Daniel Bell first formulated the concept of postindustrial society in articles published in the 1960s, and he elaborated it in The

Coming of Post-Industrial Society , published in 1973.8 In the same period, a series of other scholars also explored the idea of a parallel historical discontinuitysometimes referring to the "information society," the "service society," or the "technetronic society."9 In 1980 Alvin Toffler's popularized version of the postindustrial argument, The Third Wave , was a major bestseller.10 Yet instead of invigorating the discussion, Toffler's book appears to have marked an ending. In the 1980s there have been relatively few major statements of the postindustrial position,11 and figures such as Bell and Alain Touraine have turned to other questions. Moreover, there are also signs in the 1980s of an explicit rejection of the postindustrial framework. A widely reviewed 1987 volume by Stephen S. Cohen and John Zysman is subtitled The Myth of the Post-Industrial Economy .12 5

The first of these "postindustrial" trends is the growing importance of services in the economy, and the declining weight of goods productionmanufacturing, farming, and miningin total employment. Although the service category is highly heterogeneous and includes a multitude of different types of activity, the point remains that the factory floor has ceased to be the central locus of employment. But it is not just the statistical reality that is important; it is critical that the most dramatic social conflicts of the 1960s tended to occur in service institutionsuniversities, welfare offices, and hospitals. The second trend is the arrival of computer-based automation. This emerged haltingly in the 1960s and has expanded since then. As Larry Hirschhorn and others have argued, computer-based automation tends to change both the organization and the experience of work in both blue-collar and white-collar settings.20 In particular, the characteristic "industrial" pattern of work organization, in which workers are given narrowly defined repetitious tasks that can be done with relatively little attention, is fundamentally disrupted. Debate still rages over the precise impact of computerization on workers' skill levels, but there is considerable evidence that the new forms of work require higher levels of attention and concentration by employees (this issue will be addressed at greater length in chapter 4). The third trend is the decline of patriarchy and the breakdown of the linear life course. Earlier patterns of female subordination, based on the restriction of most women to the domestic sphere, have given way to the massive entrance of women into the paid labor force. This movement has been accompanied by a full-scale critique of social inequalities based on gender. Although many of these inequalities remain, it is difficult to exaggerate the cultural significance of the recent changes in women's roles.10

Moreover, the decline of patriarchal arrangements is linked to other changes in the adult life course. For some time, men's lives had been organized around the "one-career, one-marriage imperative"; men were supposed to remain married to the same person for life and remain in the same occupation.21 Progress through the life course tended to be linear; men were supposed to proceed from education to

work to retirement without interruptions or reversals. This pattern came apartboth marriages and occupational careers became more fluid as divorce rates increased and midlife career changes became more common. Now both men and women are more likely to move in and out of the labor force at various times in the course of their lives, the role of education and training has increased dramatically for people over twenty-five, and even the meaning of retirement has begun to change. Together, the changes in women's roles and the decline of the linear life course have fundamentally changed the individual's experience of adulthood.11

Yet even this problem of international trade competition is rarely understood in the proper context. The reality is that services such as housing, health care, restaurant meals, and transportation constitute the dominant and growing share of what consumers in the United States purchase.34 It is in the nature of most of these consumer services that they are insulated from international trade; they can only be produced domestically. Hence, the intense international competition in manufactured goods represents a struggle over a diminishing share of the consumer dollar. The shift to services means that these developed economies actually become in some ways less international over time, since internationally traded goods represent a diminishing share of total consumption. In short, the analysis that follows rests on the claim that the international economy represents a less important constraint on the structure of the domestic U.S. economy than is generally believed.19 The methodology of neoclassical economics rests on two basic building blocks. The first is the idea that the economy is an analytically separate realm of society that can be understood in terms of its own internal dynamics. Economists are perfectly aware that economic behavior is influenced by politics and culture, but they see these as exogenous factors that can be safely bracketed as one develops a framework that focuses on purely economic factors.21

The second key foundation is the assumption that individuals act rationally to maximize utilities. Here, again, economists are acutely aware that individuals are capable of acting irrationally or in pursuit of goals other than the maximization of utility, but the strategy of excluding these deviations from the rationality principle is justified

by the effort to identify the core dynamics of an economy... It is on these two foundations that marOnalist economics built its magnificent structurea model of the self-regulating market that integrates and harmonizes transactions in markets for products, labor, and capital....This model is extraordinarily powerful because it depicts an economy in which utility is maximized and there is an optimal use of resources. Moreover, the model is also dynamic; it has the capacity to respond to change. 22

The tradition of economic sociology challenges the idea that the economy is an analytically separate realm of society that has its own internal dynamics.2 On the contrary, economic transactions are seen to be continuously shaped and influenced by social, political, and cultural factors. The preferences of individuals in maximizing utility are one obvious examplehow does an individual weigh the relative value of more money as against more leisure, or of a new automobile as against a new kitchen. ...Another instance where economic transactions are obviously shaped by social factors is the relationship between employer and employees. 23 Moreover, as Durkheim emphasized, even the contract itselfa basic element of any economic transactionrests on noncontractual elements Both buyers and sellers require certain cultural understandings before it is possible for them to agree on terms. There is also a legal regime that plays a central role ire influencing these transactions. There are different possible legal concepts of property and ownership, so that the particular legal regime will

influence the kinds of transactions that take place. The legal regime also establishes the recourse that parties will have in the case of contractual violations, and this is another influence on the behavior of economic actors. Parallel points can also be made about the second foundation of neoclassical economicsthe assumption of rational action by individual s to maximize utilities, One strand of argument suggests that the model of "economic man" on which much economic analysis rests is itself a consequence of social arrangements. Karl Polanyi emphasized that it is culture that sets out the goals of individual action that are then emedded in social arrangements. 24-25

Moreover, as Dorkheim emphasized, even the contract itselfa basic element of any economic transactionrests on noncontra.ctual elements., Both buyers and sellers require certain cultural understandings before it is possible for them to agree on terms. There is also a legal regime that plays a central role in influencing these transactions. There are different possible legal concepts of property and ownership, so that the particular legal regime will influence the kinds of transactions that take place.24

Parallel points can also be made about the second foundation of neoclassical economicsthe assumption of rational action by individuals to maximize utilities. One strand of argument suggests that the model of "economic man" on which much economic analysis rests is itself a consequence of social arrangements. Karl Polanyi emphasizes that it is culture that sets out the goals of individual action that are emedded in social arrangements. 24-25

As Polanyi argues, both the liberal and Marxist traditions have been marked by their adherence to the "economistic fallacy"the belief that the evolution of society has been principally determined by such economic considerations as the search for efficiency or greater profit.27

polanyi made a fundamental distinction etween teo distinct meanings of the word economic. One meaning is the formal definition that centers on the economizing of scarce resources to make the most efficient use of what is available. The second meaning is the substantivethe meeting of material needs through a process of interaction between humans and their environment. It is only in the latter, substantive, sense that all human societies have economiesthey must all provide for human livelihood. However, it is not the case that all human societies have economized scarce resources to increase the efficiency of production. On the contrary, through most of human history, the pursuit of human livelihood was structured by kinship, by religion, and by other cultural practices that had very little to do with the economizing of scarce resources....Moreover, Polanyi also challenged the way economists analyze capitalist societies. The neoclassical insistence that the economy is analytically distinct from the rest of society makes it logical to see government regulation of business or government provision of welfare as an external interference with a market economy. While economists may disagree as to whether particular types of interference are benign or malignant, they share the view that they are

external. In contrast, in Polanyi's analysis of the substantive economy of capitalism, these forms of "interference" are seen, not as external, but as very much part of the economy. Polanyi insisted that nineteenth-century capitalism was formed by two opposing movements. The first was the movement of laissez-faire, which sought to free economic activity from government regulation. The second was the protective countermovement that sought to protect society from the market through the formation of labor unions and through new forms of government regulation. including the Factory Acts and the development of central banking. The point is that the capitalist economy was constituted by these two movements together. The protective countermovement was not external; rather, it was essential for the vitality of a capitalist order.39

The Polanyian view is that the creation of industrial capitalism in Great Britain was the result of a series of interacting changes in markets, politics, and culture, and it was all of these changes together that created a historically new economy. In the labor market, for example, it was not a question of simply allowing market Poor Law Reforms were necessary to force workers into the Satanic Mills of early industrial capitalism. And once the Poor Law Reforms were in place, the Factory Acts were also needed to place a limit on the length of the working day, or else market competition would have led to the destruction of the working class...just as important as these political measures for the creation of industrial capitalism was the resolution of the cultural question I forces to work; rather, the

who should be the industrial proletariat and how should family life be structured. Women and children in large part staffed the early factories, an arrangement that was problematic for the long-term reproduction of the working class, But the ultimate solutiona primarily male working class that struggled for a family wagedid not emerge overnight. Nor was it the only possible solution. It required intense struggles, waged at the workplace, in the community, and through the state, for this new pattern to emerge. Yet, this new pattern was clearly a critical ingredient in the success of this new economic order.40

The reality is that any economy involves three distinct levels. At the first level are the microeeonomic choices that are available to individuals. These choices can be structured by markets, but they do not have to be; even where markets do not exist, individuals still retain some capacity to choose. While Soviet-style planning assumes, for example, that plant managers will simply follow the plan, the system of planning always leaves choices open and managers will respond to both overt and covert incentives in making their choices.41 The third level, which both theorists of the free market and theorists of government planning ignore, is the vast area of social regulation the social arrangements that condition and shape microeconomic choices. For example, Polanyi cites the complex system of rules governing market transactions in medieval society that placed limits on price competition. Social regulation encompasses

all of the diverse ways in which individual economic behavior is embedded in a broader social framework. The immediate work group often exercises great influence over the choices individuals make as to the intensity with which they work. Moreover, most people work in large organizational settings in which formal and informal mechanisms regulate the behavior of their members. And even transactions between people in different organizations are governed by a variety of social mechanisms. This perspective that links microeco choice, social regulation and state action helps to highlight 43

The problem is that the institutional arrangementsthe particular mix of market freedom, government intervention, and social regulationthat stabilized the Western economies in the aftermath of World War II are no longer adequate for the tasks of managing either the U.S. domestic economy or the world economy. New institutional arrangements have to be devised, but the problem is far more complex than simply increasing or decreasing the amount of market freedom or government planning. Complexity has increased because some of the background factors that are left out of conventional economic analysis are changing. Preferences are shiftingfor example, over who should be in the workforce and over the relative value of different economic goods. Moreover, new technologies are changing both markets and techniques of production so radically as to undermine earlier understandings of what is productive and efficient.43

my intention is to show that the increasing centrality of the social dimension of production in postindustrial economy requires a new framework of analysis. 45

Thinking about Alternatives It is necessary, however, to begin with a discussion of the kind of alternative that qualitative growth represents. This is important for

The point of this argument is to show that actual economies represent an extremely complex mix of microeconomic choices, social regulation, and state action. Given the complexity of these arrangements, the kinds of sweeping claims that are made by both defenders and critics of the market appear intellectually suspect The idea that allowing greater market freedom will invariably increase economic efficiency is a purely ideological one. By the same token, claims that increases in the planning of the economy will necessarily produce greater rationality are equally problematic.73

The argument of this chapter is that it is increasingly problematic to view capital as a thing that can be accurately measured in dollar terms. Such a view obscures both pervasive capital savings and the growing importance of the organizational context in which physical capital is mobilized. Above all, this view diverts attention from the fact that both the efficiency and the quantity of production depend increasingly on organizational variablesthe specific ways in which human beings and technology are brought together. The traditional concept of capital makes it difficult to grasp that human beings and their networks of interrelations are the society's central productive force. 152

A democratization of investment decision-making has the potential to improve organizational rationality, because broadening the number of people involved in the process decreases the likelihood that relevant variables will be neglected. Furthermore, when employees are involved from the start in decision-making about new technology, they are less likely to see it as a threat. This increases the likelihood that its full potential will be realized. In sum, the alternative to the intravenous model of capital is a view that recognizes the centrality of the organization's human resources in determining a firm's effectiveness. This recognition in turn justifies a reversal of the traditional privileging of investors' interests relative to employees' interests; it points toward a transformation of the corporate form that vests more power and responsibility in the firms employees.154

The argument of this chapter, however, is that GNP has become an increasingly problematic measure of economic output, and that the data have become an unreliable source of information on how well or badly the economy is doing. 155

sonrasi genel Qualitative Growth I The first principle of qualitative growth is the positive feedback between the development of human capacities and future expansion of production. This feedback results from the changing nature of work required by advanced technologies_ Labor is increasingly employed to innovate, regulate, and change the production process, rather than to facilitate repetitive use of muscle power. As innovations save labor and acme wealth, socicry can use some of that w.ealth to expand the pool of people with the skills to develop and use new innovations. But, at present, such positive feedback is often screndipitous, a society organized around qualitative growth would reform institutions tc,nsurc and promote positive feedback. The second principle of qualitanve growth is the importance of the qualitative diiminsions of output, and of satisfactions that arc not directly tied commdnics, including inherently satisfying work, leisure, economic security, crnironmental protecton, and community and mluntary urviccs. Expansion of noncommodity sansfactions and product quality is not cost-

free. But most of the growth dividend from the positive feedback dynamic should be used to increase the quality rather than the quantity of output. Continued growth is compatible with environmental concerns for two reasons: first, because consumption is increasingly 6acused on scrviccs rather than goods; and second, because ennronmental improvement (such as cleaner air) is one of the ways in which qualitative growth can take place_ The third principle of qualitative growth is that neither the market nor planning IS adequate as an exclusive organizing principle for the economy. Both have proved to be incapable of giving sufficient importance to product quality and noncommodity satisfactions. The pursuit of qualitative growth requires- a combination of individual choice, social regulation, and

Qualitative Growth 11

An institutional framework that could support the principles of qualitative growth includes changes in the organization of the workpla and the labor market, public access to and support For new ideas and technologies, and new mechanisms for economic coordination. Cooperative labor relations arc increasingly important for current production processes, and will beeom e even more essential for the positive feedback envisioned in qualitative growth. Finns must provide employees with career development opportunities, greater employment security, and democratc participation in decision making. These acts must be supported by leg...lathe changes that expand the rights of employees. Such institutional and legal changes, ultimately making employees genuine stakeholders in the firm, arc required to evoke full, creative participation and innovaton from the workforce. It is difficult to create a cooperative workplace without corresponding changes in the labor market_ The most important change is the estabhshmem of a system of basic income supports available to all members of society_ This would encourage continuing education and training, thereby accelerating the diffusion of new ideas and technologies into the workplace. Such a system would make it more difficult to fill the least interesting and worst paid jobs, creating incentives for employers either to automate Of to restructure jobs to make them more attractive. A bask income system would reverse the current underproduction of leisure by freeing individu-

als to reduce their hours. Participation would meters in interesting but currently unpaid Of underpaid work, such as community journalism, arts, and child care. Society's arrangements for the development and utilization of new ideas arc of aitical importance to qualitative growth. Them is a fundamental tension between the privatization of innovations and their diffusion into the economy. Public disaribution of new software, research findings, or other advances will get them into circulation quickly, but at the expense of the private rewards and incentives that often motivate innovation_ Proprietary use of new ideas preserves monetary incentives at the expense oF rapid diffusion. However, there is 2 rich variety of incentives that can facilitate innovation. For example, the computer hobbyists who helped spark the early development of personal computers came from an antiestablishment, corm-

tercultural background, and were nor initially motivated by the pursuit of wealth. The fact that the work of successful artists and architects Is frequently imitated by others does not appear to diminish ardstic creativity; it is generally rice innovator who becomes famous. Our god should then be to shorten the period of patent and copyright promcnon for new idea, and to increase the range of =Mins thar fad under the model of artistic cmadvitybringing fame but nor exclusive use to authors of important advances. "The academic or government scientist who develops an AIDS vaccine should be rex-aided with fame and recognition, but the patent rights should enter the public domain."[211-2I2] To meet the goals of qualimove growth, complex coordination of production and investment decisions arc required. The best way to do this is to expand the role of the private firm as an instrument of public purpose, as has been done with affirmative action. While regulation is needed, the primary emphasis iv an forcing [erns to internalize a broadened set of goals.

Th

e pursuit of profit is always socially construe-Lod, occurring within a

framework of law and custom; iris entirely possible to modify that framework to meet social objectives. New objectives and improved efficrency tee also needed in public sector

as delivery. Just as in the private sector, lower level public workers must become stakeholders in the operation of then agencies. Incentives should be created to make agencies more responsive to the public that they serve. Finally, the role of democratic politics should he expanded in shaping decisions about spending on infrastructure and public goods. Democratic planning mechanisms arc needed to include nonclite groups in decision making. "Rather than simply being passive vichrns of either market processes or elite planning, simians could begin to address the bask goesfi011, of how to live and how the society's resources should be used "1215]

state acdon. Many current experiments with hybrid institutional forms may help create new models for economic organization.

Qualitative Growth II An institutional framework that could support the principles of qualitative growth includes changes in the organization of the workplace and the labor market, public access to and support for new ideas and technologies, and new mechanisms for economic comehnation. Cooperative labor relations arc increasingly important for current production processes, and will become even more essential for the positive feedback envisioned in qualitative growth. Firms must provide employees with career development opportunities, greater employment security, and democradc participation in decision making. Thew acts must be supported by legislative changes that expand the rights of employees. Such institutional and legal changes, ultimately making employees genuine stakeholders in the firm, arc required to evoke full, creative participation and innovation from the workforce_ It is difficult m create a cooperative workplace without corresponding changes in the labor market. The most important change is the establishment of a system of basic income supports available to all membersof society. This would encourage continuing education and training, thereby accelerating the diffusion of new ideas and technologies into the workplace. Such a system would make it more difficult to fill the least interesting and worst paid jobs, creating incentives for employers either to

automate or to rescructurc jobs to make them mono attractive. A basic income system would reverse the current underproduction of leisure by freeing individuals to reduce their hours. Participation would increase in interesting but currcndy unpaid or underpaid work, such as community journalism, arn, and child care_ Society's arrangements for the development and utilization of new ideas arc of critical importance to qualitative growth. There is a fundamental tension between the privatization of innovations and their diffusion into the economy. Public distribution of new sofmare, research finding, or other advances will get thorn into circulation quickly, hut at the expense of the private rewards and incentives that often motivate innovation_ Proprietary use of flO w ideas preserves monetary incentives at the expense of rapid diffusion.