organizational adaptation and suggests how to avoid control systems which prevent an organizational system from learning.     

Reshaping accounting research: Living in the world in which we live

This paper is derived from my participation as a faculty guest of the University of Wollongong's Faculty of Commerce 20th Annual Doctoral Consortium. Consistent with the theme of “paradigm, paradox, and paralysis?”, I argue in this paper that accounting practice and scholarship suffer from paralysis created by the imposition of a neoclassical economic paradigm. Starting from the premise that accounting is foremost a practice, I argue that accounting cannot be limited by any one type of understanding. A human practice like accounting is simply to multi- faceted and complex to be sensibly “modeled” in any one particular way. The “flight from reality” (Shapiro, 2005), that occurred because of the empirical revolution in accounting, should be abandoned in favor of a more problem driven approach to accounting research and practice.     

Market and Political/Regulatory Perspectives on the Recent Accounting Scandals

Not surprisingly, the recent accounting scandals look different when viewed from the perspectives of the political/regulatory process and of the market for corporate governance and financial reporting. We do not have the opportunity to observe a world in which either market or political/regulatory processes operate independently, and the events are recent and not well researched, so untangling their separate effects is somewhat conjectural. This paper offers conjectures on issues such as: What caused the scandalous behavior? Why was there such a rash of accounting scandals at one time? Who killed Arthur Andersen—the Securities and Exchange Commission, or the market? Did fraudulent accounting kill Enron, or just keep it alive for too long? What is the social cost of financial reporting fraud? Does the United States in fact operate a “principles‐based” or a “rules‐based” accounting system? Was there market failure? Or was there regulatory failure? Or both? Was the Sarbanes‐Oxley Act a political and regulatory overreaction? Does the United States follow an ineffective regulatory model?     

Pricing Final Indemnification Payments to Private Sponsors in Project-Financed Public-Private Partnerships: An Application of Real Options Valuation

The extraordinary global growth in the private funding of public infrastructure projects in the form of public‐private partnerships (or PPPs) is expected to have major social and economic benefits—benefits that result in large part from improving the allocation of project risks between the public and private sectors. But with the financial crisis and severe tightening of credit likely to limit the financing and delivery of new projects, both project participants and their financiers need to manage the technical, economic, legal, and political complexities of infrastructure projects more carefully, especially in less traditional infrastructure deals that involve complex operations, new assets, or emerging markets. This paper proposes and illustrates the application of the real options valuation approach to a critical feature of most PPPs: establishing the final “indemnification” amount to be paid by a public administration to private partners in the project financing of those PPPs that face substantial market risks. In demonstrating this approach, the authors use the case of the Pedemontana Lombarda toll road, a major transportation infrastructure project in Northern Italy for which financial plans have been filed and whose start is now pending. The main function of real options in this case is to capture the effects on value of the major market risk in such projects—namely, the uncertainty about volume of traffic on the new road. The authors interpret the final indemnification price as the value of a real put option sold by the awarding authority to private investors (in the case of a project that would otherwise be unprofitable and have a negative NPV). The put option takes the form of a clause in the concession contract that gives investors the right, under certain circumstances, to sell the toll road back to the government for a fixed sum (in this case, €2.9 billion). According to the authors, this valuation approach is likely to be helpful in any kind of infrastructure project that faces risk stemming from the unpredictability of market demand and future revenue streams.     

The effect of TARP on the propagation of real estate shocks: Evidence from geographically diversified banks

This study examines the effect of TARP on the propagation of real estate shocks via geographically diversified banks in the U.S. I find that TARP money provided for banks exposed to distressed areas (i.e., “affected” banks) was positively associated with small business loan originations in “non-distressed” areas (i.e., counties with smaller real estate shocks), mitigating the shock transmission. In addition, the bailout funds facilitated “affected” banks’ faster return to their pre-crisis level of franchise value. Overall, the marginal benefit of TARP funds seems to have been greater for “affected” TARP banks. I conclude that this policy helped “affected” banks cleanse/strengthen their balance sheets and recapitalize, which paved the way for increased lending.     

Whither the mixed economy?

Following his articles “Towards a more stable state” and “Changing ethics of distribution” in Futures (December 1972 and June 1971) Sir Geoffrey Vickers now explores the causes of instabilities inherent in Western mixed economies. Internally, these derive from the need increasingly to subordinate market choice to political choice; externally from the need to support international exchanges by unrequited transfers of purchasing power comparable to those on which mixed economies are already dependent internally.