Styhre, Alexander - Precarious Professional Work - Entrepreneurialism, Risk and Economic Compensation in The Knowledge Economy (2017, Springer International Publishing)

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
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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 pro-
fessionalism. 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 contempo-
rary term to denote this group would be “knowledge workers”—a con-
cept 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 activi-
ties. 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 con-
temporary 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 scen-
ery 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 coher-
ent 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 con-
tracts, 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 privi-
leged 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 work-
ers 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 suc-
cessful 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 hap-
pens 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 organi-
zations, 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 inter-
est, 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 conduct-
ing 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 explain-
ing 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 ques-
tion “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 rel-
evance 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 regu-
latory 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 con-
ducted 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
1 Introduction: The New World of Precarious Professional

Work 1
2 Investor Capitalism and the Decline of the Public

Corporation and the Middle Class 43
3 The New Forms of Professional Work: Entrepreneurialism

and Precarious Professional Work 109
4 Conducting and Managing Precarious Professional

Work: Hard and Soft Human Resource Management
Practices 161
5 The 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 his-
torically 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 busi-
nesses. 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 1

A. Styhre, Precarious Professional Work, DOI 10.1007/978-3-319-59566-5_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 man-
agement 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 ordi-
nary investor is, in effect, an anonymous pensioner on the enterprise,”
Veblen ([1919] 1964: 45) says. Veblen regards the rights of free contract-
ing 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 suf-
ficient 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 separa-
tion 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 impor-
tant 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 con-
temporary 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 corpo-
rate 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 regard-
ing the relationship between economic theory and policy—“science cre-
ates nothing but theories. It knows nothing of policy or utility, of better
or worse,” Veblen (1961: 19) argued—he was concerned about the enor-
mous 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
in my opinion the most poisonous, is to focus on distribution” (cited

in Wisman 2013: 939). For Lucas, studying inequality was “a distrac-
tion 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 intellectu-
als 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 pos-
session. 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 enter-
prises, 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 argu-
ment, 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
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 domi-
nated 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 taxa-
tion 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 eco-
nomic inequality, being after all at the core of the argument, will be dis-
cussed in some more detail.

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 own-
ership 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 com-
bination of “longer-term employment, health and retirement security
through a combination of public and private benefits, and broad union-
ization of the workforce,” has been dissolved. That is, in the new eco-
nomic 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 compensa-
tion 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 finan-
cialized 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:
We define economic insecurity as the psychologically mediated experience

of inadequate protection against hardship-causing economic risks. We pre-
sume 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 inse-
curity is not a predicament of only the uneducated or certain vulner-
able groups, but today it cuts through the economic spectrum of the
American society: “Neither income nor education is consistently posi-
tively associated with lower levels of worries—and, indeed, with regard to
retirement wealth, the richer and more educated are actually more wor-
ried” (Hacker et al. 2013: 36). In other words, the economic instability
of the highly differentiated and financialized economic system of com-
petitive 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 earn-
ings 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 inequal-
ity, 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 indus-
try 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-
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 eco-
nomic 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 flex-
ploitation” (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 compensa-
tion 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 increas-
ingly 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 guaran-
teed 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 increas-
ingly 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
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 manage-
rial tools (outsourcing and offshoring once again, but now to places such as
India’s computer science and technology center Bangalore) and by renam-
ing 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 pro-
fessionalism 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 histori-
cal trajectory. For instance, certain traditional professions (e.g., medicine
and juridical services) are still relatively sheltered from a downward pres-
sure 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 develop-
ers such as programmers, game writers, and 2D and 3D animators) or that
have successfully been professionalized over the last decades (e.g., manage-
ment 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 pro-
fessional 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 pro-
fessionals, 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 pre-
carious work (defined in more detail below) may be treated as an unneces-
sarily 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 finan-
cialized 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 cor-
porate 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
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 bourgeoi-
sie revolution of the seventeenth and eighteenth centuries (McCloskey
2006; Cassis 1993). After many rivers had been crossed, it was the bour-
geoisie 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 con-
sists of placing valued outcomes at risk to others’ malfeasance. Trust rela-
tionships 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
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 eco-
nomic 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 creden-
tials, 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 pro-
fession 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 mer-
chant 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 seven-
teenth century and the modernization of the European states, the
idea of professional classes was further pronounced. The swift differ-
entiation 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 orga-
nizing expertise and know-how into professional communities, capa-
ble of acting as a unified body with shared interests and norms and
values, and managing to operate as an autonomous force in between

the political system of the emerging democracies and capitalist mar-
kets: “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 account-
able for their own economic performance.
However, with the increased differentiation of economic activities
and society and the growing demand for more specific and special-
ized 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 spokesper-
sons 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 self-
employing professional, the modern-era professional was hired by the
state or a multinational corporation. In the latter phase, the profes-
sional 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 profession-
als make legitimate jurisdictional claims and were relatively generously
compensated for their work, they were also less exposed to market risks
15
in comparison to the white-collar worker community. On the basis

of such privileges and responsibilities, professional work became the
middle-class occupation par préférence. Perform well in school, enter
the university, earn a degree, and acquire a stable position in an agency
or corporation became the prescribed career route for middle-class chil-
dren for most of the twentieth century.
Today, things look different, at least for some of the professional
groups and for certain professional workers. The post-World War II
period was characterized by economic growth and a close correlation
between productivity growth and real wage growth for a large share of
workers, accompanied by a Keynesian-style welfare state, financed by
progressive taxes, but by the mid-1960s, the profit rate started to fall
in, e.g., the American manufacturing industry. As predicted by econo-
mists such as Michal Kalecki in the 1960s, the decline of profits would
disrupt the seemingly perfected Keynesian economic system. In the
1970s, a series of political and economic crises added to an economic
decline unseen since the depression era. At the nadir of competitive
capitalism in the mid-1970s, the business community started to mobi-
lize to restore “economic freedom” and to reduce governmental regula-
tion, a diverse process that led to the election of the neoconservative
governor Ronald Reagan as president in 1980 in the United States and
with the Tory Prime Minister Margaret Thatcher taking office in the
UK the year before. The new pro-business climate of the 1980s, includ-
ing head-on conflicts with trade unions on both side of the Atlantic
and a high-interest rate policy to remedy soaring inflation, led to the
loss of blue-collar work in both the United States and the UK. In the
UK, job loss came from the political decision to no longer support,
e.g., the state-owned mining industry, but in the United States, the
economic changes were caused by monetary politics leading to high-
interest rates and an overrated dollar, making American manufactur-
ing industry less competitive vis-à-vis, e.g., Southeast Asian producers
(Stein 2011). In addition, changes in corporate governance practices
and the shift to a shareholder welfare policy encouraged the new gen-
eration of CEOs and directors to downsize and offshore activities to
cut down to increase after-tax profits, adding to the decline of blue-
collar work.
he Consequences of the Financialization
T
of the Economy
During changes of the 1980s, the white-collar community (including
larger groups of managers and administrators, and not only the profes-
sionals being the “elite” of the white-collar community) was not primar-
ily affected, but by the early 1990s, as Newfield (2008: 81) says, “the
American layoff machine stated to buzz through the white-collar cubi-
cles” (see, e.g., Budros 1999; Datta et al. 2010). Jung (2016) points out
that long-term employment has “[d]rastically changed since the 1980s”
(see also Bidwell 2013) and argues that downsizing is one of the key
explanations for this more short-term-oriented labor market. As down-
sizing programs are negotiated between investors, workers, and top man-
agement, the “full implementation” of downsizing programs are unlikely,
Jung (2016: 348–349) argues. Being essentially a political process, the
outcome is oftentimes a compromise between profit maximization and
maintained managerial authority, but frequently, the empirical data indi-
cates, “at the cost of workers’ job security” (Jung 2016: 349). For instance,
during the 1980s’ recessionary years, large-scale downsizing became prev-
alent, and when the economic conditions improved by the end of the
decade and in the 1990s, downsizing programs were still announced and
were treated as being part of the new conventional wisdom. In 1994, for
instance, aggregated corporate profits rose by 11 percent, and yet “cor-
porate America cut 516,069 jobs,” an amount of downsizing far greater
than in the recession year of 1990, when 316,047 jobs were disappeared
(Jung 2016: 349).
Examining a data set including 656 companies laying off people over
the 1984–2005 period, Jung (2016: 359) presents three important find-
ings: (1) institutional investors, ex hypothesi assumed to favor shareholder
welfare governance practices, facilitate downsizing implementation (i.e.,
institutional investors prioritize short-term profits over long-term eco-
nomic growth); (2) trade unions do play an active role in reducing the job
loss from downsizing, a finding that supports previous studies indicat-
ing that unions serve to advocate the interest of labor (both trade union
members and other labor market participants) and thus counterbalance
The Consequences of the Financialization of the Economy
17
the power of investors and managers; (3) CEO incentives (i.e., compen-
sation in terms of stock holdings and/or stock options, directly respon-
sive to finance market evaluations of such assets) to downsize influence
the magnitude of total downsizing. Jung’s (2016) all three findings sug-
gest that, as being a matter of corporate governance, the three catego-
ries of investors, workers, and managers act on the basis of self-interest
and in accordance with the short-term perspective, characteristic for the
shareholder welfare governance model. As institutional investors today
assess their fund managers on the basis of their performance vis-à-vis
competing funds and finance institutes (Rajan 2006: 501), leading to a
short-term focus on corporate performance, and as CEO and other top
managers are widely incentivized to cut down costs to boost stock market
valuations, Jung (2016: 368) contends that “the future does not look
promising for workers”:
Powerful investors will continue to demand more drastic implementation

of downsizing, a demand that top managers oriented toward shareholder
value actively embrace. The impact is likely to be more severe for non-
managerial workers, because the power of top managers provides some
protection for middle managers . . . Combined with rent generation at the
top . . . rent destruction by downsizing at the bottom can exacerbate eco-
nomic inequality among workers. (Jung 2016: 368)
While unemployment was basically treated by policymaking as a short-

term problem prior to 1980 (Wray and Pigeon 2000: 835), derived from
the volatility of the economic cycle, the research of, e.g., Jung (2016)
indicates that the corporate system per se uses the supply of labor as a
mechanism to strategically manage profit levels in line with finance mar-
ket expectations (see, e.g., Coffee 2006: 83).
Bidwell (2013: 1078) substantiates Jung’s (2016) findings and shows
that “declining organizational tenure,” i.e., shorter and more unstable
employment relations, is not explained on the basis of exogenous factors
such as increased foreign competition or technological change, which
“had very little effect on either worker tenure or its changes over time.”
Instead, Bidwell (2013: 1077) found that “[d]eclines in tenure have
been strongly associated with changes in industry-level unionization:
including unionization in my analyses explained around one-half of the

decline in tenure within large organizations between 1979 and 2008.”
More specifically, the subsection of the population most likely to have
stable, long-term employment relationships during the postwar period
of managerial capitalism, men aged 30–65, has gradually lost employ-
ment in large-scale corporations. In 1979, the average tenure of men aged
30–65 was “92% higher in organizations with more than 1,000 employ-
ees” than the average tenure in small organizations (Bidwell 2013: 1069).
By 2008, that gap had “declined to just 22%.” This “marked decline”
in the length of employment relationships, especially in large-scale cor-
porations, represents “one of the most important changes in the nature
of employment, careers, and organizations to have taken place over the
last three decades” (Bidwell 2013: 1077). Tenure has declined by 30 per-
cent among “prime-aged men” in large organizations, with “particular
increases in the proportions of men with less than three years of tenure”
(Bidwell 2013: 1077). In short, Bidwell’s data and results support Jung’s
(2016) findings that labor is today treated as a mechanism being used to
manage firm-level profit levels to better satisfy market expectations. As
a primary consequence, the balance of power between capital and labor
today greatly benefits the former.
Lin (2016) stresses, just like Jung (2016) and Bidwell (2013) do, that
unemployment rates have soared in the American economy during the
last decades. Lin connects this downward slope in employment, especially
affecting the blue-collar worker community, with the entrenchment of
the shareholder welfare governance model. In this governance regime,
fewer employees produce higher economic value, but the performance
benefits primarily the owners of stock:
[Between 1982 and 2005] there was a 10% increase in the concentration
of revenue but a 15% decrease in the concentration of domestic employ-
ment in the largest U.S. firms. In absolute terms, in 2005 the largest U.S.
firms increased their gross revenue by more than $780 billion but hired 2.8
million fewer workers. (Lin 2016: 972)
One widely used method to generate higher shareholder value is to

increase the debt-to-assets ratio (in accounting terms, to manipulate the
The Consequences of the Financialization of the Economy
19
return-in-equity measure, ROE), which serve to leverage the return on

the equity invested in the firm. Between the early 1980s and 1993, the
debt ratio increased from 0.55 to 0.70, and by 2005, the ratio had sta-
bilized at 0.67. Such measures indicate, Lin (2016: 977) proposes, that
companies are “heavily depend[ent] on debt to fund their operations.”
The foremost implication of this high-leverage strategy is that whenever
there is an economic downturn or a cash flow problem, firms with higher
levels of debt “[f ]ace greater pressure to reduce labor costs under the
threat of bankruptcy” (Lin 2016: 977). That is, the shareholder welfare
governance model translates into higher return-on-equity for the own-
ers of stock, but it is the employees who buffer against shareholder loss
during economic downturns. When firms channel their finance capital
into financial activities, rather than reinvesting them in productive activi-
ties, this in turn weakens employment growth (Lin 2016: 975); financial
instabilities shrink the supply of employment. Lin (2016: 977) provides
empirical data that reveals a trade-off between financial investment and a
long-run total employment, especially for blue-collar work, which suffers
“a devastative effect.” Lin summarizes the three empirical findings:
First, increasing operation in financial activities not only substitutes for

investment in production but also reduces resources available for the work-
force. Second, increasing dependence on debt as a main source of capital
generates a constant pressure to meet interest obligations and constrains
firms’ ability to expand employment . . . Third, the increasing pressure to
reward shareholders expands the outflow of firms’ resources and compels
managers to replace the retain and reinvest cycle with a downsize-and-
distribute spiral, in which labor expense becomes a primary target of cost-
cutting strategies. (Lin 2016: 984)
In other words, the financialization of the firm, dominated by the share-

holder welfare model and its emphasis on “efficiency” and production
of short-term free cash flow, is the primary explanation for the decline
of employment in the United States (Lin 2016: 973). That is, organiza-
tional and managerial factors, rather than technological development or
broader macroeconomic and political changes (i.e., the “globalization”
of the world economy), explain a substantial share of what Lin (2016:
985) addresses as “the polarization of the labor market and growing

inequality.” In this view, a national economy can choose between higher
shareholder welfare or employment, but to combine these two objectives
seems more difficult.
The combination of shareholder value creation policies—favoring
short-term cost-cutting programs rather than long-term risk taking to
increase market shares and to produce new innovations (Lazonick 2013;
Goldstein 2012; Brockman et al. 2007)—the offshoring and outsourcing
of administrative and expert functions (e.g., R&D), and the computer-
ization of work (Fligstein and Shin 2007) contributed to the job loss also
in the white-collar community and among professionals. In the new mil-
lennium, increasingly characterized by what has been called the financial-
ization of the economy (e.g., Epstein 2005), blue-collar manufacturing
work has been by and large substituted by less well-compensated service
work, including less benefits and less stable employment relations, but
white-collar work is also less safe and predictable. In addition, the middle
class, once being assured a relatively secure and comfortable career in
industry or state or municipality administration on the basis of earned
university degrees, can no longer take for granted a close-knit causality
between “human capital investment” and a career and a reliable bottom-
line life income. In Newfield’s (2008: 2–3) account, the middle class “is
shorthand for ‘college educated,’” and this middle class is today being
reduced in size and “losing its non-colleague educated members to stag-
nating or declining wages.” In this new economic regime, yet another
transformation of the capitalist system, there are reasons to critically
rethink what professionalism means and what it stands for.
The Concept of Precariousness

The British sociologist Guy Standing (2011) popularized the concept
of the precariat, denoting the social class that is offered little more than
short-term work contracts and earning relatively less money than the
traditional blue-collar worker community did. Kalleberg (2009: 2) uses
the term “precarious work” to describe employment that is “uncertain,
unpredictable, and risky from the point of view of the worker.” Gill and
21
Pratt (2008: 2) define precariousness (in relation to work) as “all forms

of insecure, contingent, flexible work—from illegalized, casualized and
temporary employment, to homeworking, piecework and freelancing.”
Following this definition, much professional work is today certainly filled
with uncertainty and unpredictable events, and while the risks may not
be a matter of health and well-being, there are still risks involved in the
work that threatens the possibilities to maintain a traditional middle-
class life style. As the underlying capitalist economic system, based on
market pricing and competition, is dynamic and thus inherently fluid
and changeable, any concept of precarity, precariousness, and precarious
work of necessity accommodate “flexible,” i.e., unstable labor relations.
Neilson and Rossiter (2008: 63) argue that precarity is “not an empiri-
cal object that can be presupposed as stable and contained.” Instead, it
might better be “understood as an experience,” they propose, “[s]ince
unearthing the tonalities of experience requires an approach that does
not place an either/or between conceptual and empirical approaches to
the world” (Neilson and Rossiter 2008: 63). De Peuter (2011: 421) sug-
gests that the concept of precarity should be regarded “a linguistic device
for illuminating working conditions generally obscured in dominant dis-
courses.” This “linguistic device” in turn shifts the focus toward the “lab-
oratory of labor politics,” which many professional workers are subjected
to in the contemporary economy (De Peuter 2011); precarious work is
thus ultimately the consequence of policies and underlying theories that
justify changes in labor market policy.
Gill and Pratt (2008: 2) stress how “[c]hanging modes of political and
economic governance” over the last decades “have produced an appar-
ently novel situation in which increasing numbers of workers in affluent
societies are engaged in insecure, casualized or irregular labour.” In this
new world of work (Beck 2000), notions such as “creative labour, net-
work labour, cognitive labour, affective labour and immaterial labour”—
Gill and Pratt (2008: 12) even speak about “brainworkers,” members of a
“cognitariat”—are flourishing and widely circulated, even made fashion-
able (Gill and Pratt 2008: 2). At the same time, concepts such as “immate-
rial labour” or “affective labour,” being at the very core of the discourse on
postindustrial economic value production, remains “[r]ather ill-defined
and not sharp enough to see the ways in which cultural work is both like
and not like other work,” Gill and Pratt (2008: 20) claim. An alternative
route would be to pay less attention to discerning the intellectual and
cognitive content of this line of work and to more explicitly discuss pre-
carity and precarious work as a function of the sharing of the economic
value generated. As the cognitive and embodied capacities involved in
postindustrial economic value production are of necessity for most part
escaping the representative devices used by scholars, a more fruitful and
“doable” approach would be to see how individuals participating in this
line of work are actually sharing the economic gains from the productiv-
ity growth reported over the last centuries—measured in terms of, e.g.,
real wage growth, social security benefits, stable and long-term labor con-
tracts. If not sharing such gains and benefits, these individuals are likely to
participate in precarious work, that is, work that is not sufficiently com-
pensated in comparison to the benefits accruing to other stakeholders.
onsequences: The Enterprising Ethos of Precarious

C
Groups
As has been demonstrated in the scholarly literature, the spread of the

enterprising and neoentrepreneurialist ethos being at the core of the
world of precarious work and in the present regime of investor capital-
ism is at times embraced and enacted by unexpected groups who appear
to have little to do with the Schumpeterian concept of the entrepreneur
as a debtor expanding his or her business. Monahan and Fisher (2015)
examine how individuals being unsuccessful in competing in the US
labor market secure income and indeed a “career” through participation
in the clinical trials conducted by pharmaceutical companies. The work
conducted is thus to provide one’s body as a material substratum in phar-
maceutical development project:
Drug development as we know it could not happen without these indi-

viduals allowing their bodies to be used to test drug toxicity and side effects,
generating data that are transformed into intellectual property for pharma-
ceutical companies and are used to make decisions about which products
to pursue. (Monahan and Fisher 2015: 551)
23
Moreover, in order to pursue this line of work, these workers cultivate

entrepreneurial identities “both within and beyond the clinics” to make
sense out of their work life experience (Monahan and Fisher 2015: 546).
In some cases, the participation in clinical trials is a way to raise money
for planned entrepreneurial activities such as “start-up companies, real-
estate ventures or artistic endeavours” (Monahan and Fisher 2015: 546).
However, out of 178 interview subjects, nearly a third of the participants
were unemployed and thus participated in the clinical trial as a means
to make money to support themselves and their families (Monahan and
Fisher 2015: 551). Therefore, Monahan and Fisher (2015: 548) suggest,
“[t]hese work conditions for healthy volunteers [are] similar to other pre-
carious labour in that it encourages creative or entrepreneurial responses
to those conditions while responsibilizing individuals for contending
with their employment insecurity.” At the same time as the participants
were part of a precarious labor market, they still maintained an enterpris-
ing attitude and an entrepreneurial ethos and engaged in detailed self-
monitoring to secure their “employability”:
[P]articipants develop sophisticated regimens for staying healthy and keep-

ing their lab results within acceptable ranges. They work out regularly
between studies, but taper off right before screening so that their liver
enzymes will not be elevated, which would lead to them failing the screen-
ing. They eat blueberries, arugula, spinach, kale, salmon, yogurt, raw gar-
lic, and other expensive health foods to maintain measurable health. They
develop nutritional and medical expertise, observing their lab results and
adjusting behaviour accordingly. (Monahan and Fisher 2015: 559)
In other words, rather than being “passive volunteers,” the participants

are “actively trying to shape the opportunities they have for income in an
unpredictable market” (Monahan and Fisher 2015: 561). Monahan and
Fisher continue: “An entrepreneurial ethos allows them to view personal
sacrifice and exposure to potentially dangerous drugs as smart invest-
ments, as stepping-stones to more financially stable and fulfilling lives.”
In the US labor market and economy, the virtues of enterprising skills
and an entrepreneurial ethos have thus penetrated and trickled down to
also social groups that are quite far from being professional elites and
professional groups endowed with jurisdictional discretion—groups tra-

ditionally in need for such beliefs and norms. Today, also unemployed
individuals manage their own “employability” on the basis of such beliefs.
he Question of Economic Extraction: Who

T
Does the Job and Who Makes the Money?
In the post-World War II era, the period of managerial capitalism (Marris
1964; Chandler 1977), the middle class, traditionally being self-employed
or conducting professional work in, e.g., state agencies, was transformed
into organization men and, eventually, women, salaried white-collar
workers who conducted various forms of professional administrative and
expert work in large-scale divisionalized corporations (Whyte 1956; Mills
1951). As will be discussed in Chap. 2 in this volume, the large, divi-
sionalized, at times multinational corporation provided an institutional
structure that greatly rewarded blue-collar and white-collar workers’ work
ethic and loyalty, translating the productivity growth in the operations
into real wage growth and stable, predictable employment. Until at least
the end of the 1960s, the expansion of Western competitive capitalism
endorsed these corporativist and oligarchic tendencies (Galbraith 1971),
making economic prosperity a matter of sharing the fruits of institutional
reform through the bargaining between organizational stakeholders.
In the 1970s and 1980s, characterized by economic decline and
increased levels of industrial conflicts, unseen since the depression era
times, this peace treaty between capital owners and labor was undermined.
As free-market ideologies gained a foothold in the general defense of
industry’s autonomy vis-à-vis government regulation and control, grow-
ing in importance in. e.g., the United States in the 1960s and 1970s
(Akard 1992: 601; Vogel 1983: 27), shareholder value ideologies were
popularly advanced in free-market quarters as one way to increase the effi-
ciency of economic activities and, indirectly and unofficially, to curb the
trade unions’ (widely understood by free-market protagonists as a threat
to economic freedom, market efficiency, and other virtues held in esteem)
claims to increased economic compensation. More generally, free-market
proponents represented a very negative view of the trade unions and the
The Question of Economic Extraction: Who Does the Job...
25
labor movement, treating these organizations not so much as business

partners and legitimate discussants but as being corrupt and prone to
claim unreasonable economic compensation and the authority to influ-
ence business decisions (Jacobs and Myers 2014; Horwitz 1986). “What
is not generally recognized is that the real exploiters in our present society
are not egoistic capitalists or entrepreneurs, and in fact not separated
individuals, but organizations which derive their power from the moral
support of collective action and the feeling of group loyalty,” Friedrich
von Hayek (1979a: 96) declared. Elsewhere, Hayek’s (1949: 117) anti-
unionism is even more conspicuous:
If there are any hope to return to a free economy, the question on how to
the powers of trade-unions can be appropriately delimited in law as well in
fact is one of the most important of all the questions to which we [free-
market proponents] must give our attention. (Hayek 1949: 117)
As detailed by Mizruchi (2013), this new attitude toward trade unions

represented a shift in the US business community but was also an idio-
syncratic American phenomenon, unparalleled elsewhere (Vogel 1983:
24–25).
After the mid-1960s, productivity growth and real wages started to
diverge (Wolff 2003), and the economic value created in the new free-
market regime increasingly benefitted capital owners, the firm’s financiers
(e.g., bond-holders), and owners of stock. Worse still, in the new era of the
financialized economy of investor capitalism, professionals and middle-
class workers are to a larger extent employed by small- and medium-sized
companies, and in many cases, innovation work is frequently conducted
in companies that still not have a positive cash flow. Such thinly capital-
ized companies do not always have the resources to buffer the ebbs and
floods during the economic cycle, making the risk of layoffs a more sub-
stantial concern also for professional workers. In venture capital-backed
companies, the future of the company is in many cases uncertain, and
it demands some precaution on the part of the coworkers to handle the
risks of lost employment and income. On average, the restructuring of
the economy from large-scale corporations, with their own internal labor
market and their own financial capital to allocate over the business cycle,
to small companies, vulnerable to changes in the supply of capital in the

market, has significant implications for professional work. In one way or
another, in the regime of managerial capitalism, structuring industries
into oligarchies characterized by close collaboration between the state,
industry, and trade unions, there was a correlation between the size of
the firm, the economic value generated, and job growth and job security
(Bidwell et al. 2013). In the contemporary economy, there is a less linear
relationship between, e.g., economic value and firm size, and firms that
generate large economic value may employ a relatively limited number
of coworkers (Davis 2009), and their employment contracts do generally
not give coworkers the right to proportional compensation on the basis
of the value generated. In the new regime of capitalist accumulation, new
conditions prevail.
Lazonick and Mazzucato (2013: 1094) define innovation formally as
“[t]he generation of higher quality products at lower unit cost at prevail-
ing factor prices.” New innovations generate by definition higher returns
on investment, everything else equal, but the growth of innovation does
not of necessity reduce economic inequality. On the contrary, the oppo-
site seems to be the case, contrary to what, e.g., politicians and policy-
makers claim or hope for: “[o]ne of the decades in which growth was the
‘smartest’ (innovation led)—the 1990s—was a decade in which inequal-
ity continued to rise,” Lazonick and Mazzucato (2013: 1094) argue. For
instance, Wray and Pigeon (2000: 826) show that less than 2 percent of
the jobs created in the 1990s benefitted half of the American population
without a college degree. Therefore, a better understanding of the rela-
tionship between finance, innovation, economic growth, and economic
equality is needed, preferably, as Mazzucato (2013a: 852) says, begin-
ning with an analysis of the deeply “uncertain” character of innovation.
Innovation work is always uncertain, being a bet on the future, and while
many people may benefit indirectly from a successful innovation, the
economic value generated tends to benefit a relatively limited number
of stakeholders. Lazonick and Mazzucato (2013: 1094) thus call for a
more detailed study of the “tensions” between “how value is created and
how value is extracted in modern-day capitalism.” That is, the coworkers
that generate economic value may not be the ones that directly benefit
The Question of Economic Extraction: Who Does the Job...
27
from this capital accumulation, neither directly through, e.g., contractual

ownership rights and dividends and stock options, nor indirectly as the
firm accumulates economic resources that create other benefits such as
job security or fringe benefits as part of the employees’ compensation
package.
More explicitly, Lazonick and Mazzucato (2013: 1094) advance the
hypothesis that “[t]here has been an increasing separation between
those economic actors who take the risks of investing in innovation
and those who reap the rewards from innovation.” This change has not
occurred overnight but is part of the general tendency to deregulate
and deinstitutionalize competitive capitalism. “A set of socially devised
institutions related to corporate governance, stock markets, and income
taxation have permitted this concentration of value extraction in a few
hands,” Lazonick and Mazzucato (2013: 1108) propose. For instance,
as will be examined in Chap. 2 of this volume, the dominance of share-
holder welfare ideology in corporate governance (Jensen 1986, 1993,
2002), based on the discrediting of executives and board of directors
as qualified decision-makers, and the advancement of finance market
actors as the most efficient mechanism to reduce agency costs (i.e., the
cost to monitor the executives’ work so they act in line with the owners
and other principals’ interests), leads to also large companies as being
bound up with finance market-based forms of control (Bratton and
Wachter 2010; Daily et al. 2003; Davis and Stout 1992). Organizations
thus distribute their free cash flow and increase their debt to become
capital efficient, and the ups and downs in the economic cycles are
handled through layoffs rather than through the buffering of aggre-
gated financial capital.
In the case of venture-backed companies, such as life science ventures,
there is not yet any free cash flow to distribute, but here it is the venture
capital investors that contract for the economic value to materialize in the
future. In both cases, professional workers live and work face-to-face with
finance markets, and must learn to endure the specific form of finance
market control that has been widely instituted in society. The question is
then to what extent the finance market worldview has penetrated all eco-
nomic activities, even potentially to the point where the sacred figure of
the entrepreneur, the redeemer and life-blood of competitive capitalism,

is subsumed by the interests of finance market actor, Mazzucato (2013a)
asks:
The problem is not one of the big bad banks and dodgy financial institu-
tions (e.g., hedge funds and credit default swaps) versus the (potentially)
innovative ‘real economy’—restraining the former and liberating the latter.
The key problem is how to de-financialize real economy companies, and
to find ways that value creation activities (in both the financial sector and
real economy) are rewarded over value extraction activities. (Mazzucato
2013a: 863)
Bryan and Raffery (2014: 891) address the dominance of finance market
actors in similar terms, suggesting that the “substantial meaning of finan-
cialization” is not only a matter of the finance industry growing in size
and importance (as it has proved to do; Deutschmann 2011: 353) but
precisely how finance market calculative practices become more “socially
pervasive.”
In summary, in the era of investor capitalism, where economic value
is increasingly created in small- and medium-sized companies, frequently
located in networks of firms, universities, and agencies, professionals
are likely to benefit less from the participation in entrepreneurial and
value-creating activities. In such cases, it may be that professionals are
not given more secure employment contracts, nor do they hold con-
tracts granting them the right to the economic value generated in and
through their work. This is the new precarious professional work, a form
of winner-takes-it-all economy (in Hacker and Pierson’s 2010, formula-
tion), where only those who contract for the residual cash flow benefits
from the s uccess. The compulsory chatter about the value and merits of,
e.g., entrepreneurship (see, e.g., Pink 2001), otherwise pervading policy
debates and political discussions, is thus poorly aligned with less flatter-
ing views of professional enterprising, where actual legal contracts grant-
ing the few the right to the economic value generated undermine the
very incentive structure of the entrepreneurial function of competitive
capitalism. What remains is an empty praise of enterprising individu-
als, at times not even attempting to veil the free-market ideology that
Research Question and Outline of the Book
29
apparently benefits finance market actors over entrepreneurs, ultimately

making speculation more financially attractive than enterprise (Wray
2009: 810). The entrepreneurship ideology is therefore little more than
a sparkle of escapism and mythology in the otherwise instrumental and
calculative reason of the finance industry, a dream of creating amazing
new economic wonders firmly rooted in the narrative structure of the
folktale (see, e.g., Propp 1968).
Expressed differently, the ethos of entrepreneurialism, the willingness
to work hard, take risks, to challenge inherited beliefs, etc., is still held in
esteem as fine, productive middle-class and professional virtues, but the
entrepreneur as an initial debtor, eventually claiming the right to the eco-
nomic value from his or her diligence and ingenuity, is less appealing in
this new economic regime. On the contrary, the contractual elements of
enterprising are aligned with the wider logic of investor capitalism, which
the cynic may summarize as what has been referred to as “the Golden
Rule of Wall Street,” stating that “[h]e who has the gold makes the rules”
(Peck 2010: 251). In the revised version of the entrepreneurial function
of investor capitalism, entrepreneurship work is thus a form of salaried
work and little else; it is no longer a “life style” or a specific “mode of
thinking” but quite strictly the insecure work to produce innovations
under the influence of uncertainty. If few rather than many reap the eco-
nomic benefits from joint team production innovation work, innovations
per se no longer create economic growth or iron out economic inequality,
but on the contrary add to such socioeconomic imbalances. Those are
the new conditions of investor capitalism that Lazonick and Mazzucato
(2013) and Mazzucato (2013a) want to examine in greater detail.

This volume examines how professional work has been affected by the
free-market advocacy and its accompanying policy reform and insti-
tutional changes occurring over the last four decades. Using the term
“precarious professional work,” a term that contains its own polemics as
professional work has traditionally been portrayed as the very antithesis
of precarious employment, it is suggested that changes in the employ-
ment of professionals (i.e., workers with certain predefined academic cre-

dentials and other licenses and certifications, and conducting work that
is complicated to represent in manuals and protocols, nor easily automa-
tized, robotized, etc., i.e., work that contains a considerable “indeter-
minacy to certainty ratio”) are indicative of political, institutional, and
ideological changes that affect the production of economic value and
value extraction in the present economy. That is, changes in the corporate
system and in the market system wherein corporations operate and com-
pete have been unfavorable for professional workers, today having less
secure employment, are lower compensated (with the exception of the
top income decentile, especially in the so-called FIRE sector—finance,
insurance, and real estate—of the economy), and increasingly work in
small firms with less ability to buffer the ups and downs in the economic
cycle or being self-employed.
In the era of managerial capitalism, dominating from the New Deal
era to the mid-1970s, coworkers, including professionals, were benefit-
ting from the team production efforts either in the form of increased
economic compensation (i.e., real wage growth) or through stable
employment and other benefits provided by the employer. In the era of
“shareholder value ideology” (Weinstein 2013: 49; Goldstein 2012: 271;
Lazonick 2013), a market-based governance model being widely imple-
mented in investor capitalism enacts the owners of the firm’s stock as
the sole residual risk bearers of the team production efforts, which by
implication entitle them, the proponents of the model argue, the right
to the cash that remains when all costs are being covered. In this new
governance model, it is the market that prices the skills and competencies
of, e.g., professional groups (say, engineers, lawyers, or physicians), and
for various reasons, still subject to much debate and controversy, such
increased reliance of market pricing coincided with (or, some would say,
caused) declining real wage groups, deindustrialization, increased levels
of household debt, and soaring economic inequality. In other words, the
shift from the managerial capitalism model to the investor capitalism
model has brought among many other things a new view of, e.g., profes-
sional work.
While much scholarship has examined the decline of blue-collar and
white-collar work, professionals have been treated as a privileged group,
31
and for good reasons. However, just because professional groups and the
middle class (the primary recruitment ground for professional workers)
have lost relatively less than, e.g., the blue-collar community—some pro-
fessional groups (e.g., finance traders, lawyers) have certainly gained from
the institutional changes—it does not mean that they as a social group
and the middle class as a social strata have been unaffected. On the con-
trary, professional work has been redefined from being a favored group,
endowed with jurisdictional discretion, fiduciary duties, and autonomy,
to a class of “knowledge workers,” responding to the same market pricing
mechanisms as any other category of salaried workers. Such institutional
changes and modifications of the management vocabularies and practices
are worthy of scholarly attention.
The outline of this volume includes five chapters. In Chap. 2, “Investor
Capitalism and the Decline of the Public Corporation and the Middle
Class,” the policy and institutional changes over the last four decades
are examined, with a specific attention being paid to how finance mar-
ket pricing has been advocated as an adequate model both for control-
ling managerial decision-making quality and for the pricing of skills and
competencies. The advancement of the investor capitalism model has
therefore led to a new view of employment, and this in turn has affected
how professional work is understood. In investor capitalism, professional
work is no longer a privileged, elite work domain of expertise, protected
from market assessment, but instead become a form of “expert labor”
or “knowledge work” with no particular differences vis-à-vis, e.g., blue-
collar or white-collar work. In investor capitalism, professional work to
some extent is “deconsecrated,” losing some of its halo as prestigious
expertise worthy of respect or even veneration.
In Chap. 3, “The New Forms of Professional Work: Entrepreneurialism
and Precarious Professional Work,” the nature of professional work is
defined and the scholarly literature on professions is reviewed. Terms
such as professional ideologies, institutionalization, and managerialism
are discussed as important analytical categories being used in the study
of professions and professionalism. In the second part of the chapter,
the recent emphasis on an enterprising ethos and an entrepreneurial
spirit in professionalism is discussed. In this setting, concepts such as
self-employment (as opposed to “career jobs,” contract work, venture
labor, and networking) are advanced as being part of the regime of enter-
prising professionalism being promoted within investor capitalism. The
chapter thus summarizes how professionals today are expected to not
only develop certain skills and competencies but also actively market
such skills and participate in networking activities that help them secure
employment contracts.
In Chap. 4, “Conducting and Managing Precarious Professional Work:
Hard and Soft Human Resource Management Practices,” the condi-
tions under which a professional career is conducted today are examined.
Starting with the ability to be admitted to tertiary education programs,
and leading forward to employment and career planning, professional
work is already from the outset based on the participation in competitive
games. Also inside the firm, when salaried work has been secured, profes-
sionals are today expected to manage their careers as enterprising selves,
yet, seemingly inconsistent, they should contribute to the team produc-
tion efforts by sharing the know-how and communicating expertise with
colleagues. Needless to say, such opposing (or at least merely tangential)
activities demand skills, competencies, and identities that can accommo-
date a repertoire of practices. For instance, expert professionals such as
“corporate professionals” (e.g., licensed project managers) participate in
identity work and are subject to identity regulation (being part of mana-
gerial initiatives) in order to bridge and reconcile such a variety of objec-
tives. In practical terms, professional workers need to figure out whether
they should pursue careers as “experts” or “generalists,” and try to calculate
the risks and benefits of each career strategy. This pressure to participate in
calculative practices to optimize career outcomes and individual benefits is
indicative of the new regime of professionalism, putting less emphasis on
the community and collective accomplishments, and increasingly enact-
ing the professional as a free-standing and enterprising individual.
In the fifth and final chapter, “The Future of Professionalism: How
to Preserve and Justify Jurisdictional Discretion in Investor Capitalism,”
the concept of financialization, the key feature of investor capitalism, is
discussed as an important factor to consider when it comes to the future
of professionalism. Financialization denotes the increasingly larger share
of the aggregated economic value being generated within the finance
industry in the economy and a number of accompanying practices, ide-
Summary and Conclusion
33
ologies, and norms derived from the finance industry and its primarily
calculative and short-sighted ways of operating. Under investor capital-
ism, the economic growth has stagnated, economic inequality has grown,
and economic instability, caused by speculative behavior in the finance
industry, by and large propelled by the expansion of securities markets
has increased. All these changes, unified by the pursuit for “efficiency”
in market transactions, have significant implications for professionalism.
Moreover, the middle class, the principal recruitment base for professional
work, is not only shrinking in many OECD countries but also suffers
from increasing burdens of household debt (not the least student loans,
the costs the middle-class needs to pay to enter attractive professions) and
an essentially unpredictable economy, characterized by volatility and dis-
ruption. Therefore, the final chapter speculates whether professionalism
as an organizational resource, social institution, and middle class occupa-
tion is capable of surviving and to play an active role in the creation of
economic value within the firm and in shaping society more widely. The
short-term value extraction practices of the finance industry certainly do
not operate to the advantage of professionalism as it has been conceptu-
alized historically. Perhaps, in the future, professionalism may fraction
into a set of isolated communities, including a number of secure and
well-paid professional positions in, e.g., the health care sector and in the
domain of jurisprudence, and a substantial pool of “knowledge workers,”
employed in small- and medium-sized firms interconnected in networks?
In this scenario, precarious professional work is likely to be a useful term
for the analysis of professionalism in investor capitalism.
One of the most complicated pedagogical tasks for policymakers, aca-
demic scholars, and media pundits is to explain the difference between the
corporate system, being the centerpiece of competitive capitalism and its
principal mechanism for economic value generation, and the wider society
wherein the corporate system is embedded. The corporate system, rooted
in a variety of mechanisms and practices, including, e.g., professional
expertise and managerial skills, is, at least ideally, based on market com-
petition, and therefore it is essentially understood as what is constituted

through competitive games. Society, on the other hand, cannot be treated
as a corporation writ large, simply because societies per se do not compete
in the same manner as corporations do, and nor do societies select and
recruit its citizens and other resources from a product factor market. In
times of economic hardship, a corporation may choose to lay off people
or to restructure the activities to enhance its competitive advantage, but
such possibilities are not available for a society or a sovereign state. That
is, corporations may vary in size and performance over time, but societ-
ies are given as they are. Consequently, the performance-reward systems
implemented in corporations value outstanding individual performance,
but societies (at least welfare states, but similar mechanisms, say, charity,
are used in less differentiated societies) use transfer systems to provide basic
means for living for all its citizens (and at times, also noncitizens such as
refugees, or people visiting on a temporal basis, i.e., they hold visas that
grant them certain rights). To enfold the corporate system and society and
claim they basically respond to the same mechanisms is a mistake: corpora-
tions create economic value in competitive markets, but society’s role is to
create the highest possible well-being for the largest possible proportion of
its citizens on the basis of the means it accesses. As a consequence, when
economic terms such as efficiency starts to penetrate new social spheres,
e.g., the domain of jurisprudence (Rizzo 1980), it is indicative of a category
mistake, the failure to separate and keep apart different types of social insti-
tutions and to understand how they operate on the basis of their individual
operative logic and in accordance with their own performance metrics.
At the same time, it could be that what is “good for industry” is also
“good for society,” but a straightforward causality cannot be assumed a
priori. Instead, in many cases, policies that benefit industry (at least on a
short-term basis), say, the right to lay off people at lower costs on the basis
of new legislation, may (and often do) create additional social costs, what
economists call externalities. To claim that economic efficiency of neces-
sity is socially beneficial and attractive as a proposition is to overlook that
the very term “economic efficiency” is not a value-neutral term but is a
construct derived from within economic theory and that carries certain
connotations and a number of unstated assumptions. One solution to
overcome this duality of considering the interests of both the corporate
Note 35

system and society is to deny the existence of the latter altogether, as

some conservative or libertarian intellectuals have done. Such a strategy
certainly promotes a more logically consistent theoretical framework for
the analysis of economic value production, but it overtly downplays the
experience of millions or even billions of people who spend their lives in
corporations (or similar economic organizations) and societies and who
would dismiss the denial of the latter as sheer philistinism.
Policymakers, academic scholars, and media pundits need to explain
how economic and social interests are interrelated, intersecting, copro-
duced but at times also diverging, and that policies and practices that
apply and generate desirable outcomes and results in the corporations
may work poorly in social organization, and vice versa. The term profes-
sionalism is vulnerable for this failure to address the two spheres of eco-
nomic value creation as its straddles the two spheres: professionals work
within corporations, but they have also, historically speaking, acted within
society to advance certain practices and to institute norms and beliefs that
have benefitted a more robust and resilient society. The term precarious
professional work being used in this volume is precisely indicative of the
new mode of thinking wherein this more social role of the professional
worker is undermined or disqualified, and the professional is more nar-
rowly defined as a “knowledge worker” or “expert,” only serving his or her
employer and otherwise being excluded from wider social discussions and
projects. That is, precarious professional work denotes professional work
defined in strictly economic terms and, more specifically, economic terms
related to the efficiency criteria. In the era of investor capitalism, pro-
fessional work becomes precarious when professionalism is only valued
and priced within the horizon of corporate efficiency. The externalities
derived from this mode of thinking should be examined in detail.
Note
1. In fact, Louis Brandeis is today an iconic figure for center-left-ori-
ented legal scholars, “[a]n inspiration not just for progressive bloggers
but for generations of legal scholars and practicing lawyers” (Riles
2011: 85).
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2
Investor Capitalism and the Decline
of the Public Corporation
and the Middle Class
Introduction
The term professionalism did not emerge in a social vacuum but is indic-
ative of a particular historical society’s need to organize its knowledge and
expertise into classes and categories being robust over time. For instance,
in a society characterized by the authority of the church or the politi-
cal power of a monarch, the literati and intellectuals created institutions
such as religious orders or fraternities, universities, and learned societies
to protect their interests and rights. As society has undergone a process
of modernization, including the development of representative democ-
racy and the industrialization of the economy, professionalism, its insti-
tutions, and their roles have changed with it. In the post-World War II
period, professionalism has thrived, by and large moving in lockstep with
the expansion of industrial production and technological and scientific
advancement. By the early 1970s, managerial capitalism, characterized
by the dominance of manufacturing industry, an oligopolistic industry
structure, and the codevelopment of the welfare state run on the basis
of Keynesian economic policies, was increasingly criticized for failing to
bring, e.g., inflation under control. During the turbulent 1970s, much of

44 2 Investor Capitalism
the policy changes that were implemented in the 1980s and 1990s were
justified on the basis of the idea that free-market pricing would be more
efficient (and thus socially desirable) than the management-based model
of the oligopolistic industry structure that developed in the postwar
period. In the 1980s and 1990s, the so-called investor capitalism model
was established, with a number of principal changes following. Many of
these changes would affect how the professions are organized and what
role they play in society. In this chapter of this volume, the economic and
political changes over the last four decades are sketched to serve as a back-
ground for the changes in professional work being examined in greater
detail in Chaps. 3 and 4.
Theoretical Perspectives on Investor Capitalism

Institutional, Political and Technological Changes
in the Postwar Period
In 1951, Charles Wright Mills published the book White Collars, a trea-
tise that examined the way of the life of the new American middle class,
closely bound up with the large-scale corporation. A few years later,
William H. Whyte (1956) would present a similar analysis in his influ-
ential The Organization Man, being another sociological and cultural
analysis of the new, suburban corporate class that gradually displaced
the American entrepreneur and that pursued life-long careers in multi-
national and multidivisional corporations. With great precision, Mills
(1951) examines how the American economy at the same time becomes
increasingly oligarchic at the same time as entrepreneurialism, now losing
ground, is praised: “The United States has been transformed from a nation
of small capitalists into a nation of hired employees; the ideology suit-
able for the nation of small capitalists persists, as if that small-propertied
world were still a going concern” (Mills 1951: 34). This acclaim of the
entrepreneurs is puzzling, Mills (1951: 34) argues, as “the logic of the
small entrepreneurs is not the logic of our time.” Still, as the small urban
entrepreneur “suffers exhaustion,” policy-makers and industry represen-
tatives proclaim the virtues of the entrepreneur. “In any well-educated
45
Senate hearing on economic issues, someone always says that the small
entrepreneur is the backbone of the American economy,” Mills (1951:
44) says. Mills argues that the reason for this awakened concern for the
entrepreneur is derived from symbolic and ideological interests, rather
than being a practical issue to handle. In the age of oligarchic tendencies
and close-knit collaborations between industry and policy-making, the
entrepreneur is, Mills (1951: 44) suggests, “the last urban representa-
tive of free competition and thus of the competitive virtue of the private
enterprise system.” In a Weber (1949) vocabulary, the entrepreneur is an
ideal type, an economic actor competing on what is an original, unregu-
lated, unpoliticized, and, by implication, fair market, representing a pure
form of competition:
The principle of the self-made man, and the justification of his superior
position by the competitive fire through which he has become, require and
in turn support the ideology of free competition. In the abstract political
ranges, everyone can believe in competition; in the concrete economic
case, few small entrepreneurs can afford to do so. (Mills 1951: 36)
One may ask why this concern for the entrepreneur, the mom-and-pop
store owners, small boutique owners, and their kind, bound to become
extinct in the age of a competitive capitalism, benefitting economies of
scale and political connections and influence, was addressed in the early
1950s. Mills (1951: 3) underlines that the belief in the entrepreneur as the
clear-cut case of market competitor is part of the narrative of what Mills
calls the ideology of utopian capitalism. Utopian capitalism is an economic
system that rests on free-market competition, and wherein all attempts
to gain benefits and competitive advantage through political connections
and other forms of nonmarket enterprising are disqualified or punished.
This veneer of “fair competition” played a key role in the era of oligar-
chic capitalism of the post-World War II period, and the entrepreneur
became the foremost symbol, despite his or her waning importance in the
American economy, for a robust and sound capitalist economy.
Two decades before the publication of White Collars, during the
depression, the Roosevelt administration implemented the most ambi-
tious economic program to restore the American economy. The New
Deal program, including all kinds of local and regional projects includ-
ing also art projects (Gibson 2002) and infrastructure investments,
was already from the beginning lambasted by conservatives as a thinly
veiled socialist program (Jones 2012: 93; Hofstadter 1963: 41). Despite
such criticism, the New Deal was ultimately successful in turning the
American economy and securing prosperity for the coming decades, not
the least in the 1950s and 1960s. The so-called Glass-Steagall Act of
1933, a bank act defining the rules of the game for the finance indus-
try for the coming decades (Rock 2013: 1912), played a key role in
advancing what Robin Marris (1964) calls managerial capitalism. The
previous generation of capitalists of the gilded age, including Cornelius
Vanderbilt, John D. Rockefeller, and so forth, made their fortunes in the
oil, steel, and railroad businesses, and the first generation of manufactur-
ers such as Henry Ford continued their path and advocated a form of
“personal capitalism,” wherein strong, recalcitrant founders and own-
ers put their distinct mark on their businesses. Henry Ford, born and
raised in rural Michigan, was perhaps the last of these autocratic own-
ers, an eccentric that were known for his hatred of Jews, unions, war,
and—somewhat unexpected given that Ford was raised on a farm—cows
(Grandin 2009). Ford’s legacy managed to maintain his grip on Ford
Motor Company well into the 1960s, and his fierce antiunionism was
largely out of step with the depression-era politics. Ford was an excep-
tion though, as American industry was neither governed by the “invis-
ible hand” of the freely operating market, nor under the strict control of
either government or autocratic owners, but became increasingly man-
aged by salaried executives and board of directors: “The rise of modern
business enterprise in the United States, therefore, brought with it mana-
gerial capitalism” (Chandler 1977: 1).
In contrast to Henry Ford, Alfred P. Sloan, serving General Motors for
most of his career (Sloan 1964), was exemplary of the new generation of
skilled, professional, somewhat faceless executives and managers that started
to populate the upper tiers of American corporations during the depression
and in the coming decades. Needless to say, the mass production economy
that developed in the United States and increasingly spread to Europe and
elsewhere in the post-World War II era, based on stable industrial relations,
demand-driven economic growth, the expansion of the welfare state on
47
the basis of progressive income taxes and with manufacturing as the domi-
nant industry, was a successful economic organization that served to spread
economic well-being over a wider set of economic strata. Keller and Block
(2013: 635) speak of the post-World War II period as the “golden age of
managerial capitalism”; Dore et al. (1999: 109) portray the 1960s as “the
heyday of managerial capitalism.”
Managerial Capitalism and Its Decline
In Marris’s (1964: 1) view, managerial capitalism is “[a] system in which

production is concentrated in the hands of large joint-stock companies”;
that is, managers are granted the discretion to make investment deci-
sions and are thus endowed with a substantial authority in the economic
system. Marris (1964: 15) defines management accordingly: “We define
‘the management’ as the particular in-group, consisting of directors and
others, which effectively carries out the functions legally vested in the
board.” Marris (1964) suggests that salaried manager is substituting
for the role of the “classical entrepreneur”—which has “virtually disap-
peared,” Marris says—with the difference that the managers “can wield
considerable power without necessarily holding equity, sharing profits or
carrying risks.” Marris (1964: 6) adds that a manager is a “different type
of person” than an entrepreneur, with “different ideals” and “different
personal values,” and these differences may in turn affect how economic
enterprises are managed. For instance, Marris (1964: 5) suggests: “[i]t is
by no means obvious that action intended to maximize the utility of a
company’s stockholders is consistent with maximizing the utility of the
action-takers, i.e., of management.” This principal idea, that managers
are not of necessity interested in and/or incentivized to maximizing the
value generated for the benefit of the shareholders, would be the leitmotif
in the shareholder primacy literature emerging in the 1970s and paving
the way for shareholder primacy governance policies in the 1980s.
In 1966, after-tax profit rate for all nonfinancial corporations in the
United States was 13.7 percent (Akard 1992: 601), and after this year, the
rate began a downward trend. In the manufacturing industry, the primus
motor of managerial capitalism, the same pattern is discernible: “From
1965 to 1973, the profit rate in manufacturing fell by nearly 41 percent

while that of the private business sector fell by 30 percent” (Van Arnum
and Naples 2013: 1160). Also in a long-term perspective, the peak in
profit rates in 1953 in the United States would still stand as a record:
[T]he net profit in US manufacturing shows a very similar trend to that of

the total economy, first falling from a peak at 32.3% in 1953 to a low point
of 8.3% in 1983 and then recovering, in part, to 15.9% in 1997. (Wolff
2003: 451)
By the early 1970s and especially after 1973s oil crisis, leading to soar-
ing energy costs, it was apparent that the era of managerial capitalism
and the accompanying (or, alternatively, vice versa) Keynesian welfare
state would face substantial challenges in the future. The new decade
was a very turbulent and in many ways “lost decade,” not only in the
United States, which endured two oil crises, the political crisis caused
by the Watergate scandal and the widely criticized Vietnam war, and the
largest stock market decline since the depression—“the American stock
market lost nearly half of its value between 1972 and the end of 1974”
(Stein 2011: 102)—but also in the UK and elsewhere (in Sweden, for
instance, the shipping industry, one of the industrial prides of the small
and export-oriented Swedish economy, was almost wiped out in only a
few years in the mid-1970s). For Stein (2011), the 1970s was the decade
where the future of the American economy was radically modified and
where manufacturing industry had to resign and give way to a growing
finance industry. In the coming two decades, managerial capitalism was
displaced by investor capitalism, a regime of economic accumulation that
operated along entirely different theoretical and governance routes than
the oligarchic manufacturing industry.
Investor Capitalism and Financialization
Hyman Minsky is a renowned yet heterodox economist and theorist of

finance-based capitalism, operating in the margins of neoclassical economic
theory and by and large being ignored by mainstream economists until
the finance market collapse of 2008 and the following years, commonly
49
referred to as “the Great Recession” (e.g., Suárez 2014; Biven and Shierholz
2013). Minsky (1986: 220) notices that since the mid-1960s, correlating
closely with the decline in profit levels, “a progression in the seriousness
of financial crises has taken place.” In Minsky’s view, the capitalist econ-
omy, as a tightly integrated economic system, is, as we learn from history
(Kindleberger 2007), inherently unstable and vulnerable to speculation,
and therefore, at recurrent moments, it is pushed to an instable stage or
even to the verge of collapse. In mainstream neoclassic economic theory,
capitalist economies are rooted in market transactions, and as markets have
the capacity to regulate themselves as novel information is issued and made
available, the Minskian “instability hypothesis” is deemed theoretically
incredible. As there is ample evidence of economic crises and bubbles in
finance markets and systems (Calomiris and Haber 2014: Kindleberger
2007; Black 2005), proponents of mainstream neoclassic economic theory
advance the ad hoc hypothesis that it is political regulation and other exter-
nal factors that cause the capitalist economy to backfire: if the economy
works less than perfectly, the argument goes, it is not the economic actors
per se, operating on the basis of the pricing mechanism of the market, or
the market that is to blame—it is the government and regulators who are
culpable.
Minsky (1980) rejects this view and claims that the instability hypoth-
esis derives from the fact that capital markets favor and trade liquid assets,
at the same time as most of the assets in a capitalist economy are illiq-
uid. This liquidity preference, in turn, represents a specific, not a general,
interest in the economy: “The essential liquidity preference in a capitalist
economy is that of bankers and businessmen, and the observable phe-
nomena that indicate the state of liquidity preference are the trends of
business and banker balance sheets” (Minsky 1980: 508). The increased
liquidity/illiquidity ratio in turn creates a hedging problem, wherein
nonfinancial firms have to act as if they too favor liquid assets:
The multi-billion corporations, which dominate our economy, borrow in a

wide array of financial markets and from many different institutions in
order to carry out their operations and fulfill their financial contracts . . .
In our economy, nonfinancial corporations have many of the liability man-
agement attributes of banks. (Minsky 1986: 42)
More importantly, in this process, hedging activities are easily taken over
by what Minsky calls speculative financing, a betting on the future that
may benefit the finance actor but that nevertheless leverage the risk of the
entire financial system:
Our economy is unstable because of capitalist finance. If a particular mix

of hedge and speculative financing of positions and of internal and external
financing of investment rules for a while, then there are, internal to the
economy, incentives to change the mix. Any transitory tranquility is trans-
formed into an expansion in which the speculative financing of positions
and the external financing of investment increase. (Minsky 1986: 219)
In Minsky’s institutional view of the capitalist economy, finance indus-

try actors operate on the basis of liquid resources, but in the capitalist
economy at large, Mehrling (2011: 67) says, “illiquidity is a fact of life.”
The production capital in, e.g., manufacturing industry generates only
a cash flow over an extended period of time, which means that “liquid-
ity is always a problem for the economy as a whole, and hence for each
agent within the economy as well” (Mehrling 2011: 67). This liquidity
preference is the primus motor for what Minsky calls money-manager
capitalism, and economic regime always of necessity containing elements
of speculative finance.
Money-Manager Capitalism
The regime of speculative finance, Minsky’s money-manager capital-

ism, the product of institutional innovations that dramatically altered
the control of “corporate equities and bonds” after the “credit crunch”
of 1966 (Whalen 1997: 520), structures the perception of the relation-
ship between the finance industry and nonfinancial industries. While,
e.g., manufacturing industry creates economic value through the invest-
ment in production capital and accompanying human resources (e.g.,
engineering skills and design competence), investments that generate
liquid assets only after significant periods of time, the finance indus-
try thrives on the very circulation of liquid (or pseudo-liquid, as in the
case of many derivative instruments) capital. In this circulation, there
51
is always room for speculative investment and venturing, in some cases

being beneficial for the overall economic activity and economic growth,
while in other cases regressing to dysfunctional speculation or mere
fraud. In Minsky’s (1986) theoretical model, breaking with neoclassical
economic theory orthodoxy in decisive ways, instability is one of the key
systemic characteristics of the regime of competitive capitalism—a posi-
tion that is strongly opposed to the conventional wisdom of mainstream
neoclassical economic theory, suggesting that free markets are capable of
self-correcting and self-stabilizing through the price mechanism. “The
essential flaw of capitalism lies in the emergence of financial relations
that can lead to snowballing instability,” Fazzari and Minsky (1984: 109)
argue, thus discrediting this Euclidean principle of general equilibrium
in neoclassical economic theory (see, e.g., Kaldor 1972). Minsky and
his followers regard that proposition with great skepticism and treat it as
being advocated in isolation from the overwhelming empirical evidence
suggesting otherwise, i.e., that equilibrium is the exception, and if it is
established, it is more a matter of being an outcome from thoughtful
policy-making and regulatory control than a “natural state” of allegedly
self-regulating markets.
While Minsky remains a controversial figure in the economics disci-
pline, the very idea of endemic instability in competitive capitalism is no
longer ignored or discredited out of hand. In fact, a body of literature
examines how these instabilities are produced on the basis of speculative
behavior in finance markets. Froot et al. (1992: 1461) question the con-
ventional assumption of finance theory suggesting that “if speculators are
rational, trading horizons should not affect asset prices.” Being steeped in
the doctrine of the rationality of markets, Froot et al. (1992) argue that
the very term “rational” is here deceptive as it may in fact create instabili-
ties, which per se would be understood as an undesirable (and thus “irra-
tional”) quality of the finance capital markets. The argument pursued by
Froot et al. (1992) is nontrivial and highly technical, but they essentially
suggest that “rational speculators” can increase their overall profits by
“taking advantage of the short-horizon extrapolation of positive-feedback
traders.” This in turn makes these speculators “drive the asset price away
from its fundamental value” (Froot et al. 1992: 1479). This means, on an
aggregated level, that there is a premium on short-term trading in finance
markets that materializes as “herd behavior,” which in turn is justified the

on basis of rational calculation:
[S]hort-term trading in the capital market might imply that even if some
traders could potentially learn more about managers’ pricing strategies, they
might rationally choose not to, focusing instead on, say, predicting next
month’s earnings announcement. Thus, short-term trading might help cre-
ate the informational problems that are a necessary precondition for short-
sighted investment behavior by corporations. (Froot et al. 1992: 1481)
Expressed differently, when the individual acts rationally (i.e., in accor-

dance with finance theory prescriptions), irrational behavior (“herd-like
behavior”) is generated on the aggregated level. That is, rationality begets
irrational outcomes, a conundrum to solve for free-market theorists. As
predicted by Minsky (1986), finance capital markets are not defined by
their ability to self-regulate and stabilize themselves when thousands of
finance traders act uncoordinatedly, but on the contrary, certain seem-
ingly irrational behavior, essentially “social” and “behavioral” in nature,
generates recurrent and therefore predictable instabilities. What is being
observed on the micro-level of practices—individual finance traders’
behavior—thus accumulates on the macro-level, making an essentially
financialized global capitalist economy vulnerable to all kinds of signals
and events that may cast the economy into a downward spiral (see, e.g.,
Levitin 2011: 469). This is, for instance, the reason why most stock
exchanges have established mechanisms that automatically halt the trad-
ing for a period of time whenever the index falls below a certain level for a
shorter period of time. This mechanism serves to “cool down” the finance
traders and to stop widespread panic that would lead to “irrational”
behavior and undesirable outcomes. Such mechanisms remain a challenge
for free-market theorists to explain, but they commonly dismiss them, ex
hypothesi, as unnecessary regulatory interventions, ultimately harmful to
market efficiency. For proponents of regulation, finance industry insta-
bilities have unacceptable political consequences and the industry should
therefore be regulated and monitored (Levitin 2011).
At the same time as the increased emphasis on liquidity and the
unprecedented expansion of the finance industry have arguably served
53
to “democratize the access to finance capital” (see, e.g., Rajan 2006), the
strong orientation toward liquidity creates certain problems not only
within the community of financial traders as demonstrated by Froot
et al. (1992), but there are also problems created between, e.g., outside
investors and inside managers in companies holding substantial stocks
of liquid assets. The presence of such liquid assets makes the assessment
and monitoring of these firms more complicated and costly, and this cre-
ates so-called agency problems. In the following, these two issues will be
discussed.
wo Studies of the Consequences of the Liquidity

T
Preference
Morgan (2002) examines the former problem of assessment and studies

how bonds issued by companies (including banks) in the 1983–1993
period have been rated by the major rating agencies Moody’s and
Standard and Poor’s (S&P). Morgan (2002: 874) suggests that disagree-
ment in rating between Moody’s and S&P is a “proxy for uncertainty,”
i.e., the inability to rate the bonds issued consistently is indicative of
underlying instability of companies that hold substantial shares of liquid
assets. Based on his data set, Morgan (2002: 874) finds that raters “split
substantially more often over the bank issues than over other issues with
similar features (averaging rating, etc.).” In fact, Morgan (2002: 876)
continues, the gap between the “mean ratings” by Moody’s and S&P was
“four times larger for bank issues than for the typical nonbank issue.”
More specifically, this uncertainty in how to rate bonds issued by banks
has been accentuated after circa 1986, that is, after deregulation policies
have been implemented in order to increase the “market efficiency” of the
finance industry:
Raters’ seemed increasingly uncertain about banks after 1986 . . . After

1986, the proportion of split-rated issues became increasingly common in
banking and increasingly uncommon in other industries. By 1993, banks
and insurance were about tied in terms of split-rated issues, and both were
ahead of other industries. (Morgan 2002: 880)
Morgan (2002) seeks to explain this uncertainty regarding the solidity

and creditworthiness of banks and insurance companies on the basis
of these firms’ relatively few tangible assets, and the ability of the man-
agers in those firms to participate in asset substitution (a problem dis-
cussed shortly), which in turn creates agency problems between the
banks’ owners and managers and its creditors. In other words, consis-
tent with Minsky’s (1986) financial instability hypotheses, “financial
assets generally may create collateral uncertainty for bank investors”
(Morgan 2002: 881).
The term asset substitution is a key to this uncertainty; as banks hold pri-
marily highly liquid and thus tradable assets, the stock of assets in banks
and insurance companies is complicated to assess and monitor as banks
can change positions in a split second, which undermines outsiders’ abil-
ity to keep track of the stock of assets and to determine what they may be
worth for the time being (Morgan 2002: 882). That is, the very liquidity
of the assets held by banks and insurance companies undermines the
monitoring of these banks, and that in turn induces agency costs, which
in the next stage is materializing into uncertainty over the rating of, e.g.,
bonds being issued by such finance institutions: “Disagreement between
bank raters over bank issues can be traced to the banks’ underlying assets
and capital structure. Trading assets, in particular, seem to confound
the raters, as do loans” (Morgan 2002: 875). The uncertainty of finance
institutions (and the instability that derives therefrom) is thus a direct
consequence of the preference for liquidity, as stated by Minsky. “[T]he
unique nature of banks assets, combined with their high leverage, cre-
ate fundamental uncertainty for investors and analysts,” Morgan (2002:
881) summarizes.
In Morgan’s (2002) view, the uncertainty and instability engendered by
the excessive liquidity of the stock of assets held by finance institutions—
Morgan (2002: 888) speaks about “the relative opacity of banks”—justify
and motivate regulatory control of the finance industry. Various forms of
herd behavior and opportunistic behavior—“runs, contagion, and other
strains of systemic risk”—can harm the long-term stability of the finance
industry, and therefore reformers should take careful action to ensure
that excessive speculation does not undermine a functional finance mar-
ket. However, this is by no means a trivial task, Morgan (2002: 888)
55
warns: “[R]eformers should remember what they are dealing with: banks
may be the black holes at the center of the financial universe, powerful
and influential, but are to some degree, unfathomable.”
Morgan’s (2002) study demonstrates how liquidity per se generates
agency costs and monitoring problems, and that translates into uncer-
tainty and instability on the macro-level of the finance industry. Liquidity
is therefore not of necessity only a “good thing” in the economic sys-
tem of competitive capitalism, dependent on reasonable stability to give
actors such as investors and entrepreneurs possibilities to calculate and
assess risks over time. More specifically, as discussed by Myers and Rajan
(1998), the agency problems derived from excessive liquidity generate
substantial agency costs. In general, agency theorists such as Eugene Fama
and Michael Jensen (1983) associate such agency costs with traditional
and mature industries, generating a significant cash flow but having few
internal investment opportunities that hold the promise of generating an
adequate return (measured as return on investment [ROI]). Under such
conditions, Fama and Jensen (1983) suggest, cash-rich but risk-averse
(and allegedly self-serving) managers accumulate finance capital and
squander them in projects that either serve to insulate managers from
the consequences of market pricing, or generate substandard return on
investment, two activities that bereave the shareholders of the residual
cash flow they are entitled to, according to agency theorists. However,
these concerns are rarely, if ever, addressed as a concern in the finance
industry by agency theorists, but the studies reported by Morgan (2002)
and Myers and Rajan (1998) indicate that they should do so, and that
they should do so not on the basis of their standard argument—that sala-
ried managers squander the residual cash flow at the shareholders’ loss in
predictable ways—but because the liquidity of holdings per se is a concern
when it comes to the monitoring of managerial decision making.
First of all, Myers and Rajan (1998: 733) define liquidity as “the ease
with which [an asset] can be traded”; “The more liquid a firm’s assets,
the greater their value in short-notice sales” (Myers and Rajan 1998:
733). Thus the term liquidity embodies the efficiency criteria that neo-
classical economic theory holds in esteem, as the transaction costs for
circulating an asset are lower the higher the liquidity. However, this “effi-
ciency” is contextual as liquidity per se generates agency problems and
agency costs: “For financial institutions, however, increased liquidity

can paradoxically be bad. Although more liquid assets increase the abil-
ity to raise cash on short notice, they also reduce management’s ability
to commit credibly to an investment strategy that protects investors,”
Myers and Rajan (1998: 733) argue. Managers that control highly liquid
assets are endowed with operational flexibility; i.e., it is easy for them to,
e.g., “substitute from liquid assets into illiquid investments” (Myers and
Rajan 1998: 763), and only the managers know how to orchestrate this
substitution. From the perspective of the principal (say, a lender), such
substitution is, Myers and Rajan (1998: 763) say, equivalent to “stealing
part of the assets.” That is, even though there is a higher degree of control
of, e.g., banks through mandatory public disclosure practices and better
law enforcement to reduce the risk of fraud, the level of risk and opacity
in the finance industry remains considerable.
These agency problems, derived from liquidity as stipulated by Minsky,
in turn lead to what Myers and Rajan (1998: 763) refer to as disinterme-
diation—“the movement of more creditworthy firms away from borrow-
ing from financial intermediaries to direct market financing.” In other
words, when finance markets are deregulated to increase the efficiency of
the supply of finance capital, the access to liquid assets increases (which
can be understood as a measure of market efficiency), but rising agency
costs undermine creditworthy firms’ incentives to use intermediaries. As
“high-quality clients” now operate directly on the finance market and “cut
off the middle man,” banks, which “have a cost disadvantage in funding
the highest quality clients,” must serve other actors in the economy, most
notably by “providing guarantees and backup lines for commercial paper”
(Myers and Rajan 1998: 763). For investors (e.g., individuals buying bonds
issued by creditworthy firms), they can now charge “a rate appropriate to
the risk of the high-quality firm, rather than a rate commensurate with
the average risk of the lower credit-quality bank” (Myers and Rajan 1998:
764, Emphasis added). In contrast, banks now serve the more risky and
volatile segments of the finance industry. Taken together, what Myers and
Rajan (1998) call the “paradox of liquidity,” suggesting that the theory
that increased levels of liquidity (postulated to be more transparent than
illiquid assets, bound up with certain expertise and specific market condi-
tions) would reduce monitoring cost for outsiders, is contrasting against
57
the practical difficulties involved in monitoring managers who can use

their liquid assets to take illiquid positions at short notice. The paradox
thus consists in that what is allegedly conducive to increased transparency
(and thus providing better possibilities for monitoring, e.g., managerial
decision-making quality) de facto leads to opaqueness. The paradox is thus
similar to the riddle, “What grows in size as more disappears?” (Answer: A
hole); it is seemingly inconsistent with the everyday use of language and is
therefore counterintuitive, and more specifically, it violates the dominant
economic theory proposition that liquidity equals transparency.
The studies of Morgan (2002) and Myers and Rajan (1998) thus reveal
that Minsky’s (1986) finance market instability hypothesis, running against
the conventional wisdom of mainstream neoclassical theory that predicts
that liquidity is the gateway to increased efficiency and stability in finan-
cial markets—at least a host of policy changes and reregulatory reform
have been justified and communicated on the basis of such grounds (Grant
2010; Topham 2010)—is not only some specific theoretical proposition,
but actually captures the functioning of underlying financial market activi-
ties. Increased liquidity leads to instabilities in the economy, based on the
difficulty of monitoring actors that control and continuously modify large
holdings of highly liquid assets. This in turn incentivizes high-quality firms
to raise capital without the help of intermediaries (e.g., banks), and that
pushes finance industry actors to the more risky end of the continuum and
to serve less creditworthy and thinly capitalized clients. In these fringes of
the finance market, disequilibrium and speculation are systemic features,
leading to situations where speculative behavior puts the finance industry
stability at risk, as in the case of the fall of 2008 and in many other minor
crises after 1980 (Calomiris and Haber 2014; Black 2005).
Rajan (2006) stresses that it is not so much the design of the financial
assets per se but the incentive structure of the finance industry that gener-
ates undesirable instabilities in the economic system:
In the new, deregulated, competitive environment, investment managers

cannot be provided the same staid incentives as bank managers of yore.
Because they have to have the incentive to search for good investments,
their compensation has to be sensitive to investment returns, especially
returns relative to their competitors. Furthermore, new investors are
attracted by high returns. Dissatisfied investors can take their money else-
where, but they do so with substantial inertia. (Rajan 2006: 501)
More specifically, finance market actors are today typically compensated

on the basis of upside returns rather than on the basis of their ability
to avoid downside risks. In addition, their performance is increasingly
relative to peers, either directly or indirectly, because investors exit or
enter funds on the basis of concerns regarding returns. Unfortunately,
Rajan (2006: 501) writes, “the knowledge that managers are being evalu-
ated against others can induce superior performance, but also a variety
of perverse behaviour.” Such incentive systems, poorly aligned with the
interest of a wider set of constituencies also outside of the finance indus-
try, matter because “sudden shocks,” in the financial system caused by
what Rajan (2006) calls “perverse behavior,” “may result in severe and
prolonged distress in the real economy” (Mehran and Mollineaux 2012:
219): “Nonfinancial firms and households may take longer to recover
from shocks than financial firms, due to the illiquid nature of their assets
and the longer time horizon of many physical and human capital invest-
ments,” Mehran and Mollineaux (2012: 219) argue. Therefore, to insti-
tute and actively manage a culture of prudence and risk moderation
should be a key priority in the finance industry, both Rajan (2006) and
Ellul (2015: 292) claim:
Banks with a conservative risk culture will simultaneously take lower risks
and decide to have stronger risk management structures. Similarly, banks
with a more aggressive risk culture will elect to take higher risks and put in
place weaker risk management structures. (Ellul 2015: 292)
Unfortunately, a host of studies conducted after the 2008 finance indus-

try collapse have revealed that such a “conservative risk culture” has not
really been the defining mark of the increasingly globalized finance indus-
try (Hagendorff and Vallascas 2011; Fahlenbrach and Stulz 2011); in con-
trast, as Hagendorff and Vallascas (2011: 1079) summarize their findings:
Overall, our results are consistent with the view that executive compensa-
tion practices at banks have contributed to the recent financial crisis and
59
that attempts to employ executive compensation to align the interests of

managers and shareholders through higher-risk taking incentives are
unlikely to limit risk-taking in the banking industry. (Hagendorff and
Vallascas 2011: 1079)
Therefore, Rajan (2006: 502) argues that when all factors are considered
on an aggregated level, available data “[s]uggests that despite a deepen-
ing of financial markets, banks may not be any safer than in the past.
Moreover, the risk they now bear is a small (though perhaps the most
volatile) tip of an iceberg of risk they have created.” He continues:
Taken together, these trends suggest that even though there are far
more participants today able to absorb risk, the financial risks that are
being created by the system are indeed greater. And even though there
should theoretically be a diversity of opinion and actions by partici-
pants, and a greater capacity to absorb the risk, competition and com-
pensation may induce more correlation in behaviour than desirable.
(Rajan 2006: 502)
In addition to the consequences of increased instability of the global

finance system, always exposing the wider economy at the risk to be
thrown into financial turmoil that it will take considerably longer to
sort out for nonfinancial industries than for the industry that caused
the economic instabilities and downturn in the first place, the sheer
inability of creating transparency, robust regulatory control, and a
theoretical agreement about the nature of the finance industry gen-
erate a fair share of frustration, also among “insiders” (i.e., finance
theorists). For instance, in a recent review paper published in Annual
Review of Financial Economics, Mehran and Mollineaux (2012) express
their concern:
[F]inancial institutions remain frustratingly inscrutable. Despite nearly a

century of concerted research and periodic financial crises, the connections
between the governance of banks, their individual performance, and the
long-run stability of the financial system are not well understood. Many
questions remain unanswered about the causes of the [2008] crisis. (Mehran
and Mollineaux 2012: 216)1
Money-manager capitalism is thus an economic system beset by many

sources of instability, which the sheer size of the finance industry and the
great number of actors cannot amend or effectively counteract.
e Financial Instability Hypothesis: Practical Implications

Th
and Consequences
A consequence of the liquidity preference is that much neoclassical econ-

omy theory is irrelevant, unable to apprehend the elementary process of
the real-world economic system, dominated by finance market actors,
Minsky (1980) says:
Once we shift from an abstract economy and turn to analyzing the behav-
ior of a capitalist economy with expensive capital assets and a sophisticated
financial system, the equilibrium, equilibrating, and stability properties
derived in standard economic theory are not relevant. Such a capitalist
economy is unstable due to endogenous forces which reflect financing pro-
cesses. These processes transform a tranquil and relatively stable system
into one in which a continued accelerating expansion of debts, investment,
profits, and prices is necessary to prevent a deep depression. (Minsky 1980:
519)
Such statements secured a heretic role for Minsky, unfortunately margin-

alizing his influence in mainstream economic theory, which in turn led
to limited activity to prevent recurrent economic crises and bubbles after
1980. Despite the alarming growth of such events in the United States
and the global economy after 1980 (e.g., Calomiris and Haber 2014;
Wolfson and Epstein 2013; Gorton 2010; Black 2005), free-market pol-
icy dominated for most of the period until 2008, a full-scale global crisis
that caused much debate (Blinder 2013; Stiglitz 2010; Sorkin 2009). In
contrast, already in 1980, Minsky called for regulatory control of the
finance industry2:
[C]ontrol of banking—money, if you wish—is not enough; the liability

structures available to units that own the massive capital assets of the
economy must be constrained. The fundamental dilemma in economic
61
organization is how to preserve the vitality and resilience of decentralized

decisions without the instability accompanying decentralized financial
markets. (Minsky 1980: 520)
In the era of personal capitalism until the depression-era time and in the
managerial capitalism of the post-World War II period, the finance indus-
try was by and large a support function to industrial production and the
economy at large. After 1980, this operative order would change as the
finance industry increasingly would dictate the rules of the game in the
capitalist economy. This shift in the balance of power from the large-scale
corporation to the network-based, knowledge-intensive, yet oligarchic
finance industry would have pervasive influence on the economy and
labor relations by the end of the century and the beginning of the new
millennium. If “wealth holders” (Mehrling 2011: 68) by and large prefer
liquid over illiquid assets, and if the finance industry and nonfinancial
companies are increasingly entangled in the contemporary economy,
there is a need for mutual adjustment between the interest of different
actors, and between the short-term and medium- and long-term goals of
these actors. In the era of the investor capitalism, the balance of power
has moved in the direction to benefit actors with a preference for liquidity
and short-term rents. For instance, the increased levels of household debt
(Montgomerie 2009) and the presence of, e.g., housing bubbles in, e.g.,
the United States (Mian and Sufi 2014), two widely examined empirical
conditions in the American economy, are in part caused by the finance
markets being able to transform illiquid assets such as home mortgage
loan and underlying real estate ownership contracts into liquid financial
assets such as mortgage-backed securities (MBS) or collateralized debt
obligations (CDO). As Bryan and Rafferty (2014: 891) remark, “Perhaps
people’s subordination to capital comes not just from the extraction of
a surplus in the workplace, but also holding illiquid assets (jobs, houses,
health) in a world of liquid assets, leaving workers (households) as sys-
temic ‘shock absorbers’ in global financial markets.” In a world where
finance market actors can generate a yield on the basis of the capacity to
make illiquid assets liquid through complex financial engineering such as
securitization, the owners of illiquid resources are always exposed to risks
that they themselves have not decided to carry—they become the “shock
absorbers” of finance industry, as in the case of the housing bubble in the

United .States in the beginning of the new millennium (Mian and Sufi
2014).
Practical Implications
xamining the Correlation Between Financialization
E
and Economic Growth
The period after 1980 has been characterized by the movement away from
an economy dominated by directors and salaried managers toward an
economy granting finance industry actors a much more influential role in
monitoring the economic value creation and extraction and in prescrib-
ing organizational and managerial activities for nonfinancial industries
(Styhre 2015). The enforcement and normalization of shareholder pri-
macy governance is just one example of how the financialization of the
contemporary capitalist economy has now moved to historically unprec-
edented levels. As this tendency to examine not only economic activities
and processes but virtually all social and human activities through the lens
of a finance-oriented free market has been most successfully established,
it is reasonable to examine whether the degree of financialization in an
economy coincides with economic growth, widely regarded as the most
robust measure of economic performance. Even though there are studies
suggesting that is the case, more recent studies suggest otherwise, thus
casting doubt on the benefits of a financialized economy. In the follow-
ing, these studies will be reviewed.
Cetorelli and Gambera (2001: 619) examine the growth and concen-
tration of the banking sector and find that “bank concentration has an
average depressive effect on industry growth” (Cetorelli and Gambera
2001). At the same time, industries in need of external capital (i.e., by
definition, all entrepreneurial firms developing their business on the basis
of debt financing) are benefitting from better access to credit. This find-
ing is unsurprising as the raison d’être of banks is to spread risks and
to distribute capital from mature to emerging industries: “The results
show robust evidence that industries in which young firms are more
63
dependent on external finance will in fact grow relatively faster in those

countries where the banking sector is more concentrated,” Cetorelli and
Gambera (2001: 620) summarize. Yet, the aggregated result suggests that
“that bank concentration has a negative effect on growth that, on average,
affects all sectors indiscriminately” (Cetorelli and Gambera 2001: 634).
That is, with the exception of entrepreneurial firms, there is no evidence
of a positive correlation between financialization (operationalized as bank
concentration and growth) and economic growth.
Aizenman et al. (2013) examine whether the “liberalization” of the
regulation of the finance industry leads to more periods of decline in
the finance industry over time, an event that strongly affects the wider
economic system and that stresses households, which encounter new
uncertainties when managing their budgets (Redbird and Grusky 2016).
The statistics collected and generated indicate a “[h]igher frequency of
occurrences of sudden declines in financial sector value added than pre-
dicted by a symmetric normal distribution, corroborating the notion
that the financial industry, while growing over the long run, is subject to
abrupt, periodic contractions” (Aizenman et al. 2013: 5). More specifi-
cally, this concern—a more shaky economy, more complicated to pre-
dict and thus not conducive to, e.g., increased investment appetite—is
most pronounced in emerging markets and in a subgroup of developed
countries, including Denmark, Italy, Sweden, and the United States
(Aizenman et al. 2013: 5). This empirical data is not easily explained by
extant theoretical models. More specifically, Aizenman et al. (2013: 16)
suggest that the liberalization of the finance industry leads to increased
levels of instability and recurrent financial crises (see, e.g., Calomiris
and Haber 2014; Friedman and Kraus 2012), coming at a price for
the aggregated economy: “Most sharp financial sector contractions
appear to have taken place after the broad liberalization of international
financial markets, especially in 1980s. Of the 12 post-1980 financial
contraction episodes, 9 are associated with sharp reversals in foreign
financial capital inflows, or ‘sudden stops’” (Aizenman et al. 2013: 16).
Such evidence stands in sharp contrast to the widely held belief in free-
market communities of the post-1980s’ era that markets have the innate
capacity to stabilize and correct themselves, but only if they are devoid
of regulatory control and interventions. Such theories do not stand up
well against empirical evidence. Aizenman et al. (2013) summarize their

results:
Our empirical study validates the asymmetric nature of the link between
financial sector growth and growth in the real economy. Abrupt financial
contractions are more likely to take place following periods of accelerated
growth in the financial sector—the higher the growth rate of financial sec-
tor value added relative to the non-financial sectors, the greater its power in
predicting subsequent financial busts. Furthermore, financial contractions
are associated with a large decline in the value added of key real sectors, with
the construction sector affected the most, even though financial expansions
do not seem to have much of an effect. (Aizenman et al. 2013: 20)
In contrast to the findings of Aizenman et al.’s (2013), Bekaert et al.’s

(2005) data from 95 countries demonstrates that a liberalization of
financial markets (defined as a combination of “macro-reforms, finan-
cial reforms, legal reforms”; Bekaert et al. 2005: 29) on average leads
to a 1.2 percent increase in real per capita growth in GDP. However,
as Bekaert et al. (2005: 41) remark, the study “reveals association, not
causality.” Therefore, Bekaert et al. (2005: 41) summarize, “the answer
to the question ‘Does (not ‘Did’) financial liberalization affect economic
growth?,’ remains difficult to answer definitively.” In contrast, as demon-
strated by the article of Aizenman et al. (2013) a number of years later,
there are many scholars and pundits arguing that liberalization “increases
economic growth volatility” (Bekaert et al. 2005: 41). In contrast to
the studies reported by Cetorelli and Gambera (2001) and Aizenman
et al. (2013), Bekaert et al. (2005) propose a positive association between
financialization and economic growth, albeit they remain agnostic about
the causality. King and Levine’s (1993) study including data from 80
countries published in the early 1990s proposes a more straightforward
linearity between “financial development” and “long-run growth”:
We find that the predetermined component of financial development is a

good predictor for long-run growth over the next 10 to 30 years, Furthermore,
higher levels of financial development are strongly associated with future
rates of capital accumulation and future improvements in the efficiency with
which economies employ capital. (King and Levine 1993: 719)
65
King and Levine (1993: 781) stress the causality between the finance
industry expansion and economic growth: “Finance does not only follow
growth; finance seems importantly to lead economic growth.”
The more recent study of Tomaskovic-Devey et al. (2015) challenges the
findings and policy implications of Bekaert et al. (2005) and King and Levine
(1993). Studying the growth or decline of industry value added as a factor
determined by financial investments in the nonfinance sector, Tomaskovic-
Devey et al. (2015: 526) find that “[i]ndustries that pursued financial ori-
ented investment strategies subsequently generate less total income. This
finding is robust across major sectors of the economy.” In addition to the
declining economic return, derived from increased financial investments,
this managerial policy increases economic inequality as the shareholders’
gain is the loss of labor and government (Tomaskovic-Devey et al. 2015:
526). Financialization thus causes both economic decline and increased
economic inequality. Tomaskovic-Devey et al. (2015: 527) emphasize that
increased financialization, measured as the share of financial assets held by
nonfinancial firms, has been a persistent tendency in the period after 1970:
Although there was a small growth in financial assets as a share of all assets
from 1970 to 1980, during the post-1980 period of financialization the
share grew rapidly rising to as high as 29% of all assets held by non-financial
firms by the early 2000s. Financial assets as a share of all investments
declined across the 2000s. (Tomaskovic-Devey et al. 2015: 527)
This tendency to expand the level of financial assets at the expense of,
e.g., production capital or investment in human resources was observed
in all industries but was accentuated in the manufacturing industry
(Tomaskovic-Devey et al. 2015: 535). When, e.g., the manufacturing
industry increased its level of financial assets relative to investments in
production assets, a lower growth in industry value added materialized
(Tomaskovic-Devey et al. 2015: 529). Moreover, this new finance mar-
ket orientation led to the loss of labor income and lower tax revenues. In
terms of labor income, the change is substantial over time:
[T]he trend towards financial investments by non-finance corporations

may have reduced total labour income by as much as 60% over the 38-year
observation period. While this may seem like a high number it represented
a compounded decline in labour income growth of only about 1.5% a year.
(Tomaskovic-Devey et al. 2015: 538)
In terms of tax income, Tomaskovic-Devey et al. (2015: 538) calculate

the estimated impact on the total volume of taxes paid in production
and on corporate profits to be in the range of a “decline of almost 6%.”
However, the lost tax revenues derived from blue-collar job loss and
declining compensation are likely to be substantially higher, a reason-
able conclusion given the sharp decline of manufacturing jobs in the
American economy in the 1980s and 1990s. Tomaskovic-Devey et al.
(2015: 538) calculate the overall negative consequences of the financial-
ization of nonfinancial industries to the depression of value added to
3.9 percent, roughly the equivalent of 3 years of lost economic growth
for the 38-year period (1970–2008) examined. Tomaskovic-Devey et al.
(2015: 541) summarize their findings in terms of Wall Street being able
in the period to set the agenda and to incentivize managers to act in
the interest of the finance industry, a strategy that paid off well for Wall
Street but slowed down economic growth and generated increased eco-
nomic inequality: “The coefficients for financial investments on value
added were uniformly negative in the 1980s and 1990s . . . Wall Street
was rewarding corporations for declining employment and these strate-
gies were economically positive for capital.” Wall Street was thus in the
position to dictate the rules of the game for nonfinancial industries to
benefit its own interests, and as a consequence, the aggregated economy
performed worse.
e Declining Productivity Growth After 1970 and 2005

Th
in Particular
While the studies reviewed above all examine financialization as an inde-

pendent variable affecting economic growth, Gordon (2015a) exam-
ined total factor productivity (TFP) in the US economy over the period
1920–2014, but without advancing any hypothesis regarding the decline
in TFP after 1970 and especially more recently, after 2005. The TFP
67
measure provides the “the best available measure of the underlying pace
of innovation and technological change,” Gordon (2015a: 54) suggests, as
it subtracts “the effects of capital deepening and of improved educational
attainment” from labor productivity growth and thus provides a measure
that can demonstrate productivity growth over longer periods of time.
“Average TFP growth of 0.70 percent for 1972–2014 was barely one-
third of the 2.01 growth rate achieved between 1920 and 1972,” Gordon
(2015a: 54–55) summarizes the statistics. Gordon (2015a) adds that in
the 1996–2004 period, for the take-off for digital media and Internet-
based innovations in, e.g., administrative work and eventually in retailing
and service industries, the TFP was 1.43. This is substantially higher than
the TFP of 1972–1995 at 0.58 and the TFP of 2005–2008 at 0.54, and
this condition has been explained by economists as a “delayed effect” of
the advances in computer science and computer technology in the 1970s
and the coming decades. The four-year period 1999–2002 was also the
only period over 1986–2013 where net investment to the capital stock
was above the 3.2 percent average calculated for the 1950–2007 period:
The ratio of net investment to the capital stock . . . has been trending
downward relative to its 1950–2007 average value of 3.2 percent. In fact,
during the entire period 1986–2013, the ratio exceeded that 3.2 percent
average value for only four years, 1999–2002, that was within the interval
of the productivity growth revival. (Gordon 2015b: 542)
This data indicates that faltering TFP reduce the willingness to invest in
production capital, which in turn leads to further declines in TFP, lead-
ing into a vicious circle of lower economic activity and performance.
Gordon’s (2015a) study points at a variety of factors that policy-makers
and economists should be concerned with, as many different variables
are mutually constitutive and/or entangled in convoluted ways, yet affect
productivity growth and thus further complicate policy-making:
Slower growth in potential output from the supply side, emanating not just
from slow productivity growth but from slower population growth and
declining labor-force participation, reduces the need for capital formation,
and this in turn subtracts from aggregate demand and reinforces the decline
in productivity growth. In the end, secular stagnation is not about just

demand or supply but also about the interaction between demand and sup-
ply. (Gordon 2015a: 58)
If it can be assumed that the unprecedented expansion of the global

finance industry has played a role in the declining TFP, then it will
demand considerable political engagement to turn the Western econo-
mies in a direction that does not further leverage economic inequality
and otherwise promotes undesirable outcomes that contribute to declin-
ing economic efficiency and performance.
F irm-Level Consequences of Investor Capitalism:

Shareholder Welfare Governance and the Decline
of the Public Corporation
The decline of managerial capitalism constitutes a major event in the era

of Western societies, with ramifications across the entire Western, demo-
cratic society and strongly influencing the lives of millions of employees,
not the least the professional, middle-class workers being discussed in this
volume. As Davis and Greve (1997: 8) write, on the level of the firm, the
most important change was in the relations between those who own and
those who control large corporations, with the shareholders being what
agency theorists (e.g., Fama and Jensen 1983) calls principals, gaining the
upper hand in the new regime, and the executives and board of direc-
tors now serving as their agents. In contrast, corporate law, defined and
enacted to enable transparency and stability in the relation between vari-
ous stakeholders to create possibilities for effective markets (Blair 2003;
Eisenberg 1989), gives considerable discretion to executives and the board
of directors (Stout 2012, 2013). In agency theory, widely popular in the
1980s as it advanced a new model for corporate governance, anchored in
finance market control that the new generation of agency theorists such
as Michael C. Jensen (1986, 1993) argued would discipline managers and
punish managerial malfeasance, much of corporate law is simply ignored.
For instance, shareholders do not have the right to claim the residual cash
flow (the cash remaining after all costs are covered and taxes paid) as it
69
is the board of directors that have the formal authority to decide how to
allocate this capital. In addition, agency theorists mostly ignore that not
all shareholders operate within a low-risk, short-term investment horizon
(as in the case of pension fund savers, at times not claiming their share
of the after-tax profits until decades into the future) and that some of the
principals are creditors, not shareholders (Rock 2013). In other words,
most of the key arguments advanced by agency theorists that justify the
shareholder primary governance practice rest more on preferences and
wishful thinking than on a careful review of corporate law and real-world
economic conditions. Regardless of the hollowness of the agency theory
argument and its shareholder primacy model (Daily et al. 2003; Davis
and Stout 1992), it was the short-term-oriented owners of stock who
benefitted the greatest from the shift in the balance of power from, e.g.,
organized labor to finance industry actors.
Based on a combination of free-market advocacy, pseudo-legal reason-
ing, and the idea that managers induce agency costs in predictable ways (a
proposition being both counterintuitive given the swift economic growth
in the post-World War II era and the density of various mechanisms for
finance market-based control of the public corporation being in place),
agency theorists have advocated shareholder welfare as the only legiti-
mate purpose of the corporation and managers (see, e.g., Hansmann and
Kraakman 2000). While apparently being unsubstantiated by empirical
data and presenting a theoretically incredible model, agency theory has
been remarkably influential, and today, much of the corporate system
is geared toward transferring earnings to the shareholders either in the
form of dividends or as stock repurchases. To put it simply, we are now
living in an era where shareholder welfare is indubitably given the highest
priority.
After three decades of shareholder welfare, a slowdown of economic
growth, the escalation of economic inequality, and rising concern regard-
ing the resilience of competitive capitalism, there is a substantial litera-
ture critically examining the efficacy of shareholder primacy governance
on both firm level and aggregated level. For instance, Tomaskovic-Devey
et al. (2015: 541) suggest that the shift from “production and market
share to financial and shareholder value investment strategies” has “most
likely reduced total economic growth in the USA.” They suggest that
employment and wage stagnation, in combination with rapidly growing

levels of economic inequality, have led to a decline in local and federal
government’s tax revenues, which in turn further limits the economic
growth. Therefore, Tomaskovic-Devey et al. (2015: 541) summarize, “it
is safe to say that for the vast majority of the U.S. population financial-
ization has led to lower standards of living as well as weaker state invest-
ment capacity for both the population and infrastructure than what
would have been possible under a more production-focused regime.”
More specifically, rather than being conducive to economic growth and
economic welfare (two desirable outcomes for most moderate economic
commentators and policy-makers), the shareholder primacy gover-
nance “[e]ncouraged firms to replace equity with debt and to reduce
employment” (Tomaskovic-Devey et al. 2015: 542). These reductions
in employment were “taken as signals of managerial seriousness and
rewarded with surges in stock prices,” Tomaskovic-Devey et al. (2015:
542) suggest, leading to a boosting of firms’ return on equity (ROE),
unsurprisingly being the prime indicator for stock analysts assessing firm
performance. This in turned rewarded manager who sacrificed long-
term economic growth to accomplish short-term profits, sanctioned by
the finance industry logic:
[T]he shareholder value movement produced a perverse set of incentives to

reduce total production and perhaps in the long-run total profit, while
boosting stock prices and dividend payments on the remaining equity. Our
results suggest that financial investment strategies, in concert with the
shareholder value movement and CEO compensation strategies reduced
the long-term value of the non-finance corporate sector and transferred
income to financial service firms and rentier capital in general. (Tomaskovic-
Devey et al. 2015: 542)
Seen in this light, the series of financial crises and corporate scandals
that were witnessed from the early 1980s, beginning with the savings
and loan industry crisis in the mid-1980s (Black 2005), and reaching an
unprecedented level when the global finance market collapsed in 2008, is
endemic to the financialized economy and the shareholder primacy model
advocated and promoted by agency theorists and others. In Guillén and
71
Capron’s (2015) view, there is a straightforward causality between these

various events and occurrences:
The rise of shareholder capitalism during the late twentieth century created
the conditions for the various financial crises and corporate scandals of the
first decade of the twenty-first century. The fact that so many countries
around the world continue to experience severe economic and financial
distress, corporate scandals, and rogue behavior by managers and traders is
paradoxical because all of these problems have proliferated at a time when
corporate governance rules, including shareholder rights protection, have
presumably been ‘improved’ around the world. (Guillén and Capron 2015:
153)
In this view, shareholder primacy governance is one of the foremost vehi-

cles for the financialization of competitive capitalism and for the transfer
of economic resources from a variety of constituencies to the sole benefi-
ciaries of the firm’s investors, i.e., the shareholders. This in turn led to a
long series of events and consequences that today are subject to intense
scholarly attention, to be addressed elsewhere in this volume. One of
them is the decline of the public corporation as a key institution in com-
petitive capitalism.
The Decline of the Public Corporation
One of the key consequences of the shareholder welfare governance is

the decline of the public corporation in the American economy. In the
era of managerial capitalism, the large-scale corporation in general meant
a manufacturing firm, but after the 1980s’ swift deindustrialization of
the US economy (Bluestone and Harrison 1982), this would change.
“By March 2009, more Americans were unemployed than were employed
in manufacturing, and all signs pointed to further displacement in the
goods-producing sector,” Davis (2009: 27) reports. The deindustrializa-
tion not only restructured American industry but radically transformed
American cities that relied on the manufacturing industry for employ-
ment and economic well-being: “From 1950 to 2010, the population
of the City of Chicago declined, 25.5 percent, that of Philadelphia by
26.3 percent, that of Cleveland by 56.1 percent, that of Detroit by 61.4

percent, and that of St. Louis by 62.7 percent,” Gordon (2015b: 368)
claims. While Chicago and Philadelphia, the third and fifth largest cit-
ies in the United States, still have a bustling and attractive downtown
area, parts of the downtown of Cleveland, Detroit, and St. Louis today
look like ghost towns, Gordon (2015b: 368) adds. In addition, relatively
well-paid, stable, and export-oriented manufacturing jobs have been sub-
stituted by relatively lower paid, uncertain, or temporal service sector
jobs, leading to a downward push of the income primarily of blue-collar
workers, but also for white-collar workers and university-educated indi-
viduals and middle-class families.3 In 1950, eight of the top ten American
employers were manufacturers, but today all are in services and seven
are retailers (Davis 2010: 333). “By 2009, Wal-Mart employed about
as many Americans (1.4 million) as the 20 largest U.S. manufacturers
combined, and 9 of the 12 largest employers were retail chains,” Davis
(2009: 30) writes. “In 1980, manufacturing accounted for 28 percent
of all US jobs, while retail and services accounted for 24 percent. By
2011, manufacturing accounted for only 11 percent of all jobs, while
retail and services accounted for 43 percent,” Decker et al. (2014: 17)
add. Wal-Mart, notorious for its harsh employment policies and lack of
benefits (Ingram et al. 2010; Brunn 2006; Fishman 2006), is thus the
ideal-typical blue-collar—or perhaps better, working-class (service work-
ers rarely wear blue-colored overalls at work)—employee. It is no longer
General Motors that stands as the icon of American capitalism—and nei-
ther does Wal-Mart, to be fair—but Silicon Valley computer industry
cluster companies such as Google and Apple. The crux is, as Davis (2010:
351) points out, while these companies and these high-tech, knowledge-
based industries may generate enormous income and economic wealth,
they do not employ as many workers as the manufacturing industry once
did, creating a political challenge when economic performance and sub-
stance correlate poorly with job growth. In the knowledge economy, few
highly skilled professional workers generate higher per capita economic
value than in previous economic regimes.
Davis (2009, 2010) suggests that not only does the manufacturing
industry today play a smaller role in the American and global economy,
but so too does the “large corporation” per se. “Large corporations have
73
lost their place as the central pillars of American social structure,” Davis
(2009: 27) says. In 1950, the ten largest US employers hired 5 percent
of the American workforce; today, this figure is 2.8 percent (Davis 2010:
333). Davis (2013) references the management writer Peter Drucker, a
foremost theorist of the managerial capitalism model, speaking about the
“society of organizations” as a key trait of the post-World War II econ-
omy. Davis argues that the large corporations not only were economic
engines but also served as social institutions in the period. Only today, in
hindsight, can the role of the large corporations in the American society
and elsewhere be fully overviewed. The standing criticism of the 1950s,
1960s, and 1970s that large corporations served to repress and enslave
the minds of the organization men and women spending their entire
lives within their domains (see, e.g., Crozier 1964) seems unsubstanti-
ated as these corporations were instead one of the foremost vehicles for
economic growth and prosperity:
Many accounts attribute the current situation to the unfettered power of

large corporations. In reality, the reverse is true: our current problems of
higher inequality, lower mobility, and greater economic insecurity are in
large part due to the collapse of the traditional American corporation. Over
the past generation, large, public traded corporations have become less
concentrated, less interconnected, shorter-lived, and less prevalent: there
are fewer than half as many public corporations today as there were fifteen
years ago. (Davis 2013: 284)
What Davis (2013) points at is instead the deinstitutionalization of

the public firm and its displacement by a network-based economic
organization, where lower transaction costs render the “hierarchy”
(with Williamson’s 1975, vocabulary) a less effective way to organize
joint work as an in-house activity. More critically, the strong advance-
ment of short-term shareholder interests renders most in-house activi-
ties a potential evidence of top management’s squandering the residual
cash flow and the withholding of economic resources that the share-
holders have supposedly contracted for. In both explanations, derived
from economic conditions and market efficiencies or a rebalancing
of political power, the large corporation seems to be on the way out.
The very term public corporation, denoting a company being listed

and whose stocks are traded on the stock exchange, free to acquire
for anyone, may also become obsolete over time. The pressure from
shareholders to distribute a larger proportion of all after-tax profits as
soon as possible may make the very idea of having shareholders at all
unattractive, Stout (2012) speculates. For instance, between 1997 and
2009, “[t]he number of public companies listed on stock exchange
has declined by 39 percent in absolute terms, and by a whopping
53 percent when adjusted for GDP growth” (Stout 2012: 54). Also
Davis (2013: 292, Figure 3) reports a decline in initial public offer-
ings (IPOs), the introduction of stock ownership in companies previ-
ously held in private equity, after 2000. On the basis of such data,
Davis (2013: 294) speculates about what he calls “the postcorporate
economic organization,” where economic value (e.g., new innova-
tions) is generated in networks of actors and small companies (Block
and Keller 2009).
In summary, in investor capitalism, the corporation as such either
is unfit to effectively operate in an environment characterized by
lower transaction costs or is made suspect of being little more than
a vehicle for withholding the free cash flow that should preferably be
distributed to the shareholders, whom in turn (neoclassic economic
theory optimistically maintains) pipe the capital into potential high-
growth industries and entrepreneurial activities starved of capital and
thus serve to generate the next generation of products, services, and
employment opportunities. In both perspectives, corporations have to
justify harder than ever why they should exist and in what way they are
better in handling economic activities than comparatively smaller and
more specialized firms, and networks of such firms in particular. From
the perspective of the professional worker, the decline of the large cor-
poration means essentially that professional work is now located in
closer proximity to the market, today not only having little patience
with unfocused and interest-driven “blue sky research activities,” but
also being theorized by neoclassic economic theorists as what should
discipline inefficient uses of economic resources. The decline of the
large corporation thus serves to redefine professionalism and profes-
sional work as such.
75
tructural Changes and the Shareholder Primacy

S
Governance: The Rise of Private Equity Firms
As the business charter with limited liability granted by the state is the
conventional vehicle for enterprising activities demanding financing from
multiple sources, the decline of the public corporation has been comple-
mented by the growth of so-called private equity firms (Appelbaum and
Batt 2012; Tillman 2012). Private equity firms are a new class of busi-
ness charters developed within investor capitalism, taking advantage of
the abundant supply of cheap finance capital. While the public firm was
originally instituted to enable economic growth, to promote entrepre-
neurial activities, to secure investor interest, and to justify and enforce
managerial discretion, and therefore by and large being beneficial for
wider socioeconomic interests, private equality firms demonstrate lim-
ited concerns for such interests; in private equity firms, the principal
objective is not to promote economic growth benefitting a wider set of
constituencies but to enable economic value creation and extraction to
benefit the owners.
Mazzucato and Shipman (2014: 162) define value creation as the
“production or distribution activity generating current outputs that
can be sold for more than their production costs, and/or capital assets
that can generate such profitable current outputs in future.” In the new
financialized regime of economic venturing, it is no longer return on
investment (ROI) that is targeted but return on equity (ROE), an indica-
tion of how well managers perform and produce economic value on the
basis of the equity being invested by the owners, not the total stock of
finance capital engaged in the venture. In order to raise the ROE, manag-
ers are incentivized to take on larger proportions of debt, which increase
the leverage on equity invested, and to maintain high levels of dividends
and to defend share prices so that equity holders do not face comparably
higher capital risk than the firm’s creditors (e.g., the owners of the firm’s
securities). This tendency to walk on the razor’s edge to maximize ROE
thus substantially reduces the management’s incentives to “put sharehold-
ers’ capital at risk through product or process innovation,” Mazzucato
and Shipman (2014: 1078) argue. With a somewhat unsubtle metaphor,
the ROE oriented company becomes a “zombie firm” as it no longer
articipates in long-term and forward-oriented activities such as innova-

p
tion projects and investment in human resources, but is merely kept alive
to enable value extraction for the short-term benefit of the owners on the
basis of existing resources. Mazzucato and Shipman (2014) suggest that
this ROE focus is contagious, spreading across industries.
Publicly listed companies therefore [by implication] came under pressure

to restore ROE by reducing their shareholders’ equity, through techniques
that included moving assets off the balance sheet, substituting debt for
equity, and buying-back shares. Privately held companies reacted to similar
pressure by running down their reserves, or by floating on stock markets
and paying-out the reserves as bonuses to the new shareholders. (Mazzucato
and Shipman 2014: 1078)
Tillman (2012: 1605) suggests that the thinly capitalized private equity
firms are inextricably bound up with the supply of inexpensive capital
and the growth of finance institutions (i.e., banks) willing to participate
in the advanced financial engineering activities demanded to keep these
firms afloat. Tillman (2012: 1605) also claims that the growth of private
equity funds, financing these activities, contributed to the 2008 financial
crisis by “encouraging excessively risky bank activity.” The supply of such
funds is in turn directly related to what Appelbaum and Batt (2012: 15)
refer to as the “shareholder-value revolution” and the “leveraged-buyout
(LBO) movement” of the 1970s and 1980s. In the 1990s, Wall Street
thoroughly institutionalized the shareholder welfare model by diffusing it
throughout the “non-financial sectors of the economy” (Appelbaum and
Batt 2012: 16), and thus an unprecedented level of capital accumulated
in the finance industry. When the economic value generated in the firms
is no longer reinvested in, e.g., real wage growth in parity with productiv-
ity growth, or in R&D and innovation activities, but is distributed to the
owners of stock, this excessive capital needs to be channeled elsewhere,
both mainstream theoretical models and common business sense suggest.
As much investment opportunities are discredited within the shareholder
welfare governance logic as a wasteful squandering of resources, capital
funds are made available for other, supposedly more rational investment.
Thus, a substantial share of the capital raised by private equity firms is
77
supplied by, e.g., pension funds (accounting for roughly one third of all
private equity capital; Appelbaum and Batt 2012: 43).
Speaking strictly about economic efficiency as being measured by
ROE, private equity firms are a significant financial innovation. Private
equity firms, supported by the supply of cheap finance capital, can
now “[b]uy businesses the way individuals purchase houses—with a
down payment or deposit supported by mortgage finance,” Appelbaum
and Batt (2012: 43) say. Expressed differently, the financial engineer-
ing implied renders private equity funds as “private investment vehi-
cles that permit investors to combine their capital for investment” in
ways that greatly increase investors’ purchasing power (Tillman 2012:
1605). That is, when cheap finance capital is available, private equity
firms and funds create a return on investment by taking what their
critics regard as “excessive risks” (Appelbaum and Batt 2012: 53); i.e.,
they participate in speculative activities. One may question whether
the beneficiaries of, e.g., pension funds are pleased to participate in
this form of economic venturing, either in terms of the economic risks
involved or on the basis of moral and ethical concerns derived from the
short-term focus of these ventures. For instance, in the 1980s, the early
days of the private equity industry, a 10/90 private equity/debt ratio
was common in the industry (Appelbaum and Batt 2012: 43); i.e., the
access to a relatively small amount of equity could generate substantial
economic power. More recently, this figure has moved toward a 25–35
percent private equity level. Yet, between 1970 and 2002, firms sub-
ject to leverage buyouts were twice as likely to file for bankruptcy in
comparison to publicly traded companies (Appelbaum and Batt 2012:
49). In addition, Tillman (2012: 1610–1611) argues, the private equity
industry has been closely associated with what is called “shadow bank-
ing” (Greenwood and Scharfstein 2013; Strahan 2013), where banks
speculate in highly complex securities being lifted off the balance sheets
as a method to circumvent legal restrictions and regulatory control.
As a consequence, private equity industry generates endemic instabil-
ity in the finance industry and, ipso facto, the so-called real economy.
Ultimately, however, the principal concern of the wider public, not
immediately having interests in the finance industry, is that the bulk
of economic value generated and distributed to owners in the private
equity industry is at risk to be the other stakeholders’ loss (Appelbaum

and Batt 2012: 87).
Black et al. (2007) examine the relationship between the presence of
“active equity markets,” dominated by “outsider governance” based on
the market for corporate control, and novel labor management practices.
Black et al. (2007: 644) predict that firms being active in such markets
demonstrate a lower willingness to bear the costs for initial, apprentice-
type training since employee exit or layoff risks no longer justify such
investment in volatile markets. In other words, managers “under greater
pressure from ‘mobile’ shareholders” are less able, nor incentivized,
to make investments in early stage training (Black et al. 2007: 644).
Furthermore, on-the-job training of specialist and expert skills is also
predicted to be lower in firms located in countries with high levels of
equity market activity: “The lesser ability of firms to offer guarantees of
long-term employment in economies characterized by shareholder pres-
sures and a high level of M&As results in employee unwillingness to bear
the opportunity costs of firm-specific training,” Black et al. (2007: 644)
argue. Third and finally, firms in active equity markets are under the pres-
sure from shareholders to deliver high returns, which constrain employee
incomes “at lower levels of the firm,” whereas “the alignment of executive
pay with company performance through share options may produce very
high rewards for those at the top of the firm” (Black et al. 2007: 645).
As a consequence, Black et al. (2007: 645) predict, the ratio of “chief
executive pay to that of the average shop floor worker” is expected to be
greater in firms located in active equity markets.
The results from the analysis of the empirical material demonstrate
that “initial training” is negatively associated with equity markets as pre-
dicted, while in the case of on-the-job training (“continuing training”),
it is revealed, contrary to the prediction, that firms located in active
equity markets are in fact strongly associated with “higher levels of train-
ing” (Black et al. 2007: 649). This unwillingness to invest in early stage
training can be explained by the correlation between equity market activ-
ity and declining organizational tenure, i.e., when employment periods
become shorter due to increased market turbulence and/or shareholder
pressure (see, e.g., Bidwell 2013), managers are less prone to prioritize
training. In contrast, the very same tendency to lay off workers to boost
79
stock prices and dividends may cause the need for investing in retrain-
ing of the remaining staff, Black et al. (2007) argue. The investment
in continuing training is thus more of a consequence of the logic of
active equity markets rather than indicating a long-term commitment
to economic stability and growth per se. Moreover, the empirical mate-
rial reveals that equity market activity is “negatively associated with bar-
gaining centralization,” leading to a lower ratio between average worker
compensation and CEO compensation (Black et al. 2007: 649). Black
et al.’s (2007) study thus shows that the dominance of active equity mar-
kets shifts the balance of power from several stakeholders (and in this
case, most noteworthy salaried workers) to the shareholders as instructed
by, e.g., agency theorists. Black, Gospel, and Pendleton’s (2007) findings
are also consistent with those of Darcillon (2015) from a more recent
study of 16 OECD countries over the 1970–2007 period, which pro-
vides “robust evidence” that “the process of financialization has gradually
contributed to a weakening of workers’ bargaining power in the direc-
tion of an erosion/decentralization” (see also Dünhaupt 2017). In the
period, Darcillon (2015: 499) continues, “most OECD countries have
experienced an erosion of collective bargaining power since the early
1970s with the decline in union density and union coverage.” Moreover,
not only have the corporate governance practices internal to the firm
shifted the attention to the demands of shareholders, but what Darcillon
(2015: 499) refers to “employment protection institutions” (including
employment protection legislation) have been weakened and marginal-
ized in investor capitalism. Thus, the pressure toward finance capital and
private equity accumulation derives from two sources: from the firms
themselves, now primarily being concerned with their contribution to
shareholder welfare, and from policy-making and legislative bodies,
reducing labor market protection and thus actively supporting (within
the present corporate governance practices) private equity accumulation.
Even though proponents of finance industry innovations and the
private equity industry would speak of increased “efficiencies” allegedly
“benefitting everybody” (see, e.g., Easterbrook and Fischel 1996: 38),
there is in fact little evidence of such financial alchemy, but the rents being
received by the shareholders are commonly someone else’s loss or decline
in relative and real (i.e., inflation-adjusted) compensation. To turn a blind
eye to this principal feature of the underlying business model would be

permissive. Expressed in Mazzucato and Shipman’s (2014: 1076) more
moderate formulation, “understanding the strengths and limitations
of public equity markets is essential for promoting productive capital
allocation.” As a consequence, the growth of the private equity industry,
Appelbaum and Batt (2014: 197) say, “contributes in important ways to
the growing inequality in the U.S. economy”: Private equity depresses
the wages of employed workers, and those who are laid off—particularly
blue-collar workers—“typically do not find new employment with wage
and benefits as high as their prior jobs” (Appelbaum and Batt 2012: 197).
Where the public firm has essentially been discredited as a site for mana-
gerial malfeasance and the squandering of capital, the private equity firm
is portrayed by the same spokespersons as a vehicle for sound manage-
ment of financial resources. Unfortunately, what is beneficial for and in
the interest of, e.g., the owners of such firms is not of necessity desirable
for all stakeholders, or for the wider society.
A Summary of the Arguments
The managerial capitalism model of competitive capitalism was far from

perfect: It benefitted and rewarded white men and underpriced (if they
were given the opportunity to work at all) the work of women and
minorities, and the mass consumerist life style entailed a certain level
of anxiety and discontent for some, a predicament that revealed itself
in terms of drug abuse, alcoholism, and the increased consumption of
psychopharmacological drugs. Yet, at the same time, the post-World War
II growth remains unprecedented and established a living standard and
economic well-being previously unseen and almost unimaginable. When
this economic model started to run out of steam by the early 1970s, the
dominance of large-scale, financially stable corporations gradually with-
ered, and network-based enterprises, more prone to offer less secure and
short-term work contracts, took their place. The consequences of the new
investor capitalism model are higher economic insecurity on all levels,
growing economic inequality, the transfer of risk from the employer to the
individual, and the gradual loss of professional discretion and autonomy.

Investor Capitalism and the Growth of Economic Inequality… 81
Investor capitalism, an economic system dominated by finance industry

interests, thus brought the new world of precarious professional work.
Investor Capitalism and the Growth

of Economic Inequality: Economic Hardship
in the Times of Plenty
The Decline of the Middle Class
Pressman (2007: 182–183) identifies three definitions of the middle class

in the literature. The first is sociological and examines life styles and con-
sumption patterns, and stresses that the middle class as a cultural carrier
and a stabilizing factor in a society is structured around well-to-do classes
and the less economically fortunate working class. The second and most
widely used definition is economic and defines the middle class in strict
economic terms as households with an income in the 75–125 percent
range of median household income. Some commentators, e.g., Newfield
(2008: 2), define the middle class as a hybrid term (combining sociological
and economic definitions) based on university education, which is seen,
at least in a historical perspective, as a proxy for a predictable life income
expectancy. Also Fukuyama (2012: 2) uses such a hybrid definition: “By
‘middle class’ I mean people who are neither at the top nor at the bottom
of their societies in terms of income, who have received at least a second-
ary education, and who own either real property, durable goods, or their
own business.” This definition indicates that it is the secondary or tertiary
education that secures both real property and a position in the middle of
the income pyramid. The third and the least reliable definition is to let
subjects categorize themselves into a predefined class taxonomy, but as
Pressman (2007: 183) remarks, these performative definitions include
the difficulty that “most people think of themselves as middle class.”
Much of the economic and policy-oriented literature addressing the
middle class points at the relative decline of the middle class in indus-
trial, democratic states. “The American middle class has significantly
been hollowed out,” Davidson (2014: 382) writes apropos the changes in
the American economy and policy after year 2000. In the United States,
the American middle class today tries to subsist despite comparatively
weak labor markets. Wray (2009: 826) suggests that one of the most con-
spicuous consequences of what Minsky (1980, 1986) refers to as money-
manager capitalism, being the triumph of “speculation over enterprise”
in Wray’s (2009: 810) view, is the “destruction of the middle class,” thus
making a causal connection between the financialization of the economy
and the decline of the middle class. The principal explanation for this
decline, despite a growing economy in the first years of the new millen-
nium (from March 2001 to the end of 2005), is the weak job growth,
accounting for no more than merely one fourth of the average job growth
of the “previous business cycles” (Weller 2008: 54–55). As a consequence,
a weak job growth unaccompanied by federal policies to support a “mid-
dle class life style,” and otherwise enduring soaring costs for, e.g., health
care, housing, and education, leads to the erosion of the American mid-
dle class: “Despite a growing economy, [middle class] incomes have been
stagnating or flat. And because price of big-ticket items such as housing
and health care have gone through the roof, families are not able to put
away a rainy day fund” (Weller 2008: 59). Unfortunately, this tendency
to hollow out the middle class is not exclusively an American challenge,
even though the free-market doctrines arguably have been more influen-
tial and more widely endorsed in Washington than elsewhere.
Pressman (2007) reports substantial economic data, derived from the
Luxembourg Income Study for the period 1980–2000, and proposes that
in the period, the size of the middle class shrunk as a global phenom-
enon. These changes derive from both macroeconomic conditions and,
more specifically, weak job growth, and changes in, e.g., fiscal policy,
increasingly favoring market-based pricing of labor and a decline in the
political support for progressive fiscal policy, previously mediating the
inequalities caused by the market-based pricing of labor. In the United
States (but also in other developed countries), the largest portion of the
decline in the middle class was “due to worse economic conditions fac-
ing U.S. households,” Pressman (2007: 188) suggests. As the growth of
middle-class jobs was weak in new millennium in many advanced econo-
mies, the economic basis for the middle class became smaller. In addition,

progressive fiscal policies that counteract economic inequalities caused by

free-market pricing of labor support a relatively large middle class. In the
free-market doctrine that dominated policy-making in many advanced
economies after 1980, such progressive income taxation was by and large
discredited by policy-makers, economists, pundits, and other commenta-
tors, portraying such redistribution of economic resources through the
welfare state transaction system as being both morally questionable (in
terms of undermining meritocratic performance-reward systems and thus
reducing the incentives supportive of ambition and enterprising) and as
a form of state intervention that inhibits economic growth in allegedly
self-regulating markets. Pressman (2007) questions such arguments and
instead points at the central role of progressive fiscal policy in maintain-
ing a vital middle class: “As unemployment rises, the middle class will
tend to shrink unless national governments act to shore up income and
support households in their struggles to maintain a middle class life style”
(Pressman 2007: 197). Pressman (2007: 196) concludes by remarking
that between the late 1970s/early 1980s and the end of the century,
the size of the middle class “declined substantially” in several countries.
Moreover, “this decline also seems to result much more from households
falling into the lower class than from upward mobility” (Pressman 2007:
196). In, e.g., the case of Sweden, for periods a role model for the “third
way,” social-democratic welfare state for some commentators, the middle
class “shrunk substantially” in the period, even if the middle class still
constitutes almost half of all households (Pressman 2007: 182–186).
Sullivan et al. (2006) examine bankruptcy filing data from 1981, 1991,
and 2001 in three (in 1981) and five (in 1991 and 2001) American states,
respectively, and demonstrate that the economic hardship and distress of
the middle class is now translating into an actual growth in private bank-
ruptcies. To start with, the data reveals that the nominal growth in bank-
ruptcies is higher than a factor of 3.5 in the 20-year period examined,
with an accelerated growth in the 10-year period of 1991–2001:
In 1981, there were about 3.6 nonbusiness bankruptcy filings for every
thousand households in the United States, for a total of 315,832. If the
filing rate per household prevalent in 1981 had remained steady, the
umber of bankruptcy filings in 2004, the last full year before the bank-
n
ruptcy laws were changed, would have been roughly 429,000. In fact, by
2004 the rate of filings had surged to fourteen per thousand households,
for a total of 1,563,145 families in bankruptcy—a new bankruptcy case
every twenty seconds. (Sullivan et al. 2006: 215)
Moreover, when examining the “total median assets” of families filing for
bankruptcy, the data demonstrates that in 2001, families failing to main-
tain their legal contacts held substantially more resources than in 1981 and
in 1991 in particular:
Total median assets were about $27,300 in 1981, dropping to $18,300 in

1991, and rising sharply to $37,000 in 2001 . . . [W]hen families file for
bankruptcy now, they are clearly bringing with them more assets than they
brought a generation ago. Measured by the substantial increase in total
assets, the families of 2001 appear much better off than the debtors of a
decade or two earlier. (Sullivan et al. 2006: 224)
Such data suggests, Sullivan et al. (2006: 218) write, that bankruptcy
is now “a middle class phenomenon, primarily employed by families
near the middle of social and economic life in the United States.” When
Sullivan et al. (2006) began their study in 1981, the conventional wis-
dom was that it was primarily day laborers and housekeepers, “for the
most part blue collar or lower,” who were susceptible to bankruptcies
and who resort to the bankruptcy legislation to release themselves from
burdens of debt they could no longer maintain. To their surprise, though,
Sullivan et al. (2006: 220) found in the 2001 data set that “the debtors
were solidly middle class”: “More than half went into bankruptcy own-
ing their homes, and a large portion had middle-class jobs.” In addition,
this group did not display lax financial self-discipline, a lack of economic
prudence, or in any way represented some moral shift toward a declining
stigma of bankruptcy filing as have been declared from time to time by
politicians and policy-makers in Washington DC, Sullivan et al. (2006:
218) propose. Instead, the explanation for soaring bankruptcies needs
to be sought in the wider economic system and the financial culture
that developed in the 1981–2001 period: “[T]he central characteristic

of consumer bankruptcy over two decades has been increasing financial

distress, marked by rising levels of debt” (Sullivan et al. 2006: 218). As
the level of debt and financial distress has continued after 2001 (see,
e.g., Zinman 2015; Garon 2012; Hyman 2011; Barba and Pivetti 2009;
Montgomery 2009), there are good reasons to assume that the level of
bankruptcy will stay at a considerable level.
In this new socioeconomic regime, where the middle class has both
shrunk in size and lost much of its legitimacy as a group that stabilizes
society—if the very idea of society is a fiction, why pay for a large middle
class?—also the concepts of professions and professionals are affected. In
the following, the question of the middle class and its future will be dis-
cussed in some detail. This analysis includes an examination of the diver-
gence between productivity growth and economic compensation during
the last two decades and its foremost derived consequence, the growth in
household debt to compensate for smaller household budgets, i.e., a form
of “debt-based consumption” (at times referred to as “debtfare”) in the
face of lower income and the expansion of the supply of credit (at times
euphemistically referred to as “the democratization of credit,” a phrase
first coined by Arthur Morris, a Virginia lawyer, in 1910 as being part of
a finance industry initiative; Baradaran 2015: 94) on the basis of finance
market deregulation and lower levels of monitoring.
river of Economic Inequality: The Divergence

D
Between Economic Compensation and Productivity
Growth
Between 1947 and 1979, real wage growth, on average, was in parity with
labor productivity growth, while after 1979, real wages rose more slowly
than labor productivity growth did (Wolff 2003: 451). Wolff (2003: 451)
therefore claims that over the entire period, “labour productivity gains
outstripped those of mean compensation (a ratio of 2.19 versus 1.96).”
Until the end of the 1970s, the salaried workers were, to simplify things
somewhat, “paid for their performance,” while after 1979 another com-
pensation metric applies. To explain these changes, Wolff (2003: 496)
refers to “structural changes,” including the shift toward “labour intensive
services” that caused the rate of profits to fall (Wolff 2003: 496). Another
relevant structural factor is the shift in the balance between “capital and
labour” in the period after 1979, characterized by the decline of labor
unions and the labor movement:
[A] reasonable presumption might be that an equal division of power

between capital and labour should lead to real wage’s increasing at about
the same rate as overall labour productivity. If wages increase more slowly,
we might suspect that the balance in power has shifted towards capital, and
conversely . . . One must conclude that economic and political power
shifted in favour of capital, beginning in the early 1980s. (Wolff 2003:
497)
Such findings and interpretations of the causes are shared by other

researchers, including Vidal (2013), speaking about lower pay and inse-
cure jobs in the “post-Fordist” economic regime. Today, one third of the
jobs are what Vidal (2013: 605) refers to as “low-autonomy jobs,” and
these jobs are “increasingly unable to provide decent living standards of
the workers that fill these positions.” Estimates from the US Bureau of
Labor Statistics predict that “7 of the top 10 occupations projected to
generate the most jobs by 2020 are low-wage service and laborer jobs”
(Bernhardt 2012: 355), making this category of work the principal source
for new job creation in the United States.
Kristal (2013: 362) presents US data for the 1969–2007 period, and
she explains the shift in compensation on the basis of what she refers to
as “class-biased technological change.” First of all, Kristal (2013: 363)
remarks that wages and salaries account for only about half of the total
income generated in the US economy, a fact that testifies to the mag-
nitude of the financialization of the American economy. Kristal (2013:
365) also claims that the economic value generated is not “class-neutral,”
as there are capital-owning classes who are the primary beneficiaries of
this economic value production. Regarding the distribution of economic
value in the form of income, Kristal (2013) confirms Wolff’s (2003) find-
ings regarding an increased divergence between productivity and com-
pensation after the mid-1970s (even though Wolff uses 1979 as the year
ending the first period). After 1973, economic inequality has grown both

on the basis of lower compensation and the increased economic value

generated in the finance industry, benefitting a more limited number of
Americans:
From 1948 to 1973, the hourly compensation of a typical U.S. worker

grew in tandem with productivity, indicating a relatively equal share social
distribution of the fruits of economic growth and productivity gains. The
state of inequality dramatically shifted in the past three decades. Although
productivity grew 80,4 percent between 1972 and 2011, expanding total
income, average hourly compensation, which includes the pay to CEOs,
increased only 39,2 percent and—even more strikingly, the median work-
er’s hourly compensation grew just by 10,7 percent. (Kristal 2013: 383)
In order to explain this shift in policy regarding how the fruits of the pro-
ductivity gains are shared between organizational constituencies, Kristal
(2013: 377) points at computerization and the declining bargaining
power of the workers in the period where the trade unions lost ground
on the basis of new policies and political agendas: “In particular, waning
unionization, which led to the erosion of rank-and-file workers’ bargain-
ing power, was the main force behind the decline in labor’s share,” Kristal
(2013: 378) concludes. Bernhardt (2012) proposes that the “low-wage
problem” in the United States derives from the internal organization and
regulation of the so-called domestic service industries,4 where employers
are outsourcing these services to ensure financial flexibility and to create
a “legal distance between themselves and their employees” (Bernhardt
2012: 360). This tendency is facilitated by the “withdrawal of govern-
ment’s hand in the labor market,” rooted in political doctrines and eco-
nomic policy (Bernhardt 2012: 360).
tagnating Returns on Human Capital Investment for Some,

S
Higher Returns for Others
Weeden and Grusky (2014) say that “human capital investments,” in,
e.g., schooling and tertiary education, generate “rents” for the individual
holding such skills and credentials. A rent is formally defined as “[r]eturns
on an asset (e.g., labor) in excess of what is necessary to keep that asset
in production in a fully competitive market” (Weeden and Grusky 2014:

474). As education increases productivity, employers are willing to pay
more for workers who have made this investment in human capital; the
increased compensation is also understood as a compensation for “train-
ing costs” and, as such, Weeden and Grusky (2014: 478) argue, “will
yield inequality only in cross-sectional earnings”; i.e., economic inequal-
ity occurs, in the ideal market case, on the basis of differences in compen-
sation between categories of workers holding different types of human
capital. At the same time, as a practical matter and in some markets, it is
complicated for managers who determine the individual compensation
to know exactly what the current market price for human capital is, and
therefore employers “may pay their workers in excess of what the market
demands, as doing so makes them more efficient or productive” (Weeden
and Grusky 2014: 478).
As an economic theory proposition, labor market economists say
that when the direct measurement of work output productivity is costly
(i.e., the costs overshadow the benefits derived from such a calculation),
“overpayment in the form of efficiency wages becomes the cheapest solu-
tion to the problems of shirking or malfeasance” (Weeden and Grusky
2014: 478). That is, workers are paid more than the market wage to
ensure that they are incentivized to not act opportunistically (see, e.g.,
Vroom 1964); i.e., workers are not willing to jeopardize their privileges
and benefits and thus act with prudence. Moreover, as each category of
salaried workers is heterogeneous, i.e., include more or less able, ambi-
tious, and committed individuals, and as there are costs involved in mea-
suring individual productivity, employers resort to what labor market
economists refer to as statistical discrimination—they use “[g]roup-level
measurements as a shortcut assessment of individual-level capacity”
(Weeden and Grusky 2014: 479). This means that within each category
of salaried workers, there may be some individuals who are overcom-
pensated and some that are undercompensated, given their individual,
hard-to-measure performance. Taken together, the question of eco-
nomic compensation is on the one hand based on calculative practices
and mechanisms that actively seek to fairly reward investment in human
capital, while on the other hand, there are evidence of norms, beliefs,
ideologies, and sheer fallacies that tend to systematically generate lower

returns on human capital investments for certain groups vis-à-vis other

groups. For instance, women and minorities tend to be relatively lower
compensated than, e.g., white, middle-class men, ceteris paribus (see,
e.g., Castilla 2008, 2015; Castilla and Benard 2010).
Liu and Grusky (2013) add to the complexity of the argument regard-
ing where compensation is channeled by examining what kind of jobs
that are better compensated in the new economic regime. Liu and Grusky
(2013) found that it is not of necessity the case that only high levels of
education are rewarded. Instead, jobs that demand what Liu and Grusky
(2013: 1332) call “analytical skills,” including “synthesis, critical think-
ing, and deductive and inductive reasoning,” have been more generously
compensated: “[A] standard deviation of analytical skill raised wages by
10.4% in 1980 and 17.5% in 2010, an increase in payout that is far in
excess of that observed for any of the other workplace skills” (Liu and
Grusky 2013: 1338). In their discussion of the research findings, Liu
and Grusky (2013) criticize the idea that it is exogenous changes includ-
ing technological shifts (e.g., the computerization of the 1990s) that
explain changes in compensation. Instead, Liu and Grusky (2013) speak
of a “skill-biased institutional change” in the economy as the principal
explanatory factor for differences in economic compensation:
The growing demand for analytical labor reflects the accelerating ‘creative
destruction’ of modern capitalism and the associated premium on innova-
tion, problem solving, and rapid response to changing market conditions.
These institutional changes would not appear to be simple reactions to
technical change. (Liu and Grusky 2013: 1368–1369)
Lin and Tomaskovic-Devey (2013: 1289) point out that “elite workers”
now constitute “a significant fraction of the highest-income population”
(see also Dore 2008, regarding the case of the UK). Consonant with the
analysis of Wolff (2003) and Kristal (2013), Lin and Tomaskovic-Devey
(2013: 1291) emphasize that income distribution “[r]eflect the relative
bargaining and claim-making power of actors in a given organizational
and environmental context.” Unfortunately, this group remains relatively
small in comparison to the entire middle-class strata, now earning less and
being well compensated for their human capital investments. Weeden
and Grusky (2014: 481) add that not only the top 1 percent income
group has benefitted from a more uneven distribution of economic com-
pensation for work, but at least the top 10 percent of salaried workers are
today better off (Weeden and Grusky 2014: 481). This decline of a more
compressed economic compensation model, with its characteristic long
right-hand tail (i.e., with a small group of workers being very generously
compensated, say CEOs in profitable companies), has implications for
not only the labor market but also the market for human capital invest-
ment, i.e., tertiary education.
Human Capital Investment Incentives
Weeden and Grusky (2014: 474) propose, pace Kristal (2013), that the
rising economic inequality is not primarily a consequence of what is
called “skill-biased technological change,” making, e.g., computer tech-
nology skills more highly compensated when all kinds of work become
increasingly computerized. Instead, they propose, inequality is caused by
a variety of changes, including “competition-reducing processes” at the
top of the income categories and “competition-increasing change” at the
bottom, including, e.g., declining union power and the globalization of
the economy. As middle-class groups, by definition being in between the
two endpoints, have experienced stagnating real wage growth, at least
in the United States since the 1980s, this group is today less incentiv-
ized to invest in tertiary education as it generates considerable (and also
predictable) debt, while such investment does not of necessity generate a
sufficient compensation for the efforts, especially as the debt is to be cov-
ered by increased life expectancy income. On an aggregated level (e.g., on
state or region levels), investment in, e.g., R&D and education as a share
of GDP is commonly seen as “the prime driver of economic growth,”
Braunerhjelm and Henrekson (2013: 114) say, and a decline in tertiary
education investment is thus indicative of more deep-seated institutional
change or structural shifts in the economy.
In education, science and social science more broadly, there is today
a widespread concern that tertiary education is becoming increasingly
market oriented, now obeying a market logic rather than an academic logic

(in Juusola et al.’s 2015: 348, vocabulary), and with students demonstrating a
cynical attitude toward academic education, what Boiral (2012: 634) names
the “Degree Purchasing Syndrome” (DPS)—the tendency among many stu-
dents “to be more interested in acquiring a diploma than the learning that it
represents.” Phipps and Young (2015) add to this alarmist narrative:
Marketised universities exist within (and perpetuate) a culture based on

‘having’ or ‘getting’ (grades and/or jobs), which develops a sense of entitle-
ment and in which education becomes a transactional exchange . . .
Students’ lives are directed towards economic self-interest and credential
acquisition rather than connection. (Phipps and Young 2015: 314)
However, despite deplorable tendencies to undervalue tertiary education

in society, the alleged cynicism of students is not wholly unsubstantiated.
Return on human capital investment tends (as demonstrated above) to
accumulate in primarily top income groups, and a substantial literature
demonstrates that when it comes to career making in, e.g., the world of
business and professional work more widely, social class is a more impor-
tant predictor than education, ceteris paribus (Useem and Karabel 1986:
194), a finding that indicates the presence of an elitist credo, at least
for high-compensation career jobs (see, e.g., Rivera 2012; Maclean et al.
2014). Laurison and Friedman (2016: 668) use the term “the class ceil-
ing” to indicate that class is the sole remaining explanatory factor for
income differences in professional work in the UK: “[E]ven when con-
trolling for education, location, age, and cultural and social capital, the
upwardly mobile had, on average, considerably lower annual incomes (£8
to 14k) than did their higher-origin colleagues” (Laurison and Friedman
2016: 672). Social class of origin is therefore a key discriminatory factor
when it comes to aggregated income. In addition, social class also serves
as an indicator of the permeability of the profession, its openness to social
mobility. In the UK, for instance, in high-status professions such as doc-
tors, veterinarians, dentists, and physical scientists, less than 7 percent
of the professionals came from “routine or semi-routine working-class
or no-earner family origins” (Laurison and Friedman 2016: 678). Social
class is thus a key analytical term for explaining social mobility and eco-
nomic inequality.
At the same time as the discounted, aggregated life income is today less
certain and more complicated to predict than it used to be for university
graduates, Gordon (2015b: 57) says that “the cost of a university educa-
tion has risen since 1972 at more than triple the overall rate of inflation.”
Even when taking into account the supply of scholarships and fellow-
ships, provided by certain universities in the United States, “the current
level of American college completion has been made possible only by a
dramatic rise in student borrowing” (Gordon 2015a, b: 57). As a conse-
quence, Americans today owe $1.2 trillion in college debt, which means
that “[t]he next generation may choose not to complete college as they
are priced out of the market for higher education” (Gordon 2015a, b:
57). To some extent, that is already the case, Weeden and Grusky (2014:
483) argue, with only 30 percent of each “birth cohort” now earning a
college degree, a figure that has been on a stable level since the 1970s. If
investment in education, both on an individual and on societal level, is
still a valid predictor for economic growth and thus, by implication, if
progressive fiscal policies are implemented, economic well-being, invest-
ment in human capital needs to be incentivized by raising the compensa-
tion that accrues to individuals earning a college degree, or, alternatively,
by lowering the costs for, e.g., tertiary education. This latter approach,
where the state would carry a larger share of the risks involved in human
capital investment to relieve the individual from some of the economic
burden and risks, is probably the more politically attractive alternative.
In some European countries including Scandinavia, tertiary education
is offered with no considerable fees and only the cost of living expenses
accumulate over, say, a five-year education period, thus lowering the costs
that need to be covered by future economic compensation. This model
in turn justifies higher income taxes (than in, e.g., the United States)
that finance the university system for the benefit of future generations.
However, despite the advocacy of free education in some political circles
(in the 2016 primary election campaigns, Senator Bernie Sanders, D-VT,
made free tertiary education one of the pillars of his campaign, a policy
that attracted a sizable amount of primarily younger voters), there is a
long road to walk to turn such political agendas into a functional and
efficient education system. In the meantime, the return on human capi-
tal investment remains a concern for students of professionalism as the

aggregated economic compensation tends to be in decline, with a few

specific and favored groups as the exception.
The Decline of Middle-Class Jobs
Newfield (2008) comments that the 1980s was the decade of deindus-
trialization and deunification of the American economy, in many cases
accompanied by assurances that the offshoring of manufacturing to, e.g.,
Southeast Asia was part of a “natural transition” from “low-value adding
production” to “high-value” and “knowledge-intensive” work. Such rosy
images of deindustrialization mindfully ignored the fact that some of the
most knowledge-intensive work was located in manufacturing industry,
but also (possibly) underrated the socioeconomic consequences of the
swift decline of industries that took decades of hard work and policy-
making to establish. Equipped with so-called human capital theory,
which suggests that the inability to compete over salaried and attractive
work opportunities is essentially a matter of failed individual “human
capital investment choices,” proponents of neoclassical economic theory
rendered deindustrialization a matter of inadequate personal choices
being out of joint with the times. The deindustrialization of the American
industry did therefore not worry, e.g., the Reagan administration’s eco-
nomic advisors (including well-known free marketeers such as Milton
Friedman and George Stigler), who assured also middle-class voters that
the transition of the American economy was predicted by and rooted in
sound economic theory. However, by the 1990s, middle-class jobs were
now targeted as non-value adding and thus unnecessary as Wall Street
actors, taking on the role to discipline American corporations, started
to address these companies as being “dumb, fat, and happy hierarchies”
(Wall Street finance trader, cited in Ho 2009: 130–131), unable and
unwilling to change unless finance market actors put them under the
heat.
The principal argument for offshoring manufacturing and the
decline of the US manufacturing industry was supported by the idea
of “knowledge-intensive work” being the sector with the highest growth
potential, and middle-class voters possibly thought they themselves were
included in this favored sector. Unfortunately, much of this work was

more administrative than “knowledge-intensive” in nature and accom-
panied by the computerization of working life, including the growth
of Internet as the new supra-medium and major infrastructure of the
advanced economic system, and consequently the middle class could no
longer be so sure of their economic value and social position. “In the
early twenty-first century, the professional middle class for the first time
begins to see their jobs being exported overseas,” Mulholland (2012: 308)
writes. “Computerization of the middle class is not being compensated
by the creation of new jobs at an equal rate. New jobs are created, but
they do not match the number of jobs eliminated, nor do they replace
lost income,” Collins (2013: 41) adds. The computerization and digita-
lization of, e.g., administrative work, Collins (2013: 37) continues, “[i]s
now accelerating and threatening the existence of the middle class.”
In addition, at least in the United States, hosting the loudest and most
self-confident free-market community, financed by wealthy industrialists
piping their funds into a multitude of think tanks, institutes, and lobby-
ist and interest organizations in Washington DC and elsewhere (Mayer
2016; Smith 2007; Himmelstein 1992), the very idea of the middle class
as being inextricably bound up with the democratic and differentiated
society and the institution of competitive capitalism per se—the fore-
most contribution of the bourgeoisie to Western society—started to
wane. More importantly, as have been emphasized by numerous com-
mentators, the very idea of a “society” as a free-standing entity unto itself,
separated from “the economy,” was discredited. From now on, the society
was understood to be little more than a fiction or a figment in the minds
of out-of-date social reformers, and what deserved the policy-makers’
attention was instead the economy, a construct of recent pedigree and yet
now being the measure of all things.
Implications for Professional Work
In the era of managerial capitalism, a period of persistent economic

growth, professional workers enjoyed considerable degree of jurisdic-
tional autonomy and were highly valued as a repository of specialized

skills and expertise. When the corporate system was increasingly defined
as an economic value production activity, aimed to (1) maximize its “effi-
ciency,” i.e., corporations were normatively instructed to operate strictly
on the basis of the finance market pricing of the stock and other securities
(i.e., bonds), and (2) transfer the residual cash flow (i.e., the finance capi-
tal that remains when all costs are being covered) to shareholders, profes-
sional work was redefined. No longer serving the noble role of assisting
economic value production inside the corporation or articulating wider
societal concern and advocating social reforms, the professional was
increasingly understood as yet another rent-seeking stakeholder whose
services were most accurately priced on the market and who should be
compensated accordingly. More importantly, professionals were por-
trayed as yet another claimant within the corporate system, whose poten-
tial success in negotiating economic compensation and other benefits and
entitlements tended to reduce the residual cash flow to transfer to the
shareholders.
At the same time as professionals were deconsecrated and lost much
of their halo by being associated with sheer rent-seeking behavior,
the economic value creation within the corporate system relied on
professional competencies that it could not yet spare. The strategy
to marginalize professional groups while still taking advantage of
their expertise was to redefine professionalism within the framework
of investor capitalism. The foremost consequence of this redefini-
tion of professionalism was first to deny professionals any fiduciary
duties, granting them the authority to play any societal roles beyond
the mere economic value creation activities. Second, and as a con-
sequence derived from this first operation, professionals were now
labeled “knowledge workers,” “corporate professionals,” “freelancers,”
“contact workers,” and with similar terms, all stressing that the old
trustee professional or civic professional model was now antiquated
or defunct and abandoned. This professional work is thus different in
degree, not in kind, in comparison to the work of other occupational
groups. If trustee professionalism survived this change, it was primar-
ily in certain limited domains of the state administration, where, e.g.,
judges in the court system or chief scientists in governmental agencies
could continue to serve in such a role. For the bulk of professional
workers, fiduciary duties were a privilege of the past: from now on,
new mechanisms applied.
The organization of know-how and expertise in any given society and a
specific period of time reflects its underlying economic conditions, but
also its cultural norms and beliefs. Intellectuals and experts have always
been highly valuable (albeit not always appreciated when they object to
certain taken-for-granted privileges, norms, or practices) for any given
society, and such groups have therefore been able to navigate in between
various authorities and interests. In the scientific revolution of the sev-
enteenth century, leading scientists (or “natural philosophers,” as they
were referred to)—the term scientist was not coined by Auguste Comte
until 1939, but introduced as a term corresponding to the term artist
(Hobsbawm 1975: 261)—challenged church dogma and thus had to
create their own organization and networks to survive the bitter fight
over the right to define and explain natural phenomena. Throughout the
modern period (beginning roughly with the Renaissance), intellectuals,
experts, and, with the latter-day term, professionals have actively served to
develop new thinking, technologies, institutions, and practices. On the
basis of such performative capacities, ultimately rooted in their ability
to make society more functional or affluent, professionals have enjoyed
a considerable authority and jurisdictional discretion. The more recent
changes in the economic organization, beginning in the 1970s, have
actively worked to counteract such authority and jurisdictional discretion
and have portrayed professionalism as no more, no less than a category
of specialized know-how and expertise to be priced on the market. In the
following two chapters, the practical changes encountering the new gen-
eration of professional workers will be examined in detail, being by and
large indicative of the relative decline of professional authority and the
advancement of precarious professional work—a regime of professional
work that includes few or highly restricted versions of the privileges that
the textbook case on professionalism lists. In the era of investor capital-
ism, itself, to be fair, contains a limited number of examples of certain
Notes
97
professional groups (e.g., finance traders, lawyers) who have benefitted

greatly from the sea change, whereas authority or privilege that derives
from any other source than favorable market pricing of the services
being provided is discredited; only the market, and the market only, this
pseudo-monotheistic credo prescribes, can grant authority, and it does so
through the pricing of what is being offered.
Notes
1. In some cases, this lack of transparency and agreement neither on a theo-
retical level, nor on a practical, “real-world” policy-making level, is at
times leading to severe criticism and even outrage. Edmund L. Andrews’s
(2009) highly personal account of the financial crisis, carefully explaining
the personal costs induced by allegedly “poor decision making” of indi-
vidual actors—and not only by highly educated persons who are in the
position to interrogate policy makers such as Alan Greenspan in person,
as Andrews did (unsurprisingly, Greenspan saw no problem unless
Andrews had in fact defaulted)—is indicative of the frustration and anger
regarding the inadequate regulation of the, e.g., the home mortgage mar-
ket. For Andrews (2009), the decline and collapse of the finance industry
and the mortgage market it had created before its downfall needs to be
understood on the basis of group think and an ignorance pouring into an
unbecoming arrogance on the part of the policy-makers:
When I first started digging into this crisis, I was struck by how dumb
many of the players seemed. The more I learned, though, the more I
became convinced that the blunders were too basic to be written off as
boneheaded. Many of the people who should have known better did
know better. Executives of one of Wall Street’s biggest subprime facto-
ries, Merrill Lynch, ignored the prescient warnings of their own chief
economist about the housing bubble. The rating agencies ignored bla-
tant fallacies in their risk assumptions and compounded the problem
by refusing to look at the actual mortgages behind the securities they
were rating. (Andrews 2009: xiii)
This inability to stem the tide in due time, despite all the alarming evi-
dence and indications, was also taking root in the highest office in the
American Republic, Andrews (2009) makes clear:
Those people [Alan Greenspan and the Fed economists] were being
paid to look at numbers and think analytically about risk. They were
supposed to be on the alert for potential train wrecks before they
occurred. Yet most of them ignored the compelling evidence and dis-
missed that twin speculative bubbles had formed in both housing
prices and mortgage lending. (Andrews 2009: 23–24)
Ultimately, the finance industry and its contacts in White House and the
Congress served to postpone serious regulatory initiatives until the “music
stopped”—as one of the finance institution CEOs, Citigroup’s Chuck
Prince put it (cited in Brunnermeier 2009: 82)—and the entire industry
came to a standstill (see e.g., Barofsky 2012; Blinder 2013):
In Washington, of course, The Federal Reserve, the Bush administra-
tion, and Congress were ready to believe anything that business told
them . . . As late as December 2007, when the economy was tipping
into a recession, President Bush was still confidently declaring that the
fundamentals of the economy was sound. (Andrews 2009: xiii)
For commentators like Andrews (2009), the “frustratingly inscrutable”
nature of the finance industry is not a conundrum to be reflected upon or
some riddle to be solved: it is a strategically fabricated system for the pro-
duction and extraction of economic value that benefits the very few at the
expense of the many (see also Mian and Sufi 2014: 186).
2. Antistatism runs deep in the community of free-market protagonists,
always associating government action and regulatory control with a form
of “collectivism” that they believe threats the abstract principles of “eco-
nomic freedom” and other individual liberties they hold in esteem (Jones
2012; Mirowski and Plehwe 2009; Cockett 1994). At several occasions,
this pastoral belief in the virtues of free markets slipped down to not-so-
subtle remarks on the role of government from the leading proponents of
this doctrine. The Chicago School economist and the founder of the
human capital theory, Gary Becker, wrote in a Business Week column that
“[i]f we abolish the state, we abolish corruption” (cited in Mirowski 2013:
220). A similar attitude toward the state and the government was expressed
by the economist Fisher Black, making the remarkable statement that
financial innovations including derivatives constituted no risk in the
economy, while “government” did: “‘I don’t see that the private market, in
creating this wonderful array of derivatives, is creating any systemic risk,’
Black argued: ‘[h]owever, there is someone around creating systemic risks:
the government’” (cited in Martin 2014: 223).
Notes
99
3. The economist William Baumol is frequently credited for the observation

that while manufacturing and other forms of production can be system-
atically rationalized and thus demonstrate productivity growth over time,
service production does not demonstrate economies of scale or provide
other comparable productivity-enhancing opportunities. For instance, a
car can be produced faster and at a lower cost, while a symphonic orches-
tra cannot perform Gustav Mahler’s Symphony No. 5 faster or cheaper
than it could ten or a hundred years ago. The shift from manufacturing to
service production (see, e.g., Kollmeyer 2009) is thus associated with
declining productivity growth in the economy and, as a consequence,
slower real wage growth. At times, the term “Baumol’s cost disease” is
used to denote how salaries in low-productivity sectors tend to follow
those in high-productivity sectors, which impose high labor costs in, e.g.,
service industries in relation to their actual productivity growth.
4. One of the most widespread explanations for the downward pressure of
wages in neoclassical economic theory framework is the effects of “globaliza-
tion,” leading to the downward pressure on worker’s compensation when
countries and regions with lower production factor costs are able to compete
on the global market, but as Madrick (2012: 323) remarks, “low-end work is
mostly labor-intensive services that are not subject to foreign competition.”
In addition, the degree of low-wage work and increased economic inequality
problems have not escalated to the same levels in Europe, as many European
economies, despite being subject to the same technological shifts (e.g., com-
puterization) and global competition as the American economy, have devel-
oped “strong safety nets and institutionalized practices,” which stabilize the
economy and better counteract economic inequality (Madrick 2012: 323).
In the United States, in contrast and beginning during the Reagan presi-
dency, the tendency is to rely on job creation through tax reforms.
Unfortunately, in the period between 2001 and 2007, before the Great
Recession struck, the period where the Bush administration launched a per-
vasive tax reform (see, e.g., Crotty 2012: 98), “the rate of job growth was
lower than any other recovery and expansion since World War II. Furthermore,
GDP growth was slower than in any recession” (Madrick 2012: 322). What
critics refer to as “trickle-down economics” (e.g., Quiggin 2010, Chapter
Four), which justify tax-cuts on the basis of their ability to boost demand, in
turn engendering further economic activity (the so-called trickle-down
hypothesis), only limitedly affect job creation and/or stimulate economic
growth.
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3
The New Forms of Professional
Work: Entrepreneurialism
and Precarious Professional Work
Introduction
One of the challenges for most Western societies is that a culture that
favors practical action and self-sufficient and enterprising figures easily
renders intellectual activities and work as what is pretentious, cloistered,
effeminate, i.e., what is practically useless or even morally questionable.
“Intellectuals,” Hofstadter (1963: 18–19) writes, “it may be held, are pre-
tentious, conceited, effeminate, and snobbish; and very likely immoral,
dangerous, and subversive.” Well into the eighteenth century, the medical
professions constructed a pathology of “excessive reading”—certainly an
intellectual activity—emphasizing that “uncontrolled reading” was dan-
gerous because it combined “corporeal immobility” and the “excitation
of the imagination” (Chartier 2014: 67). The symptoms of “excessive”
and “uncontrolled” reading included “an engorged stomach or intestines,
deranged nerves, bodily exhaustion” (Chartier 2014: 67). In music com-
position, furthermore, one highly specialized and quite distinct “intel-
lectual pursuit” (and thus serving as an exemplary case here), there is a
long record of documentation of music being branded as “effeminate”
and associated with the “sensuous pleasures” being part of “a ‘feminine’
realm” (McClary 1991: 17). To counteract such views, undermining the

110 3 The New Forms of Professional Work: Entrepreneurialism...
legitimacy and social status of music composition and music perfor-

mance, male musicians have emphatically stressed the “rational dimen-
sions” of music by laying claim to presumably masculine virtues such
as “objectivity, universality, and transcendence” or, less subtle, by “pro-
hibiting actual female participants altogether” (McClary 1991: 17). As,
e.g., German and French culture were arguably more receptive to the
audible pleasures and the competencies of music composers than Anglo-
American culture, not essentially branding music an effeminate activity,
the Germans and French have also produced more world-class compos-
ers, McClary (1991: 17) argues. While not being devoid of outstand-
ing composers (e.g., Terry Riley, John Adams), America still awaits its
Beethoven (while the British take pride in the relative recent work of,
e.g., Benjamin Britten). The point here is that detailed and specialized
know-how is always already rooted in cultural systems and shared social
beliefs, making forms of abstract and intellectual thinking more or less
prestigious. As a consequence, the organization of specialized know-how
is not only a matter of political and administrative mobilization, but also
depends on shifting attitudes toward intellectual pursuits more widely.
Just like in the case of reading, music is portrayed as a sensual pleasure,
effeminate, and wielding undesirable influences on the subject’s imagina-
tion. These two cases (music, literature) provide historical examples of the
hostility meeting the individual who wants to pursue intellectual work, be
they in the arts or in the social sciences and humanities. No wonder the
emerging professions of the early modern period needed to defend them-
selves and to fortify their jurisdictional claims, not only against religious
and political authorities, but also against a more unpredictable and per-
vasive counterforce—inherited, everyday justified true beliefs. As already
the great Florentine “natural philosopher” Galileo Galilei knew, he had to
deal with not only powerful enemies such as religious authorities and tra-
ditions but also “the worst of them all” (Koyré [1968] 1992: 12), common
sense; “It is useless to present proof to minds not able to grasp their value,”
Koyré ([1968] 1992: 12) writes. While common sense provides the abil-
ity to guide the actor in everyday life, the specific functional ignorance
of common sense renders it quite blunt when it encounters specialized
know-how (Geertz 1975); as Koyré ([1968] 1992) remarks, common
sense fails to recognize the value of specialized know-how.
Professionals Work in Contemporary Capitalism
111
Thomas Paine (1995), the fearless champion of modern democratic

constitutionalism, also intuitively understood the regressive force of com-
mon sense and its ignorance. In Paine’s (1995: 169) view, ignorance is
“not originally a thing of itself, but is only the absence of knowledge.”
Therefore, a man or woman “may be kept ignorant,” but he or she cannot
“be made ignorant.” That is, Paine (1995: 169) wrote in a hopeful pas-
sage in The Rights of Man, revealing his belief in the reason of free men
(perhaps also women, but to a lesser extent at this stage in history), that as
soon as the mind “discovers the truth”—comparable to an object “being
seen” by the eye—“it is impossible to put the mind back to the same
condition it was before it saw it.” History reveals that common sense is
more resilient than that, and “truth” in most cases does not reveal itself
as an epiphany but is frequently bound up with various interests and
accompanied by institutional ramifications. Still, we are all indebted to
Paine for this praise of the human reason’s capacity to transcend its own
limits. In summary, intellectual work is always already made suspect by
common sense thinking, serving as a gravity force pulling abstract and
high-flying ideas back to the ground, and professionalism must be seen
as a struggle against such inherited justified true belief. In all human
societies, differentiated thinking must create its own operational spaces
and domains where thoughts and ideas can be expressed and can wander
freely. It is against such socio-historical backgrounds that the emergence
of professions must be understood and examined.
rofessionals Work in Contemporary

P
Capitalism
Professionals and Professional Work
All differentiated societies need to find ways to organize their intellectual

capital and intellectual resources that make such resources benefit the
wider society and its further development. At the same time, the bearers
of such intellectual capital—intellectuals, scholars, professionals, etc.—
are suspect of using their skills and positions to benefit themselves at the
expense of the community. George Barnard Shaw, an eccentric by any
standards, claimed that “all professions are conspiracies against the laity”
(cited in Frank 2004: 201), and Ivan Illich (1977: 16) suggests that mod-
ern life is characterized by how “the new dominant professions’ claim
control over human needs tout court.” In Illich’s (1977) account, the pro-
fessions’ advancement of their positions is bordering to mere conspiracy:
Let us first face the fact that the bodies of specialists that now dominate the
creation, adjudication and implementation of needs are a new kind of car-
tel. They are more deeply entrenched than a Byzantine bureaucracy, more
international than a world church, more stable than any labor union,
endowed with wider competencies than any shaman, and equipped with a
tighter hold over those they claim as victims than any mafia. (Illich 1977:
15)
Regardless of whether the professions are beneficial for social and eco-
nomic development, or if they serve less socially desirable roles, as Illich
(1977) proposes, the professions still constitute a social class of its own in
contemporary society.
In Schumpeter’s view ([1928] 1991: 201), there are five social classes (in
addition to farmers) in the capitalist society: (1) “the rentier class,” (2) “the
professional class,” (3) “the clerical (‘white-collar’) class,” (4) “the skilled
worker,” and (5) “the unskilled worker.” Similarly, in Hughes’s (1958) clas-
sification of categories of work, the professions and “near-professions” con-
stitute one distinct category out of six: (1) mission (e.g., religious teaching),
(2) professions and near-professions (occupations sanctioned by the state),
(3) enterprise (deals with commodities), (4) arts, (5) trades (“very close to
the arts”), and, finally, (6) jobs. In both the taxonomies of Schumpeter
([1928] 1991) and Hughes (1958), the professions are one specific type of
occupational class with its own interests and focus. In the following, the
nature of professional work will be further examined.
Defining Professions
Freidson (2001: 17) speaks broadly about professionalism as “a set of insti-

tutions” which permit the members of an occupational group to “make a
living while controlling their own work.” One of the most c entral pillars
113
of professionalism and the “ideological core of professionalism” (Freidson

2001: 109) is the claim to discretionary specialization, i.e., the ability to
monopolize a domain of expertise and to establish and enforce entry bar-
riers into a profession. Leicht and Fennell (2001) define a profession as a
specific domain of work characterized by two features:
[The term is] (1) used as a folk concept to signify (a) prestige, respect; (b)
full-time work for pay; (c) to perform some task with great skill or profi-
ciency; (2) used as a sociological concept of study: (a) elite classes of occu-
pations with a focus on the characteristics or attributes of such occupations
as a taxonomy (the attribute model of professions) . . . or, more recently, as
(b) process model, to study the processes through which certain occupa-
tions come to acquire power, develop monopolies, and/or lay claim to the
status of a profession. (Leicht and Fennell 2001: 8)
Barley and Kunda (2004) define professions in more straightforward

terms:
Professionalization is typically associated with an occupation’s possession

of an esoteric body of knowledge, state-mandated licensing, formal train-
ing programs, and professional associations that create barriers to entry and
a basis for defending their jurisdiction from the expansionist tendencies of
other occupations. (Barley and Kunda 2004: 294)
Fligstein’s (2001: 102) definition emphasizes that professionalism relies

on collegiality, a conception of work that “references to a professional peer
group,” and university education is the basis for such peer group member-
ship. As a consequence of the collegiality of professions, careers are “cen-
tered on professions, not firms or industries,” Fligstein (2001: 102) says:
once operating in a system of profession, an individual “tends to stay for
life.” In addition to the collegiality of professions, the very nature of pro-
fessional work is characterized by a high ratio of “indeterminacy to tech-
nical rules” (Malhotra and Moris 2009: 899), i.e., professional skills and
expertise cannot be easily captured by written manuals and instructions
but reside in judgmental and embodied capacities that remain opaque
and complicated to fully grasp for the outsider (Styhre 2013; Lamont
2009). Malhotra and Moris (2009: 899) also define three c ategories of
professional work: normative professions (e.g., lawyers), technical profes-

sions (e.g., engineers) and syncretic professions (e.g., accountants), wherein
the last category combines elements of the first two.
In order to constitute a peer-based community that maintains its
authority in a specific domain of expertise, professionals need to make
legitimate jurisdictional claims and to develop a shared professional ide-
ology supporting the jurisdiction. As Bechky (2003: 721) remarks, juris-
dictional claims are contested through a combination of public, legal, and
workplace claims, and such claims tend to shift relations between both
professional groups and the “boundaries of their core work domains.”
For instance, surgeons and radiologists collaborating in health care orga-
nizations may be involved in jurisdictional struggles over who has the
authority to interpret and decode the photographic plates that visual
medical technologies (e.g., PET or CT scanners) produce (Burri 2008).
Radiologists claim this expertise is part of their professional jurisdiction
and are annoyed if surgeons question their analyses: “[S]urgeons see what
they want to in the images. If they want to see something, they see it,”
one radiologist lamented (cited in Burri 2008: 48). By and large, the
workplace is a setting for jurisdictional struggles, and the tighter the work
process is integrated (as in health care), the larger the risk of professional
groups transgressing the jurisdictional boundaries. In such cases, pro-
fessional groups tend to use rhetoric and to mobilize political resources
to defend their domains of jurisdiction against, e.g., new professional
groups (Bechky 2003; Gieryn 1983).
Professional Ideologies
Professional ideologies serve as the “glue” that unifies and aligns profes-
sional communities and reproduces the sense of collegiality and shared
joint interests. Professionals may be geographically dispersed and meet
face to face only occasionally, as in the case of ordained ministers in,
e.g., the Church of Sweden, where ministers work in their own parishes
spread all over the country and meet only twice a year during the national
Church meetings, and therefore professionals need a shared set of beliefs,
norms, and ideologies that are relatively persistent over time and space
(Styhre 2014). For instance, as Hughes (1958: 79) argues, the medical
115
professions do not only claim to represent distinct clinical practices, sci-

entific know-how, and technical expertise, but also try to define the nature
of health, a “good life,” or well-being, and a series of accompanying terms
that pertain to medical practice, and not the least the very definitions of
life and death as such (as in the case of the widespread enactment of brain
death in the late 1960s to the early 1980s as a complementary and legiti-
mate definition to, e.g., cardiopulmonary death. See Lock 2002: 109).1
In Nordenflycht’s (2010: 163) view, a professional ideology “consists
of a set of norms, manifested both in explicit ethical codes enforced
by professional associations and internalized preferences, often devel-
oped during professional training.” By definition, a professional ideol-
ogy does not prescribe detailed, step-wise, protocol-based actions and
operational procedures but is the abstract framework wherein such
practices and procedures are stipulated, developed, formalized, and
rendered legitimate. While professional ideologies need to be accepted
by the community outside of the profession, the principal role of pro-
fessional ideologies is to integrate and reproduce a sense of community
and collegiality within the profession and to help individual profes-
sionals accept the burden of responsibility and authority that he or she
is expected to carry: “The most important audience for professional
ideology,” Schleef (2006: 5) writes, “is the professionals themselves—
they need to believe in the higher mandate that the professionals are
alleged to embody.” In a domain of work characterized by a high ratio
of indeterminacy to technical rules (as in the case of medicinal prac-
tice), there is always the risk that the wrong decision is made, that a
faulty diagnosis is articulated, and that certain symptoms are under-
rated or even ignored. Hence the physician (especially the neophyte)
needs to be equipped with a robust professional ideology that enables
him or her to truly believe that what he or she does is for the best for all
parts and stakeholders—not the least the patient.
Professions and Institutions
The supply of professional expertise is a function of the differentiation of

the economy and the organization of civil society. If there is a need for
new professional domains of expertise, it will be formed and promoted:
In the past one hundred years, thousands of new professions have emerged.
Many of them supplied the employees that the newly differentiated corpo-
rations needed. Others were oriented to government and to the educa-
tional institutions that were experiencing a similar trend towards
specialization. Each of these new specialties has created has system of gov-
ernance to specify and control its boundaries and do define and achieve its
professional goals. (Galambos 1983: 486)
Many professions that did not exist 100, or 50, or even 10 years ago
have now created their own distinct competencies and roles in the
contemporary society. That is, the process of professionalization is
ongoing, and it dynamically responds to both practical needs and the
political and economic interests of specific occupational groups and
the regulatory agencies monitoring these groups (McMurray 2011;
Cooper and Robson 2006). Brint (1994: 16) emphasizes that the pro-
fessions are “neither democratic nor capitalist,” and therefore they
have served an intermediary role in advancing specialized knowledge
and social reforms within the emerging modern state. Regardless of
criticism, the professions are therefore not only interested in securing
their own interests and privileges but actively shape the institutional
setting wherein the professions operate. Butler and Collins (2016:
50) argue that it is “unrealistic” to imagine that professionals “spend
all their time engaged in rent-seeking activities”; instead, profession-
als “serve their own ends while also tending to the interests of others,
namely their clients” (Butler and Collins 2016: 50). Consequently,
there is a series of studies that propose that professions are what
Scott (2008: 223) calls institutional agents, the “definers, interpret-
ers, and appliers of institutional elements.” In Scott’s (2008: 223)
view, professionals are “the most influential, contemporary crafters
of institutions.” Similarly, Suddaby and Viale (2011) propose that
professionalization—the process to create jurisdictional discretion and
accompanying privileges and responsibilities for particular groups—
and institutionalization occur simultaneously: “Professional projects
are essentially vehicles of institutionalization and field-level change”
(Suddaby and Viale 2011: 426). They continue: “As professions cre-
ate, maintain and extend their jurisdictional boundaries, they, perhaps
117
unwittingly but often with intent engage in processes of institutional

work.” In other words, professions do not emerge out of sheer neces-
sity or mysterious social transformations, but are rather the outcome
of political processes and power struggles, serving to create jurisdic-
tional boundaries and to erect entry barriers into the profession. The
professions are thus, Larson (1977: 74) stresses, “organizational proj-
ects”: The professional project “organizes the production of produc-
ers and the transaction of services for a market; it tends to privilege
organizational units in the system of stratification; it works through,
and culminates in, distinctive organizations—the professional school
and the professional association” (Larson 1977: 74).
Larson adds that this professional project includes two related pro-
cesses, whereof the first is the agreement upon a “cognitive base” and
a definition of a “professional commodity,” and the second is “the rise
and consolidation of national systems of education” (Larson 1977: 211).
The first process might seem unproblematic, but in many cases there are
severe difficulties involved in drawing the line of demarcation between,
e.g., different medical domains of expertise (see, e.g., Mol 2002). In the
field of psychiatry, struggling to establish a shared, legitimate etiology of
a series of psychological disorders—represented in the manual Diagnostic
and Statistical Manual of Mental Disorders, now in its fifth edition (Strand
2011)—there are many different orientations within the same profes-
sion. In a classic study of the psychiatric profession, Strauss et al. (1964:
8) found three distinct professional ideologies (labeled the somatic, psy-
chotherapeutic, and milieu therapy orientations) that provided their own
explanations for disorders and that prescribed specific therapies and treat-
ment methods. At times, but not very often, such professional disputes
and controversies can lead to the split of a profession into separate profes-
sional fields, maintaining their own professional organizations, education
programs, and so forth. One typical case is the split between mainstream
experimental medicine and “alternative medicine,” wherein the propo-
nents of the former domain of expertise are quite hostile toward what
they regard as the quackery and pseudo-science of the latter domain,
above all lacking robust scientific evidence to substantiate claims regard-
ing therapeutic benefits. Among economists, representing a profession
that they themselves regard as “a relatively monolithic whole” (Reay

2012: 52; see also Fourcade et al. 2015), based on what Hirschman and
Berman (2014: 794, 796) call a shared “cognitive infrastructure,” includ-
ing a specific “style of reasoning” and “economic policy devices,” there
are still a lot of discussions and branding activities taking place, sepa-
rating “mainstream,” “orthodox,” “heterodox economists,” and so forth.
However, any profession is characterized by vivid and animated debates
and discussions, and there are always a core and a periphery of the profes-
sion, but the key objective is to ensure that the profession appears to be
unified and legitimate in the eyes of the community outside of the pro-
fessions. Internal feuds and the inability to reconcile opposing interests
and professional ideologies counteract the formation and consolidation
of the profession.
When the basic “boundary work” (Gieryn 1983) vis-à-vis other
domains of expertise is conducted, the profession needs to monop-
olize the jurisdictional domain and to control the inflow of new
entrants into the profession. Like with all processes of monopoliza-
tion, the organizers of the profession need to ensure that there is a
tolerable supply of qualified and reasonably priced services, at the
same time as too many entrants lower the price paid for the profes-
sional service and perhaps also compromise the quality of the profes-
sional work conducted. The question is thus how to balance supply
and demand in ways that benefit the profession, at the same time as
the clients and the wider community are served. This process regu-
larly includes two types of organizations: (1) universities or tertiary
education institutions, and (2) professional licensing organizations
(Freidson 1986: 64). At times, these two mechanisms are combined,
for instance, in the case of the Swedish Lawyers’ Association (Svenska
Advokatsamfundet), which demands both law school diploma and a
certain amount of qualified practice (in, e.g., the courts and other
legal institutions) and years of practical work to grant a lawyer license
and a membership. Furthermore, if individual lawyers fail to act in
accordance with the code of conduct enacted by Swedish Lawyers’
Association, the license of the lawyer may be withdrawn in the case
of, e.g., grave misconduct—even for life.
119
Process View of Professionalism: Professionalization

A
and Deprofessionalization
Professionalism offers several benefits for a differentiated society: it secures

the supply of specialized know-how as certain status and privileges are
accruing to individuals embarking on professional careers; it regulates
and monitors the inflow of professional workers, and establishes rewards,
punishment routines, and sanctioning mechanisms in professional fields.
As professionalism is generally associated with status and authority, and
commonly using credentials such as degrees, licenses, diplomas, and
other forms of insignia to distinguish insiders from outsiders, processes of
professionalization have been observed in many domains of work. Leicht
and Fennell (2001: 8) say that professionalization is “the result of a suc-
cessful professional project” and further explain that “an occupation is
professionalized to the extent that it successfully defines a set of work tasks
as their exclusive domain, and successfully defends that domain against
competing claims.”
A substantial literature addresses the risks of and possibilities for depro-
fessionalization and the challenge to professional autonomy and authority
imposed by other regimes of governance and managerial control. One of
the principal concerns regarding professionalism is the perceived ideal of
the autonomy of professional actors. As Larson (1977) remarks, a “pro-
fession is more often defined as an occupation which tends to be colleague-
oriented, rather than client oriented” (Larson 1977: 226. Emphasis in
the original). In addition, as Strauss et al. propose (1964: 371. Original
emphasis omitted), “professionals follow careers, and specific institutions
are, more often than not, waystations”; professionals, having their skills
and competence and therefore in many cases being attractive on the labor
market, are always suspect of being more loyal to their profession than to
their employer or industry. That is, ultimately, it is other professionals who
have the skills and the experience to fully assess and evaluate the qual-
ity of the work of the professional (see, e.g., Murningham and Conlon
1991); clients are served, and there are good reasons to pay attention to
the client’s expectations, needs, and demands, but by the end of the day,
such opinions and assessments are “extra-professional” and cannot fully
account for the difficulties involved in the professional work. This attitude
can both be annoying—a form of “the doctor always knows best,” pater-
nalist attitude—or generate suboptimizing effects in the case of group
thinking (Janis 1982) or cognitive dissonance (Festinger 1957) in, e.g.,
high-security systems (see, e.g., Perrow 2007: 984; Weick and Roberts
1993). In addition, reinforcing the outsider’s suspicious view of profes-
sions, Collins (1979) found a surprisingly weak correlation between the
requirements of educational credentials and the skills/knowledge require-
ments of the actual work, a research finding that made Collins draw the
conclusion that tertiary education primarily serves to socialize aspir-
ing professionals-in-the-making into status cultures by drawing a line
of demarcation between insiders and outsiders (see, e.g., Schleef 2006;
Becker et al. 1961). In other words, seen in this view, it is not so much
skills and competence but the university-based “license to operate” that
serves to define professionalism.
Professionalism and Managerialism
Professionalism is commonly portrayed as being in conflict with mana-

gerialism, a regime of control and a “mode of thought and action based
on a desire to control, enhance efficiency, normalize and suppress con-
flict and promote the universalization of sectional managerial interests”
(Kuhn 2009: 685–686. See also Costea et al. 2008; Grey 1996), as pro-
fessionals operate on entirely different bases (Raelin 1985). Leicht and
Fennell (2001: 8) identify five distinct phases of managerialist control
of professionals: (1) entrepreneurialism in the 1860–1910 period, (2)
scientific management in the 1910–1940 period, (3) human relations,
in 1940–1970, (4) human resource management, 1970–1990, and (5)
“neoentrepreneurialism” after 1990. The term “neoentrepreneurialism”
is quite broad and indistinct, and the literature on the monitoring and
control of professionals adds several terms to the arsenal of professional
control that managers access.
Hodgson (2002) stresses how commercial interest organizations such
as the Project Management Institute (PMI) seeks to monopolize the term
project manager by issuing licenses to restrict the autonomy of professionals
121
through prescribing specific and mandatory project management prac-

tices. In the case of health care organizations such as the British National
Health Services (NHS), Kitchener (2002) claims that managerialist pro-
grams have been launched to better control the work of, e.g., physicians
(see also Waring and Currie 2009; Gerrity et al. 1992). McGivern and
Ferlie (2007) argue that UK health care professionals are expected to par-
ticipate in consult-driven organization change programs where they have
to use instruments that add little to their practical work. The study shows
how professionals cynically participate in these “ticking-the-box games”
but otherwise maintain the jurisdictional control of their work. In addi-
tion, Currie et al. (2012) and Goodrick and Reay (2011) draw on the
literature on institutional logic and argue that health care professionals
today need to accommodate and reconcile two or more complementary,
or at times opposing, logics in their day-to-day work, occasionally lead-
ing to new ways of working and new identities. Pratt et al. (2006) stress
the role of “identity work” as one fruitful way of coping with perceived
inconsistencies between managerialism and professionalism. While some
researchers regard various managerial control initiatives as being a threat
to professional autonomy, others, such as Timmermans (2008), claim
that professions are for most part in the position to handle and neutralize
such managerial initiatives:
Under the pressure of external control, clinical professions have shown an

ability to selectively adopt reform elements, neutralize others, and main-
tain or even expand their professional powers. Clinical medicine continu-
ously changes: there is diversification, increased specialization and
stratification within medicine. (Timmermans 2008: 180)
This research literature indicates that professional autonomy and discre-

tion are always of necessity exposed to external initiatives to better govern
and control professional know-how and expertise, but also suggests that
professional identities and practices are robust enough to evade, coun-
teract, or accommodate such pressures. One of the key explanations for
this continuity and perseverance of the professions in organizations is the
presence of professional ideologies, the shared norms, beliefs, and world-
views that serve as the infrastructure of professional work. If managerial
initiatives to control and regulate the professions are operationalized on

the basis of the virtues of transparency and the metrics of performance
measurement systems, professional ideologies tend to be seated on a more
profound level, that of socialization and identification, not easily lending
themselves to the outsider’s governance.
Professionalism as “Knowledge-Intensive Work”
To escape the term professional altogether, the terms knowledge work

(Newell et al. 2002; Alvesson 2001; Garrick and Clegg 2000), knowledge
workers (May et al. 2002; Kleinman and Vallas 2001), and knowledge-
intensive firms (Donaldson 2001; Starbuck 1992) were introduced at
the turn of the millennium. “Knowledge workers form a special class
of white-collar workers. This class includes professionals, consultants,
technicians, intellectuals, and managers,” Schultze (2000: 5) writes. This
category of work is defined on the basis of the following characteristics:
( 1) “It produces and reproduces information and knowledge.”

(2) “Unlike physical blue-collar work, knowledge work is cerebral . . .
and involves the manipulation of abstractions and symbols that both
represent the world and are objects in the world.”
(3) “Unlike service work, which is frequently scripted . . . knowledge
work defies routinization and requires the use of creativity in order to
produce idiosyncratic, esoteric knowledge.”
(4) Knowledge work “requires formal education, i.e., abstract, technical
and theoretical knowledge” (Schultze 2000: 5).
Heervagen et al. (2004: 511) say that knowledge work includes
“[p]lanning, analyzing, interpreting, developing, and creating products
and services using information, data or ideas as the raw materials.” More
specifically, knowledge work is characterized by a number of conditions
and events, Heervagen et al. (2004) suggest:
• Workers have small blocks of uninterrupted time, punctuated by fre-

quent, brief conversations.
123
• At any given time, only a proportion of tasks are worked on, with
multiple tasks being in a state of suspension.
• Task switching is common and results, in large parts, from interrup-
tions to on-going work.
• People spend most of their interaction face-to-face
• Most face-to-face interactions at work are opportunistic rather than
planned. (Heervagen et al. 2004: 511–512)
May et al. (2002: 794) suggest that knowledge workers are both more
committed to their occupation than to their employer, but at the same
time they tend to demand more participation in the decision-making
process than other occupational groups do: “Formal power in decision-
making would enable knowledge workers to mobilize corporate resources
to protect and advance their interests” (May et al. 2002: 795–796). At
the same time, in the organizations studied, May et al. (2002: 795–796)
found that management “[r]elied primarily on extrinsic rewards and job
autonomy as the major levers to manage work motivation.” Therefore, as
Blackler et al. (1999: 80) state, organizations that “depend on knowledge
work and organizational learning” need to move away from “co-ordination
through rules and hierarchies and to create ‘self-managing’ systems of
collaboration,” wherein different specialists “interact directly and jointly
regulate their shared efforts.” This means that if corporations want to be
successful in managing the know-how and skills of their knowledge work-
ers, they need to recognize that expertise, skills, and competencies are
socially embedded organizational assets and that the sharing of know-how
is at the very core of professional and knowledge work. In Subramaniam
and Youndt’s (2005: 459) vocabulary, human capital investment needs to
be accompanied and supported by investment in social capital:
To effectively leverage investments in human capital, it may be imperative

for organizations to invest in the development of social capital to provide the
necessary conduits for their core knowledge workers to network and share
their expertise. Organizations that neglect the social side of individual skills
and inputs and do not create synergies between their human and social capi-
tal are unlikely to realize the potential of their employees to enhance organi-
zational innovative capabilities. (Subramaniam and Youndt 2005: 459)
Despite the recognition of knowledge workers’ demand to participate

in decision-making processes and to be bestowed with a certain level
of autonomy, the erasing of the terms “professional” and “professional-
ism” is indicative of how trustee professionalism is displaced by expert
professionalism. By the turn of the millennium, not even management
scholars and other organization theorists seemed to care about profes-
sionalism any longer. In the era of the “new economy” (a term used by
the Clinton administration’s economic advisors in the end of the 1990s),
old school terms were thrown out to leave room for new conceptual
frameworks.
Professionalism: A Summary of Arguments
Professionalism has historically served as a “third logic” operating in

between and across the state and the market, the public sector and corpo-
rations, but the autonomy of professional groups has been hemmed on
all sides. In the public sector and state administration, professional work
is increasingly regulated by new public management initiatives includ-
ing auditing activities and the use of performance and process metrics
(Pentland 2000; Porter 1995). In the private sector, professional skills are
treated like any other form of expertise traded on the market (Brint 1994:
39). Not even the academic research community, e.g., industrial soci-
ologists, seems to be concerned with “professionals” as an occupational
category any longer as new terms such as “knowledge-based work” are
introduced (Gorman and Sandefur 2011). Despite these institutional,
political, and cultural changes, there are researchers such as Evetts (2011)
who treat professionals as a group that no longer can maintain this dis-
tinctive “third logic.” Instead, Evetts (2011: 407) says, professionalism
is now “organizationally defined and includes the logic of the organi-
zation and the market managerialism and commercialism.” The third
logic of professionalism was characterized by and defined on the basis
of “partnership, collegiality, discretion and trust,” but in the era of mar-
ket managerialism and commercialism, increasing levels of “managerial-
ism, bureaucracy, standardization, assessment and performance review”
(Evetts 2011: 407) tend to displace professional forms of control. Taken
Promoting an Enterprising Ethos and Entrepreneurial
Spirit 125
together, there is still a need for organizing know-how in the contempo-

rary, advanced economic system of competitive capitalism, but the orga-
nization is to a lower degree based on professional groups’ self-monitoring
and more based on the ethos of the enterprising self, a subject-position
characterized by an appetite for risk-taking and entrepreneurialism, in
short, an attitude that mirrors and accommodates the virtues and ethics
of the ideal-typical competitive capitalist market. In the following sec-
tions of the volume, the idea of professions as the vehicle for specialized
knowledge will be discussed from the perspective of the firm, the primary
locale for such enterprising activities for professionals who choose not to
compete directly on the market.
romoting an Enterprising Ethos

P
and Entrepreneurial Spirit
he Entrepreneurial Function of Competitive
T
Capitalism
The Austrian-American economist Joseph Schumpeter is commonly

associated with the image of competitive capitalism as a ceaseless process
of renewal through innovations and its accompanying destruction of out-
moded products and services. Schumpeter ([1928] 1991: 254) himself
suggested it was the French economist Richard Cantillon who introduced
the concept of the entrepreneur in the physiocrats’ economic framework
in the eighteenth century. In Schumpeter’s economic model, the entre-
preneur is by definition a debtor in the capitalist economic system, still
having the skills, competence, and foresight to produce new innovations,
which in turn generate sufficient income to both repay accumulated debt
and to finance new ventures, either one’s own or ventures seeking finance
investment by a new generation of aspiring entrepreneurs. The entrepre-
neur is thus a trickster figure in the capitalist system, a force that simulta-
neously produces novelty and destruction and being of vital importance
for economic growth and renewal. In other words, as Stark (2009: 5)
notices, “[e]ntrepreneurship is less about creating stability (building on
success) than about creating disruptions that prevent path-dependent

effects.” At the same time, as the entrepreneurial function of capitalism is
understood at a systemic level, being inherently dynamic and destabiliz-
ing, on the level of day-to-day operations and work in, e.g., life science
ventures, there is a need for some pockets of stability and predictability
to maintain what Schumpeter spoke of as the “entrepreneurial function.”
Block and Keller (2009) explore the general tendency that innovation
work is increasingly located in the intersections of collaborating organiza-
tions and that innovations are produced in collaborative networks. Block
and Keller (2009) identify three trends in how innovations are produced:
(1) there is a “declining centrality of the largest corporations to the inno-
vation process”; (2) “inter-organizational collaboration” and small start-
up firms play a more important role in the innovation process; and (3)
public sector institutions take an expanded role as “both participants in
and funders of innovation processes.” In other words, successful innova-
tion work is to a smaller extent conducted in R&D departments in large
corporations; instead, networks of collaborating organizations, supported
by public sector institutions, play a more distinct role in producing inno-
vations. Al-Laham et al. (2011: 574) substantiate these propositions and
show that firms with “greater research alliance capabilities enjoy a higher
likelihood of patents” (see also Ozmel et al. 2013; Powell et al. 2005;
Obstfeld 2005; Uzzi 1999).
Collaborative networks, growing in importance for innovation, com-
prise many different actors including start-up firms, research universi-
ties, venture capital firms, legal advisors, and innovation system agencies
such as business incubators and technology transfer offices (Ferrary and
Granovetter 2009). These heterogeneous organizations contribute in
their own ways to the field of life science innovation and ultimately to
what Pisano (2006) calls the “science business”—companies that both
live off and contribute to scientific research work. In this transforma-
tion of the field toward network-based activities, the entrepreneurial
university (Etzkowitz 2003) and its enterprising professors (Haeussler
and Colyvas 2011) have been given much attention. Colyvas and Powell
(2007) argue that academic researchers have become venerated as the
drivers of new know-how in the life sciences, and Berman (2012) speaks
of “the market university” as an “economic engine” in the contemporary
Spirit 127
period. Berman’s (2012) view encourages an entrepreneurial spirit among

academic researchers and renders it as a key to a vital economy, but other
commentators have pointed out the externalities of the market university,
no longer primarily serving public interests and industry but themselves
being enterprising actors seeking to raise their market value (Mirowski
2011; Bok 2002). For instance, in a hearing in the US Senate, the Hewlett
Packard representative Dr. Stanley Williams claimed that “largely as a
result of the lack of federal funding for research, American Universities
have become extremely aggressive in their attempts to raise funding from
large companies” (cited in Mowery 2009: 37).
Under all conditions, it is reasonable to assume that the know-how
accumulating in research universities around the world, themselves strug-
gling for recognition and competing over research funding, is of great
value for life science innovation activities. As a consequence, regardless
of the organization form of the innovation work, life science innovation
is today located in increasingly complex networks of relations. Studies of
scientific work more broadly (Nielsen 2012), in the life sciences (Powell
et al. 2005), and in subfields such as biotech (Owen-Smith and Powell
2004) and tissue engineering (Murray 2002), all emphasize the ability to
participate in and take advantage of network-based collaborations.
The Growth of Self-Employment
A Long Farewell to Career Jobs
“Since the late 1980s,” Jacoby (1999: 124) writes, “it has been white-collar,
educated workers who have experienced the sharpest increases in perma-
nent job loss. Less-educated workers still have the highest job loss rates,
but their rates have fallen since the early 1980s.” In 1999, Peter Cappelli
(1999) boldly announced that “career jobs are dead.” This category of
work is defined as “full-time jobs that last reasonably long, pay reasonably
well, and offer benefits, reflecting the public policy concern about whether
jobs provide the means to prevent economic hardship” (Cappelli 1999:
146). “Career jobs” were in short the type of employment that previous
generations of professionals could rely on and were expected to land if
they only played their cards reasonably well. The alleged death of this cat-
egory of work does not of necessity imply that there are worsening terms
and conditions of work, but it means that employment is today increas-
ingly shaped by the expansion of external labor markets. This means
that in practice the careers of individuals are influenced and shaped to a
lower extent by employers and managers but more by the employees and
job seekers themselves being given such responsibilities (Cappelli 1999:
147). Cappelli (1999: 151) lists a longer series of events, economic condi-
tions, and policy changes that have constituted this new world of work
and stresses the enforcement of shareholder value creation as the domi-
nant corporate governance principle that justifies extensive organizational
restructuring. While Cappelli (1999) warns against being nostalgic about
past idioms of capitalist economic production, including the paternalist
welfare capitalist model (Jacoby 1997; Quadagno 1984; Brandes 1976)
and the post-World War II era of oligarchic managerial capitalism (Marris
1964), he still emphasizes that “all workers now experience insecurity”
as corporate restructuring activities have become the Damocles’s sword
under which all professional careers are now located (Cappelli 1999: 151).
Steinmetz and Wright (1989), working within a Marxist theory tra-
dition, demonstrate that what Cappelli (1999) calls the death of career
jobs is a break with a long-term trend in American employment and thus
represents a return to the “petty bourgeoisie entrepreneur economy” being
in decline over the entire post-World War II period. Speaking of the loss
of stable and predictable employment as the rise of “self-employment,”
Steinmetz and Wright (1989: 974) argue that this type of employment has
grown in importance and that already in 1980, “at least a quarter of the
total labor force, and a third of the male labor force, either is or has been
self-employed.” Self-employment is here defined in quite precise terms:
Self-employment means, literally, being employed by oneself and is pri-

marily contrasted to two other conditions: being employed by someone
else (a wage earner) and earning an income without being employed at all
(i.e., a rentier of one sort or another who receives an income without work-
ing). The category ʻself-employmentʼ thus describes the intersection of two
dimensions of economic relations: first, whether one’s income depends on
selling one’s capacity to work and, second, whether in order to work one
Spirit 129
has to enter the labor market. A self-employed person is someone who

earns an income at least in part through his or her own labor but not by
selling his or her labor power to an employer for a wage. (Steinmetz and
Wright 1989: 979)
Taking the long-term view, Steinmetz and Wright (1989: 9745–976)

stress that between 1940 and 1973, i.e., by the first oil crisis, “there was
a virtually monotonic annual decline in the rate of self-employment in
the United States, from around 20% to under 10%.” Between 1973 and
1976, during the political turmoil and decline in the US economy, the
rate was stable, and thereafter, there was a slight but steady increase in the
rate of self-employment. That is, in the era of managerial capitalism (circa
1945–1973), self-employment and the “petty bourgeoisie” economy and
life style—which, e.g., President Ronald Reagan, the star of neoconserva-
tism, praised as “the promise of America’s future” (cited in Steinmetz and
Wright 1989: 974)—were in decline and were substituted by internal
labor markets and “career jobs.” This American trend was also empirically
verified in France and (West) Germany, where self-employment around
the 40 percent level by the turn of the twentieth century declined to
the 10–14 percent level by the late 1980s (Steinmetz and Wright 1989:
982). Part of this decline can be explained by the shrinking size of the
agriculture sector, being more and more efficient during the 1945–1973
period, but with such factors taken into account, there was still a signifi-
cant decline in self-employment, especially in the 1960s. More impor-
tantly, after around 1976, the fastest growth of self-employment was
not observed in what Steinmetz and Wright (1989: 1003) refer to as the
“postindustrial services,” i.e., in the nonmanufacturing industry, but in
the “traditional core of industrial society.”
As suggested by Cappelli (1999) and many others, in the 1980s, the
shareholder primacy governance both justified and called for extensive
corporate restructuring, making downsizing, outsourcing, and offshoring
widespread approaches to cut costs and to boost dividends and share prices
(Prechel 1994; Useem 1990). Seemingly paradoxical, when using Steinmetz
and Wright’s (1989) vocabulary, the decline of managerial capitalism pro-
moted the return of “petty bourgeoisie” economy and life style, at least on
the paper. In practice, the petty bourgeoisie certainly did not thrive in this
new era of relentless competition and cost-cutting; in fact, many commen-

tators (as will be discussed shortly) saw these changes as what undermined
the middle class and eroded its basis for economic well-being, the possibil-
ity of securing employment, and to conduct white-collar and professional
work. Steinmetz and Wright (1989) summarize their findings:
[I]t appears that self-employment has grown within the older, more tradi-
tional industrial sectors of the economy in recent years. This is especially
noticeable in construction and miscellaneous manufacturing but is also
true in machinery and transportation . . . The expansion of self-employment
within particular kinds of activities, therefore, is not a post-industrial pro-
cess but a structural feature of more traditional segments of the economy.
(Steinmetz and Wright 1989: 1007)
What Cappelli (1999) discusses as a widespread and generally observed

phenomenon—the restructuring of the labor market and the shift from
internal labor markets and its reliance on “career jobs” to external labor
market and individually managed careers—Steinmetz and Wright (1989)
substantiate on an empirical basis on the macro level. In addition, these
changes have not come about because of “deindustrialization” or the
“global shift” to produce manufactured goods outside of the core of the
industrialized world, but because new corporate governance principles
have rendered corporate restructuring the new conventional wisdom
and the hallmark of “responsible” management, now primarily benefit-
ting the shareholders. These changes in management, governance, policy,
and labor market conditions (including not the least the decline of trade
unions in the United States) paved the way for the entrepreneurial and
self-employing professional, one of the key new figures of the 1990s,
the take-off phase for neoentrepreneurialism, one of the distinguishing
marks of contemporary competitive capitalism.
e Entrepreneurial Professional: Contact Work

Th
Outside of Internal Labor Markets
Entrepreneurship researchers (e.g., Braunerhjelm and Henrekson 2013)

make a distinction between “opportunity-based” and “necessity-based”
Spirit 131
entrepreneurship, wherein the former refers to “pull-effects due to the

identification of an entrepreneurial opportunity,” whereas the latter
“implies that individuals are pushed into entrepreneurship due to high
levels of unemployment” (Braunerhjelm and Henrekson 2013: 111).
Quite simply, in the former case, the individual embarks on an entrepre-
neurial career because he or she sees the opportunity to make money, or
to realize other potentials and benefits, while in the latter case, entrepre-
neurship, harshly put, becomes a handy euphemism that conceals and/
or rationalizes the difficulties in securing a regular work position. These
two terms are complemented by what Decker et al. (2014: 5) refer to
as subsistence entrepreneurs, entrepreneurs who “[c]reate small businesses
that provide employment for the entrepreneur and perhaps a few others
(often family members), which do not usually grow,” and transforma-
tional entrepreneurs, who “[c]reate small startup businesses with the inten-
tion to innovate and grow, thus creating employment for other workers
and value added for the economy” (Decker et al. 2014: 5–6). The ideal
“textbook case” entrepreneur would then be the opportunity-oriented,
transformational entrepreneur, creating a new business on the basis of
perceived rent-generating opportunities and with the ambition to make
the venture grow in size and economic value. A key question is then, con-
sidering the relevance of this duality, how large shares of the stock of con-
temporary entrepreneurs that belong to each category. As most new firms
fail to grow and many go bankrupt (Decker et al. 2014), it is reasonable
to assume that a considerable proportion of entrepreneurs do not belong
to the category of opportunity-oriented, transformational entrepreneurs.
This concern is beyond the scope of this volume, but when it comes to
the precariousness of professional work, where professional workers are
actively encouraged to fashion entrepreneurial identities for themselves,
this is not a moot question.
O’Mahony and Bechky (2006: 918) write that “traditionally, a career
was associated with long-term employment with a single employer and
movement through a sequence of increasingly challenging jobs within a
hierarchy.” In many cases, the term career was strongly associated with
internal labor markets that provided workers with “resources for action,”
which in turn influenced “individual aspirations by projecting desirable
ends,” and that provided “feedback on goal attainment” (O’Mahony
and Bechky 2006: 918). That is, internal labor market guided career
development and helped making sense of career choices and unfortu-
nate setbacks and failures by explaining recruitment decisions. In con-
trast, in the era celebrating an enterprising ethos and entrepreneurial
spirit, wherein such internal labor markets are now largely absent or
shrinking in size, also for top management positions, individuals are
expected and encouraged to take on more responsibility for the “pro-
gression” of their careers (O’Mahony and Bechky 2006: 918). At the
same time as the ethos of “responsibilization” (Shamir 2008)—a term
discussed shortly—is laid upon the individual, “career progression in
external labor markets may be less predictable” (O’Mahony and Bechky
2006: 918). Needless to say, the combination of growing individual
responsibilities and the opaqueness of external labor market is not a
fortunate combination, and it leads to considerable stress for individu-
als who pursue careers in such markets (discussed in more detail in the
next chapter). To lighten the burden of personal career responsibili-
ties, the literature on labor market restructuring abounds with euphe-
misms to sugarcoat the pill of responsibilization. For instance, the term
“boundaryless careers” (e.g., Ashkenas et al. 1995) has been proposed
as a more appealing term than “external labor markets.” However, such
terms do little to help people competing in labor markets cope with
the various expectations potential employers may have, O’Mahony and
Bechky (2006: 918) suggest:
Boundaryless careers do not unfold in a single organization but comprise

less structured sequences of jobs that may cross occupational, organiza-
tional, and geographical boundaries . . . [T]he boundaryless metaphor may
not be helpful in examining the biggest challenge for people managing
postindustrial careers: how to navigate a progressive series of jobs in a com-
plex and volatile external labor market. (O’Mahony and Bechky 2006:
918)
One such concern is for instance how to foster the desirable enterprising
ethos and entrepreneurial spirit in professional and occupational groups
that traditionally have been serving internal labor markets. In the follow-
ing, this issue will be examined.
Spirit 133
The Enterprising Self as Professional Identity
As demonstrated by Vallas and Prener (2012: 345, Figure 5), during

the boom years in the 1997–2000 and 2004–2008 (until the Great
Recession hit), there was an increase in books being published that
shared the theme of praising entrepreneurship and enterprising activi-
ties, while work in large, bureaucratic organization was commonly
portrayed as dull, uncreative, and unable to provide possibilities for
self-fulfillment. In this literature (e.g., Pink 2001), Vallas and Prener
(2012: 347) suggest, the worker’s self is redefined as a “commercializ-
able product,” and one of the features of this literature is that it “[i]
nduces employees to embrace a critique of the very bureaucratic struc-
tures that had previously sheltered them from precarity.” In this view,
the entrepreneurship literature serves to idealize and normalize insecure
work and to treat it as “liberating” and “fun” (Warren and Fineman
2007; Fleming 2005; Kinnie et al. 2000). As a corollary of the strong
emphasis on innovation-led growth and entrepreneurialism in the con-
temporary economy, the individual is invited and encouraged to enact
himself or herself as an enterprising and entrepreneurial actor, inspired
(in the original meaning of the term, as being under “immediate influ-
ence of God”) and filled with the entrepreneurial spirit conducive to
creative venturing. Much recent research points at how flexibility, risk-
taking, and creativity are today virtues and skills widely recognized and
held in esteem in working life (Pink 2001). This new image of the self
as an enterprising and entrepreneurial figure includes the willingness
to not only participate in but also affirm and even praise competitive
games. Gershon (2011) here speaks about the neoliberal self that fully
recognizes the need to engage with risks to prosper and perform well
in various competitive games. In fact, in the era of neoliberal economic
policy and accompanying shifting social norms and beliefs, the indi-
vidual is expected to affirm the risks he or she encounters in all the
spheres of everyday life, whereof few are today providing refuge from
ceaseless competition (see, e.g., Scharff 2016). Unfortunately, the neo-
liberal adage, “free to choose,” one of the libertarian Chicago econo-
mist Milton Friedman’s many catchphrases (see, e.g., Friedman and
Friedman 1979), is a misnomer, Gershon (2011) claims:
Instead of equating freedom with choice, it might be more apt to say that
neoliberalism equates freedom with the ability to act on one’s own calcula-
tions. Freedom of this kind is inevitably unstable, especially since, in capi-
talism, calculating to one’s advantage is too frequently also calculating to
someone else’s disadvantage. (Gershon 2011: 540)
Shamir (2008) speaks about this shift in competitive capitalism as

an increased “responsibilization” laid on the individual, wherein the
enterprising subject is expected to take responsibility over his or
her working life and career. This responsibilization is derived from
“the economization of the political,” Shamir (2008: 2) suggests, the
processes wherein the instruments of public authority are no longer
laws and regulations but various normative “guidelines,” relying on
self-reflexive regulation and normative prescriptions (see, e.g., Rizzo
and Whitman 2009). This economization of everyday working life
in turn rests on what Shamir (2008: 2) calls “processes of moraliza-
tion,” wherein economic activities are understood as moral acts and
responsibilities to be carried by the individual: “[T]he further the
push to embed ʻsocietyʼ in the ʻmarket,ʼ the more socio-moral ques-
tions—traditionally the concern of civil groups, liberal-democratic
parliaments, trade unions and political parties—become ʻthe business
of market actors,ʼ” Shamir (2008: 3) writes.
In the contemporary period, when free-market competition is widely
seen as the most efficient way to structure economic transactions, and
where there is a general tendency to “ground social relations in the eco-
nomic rationality of markets” (Shamir 2008: 3), the market—otherwise
understood in neoclassical economic theory as an information-processing
and price-setting mechanism—paradoxically becomes morally embedded,
or, better, there is an economization of morality. The foremost consequence
of the enfolding of processes of economization and processes of moraliza-
tion is that the enterprising subject becomes morally responsible for his
or her economic performance and economic well-being more generally.
“Responsibilization—namely expecting and assuming the reflexive moral
capacities of various social actors—is the practical link that connects the
ideal-typical scheme of governance to actual practices on the ground,”
Shamir (2008: 7) summarizes.
Spirit 135
This tendency toward responsibilization has been observed in, e.g.,

the health care sector. In what Pitts-Taylor (2010: 639–670) refers to
as “market-based health care policies,” the population is understood
and constructed as the totality of individuals who are “encouraged to
ensure their own health and promote their personal wellness and suc-
cess in the face of economic insecurity and globalization.” In this view,
“health maintenance” becomes a “responsibility” or a “duty” rather than
a legal right or provision, targeting the body and the self as a site for
“intense personal care and enhancement.” Best’s (2012) study of how the
US Congress allocates economic resources to the National Institutes of
Health (NIH) budgets and the different therapeutic areas of NIH, based
on a data set including 53 diseases over a period of 19 years, indicates
that this ethics of responsibilization has penetrated also political decision
making. Despite making mortality rates the key metric for commensura-
tion across therapeutic areas and budget decisions, in the “new political
climate” (Best 2012: 793), research work on diseases such as lung cancer
(associated with smoking) and liver disease (associated with alcoholism)
received less funding than they should when the new algorithm was used:
“By 2006, lung cancer and liver cancer were receiving about $100 million
and $35 million dollars less, respectively, than would have been expected
based on how many people they killed” (Best 2012: 793).2
This idea of the enterprising self has today been naturalized in most
Western capitalist economies (albeit there is evidence of a subterranean
resistance to its hegemony; see, e.g., Harcourt 2014; Mirowski 2013), by
and large a new subject position coproduced with the expansion of exter-
nal labor markets, structured by short-term contracts and fueled by the
pressure to reduce costs through forms of subcontracting. Weil (2014)
speaks about the fissured workplace, a term that nicely illustrates this
new world of work, wherein workers, especially in the service industries,
operate on the basis of short-term contracts and where people, work-
ing together under the same roof and brand, may in fact have different
employers that supply specialized services. In the tourism and hospitality
industry, for instance, in the 1960s, most hotel employees worked for
the brand that appeared over the hotel entrance, while today, more than
80 percent of staff are employed by hotel franchisees and supervised by
separate management in companies that “bear no relation to the brand
name of the property where they work” (Weil 2014: 7). In Weil’s (2014:
91–92) view, the fissured workplace is not yet another name for subcon-
tracting, outsourcing, or offshoring, but is indicative of the tendency in
industry to take advantage of lower transaction costs, accomplished on
the basis of a combination of technological changes (i.e., digital media)
and changes in capital markets, and its subsequent restructuring of busi-
ness organizations into, practically speaking, “bundles of contracts” as
prescribed by, e.g., Jensen and Meckling (1976).
While there is evidence of “elite contract workers” in, e.g., the Silicon
Valley computer cluster benefitting from this restructuring of the corpo-
ration (Barley and Kunda 2004; Evans et al. 2004), the increased use of
short-term contracts, temporal work (MacPhail and Bowles 2008; Hardy
and Walker 2003), agency work (Hoque and Kirpatrick 2008), and con-
tingent employment (Bergström and Storrie 2003), is for the nonelite
community of workers a less fortunate development of industrial rela-
tions and everyday management practice (Pialoux and Beaud 1999).
Internalizing the Enterprising Ethos: Venture Labor
What Neff (2012) refers to as venture labor workers are possible to locate
between enterprising computer industry elite contract workers (Barley
and Kunda 2004) and less qualified service workers in the service and
tourism and hospitality industries (Weil 2014). Studying the New York
City computer and new media industry, at times referred to as “Silicon
Alley,” Neff (2012) argues that this new breed of workers is the outcome
of reduced job security in the 1980s and 1990s, caused by deregulation
and deindustrialization. “The social shift toward increased employment
flexibility created a fertile landscape for entrepreneurship and risk tak-
ing,” Neff (2012: 11) writes. For Neff (2012: 10), this causality is robust:
“People’s desire and need to take economic risk stemmed from a lack of
job security and an increase in employment flexibility—not the other
way around.” Neff (2012: 16) defines venture labor as “the investment of
time, energy, human capital, and other personal resources that ordinary
employees make in the companies they work.” In addition, venture labor
is “the explicit expression of entrepreneurial values of nonentrepreneurs”
Spirit 137
and is understood by the venture labor worker as a form of “investment”

in the firms they work, revealing the influence of the entrepreneurship
vocabulary among these “nonentrepreneur” workers. “When people
think of their jobs as an investment or as having a future payoff other
than regular wages, they embody venture labor. Venture labor is the way
in which people act like entrepreneurs and bear some of the risks of their
companies,” Neff (2012: 16) summarizes.
According to Neff (2012), the work of venture labor workers is vital to
high-risk, venture capital-backed companies and industries, and she cites
a venture capital investor who stresses the key role of risk-taking cowork-
ers: “It is to a certain extent in the best interest of venture capitalists to
encourage people to keep trying, to not be afraid of failure. We need
people to take a chance” (Tom Perkins, Partner of Silicon Valley venture
capital firm Kleiner Perkins Caufield & Byers, cited in Neff 2012: 5).
Also the owners and managers of venture capital-backed companies rec-
ognize the value of the enterprising skills of the venture labor workers:
“I don’t want someone who’s going to ask, ‘What’s my job?’ I need some-
one who’s going to figure out that on their own,” one cofounder of news
website says (cited in Neff 2012: 18).
Lane (2010), studying another geographical location of the US
computer and new media industry, that of Dallas, Texas—the “Silicon
Prairie”—shows how venture labor is organized into individual enter-
prises—the “Company of One.” In Lane’s account, social and economic
changes, encouraging risk-taking and an enterprising life style and
career, have led to a “no fuss,” non-nostalgic view of working life. The
computer industry workers interviewed by Lane (2010: 9) pitied men
and women “who foolishly looked to paternalistic employers to provide
them with job security and financial stability,” and dismissed them as
“losers” out of step with their times (see also Scharff 2016). In contrast,
these workers had internalized the ideal of the enterprising self and
saw themselves as entrepreneurial agents “engaged in the constant labor
of defining, improving and marketing ‘the brand called you’” (Lane
2010: 9). In contrast to Neff’s New Yorkers, being employed by a firm
and conducting salaried work, Lane’s Texans were self-employed con-
tract workers of the same category as Barley and Kunda’s (2004) Silicon
Valley computer programmers. But just like in Neff’s (2012) study,
Lane (2010) accounts for how the idea of the enterprising self has been
firmly rooted in American culture, even to the point where traditional
labor relations, including even a minimal concern for the employees,
were rebuked as a morally questionable and antiquated paternalism.
Such paternalist labor relations, some of Lane’s interviewees argued,
risk to damage healthy entrepreneurial drives and thus bereave the
individual of his or her ability to fulfill potentials and to exploit life
chances: “To give my employees job security would be to disempower
them and to relieve them of the responsibility that they need to feel
their own success,” one computer industry executive argued, to justify
the loss of job security (Lane 2010: 51).
In this new and in many ways unforgiving world of work, venture
labor workers built their own networks to be able to find new work
positions in case their employer would default or if there would be a
downturn in the industry caused by, e.g., a drop in the supply in venture
capital. Industry parties and events were for instance regarded as “one of
their most important business activities” among venture labor workers,
events where they could create social connections that could be useful
during difficult times.
enture Labor in the Life Sciences: Crossing the Boundary

V
Between Academia and Industry
Vallas and Kleinman (2008) study the consequences of the new univer-
sity governance model, where universities are increasingly treated as rent-
seeking “economic engines” (Berman 2012), and scientists and researchers
are treated as assets of considerable economic value (Mirowski 2011).
In Vallas and Kleinman’s (2008: 284) account, these changes, includ-
ing the “profit imperative” now being imposed on universities, threaten
to erode the “freedom and autonomy of scientific inquiry.” In addition,
academic researchers are increasingly incentivized to pursue entrepre-
neurial careers where they seek funding for themselves and their research
group, and thus de facto operate as “intrapreneurs” within the university
structure—as freestanding actors financing their work and yet unable to
individually profit from their enterprising work and research activities.
Spirit 139
In this new university governance structure, academic researchers may be

more attracted to pursue research careers in start-up companies, includ-
ing the life science companies that Vallas and Kleinman (2008) examine.
However, rather than being two separated and isolated systems, univer-
sity departments and start-up firms demonstrate a considerable degree
of mimetic isomorphism (DiMaggio and Powell 1983) wherein a science
logic and a market logic (with Berman’s, 2012, terms) are combined and
hybridized: “[W]e argue that a two-way cultural traffic is growing, in
which market pressures and entrepreneurial practices increasingly per-
vade academia, even as university-like codes and practices are adopted
by science-intensive firms” (Vallas and Kleinman 2008: 288). Vallas and
Kleinman (2008) continue:
[A]cademic scientists adopt entrepreneurial orientations where the cur-

rency at stake—academic as well as economic capital—often comports
uneasily with traditional, discovery-oriented modes of inquiry. And on the
commercial side, concern for collegiality and for contributions to ‘basic’
knowledge is increasingly valued, but largely as a means of attracting and
motivating both scientists and investors, not as an end in itself. (Vallas and
Kleinman 2008: 289)
In order to examine how this hybridity materializes and how it shapes and
informs everyday work in the two settings, Vallas and Kleinman’s (2008)
sample includes interviewees working in both milieus. The scientists
working in the academy were able to “retain near complete control over
the selection of research topics, the day-to-day operation of their labora-
tories and, for more junior scientists, their own work practices” (Vallas
and Kleinman 2008: 291). In addition, the academic career appeared to
consume all of the scientists’ time and effort, and an “only small minor-
ity” was “actively engaged in start-ups, the pursuit of patents, consultant
arrangements or other commercial endeavours” (Vallas and Kleinman
2008: 292). At the same time as the academic scientists, once funding
had been secured, enjoyed a considerable autonomy in their work, the
shadow of the future always kept scientists concerned about how to get
the next paper into print and how to land the next research grant. One of
the academic scientists addressed these pressures:
Even if you have tenure, in order to keep your lab functional, you have to
keep the publications and grants coming in, so it’s never completely free.
And to get the grants you have to work on stuff which is considered fund-
able. (Academic scientists, cited in Vallas and Kleinman 2008: 293)
This pressure to act both as an entrepreneur, raising one’s own funds,

and as a scientist, capable of producing world-class research and able to
compete over publication space in the leading academic journals, led
to a disenchantment of academic work in some quarters. In such cases,
“commercial employment” (i.e., employment in life science companies)
emerged as an attractive option. Scientists embarking on nonacademic
careers felt compelled to do so, Vallas and Kleinman (2008: 293) argue,
“precisely to escape the entrepreneurial pressures they encountered within
the academy.”
This tendency to escape the academy to reduce entrepreneurial pres-
sures is indicative of the more deep-seated hybridity in the life science field,
wherein academic departments are stressing revenue streams and financial
performance, while many life science firms are determined to “accommo-
date academic traditions, in keeping with the expectations of their scien-
tists” (Vallas and Kleinman 2008: 296). For instance, one company-based
life scientist stressed how publications in academic journals were granted
much prestige in his firm (cited in Vallas and Kleinman 2008: 301): “I
think it’s sort of the dual nature of [this] company that they both want to
produce drugs and want to be recognized as a first-rate research place.” On
the other hand, classic academic virtues such as the free circulation of ideas
(in Robert Merton’s, 1973, seminal account of the production of com-
munal knowledge in the academy, this virtue is at the core of the activities)
were no longer widely endorsed in the academy, some interviewees claimed:
That’s becoming an increasingly serious problem in science that, that peo-

ple are really not sharing things the way they used to, and it’s becoming
more competitive . . . It’s mostly self-protective and it doesn’t have to do
with financial interests. It has to do with credit, advancement, grants, pres-
tige, all those things and that’s why I think the simple answer is that the
field has become highly competitive. (Academic scientists, cited in Vallas
and Kleinman 2008: 296–297)
Spirit 141
That is, Vallas and Kleinman (2008: 302. Emphasis in the original)
claim, in the new regime of university governance, “private industry bet-
ter accommodates ‘academic’ norms than does the academy itself.” Firms are
today interested in financing high-prestige publications and scientists’
research work, while the university, once being understood and man-
aged as a “public good,” is primarily concerned with “establishing rev-
enue streams” (Vallas and Kleinman 2008: 303). Moreover, Vallas and
Kleinman (2008: 305) suggest that this tendency to turn the university
into an internal market, populated by enterprising individual researchers
and research groups, is propelled by university administrators, who are
“far more supportive of the commercial ethos than are the faculty mem-
bers they oversee.” This in turn indicates that this “entrepreneurial logic”
is likely to spread and be further pronounced also within less prestigious
academic institutions, “where the academic counterweight is less firmly
established” (Vallas and Kleinman 2008: 305). As less prestigious aca-
demic institutions mimic prestigious universities, the struggle over lim-
ited research funds is likely to increase, which may pressure an even larger
group of scientists to seek commercial employment.
In a more recent publication, Fochler (2016) reports a similar study
in Austria that aims to understand why academic researchers turn
down academic careers to work in small life science companies. The
sample included interviewees with a background both in the academy
(approximately 80 percent of the participants) and in large pharmaceu-
tical companies (the remaining 20 percent). In this latter group, the
primary reason for leaving the large corporation was not so much the
lack of career opportunities or the research conditions, but a general
sense of “tiresome political games” consuming too much of their energy
and time. More specifically, these scientists were concerned about how
“conservative top management decisions had constrained their choice
of research topics.” For the group of former academic scientists, the
ability to “work on a team,” to jointly explore a matter of social rel-
evance without being overly protective of neither prestige nor empirical
data and research findings, was advanced as principal arguments. Such
joint work effort was meaningful and thus worth pursuing, one of the
interviewees argued:
In a company, you move big things, things a single person could never do.
In academia, you always have to be wary: . . . Where am I on the author
list? First, last? If not, then your contribution is not worth anything, really.
You have to look after yourself in academia much more than in companies.
And that’s a great thing about companies. You don’t have to work at build-
ing ten individual careers—you can work together on one big thing. (Life
science company scientist, cited in Fochler 2016: 271)
Similar to the findings of Vallas and Kleinman (2008), Fochler (2016)

finds that the domain of academic research work is no longer—and if
it ever was, may be disputed—a safe haven for fully committed scien-
tists to explore the inner nature of things, but has gradually been trans-
formed into a pseudo-market for research services, moving in lockstep
with market changes and market-based governance ideas, including fierce
competition and all the externalities competitive games induce (e.g.,
an unwillingness to share know-how, disclosure avoidance, self-serving
career planning):
[T]he researchers, particularly senior researchers, described biotechnology

companies as institutions that allowed them to plan, conduct and retain
control over their research work along a long-term trajectory, if this type of
long-term epistemic trajectory is expected to ultimately lead to a viable
commercial product. From their perspective, both contemporary academia
and larger corporations do not allow researchers sufficient agency to con-
duct non-mainstream research with a long-term perspective. In academia,
funding and topical hype cycles may present obstacles to continuous
epistemic work on a specific topic, whereas in larger companies, risk-averse
management decisions may terminate entire lines of research. (Fochler
2016: 276)
The research findings of Vallas and Kleinman (2008) and Fochler (2016)
are thus indicative of a discontent with the enterprising university and
a culture of scientific career making on the basis of scientific excellence,
fund-raising abilities, and, more recently, increasing media recognition, a
tripartite skill profile that is very complicated to uphold. This discontent,
Holden (2015) argues, easily transforms into nostalgia and a mythology
of a past “golden age” of the life sciences:
Spirit 143
In the ‘golden age’ narrative, the moral and political economies of science
are remembered as harmonious and mutually reinforcing, nurturing the
apt conditions for autonomous, self-regulating cultures of science that
enjoyed science as a vocation on the proviso that society benefit from tech-
nological and scientific goods. (Holden 2015: 26)
This myth is based on, Holden (2015: 28) suggests, the “[s]eparation
between science as a vocation and science as a job, between moral and
political economies of science.” The research findings of Vallas and
Kleinman (2008) and Fochler (2016) indicate that today, this separa-
tion—if it ever fully existed—is no longer relevant for most life scien-
tists as money and research output are now always playing a key role in
all domains of research. Narratives about the loss of “intellectual free-
dom” and “[t]he passion and creativity to pursue academic science as
a vocation” (Holden 2015: 30) are therefore commonplace in nostalgic
accounts of the past.
What is perhaps more worrying is that life scientists complain about
the loss of “a serendipitous approach to scientific discovery.” For instance,
scientists are today expected to anticipate what research findings they are
capable of producing, and what practical applications such findings may
generate already prior to the actual research work (Power 2015). This in
turn means that the term “scientific research” is being redefined from
being an exploration of the unknown to the refinement of a pre-existing
research agenda that is targeting what is “almost already known”: “Joyce
[a life scientist] complains that research projects are only deemed feasible
and awarded grant money when the outcomes are known to some extent”
(Holden 2015: 34). What was once known as a “blue sky research,”
research work being pursued regardless of feasibility and impact con-
cerns, is simply no longer conducted as fewer research funds are willing
to venture into unchartered territories: “Interviewees did not deny the
possibility of discovery; they still believe the world is out there. However,
they bemoan the loss of freedom and time to ‘tinker’ and ‘go with the
flow’ such as they imagine their predecessors enjoyed” (Holden 2015:
35). Therefore, by the end of the day, the new university governance
model, mimicking corporations and commercial activities, may prove to
be ineffective, or, even worse, undermine the institutional legitimacy of
the academy. Science without uncertainty ceases to be science, and the sci-
entists’ willingness to carry risk—in fact, as Max Weber (1948) remarked
in his essay Science as a Vocation, they put their entire career at stake
when exploring the unknown—is only limitedly exploited as university
chancellors and financiers go for the low-hanging fruit. The consequence
may be that only the most prestigious academic institutions, normally
defined on their ability to attract world-class researchers and substantial
funding but otherwise having the confidence and the financial strength
to fund “blue sky research,” may be the champions of the restoration of
a more “aristocratic” research ideal, pushing the more “plebeian” pursuit
for short-term benefits and gains to the side.
Under all conditions, Vallas and Kleinman’s (2008) and Fochler’s
(2016) studies indicate that also highly specialized and prestigious
domains of work, that of the life sciences, at times portrayed as the “man-
ufacturing industry of the twenty-first century,” are today demonstrating
certain elements of precariousness inasmuch as scientists can no longer
simply specialize in one activity or skill but must develop various compe-
tencies to be able to compete within the predominant institutional logic,
characterized by hybrid forms of scholarly and financial interests.
Networking as Career Strategy
In the new world of work, located in the external labor market and unfold-
ing as a boundaryless career, there are three ways to cope with labor market
insecurity, Smith (2010) suggests: (1) to engage in identity work, (2) to par-
ticipate in ongoing training to improve one’s “employability,” and (3) to par-
ticipate in extensive networking. The question of identity work is addressed
in the fourth chapter of this volume, and professional training is outside of
the scope of the volume, but the question of the role of networks will be
examined in some detail. Besides the more general claim that competitive
capitalism is becoming more network based as a consequence of reduced
transaction costs and the development of, e.g., digital media that makes
communication ongoing and not very costly (see, e.g., Castells 1996), there
is a literature on how individuals use networks to accomplish certain objec-
tives and acquire competitive positions (e.g., Granovetter 1973).
Spirit 145
Podolny (2001: 35) speaks about networks as being the “pipes and
prisms” of the market, the mechanism that carries market information
into social relations and individual activities: “[N]etworks are not only
pipes carrying the stuff of the market; they are prisms, splitting out and
inducing differentiation among actors on at least one side of a market.” In
this view, markets are per se understood as and thus performatively con-
stituted as networks. For instance, DiMaggio and Louch (1998) demon-
strate that consumers rely on their network of social relations to acquire
credible information when making purchases, and therefore such social
networks serve a role similar to that of hierarchy inside organizations, as
a means to protect actors against “opportunistic behaviour”:
The data provided provide strong support for the view that individual con-
sumers use social networks the same way as firms use hierarchy: as alterna-
tive governance structures for transactions for which impersonal market
relations provide inadequate protection against opportunistic behaviour.
(DiMaggio and Louch 1998: 634)
In this view, networks carry (“pipes”) and diffuse (“prisms”) market

information into social networks—information of great value for the
individual actor (Akerlof 1970)—and these networks are in turn used
by participants to access information and otherwise create social rela-
tions that would protect them against opportunistic behavior or grant
other benefits. In addition, networks are not only capable of shielding off
downside risk but are also actively used to generate economic or cultural
benefits, including activities that increase the performance of individual
bankers (Mizruchi and Stearns 2001), the landing of a bank loan (Uzzi
and Lancaster 2002), the raising of venture capital in a business venture
(Uzzi 1999), the generation of more generous bonuses (Mizruchi et al.
2011), or to receive more job offers (Fernandez and Weinberg 1997). In
fact, Ferrary (2003) argues that entire industrial clusters such as the Silicon
Valley computer industry cluster are based on network relations and the
principle of reciprocity (Mauss 1954), i.e., “gift exchanges” among par-
ticipants, be they software companies, venture capitalists, or law firms.
Seen in this view, competitive capitalism is not only per se relying on
network structures, engendered by specialization and the reduction of
transaction costs, but for individual contestants and job seekers in exter-
nal labor markets, extensive networks of contacts are vital for maintain-
ing one’s employability and for pursuing boundaryless careers.
Neff’s (2005) study of the New York City computer industry cluster
stresses the importance of being an “outgoing person” who actively social-
izes to gain access to the latest industry information and gossip to be able
to compete in a highly dynamic and constantly changing industry, with
actors and companies constantly coming and going, merging and col-
laborating. Much of this social life of the industry occurs “after dark”
and at parties and events organized by various companies and indus-
try interest organizations: “An industry’s cocktail parties, seminars, and
informal gatherings form its social backbone and are especially important
to innovative industries that rely on the rapid dissemination of informa-
tion . . . A pattern of individual-level occurrences function to structure
industrial location,” Neff (2005: 135) writes. In this industry, located in
a vibrant metropolis, where a social life outside of work is mandatory to
be able to compete over attractive job assignments and salaried positions,
the “nightlife events” served to link “disparate producers in a rapidly
changing industry together into a community of practice that dissemi-
nated information, generated ‘noise,’ and channelled artistic lifestyles and
practices into a commodifiable form palatable to demands of venture
capitalists and Wall Street” (Neff 2005: 142). For the young and the out-
going crowd of industry coworkers, this extrovert life style thus served
to create a community out of existing participants, but also served the
role to create a halo of glamour and extravaganza around the computer
industry cluster. That image of the industry per se arguably attracted new
entrants into a relatively young and immature industry. In Neff’s (2005:
136) view, social ties (i.e., networks) are constitutive of the “productive
milieus” of this industry, and the work to develop and maintain social
ties is essentially located outside of the employing organization, yet part
of the venture labor.
However, the increased reliance on networks and social relations, in
many cases embedded in the use of digital media, is not always beneficial
for actors operating on the external labor market. Van Dijck (2009), for
instance, examines how the boundaries between producers and consum-
ers are eroding in, e.g., the digital media industry, where hybrid terms
Spirit 147
such as “prosumers” (the producer-consumer) have been introduced to

better understand the new mechanisms of economic value production.
In Van Dijck’s (2009) view, these new network possibilities have paved
the way for work that is no longer compensated or remunerated only
after economic value has been generated through, e.g., sales or dona-
tions. Moreover, there is a small literature on “free labor” including, e.g.,
Mears’s (2015) study of younger women conducting “relational work” in
venues and clubs in cities such as New York and Miami. Mears (2015:
1103) uses the examples of unpaid models doing fashion shows for
renowned designers with the intention that they will be “discovered” and
thus make more money elsewhere, or when journalists write essays or
columns for respected and widely circulated magazines to seek market
exposure for their writing skills. To some extent, the term “free labor”
is a misnomer as there are frequently some kind of reciprocal gift giving
involved in the transaction, including “gifts, perks, or access to new social
networks” (Mears 2015: 1103). However, the status and access to eco-
nomic resources of the agent recruiting and managing the individual who
conducts the free labor is considerably higher, and the agent therefore
makes more money (or gains other benefits) on the work conducted for
free than the individual makes in return. The very concept of free labor
is therefore closely entangled with the concept of status (see, e.g., Sauder
et al. 2012; Sauder 2006; Podolny 1993) and is by definition based on the
exploitation of the part with the lower status (albeit endowed with spe-
cific qualities—beauty, poise, writing skills, etc.—which the high-status
agent wants to take advantage of ) in terms of abandoning the principal
labor market mechanism of economic compensation altogether.
Harvey and Fisher (2013) report a study of how female video game
professionals participate in free labor to boost their employability in
the industry. Unlike Mears’s (2015) younger women being targeted for
their physical features and their willingness to conduct “aesthetic labour”
(Warhurst and Nickson 2007) in the night club scene, Harvey and Fisher
(2013) study professional video game developers in their own domain
of expertise and interest. Still, the question of free labor, relational work,
and gender issues applies also in this case. In the creative industries,
Harvey and Fisher (2013: 365) say, “[i]t is the demands of the social
network that shape production, influenced by non-market factors such
as the affordances of online spaces that allow for rapid feedback regarding
tastes, popularity, and reputation.” Moreover, as market pricing domi-
nates in the industry, there is also an “[i]ncreasingly important role of
unpaid, immaterial, affective, and largely female labour therein” (Harvey
and Fisher 2013: 364). In the video game industry, there is a variety of
actors involved being located on a continuous scale of their degree of
professional status, ranging from amateurs, indie developers, and profes-
sional video game developers (Harvey and Fisher 2013: 366). For both
insiders and outsiders, the distinction between these categories is oblique.
The “feminist indie video game initiative” in Toronto, Canada, provides
Harvey and Fisher (2013) with empirical data that shows how indepen-
dent video game developers (“indie developers”) are actively participat-
ing in free labor to gain a reputation in the local industry, a form of
cultural capital that can be used to land a salaried position in one of the
video game companies or to otherwise create network contacts that can
be translated into various benefits (e.g., status, influence, prestige). As
demonstrated by Harvey and Fisher (2013), the world of free labor is
ruthlessly locating newcomers, holding the lowest degree of expertise and
shortest track records, at the very bottom of the hierarchy:
[T]he participants at the bottom of the rung had to invest additional time
and effort in the form of unpaid labour to derive value from their participa-
tion in the project . . . [underlining] the central role of distinctly feminized
immaterial and affective labour—building community, creating new net-
works and connections, fostering a safe environment for collaboration—in
creating value in this emerging economy. (Harvey and Fisher 2013: 375)
Despite these concerns, Harvey and Fisher (2013) are not willing to
rely on some kind of exploitation theory, orchestrated by the cunning
power elites of the industry, to explain the role of free labor. Instead, the
network-based model of the video game industry is per se being devel-
oped and further stabilized in and through such industry events. The
events provide novices and indie developers with opportunities to “make
it into the industry,” and the industry events are thus a novel knowledge-
sharing mechanism in creative industries. At the same time, novices and
indie developers need to “embrace the culture of entrepreneurialism” and
accept the “unequal power positions” as being factual conditions of the
149
industry and what structure the video game development work (Harvey
and Fisher 2013: 376):
[G]ame designer . . . engage in the many unpaid duties required to even

become part of the scene—training in the range of software tools, largely
solitary programming and design, self-promotion through social media,
and entrance into numerous festivals and competitions in the hope of win-
ning some recognition, awards, or legitimacy. All of this labour contributes
to a vibrant market of ideas, producers, and games, reinforcing a portrait of
a city and province with vibrant digital innovation. In return, a lucky few
will make a name in games. (Harvey and Fisher 2013: 376)
The study of Harvey and Fisher (2013) is thus indicative of the new
world of professional work, where the supply of entrants and job appli-
cants in some cases exceeds the demand and where events located in the
fringes of the industry, based on uncompensated labor, can still provide
an opportunity for demonstrating the individual’s skills and capacities. As
opposed to Mears’s (2015) study of the use of physically attractive women
in the club scene,3 Harvey and Fisher (2013) examine an industry event
that besides being “done for free” is otherwise a legitimate and widely
endorsed activity. In the network-based external labor market, there is
room for activities that can shed some light on the skills and creativity of
new entrants, and these events may eventually provide work opportuni-
ties for these entrants. Therefore, the ability to participate in networks and
circuits where industry news and gossips are diffusing is imperative for the
network-based career. Employability is thus not only a matter of amassing
attractive work experience and skills, but also includes the ability to be at
the right spot at the right time, and to be able to narrate a career story that
fits the interest of the employer (Rivera 2015). More about such narrative
skills will be discussed in the fourth chapter of this volume.
Developments in the corporate system and in competitive capitalism more
broadly over the last four decades have changed the role of professionalism
in industry and society. While the professions were previously hired by
either state agencies or large-scale corporations and could thus take advan-
tage of relatively stable and well-compensated employment, the corporate
restructuring of the 1980s and 1990s led to smaller firms increasingly
connected in a network structure, with each firm to a lower extent being
able to buffer the ups and downs over the economic cycle. As the welfare
capitalism project lost much of its legitimacy when shareholder primacy
models were established as the new conventional wisdom, also white-
collar and professional work became less secure. In the new millennium,
professional work is more frequently being organized as a form of venture
labor—labor that includes one or more element of precariousness, such as
the salaried professional worker carrying some of the risks the employer
is exposed to. While professional workers are still highly attractive to hire
as they have specialized skills and competencies, professionals are today,
like any other salaried worker, to a higher degree exposed to market risks.
Whether such risk exposure is compensated for by higher salaries and
other benefits is disputed as evidence shows that real wage growth has
not been able to keep up with productivity growth (and especially not
in the 1996–2004 period of high total factor productivity). The excep-
tion has been the top ten income percentile, which has benefitted greatly
from the institutional, political, and economic changes over the last four
decades. Therefore, taken together, professional workers are today increas-
ingly exposed to market risks and uncertainties that large-scale employing
firms have traditionally buffered. Expressed differently, precariousness is
today a much more salient feature of professional work life.
Notes
1. Needless to say, such redefinitions of central terms in medical practice are
not passed unnoticed in the wider community. Healy (2002: 161) says
that the medical professions now have the authority not only to decide
“who should live and who should die” but also to “redefine death” on the
basis of certain knowledge. As, e.g., Lock (2002) notices, the new defini-
tion of death as brain death coincides with the swift advancement of
transplantation surgery, creating an endemic shortage of organs to trans-
plant. In a critical view, this is indicative of the medical professions
becoming, in Healy’s (2002: 161) phrasing, “an engineering profession”
References
151
accompanied by an instrumental “desacralization of life” that renders the

question of life or death not so much an ethical or theological question,
but essentially becomes a “budget decision” and hospital management
concern more widely.
2. Best (2012) shows that the use of “hard endpoint measures” such as mor-
tality rates and “dollars per death,” intended to base the budget decisions
on robust, scientific data, did little to prevent gender and racial discrimi-
nation. Best (2012: 780) claims to have found “suggestive evidence” that
diseases affecting primarily women and blacks “tend to have lower levels
of advocacy,” ultimately leading to relatively smaller budget allocations
for such diseases. Robust and widely agreed-upon data therefore not
always wins over inherited beliefs and preferences, despite the best of
intentions.
3. This trade demonstrates many controversial practices and socially ques-
tionable norms, including blatant sexism and elitism. “Short and heavy
women,” for instance, failing to live up to present beauty ideals, were for
instance portrayed as “liabilities for the reputations of clubs and promot-
ers,” Mears (2015: 1106) reports.
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4
Conducting and Managing Precarious
Professional Work: Hard and Soft
Human Resource Management Practices
Introduction
Karen Legge (1995) makes a fruitful distinction between “hard” and
“soft” human resource management (HRM) practices, wherein the for-
mer denotes formalized and oftentimes numerical and calculative prac-
tices used to determine, e.g., performances or rewards, while the latter
being a variety of practices and activities shaping the behavior and atti-
tudes of the individual. In many cases, companies combine hard and soft
human resource management practices in ways that optimize their use
of the workforce, with the very nature of work being a key determinant
of what combinations of hard and soft practices are being used. This
chapter examines how professional work more widely and precarious
professional work more specifically are today unfolding as a more or less
ceaseless process to muddle through the various selection mechanisms,
and, later on, managerial control and performance-reward systems con-
stitutive of everyday professional work. Before the professional-in-the-
making has even been admitted to a university education program, he
or she is exposed to screening and selection practices, and throughout
education programs and beyond, there are numerous instances where the
professional is examined, assessed, and reviewed, turning professional

162 4 Conducting and Managing Precarious Professional Work...
work life more or less into an endless high school with tests and measure-
ment today being an irreducible part of everyday work.
Operating under such conditions, one of the most important qualities
of the professional worker is to be able to endure this ceaseless monitor-
ing of performance and work processes without losing the confidence in
one’s abilities and skills. Another risk with predefined assessment meth-
ods is that such methods, which purport to capture work “in the wild”
as work procedures unfold in a “natural setting,” devoid of the influences
of the assessment activities, in fact may entice the professional to act in
ways that are beneficial for the assessment. In such cases, professional
standards are compromised to better respond to the predefined assess-
ment methods, which ultimately lead to a decline of the legitimacy of
original professional standards. In other words, there is risk of “reactivity”
(Espeland and Sauder 2007: 2) among professionals, a form of “teach-
to-the-test” response to assessments methods imposed from above. By
and large, the management of professionals is a fairly delicate balancing
of autonomy and control, where the jurisdictional discretion of profes-
sional workers is a centerpiece of the system of professionalism, a his-
torical accomplishment of professional groups, now being challenged on
everyday basis in organizations.
ntering the World of Precarious Professional

E
Work
etting into the Profession or Industry: Acquiring
G
a Tertiary Education
In education, science and social theory more widely, the access to tertiary
education, and preferably elite institutions, is the obligatory passage point
to embark on a professional career. Seen in this view, social reproduction
is at the very heart of the national and increasingly globalized education
system and what may perhaps be referred to as the “education industry”
(Bourdieu and Passeron 1977). Studies of, e.g., the admission process
(Stevens 2009) and the education system (Anteby 2013; Schleef 2006)
in elite institutions (primarily in the Anglo-American cultural sphere)
Entering the World of Precarious Professional
Work 163
strongly emphasize the wider socio-economic and cultural features of this

class of elite education. In some cases, elite schools are explicitly “non-
meritocratic” in ways that may surprise outsiders and that clearly violate
the otherwise praised principal ideas that “hard work pays off” or that
“the market never wastes a talent” (Stevens 2009).
Turner (1960) makes an important distinction between contest mobil-
ity and sponsored mobility as two ideal-type systems for selection in
educational systems, both having their socio-economic benefits and dis-
advantages. Contest mobility, Turner (1960: 856) writes, “[i]s a system
in which elite status is the prize in an open contest and is taken by the
aspirants’ own efforts.” Sponsored mobility, in contrast, is less structured
around meritocratic qualification but selects new members of elites on
the basis of predefined criteria, determined by “established elites or their
agents” (Turner 1960: 856). In sponsored mobility, “elite status is given
on the basis of some criterion of supposed merit and cannot be taken by
any amount of effort or strategy,” Turner (1960: 856) argues:
Upward mobility is like entry into a private club where each candidate
must be ʻsponsoredʼ by one or more of the members. Ultimately the mem-
bers grant or deny upward mobility on the basis of whether they judge the
candidate to have those qualities they wish to see in fellow members.
(Turner 1960: 856)
In contest mobility, new elites are selected in what is comparable to a

sporting event in which “many compete for a few recognized prizes” and
wherein the contest is “judged to be fair only if all the players compete on
an equal footing” (Turner 1960: 857). Such virtues of “free competition”
are rejected in sponsored mobility model, and instead “a controlled selec-
tion process” is favored, simply because this provides the benefit of the
elites having more detailed control of who are introduced into their com-
munity: “Individuals do not win or seize elite status; mobility is rather a
process of sponsored induction into the elite” (Turner 1960: 857).
In Rivera’s (2015: 29) account, Turner’s (1960) two models are “ideal-
types” (Weber 1949), i.e., “they are deliberate conceptual simplifica-
tions that provide useful starting points for investigating complex social
phenomena.” As being ideal-type selection mechanisms in, e.g., education
systems, the two models have their own benefits and disadvantages. Contest
mobility benefits from instituting meritocratic competitive games that pref-
erably optimize the allocation of intellectual resources and competencies
in a given society. The meritocratic selection model of the competitive
game (i.e., the competition on the basis of normal-distributed grades in
the schooling systems) is also in harmony with the liberal, democratic idea
that all citizens and members of society should have “equal life chances,”
i.e., inherited socio-economic privileges should not grant defined benefits
in life. On the other hand, Turner (1960) emphasizes, the contest model
has its own disadvantages, including the chronic insecurity among highly
competitive contestants who internalize the virtue of the competitive games
and make it part of the modus vivendi:
Elite control in the contest system is more difficult since there is no con-
trolled induction and apprenticeship. The principal regulation seems to lie
in the insecurity of elite position. In a sense there is no ʻfinal arrivalʼ
because each person may be displaced by newcomers throughout his life.
The limited control of high standing from above prevents the clear delimi-
tation of levels in the class system, so that success itself becomes relative:
each success, rather than an accomplishment, serves to qualify the partici-
pant for competition at the next higher level. (Turner 1960: 860)
Elites and elite culture may not benefit from individuals that are always
belligerent and all too ready to compete, especially not as contest mobility
tends to discipline actors to believe that success in school work, a toler-
ance or even appreciation of abstract thinking, and aesthetic refined tastes
are “only tangential to practical merit,” and therefore success in the school
system must be, Turner (1960: 864) argues, “supplemented by a test in
the world of practical affairs.” Thus, there is an abundance of “folk tales”
in the regime of contest mobility about the professional engineer who also
“proves himself to be a superior mechanic” or the business tycoon who
is reputed to be a skillful “behind-the-counter salesman” (Turner 1960:
864). Only the test of practical reason—a form of Aristotelian phronesis
or métis—can ultimately verify the accomplishments in the schooling
system. “In aristocratic ages, science is more p articularly called upon to
furnish gratification of the mind; in democratic ages, to the body,” Alexis
Work 165
de Tocqueville ([1835] 2002: 557) remarked in his acclaimed praise of

the American democracy. For elites, this restless appetite for competition
and its practical orientation is arguably not of necessity conducive to elite
culture autonomy, and therefore sponsored mobility is a more regulated
milieu for the reproduction and, to a larger extent, renewal of elites.
What is the great benefit of the contest mobility system, its alignment
with democratic ideals and norms regarding the legitimacy of merito-
cratic rewards, is naturally the principal challenge of the sponsored
mobility system. Its “democratic deficit” can be tolerated by social insti-
tutions only if it provides wider socio-economic benefits (say, as in the
case of the royal family and its role in a monarchy, allegedly providing
political stability and ceremonial decorum, royalists claims, and therefore
being a tolerable deviation from democratic spirits), or, as in elite educa-
tion institutions, there are possibilities for the primus inter pares among
outside nonelites to qualify for admittance into the system (see, e.g., Yue
et al. 2013; Pareto 1901). The principal benefit of the sponsored mobil-
ity system, on the other hand, is that it creates “intra-class loyalty” and a
security for the members within the elite system, which in turn enables
a reproduction of elite culture: “The system of sponsorship provides an
almost perfect setting for the development of an elite culture character-
ized by a sense of responsibility for ʻinferiorsʼ and for preservation of
the ʻfiner thingsʼ of life,” Turner (1960: 860) argues. The esprit de corps
and the cultivation of intra-class loyalty and defined tastes and manners
are thus the principal benefits of the sponsored mobility system. Such
identities and social capital in turn may have wider socio-economic ben-
efits, including the establishment of political, administrative (e.g., in the
legal system), economic, and intellectual elites that are not only moti-
vated and incentivized to participate in short-term competitive games,
but who use their cultural, economic, and social capital to make society
sustainable and resilient. In Turner’s (1960) ideal-typical model, contest
mobility and sponsored mobility are two complementary models whose
legitimacy and relevance are always at stake as the two selection systems
provide practical and durable social and economic effects. In most societ-
ies and in defined domains, combinations and hybrid forms of contest
mobility and sponsored mobility are implemented to optimize the supply
of intellectual capacities and talents.
It is outside the scope of this volume to discuss all details in the substan-
tial literature on tertiary education, but the substantial growth in tertiary
education on global basis (Frank and Meyer 2007) tends to be perceived as
coinciding with a diminishing return on individual investment in human
capital, i.e., the distinction value of tertiary education tends to decline.
At the same time, a diploma from a reasonably respected university is a
sine qua non for competing in professional fields, leaving the student in a
situation where he or she needs to simultaneously believe in and mistrust
the system that grants such credentials. This in turn leads to what Schleef
(2006) refers to as “surface cynicism” on part of the students, on the one
hand in need to believe in their individual skills and capacities to conduct
professional work, while on the other hand being skeptical regarding the
education program and the acumen of the teaching professors. For the
time being, there is much concern and resentment of what some critics
regard as an inflation in academic degrees (see, e.g., Collins 2013) and
what others treat as an oversupply in highly specialized and qualified pro-
fessionals, widely excessing the demand for such expertise (Stevens et al.
2008). In addition, others have voiced a concern regarding the cost of
tertiary education, leading to lifelong debt repayment that reduces the
incentive to specialize in socially needed but less generously remunerated
professional work (Gordon 2015), leading to the gradual ossification of
the late-modern society when an increasing number of students pursue
careers in the mainstream and turn down work that they in fact would
both appreciate and have sufficient talents to handle. Taken together, it
is adequate to say that the precariousness of professional work enters the
scene already at the university level, where certain groups have a problem
to justify their career choices already from day one as there are limited
work opportunities (as in the case of art school students) or where the
individual human capital investment is complicated to justify in economic
terms (as in the case of, say, librarians and many humanities programs).
fter Graduation: The Internship Economy and

A
Early-Stage Careers
In industries attracting many entrants and being exposed to market pres-

sures, reducing the cash flow (as in the case of many so-called creative
Work 167
industries, see e.g. Caves 2000; Daskalaki 2001; Townley et al. 2009),
there is a fierce competition over work opportunities, leading in some
cases to work being conducted without compensation to “get a foot
in the door” in an attractive industry. Frenette (2013) here introduces
the term intern economy to denote how an increasing proportion of all
American students graduating with a bachelor’s or master’s degree are
spending periods of their education programs as interns in organizations.
In 1992, 17 percent of all US graduates had held internships, and in
2008, the figure had inflated to 50 percent (Frenette 2013: 365–366). In
Frenette’s view (2013), such intern programs are lucrative for the educa-
tion institution as it generates relatively limited costs and for the com-
panies provides internship as the work conducted is not compensated
according to the existing market rate. The crux is that while internship
is commonly described as “a potential path to launch a career,” the vast
majority of interns do not find employment in the industry of choice
(say, the music industry) (Frenette 2013: 366). The intern economy is
thus based on what is easily seen as a cynical exploitation of aspiring
younger individual’s ambition and energy, in most cases leading to little
more than a line on the applicant’s CV, unfortunately being treated as a
quite peripheral credential in the eyes of the hiring agent browsing several
such applications.
Frenette (2013: 372) says that internships are “provisional, as in tem-
porary, conditional, and ambiguous” and that they represent “a liminal
and indeterminate period during which aspirants form a reservoir of
excess workers before potentially getting hired as paid employees.” In
other words, an internship is presented to the aspirant as “a vague prom-
ise” (Frenette 2013: 377). While defenders may be content in saying that
this “little something” is better than nothing at all, the industrial scale on
which internship has been used over the last decade calls for some more
systematic scholarly attention. For instance, Perlin (2011) proposes that
the theme parks of the Disney Corporation—“The Magic Kingdom”—is
exemplary of a commercial business today being wholly dependent on
the uncompensated work of interns, frequently in collaboration with ter-
tiary education institutions:
An infinitesimally small number of College Program ‘graduates’ are ulti-

mately offered full-time positions at Disney, A harvest of minimum-wage
labor masquerades as an academic exercise, with the nodding approval of

collegiate functionaries. A temporary, inexperienced workforce gradually
replaces well-trained decently compensated full-timers, flouting unions
and hurting the local economy. The word ‘internship’ has many meanings,
but at Disney World it signifies cheap, flexible labor for one of the world’s
largest and best-known companies. (Perlin 2011: 4)
Frenette’s (2013) study of the UK music industry presents an equally

daunting result, showing that interns are not really treated as qualified
candidates for a paid position in the industry, and yet they are accepted
on a broad basis as their work still contributes to the operations: “It’s all
about free labor. I mean, anyone who says [the opposite] is completely
deluded or rationalizing. It’s not about getting people opportunities, it’s
about getting things done without paying for it,” Mark, a music industry
employee (cited in Frenette 2013: 384), says. Therefore, Frenette (2013:
379) summarizes, “Interns provide an inexpensive source of labor; an
influx of youthful energy, information, and ideas.” Although Frenette
(2013) suggests that interns from time to time make it into the industry,
the supply of interns widely exceeds the demand for labor, leading to
what may be regarded, under certain conditions, as the exploitation of the
ambition and hard work of new entrants to, e.g., the creative industries.
Being Recruited: Passing the Needle’s Eye
In the next stage, possibly after serving for some time as an intern, aspir-
ing younger professionals may enter recruitment processes to earn a full-
time position in an attractive workplace. While the common attitude
in at least middle-class communities and in many professional groups is
that meritocracy and egalitarian procedures (i.e., what political scientists
refer to as “procedural justice”) are conducive to overall social and eco-
nomic efficiency, and that meritocratic practices and sentiments therefore
should be guarded and enforced. Newfield (2008: 95) defines meritoc-
racy as being based on the “core idea” that “social position and economic
resources should be assigned by merit rather than by birth, wealth, race,
color, gender, national origin, perceived connections or any other charac-
teristic not tied to actual performance.” Unfortunately, this attitude and
Work 169
core idea are not always of necessity being translated into organizational
practices (Castilla and Benard 2010; Castilla 2008), nor always officially
recognized. Under all conditions, when it comes to recruitment and how
to secure a professional position with a desirable employer, there are a
few questions related to the concepts of merit and meritocracy. First, the
question whether the neophyte should specialize or try to acquire wider,
more general skills to make oneself competitive in the labor market and
increase ones “employability” is one issue being studied by management
scholars. Second, regardless of whether the individual pursues a career as
a specialist or a generalist, the one of formal merits and credentials vis-à-
vis the issue of what Rivera (2012) refers to as cultural matching is a key
question pertaining to the very idea of professionalism per se. In the fol-
lowing, these two issues will be discussed in some detail.
hat Employers Value: Specialization Versus Generalist

W
Expertise
One issue all neophytes in professional fields grapple with is to what

extent the individual should specialize within specific domains of exper-
tise to improve one’s chances of being recruited. A high degree of special-
ization may create a distinction value that helps the individual stand out
in a group of applicants competing over a position. On the other hand,
if specialization is deemed to be too narrow and/or if the employer values
generalist competencies higher than specialized skills, investment in spe-
cialization can render the specialized applicant either unqualified, in the
case where the targeted expertise is outside of the applicant’s specializa-
tion, or overqualified, in the case where more generalist skills are valued
higher than specialist skills. This constitutes a thorny issue to consider
for newcomers to professions, not infrequently being discussed among
undergraduate and graduate students during their education programs.
Unfortunately, the scholarly literature provides mixed results but does
not prescribe specialization as a universal remedy to recruitment prob-
lems. Considering recruitment as a bureaucratic human resource man-
agement practice, shaped by routines and standard operating procedures
and inducing substantial costs for the employer, several scholars regard
recruitment as a form of classification practice, ultimately rooted in

market information asymmetries, as being addressed by George Akerlof
(1970) in his seminal study of the used cars market, where applicants
“know more about themselves,” than the recruiter does (for a more
detailed discussion about what is called information economics, see, e.g.,
Greenwald and Stiglitz 1986; Stiglitz and Weiss 1981; Grossman and
Stiglitz 1980). Therefore, ultimately, the recruiter is presented with the
problem of how to classify and weight essentially heterogeneous merits,
credentials, and experiences to create a discrete ranking list of applicants
out of continuous merits. That is, on the basis of formal documents,
interview material, and “interpersonal impressions,” the recruiter needs
to construct the applicants as commensurable entities, making the appli-
cation process both appear rational and credible and able to accomplish
its central objective: to recruit qualified coworkers. As the time avail-
able for the classification work is limited, both in recruitment work
and elsewhere, previous studies have demonstrated that entities that fail
to fit neatly into a pre-existing classificatory system are disadvantaged
(Zuckerman 1999) and therefore systems of classification have a con-
servative effect even though it creates an epistemological stability for the
analyst, putting his or her faith in that the classification system per se is
neutral and thus legitimate until proven otherwise.
Hsu (2006) addresses this disadvantage of generalists (or any entity
that spans across multiple positions) when it comes to the ability to com-
municate, e.g., skills or content:
Specialists concentrate their capacities on performing one type of action

efficiently and reliably, while generalists divide their capacities across many
different kinds of activities, reducing their potential for performance in
each. Specialists are thus expected to out-compete generalists in regions
they both target. Of course, generalists have their advantages as well. Given
a highly variable or unpredictable distribution of resources, generalists are
likely to outlast specialists because they spread risk across multiple regions
of the environment. (Hsu 2006: 423)
Studying the US feature film industry for the period 2000–2003, Hsu
(2006) examines whether films that spans across multiple genres are more
Work 171
likely to attract large audiences. The term genre is of key significance in

cultural industries and artistic work as it represents a widely agreed-upon
cultural category that facilitates the communication and coordination
among both producers and consumers. In the film industry, Hsu (2006:
426–427) writes, genres provide “[c]lear frameworks for selecting film
projects, organizing projects’ development, and guiding studio resource
allocation decisions.” Examining how films produced in the 2000–2003
period were classified and how much audience they attracted, Hsu (2006:
444) found that a more narrow genre description (e.g., “drama,” “science
fiction,” in total including 17 distinct genres) was more successful, but
these films were also held in less esteem than films including multiple
genres: “Films that target broader niches generally attract a larger propor-
tion of the audience at both the professional critic and consumer levels.
At the same time, however, they generate less appeal among those audi-
ence members.” Hsu (2006: 444) thus concludes that when producers
“bridge multiple positions,” audiences have more difficulty “interpreting
their identities and become more likely to ignore producers,” i.e., the
multiple-genre films are less successful than single-genre films, everything
else being equal. However, Hsu (2006: 444) adds, “[w]hether being a
generalist is generally beneficial or harmful for producers’ performance
is largely context-based”; some films that are blended and mongrelized
and that defy simple genre descriptions are highly successful in terms
of both critical acclaim and box-office income, but the production of
such films involves financial risks and demands artistic creativity. The
outcome is by and large conformity to the standard Hollywood genres,
Hsu (2006: 445) suggests: “Through the threat of social and economic
penalties, audiences pressure producers to conform to existing categories
and serve to reproduce the existing structure of the market.”
However, while the findings of Hsu (2006) and others stress the inabil-
ity of recruiters and other actors to practically speaking “think outside
the box,” and therefore are inclined to benefit specialization, ceteris pari-
bus, studies of recruitment work reported by Leung (2014) and Merluzzi
and Phillips (2016) offer a more nuanced view of the merits and risks of
specialization. Leung (2014) examines how freelance professionals using
the Internet site Elance.com managed to attract new work assignment
on the basis of their previous work experience, measured in terms of
being “erratic,” i.e., including many diverse work assignments, or, fol-
lowing an alternative strategy, being more narrowly specialized within
a smaller number of activities. In her quantitative study, classifying and
measuring work into closely related or unrelated work assignments (and
measuring the degree of heterogeneity in the portfolio of previous work
experience), Leung (2014) found that freelance professionals who “move
between more related job categories” were more likely to “win additional
assignments” than freelancers who “never moved or moved between dis-
tant jobs” during their careers. That is, generalist skills were more highly
valued than specialist skills, perhaps even more than the analyst may intui-
tively expect, thus making the question of what degree of specialization
to pursue a key concern for freelance professionals. Leung summarizes
her research findings, pointing at the end positions of the generalist’s
continuum as “dilettantes” or, in more positive terms, “renaissance per-
sons,” as being two equally unsustainable positions, but with generalist
competencies (located in the middle of the continuum) being valued by
employers:
[S]ome movement across boundaries makes a candidate more desirable, but

too much movement risks being labeled dilettantism. Employers, seeking
cues as to how much effort a candidate will exert, code incremental moves
as demonstrating commitment. These candidates will be preferred over
those who do not (or cannot) move at all. On the other hand, employers
are wary of highly unstable work histories . . . so candidates who moved
between extremely dissimilar experiences will be perceived as more erratic
and therefore less dedicated—in short, as dilettantes. (Leung 2014: 137)
These research findings have been further substantiated by Merluzzi and

Phillips’s (2016) study of business school graduates who target a career
in investment banking and suggest that the imperative to specialize is
overstated in education discourses and as a career advice more broadly.
Merluzzi and Phillips (2016: 94) argue that the admission processes into
top MBA programs are detailed and highly competitive, and review a
long list of credentials, including “strong GMAT scores [a study aptitude
test], high undergraduate GPAs [Grade Point Average], work experience,
and extracurricular activities.” For that reason, future employers can take
Work 173
advantage of an already quite robust selection mechanism when they

recruit graduates from such programs. As graduates from MBA programs
at elite universities already belong to a selected group of highly qualified
candidates, Merluzzi and Phillips (2016) examine whether graduates spe-
cializing in investment banking are more likely to receive more job offers
than graduates not being specialized to the same degree, i.e., graduates
being labeled “generalists” in Merluzzi and Phillips’s (2016) study.
Using quantitative methodologies, Merluzzi and Phillips (2016) show
that the probability of a candidate “with no exposure” to investment
banking (i.e., the “generalist applicant”) would receive “multiple job
offers” is more than twice as high than for the candidate being focused on
investment banking (i.e., the “specialized applicant”): for the first group,
the probability is 0.37, and for the second group it is 0.17 (Merluzzi
and Phillips 2016: 110, Figure 1). In addition, Merluzzi and Phillips
(2016) found that the specialized applicant being hired by investment
banks received “a lower starting bonus” than the generalists being hired,
i.e., generalists were valued more highly by their employers. Merluzzi
and Phillips (2016) suggest that the preference for generalists and their
more generous economic compensation are explained partially on the
basis of the “strong institutionalized screening mechanisms” in the MBA
programs, as investment in screening activities has low returns as there is
already a low uncertainty about a candidate’s overall ability. The detailed
screening of MBA applicants thus undermines specialization as an indi-
cator of quality (Merluzzi and Phillips 2016: 116). In addition, special-
ization is a form of “commodification” of skills, Merluzzi and Phillips
(2016: 116) argue, making it more easily measured and assessed, and
therefore also more easily substitutable for the employer:
[B]eing a focused or specialized candidate is harmful to the extent that the

profile is commoditized. The greater the proportion of the market that
shares one’s profile, the lower the value of that profile. This is a fundamen-
tal economic point but often overlooked when examining the returns to
candidate profiles. (Merluzzi and Phillips 2016: 116)
Finally, in investment banking, valuing risk-taking and the ability to

operate under certainty, the investment in specialized skills per se may
be treated as a risk-aversive attitude that is poorly aligned with the pre-

dominant culture of the finance industry. As a consequence, risk-averse
individuals are less valued as they are not seen as true contestants and
“players,” and therefore they may receive fewer job offers and lower start-
ing bonuses. In summary, Merluzzi and Phillips (2016: 116) therefore
stress that the emphasis on specialization as a safe and highly rewarded
human capital investment and career strategy should not be overstated:
Our theory and evidence suggest that the oft-documented specialist advan-
tage runs the risk of being overstated. Though scholars have identified con-
texts in which labor market specialism is beneficial, focus and specialism
may be detrimental in other labor markets. (Merluzzi and Phillips 2016:
116)
In the case of MBA graduates seeking employment in the finance indus-

try and in investment banking—arguably an elite group of profession-
als—specialized skills are not as highly valued as generalist skills. Being
able to think in broad terms and identify new opportunities and threats
are thus valued higher than expertise within more confined domains:
There is a reason why concern with creative thinking is a staple in business,

clinical, and educational contexts, to the point where phrases like ‘thinking
outside the box’ have become clichés. It is in the discovery of options and
possibilities where most of the challenge of decision making lies, not in
precisely comparing predefined and given options. (Buturovic and Tasic
2015: 141)
The capacity to “discover” choice alternatives and opportunities is argu-

ably a key skill in a variety of professional fields, and being endowed
with such capacities is likely to benefit career progress and accompanying
economic compensation.
In summary, the literature reveals that the strategy to specialize within
a relatively narrowly defined area in many cases reduces the information
processing and transaction costs for stakeholders as it makes classification
work easier. However, against this robust theoretical model, emphasizing
the cognitive implications of classifying ambiguous entities (e.g., movies)
and generalist job application candidates, evidence suggests that what
Work 175
in fact defies straightforward categorization may be higher valued and

rewarded. This puts the professional neophyte in a situation where he or
she needs to consider what career strategy to pursue: will specialized skills
be rewarded or should one develop a more generalist profile? The litera-
ture does unfortunately not provide a clear-cut answer to such questions.
Bridging Specialized and Generalist Skills
If generalist skills are valued but complicated to signal to hiring employ-

ers, and if specialized skills are more easily assessed but also commodi-
fied and substituted at lower cost for the employer, professionals seeking
employment encounter the difficult situation of managing their “portfo-
lio” of skills and experiences in ways that give the impression to include
both generalist and specialist skills. O’Mahony and Bechky (2006: 919)
speak about the career progression paradox that many new entrants to a
field, but also freelance professionals more widely, encounter when plan-
ning and managing their careers and when seeking one’s first job in par-
ticular: “Workers encounter the career progression paradox when they try
to acquire work to develop their skills in new areas but find that employ-
ers prefer those with continuous prior experience. How can individuals
acquire new experiences without prior exposure to a job?” (O’Mahony
and Bechky 2006: 919). O’Mahony and Bechky (2006: 919) study free-
lance professionals in the creative industries and introduce the concept
of stretchwork, defined as work that “largely fits with an individual’s pre-
vious work experience,” yet introduces some “small novel element” that
extends the individual’s skill in a new direction. Stretchwork is work
that increases the credentials and experience of the freelance professional
and therefore increases his or her “generalist” profile as a response to the
career progression paradox. Freelance professionals, being contract work-
ers, do not generally take advantage of well-structured and more predict-
able internal labor markets, and are therefore “more likely to encounter
situations in which they try to acquire jobs for which they lack prior
experience” (O’Mahony and Bechky 2006: 921). Therefore, they ensure
that they land a stretchwork assignment from time to time to ensure that
they can present a quite diverse set of work experience. Since all new
work experience by definition generates a discontinuity in the career, one

important part of the freelance professionals’ employment strategy is to
create a coherent narrative about previous employment out of discon-
tinuous track records and experiences. This career narrative in turn serves
to convince employers that the applicant had the desired competence to
conduct the work currently being “on the market”:
Contract workers crafted descriptions of their experience carefully to lead

potential employers to link areas in which the workers had already demon-
strated competence to areas in which they were less proficient—often using
analogies or comparisons that stressed similarities to proven skills.
(O’Mahony and Bechky 2006: 929)
That is, as a response to the specialist-generalist trade-off problem identi-

fied by Merluzzi and Phillips (2016), freelance professionals and other
contract workers sought stretchwork assignment to avoid becoming
“specialists” and to better “stretch” previous experiences to include novel
skills, rendering them “more employable” and more interesting generally
speaking. Expressed differently, by participating in stretchwork, individu-
als sought to embody both specialist and generalist positions to be able to
play out these identities depending on what employment opportunities
they were competing over at present. Rather than pursuing an “either/
or strategy,” the contract workers aimed for a “both/and strategy,” where
they maximized the possibilities to land new work contracts.
One implication from the need to “stretch” previous work experi-
ences to be able to attract new work assignment is that, e.g., brokers
and brokerage organizations enter the job market. When it is costly to
recruit new coworkers, or when contracts run for only a limited period
of time, employer may choose to use brokers to find suitable coworkers.
Bielby and Bielby (1999: 65) argue that brokerage organizations such
as “talent agencies” are more than just “efficient solutions to problems
of uncertainty in the labor market” and claim that what they call “core
agencies” serve as a key selection and promotion function in certain
industries. Today, a larger share of professional work, including, e.g.,
computer programming, engineering, legal services, and even executive-
level management, is being performed by “contingent workers,” Bielby
and Bielby (1999: 64) say. In this setting, brokerage organizations serve
Work 177
to identify and define resources and skills, and to grant legitimacy and
thus reputation to certain actors that the brokerage organization agents
believe will benefit the contracting parties and the industry more gener-
ally. For instance, literary agents, being at the center of the publishing
industry (see, e.g., Thompson 2012), shape the labor market for writers
and authors by identifying talents and introducing them to publishing
houses. In the film industry, an agency “[a]ssembles an entire writing,
producing, directing, and acting team for a project and presents it to a
studio or network as a package” (Bielby and Bielby 1999: 66).
When, e.g., an industry is in a process of change, driven by, e.g., tech-
nological innovations (say, new digital media), favorably located broker-
age organizations may take advantage of emerging market opportunities
to further advance their positions. Thus brokerage organizations not only
serve a key role to connect actors within loosely coupled networks of
organizations, dependent on skilled professional workers, they can also
use this position to strategically advance their own positions and prefer-
ably monopolize certain key functions within the network. “Reputation”
is at the core of this network model, both the reputation of the individual
actor being proposed as a legitimate candidate for a certain assignment
or position, and the brokerage agency’s reputation (thus being a form
of “meta-reputation,” a form of “derived reputation” dependent on the
reputation of the actors the agency manages): “In this kind of system,
where skill and productivity are not easily measured, reputation is a signal
of a professional’s standing in the labor market,” Bielby and Bielby (1999:
66) write.
In summary, when professional work is largely “externalized in highly
institutionalized industrial sectors,” brokering organizations serve to
“certify their clients’ reputations as competent practitioners” (Bielby and
Bielby 1999: 83). This in turn lowers the costs for both the contracting
clients and the professional seeking employment, but with the brokering
organization claiming a proportion of the income as a “connecting fee.”
The Concept of Elitism and Its Challenge for Professionalism
As opposed to the meritocratic ideal of the liberal democracy, an elit-

ist attitude averts meritocratic beliefs by stressing other more oblique
and not so easily measured qualities of applicants and/or pays attention

to credentials, experiences, and associations that are not distributed on
the basis of democratic ideals and through democratic programs. In the
UK, for instance, the Sutton Trust found “that Cambridge and Oxford
graduates account for 81 percent of the British judiciary, 82 percent of
barristers, 45 percent of ‘leading’ journalists, and 34 percent of senior
politicians” (Dacin et al. 2010: 1396–1397). In addition, in February
2009, the government minister for higher education “bemoaned the
fact that Oxbridge graduates are 15 times more likely to get jobs with
City law firms than those from other universities” (Dacin et al. 2010:
1397). In other words, Dacin et al. (2010: 1398) argue, elite universities
“provide an environment in which students learn the norms, values, and
behaviors that are legitimate and appropriate in the upper stratum of
British society, which facilitates their entry to it.”
Rivera (2012: 1000) examines how “elite firms” regard hiring prac-
tices as a “gatekeeping mechanism” that facilitates career opportunities
for some groups while “blocking the entry of others.” Elite firms in, e.g., law
and finance industries identify a set of three to five core schools, being
“highly elite institutions from which firms draw the bulk of their new
hires” (Rivera 2015: 31). In addition, 5–15 target schools are the “addi-
tional institutions where firms intend to accept applications and interview
candidates, but on a much smaller scale” (Rivera 2015: 31). The target
schools thus supply a smaller number of elite workers but serve to dis-
cipline core school graduates and to provide opportunities for non-core
school candidates. In Rivera’s sample of elite firms, school prestige and
“extra-curricular activities” were the most important parameters in the
assessment of applicants, which indicate that elite recruitment is not only
a matter of identifying and recruiting the most formally qualified appli-
cant but also to examine the wider socio-economic and cultural context
from within which the applicant has been raised and socialized. Rivera
(2015: 3) uses the term pedigree to refer to “the term that employees in
elite firms used as a shorthand for a job candidate’s record of accomplish-
ments.” Somewhat perplexingly, elite firms sought to sift out “true talent”
and declared their faith in meritocratic selection mechanisms, and yet
the term pedigree is synonymous “not with effort but rather with inheri-
tance-based privilege, literary meaning ʻancestral-lineʼ” (Rivera 2015: 3).
Work 179
Therefore, elite recruitment is “a fundamentally interpersonal process,”

Rivera (2012: 1000) says. “A lot of this job is attitude, not aptitude,”
the banker Nicholae (cited in Rivera 2012: 1008) emphasizes, indicating
that not only strict personal competencies need to be reviewed, but also
the applicant’s ability to be at ease with certain situations associated with,
e.g., the elite culture in the finance industry.
Among the elite school graduate applicants and the recruiters them-
selves, different firms fitted different shorthand descriptions such as being
“sporty” and “fratty” or being more “egghead” and “intellectual” (Rivera
2015: 94). Furthermore, employers could be referred to as being “white
shoes,” “country club,” “gruff,” or “scrappy” (Rivera 2015: 94), i.e., they
had their own distinct cultural markets and employee preferences. Rivera
(2012) here explicitly speaks about the “cultural matching” between
firms and candidates, wherein for instance the extracurricular activities
at campus and interests of the applicant were scrutinized in detail in the
recruitment process. “Cultivation of leisure time is a hallmark of upper-
middle-class culture and of elites more generally,” Rivera (2012: 1017)
says. If not being able to demonstrate an impressive elite culture track
record (e.g., leisure activities such as playing tennis, sailing, or being a
member of an exclusive country club), the applicant had slim chances
of being hired: “Concerted cultivation,” Rivera (2012: 1018) writes, is
a key factor being considered when competing over the “highest paying
entry-level jobs” in the finance industry. That is, the cultural capital of the
applicant was of great importance for his or her economic success:
Cultural fit was a formal evaluative criterion mandated by organizations

and embraced by individual evaluators. Moreover, evaluators constructed
and assessed merit in their own image, believing that culturally similar
applicants were better candidates. Finally, evaluators implicitly gravitated
toward and explicitly fought for candidates with whom they felt an emo-
tional spark of commonality. (Rivera 2012: 1017)
In order to identify applicants with good cultural fitness, the applications

were scrutinized in detail by savvy but suspicious recruitment experts to
detect and identify “evidence of drive and an orientation toward ‘achieve-
ment’ and ‘success’” (Rivera 2015: 97). In some cases, extracurricular
activities were dismissed as being “inauthentic” and fabricated to “look

good on a resume,” while in other cases “true accomplishments” were
celebrated, naturally carefully separated from things “anyone could do”
(Rivera 2015: 97). As the cultural matching was more important than
grades—grades were often “mistrusted” by employers (Rivera 2015:
101)—there is a zillion ways an applicant can be dismissed by a recruiter:
applicants can be regarded as lacking “energy and ambition,” or, on the
contrary, as being too conspicuously and annoyingly willing to serve;
they may lack story-telling skills, i.e., fail to demonstrate the capac-
ity to narrate their own life-story and their passions and interest in an
engaging manner; some applicants, and Asian-women in particular, were
deemed to be simply “dull” and were thus violating the elite career life
style; even top shelf, “upper-crust” applicants from the American elite
society (“Upper Westside,” etc.) could be dismissed as being “awkward”
or “weird” when failing to promote themselves. In the end, the selec-
tion criteria for elite career recruitment are defined so strictly that only
a miniscule proportion of all available applicants may pass the needle’s
eye, now being provided with the opportunity to embark on an elite firm
career and to lead a “baller’s life style” (a slang term denoting athlete’s
allegedly extravagant conspicuous consumption life style including fine
dining, clubbing, high-end brand clothing consumption, and the rest of
it).
Also Ho’s (2009) ethnographic study of Wall Street finance institu-
tions strongly emphasized the elitist culture of the finance industry:
[I] was struck by how proclamations of elitism (through ‛world-class’ uni-

versities, the discourses of smartness and globalization) seemed founda-
tional to the very core of how investment bankers see themselves, the
world, and their place in it. Representing a world of ‛collective smartness’
and exclusively seemed fundamentally connected not only to the criteria
for becoming an investment banker but also to the very nature of what they
do. (Ho 2009: 50)
A series of studies have demonstrated that the research findings reported

by Rivera (2012) and Ho (2009) are not only restricted to the US finance
industry, but are more widely indicative of elitist cultures in American
Work 181
industry. Useem and Karabel (1986) show that when making a career
in industry, both education and class matter, but class is given an even
higher weight than education—a result that clearly violates the egalitar-
ian ideals and its meritocratic norms, both rooted in democratic tradi-
tions. We can here cite Useem and Karabel (1986) at length:
If a senior manager had no family advantage but earned an MBA degree

from a top program, the probability of reaching this status is 1.90 times
higher than that of the group with neither (28.5 percent versus 15.0 per-
cent). Conversely, if the manager had low educational credentials but a
high origin, the probability ratio is 2.63 (39.5 percent versus 15.0 percent).
Finally, if the manager were advantaged in both areas, the probability ratio
for achieving several major corporate directorships is 3.01 (45.2 percent
versus 15.0 percent). The latter ratio implies that a senior manager with an
upper-class origin and an MBA degree from a leading program is three
times as likely as a senior manager with neither to be invited to join the
board of several major corporations. (Useem and Karabel 1986: 194)
In a study of the recruitment of graduates in chemistry university

departments, Long et al. (1979: 828) found that the hiring department
ignored “preemployment productivity,” even though this measure was
a robust predictor of later productivity, and instead hired applicants
graduating from prestigious universities: “[T]here is a substantial cor-
relation between the prestige of scientists’ doctoral departments and
the prestige of their employing departments, and this relationship can-
not be explained by any other variable that we have measured,” Long
et al. (1979: 828) summarize. That is, while the hiring department in
fact accesses preemployment productivity measure, it tends to ignore
such data and instead recruit applicants with lower degree of preemploy-
ment productivity if they have graduated from an elite university (see
also Fourcade et al. 2015). Such recruitment choices are thus indica-
tive of what sociologists name a status premium given to prestigious
institutions, a form of “credibility capital” that easily can be translated
into economic capital (Sauder et al. 2012; Ridgeway et al. 2009; Sauder
2006; Podolny 1993). Similarly, in their study of French corporate elites,
Maclean et al. (2014: 845. See also Mizruchi 2013) suggest that these
close-knit, socio-economic, and culturally homogeneous groups did not

espouse meritocracy as the prevailing “social logic.” Instead, members of
French corporate elites, i.e., “high-status agents,” participate in reciprocal
exchanges wherein they “choose one another, and are chosen in return,”
and thus constitute a “corporate class in their own right” (Maclean et al.
2014: 846. See also Padgett and Ansell 1993). In this case, the social
ties are not, as Granovetter (1973) puts it in his seminal paper, “weak,”
but quite strongly bound up with inherited privileges and a social class’s
instrumental efforts in preserving and, preferably, extending rights and
privileges. “[S]ocial class plays a persistent role in the selection mecha-
nisms, which determine who holds sway in the corporate elite and, ulti-
mately, society at large,” Maclean et al. (2014: 847) summarize.
Not all professional groups do encounter these barriers, but all pro-
fessions are to some extent based on the line of demarcation between
insiders and outsiders, and the careful policing of such boundaries. In
many cases, a milder and less insidious form of social control is executed
in recruitment processes, Fernandez and Weinberg (1997: 896) suggest,
showing how banks recruiting coworkers rely on references from exist-
ing employees. In their empirical study, they found that applicants being
recommended by coworkers were 28 percent more likely to get a job offer
in comparison to “nonreferrals.” That is, the recruitment firm solicited
coworkers and thus asked them to “put their personal social networks to
work for the company” (Fernandez and Weinberg 1997: 899).
In summary, in order to acquire a job position in professional fields
and industries, an extensive social network and skills and experiences
stretching outside the more narrow domain of work are factors that
lubricate the job application and recruitment process in predictable ways.
The philosopher Robert Nozick (1998: 11) once claimed that the capi-
talist society was “peculiar” to the extent that in contrast to virtually any
other social organization, it announces that it is “open and responsive
only to talent, individual initiative, personal merit.” Given the emphasis
on personal and individual experiences and interests that factually stretch
beyond such “talent, individual initiative, personal merit,” this merito-
cratic praise of capitalism, and its allegedly “rational” approach to, e.g.,
recruitment, is arguably overstated and turns a blind eye to the presence
of sponsored mobility selection mechanisms on all levels. Like any other
Inside the Domain of Professional
Work 183
historical and existing society, also capitalist society bears the mark of the
humans who act within their horizons of meaning. When it comes to the
recruitment of new professional workers, it is overtly human not only to
assess formal skills and credentials but also to scratch the surface to get
a sense of the human beneath the surface of formalities. In some cases,
these procedures are justified or at least tolerated by participants, while
in other cases, they are dismissed as sheer violations of either personal
integrity or democratic ideals acclaiming the virtues of meritocracy.
Inside the Domain of Professional Work

xtrinsic Motivation and the Role of Incentive
E
Structures: The Role of Performance-Reward Systems
Once academic credentials have been secured and an employment con-

tract has been landed, the professional embark on a career within a pro-
fessional field and in many cases within one specific firm. As professional
workers are by definition holding certain expertise and skills being com-
plicated to decode and represent in, e.g., written manuals and proto-
cols, the management of professionals becomes a central concern for the
employer. Today, in the era of investor capitalism, professional work is
commonly based on a combination of hard and soft human resource
management practices, where the former is oftentimes centered on vari-
ous performance measurement activities, while the latter emphasizes
behavioral and attitudinal aspects of professional work. In the following,
these two forms of managerial control will be examined in some detail.
Alvehus and Spicer (2012) speak explicitly about the use of a billable
hours system in an accounting firm as a form of “financialization” of
working life, in turn connected to the ethics of “responsibilization” of
everyday work, and their study reveals some of the externalities of the
otherwise logically designed and metric-based performance-reward sys-
tem. In their account, Alvehus and Spicer (2012) identify a number of
undesirable effects of the billable hours system. First, the billable hours
system did not really take into account all the costs involved in performing
a service as some of the less experienced accountants tended to devalue
their own work by not billing the full time worked. As reporting bill-
able hours is a “question of self-evaluation and judgment” (Alvehus and
Spicer 2012: 501), some of the costs, perhaps mostly carried by the indi-
vidual coworker, never surfaced. Second, the use of billable hours is part
of a general shift from professional work as being a civic profession to
what Brint (1994) calls “expert professionalism.” Expert professionalism
denotes forms of expertise that are not given any privileges vis-à-vis other
forms of expertise, but that operate on the basis of the same market mech-
anisms (e.g., market pricing) and a “more hard-nosed market-oriented
logic” (Alvehus and Spicer 2012: 506) as any other claims to expertise.
Professionals are thus expected to sell their expertise on the market, and
they are salaried in accordance with how market actors value and price
their competence. Third, Alvehus and Spicer (2012: 507) argue, the bill-
able hours system creates a notion of time that is “only vaguely related
to the clock time or to the experience of time.” An hour worked is not
always an hour billed, and as the accountants become more skilled and
experienced, they learn the hard way how to operate in the system and
how to muddle through the process to avoid projects with only low-rent
potentials, and how to make use of “less costly colleagues,” i.e., newly
recruited assistants, to let them do the bulk of the routine work. While
such tactical maneuvers are reasonable responses on part of the coworkers
given the design of the system and how it encourages and rewards a con-
cern for individual pay, it also opens up for an informal “internal labor
market” that some people are perhaps more skilled at navigating than
others. In other words, in the classic Marxist model of the exploitation of
labor, it is the capital owners that withhold the economic value generated
from the workers, but in the billable hours system, there is also a risk that
colleagues are exploiting one another’s work and/or their weaker negotia-
tion positions. This represents an entirely new managerial logic wherein
a free-market ideology is internalized on the individual level, not only as
a generalized ideology, but as an everyday life practice that needs to be
skillfully executed to secure adequate compensation. Alvehus and Spicer
(2012) summarize their findings:
The result is that working life was experienced as one large market that
should be skillfully negotiated in order to reap the benefits. This suggests
Work 185
that not only have we seen the financialization of the economy and firms:
we have also seen the financialization of workplace control. (Alvehus and
Spicer 2012: 507)
Another case of the financialization of performance-reward systems

is law firms, which have a long tradition to let their coworkers quite
independently serve a stock of clients (Gorman and Kmec 2009; Flood
2007). These firms are themselves being part of an industry that is tightly
bound up with the financialization of the economy as much financial
operations and innovation are accompanied and accomplished on the
basis of juridical services, Faulconbridge and Muzio (2009: 641) argue:
“[T]hanks to their central role in lubricating financial markets and activi-
ties from currency trading and the work of hedge funds, to mergers and
acquisitions and the financial restructuring of transnational corpora-
tions.” Unsurprisingly, law firms have reported an “extraordinary increase
in profitability” (Faulconbridge and Muzio 2009: 641) as they have been
able to not only generate more clients and work opportunities, but also
raise the fees for their services. These law firms have often used the so-
called PEP model, Profits per Equity Partner, to measure its profitability, a
model that is tightly bound up with the market evaluation of individual
jurists’ work and performance. The large law firms are often privately
owned, and they use primarily a very hierarchical and meritocratic part-
nering system where financially viable and enterprising coworkers can
make an internal career in the firm to eventually become a partner and
where they are entitled to a share of the aggregated annual profit of the
firm (the so-called up-or-out system).
Faulconbridge and Muzio (2009: 642) suggest that the “rise to pre-
eminence” of the PEP model is based on the fact that it converges toward
a shareholder welfare model logic. The measure of shareholder value cre-
ation is based on a variety of methods being developed by management
consulting and accounting firms, including concepts such as Economic
Value Added (EVA™), Market Added Value (MVA), Total Shareholder
Return (TSR), and Cash Flow Return on Investment (CFROI)
(Faulconbridge and Muzio 2009: 643). Law firms, with their own tradi-
tions and institutionalized practices, quite distinctively differing from the
field of management consulting, have still been thoroughly penetrated
by financial management practices as the PEP model is implemented on

broad basis, Faulconbridge and Muzio (2009: 647) argue. In their view,
the large law firms are today becoming part of the finance industry as
they have refocused their expertise on the most profitable niches, that is,
to support and assist the globalization of the finance industry:
[L]arge law firms . . . have re-focused on a limited array of practice areas,

such as capital markets and especially work associated with derivatives and
‘exotic’ financial products, which are closest to the logic and operations of
‘finance capitalism’ and which offers some of the more handsome financial
rewards. (Faulconbridge and Muzio 2009: 649)
PEP is a performance-reward system closely aligned with a financializa-

tion logic, very much based on value extraction as being the foremost
goal of the activities. Faulconbridge and Muzio (2009: 651) outline the
system in quite straightforward terms:
The rule of the game of the financialized law firm is . . . simple: increase the
number of people who bake the cake (the number of salaried lawyers)
whilst stabilizing or reducing the number of people who can share the cake
(the number of equity partners). (Faulconbridge and Muzio 2009: 651)
In order for the firm to maximize the economic value generated, the
partners of the top of the firm benefit from recruiting many assistants
being more moderately compensated for their work. As a consequence,
Faulconbridge and Muzio (2009: 651) suggest, “[a]n increase in asso-
ciate numbers, and therefore, growing leverage ratios throughout the
1993–2003 period . . . coincides with gradual improvement of PEP.”
Similar to the case presented by Alvehus and Spicer (2012), the finan-
cialized and individualized performance-reward model opens up for an
internal labor market, where the lesser paid coworkers are at risk of being
lower compensated for the economic value they generate than is formally
justified, and consequently, e.g., younger employees and women (sta-
tistically proved to be paid less than men, ceteris paribus) are the most
vulnerable groups in the PEP model. Faulconbridge and Muzio (2009)
summarize their research findings and remark that the economic value
generated in large law firms is not only a matter of increased demand,
Work 187
more skilled professionals, and more efficient markets for legal services,
but there is also a factor of financial engineering and managerial manipu-
lation involved to portray the firm as successful and profitable:
The extraordinary increase in profitability of large and global corporate law

firms recorded . . . over the past decade are not only the result of firms
generating more and more demand for the work and charging ever higher
fees for their services . . . That spike in profitability are also the result of a
process of financialization that has re-engineered law firms to make they
appear to be ever more profitable and successful. (Faulconbridge and
Muzio 2009: 641–642)
In summary, in the era of investor capitalism, the performance-reward

system based on billable hours, originally developed among enterpris-
ing professionals that served in markets through private practices and
bureaus, has gradually penetrated industries where collaborative work
and information and knowledge sharing are not only needed but are vital
for the long-term competitiveness and survival of the firm. As individual
compensation boils down to the amount that can be billed to clients,
there are some undesirable effects of this new performance-reward sys-
tem, including opportunistic behavior to benefit individual compen-
sation and the tendency to exploit new entrants to the profession and
lower paid coworkers. Kotz (2013) addresses the consequences of this
new human resource management practice, favoring individual benefits
and therefore putting the collective contributions at risk:
Under neoliberal capitalism, market principles and relations began to pen-

etrate inside enterprises. In some sectors company officials’ pay was tied to
what they could demonstrate in the way of individually generated profits.
Instead of a cooperative team of high-level officials, company officials
began to resemble a competing group of individuals, each striving to maxi-
mize his or her own income without regard for the effects on the long-term
performance of the company. (Kotz 2013: 405)
In a way, the individualized and financialized performance-reward system

reveals the triumph of the free-market ideology as the distinction made
by transaction costs theorists such as Ronald Coase ([1937] 1991) and
his disciple Oliver Williamson (1975), between markets and hierarchies

(e.g., organizations and firms), is gradually eroding when the “market
is everywhere,” now also inside large organizations. These organizations
have historically served as safe havens where economic value could be
created on the basis of other logics than the strict market-based valuation
of skills and know-how. In other words, the calculative practices of the
finance industry and the finance market have been enacted as a general-
ized model, based on the virtues of transparency, valuation, and com-
mensuration, that suits all kinds of economic activities.
anaging and Monitoring Professional Work:

M
The Role of Metrics and Auditing
With the introduction of labels such as “knowledge society,” “knowledge

workers,” and, perhaps most importantly, “knowledge management,” a
new regime of professional control was gradually established at the turn
of the millennium. No longer could professionals rely on jurisdictional
discretion being an inherited privilege, but management control was in
many cases now imposed in the form of a variety of external audits, accred-
itations, and certifications. In the “knowledge economy,” there is a need
for new concepts, tools, and techniques for capturing and t aming what is
in essence “‘slippery,’ ‘unobservable,’ and ‘unmeasurable’” (Eekelen 2015:
458) to fully assess the economic value generated. “This new [knowledge]
economy brings about a world of new economic categories that need to
be monitored and managed,” Eekelen (2015: 467) says.
As opposed to what Legge (1995) calls “hard HRM,” the new met-
ric methods and their accompanying “rituals of verification” (Power
1997: 123) are instituted as obtrusive and immutable techniques. In a
world where skills, competencies, attitudes, beliefs, etc., i.e., the princi-
pal production factors in the contemporary economy, become increas-
ingly intangible and fluid, at least the very methods used to capture
them must appear to be robust and trustworthy. In addition, the use
of all the metric methods to establish an understanding and an image
of the underlying resources—the verification of, e.g., skills—is based
on the idea, as Wittgenstein (1974: 8) puts is, that “a fact is a complex
Work 189
of objects.” The fluid and changeable production factors provided and

embodied by professional groups are not easily turned into competi-
tive advantages, but only when bundled together and seen through the
auditors’ lens can they be constituted as a “fact”—as an ontologically
certain, stable, and verified stock of assets, conducive to economic value
creation. In the following, these “rituals of verification” will be exam-
ined in some detail, and they will be related to how professional work
is organized, managed, and monitored in the contemporary economy.
These formal methods, in many cases used by external consultants and
auditors at considerable expense, thus complement the “soft HRM” of
identity work and symbolic management, making professional work
what is shaped and structured on the basis of the use of various man-
agement practices.
udits, Rating, and Ranking: The Metrics of Professional

A
Performance
A starting point for the use of all kinds of external auditing and external
accreditation is that there is a certain “politics of measuring,” an irreduc-
ible component in all verification work based on metrics. As Kula (1986:
18) says, speaking primarily about historical societies, “the right to deter-
mine measures is an attribute of authority in all advanced societies. It
is a prerogative of the ruler to make measures mandatory and to retain
custody of the standards, which are here and there invested with sacred
character.” Porter (1995a: 191) in turn speaks of a “politics of precision,”
a subcategory to the “politics of measuring,” which denotes the right of
governments and regulatory authorities to determine the level of preci-
sion in what is being measured and to announce tolerable deviations from
standards (Merry 2016). However, a full, perfect precision—and its cor-
relate, objectively true “facts”—translated into “completely explicit rules”
can never be fully attainable, Porter (1995b: 7) says: “Even with regard
to purely scientific matters, the importance of tacit knowledge is widely
recognized . . . The public rhetoric of scientific expertise, however, studi-
ously ignores such aspects of science” (Porter 1995b: 7). This inability to
achieve absolute certainty on the basis of rules and procedures enacted by
governments and regulatory authorities thus makes for instance the very
idea of full, indisputable objectivity a fallacy, a condition that can never
be accomplished or fulfilled. Yet and somewhat puzzlingly, Porter (1995b:
4) notes, “in most contexts, objectivity means fairness and impartiality.
Someone who ‘isn’t objective’ has allowed prejudice and self-interest to
distort to judgment.”
This widespread belief in the objectivity as a virtue and “the measure
of all things” gains its legitimacy from the fact, Porter (1995b: 74) con-
tinues, that “objectivity means the rule of law, not of men. It implies the
subordination of personal interests and prejudice to public standards.”
Merry (2011: S84) examines the uses of so-called indicators in interna-
tional governance, based on these ideals, and she suggests that indica-
tors “convey an aura of objective truth and facilitate comparisons.” At
the same time, “indicators typically conceal their political and theoretical
origins and underlying theories of social change and activism,” and are
therefore themselves “opaque” (Merry 2011: S84). The numerical mea-
sures used to construct indicators produce “a world knowable without
the detailed particulars of context and history.” More importantly, these
measures are presented as being “objective” and often as being “scien-
tific,” i.e., the interpretations that lurk behind the numbers are buried
under authority claims. The indicators’ latent function is therefore to
conceal the “political process of judging and evaluating” by making polit-
ical activities a technical issue of measurement and counting, managed
by allegedly neutral experts endowed with analytical skills and acumen
(Merry 2011: S88):
The creation of indicators reveals a slippage between the political and the
technical. The slippage occurs in the way issues and problems are defined,
in the identity and role of experts, in the relative power of the people
engaged in producing and using indicators, and in the power and clout of
the sponsoring organization. Through the apparatus of science and mea-
surement, the indicator displaces judgment from governing bodies onto
the indicator itself, which establishes standards for judgment. Nevertheless,
indicators are inevitably political, rooted in particular conceptions of prob-
lems and theories of responsibility. They represent the perspectives and
frameworks of those who produce them, as well as their political and finan-
cial power. (Merry 2011: S88)
Work 191
The idea of measurement is thus inherently political, based on interests

and stated objectives. But as measurement per se can never exhaust the
demands for exactitude and precision, at least not when more complex
skills and assets are measured, the very idea of “objectively true measures”
cannot be sustained. Yet there is a need for maintaining the belief that,
e.g., audits, accreditations, and other verification practices carry at least
some or partially objectively true information that can be trusted when,
e.g., making informed decisions. Verification practices are thus based on
a series of conditions, agreements, and political alliances that make them
far from uncontroversial. In the following, speaking first about audits
and then how the audit output material is used to construct increas-
ingly complex performance metrics such as league tables to better display
the alleged content of the audit information, this cobbling together of a
functional system of practices and agreements into managerial control
systems will be examined.
Audit Practices
Formally speaking, an audit is conducted (by using an agency theory

vocabulary) in a situation in which “accountability and control are
desired by a principal who does not feel otherwise able to evaluate the
performance of an agent” (Kipnis 2008: 281). Therefore, Kipnis (2008:
283) stresses, in the audit situation, distrust is “both the raison d’être
for constructing the audit and likely to be exacerbated in the audit pro-
cess.” This distrust manifests itself as the disconnection between stated
and actual objectives (e.g., “This is beneficial for the firm” versus “We
need to do this because everyone else does it”) and in the verbal, written,
numerical, and calculated depiction of individual agents’ activities and
“output” variables (i.e., performance). Furthermore, Kipnis (2008: 286)
stresses that auditing is today a widespread practice derived from a num-
ber of factors, but ultimately dependent on the common belief among
governing agents that “measurement from afar” has many beneficial effects
and represents a legitimate, instrumental rationality widely endorsed in
society. In short, commanding and participating in audits have many
socio-cultural benefits for a variety of social actors, but not of necessity
for the coworkers being audited.
Despite these alleged merits, a substantial literature and body of stud-

ies reveal that audits and the procedures of continuous assessment being
rolled out today in firms, agencies, and public sector organizations are
“[n]otoriously anxiety provoking and involve intense identity work as
audits, accountability, monitoring and surveillance all come together to
inform potential career advancements” (Knights and Clarke 2014: 351).
Foucault’s much-celebrated theorizing on the basis of Jeremy Bentham’s
(1995) concept of the panopticon, the machinery or architectural struc-
ture rendering agents visible from a centrally located vantage point, would
thus be a suitable metaphor for the auditing practice, wherein the agent
is now fully aware of being continuously monitored and assessed, but not
exactly when or how. Modern working life and careers beset by constant
audits thus unfold like an endless high school, with examinations (audits,
review, etc.) laid out like beads on a string stretching into a distant future.
There has been a quite substantial scholarly critique of audits and
auditing, both in terms of the ideas and principles that auditing rests
upon and the difficulties involved in actually conducting the audits as
they are formally prescribed. Power (1997: 123) argues that a society
that increasingly enforces auditing as a governance method is endangered
because it “invests too heavily in the shallow rituals of verification at the
expense of other forms of organizational intelligence.” Ultimately, the
fully committed auditor makes what Gilbert Ryle (1949) calls a category
mistake, i.e., confuses the map and the territory, and is therefore at risk
to fail to appreciate the territory simply because it cannot live up to the
ambitiously stipulated features promised by the map. In Power’s (1997:
123) view, this attitude represents a “learned ignorance.” In addition,
McGivern and Ferlie (2007) address the “teach-to-the-test” problem
inherent to all external verification practices and say that practices “less
amenable to measurement” gradually lose their legitimacy. Therefore,
audit systems are “[s]elf-perpetuating, consuming increasing amounts of
resources, and insensitive to their own unintended, dysfunctional and
immeasurable side–effects” (McGivern and Ferlie 2007: 1363). The old
accounting slogan “What gets measured gets done” is here the guiding
principle, but McGivern and Ferlie (2007) are concerned that what really
gets things done in fact not only is ignored by unsophisticated audit-
ing methods, but also loses legitimacy; that is, auditing could do more
Work 193
harm than good. These concerns have been accentuated in the field of
finance industry audits, where a variety of credit rating, auditing, and
accreditations have proved to accomplish very little in stemming the tide
of excessive risk-taking and maintaining a culture of prudence in quickly
expanding finance markets, increasingly relying on advanced derivate
instruments whose value has been most complicated to calculate over the
economic cycle. Sikka (2009) makes this point very explicitly:
Accountants, as auditors, have cemented their status and privileges on basis

of claims that their expertise enables them to mediate uncertainty and con-
struct independent, objective, true, and fair accounts of corporate affairs.
This expertise, it is claimed, enables markets, investors, employees, citizens,
and the state to limit and manage risks. Such claims, however, are precari-
ous as measures of revenues, costs, assets, liabilities, and profits are con-
tested technically as well as politically and also because capitalist economies
are inherently prone to crises . . . The claims of expertise are frequently
punctuated by unexpected corporate collapses, frauds, and failures. (Sikka
2009: 868)
Such conditions and outcomes, being subject to extensive scholarly and

regulatory attention after the 2008 finance industry meltdown, point at
the concern regarding what has been called the performativity of audits,
their ability to rather than observing factual conditions instead contrib-
uting to the construction of the object of study on the basis of the assess-
ment parameters the audit imposes. Such consequences of auditing are
a major concern as it undermines the principal idea and raison d´être
of auditing—to present an authoritative and objective overview of orga-
nizational assets, procedures, and practices, aimed at further reinforc-
ing desirable outcomes such as profitability and competitive advantages
more broadly. Power (1996: 291) makes this predicament a major issue
in auditing scholarship:
Auditability is not just a natural property of economic transactions, not

simply a function of the quality of evidence which exists in the environ-
ment within which auditing operates. Rather, auditing actively constructs
the legitimacy of its own knowledge base and seeks to create the environ-
ment in which this knowledge based will be successful. (Power 1996: 291)
By implication, the very idea of “verifiability” upon which the idea of

auditing rests is a fallacy as, Power (1996: 305) puts it, in an almost
Kantian passage, the “properties of things in themselves” are “inaccessible
to us.” In contrast, in the auditing situation, the “properties of things” are
a “function of the institutional credibility of experts.” These auditors are
granted the authority to point at assets and practices, and to classify them
and to perhaps even inscribe meaning and economic value into them.
This is the very essence of the performativity of the audit, centered on
the auditor’s authority to separate the significant from the insignificant,
the legitimate from the illegitimate, etc. “[Auditing] attempts to devise
numeric performance measures. In doing so they all to a greater or lesser
degree distort the phenomena they purport to measure,” Kipnis (2008:
281) summarizes.
Proponents of audits, including governing bodies and regulatory
agencies and not the least the auditors themselves (auditing is a lucrative
business; Robson et al. 2007), on their own being professional workers
with an acute need to believe in the efficacy and meaning of what they
are doing, are at pain to portray and market the audit practice as being
a neutral and objective procedure. From a scholarly perspective, this is a
politicized and epistemologically frail advocacy: “Making things audit-
able is a constant and precarious project of a system of knowledge which
must reproduce itself and sustain its institutional role from a diverse
assemblage of routines, practices and economic constraints,” Power
(1996: 312) writes. Power’s (2015) more recent study of the measure-
ment of the practical “impact” of university-based research is one fine
example of the performativity of audits—how a life world is created
ex nihilo on the basis of governance objectives—which is possibly an
irreducible element of practice. So-called Impact Case Studies (ICS) is
today becoming a key performance metrics in the monitoring of the
university sector, in turn representing what Power (2015: 44) refers to as
an “intensification of a latent productionist logic of academic labour.” The
basic idea is that academic research work, across all disciplines, should
be able to demonstrate an impact on the wider society, preferably in
activities that are conducive to economic value production, such as in
innovation work. The crux is just that it is complicated to decide how to
measure this “impact,” and the procedures leading to such agreements
Work 195
are politically complex and in need to take into account a variety of

factors and interests. For instance, university governance today seeks to
reconcile two institutional logics, the logic of “academic autonomy and
a curiosity driven agenda for research,” and the logic of “productivist
valuation of research for its use-value” (Power 2015: 44). Governing
bodies preferably want to maintain and align the two logics, while most
academic researchers stress the importance of the former logic, arguing
persuasively that the enforcement of the former logic would lead to out-
comes satisfying the demands of the latter logic, while the enforcement
of the latter logic would undermine its own intensions. To date, govern-
ing bodies have put little faith in such claims.
To cut a long story short, Power’s (2015) empirical work shows that it
is very complicated and demanding for the actors involved in the work
to establish standards for how impact should be measured, and that the
construction of standards tended to amplify what was originally regarded
as relatively vague and insignificant evidence of “impact” into what
was regarded as more robust and credible indicators (Power 2015: 49).
Moreover, the establishment of standards for impact was gradually stabi-
lized through “trial and error” processes and numerous iterations, making
the entire construction of a new governance model emerge as a “fabrica-
tion process,” gradually accommodating and/or neutralizing critique and
concerns regarding the very idea of “scientific impact.” Therefore, Power
(2015: 50) contends, the ICS work should not be seen primarily as an
accounting work practice, but as a “strategic product of a broader gover-
nance ambition”—a form of “new infrastructure,” to further control and
shape academic research work: “With the development of infrastructure,
impact is transformed from an abstract ‘matter of concern’ to a matter of
(organizational) fact,” Power (2015: 50) contends.
The creation of impact standards and metrics is thus indicative of what
Power (1997: 28) refers to as “the deep epistemological obscurity of audit-
ing,” the conflict that unfolds between the claim to be a “mirror of nature”
(with Rorty’s 1980, evocative image) and the politicized tinkering and
bricolage that constitute the actual auditing, being something essentially
different than the seamless and almost effortless measurement that pro-
ponents of auditing anticipate. These complications do not make audits a
useless social practice—they could, when used with care and moderation,
provide meaningful information—but to conceal the ulterior motive of

auditing, to control professionals and other workers through new means,
is not very helpful for its implementation. Instead, audits should be
examined precisely as what they are, as systems of verification denying
their own impossibilities and their political and managerial roots in order
to better explain both why they are successfully implemented and why
they fail from time to time.
e Further Processing of Audit Information: Rankings

Th
and League Tables
Once auditing practices have been successfully accomplished—success-

ful in terms of legitimate information and data being generated, repre-
sented, and reported to relevant decision-makers—there are additional
procedures and verification practices being organized on the basis of the
audit input material. Audits can be said to be “inner-directed,” primarily
comparing existing resources, assets, procedures, or examining predefined
audit standards, per se being constantly modified as new auditing data
accumulates. In the next step, there may be an interest among governing
bodies, regulating agencies, and the wider public to examine how indi-
vidual organizations or firms compare across industries or sectors of the
economy. In such cases, auditing materials serve as the input for the con-
struction of more refined numerical representations and visualizations, as
in the case of rankings and ratings. To start with rankings, for instance,
widely used to list universities and university education programs, a rank-
ing or a league table (think of, e.g., the Premier League table locating
each football team in a hierarchically structured table and specifying each
team’s games played, wins, draws, losses, and goal ratios as the basis for
their position. See, e.g., Johns 2016) is a visualization technique that cre-
ates a “geometrical space” on the basis of numerical data. Critics contend
that while this visualization of the hierarchy allegedly easily communi-
cates underlying and arguably substantially more complex data materials,
rankings are deceiving as statistically insignificant differences are ampli-
fied beyond their practical relevance (De Mesnard 2012; Saisana et al.
2011; Ziliak and McCloskey 2008). “[T]here is a lot of fluctuation in the
Work 197
ranks of schools due to very small and statistically insignificant changes

in their scores or the scores of the schools near them in the rankings,”
Sauder and Lancaster (2006: 114) point out. While this is a more tech-
nical critique of the production of statistical data and the visualization
thereof, there are other, possibly undesirable, consequences of rankings
that demand scholarly attention.
Adler and Harzing (2009: 74) claim that rather than “genuinely fos-
tering relevant knowledge,” the strong emphasis on university ranking
“seems to be driven by a desire to identify winners and losers in a game of
academic prestige.” Being constructed as “zero-sum games,” wherein one
university’s gain in positions is the other’s loss, ranking is by no means a
neutral, depoliticized, and undisputed representation of university per-
formance, Sauder and Espeland (2009: 79) claim. Instead, the spread
of university ranking as a governance tool leads to “meticulous scru-
tiny, distrust, innovation in gaming techniques [i.e., how to manipulate
the system], and pressure for conformity,” each of which is at the core
counterproductive to university performance, scholarly excellence, and
teaching quality. Despite vigorous and persistent critique from academ-
ics, university rankings are still widely distributed and are very popular
among lay audiences in particular. The lure of the university ranking is
that lay audiences, Sauder and Espeland (2009: 79) suggest, “imagine that
the meaning of numbers is universal and interpretable” to any individual,
and therefore the ranking methodology “seems transparent, rigorous, and
reproducible, especially to nonexperts.” In other words, rankings purport
to economize the use of underlying statistical materials and to facilitate
the communication of what is in fact convoluted and opaque to not only
lay audiences but also the actors being subject to the ranking themselves
(Humphrey et al. 2009: 819). “[L]eague tables embody calculative prac-
tices that render previously incomparable elements visible and compa-
rable. The different evaluated elements are put into a hierarchical relation
to each other,” Kornberger and Carter (2010: 331) say.
In fact, as the mathematical theory of information proposes, a reduction
in informational content increased the possibilities for communication at
a lower cost, but the “thin descriptions” (Porter 2012: 212) of rankings
arguably fail to accommodate all the underlying information. That is, for
proponents of the ranking methodology, the loss of informational content
(which may, after all, not be a major concern for this group, but merely for
the actors being ranked) is compensated in terms of easy-to-communicate
visual tools (which in fact motivated the use of ranking methodology in the
first place, proponents of ranking methodology argue). However, just like
the data and information generated in the previous stage, in the auditing
work, the epistemological fragility of rankings and its “side effects” are in
many cases either ignored or swept under the carpet as being an irrelevant
or unmotivated critique expressed by groups already being favored (e.g.,
university researchers). Thus, there is a certain political economy of truth
embedding auditing and ranking practices, oftentimes ignored in the day-
to-day work to govern and monitor, e.g., professional workers. Nevertheless,
the underlying and innate procedures and routines for generating this type
of data, information, and visual tools demand scholarly attention and criti-
cal scrutiny, especially in the case where they tend to replace traditional
governance and managerial practices. As professionals are increasingly
exposed to “algorithm governance” (Johns 2016), an increased understand-
ing of auditing and the distribution and circulation of auditing data in,
e.g., rankings and ratings and its consequences are demanded.
Into the Heads and Minds of the Workers: Professional

Identity Work and Identity Regulation
As a complement to the hard human resource management practices

implemented that assess professional work through the production
and calculation of quantitative performance measures, various forms of
knowledge-intensive work, characterized by the actor’s ability to control
the skills and competencies as they are complicated to codify and are
embodied, are managed on the basis of identity work and identity regula-
tion. “Identity refers to the individual characteristics by which a person is
recognized and known,” Pullen (2007: 630) writes. In Fligstein’s (1990)
view, such identities are seated within the broader interests and strategies
of the industry and the firm wherein the individual actor operates:
Actors are assumed to construct rationales for their behavior on the basis of
how they view the world. Their goal and strategies result from those views
Work 199
and are not the product of an abstract rationality. The construction of

courses of action depends greatly on the position of actors within the struc-
ture of the organization, which form the interests and identities of actors.
(Fligstein 1990: 11)
Over the last decade, there has been a significant scholarly interest in
the question of identity and identity work in various professional and
occupational groups (see, e.g., Petriglieri 2011; Ibarra and Barbulescu
2010; Korica and Molloy 2010; Patriotta and Spedale 2009; Yhanna
et al. 2009; Brown 2006). This literature suggests that individual identi-
ties constitute an intermediary level between the self and the organization
or profession, and between the individual actor and the employer: “The
notion of identity may be regarded as a fundamental bridging concept
between the individual and society,” Yhanna et al. (2009: 300) suggest.
Meyer and Hammerschmid (2006: 1001) say that identity work is “[t]
he micro-level enactment of social structure.” Therefore, “professionaliza-
tion,” Ashcraft (2013: 14) writes, “is a strategic occupational identity
project—a concerted effort to sway multiple audiences to accept a par-
ticular answer to the question ‘What is this line of work?’ and associated
appraisals (e.g., ‘How complex and valuable is it?’).” In Ashcraft’s (2013:
14) view, the occupational identity project (“what is it that we do?”) merges
with “occupational image[s]” (“What do we want them to think that we
do?”), but also frequently entails “a corresponding overhaul of individual
practitíoner identity” (“Who am I?”).
Furthermore, identities are neither innate nor simply given by social
positions and employment, but are actively constructed in the day-to-day
work and in the endeavor to create meaningful and socially legitimate
images of the self that strengthen and justify both professional and occu-
pational skills and competencies and the privileges and rights that come
with such authority. Gioia et al. (2010: 34) suggest that “organizational
identity,” i.e., a professional or occupational identity constructed within
the realm of an organization such as a company or some public sector
organization, is “fundamentally a reflexive, self-referential, self-defined
concept.” In practical terms, identity work includes (1) “a cognitive
dimension,” (2) “a verbal and discursive dimension,” and (3) “an action
dimension,” Gioia et al. (2010: 35) propose. Identities are constructed as
meaningful images of the self, and these images are expressed verbally and
in narratives; such images in turn guide and structure the practical work.
In everyday work situations, these three analytical dimensions merge
and constitute one seemingly coherent whole wherein, e.g., cognitive
components and action are recursively integrated: “Whereas actors per-
form actions, actions create actors (or, rather, their identities) within the
context of a narrative, which is created, in turn, by actions and actors,”
Czarniawska (2009: 424) says. Expressed differently, identity work is an
ongoing process of adjusting individual experiences, skills, and interests
to external demands and expectations to create possibilities for profes-
sional and occupational performance.
As identities are important for what Cech et al. (2011: 642) call pro-
fessional role confidence, defined as “[t]he individual’s confidence in their
ability to fulfill expected roles, competencies, and identity features of a
successful member of their profession,” employers are frequently actively
encouraging identity work and actively participate in the process to con-
struct professional identities that are beneficial for both the individual
and the employer. Identity work and identity regulation are thus based
on ideals, norms, and the desire to live up to these ideals, making identity
work an ongoing process to adjust and moderate individual identities to
changing norms:
In identity work and regulations, individuals draw on and convey ideal

selves and encourage one another to align their identities with these ideals.
A focus on ideal selves draws attention to the social pressures involved in
identity construction and considers how identity workers maintain and
repair their identities so that they align with these ideas. Understandings of
ideal selves are normalized, maintained, and renegotiated in the dynamic
process of identity work and identity regulation. (Wieland 2010: 512)
For instance, in management consulting firms, there are often quite strict
mandatory dress codes, and there is a “culture of elitism,” where it is
frequently pointed out and signaled that management consultants are
exclusively recruited from elite education institutions. By consecrating
entrants into the field and by equipping them with a management con-
sultant identity, including routines for how to dress and how to act and
Work 201
speak and thus creating a certain management consultant poise, neo-

phytes can arguably perform better and act with integrity in this new
professional field. “Job seekers work on and deploy their identity as a
resource: they reconstruct it, manage impressions of self and interactions
with others, engage in emotion work, and otherwise ‘chart the course of
the self,’” Smith (2010: 284) says. In this view, professional identities are
individual and collective accomplishments, conducive to economic per-
formance and professional role confidence.
Identity Work in Corporate Professions
Paton, Hodgson, and Muzio (2013) use the term corporate professions to
denote professional or pseudo-professional groups that base their juris-
dictional discretion on merits earned within the employing organization
rather than university credentials. Examining the case of project manag-
ers, Paton, Hodgson, and Muzio (2013) make this an illustrative case
of how a novel form of expert professionalism has been established by
professional licensing organizations such as the Project Management
Institute (PMI) (for an overview of the consolidation of professional
project management expertise and the gradual monopolization of project
management licensing authority, see Hodgson 2002, 2005; Hodgson and
Cicmil 2006; Räisänen and Linde 2004). In the case of project managers,
as opposed to university-based professional training that rests on tradi-
tional examinations that test the individual’s “technical mastery of official
bodies of knowledge,” the prestige and status of corporate professions
are to a certain extent replaced by “alternative types of credentials which
emphasise competences, transferable skills and industry knowledge and
experience”. Moreover, corporate professions are no longer rooted in the
credentials issued by institutions established within liberal democracy,
but instead draw on industry interests and the monopolized certification
rights of certain organizations (e.g., PMI), a tendency that can best be
described as the privatization of professional licensing.
As traditional professional credentials, founded on the close to 1000
years of history of university-based intellectual work and its authority
granted by the sovereign state, take into account wider social interests
and concerns in the education and training of future professionals, the
corporate professions face a legitimacy problem as their earned creden-
tials are easily understood as what are generated within a parallel struc-
ture of licensing, primarily pledging allegiance to industry interests and
subscribing to instrumental and technical knowledge interests:
[F]or the corporate professions, unlike the traditional professions, the aim
is to build a consensus around their professional status through marketing
their activities to corporations that employ or use the services of their
members, emphasising the commercial benefits of supporting professional
membership and accreditation in their area. (Paton et al. 2013: 229)
In addition, while the traditional professions were trained to act as an

autonomous group, with the integrity to oppose, e.g., government ini-
tiatives, thus making intellectual autonomy one of the cornerstones in
professional education and training, in the case of corporate profession-
alism, few of these elements are emphasized. The project management
association studied by Paton, Hodgson, and Muzio (2013) provides only
a “relatively weak position for the individual practitioner,” now reliant
on “market-recognised ‘expertise’” to be able to acquire credentials to
operate as a project manager. As a consequence, the project manager is
not only “controlled by corporate bureaucracy and an embedded career
structure,” but also by a “professional association that itself is increas-
ingly subject to the agenda of employers and clients” (Paton et al. 2013:
237). Seen in this view, the very use of the term corporate profession is a
misnomer as the very core of professionalism, its autonomy and jurisdic-
tional discretion, is abandoned as the gold standard for professionalism.
Instead, instrumental interests and technical expertise and the very award
ceremonies and rituals, where earned credentials are symbolically handed
over, are imported into the new credentializing organizations, in this case
successfully monopolizing the right to license “project managers.” “[T]he
shift in power from practitioner (and the state) to the employer/client,
are profound,” Paton et al. (2013: 237) summarize.
In summary, corporate professionalism constitutes a substantial threat
to traditional professionalism, a threat not entirely different from the role
Work 203
of think tanks vis-à-vis university-based research in policy-making (see,

e.g., McLevey 2015; Medvetz 2012; Smith 1991), where a few selected
components are valued (e.g., the consecration rituals and initiation cer-
emonies, and the emphasis on examinations) while otherwise leaving the
more critical issues pertaining to knowledge production and its quite
detailed and strict routines for verification behind. Corporate profession-
alism is based, just like think tank-based knowledge production, on a
piecemeal appropriation of a selection of elements needed to uphold a
façade of authority and trustworthiness, but as instrumental interests and
short-term practical consequences are always given priority, the very core
of professional ideology, its intellectual and political autonomy vis-à-vis
other social institutions and actors, is downplayed. The term “profession”
is instead associated with technical skills and instrumental rationality. In
essence, the “corporate professions” become “knowledge workers” who
have been widely discussed in the literature as a form of “Professionalism
2.0,” but their licensing organizations have been strategic in emphasiz-
ing the very concept of “profession” in their long-term commitment to
monopolize certain licensing rights.
Professional Identity Work Pathologies
While the concept of identity is mostly treated as a resource in the hands

of the individual professional, a form of shield that protects against
appropriations and the loss of self-confidence, and being able to convey
meaning in a world that is buzzing and blooming with confusion, there
is also a less appealing side of identity work. Such conditions include the
tendency in contemporary working life to promote rampant individual-
ism, groupthink, and other cognitive lock-ins, and the internalization of
professional cultures that justify or even mandate excessive overwork, all
in their own way generating their own pathologies and undesirable side
effects. To start, there is a literature that addresses the strong entrench-
ment of enterprising and entrepreneurial ideologies in the contempo-
rary society and in the economic system of competitive capitalism. These
ideologies emphasize the importance of individual initiative and a care
for one’s own career and “employability,” and also stress the individual’s
responsibility to continuously make sure that he or she remains attrac-

tive to recruit. By and large, this discourse has dusted off a theological
vocabulary wherein terms such as “passion” and “commitment,” terms
originally denoting the submission to religious faith despite the absence
of “objective evidence” of a God or other divine appearances (the Latin
root of religion, religio, means “to bind”), have been key concepts. For
instance, Gielnik et al. (2015) suggest that the emphasis on “entrepre-
neurial passion,” or an “entrepreneurial spirit,” in much of the popular
and mainstream academic entrepreneurship literature, is delusional as
what really matters is nothing but old-fashioned hard work when it comes
to producing actual success in entrepreneurial pursuits. That is, rather
than being the driver of entrepreneurial success, passion is the by-product
or side effect of “entrepreneurial effort”: “[T]here is substantial variance
in entrepreneurial passion over time and changes in entrepreneurial pas-
sion are a consequence of entrepreneurs’ efforts. Entrepreneurs increase
their passion when they make significant progress in their venture and
when they invest effort out of their own free choice,” Gielnik et al. (2015:
1017) summarize their findings.
In addition, the strong emphasis on individual responsibilities and ini-
tiative in the entrepreneurship discourse—in turn incorporating much of
the neoliberal and neoconservative credo that was articulated and widely
circulated from the mid-1970s—is another theme, anchored in the ideal
of hyper-individualism, which had been criticized for not really being
what industry and society more broadly value and appreciate today, nor
being conducive to personal growth and happiness. Studies show that an
increasing amount of innovations is produced in network-based struc-
tures wherein heterogeneous communities collaborate on the basis of a
project of joint interest (Block and Keller 2009), being indicative of the
fact that rogue individualism is less valued today than it perhaps was in
the past, at least when it comes to professional work. Furthermore, unre-
strained individualism, bordering to sheer and in many ways unattractive
egotism, is not a social ideology that makes people happy in the end—on
the contrary, being part of a community is what defines humanity and
creates meaning (see, e.g., Kilduff et al. 2016). As Cooper (2008) dem-
onstrates, the neoliberal notion that individuals’ talents are “unleashed
when they have to fend for themselves,” i.e., the idea that participation in
Work 205
ongoing and ceaseless competitive games is beneficial for both economic

growth and personal well-being, is both mistaken and unsubstantiated.
In contrast, Cooper’s (2008: 1253) study reveals that “when individuals
are truly ‘on their own,’ their progress is thwarted by economic vulner-
ability, often followed by emotional paralysis.” Such a finding does not
of course cross out individual initiatives and strict work moral or under-
mine individual independence, but rather stresses that economic stability
is more conducive to economic growth, innovativeness, and an enterpris-
ing culture than a situation wherein economic actors have to constantly
fight for their subsistence.
Professional cultures and professional identities may also nourish
and encourage forms of elitism and other norms that generate cogni-
tive biases such as cognitive dissonance (Festinger 1957) or groupthink
(Janis 1982). Such modes of thinking no longer take into account a wide
variety of factors that need to be considered as the participants in the
focal epistemic community or decision-making community have inter-
nalized and fortified the belief that they have individual and collective
superior intellectual capacities or morals that insulate them from making
elementary mistakes. Groupthink, for instance, is commonly associated
with elite culture, and the Bay of Pigs military campaign debacle of the
Kennedy administration (Allison 1971), involving some of the “best and
the brightest of the American society,” has been one well-known case of
how “smart people make dumb decisions.” A more recent case is the col-
lapse and bankruptcy of the much-revered energy company Enron, being
a scandal of unprecedented proportions. Despite having a “splendid
board on paper, fourteen members, only two insiders” (Gordon 2003:
1241) and political connections on the Capitol Hill and in the White
House (Froud et al. 2004: 905), Enron engaged in speculative and fraud-
ulent behavior and became a company that was described by one of the
investigators as being “[l]argely comprised of incredibly immoral, arro-
gant, and mercenary individuals that created a milieu of sleaziness and
greed” (Commentator Carol Devine Molin, cited in Seeger and Ulmer
2003: 69). Being under the influence of group thinking, otherwise intel-
ligent and considerate individuals may abandon their capacity to execute
self-reflexivity in meaningful ways and become blinded by the alleged
brilliance of their community. Another case of such cognitive dissonance,
based on elite culture, is the finance industry, wherein elite university

graduates from Princeton and Harvard are fed with acclaim over a con-
siderable amount of time until they believe they possess superior intel-
lectual and analytical capacities, unrivaled by any other social actor or
institution:
Wall Street investment bankers, by virtue or by their smartness, believe that

they cannot help but outwit, outmaneuver, run circles around most corpo-
rations. These kinds of charts and jokes work to perform and produce their
sense of superiority and entitlement. (Ho 2009: 105)
Many organization psychologists, management scholars, and media pun-

dits have been concerned about elementary forms of group thinking and
have named a number of mechanisms being involved, not the least nar-
cissistic behavior, being defined as an individual that “have very inflated
self-views and who are preoccupied with having those self-views con-
tinuously reinforced” (Chatterjee and Hambrick 2007: 351). As a conse-
quence of such distorted self-images, narcissistic individuals demonstrate
idiosyncratic cognitive and motivational dispositions. As narcissistic indi-
viduals “rate themselves highly (and more highly than is objectively war-
ranted)” on an array of dimensions, including “intelligence, creativity,
competence, and leadership abilities,” i.e., they suffer from cognitive dis-
sonance, narcissists demonstrate an intense need to have their “superior-
ity reaffirmed” (Chatterjee and Hambrick 2007: 354). More specifically,
narcissistic individuals regularly undertake “challenging and bold tasks”
that are highly visible to audiences that the narcissistic individuals
respect and thus are deemed to be in a position to fully recognize his
or her performance, ultimately reinforcing the identity of the narcissist.
While narcissism is commonly understood as an individual psychological
disposition or even a “clinical disorder,” a similar tendency to ignore
risks and to strive to accomplish extraordinary activities can affect other
groups.
Under all conditions, individuals that succumb to group thinking,
oftentimes self-declared elites and high-performing individuals, not only
may destruct economic value and ruin the life world of millions of people
through making inadequate, faulty, or unnecessary risky decisions, but
Work 207
they can also self-inflict harm by imposing unreasonable expectations on

themselves in terms of workload and performance. “For me it is more
than a vocation. Science absolutely consumes my life. That’s all I do,
I don’t do anything else. I have no hobbies. I have no relationships. I
just work,” a bioscientist (cited in Holden 2015: 34) admitted during an
interview. The identity work of professionals frequently includes work
morals and explicitly or implicitly stated performance objectives, in some
cases at a level where there are no possibilities for fulfilling such objectives
without extensive overwork (Schor 1993). Being related to narcissistic
behavior, overwork is based on unreasonable expectations (i.e., perfec-
tionism) poorly aligned with the nature of everyday work life. While
overwork carries its own pathologies including family-work life imbal-
ances, burnout, and, in the worst case scenario, premature death (what
the Japanese refer to as Karōshi), there are also significant interrelated ten-
dencies in the contemporary society pertaining to overwork. Hochschild
(1997, 2012) examines the consequence of overwork for families and
children, and points out at what can be referred to as the “overwork sup-
port industry” that provides a variety of family-life services that the over-
working individual can no longer carry responsibilities for or keep track
of when weekly workload exceeds 60, 70, or even more hours, and may
include extensive traveling schemes. As Hochschild (1997, 2012) makes
clear, such career life is unsustainable, and the price paid for this “work
moral gone wild” includes both the overworking individual and his or her
family. Muhr (2011) examines the fascinating case of female elite career
managers, transforming themselves into high-achieving, almost superhu-
man actors to be able to transcend sordid everyday sexism and mundane
everyday life experiences. Maintaining a family life on the basis of vari-
ous support functions including the work of family members, nannies,
catering firms, cleaning services, and other outsourced paid-for-services,
these female elite managers uphold a façade of sublime perfection and
remarkable individual accomplishments, but they ultimately, Muhr
(2011) suggests, lose the battle as this process to construct the image
of the hyperefficient career woman, equipped with a family, renders the
very same accomplishments, impressive as they are and in which they
take pride, uncanny in the eyes of colleagues. As leadership is ultimately
based on a primus inter pares ideal, where the leader’s humanity and per-
sonality must be possible to discern beneath the shiny armor of earned

credentials, track records, and accomplishments, marketing oneself as a
superhuman to subordinates does not create possibilities for trust and
understanding. The overworking, overachieving female elite boss thus
becomes intimidating and “out of reach” for subordinates and colleagues,
Muhr (2011) contends.
Yet another parable of relevance for identity work and its potential
pathologies pertains to what is called health promotion in the workplace,
a managerial initiative to align organizational and individual interests but
also, by implication, to some extent what puts individual integrity at risk
(Maravelias 2015; Holmqvist and Maravelias 2011; Holmqvist 2009;
Zoller 2003). While extensive overwork is only officially or semiofficially
mandated or endorsed in certain industries such as the finance indus-
try, and is therefore primarily dependent on individual career decisions
and ambitions, health promotion is commonly established on the basis
of a general concern for the coworker’s personal well-being and health.
However, as Maravelias (2015) suggests, what health promotion actually
means for different groups of employees differs substantially, and while,
e.g., blue-collar workers are primarily encouraged to participate in self-
disciplinary and reactive activities such as losing weight by being on a diet
or to quit smoking, for elite workers such as CEOs and top management
team members, health promotion often unfolds as individual accom-
plishments within highly strenuous activities such as the participation
in marathon races, off-piste skiing, mountain climbing, etc. Seen in this
view, the identity work of professional groups may include and embody
ideas about personal health, self-discipline, and the capacity to discipline
the body (either in the case to quit smoking or as the capacity to endure
physical fatigue).
In summary, professional workers are to a lower extent longer protected
by institutional arrangements that justify privileges or protect jurisdictional
claims, but professional workers need to increasingly fashion meaningful
professional identities for themselves. Some of these identities are explicitly
sanctioned by the profession per se and professional credentializing organi-
zations, while in other cases it is the employer that imposes identities and
beliefs on the neophyte. Finally, there is significant room for individual
variation, for instance, in terms of deciding the level of workload tolerated.
209
Ultimately, it is the professional actor himself or herself who benefits the

most from a robust professional identity, but there are numerous ways the
individual can suffer from the pathologies lurking in all professional com-
munities—be it groupthink, narcissism, or excessive overwork.
In the textbook case, a professional group is a highly specialized category
of workers that has successfully monopolized its domain of expertise and
thus controls the supply of experts in the field and maintains jurisdic-
tional autonomy in the day-to-day work. Such a romantic view of the
more or less autonomous and independent professional, free to decide
how to contribute to society, is only partially substantiated by empirical
evidence. While it is true that professional workers control their own
expertise and therefore need to comply with organizational and mana-
gerial objectives, they are also subject to extensive managerial control
activities and compete over work opportunities in the labor market with
other professionals. Professional work is for various reasons complicated
to decode into written manuals or protocols, and the expertise profes-
sionals hold includes many contingencies and uncertainty, making their
work complicated to, e.g., automatize or displace by, e.g., digital media.
As a consequence, professional work of necessity contains elements that
grant them jurisdictional authority and discretion.
Recent changes in the corporate system and in competitive capital-
ism, including the enforcement of the shareholder welfare governance
model, have further emphasized professionals’ role in creating economic
value. One way to align shareholder interests and the interests of pro-
fessional workers is to assess individual or group-based performance in
monetary terms and to connect such performance-reward system with
identity work being conducive to shareholder wealth creation. As pro-
fessionals are commonly assumed to primarily identify with their own
group of professional workers and their interests (representing a specific
professional esprit des corps), and to serve a more free-standing role in
between the state and the market, the alignment of professional beliefs
and attitudes, and, e.g., shareholder interest, demands its own managerial
savoir-faire, rhetorical and narrative skills that will convince, say, medical
doctors that also business concerns and not only medicinal conditions
and ideologies do matter when they prescribe therapies for their patients.
In the era of expert professionalism within the economic regime of inves-
tor capitalism, the very term professionalism is at risk to appear as an
atavism; it is unsurprising that terms such as “knowledge workers” have
been proposed to substitute for the conventional term professional, not
carrying the promise of jurisdictional authority and yet emphasizing the
specialized skills being embodied by such groups of workers.
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5
The Future of Professionalism: How
to Preserve and Justify Jurisdictional
Discretion in Investor Capitalism
Introduction
“Prediction is difficult especially about the future,” the great Danish
physicist Niels Bohr once remarked (cited in Rona-Tas and Hiss 2010:
121). At the same time, as we learn from meteorologists—the entrusted
predictors par excellence in modern life (Fine 2007)—the weather tomor-
row is likely to look essentially like today’s; only occasionally are there
disruptive changes. Based on these premises, this chapter will discuss the
future of professionalism within the pervasive institutional and cultural
shifts described in this volume, the deinstitutionalization of managerial
capitalism, and the entrenchment of investor capitalism.
In the New Deal era, the liberal lawyer Louis Brandeis famously
claimed that in the economic system of competitive capitalism, it is dif-
ficult to eat the cake and have it too: “We can have a democratic society
or we can have greater concentrated wealth in the hands of a few. We
cannot have both” (cited in Bartels 2008: 284). The timelessness of this
statement has revealed itself in the extensive literature spawned by the
finance industry collapse of 2008 and its aftermath (e.g., Eichengreen
2015; Blinder 2013), leading to one of the longest lasting recessions in
the post-World War II era and the enactment of austerity regimes in

220 5 The Future of Professionalism: How to Preserve and Justify...
numerous countries being affected by the cost of restoring the banking

sector or/and the reduced supply of cheap finance capital (Major 2014;
Schui 2014; Konzelmann 2014; Blyth 2013). Paired with a series of spec-
tacular corporate failures—whereof the case of Enron can make claims to
be the textbook case par excellence—being exemplary what Bartels (2008:
295) refers to as the “fraudulent and pernicious specimens of American
entrepreneurship,” there are good reasons for discussing in depth the
consequences of unregulated investor capitalism and its financialization
of all sectors of the economy. At the same time, as Bartels (2008) and
Blinder (2013) have remarked, substantial parts of the wider population
in the countries affected by the finance industry crisis may have not yet
fully surveyed the entire field and understood all the consequences of
the events of 2008. Bartels (2008) argues that the unfortunate conse-
quences of finance-driven enterprising over the last two decades still “has
generated only modest public consternation and no concerted political
response.” Yet, the consequences were and still are significant:
Assets estimated at more than U.S. $4 trillion were written off as a result of
the [2008 finance industry collapse], while the U.S. government commit-
ted almost U.S. $9 trillion to dealing with its effects. Jobs were lost around
the world, and as many as 200 million people may have been pushed into
poverty by the resulting recession. (Hardy and Maguire 2016: 80)
Not only has the work to unravel all the aspects of what caused this major
event led to an increased skepticism toward the idea of free, unregulated
markets as the indubitably most efficient way, being essentially unrivaled,
to create economic prosperity, as have been claimed by many economists
safely couched in prestigious institutions and serving advisory roles,
but the very role of the economy and its influence in late-modern soci-
ety have been discussed in entirely new terms. The historian Tony Judt
(2015: 308) captures this new sentiment: “The new master narrative—
the way we think of our world—has abandoned the social for the eco-
nomic . . . [c]ontemporary debate foregrounds interests and preferences
that can be rendered in economic terms.” In Judt’s term, economic inter-
est—and what Friedrich von Hayek, Milton Friedman, and many others
referred to as “economic freedom” (as opposed to and privileged over
Financialization and Its Consequences
221
“political freedom”)—today overshadows all other societal and human

interests, making the financialized economic system not so much a tool
in the hands of the political system but rather the other way around. “The
idea of a society held together by pecuniary interests alone is, in [John
Stuart] Mills’ words ‘repulsive.’ A civilized society requires more than
self-interest, whether deluded or enlightened for its shared narrative of
purpose,” Judt (2015: 309) continues.1
Seemingly paradoxically, at the stage in history where “economic
freedom” has been relentlessly advocated and enforced—economic free-
dom should at least have the benefit of increasing prosperity to justify
its revered status—there is a concern that this event coincides with the
decline of overall economic well-being. As Whalen (1997: 520) remarked
already back in the mid-1990s, speaking with great prescience, “With the
end of the managerial era of the early postwar period, stability in U.S.
industrial relations has also ended.” Whalen (1997: 520) continues:
Workers at nearly all levels are insecure, as entire divisions are bought and
sold and as corporate boards exhibit a chronic need to downsize overhead
and to seek out the least expensive set of variable inputs. A similar pressure
is being felt in the public sector, where privatization and outsourcing have
become widespread. (Whalen 1997: 520)
In this final chapter, some of these concerns will be addressed in more

detail, paying specific attention to the question of how the new conven-
tional wisdom of the post-2008 period (basically the same as before the
events, with some attempts to regulate the finance industry a bit tighter but
otherwise little more. See, e.g., Münnich 2016) will affect professionalism,
professional work, and what is here called precarious professional work.

The Consequences of Economic Instability
There is evidence of the financialized capitalist economy being more unsta-

ble and demonstrating a higher degree of volatility than during previous
periods. In addition, these instabilities are commonly created or mediated

by policy-making and changes in regulatory control (e.g., Paredes 2003),
in turn resting on, e.g., economic theories and reasoning, translated into
policy-making agendas and political processes. Perugini et al. (2016)
examine a data set from 18 OECD countries over the 1970–2007 period
to examine whether economic inequality (measured as the level of house-
hold debt) causes “systemic financial risk.” They answer this question
affirmatively and suggest “a direct causal link between income inequal-
ity and indebtedness” (Perugini et al. 2016: 250; see also Turner 2015).
More importantly, speaking against the advocacy of deregulation of mar-
kets as a means to increase competition and to reduce transaction costs,
Perugini et al. (2016: 250) claim that the level of financial deregulation
does not make a difference in terms of counteracting economic inequal-
ity: “In fact our findings suggest that income inequality drives private
sector indebtedness irrespective of the level of financial regulation (and
vice versa).” The implications from these findings are not insignificant.
First, the result challenges the orthodox neoclassical economic theory
view that “the distribution of permanent income is irrelevant to macro-
economic outcomes” (Perugini et al. 2016: 251): economic inequality is
per se a problem as it is conducive to economic instability, in turn creating
further uncertainty. The doctrine that economic inequality is a nonissue
does not fare well when confronting real economy data. For instance,
Angelopoulos et al. (2007: 898) claim, on the basis of their study of 23
OECD countries over the 1970–2000 period, that these countries could
“improve their growth performance by reallocating public spending
towards productive activities.” That is, taxation, commonly understood
as a policy that counteracts economic inequality, does play an active role
in promoting economic growth. Second, policy-makers who wish to
make the finance industry more resilient need to engage in a wider set of
reforms than to further deregulate the finance sector and to carefully con-
sider mechanisms for the redistribution of income and policies to handle
the growing stock of household debt (Perugini et al. 2016: 251). That is,
economic stability is not simply a matter of monetary policy as prescribed
by certain branches of orthodox neoclassical theory, but is the outcome
from a wider set of political reforms and regulatory practices.
223
ecuritization, the Subprime Loan Crisis, and the 2008

S
Finance Industry Meltdown
Perugini et al.’s (2016) primary contribution is that they establish a rela-

tionship between economic inequality, measured as level of debt, which is
understood as a personal predicament and a micro-economic condition,
and economic instability, which is examined as a macro-economic con-
cern. There is thus a need for understanding the mechanisms that con-
nect individual decisions and structural features of the economy to better
understand how the two levels of analysis are inextricably bound up and
coproduced, rather than being independent variables. While economic
inequality will be discussed in more detail in the section below, the ques-
tion of macro-level instability and its relation to policy and regulatory
activities can be illustrated by the expansion of the subprime loan crisis
and its central role in creating the 2008 finance industry collapse.
In the period 1997–2006, residential home prices rose, on average,
by 125 percent in the United States, by 175 percent in Spain, and by
260 percent in Ireland (Eichengreen 2015: 89). In Ireland alone, with
a population of 4.5 million people, 550,000 new homes were built in
the period, and yet the prices were skyrocketing. In the United States,
Ben Bernanke, by then the chairman of Council of Economic Advisers,
and eventually the chairman of the Federal Reserve, gave a speech before
Congress in October 2005 wherein he claimed that the rises in housing
prices over the last two years, exceeding 25 percent, were not the effect
of “speculative activity” but rather reflected “strong economic fundamen-
tals.” Taking advantage of regulatory reforms and a general positive view
of the future, buyers of real estate foresaw a bright economic future in
America and were thus ready to take on more debt to buy a home than
any previous generation. This rosy image of the American real estate mar-
ket and the American economy would crumble less than two years later,
when the intricacies of the widely expanded subprime market would be
disclosed. Deregulation of the finance industry in 1999 and 2000 had
expanded the securities industry, wherein finance institutions could “slice
and dice,” e.g., mortgage loans and sell them as mortgage-backed securi-
ties (MBSs) on an international finance market, thus making, e.g., real
estate mortgage lending a significantly more lucrative business as loans

were now only assets held by, e.g., a bank for, say, 30 years, but could gen-
erate a cash flow during the entire contract termination period. “[T]he
securities industry grew from 0.4 percent of GDP in 1980 to 1.7 percent
of GDP in 2007,” Greenwood and Scharfstein (2013: 7) notice.
Unfortunately, the success of the new sophisticated and exotic financial
instruments “[w]ent hand-in-hand with the growth of ‘shadow banking,’
in which key functions of traditional banking are provided by a host of
non-bank financial entities” (Greenwood and Scharfstein 2013: 21). As
financial institutions could expose themselves only to a certain predefined
level of risk, many financial institutions in fact chose to conceal their risk
exposure by simply moving some of their assets and liabilities outside
of their regular accounting: “[S]hadow banks [are] defined as ‘financial
intermediaries that conduct maturity, credit, and liquidity transformation
without explicit access to central bank liquidity or public sector credit
guarantees,’” Greenwood and Scharfstein (2013: 21) explain (see also
Fernandez and Wigger 2016). The securitization of real estate loans and the
shadow banking system facilitated the expansion of the stock of mortgage
loans (addressed shortly) but also made the financial system more fragile.
The conventional wisdom in orthodox neoclassical economic theory sug-
gests that unregulated markets and free-market pricing enable actors to
better assess and monitor their risk exposure and to take action to prevent
exposure to excessive risk. The market therefore contains self-regulatory
mechanisms that optimize the efficiency, yet maintain the resilience of the
market. This theory and doctrine fared poorly in the real estate mortgage
market of the 1997–2006 period, empirical evidence shows.
The work of Mian and Sufi (2009, 2014) shed light on how the sub-
prime mortgage market, expanding widely in the 2002–2005 period, was
based on financial speculation of the Minsky type, founded on the com-
bination of securitization (i.e., the ability to spread risks across global
financial markets) and shadow banking, making high-risk real estate
loans still financially attractive in a short-term perspective. In many ways,
the 2002–2005 subprime loan market expansion represented an anomaly
in a historical perspective:
225
Our historical comparison . . . reveals that 2002–2005 is the only period in

the last eighteen years in which mortgage growth and income growth are
negatively correlated. In all other periods, income growth and mortgage
growth are positively correlated, a one could expect under standard models
of mortgage lending. (Mian and Sufi 2009: 1453)
By examining the expansion of subprime lending on the level of indi-

vidual ZIP codes (used in the American postal code system), Mian and
Sufi (2009: 1453) demonstrate how earlier credit-rationing constraints
were relaxed in the period; individuals that were previously likely to be
denied credit (at times referred to as NINJAs, meaning “No Income, No
Job, (no) Assets”) were now eligible for mortgage lending (Rona-Tas and
Hiss 2010; Keys et al. 2009). Since the subprime loan market expanded
in the only period of time wherein recorded credit growth negatively cor-
related with income growth, there are reasons to believe that much of this
lending was based on purely speculative interests.
While securitization serves to spread “individual risks” over several
financial institutions, this finance instrument makes certain risks tol-
erable, but if the securitization of a large stock of subprime mortgage
loans is distributed globally—which it was (Fligstein and Habinek
2014: 639)—the entire international finance system becomes con-
taminated: “[B]etween 2001 and 2007, banks from mostly Western
European countries dramatically increased their holdings of US MBS
and CDO [Collateralized Debt Obligations]” (Fligstein and Habinek
2014: 639). As, e.g., Ellul (2015) has emphasized, these new classes of
financial assets were very complicated to price on the basis of incom-
plete data series, which led to an underestimation of the systemic risks
they entailed:
Because these were new financial products, statistical analyses based on

historical data faced severe limitations. A risk manager would have needed
not only an analysis of the behavior of real estate prices across different
states and its effect on the balance sheet, but crucially also about the likeli-
hood of a sharp downturn of real estate prices correlated across several
geographical states. (Ellul 2015: 285)
With incomplete data and with no data over the entire economic cycle,
financial traders buying MBSs and CDOs on the international finance
market acted in the dark. Not until it was too late, the fragility of the
derivative instruments and the underlying subprime mortgage market
was revealed.
The subprime mortgage market was widely targeted as the main explan-
atory factor making the entire financial system topple over in 2008, but
rather than being an isolated phenomenon, this event was more of the
culmination of a long series of regulatory reforms and lax monitoring
practices. In their conclusion, Mian and Sufi (2014) call attention to the
more long-term consequences of the financialized economy, questioning
whether finance is actually the motor of the capitalist economy, or if it, as
Louis Brandeis once put it, always arrives late and takes a position when-
ever all the risks are already discounted:
As it currently stands, the financial system benefits very few people, and
those few have a vested interest in staving off any reform that could move us
away from debt financing. However, we cannot continue down the road of
unsustainable debt binges and painful crashes. (Mian and Sufi 2014: 186)
In the case of the subprime mortgage market expansion, it was only the
financial institutions, lowering their standards for mortgage lending, and
thereafter taking advantage of the risk-spreading mechanisms of MBSs and
CDOs, that benefited in the end. The financial institutions that jumped
the gravy train could comfortably let the government take care of the mess
they created, and ultimately it was the taxpayers who picked up the bill.
As Mian and Sufi (2014) rightly question, there are reasons to consider
this relentless expansion of finance industry operations as they lead nei-
ther, as has been demonstrated, to economic growth nor to increased eco-
nomic well-being. In contrast, they lead to increased economic instability
being a major concern for a wide range of households and families, and,
as will be discussed next, to increased economic inequality. People work-
ing in the finance industry have benefited greatly from the liberalization
of their trade and they have rewarded themselves generously in terms of
baseline pay and bonuses being paid out, but few others, by the end of the
day, have benefited from the financialization of competitive capitalism.
227
Financialization and Economic Inequality
Perugini et al. (2016) associate economic inequality and economic insta-

bility. Kus (2012), in turn, examines the relationship between financial-
ization (which could be measured as the level of economic instability in
an economic system) and economic inequality in 20 OECD countries
over the 1995–2007 period. In Kus’s (2012) theoretical model, finan-
cialization (i.e., the expansion of the finance industry and its aggregated
share of the economy) is both a cause and an effect of increased economic
inequality: The shrinking profitability of the nonfinancial sector of the
economy, at least partially explained by the unwillingness to invest in
production capital, in human resources, and in R&D and innovation
activities, leads to a downward pressure of salaries and benefits. The sheer
expansion of the finance industry has been portrayed as a general shift in
the economy toward more “knowledge-intensive work,” which has been
used to justify reforms that have either benefited the finance industry
directly or otherwise “[c]ontributed to the weakening of certain policies
and institutions that help keep income disparity in check, such as unions
and minimum wage laws” (Kus 2012: 485). There is also a general ten-
dency in the era of investor capitalism that new corporate governance
practices align shareholder and managerial interests, which “[i]nvariably
led to a focus on short-term profits” (Kus 2012: 485). Finally, the stock
market boom of the late 1990s–early 2000s, the direct consequence of
the changes listed above, has increased the concentration of income in
the top income percentiles (Kus 2012: 485).
Moving on and examining the data, Kus (2012) demonstrates that all
the four indicators of financialization in the analysis, including (1) “total
value of stock traded on the stock market exchange as a percentage of
GDP,” (2) “bank profitability measured in terms of bank income before
tax as a percentage of GDP,” (3) “securities under bank assets,” and (4)
an aggregate financialisation index, display a “[s]ignificant positive asso-
ciation with income inequality” (Kus 2012: 492). The trend in the 20
OECD countries studied by Kus (2012) is perhaps even more accentu-
ated in the United States, the home base for free-market advocacy. Moss
(1996) suggests that the “politics of economic inequality” can be traced
back to the first oil crisis in 1973:
Since 1973 . . . the real wages of production and nonsupervisory workers

have exhibited a sustained decline. Although real per capita GNP and labor
productivity have continued to increase, wage earned have had to work
longer hours to preserve their share of national income. Never before in
American history has an entire generation of workers experienced such a
deterioration of earning power. (Moss 1996: 175)
Also Gordon (2015b: 542) emphasizes the first oil crisis as a turning point
for labor’s compensation: “The fact that the real wage rose above its trend
by more than productivity between 1950 and 1973 implies that labor’s
share in total income increased over this interval. The reverse occurred
during 1973–2014.” Wodtke’s (2016) study reveals that the decline in
income is by and large a matter of social class, with income differences
between social classes increasing by about 60 percent since the 1980s in the
United States. Moreover, Wodtke (2016: 1386) says, institutional changes
and policy changes leading to “de-unionization, regressive reforms to the
tax code, and freezes in the nominal minimum wage,” all working to the
disadvantage of low- to middle-income groups, in combination with
“growing incomes for high-level managers and large proprietors” (Wodtke
2016: 1408), explain most of the growth in economic inequality.
In the 1980s and 1990s, the economic inequality and especially the
blue-collar community lost their income base, the manufacturing indus-
try, but also white-collar and middle-class income families saw their life
chances being substantially reduced. Even in the mid-1990s, otherwise
being a period of economic stability and growth, middle-class America
suffered from the loss of reasonably well-paid and stable employment,
Moss (1996) reports: “For people like us . . . I’m afraid the good times
are gone for good,” Susan, a mother of five and a wage earner in Kansas
City, Missouri, said (cited in Moss 1996: 175). However, for people
unlike Susan, e.g., business school graduates, preferably with a degree
in finance, or making a leadership career in the major corporations, the
future looked brighter. Indeed, their economic compensation would sky-
rocket during the coming decades, thus creating one of the most puz-
zling empirical phenomena for agency theorists, rejecting managers, ex
hypothesi, as being incompetent and self-serving squanderers of the share-
holders’ wealth, and yet precisely people of this group were the primary
229
beneficiaries in the period when the agency theory model of shareholder

welfare was implemented on broad basis. In the following, this “outlier”
income group will be examined in some detail.
On the Gravy Train: Soaring CEO Compensation
Bebchuk and Grinstein (2005) examine the 1993–2003 period, the real
“take-off phase” for the financialization of the economy, and find that the
2003 CEO levels of compensation exceeded the levels predicted by the
1993 regression by 115 percent. These findings were statistically significant
on the 1 percent level. In the standard version, executives are compensated
on the basis of stock options and the use of other forms of financial assets,
and often a significant share of the growth in compensation derives from
the CEO’s ability to increase shareholder value. When checking against
the growth of firms and performance, Bebchuk and Grinstein (2005: 291)
find that the log of equity-based compensation increased by a factor of
1.347 for CEOs and by 1.468 for the top executives. Even though the
equity-based compensation peaked in 2000, by the time of the burst of the
information technology bubble, cash-based compensation has continued
to trend upward during Bebchuk and Grinstein’s (2005) entire period.
These changes cannot be explained on the basis of any observable, objec-
tive changes in the firms being managed: “[C]hanges in size and perfor-
mance can explain only 66 per cent of the total 166 increase, or about
40 per cent of the total increase, with 60 percent of the total increase
remaining unexplained” (Bebchuk and Grinstein 2005: 287). Based on
these statistically solid results, including the control of firm growth and/
or performance vis-à-vis 1993, Bebchuk and Grinstein (2005: 289) con-
clude, “The relationship between pay and firm attributes has changed sub-
stantially during the period under consideration.” That is, executives were,
ceteris paribus, more generously compensated in 2003 than in 1993. “[C]
ompensation levels increased far beyond what can be attributed to changes
in size and performance,” Bebchuk and Grinstein (2005: 286) contend.
Lord and Siato (2010: 43) report that the median levels of “total real
annual CEO compensation” more than doubled from US$1.18 mil-
lion in 1994 to US$2.80 million in 2007 (in real 1994 dollars) (Lord
and Siato 2010: 43). Bebchuk and Grinstein (2005) point at the “brief
decline” in total CEO compensation following the market crash in 2000,
while after this event, they continue, the “real total compensation has
risen again significantly in most industries.” DiPrete et al. (2010) provide
additional executive compensation data:
Adjusted for inflation, the median salary/bonus increased from 1993

through 2006 by 40%, whereas the mean increased 58%. Adjusted for
inflation, the median total compensation went from $1.6 million to $3.2
million, a 106% increase, whereas the means increased by 116%. (DiPrete,
Eirich, and Pittinsky 2010: 1687)
In contrast, according to the data reported by Hall and Liebman (1998:

667) from the 1993–1994 period, at the beginning of the period of
increased economic compensation for executives, there is still, despite
the finding that “CEOs have enjoyed larger gains in compensation, both
in absolute terms and relative to most other highly paid groups” (Hall
and Liebman 1998: 667), a “positive correlation” between CEO com-
pensation and performance. The data reported by Bebchuk and Grinstein
(2005), Lord and Siato (2010), and DiPrete et al. (2010) (but not sup-
ported by Hall and Liebman 1998) suggest that there has been a shift
in corporate governance practice inasmuch as executives are today more
generously compensated for their work than they were in the early 1990s.
Executives are apparently winners in the compensation game.
The Politics of Inequality
From a social theory perspective and in a historical view, the financializa-

tion of the economy and its accompanying economic inequality did not
occur ex nihilo, but was rather the effect of new doctrines and ideologies,
scholarly advocacy, and policy-making. The new economic inequality was
possibly never a goal per se, but it was one of the foremost consequences of
the new policy agenda being enforced in Washington and thereafter on a
global scale. As political scientists such as Pierson (1996) have argued, the
welfare state as such has not been undermined by the last decades of free-
market advocacy as even conservatives have come to regard social welfare
231
provisions as being closely bound up with competitive capitalism. “Even

in Thatcher’s Britain,” Pierson (1996: 173) writes, “where an ideologically
committed Conservative Party has controlled one of Europe’s most cen-
tralized political systems for over a decade, reform has been incremental
rather than revolutionary, leaving the British welfare state largely intact.”
Hacker (2004: 244) argues that the “popular and embedded institutions”
of the welfare state are largely insulated against “authoritative reform,”
and therefore the critics of the welfare state instead “seek to shift those
institutions’ ground-level operation, prevent their adaptation to shifting
external circumstances, or build new institutions on top of them.” For
instance, rather than confronting welfare provisions head-on by advo-
cating, e.g., private alternatives, conservative, neoliberal, and libertarian
critics of the welfare state work to undermine the ability to finance such
public sector activities. Questioning the legitimacy of trade unions, for
instance, which serve to enforce economic equality through collective
wage bargaining processes that benefit not only paying trade union mem-
bers but all wage earners (Brady et al. 2013), has effectively reduced labor
power and its ability to advocate reforms that benefit, e.g., working-class
families. In the following, some of the changes primarily in the United
States contributing to the higher level of inequality will be discussed.
To start out, the concept of economic inequality as being universally
deplorable and what must inevitably lead to significant political action
should be understood as a situated doctrine per se. For conservatives,
neoliberals, and libertarians such as Friedrich von Hayek and Milton
Friedman and several representatives of orthodox neoclassical economic
theory, such a statement is indicative of the internalization of certain
norms and beliefs, encouraged and sanctioned by welfare state institu-
tions. In contrast, Mirowski (2013) writes in his scathing critique of neo-
liberal ideology that economic inequality is normalized as a by-product
of a functional competitive capitalist economic system:
Neoliberals regard inequality of economic resources and political rights not

as an unfortunate by-product of capitalism, but a necessary functional
characteristic of their ideal market system. Inequality is not only the natu-
ral state of market economies from a neoliberal perspective, but it is actu-
ally one of the strongest motor forces for progress. (Mirowski 2013: 63)
More specifically, rather than treating economic inequality as an unfor-

tunate collective failure to provide the greatest possible economic
well-being for the greatest number of people, neoliberals claim that
“people should be encouraged to envy and emulate the rich. Demands
for equality are merely the sour grapes of the losers” (Mirowski 2013:
56). More importantly, any attempt to offset or ameliorate the trend
toward economic inequality is strongly denounced by neoliberals, as
such intervention into the pricing mechanism of self-regulating mar-
kets only creates detrimental inefficiencies that slow down and imperil
economic growth. Thus, economic inequality is not so much a failure
as it is indicative of a sound economic system, and even if it would have
been regarded a failure of policy, etc., any attempt to counteract eco-
nomic inequality is prohibited as it represents a violation of the rational
market doctrine, widely endorsed in the free-market community. In
contrast, for more liberal to left-leaning theorists and commentators,
economic equality is one of the most pressing socio-economic issues in
the contemporary economy, being approached from a number of per-
spectives and through the use of an arsenal of mechanisms and tools.
In this view, economic equality is not to be celebrated, nor being a
consequence of force majeure, the fatalist stance that the economy cre-
ates conditions that no policy-maker or regulatory authority can ever
command (Kelly and Enns 2010: 856), at least not unaccompanied by
considerable costs.
Fiscal Policy, Deunionization, and Conservatism
The most important factor regarding how economic inequality is coun-

teracted is the fiscal policy of the state. “Taxes represent perhaps the most
viable way in which policy makers influence the distribution of income,”
Hacker and Pierson (2010: 182) say. Actively encouraged in Keynesian
economic theory as a means to transfer economic resources from high-
income groups to less generously compensated groups, either directly in
the form of benefits, or indirectly as subsidies and various governmental
initiatives, fiscal policy changed radically in the 1980s and 1990s, espe-
cially in the United States. Hacker and Pierson (2010: 154) argue that
the “balance of political power” tilted sharply in favor of those at the top
233
of the economic pyramid in the 1970s and point out at four areas that
were affected by this change: the growth of the finance industry, changes
in corporate governance, changing industrial relations (including, i.e.,
antitrade union campaigns and policies), and changes in fiscal policy and
taxation. While these changes, part of the neoconservative policy agenda
of the Reagan administration, were claimed to be beneficial for economic
growth, and therefore the economic tide would “raise all boats,” such
declarations were overly optimistic regarding the outcome for economi-
cally vulnerable groups: “[F]ew of the benefits of economic growth at the
top between 1979 and 2005 trickled down,” Hacker and Pierson (2010:
157) say.
Regarding taxes and fiscal policy, the extensive income tax, real estate
tax, and corporate tax reforms implemented by the Reagan administra-
tion slashed the nominal taxes being paid for the top income group,
but also hollowed out federal budgets, making Ronald Reagan the post-
World War II president who tolerated the most significant budget defi-
cits. Since the 1980s, the elimination of progressive taxation, wherein the
highest income groups pay relatively higher proportions of their income
in taxes, has been a typical American phenomenon: In 2015, Ebenstein
(2015: 201) reports, in the United States, the poorest 20 percent pay 11.1
percent of the income in sales, property, and state income tax; middle-
income families pay 9.4 percent; and the richest 1 percent pays 5.6 per-
cent, figures being indicative of a de facto regressive taxation. The top
400 earners in the United States—the superrich, including celebrity bil-
lionaires such as Bill Gates and Warren Buffet—pay less than 20 percent
taxes. Needless to say, this strong emphasis on private property and low
taxation in US fiscal policy has reduced the possibilities for mediating
economic inequalities, the foremost externality of “economic efficiency.”
Another important component of the 1980s’ neoconservative revolu-
tion was the staunch position vis-à-vis trade unions, by and large part
of a broader campaign against all “forms of collectivism,” which in
turn was regarded as being contaminated by socialist ideas, per se being
“un-American.” In combination with the decline of the US manufactur-
ing industry, partially caused by an overrated dollar that undermined the
competitive capacity of the industry, partially justified by the widespread
belief that manufacturing was a “low value added” industry destined to
soon be shipped off to some low-wage country in the third world, the
marginalization of the trade unions, actively orchestrated by the highest
office, served to weaken rank-and-file workers’ bargaining power (Kristal
2013: 378). Studies show that countries where trade unions have main-
tained a strong position in society and where they are treated as legitimate
actors in industrial relations, the trade unions cushion economic inequal-
ity for all workers, not only the members of the trade unions: “In coun-
tries with high unionization, inequality and poverty are lower and wages
are higher” (Brady et al. 2013: 873); “For a standard deviation increase in
unionization,” Brady et al. (2013: 883) say, “the odds of constant work-
ing poverty decline by a factor of 1.19.”
The changes in fiscal policy, the waning of organized labor, and the
decline of stable and reasonably well-compensated blue-collar workers’
jobs, especially in the manufacturing industry, all added to increased eco-
nomic inequality in the American economy and created its own momen-
tum, as economic inequality per se, when kept within “reasonable levels,”
does not lead to a radicalization of low-income groups, but rather its oppo-
site—a conservative attitude toward social reform (Redbird and Grusky
2016: 199; Bonica et al. 2013: 108). “[E]conomic inequality may be
self-reinforcing, with economic inequality generating political inequali-
ties that prevents the poor from using the democratic process to push
for government action that would increase their well-being and reduce
economic inequality,” Kelly and Enns (2010: 855) write. This outcome
may seem counterintuitive, but Kelly and Enns (2010: 865) suggest that
“[w]hen inequality rises, the public shows less support for welfare spend-
ing.” This is indicative of what Thomas Frank (2004, 2012) has addressed
as an idiosyncratic American phenomenon, where lower-income groups
side with the richest people in the country and actively support policies
that counteract the interests of low-income groups. Speaking about his
own home state Kansas, the arch-typical American Midwest heartland
state, Frank (2004: 106) suggests that here, “the working-class heroes are
more Republican than their bosses.” Frank (2004: 119) thus speaks of
conservatism, the badge of honor carried by Republican voters, as being
“the doctrine of the oppressed majority,” whose supporters effectively
fashion the role of the truth-tellers and underdogs, pointing fingers at
235
what they regard as arrogant East Coast liberals and intellectuals endors-
ing a blend of cosmopolitanism and social reforms not endorsed by con-
servative voters, even when the policies advocated by these groups benefit
their own economic interests and well-being:
Conservatism does not defend some established order of things: it accuses,

it rants; it points out hypocrisies and gleefully pounces on contradictions . . .
They [Republicans and conservatives] are always the underdog, always in
rebellion against the haughty establishment, always rising up from below.
(Frank 2004: 119)
For Frank (2004), by the end of the day, the neoconservatism of the
Reagan era, a combination of classic conservatism and its reliance on the
family, morality, God, and the care for the local community, in combina-
tion with not-so-quite-conservative beliefs in the virtues of free markets
and relentless competition on all levels, has been the reigning doctrine
among much of Republican voters. The triumph of neoconservatism
thus needs to be understood as a deeply puzzling phenomenon: “Like a
French revolution in reverse—in which the sans-culottes pour down the
streets demanding more power for the aristocracy—the backlash pushes
the spectrum of the acceptable to the right, to the right, farther to the
right” (Frank 2004: 8).
While the 2008 finance industry meltdown literature and commen-
tary did call for some attention regarding the state of competitive cap-
italism, such discussions did little to change the order of things. The
growth of economic inequality has continued at the same pace as in the
1990s and in the new millennium. Employers, in many cases operating
under shareholder primacy governance schemes, have successfully curbed
hourly wage growth, and as the federal minimum wage remains unin-
dexed for inflation, it fails to keep pace with average wage growth and is
now “below guidelines advanced by advocates of a living wage” (Lambert
2008: 1206). The spread of taxable income has increased significantly
since the 1970s (Lambert 2008: 1205), and in the United States, the
decline of benefits, one factor that could buffer some of the consequences
of declining real wages, remains a central concern:
Analyses of 2006 CPS [Current Population Survey published by the

U.S. Bureau of Labor Statistics] data indicate that, among workers in the
retail sector, only 52 percent of full-time workers and 16.4 percent of part-
time workers had health insurance coverage through their employer; across
industries, only 18.6 percent of part-time hourly workers were covered by
health insurance through their employer. (Lambert 2008: 1206)
In particular, the shift from relatively well-compensated and stable jobs

in manufacturing to relatively lower paid and more insecure jobs in, e.g.,
the service industries and retailing (Kollmeyer 2009) has added to the
condition, Lambert (2008) argues:
Retail provides the best example of how accountability practices influence

the extent to which instability is transferred to workers. In all the retail
stores studied, managers were held accountable for maintaining a particu-
lar ratio between the number of hours employees worked and either store
sales or traffic. (Lambert 2008: 1206)
Perhaps, other measures of the state of the economy than the traditional
unemployment measure, real wage growth, etc., may be relevant to
examine: “[T]he number of pawn shops has grown 50% since the start of
the Great Recession, with over 10,000 outlets in the United States cur-
rently,” Zinman (2015: 258) remarks, being possibly yet another indica-
tor of how the finance industry collapse translates into quite tangible and
material consequences.
In summary, financialization not only coincides with increasing eco-
nomic inequality: it is one of the foremost drivers of inequality. The
strong emphasis of shareholder welfare and the deregulation of suppos-
edly self-regulating markets translated into managerial decisions regard-
ing downsizing, offshoring, and outsourcing to cut costs, in combination
with fiscal policies benefiting high-income groups and the political pres-
sure on trade unions, created an entirely new economic system where
economic equality and full employment were no longer held in esteem
as legitimate measures of economic performance. Instead, “economic
efficiency” was the catchphrase of the neoliberal and neoconservative
discourse, accomplished on the basis of deregulatory policies. The first
Implication for Professionalism
237
casualty of the “war on collectivism,” declared by Friedrich von Hayek

and his followers in Chicago, was the blue-collar community, but also
white-collar workers were strongly affected by the downsizing programs
of the 1980s and 1990s. Professional workers have historically been rela-
tively well protected from market-oriented activities, primarily because
they have controlled and indeed embodied know-how and expertise that
are complicated to acquire on the market at low costs, but in the new mil-
lennium, there are many tendencies pointing toward also a new regime of
professional work. No longer safely couched in companies and public sec-
tor organizations, professional work is relocated closer to market pricing.
In addition, technological changes such as digital media and robotization
(see, e.g., Compagni et al. 2015; Barrett et al. 2012) are now affecting
a broader spectrum of the economy and need to be taken into account.
The Road Ahead
Financialization represents a new economic regime that emphasizes short-

term financial interests, favoring liquid over illiquid assets, and has, over
time, led to lower economic growth and lower investment in R&D and
human capital. This in turn has generated increased economic instability,
making actors more risk averse and unwilling to participate in new ven-
tures or even reinvesting in production capital. In many cases, the finance
industry, inventing a stream of new financial instruments and assets (e.g.,
various classes of derivatives), has offered more lucrative investment
opportunities than the “real economy” has been able to (Fernandez and
Wigger 2016), thus making the finance industry to some extent an auto-
poietic, i.e., a self-organizing and recursive economic system. Changes
in policy and industrial relations and the entrenchment of new ideolo-
gies have done little to counteract the new levels of economic inequality
generated over the last four decades. In fact, some of these changes have
been seen as naturally occurring tendencies, in some cases even applauded
by, e.g., free-market protagonists.
Speaking against this background and these changes, the concept

of professionalism, founded on epistemic communities and communal
interest and concerns, may appear to be wholly out of joint with the
times. Professionalism is rooted in the university system and the earn-
ing of formal credentials that provide access to and membership in
professional communities, endowed with certain privileges and rights
(e.g., jurisdictional discretion) and duties (e.g., to not only promote
self-interest but serve society and clients at large). Professionalism is
therefore a problematic concept in the era of free-market capitalism;
it constitutes a “third logic” (Freidson 2001) in between the state and
the market, and speaks not of necessity on behalf of neither, obeying
its own interests but not exclusively so as all successful “professionaliza-
tion projects” (Larson 1977) are based on the legitimacy acquired if,
and only if, the professional expertise benefits and otherwise supports
wider societal and human interests. Seen in this way, the “profession-
alization” of, e.g., management consultants or project managers can
never be fully accomplished as the wider public does not immediately
and intuitively see the social benefit of this expertise; the expertise of
management consultants or project managers may be highly valued
within industry and may contribute in substantial ways to the effi-
ciency of economic activities, but in comparison to the work of, e.g.,
medical doctors (providing health care), lawyers (serving the judicial
system), and scientists (presenting new scientific findings and, in some
cases, new innovations or provide other benefits), the expertise of these
specialized groups remains opaque to the wider public. Thus, there is
a stratification of professional work that to various degrees is exposed
to market pressures and initiatives to “deprofessionalize” to various
degrees.
First, there are the “classic liberal professions,” including lawyers,
medical doctors, scientists, and architects, oftentimes being entrepre-
neurial in orientation and self-employed, and being at the core of the
“third logic” examined by Freidson (1986). Second, there are what
can be called the “new professions” or “corporate professions,” more
closely related to market-based needs and practical skills, and not to
the same degree serving an equally mediating role between the state
239
and the market. This group of professionals, the typical late-modern

“knowledge workers,” having expertise and skills valued by the market,
includes, e.g., video game developers, computer programmers, manage-
ment consultants, project managers, public relations consultants, lob-
byists, public sector officers, etc. Third, and perhaps less valued in the
market, there are “creative professionals,” to a higher extent being self-
employed and entrepreneurial in orientation, and in many cases relying
on either the state as a financier or private patronage (or hybrid forms
thereof ). This group includes designers, certain artists, movie producers
and directors, museum staff and curators, etc. The differences between
these groups are significant in terms of their ability to acquire salaried
positions (relatively easily accomplished for a medical school graduate,
but considerably more complicated for an art school graduate; Menger
1999) and to what degree they are successful in defending jurisdictional
authority (at times a privilege not really being as highly valued by, e.g., a
computer programmer, architect, or think tank lobbyist, taking pride in
being able to work in close collaboration with other professional groups
or clients).
Moreover, these different ideal-typical professional groups, appearing
in many hybrid forms and constellations, are to a varying degree subject
to market pressures and managerial practices. Some professional groups
may be able to maintain jurisdictional discretion but may be expected
to demonstrate social benefits derived from their work (as in the case of
university-based scientists), while others have their expertise increasingly
codified into documents and instructions, and being subject to accredi-
tations (as in the case of project managers and auditors). Yet another
group may be given considerable jurisdictional authority in their day-to-
day work but still operate within organizations relying on, e.g., venture
capital investors (as in the case of scientists working in small start-up life
science firms. See, e.g., Fochler 2016), or public sector financiers (as in
the case of artists or curators, relying on federal or local culture budgets).
Other groups, such as judges and jurists being employed by what is still
regarded as the legitimate realm of the state, the legal, and punitive sys-
tem, may experience only limited changes besides perhaps the pressure to
cut budgets in line with low-tax policies.
Precarious Professional Work Revisited
All these changes call for the question whether this can be legitimately
portrayed as the growth of “precarious professional work.” This use of
the term, in most cases denoting the work life situation for the most
vulnerable groups on the labor market—the individuals working
without formal contracts, being paid by the hour, receiving few or no
benefits, suffering recurrent periods of unemployment, especially dur-
ing downturns in the economy—is polemical. Professional workers
are by definition “elite workers,” well educated and trained, and are
therefore gaining the upper hand vis-à-vis what Guy Standing calls the
“precariat”—a term being a playful development of Karl Marx’s term
das Lumpenproletariat, the working poor and the penniless day labor-
ers of the mid-eighteenth century. But working under precarious work
conditions, characterized by uncertainty, unregulated work contracts,
shrinking benefits, and lowered social security networks, is not as a pre-
dicament of the precariat. As demonstrated by Hacker et al. (2013),
individuals with higher education credentials are more worried about
the effects of economic downturns than other groups are, and the sense
of being vulnerable to the essentially unpredictable ups and down in the
economic system is not a predicament of only lower-income groups (see
also Sullivan et al. 2006). The term “precarious professional work” is also
used polemically to denote how the jurisdictional authority, once being
taken for granted as soon as the individual was granted membership in
a professional community, is today gradually eroding through the use of
a variety of management control mechanisms and tools, including not
the least auditing, assessing either the very work procedures of everyday
professional work or the output from such work, measured in degree
or quality. Such process and performance auditing are further trans-
lated into increasingly complex tools for rating, ranking, and otherwise
assessing professional work, in many cases on the basis of calculative
practices that remain opaque or strategically concealed to the audiences
of such performance measures. As a consequence, professional work
is increasingly understood not on the basis of the autonomy inscribed
into the professional jurisdiction but as the ability to comply with and
to act in accordance with such control systems. In the end, successful
241
professional work is no longer to simply pledge allegiance to the ethos

and working procedures of the professional community, but to tactically
and strategically make use of professional expertise to score high on the
performance metrics being prescribed. This in turn means that profes-
sional integrity is traded for a form of “teach-to-the-test” strategy where
objectives and performance metrics defined outside of the professional
community become prioritized objectives in the day-to-day work (see,
e.g., Boiral 2012).
In this context, it is possible to distinguish two forms of precari-
ousness. First, the “hard-core precariousness” of the late-modern low-
skilled and lowly compensated worker, perhaps no longer even capable
of supporting himself or herself and the family on the basis of full-time
income, what the American calls “the working poor,” averaging 10.4
percent of the total American workforce in the 1974–2004 period
(Brady et al. 2013: 873). Second, there is a less malign form of precari-
ousness that is based on the shift from being based on relatively stable
and well-compensated work to increasingly conducted on the basis of
market pricing and contracting, leading to the autonomy of the profes-
sional group no longer being a constitutional feature, but increasingly
emphasizing the collaborative competence of the professional and the
ability to operate on the basis of external, not professional evaluations of
the output and the performance. This work life is arguably not beset by
hardship and anxieties comparable to the precariat, but it is certainly a
change in terms of privileges and perceived security vis-à-vis previous
generations of professionals. For instance, earlier generations of scien-
tists either could rely on the state to have their research work funded
or could land a position in some large-scale multinational corporation,
capable of buffering resources over the economic cycle and therefore
providing opportunities for a relatively stable and predictable research
work career. Today, the university system is imposing pressure on sci-
entists, in addition to all other managerial and governance assignments
needed to run departments and faculties, to both attract research fund-
ing and to point at the practical and preferably economic short-term
benefits of their research activities. In addition to publishing, already
being a time-consuming and emotionally draining activity per se, scien-
tists are expected to communicate the significance of their research with
nonprofessional audiences and preferably also attract media attention.

Needless to say, diluting the precious and shrinking work time that are
reasonable to be expected from an individual, possibly also rearing chil-
dren and having responsibilities toward spouses, family, and the wider
community, into a long series of activities accompanying the core assign-
ment is not of necessity conducive to academic excellence. Moreover,
such policy may easily raise the level of frustration among individuals
who anticipated a career in the sciences, unwilling to participate in a
wide variety of supplementary activities, not always adding to scientific
progress or excellence.
It may be, in the end, that the term “precarious professional work”
could be better substituted by some less acrimonious term, but the con-
cept of precariousness still captures some of the ennui and frustration
expressed within several professional communities, encountering increas-
ing pressures to both perform their traditional roles and to fashion novel
identities and to participate in additional activities. Academic concepts
always have an element of polemics to better convey innate, yet vague
changes in social organization and governance, and precarious profes-
sional work provides such affordances; it is a term that apprehends and
problematizes the status and role of professionalism in the contemporary
period, being still as venerated but gradually being subordinated to other
social interests and whose inherited professional autonomy is treated
with great skepticism in a society wherein market-based pricing becomes
the measure of all things under the sun. Therefore, the term is not used
to instruct the public to “pity the professionals,” but to pay attention to
the fact that the decline of, e.g., blue-collar work in Western economies
by no means should be understood as an isolated and singular phenom-
enon, but that all kinds of skills and competencies generating economic
value are likely to be subject to the control and management of those who
are the primary beneficiaries of the economic value extracted from these
production activities. In this view, the term precarious professional work
is proposed as a potentially prescient term, as an operative hypothesis
of what may come in the future when professional communities can no
longer resist the pressure from external stakeholders seeking to discipline
and control their work, and when market pricing defines all quarters of
professionalism.
243
Professional expertise is an indispensable resource in contemporary soci-
ety: the expertise and know-how of professional groups are deeply seated
within the technological, social, behavioral, and economic complexities
of everyday life in the third millennium. The capacity to provide such
expertise and know-how makes professionals attractive and sought-after
employees, and this speaks to the advantage of this category of work-
ers. At the same time, the loss of professional autonomy, the increased
emphasis on external control of workplaces and industries through, e.g.,
audits, rankings, and consumer reviews, and the fragmentation of large-
scale corporations into a network of interrelated and closely knit orga-
nizations and freelance agents have all made professional careers more
demanding to pursue. Wide-ranging institutional and political changes,
including the emphasis on market-based transactions and expertise as a
commodity to be valued and priced in the marketplace, have to some
extent served to deconsecrate professional work. Much professional work
is today demystified and commodified into tradable assets and proce-
dures, which further puts pressure on professionals to conform to mana-
gerial objectives and to fashion entrepreneurial identities for themselves.
In this volume, the term “precarious professional work” has been used
to denote a situation wherein professional communities and professional
workers cannot take privileges such as professional autonomy and discre-
tion for granted. To use the term precariousness (and terms derived there-
from) may be disputed as a form of rhetoric that ignores that the work life
situation of professional workers is still significantly much more favorable
than that of what Guy Standing (2011) refers to as the “precariat,” a form
of late-modern Lumpenproletariat working on the basis of short-term, at
times even day-to-day contracts, and who receive only low or minimal
wage and are entitled to few, if any, benefits. This is a valid point to make,
possible to extend and support by empirical evidence, but the term precari-
ousness has a certain unnerving tone to it that is appealing from a scholar’s
perspective. In the era of investor capitalism, where the wheels seem to
turn faster for every single year and where “competition” has remained the
leitmotif in both working life and in society more broadly for a long period
of time, both occupational and professional groups experience a certain
uneasiness or even anxiety about their ability to “stay competitive” and

“employable” throughout their entire working life. Precarious professional
work thus denotes a combination of actual working life conditions, includ-
ing a fiercer competition over attractive work positions, an endemic pres-
sure to lower costs, and a more fleeting, even hazy sense of being exposed
to primarily economic forces that are beyond the control and reach of not
only the individual but also to some extent political and regulatory bodies.
Events such as the 2008 finance market collapse have been interpreted as
some kind of natural disaster, a force majeur unleashed to wreak havoc in an
unprepared world (King 2016; Turner 2015). Such an image is of course
simplistic and ignores all the explanatory factors that surfaced immediately
and over time in business media and in scholarly analyses, but the feeling
of being located in a world determined by an unruly finance industry, by
and large operating independently from political bodies and regulatory
agencies, is deep-seated and lingers on. The precarity of everyday life and
working life is thus present on various levels, from the macro-scale issues
pertaining to globalization and international trade to the micro-scale of the
individual’s working life and day-to-day activities.
The blue-collar worker community did certainly draw the shortest straw,
especially in countries such as the United States, where policy-makers and
economic advisors have dismissed the manufacturing industry as some
kind of dead end of competitive capitalism and have happily shipped off
this line of production overseas. In countries such as Germany, Japan, and
Sweden, all export-oriented, so-called embedded liberal economies, the
manufacturing industry still accounts for a significant amount of work
opportunities and adds substantially to the national wealth, but growing
economies such as the BRIC countries have advanced their positions,
even though the Great Recession and other recent events have slowed
down the process. Professional work has been relatively less exposed to
changes in economic policies, but the overall tendency, where economic
inequality is growing and the middle class is shrinking, is worrying. Not
the least the privileges of the finance industry, embedded in law (Pistor
2013), remain a concern for not only policy-makers and regulators; its
dominance in contemporary society is comparable to nuclear plants:
we rely on them as being the socio-economic system we ourselves have
developed, but still we do not believe we can fully trust them as failure and
References
245
breakdowns—with devastating consequences—always overshadow their

benefits. The term precarious professional work is thus to some extent a
rhetorical gesture, an attempt to point at the partial loss of professional
privileges, and yet it is intended to contain the sense of being vulnerable
and exposed to forces that cannot be fully apprehended. The future of
professionalism can be determined only on the basis of actual outcomes
and changes in society and in the economy, so the question regarding the
accuracy and usefulness of the term is ultimately proven in the years and
decades to come. Under all conditions, the question of the future of pro-
fessionalism, today rechristened as “knowledge-intensive work” to erase
historical privileges from the scoreboard, deserves scholarly attention.
Note
1. A similar view is advanced by Hegel Philosophy of Right, first published in
1820s. While Hegel recognizes private property as a fundamental right
(just like John Locke did in his Two Treatises on Government, first pub-
lished in 1690), it does not follow that all social life is to be understood as
what is most efficiently regulated on the basis of pecuniary interest: “Hegel
does not wish to impose images, metaphors, or models of private property
and free contract throughout all social life. Nor does he wish to follow
economistic theorists in asserting, without much argument or context,
that free alienating and contracting are always desirable” (Stillman 1988:
1054). Both Anglo-American competitive liberalism and continental
embedded liberalism thus share their “founding fathers’” (Mill and Hegel)
belief in society as what transcends economic activities and interests.
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Index1
A C
absentee ownership, 2, 3, 5–7 career progression paradox, 175
aesthetic labour, 147 Cash Flow Return on Investment
affective labour, 21, 148 (CFROI), 185
agency costs, 27, 54–6, 69 CEO compensation, 70, 79, 229–30
agency work, 136 Citigroup, 98
Apple, 72 civic professionalism, 10
asset substitution, 54, 56 class-biased technological change, 86
audits, vii, 188–98, 243 clinical trials, 22, 23
cognitariat, 21
cognitive dissonance, 120, 205, 206
B cognitive labour, 21
Bernanke, B. S., 223 collateralized debt obligations
boundaryless career, 132, 144, 146 (CDO), 61, 225, 226
brokers, 176 collegiality, 113–15, 124, 139
Note: Page number followed by ‘n’ refers to notes.

1

A. Styhre, Precarious Professional Work, DOI 10.1007/978-3-319-59566-5
252 Index
computerization, 20, 87, 89, 94, 99 free labour, 148

contingent employment, 136 French revolution, 12, 235
corporate professions, 201–3, 238
creative industries, 147, 148, 166–8,
175 G
creative labour, 21 Galilei, G., 110
cultural matching, 169, 179, 180 Glass-Steagall Act, 46
Google, 72
Gospel of Work, the, 13
D Great Depression, 3, 6
de-professionalization, 119–20 Great Recession, the, 49, 97n4, 133,
disintermediation, 56 236, 244
Disney Corporation, 167 Greenspan, A., 97–8n1
drug development, 22, 140 groupthink, 203, 205, 209
E H
economic freedom, 15, 24, 98, 220, Hegel, G. W. F., 245n1
221 herd behaviour, 52, 54
Economic Value Added (EVA), 185
economization of morality, 134
employability, 23, 24, 144, 146, 147, I
149, 169, 203 identity regulation, 32, 198–203
Enron, 205, 220 identity work, 32, 121, 144, 189,
expert professionalism, 10, 124, 184, 192, 198–209
201, 210 ideology of utopian capitalism, the,
45
immaterial labour, 21
F Impact Case Studies (ICS), 194,
federal minimum wage, 235 195
Federal Reserve, 98, 223 initial public offerings (IPOs), 74
film industry, 170, 171, 177 institutional agents, 116
financial instability hypothesis, 54, internal labor markets, 25, 129–32,
60–2 175, 184, 186
fissured workplace, the, 135, 136 intern economy, 167
Ford, H., 46 investor capitalism, 22, 25, 28–33,
Ford Motor Company, 46 35, 43–99, 183, 187, 210,
free cash flow, 3, 19, 27, 74 219–45
Index
253
J O
J.P. Morgan & Co., 5 opportunity-based, 130
organizational tenure, 17, 78
L
labour intensive services, 85, 99 P
law firms, 11, 145, 178, 185–7 Paine, T., 111
liquidity, 49, 50, 53–61, 224 panopticon, 192
Locke, J., 245 paradox of liquidity, the, 56
pawn shops, 236
PEP. See profits per equity partner
M (PEP)
managerial capitalism, 8, 18, 24, 26, performance-reward system, vii, 34,
30, 43, 46–8, 61, 68, 71, 73, 83, 161, 183–8, 209
80, 94, 128, 129, 219 personal capitalism, 46, 61
Market Added Value (MVA), 185 political freedom, 221
MBSs. See mortgage-backed politics of precision, 189
securities (MBSs) precariat, the, vii, 20, 240, 241, 243
Mills, J. S., 221 precarious work, 11, 20–2, 240
money-manager capitalism, 50–3, private equity firms, 75–80
60, 82 processes of moralization, 134
Moody’s, 53 productionist logic, 194
mortgage-backed securities (MBSs), professional ideology, 31, 114–15,
61, 223, 225, 226 117, 118, 121, 122, 203
professional role confidence, 200,
201
N profits per equity partner (PEP),
narcissism, 206, 209 185, 186
National Institutes of Health (NIH), prosumers, 147
135 psychiatry, 117
necessity-based entrepreneurship,
130
network labour, 21 R
New Deal, the, 3, 4, 30, 46, 219 Reagan, R. W., 6, 8, 15, 93, 99, 129,
Nobel Memorial Prize in Economic 233, 235
Sciences, 3 rent, 17, 87
nonbusiness bankruptcy, 83 residual cash flow, 3, 28, 55, 68, 73, 95
normative professions, 114 responsibilization, 132, 134, 135, 183
254 Index
Roosevelt, F. D., 3, 6, 45 temporal work, 136

TFP. See total factor productivity
(TFP)
S Thatcher, M. H., 15, 231
self-employment, 31, 127–32 thin descriptions, 197
shadow banking, 77, 224 total factor productivity (TFP),
shareholder value ideology, 24, 30 66–8, 150
Shaw, G. B., 111 Total Shareholder Return (TSR), 185
Silicon Alley, 136 trust, 4, 12, 13, 124, 178, 208, 244
skill-biased institutional change, 89 trustee professionalism, 10, 95, 124
Sloan, A. P. Jr., 46
speculative financing, 50
Standard and Poor’s (S&P), 53 V
statistical discrimination, 88 venture labour, 136–44, 146, 150
stretchwork, 175, 176 video game industry, 148
surface cynicism, 166 Vietnam war, 48
syncretic professions, 114
W
T Wal-Mart, 72
technical professions, 114 Watergate scandal, 48

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ALEXANDER STYHRE

ISBN 978-3-319-59565-8 ISBN 978-3-319-59566-5 (eBook)

Library of Congress Control Number: 2017944450

© The Editor(s) (if applicable) and The Author(s) 2017

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature

A few years back I submitted a book proposal to a publishing house. The

participation in market-based activities. In order to overcome inherited

of an element of precariousness within professionalism. That is, to use

I would like to thank Liz Barlow, commissioning editor, Palgrave

1 Introduction: The New World of Precarious Professional

2 Investor Capitalism and the Decline of the Public

3 The New Forms of Professional Work: Entrepreneurialism

4 Conducting and Managing Precarious Professional

5 The Future of Professionalism: How to Preserve and

© The Author(s) 2017 1

profit leaves them [finance agents], by settled habit, unfit to appreciate

In addressing his concerns regarding the separation of ownership and

in my opinion the most poisonous, is to focus on distribution” (cited

The dominant element in our financial oligarchy is the investment banker.

Finally, besides appropriating “other people’s money”—a phrase turned

J.P. Morgan & Co. [i.e., finance industry representatives] declare . . . that

Ultimately, Brandies implies, while still recognizing the role of functional

ownership is a challenge to handle within the institution of the firm,

The Social Contract of Competitive Capitalism

We define economic insecurity as the psychologically mediated experience

tile business environment.” This novel praise for entrepreneurialism—a

immediate consequences is that the very term “professional” today may

 hanges in the Economic System

complexity.” In short, in Tilly’s (2004) and Luhmann’s (1979) use of the

values, and managing to operate as an autonomous force in between

in comparison to the white-collar worker community. On the basis

Powerful investors will continue to demand more drastic implementation

While unemployment was basically treated by policymaking as a short-­

including unionization in my analyses explained around one-half of the

One widely used method to generate higher shareholder value is to

return-in-equity measure, ROE), which serve to leverage the return on

First, increasing operation in financial activities not only substitutes for

In other words, the financialization of the firm, dominated by the share-

985) addresses as “the polarization of the labor market and growing

The Concept of Precariousness

Pratt (2008: 2) define precariousness (in relation to work) as “all forms

 onsequences: The Enterprising Ethos of Precarious

As has been demonstrated in the scholarly literature, the spread of the

Drug development as we know it could not happen without these indi-

Moreover, in order to pursue this line of work, these workers cultivate

[P]articipants develop sophisticated regimens for staying healthy and keep-

In other words, rather than being “passive volunteers,” the participants

professional groups endowed with jurisdictional discretion—groups tra-

 he Question of Economic Extraction: Who

labor movement, treating these organizations not so much as business

As detailed by Mizruchi (2013), this new attitude toward trade unions

to small companies, vulnerable to changes in the supply of capital in the

from this capital accumulation, neither directly through, e.g., contractual

the entrepreneur, the redeemer and life-blood of competitive capitalism,

apparently benefits finance market actors over entrepreneurs, ultimately

Research Question and Outline of the Book

ment of professionals (i.e., workers with certain predefined academic cre-

petition, and therefore it is essentially understood as what is constituted

system and society is to deny the existence of the latter altogether, as

Goldstein, J. P. (2009). Introduction: The political economy of financialization.

Luhmann, N. (1979). Trust and power. New York: Wiley.

Wallerstein, I. M. (2011). The modern world system 4: 1879–1914. Berkeley/Los

1 Introduction: The New World of Precarious Professional

2 Investor Capitalism and the Decline of the Public

3 The New Forms of Professional Work: Entrepreneurialism

4 Conducting and Managing Precarious Professional

5 The Future of Professionalism: How to Preserve and

The Social Contract of Competitive Capitalism

hanges in the Economic System

While unemployment was basically treated by policymaking as a short-

The Concept of Precariousness

onsequences: The Enterprising Ethos of Precarious

he Question of Economic Extraction: Who

Research Question and Outline of the Book

Theoretical Perspectives on Investor Capitalism

Managerial Capitalism and Its Decline

Investor Capitalism and Financialization

wo Studies of the Consequences of the Liquidity

e Financial Instability Hypothesis: Practical Implications

e Declining Productivity Growth After 1970 and 2005

F irm-Level Consequences of Investor Capitalism:

The Decline of the Public Corporation

tructural Changes and the Shareholder Primacy

articipates in long-term and forward-oriented activities such as innova-

Investor Capitalism and the Growth

of consumer bankruptcy over two decades has been increasing financial

river of Economic Inequality: The Divergence