Limit factors--Is social enterprise sustainable?--II.B

In the prevailing mythology of social enterprise, the movement will grow exponentially so as to occupy the field, with the new hybrid model of a double- or triple-bottom line displacing more traditional nonprofit and for-profit institutions. It’s an attractive, even inspirational vision of social revolution, but it may have little bearing on how social movements and the way we describe them actually evolve.  Rather than subsisting in periods of relative stasis with occasional periods of rational revolutionary change, the cooperative impulse expresses itself in forms that exhibit the customary wild and aperiodic swings associated with complex system, with the business trusts and settlement houses of one era giving way to the corporation and New Deal in the next.

The remarks in the previous section pointed to a few of the key factors that contributed to the spike in social enterprise over the past decade.  Yet these positive environmental influences are neither permanent nor all-encompassing, and we can already see a range of other values that could interact to create a cascade in the other direction.   Although social entrepreneurs may not recognize it—as is all too often the case in bubble economies—the conditions for collapse are already in place, starting with an overt backlash against business hybrids.  The downtown of the economy is arguably the most conspicuous environmental shift.  Not only is entrepreneurship no longer a sustainable metaphor for personal and organizational success, but an upsurge in economic dissatisfaction can make the very idea of profiting from charity seem inequitable, if not inefficient.  

The latter objection points to more a systemic obstacle to the continued diffusion of social enterprise as an organizing principle—namely, its lack of a compelling rationale for integrating business and noncommercial values.  
In addition, within the more traditional nonprofit mainstream, a growing number of critics are objecting to social enterprise for what they see as its reductionistic nature.  For example, Michael Edwards’ Just Another Emperor has garnered significant attention for its argument that social enterprise is a rhetorical mirage, an appropriation of business jargon that is inconsistent with the core values of the charitable sector.  Critics of a more postmodern bent raise similar objections from another angle, echoing the neo-Marxist approach to systems theory in the Frankfurt school to argue that social enterprise embodies the “colonization of the life-world” by the economic realm. The economist Robert Reich argues that hybrid ventures are “as meaningful as cotton candy”—the glib belief that we can “do well and do good at the same time” masks the subversion of the common good by the aggregation of wealth and power in the hands of corporate executives  (171).

What unites these disparate critical voices is a shared sense that charity by definition is distinct from commodified rhetoric and values—true virtue lies in the communal realm of Ferdinand Tönnies’ gemeinschaft, not the impersonal gesellschaft of contracts, metrics and trade.  Mirroring this critique is the response to hybridization by those who see a social mission as incompatible with for-profit business.

Once again the opposition is multi-tiered.  The most fundamental objection is that hybridization is inconsistent with corporate law, in which the standard for assessing corporate actions is whether they maximize shareholder value.  Here reductionism to the latter single value becomes the standard; public-minded legislators may have enacted constituency statutes and other reforms aimed at allowing corporate managers to consider the interests of nonshareholder stakeholders, but the driving for force of investor markets—particularly in an economic downturn—keeps the singular aim of for-profit business the maximization of financial return.

Organizational theorists extend this reductionistic approach to their analysis across the organizational spectrum.  Contemporary models of corporate identity have discarded the metaphor of corporate personality as obsolete; instead, the corporation and its analogs are aggregates of inputs, outputs and agreements—a “nexus of contracts” is one prominent image—arrayed so as to minimize transaction costs.  Nonprofits—reduced in this paradigm to organizations that prohibit the distribution of net profits to insiders—form in areas of the economy marked by contract failure, while business corporations, cooperatives and other aggregates with their own default rules dominate in environments where the rules governing each prove to be most efficient (Hansmann, 1996).

This mode of understanding business organization has proven stubbornly resistant to efforts aimed at incorporating social responsibility into the corporate DNA.  The rhetoric of moral value and social responsibility has no place in a world reduced to connections and efficient exchange; even the apparent victories of social enterprise, such as the mainstreaming of green business and corporate charity—can be recast as strategic signals that are efficient responses to market realities, such as the rising price of fossil fuel.  Arguments that socially responsible organizations are more profitable are similarly ineffective, given the relative lack of quantitative evidence.  

The most self-defeating argument, though, is the claim that social enterprise is superior because triple-bottom-line ventures function as self-sustaining dynamic systems, mirroring the global ecosystem itself.  Beyond the fact that such claims assume more than they prove, complex systems theory actually supports the proposition that social benefit can be a positive externality of selfish profiteering.

Consider the influential systems-based argument made by Fritjof Capra, whom movement advocate Paul Hawken lauds for providing a strong conceptual underpinning for sustainability. Capra grounds the need for hybrid business practices in the nature of living systems, in which networks of complex interactions produce novel emergent properties.  For Capra, “the spontaneous emergence of new order” (116) is, in the words of Alfred North Whitehead, “nature’s creative advance”—the “key property of all living systems” (117).

Extrapolating from this principle, Capra argues that business organizations fail to adhere to the animating principle of natural sustainability—they are “life-destroying,” not “life-enhancing.”  (128)  The problem lies in the formal structure of business itself, which consists merely of the “rules and routines that are necessary for the effective functioning of the organization”  (121). Whereas the life of a cooperative enterprise subsists in informal emergent structures marked by creativity and higher values, today’s business focuses solely on reductionistic elements, such as “profits, shareholder value, market share” and return on investment (126). The corporation as designed is soulless and mechanistic; blind to “the aliveness of its communities” business fails to consider social benefit, thereby fostering cascades of destruction throughout the social web.

This argument may seem convincing within the social enterprise movement, but at its core it is self-refuting. Indeed, the self-refuting nature of Capra’s perspective curiously mimics the self-refuting nature of Capra’s own consisting commitment to a version of quantum mechanics, that of his teacher Geoffrey Chew, although Chew’s “bootstrap” approach has long been discredited within the physics community.  Within a dynamical systems model, the emergence of sustainable order does not require that each particular part of the system exhibit the same traits as the desired holistic outcome. To the contrary, as Capra repeatedly observes, one of the defining traits of an emergent pattern is that exhibits “radical novelty”—“features that are not previously observed in the complex system under observation.”

Far from being alien to contemporary capitalism, this very dynamic of radical discontinuity is central to the metaphors and principles that economists from Adam Smith to Friedrich Hayek have identified as the source of social benefit in free markets: individuals and businesses pursue their own ends and, mirabile dictu, constructive good emerges out of chaos, selfishness and vice.  Arguments based on the emergence of self-sustaining ecosystems are unconvincing precisely because they do not answer the question of why a business must internalize an ethic of social responsibility.  It is not enough to say, pace Capra, that nature uses rule-based processes and destructive crisis points as the fulcrum for the mystery of spontaneous order (118). 

The Occam’s Razor conclusion from natural sustainability is that mechanical corporate rules and asocial profiteering are critical components of the emergence of good, just not the parts that do-gooders like.

Above: As physicist Murray Gell-Mann indicates, in an emergent system you do not have to be good to do good

From this perspective, assertions that business must reflect the natural order can seem naïve, if not incoherent.  As Bernard Mandeville rhapsodized in his classic Fable of the Bees,

Fools only strive
To make a Great an honest Hive.
T'enjoy the World's Conveniencies,
Be famed in War, yet live in Ease
Without great Vices, is a vain
Eutopia seated in the Brain.

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