New Economics Foundation, London, Working Paper No. 5
32 Pages Posted: 13 May 2002
Date Written: May 1, 2002
This paper identifies a new way to govern the public or private sectors by not limiting the options to markets and hierarchies as considered by economists. Sociologists have identified that associations and clans/communities provide two additional distinct modes of governance. The use of all four modes with inclusive stakeholder participation is identified as a condition for self-governance. Another condition is the separation of power to create interdependent network relationships within and between organisations. Networks creates a new way to govern that changes the role of government by allowing citizens to protect themselves directly with the institutions that affect their lives. The paper identifies how network governance allows economic forces and market competition to be replaced with social forces and political competition to improve the economy, efficiency and effectiveness of the public or private sector. The design rules used to establish stakeholder controlled network organisations such as VISA International and the Mondragon Corporacion Cooperativa are shown to follow deeper criteria identified by the science of governance that is also known as cybernetics. The paper applies the laws of governance found in nature to identify the limitations of markets and organisational hierarchies in either the public or private sectors to explain the unexpected failure of Railtrack, Enron, and other publicly traded companies. The new not-for profit organisations being established in the UK to operate Railtrack and Welsh Water are shown to be inconsistent with the laws of governance.
Keywords: Corporate Governance, Ecological organisations, Network Governance, Non-profit, Privatisation, Public Sector governance, Science of governance, Self-governance, Self-regulation, Social enterprises, Stakeholder organisations
JEL Classification: D7, D8, G3, L1, L3
Suggested Citation: Suggested Citation