7- public market political firms

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Public Market: Political FirmsAuthor(s): Niels kerstrm AndersenReviewed work(s):Source: Acta Sociologica, Vol. 43, No. 1 (2000), pp. 43-61Published by: Sage Publications, Ltd.Stable URL: http://www.jstor.org/stable/4201181 .

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ACTAOCIOLOGICA000

Public Market - Political Firms

Niels Akerstrem AndersenDepartment of Management, Politics and Philosophy, Copenhagen BusinessSchool, Denmark

ABSTRACTThe main argument in this paper is that private companies become an integral part ofthe political system when public services are contracted out. Private companies begin tocompete for influence on political goals to strengthen their positions for future tenders.Firms that are subcontractors to the public sector find that everyday financial decisionsmay have an impact on the political process. It becomes necessary for a private firm inthe public market to internalize the logic of politics. The system theory developed byNiklas Luhmann is the theoretical point of departure, while the empirical studyexamines the Danish firm Scan Care and its attempt to construct a market for servicesfor elderly people in the first half of the 1990s. The author of this article believes thatwhen public services are contracted out to the private sector, the size of both sectorschanges, as does the quality of the relationship between public and private and thesemantic meaning of both terms. Contracting out not only leads to a larger market, butalso to mote politics. Politics explode out of the framework of the public sector into theprivate sector and become a basic condition for the involvement of firms in publicmarkets.Niels Akerstrem Andersen, Department of Management, Politics and Philosophy,Blagaardsgade 23b, DK-2200 Copenhagen N, Denmark? Scandinavian Sociological Association 2000

1. IntroductionThe overall thesis of this article is that privatecompanies become an integral part of thepolitical system when public services are con-tracted out. Private companies begin to competefor influence on political goals to strengthentheir positions for future tenders. Firms that aresubcontractors to the public sector find thateveryday financial decisions may have animpact on the political process. It becomesnecessary for a private firm in the public marketto internalize the logic of politics. Firms in thepublic market have to get used to a public life inwhich any internal event could be interpretedpolitically.Since the beginning of the 1980s contract-ing work out has been advocated as a form oforganization of the public sector of the future.Together with privatization, direct payment by

the end user and private optional extras,contracting out has been regarded as a meansof commercializing the public sector and repla-cing politics with market. This tendency isvisible in politics when leaders of the nationaldepartments of finance meet in the OECDexchanging new recipes as well as researchfindings, e.g. new public management (OECD1992).The problem is that the boundary betweenpublic and private has been discussed as if itwere a line in the sand, as if the character of theareas on either side of the line remainedunaffected by throwing a few grains eitherway. The boundary has been discussed asthough when public services are moved intothe market, nothing happens except quantita-tively: there is a larger market and a smallerpublic sector. New public management hasontologized the private and public sectors,

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44 ACTASOCIOLOGICA000 VOLUME3

thinking in dualities (Townley 1998). Theauthor of this article believes that when publicsector work is contracted out, not only does thesize of each sector change, but so do the qualityof the relationship between public and privateand the meaning of both terms (Teubner 1999).Ignoring these semantic changes means ignor-ing the major effects of the strategies ofmarketization. In this article it will be arguedthat we cannot expect to find the same qualitiesin private firms in public markets that we expectin private firms in a private market.Privatization of public services entails aredefinition of the relationship between publicand private. The thesis that the logic of politicsmoves together with the privatized services intothe private sector will be developed in thefollowing. Contracting out not only leads to alarger market, but also to more politics. Politicsexplode out of the frame of the public sector intothe private sector and become a basic conditionfor the involvement of firms in public markets.This article focuses on changes in theconditions of competition and strategy-making,claiming that these are differentiated into twoorders. First-order competition occurs in analready existing market, where strategy-makingis a question of internal co-ordination of manyfunctionally differentiated plans with one aim.Second-order competition occurs when compet-ing firms determine the rules for future compe-tition, e.g. by constructing a public market andits premises for tender. In this order, strategy-making becomes an inter-organizational matterof co-ordination of strategies across organiza-tions, private and public firms, local authorities,trade unions and government agencies, in thebusiness of politics.The development of second-order strategiesand the explosion of politics into the privatesector goes on not only in relation to contract-ing out. Similar changes may be observed inrelation to reflexive regulation in environmentalpolicies and in industrial policy networks,especially in the Scandinavian countries(Amin & Thomas 1996; Pedersen et al. 1992;Andersen & Kjaer 1993). What is so specialabout contracting out is that the politicization isan effect of marketization efforts.

A final and verified theory will not bepresented. Instead, a case study will be pre-sented, based on which heuristic theses will bedeveloped. The case is the Danish firm ScanCare. Two leading companies established thefirm in Denmark, Falck and InternationalService Systems (ISS), in order to open a public

market for elder care service. The twocompanies were already in the service sector.Falck is an old family company, established in1906 and recently bought by a larger insurancecompany. Falck has for very many years beenthe only private alternative to public fireservice in Denmark, and in recent decades ithas also been a large security firm in Denmark.Recently it has entered the market for careprovision. Falck's primary area is Denmark, butnowadays it is also well established in Norwayand Sweden. The company has more than10,000 employees and a turnover of$802,000,000 USD per annum (1997 figures).The ISS is a very large service company, also inthe international market. ISS has divisions notonly in Scandinavia, but also in other parts ofEurope, in Brazil and in Asia. It employs morethan 100,000 people and has a turnoverof almost $200,000,000,000 USD. It providescleaning and maintenance, health care, foodhygiene, transport, care, cleaning products andmachinery, landscape gardening and catering.Elder care service in Denmark is entirely apublic issue. Except for hospitals, the localauthorities control all elder care service. Theregional authority controls hospitals. There istherefore also a clear-cut distinction betweenhospitals and homes for the elderly, for example.The role of the State has not been to governindividual health trusts, but only to decide theoverall political and legal framework in whichelder care takes place, including approval andprice control of drugs and recommendation oftreatment. Thus, private firms in the elderservice market were almost non-existent untilthe creation of Scan Care in 1994, and untilrecently there has been a great deal of resistancefrom the majority of the Danish populationagainst any private initiative in the healthsector. Danes would rather pay higher taxes.Today, contracting out (not privatization) is onthe agenda. The basic idea is public financingand private production.

2. Firm and politics as systems ofcommunicationMost research on contracting out has privilegedone system perspective. Economy researchfocuses on the economic benefits of contractingout (Savas 1987). Legal research focuses on theproblems of contracts about products such aswelfare services (Osborne & Gaebler 1993).Administrative research focuses on the effects of



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contracting out on the public capacity ofsteering (Hood 1996). These are all of majorimportance. But exactly because they set onesystem as their point of observation, their blindspot is the relations and boundaries betweensystems. This is where Niklas Luhmann'ssystem theory becomes relevant.The focus of this article is a boundary, theboundary between public and private, politicsand economy - not economy and not politics -but the relationship between them. The subjectsuggests that a choice of philosophy of difference isrequired. Niklas Luhmann's system theory hasbeen selected as the point of departure, whichimplies that the distinction between system andenvironment becomes a guiding tool in obser-vations of firms in public markets. Exactlybecause Luhmann's system theory is based ona philosophy of difference and not on aphilosophy of identity, it avoids ontogizing thepublic and private sectors as pre-given entities,instead making their constructions an openquestion.Social systems as communicationAccording to Luhmann's system theory, societyconsists of social systems, and social systemsconsist of nothing but communication. Politics,economy and firms are different social systemsof communication.Communication is the basic element ofsocial systems, be they interactions or moreembracing systems like organizations. Luh-mann describes communication as a processincluding selection of information (what is to becommunicated), selection of form of message(shouting or e-mail) and selection of under-standing (what was communicated). In thisdefinition there is no communication until onecommunication has been opened for connectionand another communication has connected,selecting one understanding from a multitudeof possible understandings. So communicationis not necessarily speech acts, but alwaysan ongoing process of selection (Luhmann1995:137-176). Whenever a communicationprocess selects information, form of messageand understanding, it actualizes the distinctionbetween the actual and the possible. Theselection of information always stands in rela-tion to a horizon of possible information, theselected form of message to possible forms andthe selected understanding in relation to possibleunderstandings.

Communication as an ongoing process ofselection is intimately related to meaning,

defined as the unity of the distinction betweenthe actual and the possible (Luhmann1985:102). Whenever something is actualizedin communication, a multitude of possibilitiesarises; meaning is the relation between what wechoose and what immediately arises as otherpossible choices. For example, the televisionnews about the Tour de France in 1998 focusedvery much on doping scandals. The meaning ofthese scandals consists exactly of the fact thatthey were highlighted against a background ofother possible highlights, e.g. more direct sportevents. So meaning is not a reference relation-ship between words and things or signs andconcepts, and it is not one possibility inpreference to another. Meaning is a simulta-neous unity of the actual and the possible.

In the selection of information, form ofmessage and understanding, the communica-tion process simultaneously draws a distinctionbetween itself and its environment, constantlyreferring either to itself or its environment. Inother words, the system is always using thedistinction between self-reference and other-reference, that is, between system and environ-ment. Like all other distinctions, this one is, ofcourse, a distinction in the media of meaning,and an operation of meaning is always anoperation of a system. Whenever a commu-nicative-meaning system draws a specific dis-tinction between itself and the other, it is alsodrawing a line between the actual and thepossible; thus, we are talking about the system-constitutive boundary. This boundary is aboundary of meaning. It determines that out-side a particular system (that is, in othersystems), meaning is created by other condi-tions. Systems are, so to speak, incommensur-able regarding their production of meaning.The idea about communicative meaningsystems has multi-faceted implications. First ofall, the environment is not an objective fact initself, but only an environment to a specificsystem, i.e. an internal construction in a systemof communication. Both system and environ-ment are constructed when the line betweenthem is drawn in the communication. In thisperspective environment is not a facticityshifting with distinctions, but a contingency(Luhmann 1995:295-297). With shifts indistinctions, indications and selections, thesystem and environment are constituted asdifference and as horizons of possibilities, andthe environment is always more complex thanthe system boundary. Outside one system ofcommunication, meaning is always constructed



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differently by other systems, and whether or notthe alien constructions are noises heard fromthe system depends on its own internal bound-ary construction (Teubner 1992).

Secondly, communication is only possiblewithin a system. Different systems may com-municate about each other, but they cannotcommunicate with each other, simply becausethey produce meaning differently. The radicalconsequence of this approach is that everycommunicative system establishes its ownenvironment and, more importantly, only oneenvironment. From the viewpoint of. commu-nication, the world (space, time and objects) ismono-contextual. But from the viewpoint ofdifferentiation, 'the world' is a polycontextualflux swarming with ontological places'. Theresult of differentiation in communication is anendless number of social systems, each with itsown environment, communicative closednessand selection of meaning.Politics and economy as social systemsPolitics and economy belong to what Luhmanncalls 'functional systems', that is, systems thatclose themselves around certain functions. Law,art, religion and science are also functionalsystems. They may all be observed as functionalsystems consisting of nothing but communica-tion, and in this communication differentiatingthemselves from each other: politic/not politics,economy/not economy, art/not art, etc. throughfunctional differentiation.

Historically, functional systems haveemerged parallel to different media of commu-nications. Economy co-evolves as an autono-mous system with money, politics with powerand science with theories. A medium of com-munication is a highly generalized loose coup-ling of possibilities that can be found in anendless number of communications withoutlosing its generality. Money can be used to buycookies, and ten minutes later the same moneymight be used to buy sex. Each of the transac-tions is bound to a specific meaning, but it doesnot influence the money as such.Bound to the media of communication isbinary codes. A binary code is a difference inpreference with a positive and negative side. Thepositive side defines a basic value orientation.The negative side is the reflexive side. Binarycodes ensure the identity of the functionalsystems. Communication in the system mayalways connect to one or the other side of thecode. The code divides the world of theparticular system into two: -h or ?. A code is,

of course, open to an endless number ofsituations, just as it is open to a supplement ofmany other distinctions.In this framework we might see thepolitical system as signified by a particularfunction, medium and code (Luhmann 1968,1971, 1972, 1974, 1977, 1984. 1990). Func-tionally, the political system emerges as a par-ticular communication giving itself the functionof making collectively binding decisions. Themedium of communication is power, and in thisconnection, two codes provide the boundary ofmeaning of the political system. The primarycoding of the political system is government/governed, where government is the positivevalue and governed the reflexive value. It isalways better to be in government than to begoverned. The democratization of the politicalsystem adds a secondary coding. Democratiza-tion led to a bifurcation of the top of the politicalsystem. Government becomes split into govern-ment (+) and opposition (-), (designated as+power/?power), where it is always better to bein government than in opposition; more poweris always better than less power. Governmenthere means to have the right to make collec-tively binding decisions. The primary andsecondary coding of the political system stipu-lates that all that can be made politicallyrelevant must serve either government orgoverned in the primary coding or governmentor opposition in the secondary coding. Finally,government and opposition are always rela-tional values or positions in the communica-tion, and nothing else. Opposition can onlyreflect upon itself in the relation to thepossibility of government. Connecting to thepositive value simply means connecting to thevalue of power, that is, how to stay in power orhow to get into power, and connecting to thenegative value means reflecting on how to dobetter, assessing the risk of losing power, etc.Wherever communications follow the selectionsof the code, it is regarded as the political systemof communication. So the political system is notlimited to parliamentary institutions and poli-tical parties, but extends also to the commu-nicative connection to the political coding.In parallel, the economic system can besignified with a particular function, mediumand code (Luhmann 1994). Functionally, theeconomic system emerges as a communicationgiving itself the function of determining prices.The medium of communication is money, andconnected to this medium is the code owner-ship/not ownership (or operatively pay/not



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Public Market PoliticalFirms 47

pay). The whole world can be divided into whatI own and what I do not own, where it is, ofcourse, better to own than not to own. Again,the two sides of the code are only positions in thecommunication, and the code is open to manyother distinctions.

Economic communications can only com-municate with economic communications, andpolitical communications only with politicalcommunications. The two systems may, ofcourse, observe and communicate about eachother, but never with each other. The economicsystem may understand everything it observesin the political system, but it will always make iteconomically meaningful by connecting it toone side of the economic code, and visa versa.Everything may be understood in the politicalsystem, but always within the framework of thedistinctions government/governed and govern-ment/opposition. Taxes provide a very mean-ingful theme in both systems, but in verydifferent ways. Increasing taxes may be con-nected to the reflexive side of the code govern-ment/opposition discussion, the risk of losingpower in the ruling party. In contrast, taxes maybe seen as potential future economic transac-tions, a new market of consulting with theprospect of minimizing taxation.

Organizations as social systems and asformsOrganizations are another type of social system.Organizations may be defined as decision-making systems. Organizations consist ofdecisions, and they themselves produce thedecisions they consist of. A decision is, then,a communication, which implies a choice ofattitude to a social expectation (a fixation of anexpectation on an expectation). The decisionmakes a distinction between before and after.Before the decision, alternatives appear as opencontingencies. After the decision, the samecontingencies are fixed; the decision mighthave been decided differently.Decisions are basically based on paradoxes:only questions, which, in principle, are undecid-able, may be decided (Luhmann 1993). If ananswer can be found by analysis, it is not amatter of decision, but of calculation. Organiza-tions as decision-making systems are thereforethrown into a maelstrom of choices, choicesthat do not vanish through careful analysis. Tobe able to arrive at a decision, organizationsmust unfold the paradox of decision-making;that is, they must make the paradox invisible. Tocreate a situation of choice, the organization

must exclude an endless number of possibilities.This can be done through the creation of a fewalternatives from which to choose. By con-structing alternatives, decisions are impliedabout which alternative alternatives to exclude.

To unfold this paradox organizations oftenrefer to their environments. A private firmmight refer to the market as a demanding factornot to be ignored. A public organization mightrefer to an authority. A kindergarten might referto the needs of the children, etc. What happensis that the organization decides what belongs toits environment and what belongs to itself. Itdecides what is the relevant environment. Theenvironment of the organization is an internalconstruction within the organization. When theorganization describes its environment, it simul-taneously defines what is relevant to theorganization, how the organization stands inrelation to its environment and what theobjective conditions for decision-making arewithin the organization. When the organizationdescribes its environment, it simultaneouslydraws a boundary between itself and theenvironment. Neither organization nor envir-onment exists as a precondition, but bothemerge drawing the boundary by means oftheir differences. So the identity of the organiza-tion consists of nothing but its relationship withthe internally constructed environment. If theenvironment of the organization is the point ofreference that stops the argumentation aboutalternative decisions, then the boundarybetween organization and environment is theblind spot that makes decisions possible underthe paradoxical condition of undecidability ofdecisions.

Organizations are systems of decision-making, but they are also forms forming generalmedia of communication in concrete situationsof decision. Organizations are never a part of afunctional system. Organizations belong to theenvironments of the political system, theeconomic system, the system of art, of science,etc. They cannot communicate with each other.Though organizations always emerge in con-nection with a functional system, they arealways linked to at least one functional system.The link is a relationship between form andmedia. Decisions always form a medium. Asmentioned, media are generalized loose coup-lings of possibilities open to many concreteforms. Decisions as forms are opposing, tightcouplings of possibilities, bound to a veryspecific situation only for a moment. While itis easy to exchange elements of a medium, e.g.



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one coin with another, it is impossible toexchange elements of a form, e.g. one decisionfor another decision. Though it is given thatorganizational communication must link to afunctional system forming its medium, it isbasically open to choice as to which medium toform or whether to form several media (butnever in the same operation). Again, as men-tioned, a general medium always carries abinary code. So the choice of medium in theorganization is a choice of closure of theorganizational communication. Using moneyas a medium, decision-making basicallybecomes a question of spending or not spending.Using power as a medium; decision-makingbasically becomes a question of governmentversus opposition.

We are now very close to a reformulation ofour research question about private companiesin public markets. A firm may be regarded as akind of organization. In general it could be saidthat private firms are organizations forming themedium of money, that is, they are organiza-tions closing themselves around the codespending/not spending, ownership/not owner-ship. They are, of course, open to form othercodes, but it is to be expected that the codespending/not spending should play the mostimportant role. This also means that the codespending/not spending is the departure of theinternal communicative description of theorganization itself as well as its environment.The construction of the environment as amarket divided into segments, customers, com-petitors, partners, etc. may be seen as a mirrorof this.

Other organizations might form othercodes, thereby constructing themselves as orga-nization-in-environment. basically as 'different'.Public organizations form the code government/governed and parties form the code govern-ment/opposition, etc.ThesisThe point is: If the object of this study is a privatecompany turning towards a public market, itmust be possible to locate changes in the closureof the organizational communication, if it iscorrect that the logic or code of politics explodesinto the private sector. The basic thesis is thatprivate companies turning toward the publicmarket become political in the sense that theybegin to form the medium of politics, that is,they close themselves around the code govern-ment/opposition. This is outlined in the follow-ing subtheses:

? The differentiation in a political system andan economic system suddenly becomes adifferentiation of communications inside theorganization, oscillating between forming thepolitical codes and the economic codes. Wemay therefore expect disagreements or con-frontations between incommensurable com-munications within the firm itself.? The very construction of the decision as adecision will be influenced by the politiciza-tion process. To decide is simply not the same.It depends on the coding.? Changes in the argumentation behind adecision can be observed, and therefore alsoin the method of generating alternatives.? The organization will observe the environ-ment differently using quite another seman-tic developed in the political systems.Different and incoherent pictures of theenvironment can even be observed, depend-ing on the code of communication.? The organization will recreate its descriptionsof itself. New types of reflexivity can beexpected to cope with the double coding ofthe organizational communication.

In the following, the focus will be on Scan Care,not as a given actor, not as a given entity with agiven environment. Scan Care will be observedas an organizational system emerging in com-munication; that is, communication and thedistinctions between Scan Care and its environ-ment as they emerge in the communication willbe observed. It cannot be presumed that there isonly one Scan Care. There may be manycommunications referring to themselves as'Scan Care' while defining themselves-in-envir-onment very differently. The observer has to beopen to discontinuity not only in time (thedistinction Scan Care/environment mightchange significantly over time), but also inspace and from situation to situation.

Data and their constructionThe data in this case study are many. First, Ihave had full access to the archives of Scan Careand ISS regarding the case in the broadest sense.Among the data are included minutes, strategypapers, internal reports, working papers andletters. Second, there are official documents andarticles from newspapers and magazines. Thirdare the internal materials from selected munici-palities, such as letters and reports. Finally, Ialso conducted interviews.

So the data are first of all made up of texts.The texts have not been read as expressions of



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an author. Neither they have been read asmanifestations of a kind of structure. They wereread as communicative monuments, as recur-sive communicative selections, each of themconnecting to earlier selections, opening ahorizon of possible future connections, alto-gether making a communicative net of articu-lations (Andersen 1999).

3. Scan Care between politics and marketConstruction of the market for elderlyservices and the development of Scan CareThe story of Scan Care begins with the ISS. InOctober 1990 the ISS' department for strategicmarketing wrote a 'Background Paper for aProject to Develop the Concept of an ISS Servicefor the Elderly' (ISS 1990). This paper providedthe initiative for the company's first step in thedevelopment of an internal construction of amarket segment for elderly care service. Basedon a population prognosis from the DanishOffice of Statistics (Danmarks Statistik) and on amarket analysis carried out by The DanishBureau for Technical Information (DanskTeknisk Oplysningsforbund), 'From Baby Boomto Senior Market', an expanding market forelderly care service was identified.

Three trends were highlighted: (1) in thenear future there will be more elderly people,especially elderly people with very great need ofcare; (2) the demands for care of the elderly willincrease; and (3) more and more elderly peoplewill remain in their own homes longer. Finally,the financial circumstances of local authoritieshad deteriorated during the 1980s, and theeconomy did not look like it would improve inthe 1990s. Together, these three tendenciescreated a potential drain on resources, whichwould force local authorities to think laterallyand use private companies to provide service forthe elderly. It was therefore predicted that localauthorities would be forced to open a newmarket. At the same time it was thought thatthese circumstances were not uniquely Danish;similar circumstances prevailed in other coun-tries such as the USA, Japan and Canada. Newoutlines were being drawn not only for theDanish domestic market, but also for a greatexport market for elderly care. The constructionof this potential market became a referencepoint in the ISS' consideration of new productinvestment.

With reference to this potential market, itwas proposed that the ISS develop a concept for

service for the elderly. The progressive definingof this concept included elements such as thecreation of a 'think-tank' and running pilotprojects. It was envisaged that this concept ofservice for the elderly would include cleaning,food delivery to the home, personal care, linen,laundry, security, surveillance, on-call service,distribution of aids and transport (ISS 1990).The ISS department for strategic marketingcompleted its plan for Project 1SS Service for theElderly in January 1991. The aim of the projectwas to develop a service package, which wouldcontribute to the realization of the socio-political aims for the elderly care sector ascheaply as possible. It had to be broadly based,modular and suitable for export in its entirety. Adraft was developed for a course of actionstarting with a clarification phase, duringwhich a market analysis was carried out, theneed for product development was identified,the framework for creating a service image wasset, and the aims for exporting the system wereclarified. Furthermore, a series of key questionswere raised about the limits of the marketsegment, the structure of the delivery system,project management and the extent to whichthe ISS service for the elderly would be anindependent organizational unit. The argumentfor independence was that it is very importantthat an organization be perceived and perceiveitself as a unit with its own identity (ISS 1991b).In August 1991 Project 1SS Service for theElderly published a quantitative report on themarket for elderly care in Denmark. It includedan analysis of the size of the market, marketshares, extent of coverage, etc. The market wasidentified as the world, which is the primarysubject for analysis in this report (ISS 1991a).Towards the end of 1991 a department fordomestic service was set up with the aim ofproviding cleaning of pensioners' homes. Sev-eral contacts were made with local authoritiesduring the autumn of 1991, and the followingspring a series of seminars were held on servicefor the elderly, which were attended by staff ofall grades from various local authorities. Fromthe point of view of the ISS, the aim of theseseminars was to gain insight into the sectorwith a view to laying the foundations fornegotiating on equal terms with local auth-orities. In late summer of 1992, the first majorlocal co-operative project was commenced withthe municipality of Graested-Gilleleje.In 1993, conditions for the Projectchanged significantly. Falck bought up ISS-Securitas, which eliminated competition be-



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tween the ISS and Falck for on-call service. Theycould now be said to be 'completely comple-mentary as regards service delivery' (Steffensen1995). Falck had the know-how about alarmsand security, while the ISS were experts oncleaning and catering. With the purchase, bothcompanies became contractually obliged toexplore the potential for joint co-operation inthe field of care for the elderly (Falck 1995).In the summer of 1993 the ISS and Falckwere well into the negotiations about joint workon elderly care. At the same time the coalitiongovernment led by the Social Democratic Partysent out messages about co-operation betweenthe public and private sectors. The report ThePublic Sector in a New Light published in June1993 mentions joint developmental work,including contracting out and contracts fordevelopment. The report stated that 'creating aclose dialogue and co-operation will be achallenge which will break down the oldbarriers between the sectors and replace themwith common 'growth areas' where the productdevelopment and export potential of privatecompanies will be in the centre' (Finansminis-teriet 1993a, 1993b:5).A subsequent report in September 1993from the Ministry for the Co-ordination ofEmployment Politics caused even greater excite-ment at Falck and the ISS. It stated, amongother things, that 'There are prospects for bothstrategic contracting out and the establishmentof public-cum-private companies in the field ofelderly care. Public-cum-private companiescould be in charge of setting up and runningnursing homes, and such companies willsubsequently have an edge in the competitionfor export of the system to other countries'(Ministeriet for Erhvervspolitisk Samordning1993:77).In this positive atmosphere the ISS andFalck wrote a paper to describe their potentialfor joint work (ISS & Falck 1993). In this paperthe environment that the ISS had originallyconstructed for its project on service for theelderly became a shared one of co-operationbetween the ISS and Falck. Thus, the par-ameters for co-operation were established. Itwas the purpose of this paper to define acommon position for the ISS and Falck in themarket, based on that originally identified bythe ISS.

Among the objectives of the paper was theintention of discovering whether there was aneed for care among the elderly, which could bemet by the current product range and delivery

systems within the two companies. The paperemphasized that '. . . by combining the currentservices of Falck and the ISS it will be possible tooffer local authorities a concept which will meetthe need for security for the elderly ... Acombination concept is unique and by making itpossible for the public and the private topick'n'mix the services as necessary, the provi-sion can be tailored to individual needs'. Thepaper recommended that a company be set upnot as a provider, but as a buyer of services andproducts from the ISS and Falck. This companywould:? have responsibility for the customers? identify and describe the need for productsand services within the field of elderly care? gather intelligence about the market and its

possibilities, threats, norms, standards,agents and interest groups? develop a network in the social sector? influence opinion? lobby the public and agents in the sector? create an independent image of the company? initiate and participate in joint product andmethod development between the sector andthe managing companies? take the lead in making, sustaining andfollowing up contacts with agents in theelderly sector (ISS & Falck 1993).

Scan Care was set up in January 1994. It heldits inaugural management committee meetingon January 28, at which were discussed, amongother things, Scan Care's mission statement,aims, common strategy, organizational plan,action plan and timetable (until August 1994),common projects, contacts and the interestedparties surrounding the new company. Atechnical committee was set up to co-optinfluential agents within the sector as well(Scan Care 1994).Attempts at keeping politics out of ProjectEldercareSetting up Scan Care was, as shown above,closely related to a process whereby the image ofa market for elderly care was constructed. Thena position was developed from which thecompany could be active in this market, andfinally a legal framework was establishedthrough which this position could be held andexpanded.

Although the perception of Scan Care in amarket and reference to the economic codedominated its early development, politicalaspects were not absent as a theme. Most



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Thephysical oundary

Themental oundary

Fig. 1. Pure service distinguished from nursing and care.

minutes and strategy documents from 1990-94include a brief mention of the political condi-tions for the project. However, politics wasclassified as 'noise' to be avoided, and theconcept was deliberately defined with a viewto de-politicize its work.As early as 1990 the relationship withpolitics played a part. Attention was drawn tothe fact that a dialogue with ministries,government departments and local authoritieswas a necessary precondition for the develop-ment and success of the elderly care concept.Therefore, they wanted to set up a 'think-tank'(ISS 1990). The purpose of the dialogue in thisthink-tank was to ensure that the services onoffer would reflect the needs of future customersas precisely as possible. Furthermore, attemptswere made to differentiate between service andcare:

In order to keep developmental time and cost lowand to avoid provoking a strong reaction from thelocal authority, it is recommended that the ISS, atleast in the short and medium term, focus on thoseaspects of elderly care which could be described asservice for the elderly, i.e. cleaning, food delivery orsimilar and refrain from offering community nur-sing services, i.e. care of the sick, personal care anddiet, social activities. (ISS 1990)

This distinction was used again in 1991. Theargument for not getting into nursing-relatedcare was that such a move 'certainly would bemet with a great deal of professional opposition.On the other hand, there is hardly likely to bethe same professional-based opposition to thedomestic services aspects of elderly care, as thestaff in this area is not marked by the sameprofessional consciousness'. This distinction isloosely connected to a risk assessment, whichidentified two risks: (1) that the market couldturn out to be closed, especially because 'the ISScould be seen as creating problems rather thanas solving problems if our initiative creates

unrest among the workforce'; and (2) theconsequences of a poorly carried out projectwere that the ISS would have to wait years topenetrate the market, and that its image in thepublic sector would be hurt. The risk assessmentis no more comprehensive than is quoted above(ISS 1991b).

During late 1993 and early 1994 thedistinction was further refined as part of thedevelopment of the elderly care concept. Threekey products for the elderly were identified:'service only', nursing and care. Nursing andcare aspects were each defined by a boundary:nursing is limited to physical needs. As soon asan activity concerns a person's body, it is definedas an aspect of nursing. Care is correspondinglydefined as within a mental boundary. As soon ashelp concerns an elderly person's mental well-being, it is considered care. The three areas,service, nursing and care, naturally overlap.The concept of Scan Care was developed fromthe beginning with the intention not to crossthe boundary between the physical and themental, the body and the soul. It was intendedto provide 'service only' (Steffensen 1995; seeFigure 1).Two reasons were given. First, the provi-ders had more expertise in the service aspects.The products were therefore known, even if theywere being gathered together in a new concept,directed at new clients. Secondly, there was therisk of politicization. No actual assessment of therisk of politicization was carried out; rather, therisk was considered based on common sense(Steffensen 1995).Until the spring of 1994 it was thusaccepted that politics is a basic condition whenconsidering new public markets, although thepolitical can be minimized and controlled byredefining the tasks so as to exclude the openlypolitically sensitive. For Scan Care, politics haduntil then primarily meant limiting its conceptof elderly care. However, in the spring theattempt to keep politics out failed. Negotiationstook place with several local authorities andproposals were made to provide 'service only' forthe elderly. However, the local authoritiesconcerned wanted Scan Care to provide notjust service, but also nursing and care. Thedistinctions made by the ISS and subsequentlyby Scan Care were not made by the localauthorities. On the contrary, the trend here wastowards the concept of total care, whichcombines nursing, care and service, so thatelderly people in their own homes, for instance,would not have to deal with a whole range of



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people carrying out separate duties. Instead oneor two carers would perform several functionsand develop closer relationships with individualelderly people. At this point Scan Care realizedthat there was not great market potential for'service only' delivery.This new situation generated a lot of dis-cussion at Scan Care and its parent companies,ISS and Falck. The ISS found it immediatelyproblematic to offer the total service because itwould imply crossing the boundary betweenphysical and mental care of elderly people,moving into areas where they currently had nocompetence and risking politicization.However, Scan Care accepted the condi-tions made by the local authorities. To quoteScan Care, the company was now 'moving froma strategic situation focusing on market devel-opment into a business development situation inwhich products as well as clients are new'. Thischange of direction meant that Scan Carebecame the focus of attention for ISS manage-ment. It was feared that control would be lost ina turbulent situation arising from lack ofcompetence and politics. They were aware thatthe automatic response in general would be that'profit and care don't mix', and a politicalreaction was expected (Steffensen 1995).From August 1994 Scan Care worked onthe basis of integrating nursing, care and'service only'. Care aspects, such as readingaloud and attending elderly people on holidays,were developed, as were nursing aspects such asdispensing medicines, physiotherapy and exer-cise.

Suddenly, it was no longer possible to keeppolitics out. As expressed by a Scan Caredirector: 'We were suddenly on the politicalagenda. We were knee-deep in it' (Steffensen1995). Television and the national paperscovered the issue and demonstrations againstcontracting out service for the elderly were heldin some areas.

Crossing the political line effected a shift inthe argumentation model from economic topolitical, and a change of view of the outsideworld, attaching greater importance to asses-sing the political environment and thus shiftingthe company's own position.From economic to political argumentationin the transition from trying to keep politics out(by distinguishing between mental and physicalservices) to segregating and subsequently poli-ticizing on all levels, Scan Care shifted in itsargumentation to the outside world (local

authorities, local government and personnel,the elderly and local citizens in general) and alsoin its internal criteria for decision-making. ScanCare moved from a natural use of financialarguments identical with its justification of itselfin relation to the trends in the elderly caremarket to creation of a range of comparablemodels for argumentation. In the end, itsarguments were political, with the politicalcode of government/opposition as a backgroundmodel implemented by questions such as: 'Doesthis line of argument lead to dialogue orconflict?' and: 'Which agents can be includedin which argumentation models?'The three argumentation models used byScan Care have been designated as follows: ThePolitics of Expenditure Model, The SynergyModel and the Value Model. These models canbe characterized using three variables:1. The final argument: what is the final argument,the last reference, on which all other argumentsare based? If this final argument is rejected, theentire model is refuted.2. Subject positions: which possible stands canagents take and argue from within the model? and3. Open/closed: to which arguments is the modelopen and closed?Organizations can relate to argumentationmodels in two ways. They can either have amodel and base arguments on it, or they candevelop a model and reflect on the argumenta-tion. In the case of the former, the borderbetween the organization and the outside worldis a known certainty. In the case of the latter, theborder is played with during learning processes.

The politics of the Expenditure ModelThis model is identical to the one on which theaim of Project Eldercare was based in 1990.This model is therefore connected with thevision of Project Eldercare within a market. Thebasic assertion is, very simply, that there aretrends that will force local authorities toconsider contracting out for financial reasons.The justifications for contracting out are there-fore solely financial.The following quotation is an example ofthis model:

There will be many more senior citizens in themunicipality of Graested-Gilleleje in the years tocome. There will particularly be more of the veryold who will be in need of the greater care services.Elderly care services in the municipality ofGraested-Gilleleje will therefore need many moreresources to maintain the present quality standard



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and methods. It will hardly be possible to increaseresources for elderly care in keeping with thistrend. There will therefore be fewer resourcesavailable to each individual. The quality will belowered. What is more, future generations ofelderly will have other needs and make otherdemands of future elderly care service. To maintainthe present quality, there will be a need for . . .new methods to solve the problems.' The models inquestion are models which implicitly involve co-operation with private providers. (Graested-Gille-leje Kommune 1994)

The last argument of this argumentation modelis obviously the budgetary squeeze. If theparticipants do not accept the squeeze, allarguments are refuted. Correspondingly, thesubject positions that allow you to participate inthe debate without it breaking down are purelyfinancial. It must be accepted that the problemsof the politics of elderly care are basically of afinancial nature; otherwise it is not possible toparticipate.There is only room for other views in so faras these offer solutions to the financial problem.Thus, this model of argumentation is exhibitsvery little sensitivity to considerations otherthan those with financial clout.

Responsibility here equals financial respon-sibility for finding a solution to the budgetaryconstraints.

Synergy ModelThe Synergy Model evolved in 1994 and wasdisseminated by the Ministry of Employment.The basic assertion is that the public sector isgood at certain things and the private sector isgood at other things. Together, both can get thebest of both worlds. In mathematical terms:2 + 2 = 5. To quote the Birkerod Report: 'Thepurpose of this [co-operation] is to combine thebest of the public sector with the best of theprivate sector to create a synergy which themunicipality of Birkerod could not create alone'(Styregruppen 1995).The development of the Synergy Model ledto a redefinition of Scan Care. In January 1995Scan Care published and disseminated a newimage of itself, stating, 'The basic idea behindScan Care is that by combining the best of thepublic sector with the best of the private sector,a synergy of problem-solving is released inwhich 2 + 2 = 5' (Scan Care 1995b). It is nowno longer the potential market that justifiesScan Care, but the potential for synergy. 'Public'now means a view of humanity involving self-respect and a worthy life, professionalism and

responsibility, individualization, flexibility inservice and a personal touch. 'Private' equalsan unambiguous connection between a busi-ness foundation, criteria for success and reasonfor being, wide room to manoeuvre in decision-making, visible management, motivating orga-nizational culture and being in the forefrontregarding technical equipment, training andinformation.

The final argument in the Synergy Model isto what extent it is possible at all to talk aboutan added benefit of synergy in the close workingrelationship between public and private. TheSynergy Model opens up some new subjectpositions. There is a position for each place,from which it is possible to contribute to thesynergy. However, at the same time the public-private division is consolidated: the 'us' and'them', a kind of armistice structure in which noone seriously needs to move. The Synergy Modelis open to arguments, which increase anddecrease the added benefit of synergy.Value ModelThe model of values was the final one to bedeveloped. It was created in the latter half of1995 and based on the premises that nobody(local councillors, officers, health care workers,etc.) is opposed to freedom of choice, andnobody will defend monopolies and disem-powerment.The key point of the argumentation modelwas that Scan Care and the public shared abasic outlook and common values, a 'humanis-tic outlook'. They both valued the worth of theindividual and his or her ability to look after himor herself. They both valued health. In spite ofthe public-private divide, they had the samestarting point. The problem was, however, thateven if the public sector was full of goodintentions with respect to shared values, publicorganizations let the values down because of themonopoly status of the institutions, the absenceof freedom of choice and the tendency towarddisempowerment, which results in powerless-ness among the elderly, who consider it pointlessto complain because of lack of alternatives.Scan Care, on the other hand, was in abetter position, as a private company competingwith other companies, to live up to the sharedvalues. The market demanded that they beresponsive, more flexible. Citizens could opt outif they wanted to. Finally, Scan Care had ahistory of considering the individual. Theyargued, in other words, that they could assurethe basic values a real status. They could assure



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Theinalrgumentubjectositions Open-closedPoliticsfExpenditure Theudgetary PossibleoholdVariousiewsffinancialolutionsLimitedo hosewithinanciallout

Synergy Theddedenefitfsynergy Possibleohavevariousualitieswhichanontributeto hesynergy_

Plus-minusynergy

Subscribingohumanalues Possibleoholdvariousalues AnythingoesutdogmaegardingthemeansFig. 2. Argumentation models.

autonomy. They could break the monopoly andrealize the importance of the basics (Steffensen1995).The final argument in the Value Modelbuys into the importance of human values. It isnot possible to argue against human values asthe basic premise of contracting out. Everybodyis included, and once inside, you cannot bedogmatic about the means because the end isthe realization of something as fundamental ashuman values. One cannot legitimately preferpublic solutions to private ones as long as theprivate solutions are better with respect to thevalues.

The three argumentation models are sum-marized in Figure 2. While developing theValues Model, Scan Care became explicitlyreflexive regarding its argumentation modelsand its relation to the outside world. Discussionscommenced in which the argumentation mod-els were compared in terms of which agentscould, from experience, be persuaded andseduced by which model. The possible argu-ments within the various models were com-pared. Finally, experiments were consciouslyconducted with the various models in relationto the various fora.

In his presentation of the Value Model,Mads Steffensen (Director of Scan Care) com-pares it to the Financial Models. The strength ofthe Financial Models is in their relation to localadministration and councillors. By contrast, theFinancial Models only arouse suspicion amonghealth care staff and the elderly. Mads Steffen-sen summarizes as follows: ? have tried to talkmoney. But forget it. Only political argumentshave clout! My fundamental attitude is thatprivate/public co-operation means that 2 plus 2equals 5. But this is a financial argument whichis not bought' (Steffensen 1995).This is the very reason Scan Care developedthe Value Model. The question was how ScanCare would then come through. The ValueModel was seen as the answer because with it,'the health care staff's view of the world is put

into shape!'. In the development of the model itwas taken into account that everybody isincluded when the model is based on values:'When arguing on the premise of values,opponents of contracting out are put in aposition where they can only say ? don't wantto because I don't want to'. Then, of course, yourisk war at the same time' (Steffensen 1995).

The political environment displaces themarketGiving up its attempts to keep politics at adistance by segregating pure service furtheraffected Scan Care's internal construction of itssurroundings. The focus shifted from themarket to the political environment.The basic reason for Scan Care's existencewas, of course, that there was believed to be avery big potential market for elderly care. Theproblem was that this market was not regardedas accessible until a series of political problemswas overcome. In the meantime, it did not makesense for Scan Care to perceive itself as acompany in a market. On the other hand, itdid make sense to regard itself as a politicalplayer (with certain limitations) in a politicalworld. As will become apparent, the construc-tion of the political world became increasinglyimportant in Scan Care's own construction ofitself in the world around it. In the end, it wasactually the political considerations that led tothe decision to drop the idea of aiming for themarket for service for the elderly.In 1991, as mentioned earlier, the marketwas the primary environment to which ScanCare could relate analytically, but from thebeginning of 1995 Scan Care's managementwished to keep track of developments in thepolitical world, not those in the market. Thus,politics had a high profile in the directors' reportto Scan Care's first management committeemeeting in 1995. The report reads as follows:

The time since the last committee meeting inNovember 1994 may only be described as aneventful period. The public market share continuesto be assessed as heavy and influenced by amixture of political likes and dislikes. We canreport that Scan Care has become widely known inpublic and political circles, which furthermore hasmeant that Scan Care has got on the politicalagenda, which as we know always results inmaking friends as well as enemies. It has to berealized that classical marketing of Scan Careservices is therefore superfluous (...) There iswidespread political scepticism about privatizing



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Public Market PoliticalFirms 5 5

the key local public services, nursing and care.(Scan Care 1995a1)On August 24, 1995 another managementmeeting was called. According to the agenda,plans for 1996 were to be discussed, amongother things. This item was supported by twodocuments: Developmental Scenanos 1995-2000 (Scan Care 199 5d) and Strategic Plan1996 prognosis 2000 (Scan Care 1995c). Theanalysis of Scan Care's political environment isthe decisive factor in these papers. The formeroutlines scenarios for each individual existingproject, plus a number of potential projects. Foreach project four possible scenarios aredescribed: the best possible situation, an opti-mistic assessment, the realistic assessment andthe worst possible case.It is characteristic of the analysis that thecauses typically identified in the 'realistic' or'worst possible' scenarios are mostly related topolitics. There are, in almost every case, politicalreasons for a project failing. The political aspectsare described in the following terms: 'a longpolitical process', 'political opposition', 'politicalturbulence delays the start', 'no political basis','the political majority is maintained', 'thepolitical majority is lost at the election' and'for political reasons the time is not ripe' (ScanCare 1995d). Everywhere politics is referred to.Politics is not seen as a risk that can bemanaged, but as a hazard in the environment.Politics is also prominent in Strategic Plan1996 (Scan Care 199 5c). The analysis is dividedinto two parts. The first part is an analysis of thepolitical trends that influenced Scan Care'spotential to open up the public market forelderly services. Issues include (1) the tendencyof political opponents of privatization to use thelaw as a tool; (2) the Ribus conflict,2 whichscared the timid but hardly fazed the cold-blooded; (3) Poul Nyrup's (the Prime Minister's)pastoral letter of June 1995 to members of theSocial Democratic Party, in which the line forprivatization is drawn at hospital care and careof elderly; and (4) the welfare discussion withthe Welfare Commission, among others, whichis reported as diffuse and without concreteoutcome. All in all, there are no indications thatthe question of privatization would be resolvedin favour of Scan Care.

The second part attempts to analyse ScanCare's image and external agents' beliefs aboutprivatization of service for the elderly. There arethought to be twelve images of Scan Care heldby the outside world. In summary, Scan Care

believes that 'the trend of the undercurrents inthe developments in society is in a directionwhich is favourable to Scan Care, all thingsbeing equal; however, the immediate politicalmanifestations are becoming problematic toScan Care. The current is with us; but windand waves are p.t. against' (Scan Care 1995c).It is concluded that 'The strategic challengefor Scan Care consists of realizing its aims ina market and a political situation whichis characterized by a widespread but not un-equivocal political-ideological opposition, pro-fessional scepticism and major technicalchallenges of setting up a complex and untesteddelivery system' (Scan Care 1995c).

Closing down Scan Care was seriouslyconsidered from September of that yearQorgensen 1995). On October 12 a publicannouncement was made that Scan Care'sactivities would be wound down in such a waythat it could be revived with 24 hours' noticewhen Denmark is ready for it. The reason givenwas Prime Minister Nyrup Rasmussen's nega-tive statements about privatizing elderly care.Internally, the reason for winding down wasunderstood to be that 'The public market is notyet sufficiently ripe for Scan Care to maintain anorganization of the present size on a sensiblebasis' (Johansen 1995).ConclusionThis case history clearly shows how Scan Caremoved from forming the economic code toforming the political code of government/opposition as well. The starting position wasthat all decisions were about spending/not-spending. The political environment was alsoassessed on the basis of this code. The decisionto segregate the political from the economic wasobviously a business decision and not one thatreflected the political code. However, as from thedissolution of the boundary between the mentaland the physical, the political code permeatedScan Care. Entering the field of elderly carebecame an economic decision to relate to thepolitical environment with the political code.We saw how Scan Care articulated a rangeof political problems and sought to solve themvia the political system. We also saw how itmoved from a natural use of financial argu-ments with local authorities and others towardsthe creation of a series of comparable argumen-tation models, which finally was reflected in thecode of government/opposition as its basicmodel. It became financially decisive to be inline with the sitting majority and weaken the



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opposition to privatization. Thus, the economiccode took second place, and its realizationbecame dependent on Scan Care's politicalendeavours.The shift in code is even more visible in

Scan Care's observation of the world around it.Until the dissolution of the boundary betweenthe mental and physical, Scan Care constructedits environment as a market. After the dissolu-tion of the boundary, the environment wasconstructed as a political one with political alliesand opponents. The focus was on political risksand processes.

Finally, we saw how the economic code andthe political code clashed. It became a problemfor Scan Care (and especially the ISS) to bepatient, that is, to decide when to end itspolitical involvement (with or without success)and let the economic code take over.

4. Conclusion: language games andsecond-order strategiesDoes contracting out then lead to more marketand less politics? The experience of this casestudy suggests a change towards more marketand more politics. In this last part of the articleseven more theoretical theses about the parti-cular conditions for a company in a publicmarket are outlined.Thesis no. 1

Competition will differentiate into two orders. Second-order competition is about defining premises of futurecompetition. If a company does not participate insecond-order competition, it risks being excludedfromparticipating in first-order competition as well.

The public market is in many cases not yetestablished. It is a market under construction;therefore the rules of the game have not yetbeen created nor fixed. The companies involvedmust relate not only to the market, but also to apotential market that is not yet open. Even inareas with a tradition of tendering, the politicalgame constantly redefines the conditions of themarket, changing budgets, priorities, policiesand procedures. Under such circumstancescompetition has to do with the very opening ofthe public markets and the definition of itspremises. Competition is about the constructingof a market already in the making, creatingadvantageous opportunities for future expan-sion.

A distinction between competition of first-

and second-order is therefore suggested. First-order is competition for a given market withgiven premises. Second-order is competitionwith the intention of defining the premises offuture competition. Second-order markets aremarkets under construction, which involves notonly the creation of demand, but also ofinstitutional frameworks and the rules of thegame.In relation to contracting out, second-ordercompetition is important. When Scan Care wascreated, a market for elder care simply did notexist. Despite this situation, Scan Care defineditself as a company in the market for service forthe elderly. There was no such thing as first-order competition. There was no other companydefining itself in the same sector. Scan Carecontextualized itself in an imaginary market, ina potential but not yet actual market, and itrealized that it could secure an important futureposition if it opened and defined the new publicmarket. Competition was recognized as asecond-order activity.It could be said that second-order competi-tion is a passing phase, but it should beremembered that the conditions of publicmarkets are political and thus open to changeand influence. The specifications of productquality in tenders are closely connected with thepolicies of the relevant areas of interest, such asolder people's needs, general health or chil-dren's needs. To formulate and decide a policy istherefore also to define the premises of futurecompetition.When companies compete in the secondorder, other conditions of strategy-making,learning, cognition, etc. may be expected toarise. Second-order companies are not onlyeconomic organizations; they are also politicalorganizations taking parts in political games ofnegotiation together with a whole range ofdifferent actors.

The strategic challenges differ for the twoorders of competition. A distinction betweenfirst- and second-order strategies similar to thatbetween the two orders of competition is sug-gested (Andersen 1992; Jessop et al. 1993). Instrategies of first order, an individual companyco-ordinates internal activities and plans fora known future. In strategies of second order,various different organizations (e.g. privatefirms, local authorities, unions, governmentdepartments and agencies) co-ordinate theirfirst-order strategies for the long-term future.In other words, second-order strategies haveto do with the definition of imaginary com-



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munities and a common destiny, where every-body shares a vision of the future differentiatedin threats and hopes, necessities and possibili-ties.

Thesis no. 2A distinction between two kinds of games in second-order strategies is suggested. Language games defineimaginary communities and future images. In thesecommunities and images concrete games of negotia-tions take place making collective decisionspossible across many mutually independentactors. (Pedersen 1989)

When Scan Care met together with localauthorities and others to present its concept ofservice for the elderly, it could not expect itsconcept to be understandable to everyone. Itwas crucial to the success of Scan Care that it beable to present not only a well-developedconcept, but also a semantic context in whichthe concept would have a particular meaning.Scan Care had to develop and gain acceptanceof imaginary communities and future images,which indicated privatization, before it couldbegin to expect serious considerations, inter-pretations and negotiations about its concepts.Acceptance of a common vision of the future isin fact a precondition for conflicts, problems andsolutions. Even struggles have to have a mean-ing. The meaning of struggle has to be agreed.A distinction between two kinds of gamesin second-order strategies is suggested: lan-guage games that define imaginary commu-nities and visions of the future, and games ofnegotiations that make collective decisionspossible for many mutually independent actors.An imaginary community in this context mightbe 'the public sector 2000' defining a horizon ofexpectations of the future and a space ofexperience. A budgetary squeeze might be oneelement in this future horizon, and the labellingof a number of government styles as traditionalmight be an element in the space of experience.In this imaginary community, privatization canbe framed as a very reasonable instrument. Theimaginary community constructs future possi-bilities and threats, which subscribe exceptionsof responsible behaviour to individual actors,motivate collective initiatives and, all in all,create a context of meaning in which problemsmay be articulated and negotiated across theboundaries of public and private.

In short, the language games constructpossibilities and the negotiations games trans-

form these possibilities into real options fordecision-making.

Thesis no. 3PoUtical codes are formed at the level of second-orderstrategies. As a result it becomes a problem for privatefirms to decide when to form the political code andwhen toform the economic code. There is no such thingas a 'third' code, when it has to be decided which code toform.

When firms participate in language gamesdeveloping second-order strategies, they formthe political code of government/opposition(+power/-power). They constantly evaluatetheir models of argumentation, alliances, net-works, etc. in light of this code. They constantlystrive for power, to enter alliances with whoeveris in government, and they constantly reflect onhow to avoid being in opposition to theestablished power. If they are not able to formalliances with whoever is in power, they simplyfail at the level of second-order strategy.Participating in language games thereforemeans that decisions within a company regard-ing matters such as formulation of productconcepts and strategies are no longer automa-tically perceived as merrely economic, but aspolitical as well.

Companies then form political as well aseconomic codes. The problem then becomeswhen to form which code. By forming just onecode it is possible to compare alternatives inlight of the binary scheme of values +/- (poweris better than no power, more money is betterthan less money). By forming two or morecodes, it is not possible to compare the differentschemes of values. It makes no sense to comparedifferent codified values, e.g. power with money,money with love, justice with health. Their is noway to determine what is best, to govern or toown. Each code divides the world in two: intogovernment and opposition, into what I ownand what I do not own, into justice andinjustice. There is no place for a third positionin this binary division of the world, and there-fore no extra position from which one code canbe compared with another, no extra positionfrom which codes can be compared as alter-natives. The political code might be representedin a decision-making process forming theeconomic code, but then the question iswhether politics pay off or not. In the formingof the political code in second-order strategies,the political issue is a question not of the pay-off,but of putting oneself into a position of power



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and government versus opposition. Economymight also be represented in decisions formingthe political code, e.g. in a question of whetherto use economic argumentation or not in orderto gain power. Which code to form is a decisionthat can only be made by forming a code! Andthere is no third code, no 'supercode' beyond theeconomic and political codes, in which such adecision can be made. Exactly because of theincommensurability of codes, there is no naturalequity between a negative (or positive) eco-nomic examination and a negative (or positive)political one.

Using the early creation of Scan Care as anexample, the forming of the political code led toscepticism regarding 'Project Elder Service',while the forming of the economic code led toan optimism based on prognoses of an enor-mous market. No third code could stabilize orcontrol the balance of these two very differentworldviews. In the end, the company had tochoose one of the codes as the basic code fromwhich all codes must be managed. But whichcode should be formed in this decision? Logicallyany company in this situation ends up con-tinuously regressing without stable points ofreference.

The presence of incompatible codes withinorganizational communication makes collisionof codes possible, e.g. in the balancing of first-and second-order strategies. The likelihood ofcode clashes might increase when the first andsecond orders are also separated organization-ally, as in a company where different subsystemsform different codes and therefore constructdifferent boundaries between the company andits environment. To some degree Scan Care wasan example of this. The day-to-day manage-ment of Scan Care formed the political code ofgovernment/opposition. The board of directorsof Scan Care formed the economic code pay/notpay. Often the board of directors was informedabout the situation in Scan Care in the code ofthe political, although the Board insisted onmaking economic and not political decisions.The message was sent in the political code, butreceived in the economic code. The Boardregarded itself as having the final say as towhether Scan Care and second-order strategieswould pay off or not.When companies form political codes, notonly does the economic code change, but sodoes the background model from which thecompanies observe and ascribe meaning to theirenvironment. The case of Scan Care showedhow perceptions of the environment as a market

were displaced by perceptions of politicalopportunities when Scan Care began formingthe political code. Suddenly the criteria forselection of relevant events in the environmentchanged. Within Scan Care, obstacles in theenvironment began to be differentiated intomeaning and 'noise'. Meaning was no longerproduced on the same conditions. For instance,it was no longer of major importance to possessanalytical tools regarding the market. Whatbecame important was the ability to makereliable analyses of political opportunities andrisks. Thus, clashes between codes of commu-nication also mean clashes of different internalconstructions of the environment.

Thesis no. 4In language games and negotiations there are manyparticipants representing many different systems, eachof them with its own definitions of rules of argumenta-tion and relevant contexts. This means that aparticipant in second-order strategy companies mustlearn how to handle the blind spots of other systems.Without sensitivity to the blind spots of other systems,companies do not have much chance of creating futureimages that will gain acceptance.

We must imagine that in cross-organizationallanguage games, every organization has its owninternal construction of its environment. Thus,in language games, a multitude of organizationsand environments is at stake. Each participanthas its own definition of 'relevant environment'.A private company might contextualize itself asa firm in a market, a public organization withina hierarchy, a trade union as a combatant in afield of struggle, etc. The questions are: how canso many different systems negotiate at all? Howis it at all possible to construct imaginarycommunities and visions of a future that makesense to all systems?In language games and negotiation, theproblem is to transgress the mutual ignorancebased on the many blind spots. The involvedsystems systematically misread each otherbecause of their communicative closure, eachdrawing a different boundary of meaning(Teubner 1992). What is meaningful to onesystem is noise to another, or even worse: whatis natural to one system is regarded withsuspicion by another. For example, it makesgood sense to the local authorities to usetendering as a means of accountability, whilethis practise is regarded as suspect by staff in anursing home. Someone will lose out whencosts are cut.



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The question is: how can each companydeal with the blind spots of the others? This iswhat second-order learning is all about: to'hack' through models of argumentation,through the system boundaries of others.However, models of argumentation can neverbe broken from the outside. The 'hacker' has tobe located inside the model as a prisoner of aparticular semantic and bound to particularblind spots.A distinction can be made between firstand second-order learning. Learning of the firstorder can be defined as learning based on a non-reflected system boundary about the effects ofdecisions in relation to expected effects.3 Thesystem boundary, that is, the boundary ofmeaning of the communication system, foundlearning of the first order by founding theexpectations of the system, and of course, theboundary changes slowly as an implicit out-come of the learning process. In contrast,second-order learning is defined as learningbased on self-reflexivity of one's own boundaryabout the effects of boundary-making. Forinstance, how does this particular distinctionbetween inside and outside our system reduceour possibilities of dealing with the blind spots ofother systems? Learning of the second orderassumes that boundary-making affects thereception of oneself into other systems. Thesearch to be recognized is a part of what othersystems define as a relevant environment. Theeffect of failure is that you turn into pure noise.

Thesis no. 5The irm has to reconcile itself to thefact that it cannotdeclare its own image of the environment as a validimage to all other systems. There can be no hierarchy of'realities'.

To insist on one's own construction of theenvironment as superior would mean ignoringthe fact that systems in general are not able tobe in direct contact with their environment.They only make sense to their environment andevents in it via an internal construction of theenvironment. The internal construction of theenvironment enables the system to observe theenvironment, but always restricted by a blindspot. If a system, e.g. a company, still insists onits superior construction of the environment, itrisks losing credibility in other systems. Thecompany risks being dismissed as meaninglessnoise. Instead, the company has to limit itself tothe presentation of future images open todifferent interpretations, and supporting, not

blocking, the self-reflexivity of other systems(Andersen 1995).Thesis no. 6

Learning about ones own boundary of meaning is onlypossible within a boundary of meaning. The blind spotof a system may only be displacedand never dismissed.Companies may learn about effects of bound-ary-making. However, in the case of Scan Care,it is important to note that the company alwaysobserved models of argumentation from withinanother model of argumentation (the Politics ofExpenditure Model, the Synergy Model and theValue Model). When Scan Care discussed theweakness of the politics of expenditure model, italways did so from the point of view of anothermodel. The illumination of a blind spot of oneargumentation model always came fromanother model with another blind spot. So theblind spot can only be displaced, but can neverdisappear completely. Learning of the secondorder means self-reflexivity of the system/environment boundary, but a situation isnever without a boundary and never outside amodel of argumentation.Thesis no. 7

To question your boundary in second-order learningprocesses also means putting your identity at stake.A company can never redefine its system/environment boundary using a new model ofargumentation without also redefining itsidentity. When Scan Care moved from thePolitics of Expenditure Model to the SynergyModel, it also redefined the very mission of itswork. As a concrete example, the concept ofservice for the elderly changed when the modelof argumentation was displaced.The identity of a company is at stake whenit enters the second-order learning process, andit is arguable whether this involves the verycharacter of identification, not of the identity perse, but of the way identity is constructed. On onehand, a company might gain greater autonomy,making itself master of argumentation modelsand boundary constructions. On the other, thecompany risks becoming a stranger in its ownhome because boundaries no longer constitutea solid universe, protecting the company againstthe paradoxes of decision-making.In short: privatization and the opening of apublic market do not in a general sense lead tomarketization. The dogma of new public man-agement cannot be taken for granted. Privatiza-



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tion cannot be reduced to a question offlexibility and budget balance. It has beenshown that when the boundary between thepublic and private sectors changes, activities donot simply move from one side to another. Thesectors and their structural linkages are alsoredefined, with major constitutive and inherenteffects on their modes of functioning. Takingthis to its ultimate conclusion, privatization istoday the best means to achieve the aim ofincreased politicization and inclusion of theprivate sector in the political system.

First version received April 1999Final version accepted November 1999

Notes1 Scan Cares politicalactivitiesare then reported.2 A very serious labour conflict against competitionofwages in relation o contractingout. The conflict asted orovera year.3Learningof the first ordercan be divided nto differentsteps:single-loop earning,double-loop earningandtriple-looplearning(WisenthaJ 995).

ReferencesAmin. A. &Thomas.D. 1996. The NegotiatedEconomy:Stateand CivicInstitutions n Denmark.Economy ndSociety, 5,255-281.Andersen, N. A. 1992. Etisk regnskab og udviklingen afstrategieraf anden orden (EthicalAccountingand Second-orderStrategies).0konomistyring& Informatik,, 173-190.Andersen.N. ?. 1995. Selvskabtorvaitning.Forvaltningspolitik-kensog centralforvaltningensdvikling Danmark 900-1994(AutopoieticAdministration.The Developmentof Adminis-trativePolicyand GovernmentAdministrationn Denmark1900-1994). Copenhagen:Nyt fraSamfundsvidenskaberne.Andersen, N. A. 1999. Diskursive nalysestrategier:oucault,Koselleck, aclau,LuhmannDiscursiveStrategiesof Analysis:Foucault,Koselleck.Laclau.Luhmann).Copenhagen:NytfraSamfundsvidenskaberne.Andersen.N. ?. &Kjaer. .199 3. PrivateIndustrialPolicy n theDanish NegotiatedEconomy.In B. Jessop(ed.). InstitutionalFrameworksf MarketEconomies,pp. 195-214. Avebury:Aldershot.Dansk TekniskOplysningsforbund. romBabyBoom to SeniorMarket.

Domberger.S. 1998. The ContractingOrganization.Oxford:OxfordUniversityPress.Falck, E. 1995. Interview with Eric Falck in Copenhagen.18.2.1995.Finansministeriet 1993a. Nyt syn pd den offentligesektor(Department f Finance:The Public Sector n a New Light).Copenhagen.Finansministeriet1993b. Nyt syn pd den offentlige ektor-sammenfatningDepartment fFinance:ThePublicSector naNew Light Revised).Copenhagen.Grsested-Gilleleje,ommune1994. Rapportraanalyseprojektf?ldreomrddetGr?sted-Gillelejeommune dfart samarbejdemedISS.Arbejdstitel:rojektHjemmeservice'Report rom he

ElderPolicyProject n theMunicipality fGraested-GillelejenCo-operationwith the ISS. WorkingTitle: Project HomeServices).Graested-Gilleleje.Hood, C. 1995. New Public Management in the 1980s:Variations on a Theme. Accountancy.Organizations ndSociety20. 93-110.ISS & Falck 1993. Not?t. Tryghedskonceptg ?ldreservice(Conceptof Safety and ElderService). 17.6.1993. Copen-hagen.ISS 1990. Baggrundsnotetil projektom udvikling f et ISS?ldreservicekonceptBackground Paper for a Project toDevelop the Concept of an ISS Service for the Elderly).Copenhagen.ISS 199

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