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Which ESG? Practical, cartelising or activist? (II)
The network organisational weapon.
This is second of a two-part examination of ESG (Environmental, Social and corporate Governance), based on a talk I gave in September 2023. In the previous post, I suggested there were three ESGs:
ESG#1, the practical or McKinsey version;
ESG#2, the corporate-coordination version; and
ESG#3, the activist version.
The network weapon
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In 1952, the Rand Corporation published (pdf) what became a classic study by sociologist Philip Selznick (1919-2010), The Organizational Weapon: A Study of Bolshevik Strategy and Tactics. Selznick had been a Trotskyite in the 1930s who matured into an anti-communist liberal.
What we can see operating in contemporary activist networking is the replacement of the organisational weapon of centrally-organised Communist parties by networks of like-minded activists, operating particularly through well-funded non-profits.
Political sociologist Barrington Moore (1913-2005), in a review of Selznick’s classic study, asked why, if the Bolsheviks were so organisationally effective, they had been so relatively unsuccessful in Western countries?
There were two reasons for this lack of success. First, Communist Parties were political Parties. Other political Parties recognised them as a threat and could, and did, organise and manoeuvre against them. This was particularly effective where the Communist Parties failed to make much in the way of electoral inroads: their small-minority status was exposed for all to see.
Second, Communism offered very little to the overwhelming majority of Western elites: we will shoot you and take your property was a hard offer to sell.
If you take the society is a social prison that only the enlightened can see and lead us out of template that Marxism developed, then update it by tying it to various cultural-identity-politics agendas rather than specifically economic agendas, you can offer folk status, a sense of purpose and social-leverage, including potential control of discourse and resources, through propagating these intersectional, identity-politics, updates of the original Marxist template.
The shared language, and analytical framings, enable coordination across such networks. Think of how quickly Latinx spread: that is a case of coordination through mutual signalling. The shared status and social leverage strategies provide motivation, based on selection for what works in the existing institutional environment.
Such networking is much more like herding and flocking behaviour than command-and-control behaviour. Aided by the activists using your language, but not your dictionary. That is, having a repertoire of terms that have a general meaning and an activist meaning, the use of which provides both coordinating signals and activist leverage.
Diversity, Equity and Inclusion (DEI) have general and activist meanings: the first is used to general acceptance, the second to coordinate and generate activist leverage. Hence Diversity comes to be mean controlling hiring, Equity controlling resources and Inclusion controlling speech and assembly.
Michael O’Fallon makes the observation that what can also be abbreviated as DEI is divide et impera.
We are highly intentional beings, both conscious and self-conscious. Nevertheless, the intentional element in our beliefs and our emotions can be quite low. You can learn to interrogate your beliefs and manage your emotions, but that takes effort, will and understanding. Hence the power of social selection in such matters and our capacity for strategic self-deception. Something can, at the same time, morally motivate us and be a social-leverage and status strategy.
A recent study found that the more ideologically committed you were, the less self-aware you were. Which means greater capacity for strategic self-deception. This fits in with Garret Hardin’s classic analysis of the crippled epistemology of extremism.
Another study found that progressive activism attracts a significant minority of morally-disordered, dark-personality-traits folk. The constant tendency of activism to shift towards some updated version of the Red Guard principle that so long as it is revolutionary, no action is a crime both arises from, and attracts, such personalities.
Having evolved status and social-leverage selling points, networking can target institutions directly. The networked organisational weapon can be very effective indeed, especially in increasingly bureaucratised societies and expanding administrative states: hence what Wesley Yang accurately labels the non-electoral politics of institutional capture.
Centre-right politicians who were easily mobilised against the overtly Party-political Communist organisational weapon have proved largely clueless, or worse, when confronted with the network organisational weapon, as it plays on the conservative presumption that institutions should be largely left to manage themselves. Centre-right politicians also regularly display both a startling lack of curiosity about what is going on and why, while apparently lacking any useful framing to understand the network and institutional dynamics.
Moreover, politicians are constantly responding to media framings, from journalists who themselves accept and propagate the framings generated out of these activist networks. When in office, centre-right politicians are responding to bureaucracies whose pathologies are very well targeted by the ideas motivating and coordinating these networks: ideas that have evolved to target those pathologies.
The “quality” media, having shifted to the Pravda model of telling folk what narratives to accept to be of the smart and good, is structured for elite and network coordination. This is done by a mixture of simply not covering particular writers, books, reports etc.; hugely elevating coverage of particular events and/or narratives about them; even active misrepresentation and denigration.
For we live in an age of networks, due to falling communication and transport costs and expanding social media. ESG exemplifies the operation of the network organisational weapon, being used to create a corporate social credit system — as briefly discussed in the previous post — where the less you comply, the higher your corporate financing costs, among other disadvantages.
Both social credit in the People’s Republic of China, and Gleichschaltung (“coordination”) in Nazi Germany, require conformity to the dominant ideology by all institutions and blocked participation in society by those who failed to conform. For example, by debanking them.
Nazism was the first political movement to confront the problem of creating and sustaining totalitarian control in a society with a large commercial sector.1 Germany was already a highly commercialised society when the Nazis took power.
In the case of the People’s Republic, a large commercial sector developed through a mixture of bottom-up evolution, aggravated by the disruptions of the Cultural Revolution, and top-down political pragmatism.
It is no accident that Nazi legal theorist Carl Schmitt (1888-1985) has some high-placed admirers in the People’s Republic, though Schmitt’s friend-enemy distinction was already very much a feature of Mao’s thought.
What we are seeing with activist ESG — ESG#3 — is such organisational mechanisms evolving within Western societies through networked politics based on updates of the oppressor-oppressed “dialectical processes” template of Marxism. Such dialectical notions of oppression has since evolved into various forms of Critical Theory and its offshoots (Critical Race Theory, Critical Pedagogy, Critical Legal Studies, Queer Theory, etc.). A nice definition of “woke” is the popularisation of Critical Theory.
Hence, ESG operates as corporate social credit system through a mixture of networked-up activism, top-down UN networking and corporate cartelising.
This seems to have had less resonance in Australia, for the advocacy economy is much less significant, and our formal political institutions are much more functional, than in the US. Ironically, our education systems are rather less “redwashed” than US education systems often are.
Even in Victoria, Australian students are educated in the Russian and Chinese Revolutions. If you point out to an educated Australian that DEI training involves Maoist-style struggle sessions (where people publicly admit their racism), they will typically get the point. Such references appear to generally lack resonance to Americans.2
The Twitter Files reveal a “censorship industrial complex” of private-public partnerships in operation. US disinformation “expert” Renée DiResta explicitly talks about (pdf) such partnerships as weapons against disinformation, of harnessing “the power of partnerships”. Such partnerships enable the use of the network organisational weapon to muddy and evade accountability.
For what are stakeholders? Folk without fiduciary responsibilities or accountability. Another form of the network organisational weapon. A mixture of congenial (even spurious) expertise and cronyism.
Stakeholder capitalism is elite-networking corporatism able to mobilise activists as enforcers. Stakeholder capitalism is the corporate version of the non-electoral politics of institutional capture.
As Vivek Ramaswamy points out in Woke Inc., the imposition of fiduciary duties on company directors and managers is precisely to keep corporate power within a box. By making maximising shareholder value the prime legal duty, it inhibits the use of the resources, the organisational power, the limited liability and Business Judgement Rule protections, of corporations for other purposes. The point is not only to create commercially effective entities, it is also to inhibit corporations moving into other social domains.
The result of stakehoderism is to hijack these corporate protections while functionally reducing accountability.
Stakeholderism is the philosophy that posits that institutions should not only advance their essential purpose but also advance societal goals that go beyond the institution’s essential purpose. … At its core, it’s a tool that empowers the managerial class and allows them to escape accountability for their failures to properly advance the essential purpose of an institution.
Vivek Ramaswamy, Woke Inc., p.102.
The capacity for arbitrary shifts in ESG ratings, while appointing diversity “officers” (i.e. inquisitors or commissars) raising one’s ESG rating, is even more useful for collusive networking. Diversity officers are particularly salient example of the contemporary pattern of universities creating spurious expertise in bullshit Theory that gives such alleged experts social leverage and organisational power. (Bullshit in the sense of statements made for rhetorical effect without regard to their truth.)
For the proponents of the politics of the transformational future, the social-justice activists and their networks, can never be satisfied. Their incomes, status and social leverage all require there be ever more social justice to be sought. Moreover, the politics of the transformational future sets a benchmark that can never be fulfilled.
Reality can never be as imagined in the vision of the transformational future when constraint itself is defined as oppression. Aimed-for goals that accept the constraints of reality may be achievable. But anything that is achieved inevitably involves acceptance of trade-offs. Those trade-offs, those constraints, are denial of the truly transformational future. Hence, they can never be good enough.
Thus, folk aren’t obese, they are oppressed by fat-phobia. In reality, thousands of generations of evolution have selected for being able to detect signs of health. Just as millions of generations of evolution have selected for being able to detect which member of your species is of the opposite sex: hence the issue of “passing” for post-operative and hormone-treatment Transfolk.
Such politics, especially in its activist version, is an operationalisation of the gnostic disposition: the tendency to see reality as an alienating prison that those blessed with gnosis — what we might call critical consciousness — can see through and lead us out of. This generates salvationist politics: politics as a substitute religion, with sacred groups and taboo trade-offs, generating cult dynamics. The politics of those Brianna Wu characterises as Infinite Leftists and Matt Yglesias as moralist progressives.
As Helen Joyce, Maya Forstater and Helen Dale discuss in a recent Law & Liberty podcast, many of these advocacy organisations now stand for the opposite of what they were originally founded to do, a result of their take-over by activists following the oppressed-oppressor template of the politics of the transformational future.
There is no sop you can throw the activists that will satisfy them. Any such sop will only ever be a bridgehead for further activism. The only answer is to derail their propagating social mechanisms.
Instead, we have US corporations dancing to the tune of the toxic products of our dysfunctional universities twice over. From inside corporations and organisations, via the destruction of the notion of professions-as-service to the general citizenry and a shared heritage, and from the outside, via the non-profit advocacy economy.
So, the moralised corporate financing and asset management cartel of ESG (Environmental, Social and corporate Governance) is very much one of the more revealing patterns of our time.
The West’s Dynastic Decline
A Japanese historian (Naitō Torajirō aka Naitō Konan, 1866-1934) argued that Song China (960-1279) was the pioneering modern society.3 This is an arguable case. In Song China, there was entrenchment of meritocratic bureaucracy, highly instrumental religious policy, extensive commercialisation, deliberate fostering of technological innovation, printing and paper money.
It was, however, an abortive modernity. China may have invented paper, printing, gunpowder, and the compass, but it is European civilisation and its offshoots that transformed the world with them.
The other Chinese invention that the West adopted4 was meritocratic appointment by examination.
Entry-by-examination was a selection process that could be scaled up in societies with surging populations, increasing urbanisation and mass production. From the C19th onwards, this created meritocratic bureaucracies whose regularised effectiveness have been given more and more responsibilities.
The West thereby had 150 years or so of the equivalent of the “good dynastic rule” period.5 We are now into the “dynastic decay” period — what we might call late stage bureaucracy — as the ways that meritocracy fails, and the expanding pathologies of bureaucracy, begin to take effect.
Meritocracies fail due to their tendency to select for for capacity (intelligence, executive function, conscientiousness) but not for character. For conscientiousness is a personality trait rather than a moral quality — I am sure Stalin and President Xi both rate highly on conscientiousness.
So we are seeing (as also occurred in Chinese dynasties) increasing selection over time for manipulative, even morally-disordered, personalities resulting, as such selection does, in decaying norms, undermining the pro-social functioning of institutions and organisations.
This is aggravated by the selection in favour of ideas that target bureaucratic pathologies in our increasingly bureaucratised — and so “managed” and managerialist — societies. Those bureaucratic pathologies are: a tendency to hoard authority (often by de-legitimising, even suppressing, alternative source of information); spending resource on themselves; and avoiding the complexities of competence.
Diversity-Equity-Inclusion targets such bureaucratic pathologies very successfully. The claim to be fighting for social inclusion (and environmental sustainability) elevates authority, requires lots of training courses, consultancies and diversity officers. Appointing by identity category is much simpler than selecting for competence.
This selecting for neither capacity nor character then creates a diversity-hire problem that is both real, and unmentionable. This scrambling of the signals of competence, and degrading of quality, is institutionally corrosive, facilitating the collapse of complex systems.
ESG, and especially DEI, represent the corporatisation of those processes of social corrosion, allowing a moralised networked cronyism to decay institutions. It also provides a mechanism that can be gamed in all sorts of ways, which is why ESG with DEI has advanced as far as it has, even if the shine is starting to wear off both.
The shine is wearing off for various reasons. First, there is beginning to be significant political pushback, with Republican State legislators in various US States sponsoring (and passing) anti-ESG legislation. Second, the claims of benefits from DEI are hugely overblown, with DEI adding expensive extra layers of administration. Third, the Bud Light and Target debacles discussed in the previous post have been sobering reality tests.
Fourth, it may be dawning on corporate folk that the activists they are using as enforcers are not their friends and can never be fully appeased, they will always push for more. Theirs is not an end-point activism, it is an eternal activism as the activism itself is their social status and leverage strategy.
Blackrock CEO Larry Fink, who has been an ardent proponent of ESG, said recently:
I don't use the word ESG any more, because it's been entirely weaponised ... by the far left and weaponised by the far right.
But he then, in the words of the news report, stated that:
dropping references to ESG would not change BlackRock's stance. The ﬁrm would continue to talk to companies it has stakes in about decarbonization, corporate governance and social issues to be addressed.
None of the pressures and opportunities that generated ESG have gone away. Moreover, there is still a case for ESG#1, for “McKinsey ESG”. What is more likely than a full ESG collapse is a re-branding based on some update of the underlying strategies: with a new set of TLAs.
Roelof van den Broek and Wouter J. Hanegraaff, Gnosis and Hermeticism from Antiquity to Modern Times, State University of New York Press, 1997.
Harry Frankfurt, ‘On Bullshit,’ Raritan Quarterly Review, Fall 1986, Vol.6, No.2.
A. Frost, & Z. Li, (2023). ‘Markets under Mao: Measuring Underground Activity in the Early PRC,’ The China Quarterly, 2023, 1-20.
Russell Hardin, ‘The crippled epistemology of extremism,’ Political extremism and rationality Cambridge University Press, 2002, 3-22.
Albert O. Hirschman, ‘Exit, Voice and Loyalty: Further Reflections and a Survey of Recent Contributions,’ Social Science Information, 1974, (l):7-26.
Robert A. Kagan, ‘Adversarial Legalism and American Government,’ in Marc K. Landy and Martin A. Levin (eds), The Politics of Public Policy, John Hopkins University Press, 1995, 88-118.
Ann Krispenz, Alex Bertrams, ‘Understanding left-wing authoritarianism: Relations to the dark personality traits, altruism, and social justice commitment,’ Current Psychology, 20 March 2023.
Xie Libin , Haig Patapan, ‘Schmitt Fever: The use and abuse of Carl Schmitt in contemporary China,’ International Journal of Constitutional Law, Volume 18, Issue 1, January 2020, 130–146.
Robert Jay Lipton, Losing Reality: On Cults, Cultism and the Mindset of Political and Religious Zealotry, The New Press, 2019.
Vivek Ramaswamy, Woke Inc.: Inside the Social Justice Scam, Swift, 2021.
Harold Robertson, ‘Complex Systems Won’t Survive the Competence Crisis,’ Palladium: Governance Futurism, June 1, 2023. https://www.palladiummag.com/2023/06/01/complex-systems-wont-survive-the-competence-crisis/
Max Rollwage, Raymond J. Dolan, and Stephen M. Fleming, ‘Metacognitive Failure as a Feature of Those Holding Radical Beliefs,’ Current Biology, 28, 4014–4021, December 17, 2018.
Philip Selznick, The Organizational Weapon: A Study of Bolshevik Strategy and Tactics, Quid Pro Books, [1952, 1960] 2014.
Philip E. Tetlock, Orie V. Kristel, S. Beth Elson, Jennifer S. Lerner and Melanie C. Green, ‘The Psychology of the Unthinkable: Taboo Trade-Offs, Forbidden Base Rates, and Heretical Counterfactuals,’ Journal of Personality and Social Psychology, 2000, Vol. 78, No- 5, 853-870.
Robb Willer, Ko Kuwabara, Michael W. Macy, ‘The False Enforcement of Unpopular Norms,’ American Journal of Sociology, Volume 115, Number 2 (September 2009), 451–90.
Yuhua Wang, The Rise and Fall of Imperial China: The Social Origins of State Development, Princeton University Press, 2022.
Mussolini may have coined the term totalitarian but neither his movement, nor the state he ruled, was seriously totalitarian.
Australians have reasons to pay more attention to Chinese history.
He argued that the Tang-Song transition represented the change from the medieval (chūsei) to the early modern (kinsei) periods of Chinese history. Yuhua Wang assembles databases that provide cliometric support for the centrality of that transition in Chinese political and social history.
The printing press seems to have been an independent European invention.
The period when the population expands but before the peasant rebellions get underway in earnest.