Precarious professional work entrepreneurialism, risk and economic compensation in the knowledge economy

ALEXANDER STYHRE

PRECARIOUS
PROFESSIONAL
WORK
Entrepreneurialism,
Risk and Economic
Compensation in the
Knowledge Economy


Precarious Professional Work


Alexander Styhre

Precarious
Professional Work
Entrepreneurialism, Risk
and Economic Compensation
in the Knowledge Economy


Alexander Styhre
School of Business, Economics, and Law
University of Gothenburg
Gothenburg, Sweden

ISBN 978-3-319-59565-8    ISBN 978-3-319-59566-5 (eBook)
DOI 10.1007/978-3-319-59566-5
Library of Congress Control Number: 2017944450

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Preface

A few years back I submitted a book proposal to a publishing house. The
theme of the book was to discuss professionals and their capacity to make
judgment in their day-to-day work, a skill that is acquired over time and
through intense socialization into a profession that is the hallmark of professionalism. The editor who handled the submission was skeptical about
the very term “profession” and suggested that the term was more or less
antiquated. Instead he proposed that the more suitable and contemporary term to denote this group would be “knowledge workers”—a concept being quite fashionable around the turn of the millennium. I am still
thankful to this editor for confirming the thesis that I had entertained for
some time, that “profession” as a scholarly and managerial term is now
being abandoned, and that new terms, more or less directly coproduced

with the investor capitalism version of competitive capitalism, are now
taking its place. The classical view of the professions is that they constitute
groups of elite workers, being sufficiently well organized and controlling
forms of expertise, highly valued by society and individual employers,
and that such conditions grant professional groups the authority to speak
on behalf of society and themselves about matters of joint concern. In
the era of investor capitalism, efficiency (operationalized as maximized
shareholder returns) is the guiding star for all social and economic activities. In this mode of economic production, professional groups can no
longer engage in societal activities but must commit all their efforts to the
v


vi  Preface

participation in market-based activities. In order to overcome inherited
privileges and rights, negotiated or earned over decades or even centuries
of professional work, the very term profession is at stake. The know-how
and expertise that professional groups control and provide are of course
still highly valued and attractive to engage, but the professions can no
longer be granted the right to maintain the independent role in between
the state and the market (i.e., industry) they have had historically. Thus,
new terms and concepts are being introduced and catered.
In addition, beyond the rhetorical strategies and new narratives of contemporary capitalism, structural and institutional changes have in many
ways affected the nature of professional work. Slower economic growth,
increased economic inequality, the globalization of the economy, and
exogenous technological change are all part of the wider change of scenery where professionalism is constituted and operates. New employment
relations, increasingly high levels of household debt, and soaring costs
for tertiary education are some factors that affect, e.g., the middle class,
the traditional recruitment ground for professional workers. In order to
bridge and align a variety of conditions, changes, and factors into a coherent and hopefully meaningful model of contemporary professionalism,

this volume introduces the term precarious professional work. The term
precariousness is commonly associated with the most vulnerable and least
advantaged groups in the labor market, the unemployed, workers salaried
by the hour, people working part-time or on the basis of short-term contracts, etc., all operating at the lower levels of the income pyramid and
in many cases not being granted benefits such as health care provisions
or pension funds. In this perspective, professional workers are still privileged and enjoy many advantages over less educated or skilled workers.
Yet, many of the rights and benefits historically accruing to professional
workers are today under erasure. For instance, fewer professional workers can take advantage of secure and long-term employment as they to a
lesser extent work in small- and medium-sized firms with less ability to
cushion the ups and downs in the economy. Moreover, professionals are
increasingly compensated on the basis of their ability to participate in
competitive games and to demonstrate enterprising qualities, i.e., they are
less valued as experts and specialists and are increasingly incentivized to
act entrepreneurially. Expressed differently, professionals are increasingly
exposed to market pricing, and that implies, it is argued, the introduction


 Preface 
  

vii

of an element of precariousness within professionalism. That is, to use
the term precarious professional work is by no means intended to trivialize
or downplay the hardship encountering what the British sociologist Guy
Standing calls “the Precariat,” but it is instead a term that points at the
affinity between these least favored groups and the more historically successful professional groups inasmuch as they are both exposed to (albeit to
a varying degree affected by) the same socio-­economic forces and changes
in contemporary competitive capitalism. As the volume will hopefully
demonstrate to its readers, these socio-­economic forces and changes are

not operating at the fringes of the economy but serve on a more deep-­­
seated level to transform the processes of economic value creation.
Social scientists and management scholars, but also the wider public,
are accustomed to think of the major public (i.e., listed) corporation as
the principal site for economic value creation. This image is most likely
to be of practical relevance for considerable time to come, but what happens inside this corporation is quite another matter, demonstrating the
presence of very dynamic and changeable practices and operations. New
employment relations, new collaborative efforts between firms and organizations, new performance-reward systems, and new ways to organize day-­
to-­day work are only a few changes within the corporation that inform
and shape professionalism. In addition, the “externalization of managerial
control” through the use of audits, credit ratings, stock market pricing of
the firm’s shares and outstanding securities, and various forms of ratings,
rankings, and accreditations adds to the complexity of in-house activities.
All these changes bring about a new situation where a professional career is
no longer the safe, comfortable, and perhaps a somewhat dull middle-class
career choice that predictably follows the track from university graduation
to retirement. Instead, the new precarious professional work presents new
challenges for the coming generations of professional workers and for the
middle class with whom professionals are commonly associated.
Pollock and Bono (2013: 629) argue that scholars presenting research
work are given two tasks: “answering interesting questions” and “telling the
story.” This indicates that scholarly work should both address the matter
of joint concern and present it in ways that are literally and ­aesthetically
appealing. To merely access and present a reliable and intriguing data
is not sufficient, but the data needs to be structured into an intriguing
plot and story-line, clad in a literary language. Such declarative statement


viii  Preface

makes sense to me, but the questions regarding “Interesting for who?”
and “What story should be told” still linger on. Ultimately, to determine
ex ante what is interesting to explore is a privilege bestowed upon the
scholar; to make the assessment ex post regarding the degree of relevance,
etc., is up to the readers to determine. At the same time, unless scholars
claim and realize their privilege to identity what they believe are of interest, the community of readers cannot make their assessment. Therefore,
what gets written is dependent on scholars having the capacity to identify
conditions, perceived problems, and puzzling phenomenon that attract
their attention.
In addition, what story to be told on the basis of a specific set of data
is another epistemological and ethical concern. Scholarly writing is at
times criticized for being parochial, overtly convoluted, preoccupied
with minor theoretical controversies, and so forth. While there is a fair
share of truth in some of this critique, it is nevertheless based on the
assumption that such declarative statement could be done from some
neutral vantage point. In fact, that is an untenable proposition. The idea
that, say, an anthropologist or physicist could be criticized for conducting research that matters only for a small group of anthropologists and
physicists is to succumb to common sense thinking, assuming that any
research activity that is not immediately accessible for any possible reader,
and regardless of their willingness to invest any time or effort to learn to
understand this line of research in more detail, should be disqualified.
That is, unless, e.g., anthropologists or physicists are capable of explaining what they do and why upon request, they should lose their privilege
to conduct this line of research. While such emotional responses to what
may appear as secluded, even mystical, unpopular modes of knowing
the world may be understandable, it still succumbs to the fallacy that
all individuals have the same capacity to understand ongoing research
activities. As that is apparently not the case, all forms of expertise are at
risk to be dismissed as undemocratic and thus to serve specific interests.
But to assume that anthropologists or physicists participating in their
own idiosyncratic research activities of necessity are engaging in self-­

aggrandizement is s­ imply untenable, at least not as a general proposition
separated from context and local conditions. What they do is given by
disciplinary standards, norms, and boundaries, and they obey scholarly


 Preface 
  

ix

standards for knowledge production. This in turn implies that the question “What stories should be told?” can be answered quite liberally as any
story that the scholar who ex ante defines something as being worthy of
interest and attention, regards as being worth telling. As it is the reader
and the wider scholarly community that determines the quality and relevance of research work once it is published, there is no reason to get
stuck already before the work has even started. Pollock and Bono’s (2013)
claims regarding scholarly knowledge production can thus be handled
by a combination of elite and market models. The elite model asserts
scholarly autonomy (the right to define research problems and to proceed
accordingly), and the market model treats any scholarly publication as a
contestant over limited attention and authority in scholarly fields and in
the public sphere. Therefore, the concept of precarious professional work,
introduced and discussed in detail in this volume, should be understood
as a way to address structural and institutional changes in competitive
capitalism, in its corporate system, in its market system, and in its regulatory practices. It is a story of joint concern worth telling, no matter
whether anyone is willing to listen or not.
GothenburgAlexander Styhre
March 23, 2017

Reference
Pollock, T. G., & Bono, J. E. (2013). Being Sheherazade: The importance of

storytelling in academic writing. Academy of Management Journal, 56(3),
629–634.


Acknowledgments

I would like to thank Liz Barlow, commissioning editor, Palgrave
Macmillan, for providing me with a contract for this volume, and Lucy
Kidwell, editorial assistant, Palgrave Macmillan, for the assistance during
the publication process.
In addition, I am grateful for the collaborate work that I have conducted with my colleagues at the School of Business, Economics, and
Law, University of Gothenburg, over the last period. I am particularly
indebted to Maria Norbäck and Björn Remneland-Wikhamn.
Finally, I would like to thank my family, my wife Sara and my two
sons Simon and Max, for providing a refuge from academic work. By 5
o’clock, it is time to go, thank God!

xi


Contents

1Introduction: The New World of Precarious Professional
Work 1
2Investor Capitalism and the Decline of the Public
Corporation and the Middle Class 43
3The New Forms of Professional Work: Entrepreneurialism
and Precarious Professional Work 109
4Conducting and Managing Precarious Professional
Work: Hard and Soft Human Resource Management

Practices 161
5The Future of Professionalism: How to Preserve and 
Justify Jurisdictional Discretion in Investor Capitalism 219
Index 251

xiii


1
Introduction: The New World
of Precarious Professional Work

Introduction
Writing in the years before World War I, the war that made the United
States the leading economic and political power of the world as the historically dominant European states regressed into armed conflicts and
the destruction of economic resources on a mass scale (Ahamed 2009),
Thorstein Veblen, the quintessential academic outsider, yet “the most
famous American economist” by the early twentieth century (Ebenstein
2015), addressed the change in competitive capitalism. In Veblen’s (1916:
9) analysis, what he refers to as the “the captains of industry” of the mid-­
nineteenth century, “[a] cross between a business man and an industrial
expert, and the industrial expert seem to have been the more valuable
half in their composition,” were the indisputable authorities of their businesses. In contrast, Veblen (1916: 16) introduces a new actor or agent
on the scene, the new “financial captains of industry.” As opposed to the
original entrepreneurs and owners, caring about the means of production
and quality of the output, the new finance agent is more concerned about
the financial performance of the firm, an interest that makes them, in
Veblen’s (1916: 16) view, unsuitable for business leadership: “Addiction
to abstract and unremitting valuation of all things in terms of price and
© The Author(s) 2017

A. Styhre, Precarious Professional Work, DOI 10.1007/978-3-319-59566-5_1

1


2 

1  Introduction: The New World of Precarious Professional Work

profit leaves them [finance agents], by settled habit, unfit to appreciate
those technological facts and values that can be formulated only in terms
of tangible mechanical performance.” In the new regime of competitive
capitalism, the finance agents are the “experts in process and profits and
financial manoeuvres,” and yet the “final discretion in all questions of
industrial policy continues to rest in their hands” (Veblen 1916: 16). In
Veblen’s account, the finance agents “have been long losing touch with
the management of industrial processes,” at the same time as the management of “corporate business” have been “shifting into the hands of a
bureaucratic clerical staff” (Veblen 1916: 16).
In a publication appearing a few years later, The Vested Interests and
the Common Man, Veblen ([1919] 1964) more explicitly addresses the
changes in the ownership and managerial practice in the new economic
regime. In Veblen’s ([1919] 1964: 44) view, ownership no longer “carries
its earlier duties and responsibilities” but rather resumes the “shape of an
absentee ownership of anonymous corporate capital.” This means that
in the everyday management of the corporation, “the greater proportion
of the owners has no voice” (Veblen [1919] 1964: 44). This means that
ownership becomes separated from day-to-day management, leading to
the owners’ “claim on the earnings of the corporation” without being
practically engaged in the business (Veblen [1919] 1964: 45). “The ordinary investor is, in effect, an anonymous pensioner on the enterprise,”
Veblen ([1919] 1964: 45) says. Veblen regards the rights of free contracting and security of property as the very foundation of the ideal of the

liberal, democratic society, enshrined by the American constitution and
endorsed elsewhere in the eighteenth century. Yet, what Veblen ([1923]
1997) calls “absentee ownership,” the role of essentially passive finance
capital investors, claiming the right to the economic value generated, still
remains a concern in the capitalist system of the early twentieth century:
[T]he population of . . . civilized countries now falls into two main classes:
those who own wealth invested in large holdings and who therefore control
the conditions of life for the rest; and those who do not own wealth in sufficient large holdings, and whose conditions of life are therefore controlled
by these others. It is a division . . . between those who own wealth enough
to make it count, and those who do not. (Veblen [1919] 1964: 160–161)


Introduction 
  
3

In addressing his concerns regarding the separation of ownership and
control, Veblen anticipates the work of Adolf Berle and Gardiner Means,
The Modern Corporation & Private Property, published in the Great
Depression era in 1932, also examining the consequences of the separation between finance capital owners investing their capital in the firm
and the operational management of the firm. The work of Berle and
Means (1991) would eventually be the foundation for agency theory and
its principal policy argument that the shareholders are not only entitled
to what agency theorists refer to as the residual cash flow or free cash
flow generated by the firm, but also—being a considerably more bold
statement—that the overall efficiency would benefit from such a transfer of
capital from a variety of stakeholders to the owners of stock. It is important to pay attention to how this idea of the ownership of the production
capital has shifted from the early work of Thorstein Veblen to the contemporary shareholder welfare model to fully recognize the irony in how
Veblen’s early concern about the role of finance investors has been turned
into the shareholder primacy doctrine, today almost hegemonic in corporate governance theory (see, e.g., Pucheta-Martínez and Bel-Oms 2016).

To start, even though Veblen had a turbulent academic career and was
known to be a difficult man, he was still highly regarded in the early
decades of the twentieth century (Ebenstein 2015: 29). For instance,
many of President Roosevelt’s key advisors, responsible for the national
economic recovery program in the early 1930s—widely treated as the
consequence of the collapse of the national finance system—had read
Veblen’s work (Hawley 1966: 43–44; Ebenstein 2015: 29). The New
Deal thus had Veblen’s thinking written into its policy document. While
Veblen, unlike most of the contemporary economists, was agnostic regarding the relationship between economic theory and policy—“science creates nothing but theories. It knows nothing of policy or utility, of better
or worse,” Veblen (1961: 19) argued—he was concerned about the enormous growth of economic inequality in the land of plenty, in Veblen’s
mind a process propelled by the finance industry and the legal rights
promoting absentee ownership. In contrast, we can compare this view of
Veblen with a contemporary economist, the 1995 Nobel Memorial Prize
in Economic Sciences laureate Robert E. Lucas, suggesting that “[o]f the
tendencies that are harmful to sound economics, the most seductive, and


4 

1  Introduction: The New World of Precarious Professional Work

in my opinion the most poisonous, is to focus on distribution” (cited
in Wisman 2013: 939). For Lucas, studying inequality was “a distraction from the core goal of sound economic analysis: studying economic
growth,” Tomaskovic-Devey et  al. (2015: 527–528) suggest. “Income
inequality,” Bezemer (2016: 1286) notices, “is a traditional heterodox
concern.” Fair enough, Lucas may not share Veblen’s worries, but this
declaration is indicative of how economists have learned to understand
economic fundamentals different over time, as theories, doctrines, and
ideologies modify and change (Offer and Söderberg 2016).
Veblen shared his concern for the role of the finance industry and

the growth of economic inequality with many other leading intellectuals and policymakers of the first decades of the twentieth century. The
liberal lawyer Louis D.  Brandeis, another actor being associated with
the New Deal programs,1 was once such a public figure who addressed
the growing importance of the finance industry in the years before the
Great War. Unlike Veblen, who criticized the finance industry more
indirectly, Brandeis ([1914] 1967) was more to the point:
The dominant element in our financial oligarchy is the investment banker.
Associated banks, trust companies and insurance companies are his tools.
Controlled railroads, public service and industrial corporations financial
are his subjects. Though properly middleman, these bankers bestride as
masters of America’s business world, so that practically no large enterprise
can be undertaken successfully without their participation of approval.
(Brandeis [1914] 1967: 3)

Brandeis ([1914] 1967: 43) argues that the sole objective of the “financial
oligarchy of the investment bankers” is to generate substantial profits to
be distributed to the owners. Against this objective he places other goals,
including “industrial and political liberty,” now being “imperiled by the
Money Trust.” Brandeis’s concern is that the finance industry has now
entrenched an unprecedented power in the capitalist economy and that
it is virtually impossible to escape its influence:
The goose that lays golden eggs has been considered a most valuable possession. But even more profitable is the privilege of taking the golden eggs
laid by somebody else’s goose. The investment bankers and their associates


Introduction 
  
5

now enjoy that privilege. They control the people through the people’s own

money. If banker’s power were commensurate only with their wealth, they
would have relatively little influence on American businesses . . . The power
and the growth of power of our financial oligarchs comes from wielding
the savings and quick capital of others . . . [T]he fetters which bind the
people are forged from the people’s own gold. (Brandeis [1914] 1967:
12–13)

Finally, besides appropriating “other people’s money”—a phrase turned
into a thinly worn cliché by generations of politicians of all flags and
color—the finance industry is not really “leading” the capitalist expansion
as industry representatives are fond of claiming (and latter-day finance
theorists too say, it should be added) but rather follow suit when all risks
have already been discounted and carried by the state, Brandeis claims
(see Mazzucato 2013b, for a more recent version of this argument):
J.P. Morgan & Co. [i.e., finance industry representatives] declare . . . that
‘practically all the railroads and industrial development of this country has
taken place initially through the medium of the great banking houses.’
That statement is entirely unfounded in fact. On the contrary, nearly every
such contribution to our comfort and prosperity was ‘initiated’ without
their aid. The ‘great banking houses’ came into relation with these enterprises, either after the success had been attained, or upon ‘reorganization’
after the possibility of success had been demonstrated, but the funds of the
hardy pioneers, who had risked their all, were exhausted. (Brandeis [1914]
1967: 91–92)

Ultimately, Brandies implies, while still recognizing the role of functional
capital markets for the transfer of capital between actors and industries
and for the distribution of risks between actors with different levels of
risk aversion and time horizons, the finance industry takes advantage of
the work conducted elsewhere in the economy.
What may here perhaps be referred to as the Veblen-Brandeis argument, which what today is referred to as the “financialization of the

economy” (Styhre 2015; Van der Zwan 2014; Palley 2013; Goldstein
2009; Epstein 2005; Krippner 2005; Stockhammer 2004), is a structural
feature of competitive capitalism. This tendency to promote absentee


6 

1  Introduction: The New World of Precarious Professional Work

ownership is a challenge to handle within the institution of the firm,
a business charter granted by the state, just as it is for the aggregated
contemporary economy. The consequences of an unregulated and “self-­
monitoring” capitalist economy geared toward financial operations and
financial engineering are above all, we now have learned, an increased
level of economic instability and economic inequality as its foremost
consequences (two issues are discussed in more detail in Chap. 5). In
the era before the Wall Street crash of 1929 and the Great Depression
that followed and lasted well until the end of the 1930s in the United
States, the period when Veblen and Brandeis were writing, the economic
inequality had reached a peak (Duménil and Lévy 2004). After the Wall
Street crash, Roosevelt’s New Deal program, and the reforms that dominated the essentially Keynesian welfare state era until the first half of the
1970s (the first oil crisis in 1973 is commonly treated as an endpoint
of the period), these economic instabilities and economic inequalities
were mediated by the role of the active state, imposing progressive taxation and serving as an investor during the downturns of the economic
cycle. After 1980, when the neoconservative, pro-business policy agenda
pursued by President Ronald Reagan was implemented, the economic
inequality started to rise sharply anew, representing a significant growth
of “the portion of assets held of the richest one percent of households,”
to around 40 percent of all assets (Duménil and Lévy 2004: 139), now
being back at the levels observed in the late 1930s (Duménil and Lévy

2004: 139, Table 15.6). In this view, the Keynesian post-World War II era
and the years of shared prosperity were relatively quickly deconstructed
when new economic theories, doctrines, and ideologies gained a foothold
in policymaking quarters.
This volume addresses how this “U-shaped” curve of the economic
inequality over the period 1910–2016 (complemented by a “U-shaped”
curve when it comes to economic instability) has wielded significant
consequences not only for blue-collar jobs—the first causalities of the
1980s’ deindustrialization of the American economy, more or less the
outcome from policymaking and accompanied by theories about “global
shifts” in the world economy—but also for professional, white-collar
work more broadly. Before the question of professionalism and its most
­distinguishing feature, the claim to jurisdictional discretion and auton-


The Social Contract of Competitive Capitalism 
  
7

omy, will be discussed in more detail and positioned within the broader
socioeconomic framework of the changes over 12 decades of advanced
and increasingly differentiating competitive capitalism, the issue of economic inequality, being after all at the core of the argument, will be discussed in some more detail.

The Social Contract of Competitive Capitalism
The Veblen ([1919] 1964: 160–161) distinction between “those who own
wealth enough to make it count, and those who do not” is a key factor to
consider when theorizing the use of absentee ownership (i.e., stock ownership in listed companies) and the advancement of the finance industry.
There are reasons to believe that this apparently crude but polemically
effective dichotomy is still useful and possible to substantiate empirically.
Hacker et al. (2013: 24) claim, for instance, that what they call the “the

implicit social contract of the mid-twentieth century,” including the combination of “longer-term employment, health and retirement security
through a combination of public and private benefits, and broad unionization of the workforce,” has been dissolved. That is, in the new economic regime, many, if not most (at least in the United States, addressed
by Hacker et al. 2013), of the risks once borne collectively through the
establishment of public programs or “pooled private benefits” (such as
traditional, defined-benefit pension funds) are now being shifted back to
wage earners and families. That is, what Americans speak of as “benefits”
(e.g., health care insurance and retirement provisions) and what citizens
in European welfare states have been granted by state agencies are no
longer taken for granted, nor included in the total economic compensation packages offered by private corporations and employers. This shift in
risk bearing increases the vulnerability of the aggregated economic system
as individuals and families increase their risk aversion (with a technical
term) as they are more susceptible to the economic shocks that the financialized capitalist economic system undergoes on a regular, yet essentially
unpredictable, basis. This increased vulnerability of the individual wage
earner or family household is conceptualized as a growth of perceived and
actual economic insecurity, a term defined accordingly:


8 

1  Introduction: The New World of Precarious Professional Work

We define economic insecurity as the psychologically mediated experience
of inadequate protection against hardship-causing economic risks. We presume that households see themselves as insecure when perceived risks
exceed their expected capacity to adjust to or otherwise buffer those risks in
ways that do not cause hardship. (Hacker et al. 2013: 25)

In Hacker et al.’s (2013) study, this perceived and actual economic insecurity is not a predicament of only the uneducated or certain vulnerable groups, but today it cuts through the economic spectrum of the
American society: “Neither income nor education is consistently positively associated with lower levels of worries—and, indeed, with regard to
retirement wealth, the richer and more educated are actually more worried” (Hacker et al. 2013: 36). In other words, the economic instability
of the highly differentiated and financialized economic system of competitive capitalism leads to increased economic inequality or a widespread

concern for losing one’s already entrenched socioeconomic position in
society. This endemic middle-class anxiety is addressed by many students
of household debt, referred to by Barbara Ehrenreich (1989) as the “fear
of falling” already by the end of the Reagan era. This in turn leads to an
increased conservatism as, e.g., middle-class and working-class voters are
concerned that the government would further reduce their income earnings and their benefits if they initiate new reforms (Volscho and Kelly
2012: 695; Redbird and Grusky 2016: 199).
In this climate of economic instability and soaring economic inequality, there is a thriving discourse on enterprising and entrepreneurship that
actively discredit the previous regime of managerial capitalism, founded
on the presence of large and financially stable employers. In many cases,
those firms were located in the export-oriented manufacturing industry and were the vehicles for reforms in the post-World War II decades.
However, as Ross (2008: 36) notices, large corporations are today
“[s]corned by management gurus for their bureaucratic stagnancy, just
as their work rules, hierarchies and rituals were condemned for stifling
initiative and creativity.” In contrast, for management gurus and pundits
praising entrepreneurship (see, e.g., Pink 2001, for an exemplary case),
Ross (2008: 36) continues, “the small, entrepreneurial start-up was hailed
as a superior species, likely to adapt quicker and evolve further in a vola-


The Social Contract of Competitive Capitalism 
  
9

tile business environment.” This novel praise for entrepreneurialism—a
standing theme in American society and culture, Charles Wright Mills
(1951) remarked long ago—actively conceals the decline of the major
corporation and the stable employer’s ability to absorb some of the economic and financial risks that are endemic to competitive capitalism,
of necessity containing elements of speculation. This in turn leads to a
transfer of risks from the employer to the employee (Lin 2016; Cobb

2015; Bidwell 2013). Such a risk transfer is the effect of aggregated and
long-term use of “subcontracting, outsourcing and other modes of flexploitation” (Ross 2008: 34) that have been enforced to maximize the
value extraction from the corporate system. In addition, it is primarily
the capital owners who have been able to claim these benefits as many
workers have either become jobless or have seen their total compensation being substantially reduced. “Post-industrial capitalism thrives on
actively disorganizing employment and socio-economic life in general,
so that it can profit from vulnerability, instability and desperation,” Ross
(2008: 44) summarizes. In this view, the praise for entrepreneurialism
is a thinly veiled ideological declaration of allegiance to the virtues of a
regime of competitive capitalism, wherein major corporations increasingly dissolve and become networks of activities (Davis 2016).
More specifically, when it comes to professionalism and professional
groups, originally developed as a “third institution” in between the state
and the market, and serving wider socioeconomic interests (Brint 1994),
this traditionally favored group of “expert workers” is no longer guaranteed any specific privileges vis-à-vis other salaried workers. For instance,
when the major public corporation with dispersed ownership is in decline,
an increasing share of professional workers are employed by smaller firms
being thinly capitalized and thus having less ability to buffer the ups
and downs in the economy. Therefore, these professionals are increasingly exposed to the same risks as any category of other salaried workers.
To their advantage, professional workers are by definition attractive to
recruit and hire as they control highly specialized expertise and skills, at
times being complicated to outsource or acquire on the open market. Yet,
the last three decades have still brought substantial changes in both how
professional workers are employed and how they are perceived within
the horizon of economic value production. For instance, one of the most


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1  Introduction: The New World of Precarious Professional Work

immediate consequences is that the very term “professional” today may
seem somewhat dated, unfashionable—almost archaic. In contrast, the
contemporary managerial vocabulary speaks of “knowledge workers,”
“experts,” and a variety of newfound terms (“brainworkers” being just one
such quite unsettling term) to denote this category of salaried workers.
This volume addresses how these popular management and management
studies’ vocabularies are indicative, indeed being a form of symptom, of a
more deep-seated change in competitive capitalism that not only serves to
undermine job opportunities for blue-collar workers but now increasingly
does the same thing for professional workers. By using a variety of managerial tools (outsourcing and offshoring once again, but now to places such as
India’s computer science and technology center Bangalore) and by renaming certain types of work, a new form of professional work, here referred
to as precarious professional work, is being developed and advocated as the
future of professionalism. As has been argued elsewhere and previously, the
change from a regime of civic professionalism (Freidson 2001) or trustee professionalism to expert professionalism (Brint 1994)—professional expertise
subject to market pricing—and thereafter to precarious professionalism
does by no means demonstrate a strictly linear and straightforward historical trajectory. For instance, certain traditional professions (e.g., medicine
and juridical services) are still relatively sheltered from a downward pressure in compensation and a loss of jurisdictional authority (even though
there are evidence of changes also here): Other types of professional work
(e.g., engineering work and R&D more widely), historically seated within
specialized functions and divisions within large-scale corporations, are
now being located in small, allegedly more agile and entrepreneurial firms.
Moreover, there are novel professional groups that de facto did not exist
(or were marginal phenomenon) before 1980s (e.g., video game developers such as programmers, game writers, and 2D and 3D animators) or that
have successfully been professionalized over the last decades (e.g., management consultants). In addition, over the last decades, the level of education
has increased substantially, expanding the pool of professional workers and
workers with professional expertise (i.e., with a tertiary education diploma
and other credentials).
The principal argument of this volume is not that all of these professional groups are participating in precarious professional work; the

Changes in the Economic System of Competitive Capitalism 
  
11

argument is instead that what was once regarded as a safe haven for a
middle-class career and a relatively comfortable life style, more or less
devoid of the concern regarding employment and faltering economic
compensation, is today the privilege of a shrinking group of elite professionals, and not infrequently being employed in, or associated with,
the finance industry (as in, e.g., law firms). As a consequence, all these
economic changes, new policies, and the decline of “the implicit social
contract” (Hacker et al. 2013) have generated a new world of professional
work that is in part entirely different from traditional professional work,
in part basically the same. To address these changes in terms of being precarious work (defined in more detail below) may be treated as an unnecessarily polemical approach, but the increased levels of perceived economic
instability, the sharp growth in household debt in also middle-class
homes (the traditional recruitment ground for professional workers), and
the significant growth in economic inequality, including a stagnant or
even declining real wage growth for middle-class families, arguably justify
the use of this label. As will be demonstrated in this volume, precarious
professional work is no longer only visible at the fringes of expert work
but is now introduced on a broad basis, in many cases accompanied by
entrepreneurship ideologies, serving to normalize or even romanticize the
work in small-sized companies vulnerable to the volatility of the financialized competitive capitalism and being unable to provide many of the
benefits that historically have accrued to professional workers. In this
view, some issues addressed by Thorstein Veblen and Louis D. Brandeis
on the brink of World War I are still of high relevance for the situation a
century later.

 hanges in the Economic System
C
of Competitive Capitalism

Western-style capitalism was not built in a day, but only slowly and after
the formation of the national state and the institutionalization of corporate law and regulatory agencies has what today is referred to as “the
economy” been established. In fact, the very idea to speak about “the
economy” as some free-standing, factual, and almost animated object is


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1  Introduction: The New World of Precarious Professional Work

of quite recent pedigree; Mitchell (2014: 481) says that not until the
post-World War period, around 1948, “it became common in American
political debate to talk about the economy.” References to this object
the economy were now used in a routine, repetitive way in government
reports and in newspapers, and the term was used without accompanying
explanations. It does not take a very long-term perspective to realize that
Western-style capitalism is a specific historical accomplishment and that
the more recent phase of competitive capitalism is part of the bourgeoisie revolution of the seventeenth and eighteenth centuries (McCloskey
2006; Cassis 1993). After many rivers had been crossed, it was the bourgeoisie that created the economic system that we today have inherited
and operate, rooted in an idiosyncratic blend of a risk-taking attitude
and a close monitoring of resources, a mixture of piety, prudence, and
appetite for venturing enabling economic expansion and the regulation
of economic affairs.
To cut a long story short, since the French Revolution of 1789, the start
of the modern period for many historians and the last of the three major
revolutions of the 1688–1789 period (Wallerstein 2011: 144; Lefebvre
2001), capitalism as an economic system has constantly morphed and
multiplied, ceaselessly adding new practices, institutions, and laws to
an increasingly complex network of economic, commercial, legal, and
social relations. At the same time, despite its own “Brownian motion,”

the constant micro-level movements, the main precondition for capitalist
economies is stability; without stability, there are limited possibilities for
accurate predictions of, e.g., the interest rate, and with no possibilities for
prediction, there are higher calculable risk and degrees of nonarithmetic
risk, i.e., uncertainty. Especially uncertainty is every capitalist’s demon
as it disturbs or undermines the ability to calculate rents and returns on
investment. A corollary to the preference for stability is that trust is a
highly effective mechanism for creating stability. Trust, Tilly (2004: 4)
writes, can be thought of as “an attitude or as a relationship”: “Trust consists of placing valued outcomes at risk to others’ malfeasance. Trust relationships include those in which people regularly take such risks” (Tilly
2004: 4). In Niklas Luhmann’s (1979: 15) neofunctionalist sociology,
trust is a mechanism required to operate with reasonable security within
the horizon of the future, “characterized by more or less indeterminate


Changes in the Economic System of Competitive Capitalism 
  
13

complexity.” In short, in Tilly’s (2004) and Luhmann’s (1979) use of the
term trust, the continuation of social relations is dependent on mutual
risk taking, wherein the agent is given the responsibility to handle the
principal’s resources. “A society is called capitalist if it entrusts its economic process to the guidance of the private businessman,” Schumpeter
([1928] 1991: 189) says, pointing at the direct connections between
trust and competitive capitalism. Competitive capitalism is dynamic and
changing, but, seemingly paradoxically, this ceaseless change rests on
stable social relations and the trust in abstract institutions such as legal
contracts and regulatory practices.
One way to build trust in an economic system is to establish routines
and mechanisms for domains of jurisdiction. Certain individuals holding
specific licenses, education system degrees or diplomas, or other credentials, and thus signaling that they have passed the test and managed to

live up to high standards, are thus given the right to serve specific social
functions. Such jurisdictional domains can be either tied to a specific
organization form, as in the case of the Weberian bureaucracy, or tied to
a specific profession, independent of individual organizations but derived
from the organization of the profession per se. While the concept of profession is, just like the term bureaucracy, part of a modernist vocabulary,
where the former gained a foothold in the latter half of the nineteenth
century, the concept of profession is closely related to the urban merchant class and bourgeoisie since medieval times.
In Brint’s (1994: 26) seminal work, the “origin” of professionalism
can be traced to the ancient or medieval periods, but in the seventeenth century and the modernization of the European states, the
idea of professional classes was further pronounced. The swift differentiation of the economy and corporations in the last decades of the
nineteenth century created a need for more professional expertise and
competence, and the ambitious, career-oriented, and status-minded
bourgeoisie class, praising and living in accordance to what Gay
(2001: 192) calls “the Gospel of Work,” was naturally the primary
recruitment base for the new occupational class of professionals. Brint
(1994) suggests that the professions were more than a mode of organizing expertise and know-how into professional communities, capable of acting as a unified body with shared interests and norms and


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1  Introduction: The New World of Precarious Professional Work

values, and managing to operate as an autonomous force in between
the political system of the emerging democracies and capitalist markets: “The professions, neither democratic nor capitalist, played an
important role in efforts to shape and (at times) to constrain capitalist
development in relation to standards of a broader social well-being”
(Brint 1994: 16). Freidson (2001) argues in a similar vein that the
professions represent a “third logic” in between the hierarchy (the
organization) and the market. The classic professions are of course
the entrepreneurial professions running their own businesses, like the

lawyer in his office or the medical doctor in his practice (they were
all exclusively male for a long period of time), both serving society
through their expertise, while at the same time being held accountable for their own economic performance.
However, with the increased differentiation of economic activities
and society and the growing demand for more specific and specialized know-­how, the professions entered the state administration (e.g.,
as teachers and jurists) or the hierarchies of large-scale corporations
emerging in the early twentieth century (in the case of engineers and
scientists). While, e.g., medical doctors running their own practices
could take a standpoint to promote, e.g., public health reforms and
thus serve the third logic of professionalism, the state administration
professionals of large corporations no longer operated in accordance
with this logic; instead, they were widely regarded as being spokespersons for their employing organizations or industries. Today, in the new
millennium, the role of professions is again subject to the economic,
social, and cultural changes of the contemporary period. While the
belle epoque view of professionals emphasized the enterprising and selfemploying professional, the modern-era professional was hired by the
state or a multinational corporation. In the latter phase, the professional was no longer directly encountering relentless market forces as
major agencies and corporations wherein they served to cushion the ups
and down in the economy. Paired with the prestige and status derived
from the degrees, licenses, and other credentials of professionalism, this
category of work was privileged and attractive. Not only did professionals make legitimate jurisdictional claims and were relatively generously
compensated for their work, they were also less exposed to market risks