Exit, Voice and Loyalty

The development economist Albert Hirschman died recently, at the age of 97 after a remarkable life. A socialist activist in Germany in his youth, and actively engaged in the Resistance in France during WWII, he went on to be one of the world’s leading development economists and, from the 1960s onwards, one of the sharpest critics of that field. Discussions of his contribution can be found here and here, so I have provided below an excerpt from my 2010 paper, published in Media, Culture & Society, that summarised Hirschman’s argument in his most famous book, Exit, Voice and Loyalty, first published in 1970.

Exit, Voice and Loyalty: the Contribution of Albert Hirschman to an Understanding of Voice and Organizations

Albert Hirschman (1915 – 2012) was one of the founding figures of post-World War II development economics. A specialist in Latin American development, he was known in the 1950s and 1960s for developing the concept of ‘unbalanced growth’, arguing that the process of economic development will generate short-term inequalities that test the political will and capacity of states to reform social structures so as to enable reform and more equitable distribution of income and wealth over time (Hirschman 1981).

His perspective was an iconoclastic one, and his insistence upon understanding the historical particularities of developing countries distanced him from the positivist orthodoxies of both the development economics and development communications of his time. From his experience in development economics, and particularly his observations on the rise of political authoritarianism and economic stagnation in Latin America and elsewhere in the 1960s and 1970s, his later writings became more concerned with what he referred to as the ‘micro or personality foundations of a democratic society’ (Hirschman 1995: 83).

In Exit, Voice and Loyalty (Hirschman 1970), Hirschman used the concepts of ‘exit’ and ‘voice’ in the first instance to discuss the potential and limits of market-based solution to economic problems. Arguing that the problem of under-utilised economic resources, or a slack economy, is not simply a feature of less developed economies or economies in recession, Hirschman proposed that some level of slack is a pervasive feature of all economic societies. It has a multitude of causes including poor management practices, public or private monopoly, inefficient uses of technologies or resources, regulatory failures or government mismanagement, and is often experienced in terms of poor quality products and services, or a decline in their quality relative to price.

In economic analysis, the most obvious response to such a situation on the part of consumers is that of exit, which in turn will set in train the self-correcting forces of the market and Adam Smith’s ‘Invisible Hand’, either through firms adjusting their operations in response to such market signals, or their disappearance through loss of market share to more efficient and responsive competitors. The impersonal and indirect nature of such corrective mechanisms are seen as the cardinal virtue of the market system, and insofar as there are hindrances to the effective operation of markets and competition – as in the case of public or private monopolies, or inefficiencies that result from inappropriate public regulation of markets – the role of economists as policy advisors was seen as one of recommending to governments means by which a more competitive and responsive market situation can be established.

The counterpoint to exit is voice, defined as ‘any attempt at all to change, rather than to escape from, an objectionable state of affairs, whether through individual or collective petition to the management directly in charge, through appeal to a higher authority with intention of forcing a change in management, or through various types of actions or protests, including those that are meant to mobilize public opinion’ (Hirschman 1970: 30). As Hirschman observes, voice has been a central concept to political theory yet a marginal one to economic theory, although the rise of the consumer rights movement, environmental activism and, more recently, shareholder activism indicate its growing centrality to what is sometimes termed ‘stakeholder capitalism’ (Hutton 1996), and it has certainly been central to industrial law since the rise of the trade union movement. Voice achieves its most concrete expression in the political sphere through the concept of citizenship.

The right to participate in public life and to use one’s voice to influence the affairs of state is a cardinal tenet of liberal democratic societies, and the development of institutional frameworks that enable extended participation in public and political decision-making processes is central to ensuring that ‘rights … are practically enacted and realised through actual participation in the community’ (Hall and Held 1989: 175). As Jürgen Habermas put it, ‘the institutions of constitutional freedom are only worth as much as a population makes of them’ (Habermas 1992: 7). Hirschman captures the importance of voice in conceiving of citizenship in liberal democracies by observing that ‘it has long been an article of faith of political theory that the proper functioning of democracy requires a maximally alert, active, and vocal public’ (Hirschman 1970: 31-32).

Recognising the nexus between citizenship, participation and democracy also draws attention to its limitations in practice as distinct from theory, most notably the difference between ‘active’ and ‘passive’ citizenship. Kymicka and Norman refer to this as the distinction between ‘citizenship-as-legal-status, that is, as membership of a particular political community, and citizenship-as-desirable-activity, where the extent and quality of citizenship is a function of one’s participation in that community’ (Kymlicka and Norman 1994: 353).

Twentieth-century political theorists such as Max Weber, Joseph Schumpeter and Robert Dahl continually returned to the question of whether active citizenship was a necessary condition of effective political democracies, or whether the complexities of government and the existence of political passivity towards the state saw political influence aggregated upwards to political elites and organized political institutions such as parties and pressure groups (see Held 2006: Chs. 5, 6 for a summary of these arguments). This is accentuated by the nature of electoral competition, where there is a tendency among the major parties to take their activist base as being ‘locked in’ (i.e. unwilling to exit to another major party), and to seek the support of the less politically engaged citizens who primarily exercise influence through their vote, or by ‘exit’ (the co-called ‘swing voter’). In his interpretation of the political science literature, Hirschman observed that ‘a mix of alert and inert citizens, or even an alternation of involvement and withdrawal, may actually serve democracy better than total, permanent activism or total apathy’ (Hirschman 1970: 32).

Hirschman drew attention to the limits of exit in economic theory as well as voice in political theory. He observed that if exit was too readily acted upon by consumers, then firms would lose the capacity to respond to market signals, as they would experience rapid decline in revenues before they could respond; firm rely upon a certain level of stickiness, or loyalty, on the part of consumers towards their product or service. Hirschman also observed instances where consumer exit has little impact on firms in a market as they pick up new customers while losing other ones, so that there is little corrective mechanism in operation. Consumers face the danger of ‘diverting their energies to the hunting for inexistent improved products that might possibly have been turned out by the competition’ (Hirschman 1970: 27), rather than ‘bring[ing] more effective pressure upon management towards product improvement … in a futile search for the “ideal” product’ (Hirschman 1970: 28).

This raises for Hirschman a wider issue of the consequences of situations where ‘the presence of the exit alternative can therefore tend to atrophy the development of the art of voice’ (Hirschman 1970: 43). Whereas the exit decision is one that requires little more than the existence of effective competition, the exercise of voice ‘depends also on the general readiness of a population to complain, and on the invention of such institution and mechanisms as can communicate complaints cheaply and effectively … while exit require nothing but a clear-cut either-or decision, voice is essentially an art constantly evolving in new directions’ (Hirschman 1970: 43). *

Hirschman’s emphasis upon the ‘art of voice’ is affirmed in the literature on citizenship and participation, which observes that participation not only possesses a fairness argument – the right of people to be involved in the making of decisions that affect them – but also an instrumental argument that better decisions can result from wider participation and consultation, and a developmental argument, which focuses upon the political skills acquired by individuals through participation as part of more fully realising the potential to effectively act as citizens (Richardson 1993). In relation the policy process, Considine (1994) has argued that ‘Participation describes three types of action: it facilitates rational deliberation; it creates and communicates moral principles; and it expresses personal and group affects and needs. When all three forms of action are available, then participation provides a means for the creation of social capital from which all central democratic objectives spring’ (Considine 1994: 130).

Hirschman notes that ‘different organizations are differently sensitive to voice and exit’ and that there may be cases where ‘competition does not restrain monopoly as its supposed to, but comforts and bolsters it by unburdening it of some of its more troublesome customers’ (Hirschman 1970: 59, 74). The articulation of voice is more complex than exit because active participation and influence is a skill and an art that typically requires some form of institutional support. It is also often overlaid by questions of loyalty, and consideration of the relationship between loyalty and voice introduces new complexities to the relationship of people to organizations.

On the one hand, Hirschman observes that ‘the likelihood of voice increases with the degree of loyalty’, and that ‘as a rule, loyalty holds exit at bay and activates voice’ (Hirschman 1970: 77, 78). There is a reciprocal relationship between loyalty and voice in organizations, particular when it can lead to effective influence on its conduct: ‘a member who wields (or thinks he wields) considerable power in an organization and is therefore convinced that he can get it “back on track” is likely to develop a strong affection for the organization in which he is powerful’ (Hirschman 1970: 78). Yet this has clear limits, as the barriers to exit that arise from loyalty, while real, are ultimately finite; this is what distinguishes loyalty from faith. The question of whether to remain loyal to an organization, a company, a political party or a system of government, can be readily triggered by those who manage these entities since:

While feedback through exit or voice is in the long run interests of organization managers, their short-run interest is to entrench themselves and to enhance their freedom to act as they wish, unmolested as far as possible by either desertions or complaints of members. Hence management can be relied on to think of a variety of institutional devices aiming at anything but the combination of exit or voice which may be ideal from the point of view of society (Hirschman 1970: 92-93).

Whether voice is enhanced by the threat of exit will vary between individuals and organizations. Aside from any personal costs to the individual – which can range form denunciation to death, depending upon the nature of the organization, political party or nation-state they are defecting from – the individual threatening exit faces the concern that the organization may get even worse if they, and people like them, exited. They therefore face the difficult choice between seeking voice from within and voice from outside. The danger of seeking voice from within is that it may lead to what Hirschman referred to, in the 1960s context of Democratic Party critics of the Vietnam War nonetheless remaining loyal to the Johnson Administration, as the domestication of dissenters, whose position becomes predictable and hence discountable. The danger of seeking voice from outside is, of course, that one’s voice can be ignored as loyalty to the organization was terminated with exit. **

Footnotes

* One example of an ‘atrophying of voice’ that Hirschman describes concerns middle class families moving their children from pubic to private schools, as it was occurring in the United States in the 1960s, as an ‘exit’ option adopted in as a response to the perceived decline in quality of public school education. One difficulty arising from the movement is that in many cases the parents who leave are those ‘who care most about the quality of the product and who, therefore, are those who would be the most active, reliable, and creative agents of voice’, and hence those who could be the most articulate interests for change (Hirschman 1970: 47).

** Hirschman gives the example of how Latin American dictatorships encouraged political dissidents to emigrate, recognizing that they were less likely to influence domestic politics from outside the country. He also discusses the moral dilemmas faced by critics of East German communism in 1989 as an example of the choice between ‘private exit’ and ‘public voice’, who had the opportunity to leave the country, but who were mocked by the government as being people for whom ‘not a single tear would be shed’ about their departure (Hirschman 1995).

References Cited

Considine, M. (1994) Public Policy: A Critical Approach. Melbourne: Macmillan.

Habermas, J. (1992) ‘Citizenship and National Identity: Some Reflections on the Future of Europe’, Praxis International 12(1): 1-14.

Hall, S. and Held, D. (1989) ‘Citizens and Citizenship’, pp. 173-188 in S. Hall and M. Jacques (eds.) New Times: The Changing Face of Politics in the 1990s. London: Lawrence & Wishart.

Held, D. (2006) Models of Democracy. Cambridge: Polity, 4th Edn.

Hirschman, A. (1970) Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge, Mass: Harvard University Press.

Hirschman, A. (1981) Essays in Trespassing: Economics to Politics and Beyond. New York: Oxford University Press.

Hirschman, A. (1995) ‘Exit, Voice, and the Fate of the German Democratic Republic’, pp. 9-44 in A. O. Hirschman, A Propensity to Self-Subversion. Cambridge, Mass: Harvard University Press.

Hutton, W. (1996) The State We’re In. London: Vintage.

Kymlicka, W. and Norman, W. (1994) ‘Return of the Citizen: A Survey of Recent Work on Citizenship Theory’, Ethics 104(2): 352-381.

Richardson, A. (1983) Participation. London: Routledge & Kegan Paul.

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About Terry Flew

I am Professor of Media and Communication in the Creative Industries Faculty at the Queensland University of Technology, Brisbane, Australia. I am the author of New Media: An Introduction, the fourth edition of which was published by Oxford University Press in 2014. I am also the author of Understanding Global Media, published by Palgrave in 2007, and The Creative Industries, Culture and Policy, published by Sage in 2012.