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A Déjà-vu – and What Comes Next?
Two Steps to Modernity in Analysis, Expla-
nation, and Solution
Hanno Scholtz
Abstract
With the recurrence of terrorism, economic crises, rising inequality, and more: Why is the current decade
so comparable to the 1930s?
This paper proposes an explanatory model: Modern growth leads to four waves of institutional innova-
tion. Rationality and deliberation are introduced first around and later within organizations, while related
institutional changes occur first within organizations and only later on macro level.
This model is confronted with evidence for households/intimacy, work/education, and politics. As macro-
institutional changes parallel to those of the 1940s have not yet happened for the current transition, those
changes are derived that can be predicted for the 2020s.
9840 words (8800 words pure text without notes and references)
Keywords: Social Change; Modernity; Modernization; Second Modernity; Post-industrial Society; Indus-
trial Society; Institutions; Institutional Change; Analytical Sociology; Rational Choice; Crisis; Rational-
ity; Deliberation; Organizations; Eurocentricity; Eurocentric Modernity; Family; Romantic Love; Ac-
ceptance of Same-Sex Partnerships; Bureaucratic Organizations; Economic Sociology; Party; Nation
State; Democracy; Advocacy Organizations;
– 1 –
Currently the world changes, violence threatens, crises escalate, established institutions are no longer
a matter of course as they used to be. A small, unrepresentative sample of taxi-drivers and other more or
less casual acquaintances I personally talked to over the last decade expressed that they experience a déjà
vu, the “feeling of having already experienced the present situation” (Oxford dictionaries 2016), although
most of those asked do not have literally “experienced” it, but know it only from contemporary history.
Uniformly, my conversation partners refer to the 1930s for comparison, and as the bases of this déjà-vu
feeling they name terrorism, economic crises, a feeling of institutional instability, and more recently mi-
gration.
This paper is about the substantial base of this déjà-vu feeling. Section 1 asks whether it can be sub-
stantiated. As there are in fact no less than six parallels that link the last two decades to the first half of the
20th century, the next step of the paper is to ask for an explanation. Asking why-questions in sociology
implies constructing models of analytical mechanisms of specific phenomena following the logic of soci-
ological explanation (Coleman 1986, Little 1990).
1
Of a macro-social situation that is understood to gen-
erate specific consequences, specific aspects are conceptualized as the influential aspects of individual
situations, these individual situations lead to specific actions, and these individual actions are understood
to aggregate up to the macro-social explanandum. Such analytical models allow to derive predictions, and
some of these predictions can be used as testable hypotheses to add empirical evidence to the model.
In this specific case, the why-question is however not only an academic question. Some of my “inter-
viewees” even interrupted the conversation when asked about the future of this déjà-vu, others expressed
great concern as they knew that after the 1930s came World War II and the Holocaust.
But for the social scientist, this unpleasant perspective is a strong stimulus not to close the eyes but to
open them. Although contemporaries would never have dared to predict so, terrorism, crises, and migra-
tion turned out to transitory phenomena that finally gave rise, in the 1950s, to a working, stable and even
more socially balanced industrial society – the fact that this went along with large international imbal-
ances does not render invalid the positive effects for the industrial societies.
In addition to the normal case of generating testable hypotheses, the predictions of an analytical
model can hence be the base for conclusions about states of the world to come. In this case, they can be
used to derive predications about what will be done to turn the world into a better place in the 2030s, as
the instutions of industrial society turned the core of advanced nations into a better place after the global
crisis of the 1930s and early 1940s.
After the inspection of the déjà-vu in section 1, the course of this paper will hence be to construct
such an analytical model in section 2, to derive empirically testable hypotheses and to confront them with
empirical evidence in section 3, and to have a look on the predictions that can be derived for the future in
section 4. Section 5 concludes.
1
One may link the parallels to the concept of Second modernity introduced by Beck and Giddens (Beck 1986, Giddens
1990). But neither these original authors nor the rich literature built on their concepts have so far provided a clear explana-
tion, neither for the two-step nature of modernity nor for the parallels discussed, so the current argumentation proceeds
without building on their analyses. A closer examination that yielded some similarities was skipped for space restrictions.
– 2 –
1 A déjà-vu of parallels
Can this déjà-vu feeling be substantiated? Of the bases of the feelings mentioned by my conversation
partners, terrorism, economic crises, and migration indeed are phenomena that occur both currently and in
the first half of the 20th century, and were more or less absent in between, in the decades of established
industrial societies.
To name terrorism, the formula that "a successful terrorist strike against a major symbol of a power-
ful nation starts a war that damages international structures" describes not only the attacks on Sep. 11,
2001 which started the war in Afghanistan, but in a parallel way also Gavrilo Principe's assassination of
Austrian arch-duke and heir to the throne Franz-Ferdinand which started World War I. And this parallel is
not restricted to single incidences. In the absence of century-long time series on terrorism in general, a
region-specific analysis of the assassination data of Lentz (2002) and Jones and Olken (2005) shows that
the probability of an assassination of a head of state rises for Europe, its offshoots and Japan, namely
those societies that became the advanced core of industrial society, rose from almost zero in the early
19th century to a overall high of about one in three in the 1920s, falling as fast as it had risen before after-
wards. The same probability for Asia and Africa has risen since the 1940s to a continuously high level of
slightly above one in two - still lower than the 0.33 in the first graph when compared to the higher number
of heads of states in this world region.
<<<Show Figure 1 about here>>>
And this variation of assassination data indicates an increase in violence which took place partly on a
less visible scale but is still not simply individually motivated but has a macro-orientation with legitima-
tion strategies and in many cases organizational structures based on group conflict. Violent conflicts be-
tween the late 19th and the mid-20th century in, for example, Spain, Northern Ireland, the „Lynching
era“in the United States, Germany and Austria, after the end of the Ottoman empire, and with World
Wars I and II, including the Holocaust and murder and displacement thereafter, show a clear trend of ris-
ing levels in forms of such macro-oriented violence in the West from the late 19th century onwards, very
comparable to the rising political violence in the non-Western world in recent years.
Without delving into detail to the same degree, economic crises and migration can be substantiated
likewise:
When analyzing the economic crisis of 2008, economists compared not only the crisis itself but the
fact that economic crises in general had reappeared to the Great Depression in the 1930s and other
crises that comprised, among others, the bank run of 1907, the hyperinflation around the end of
World War I, and more regional but still severe crises in the late 19th century (Reinhart and Rogoff
2009).
And the current waves of migration indeed resemble the millions of migrants that left for a better life
in the late 19th and early 20th century.
And there are even more parallels, parallels that are less prominent as such in public discourse. One
may mention rising inequality, global resource shifts, waves of democratizations and of globalizations,
and there may be more parallels outside.
– 3 –
The last four decades have witnessed a remarkable increase in social inequality among all Western
societies. The process started in the United States and quickly grasped the United Kingdom, but finally
almost none of the Western advanced economies was able to avoid it. And even in the scarce societies
where the welfare state was successful enough to avoid an increase in disposable income inequality, a
closer examination of the Luxembourg Income Study's distribution data show that market income ine-
quality has recently risen, at least. Although in different nations this process has started at different dates,
its remarkable uniformity shows that this is not the result of many small specific institutional changes but
of a larger underlying dynamic. And th uniformity of the process resembles the fact that the 19th century
witnessed a very comparable dynamic: income inequality - and, in the absent of effective welfare states,
at that time market income inequality about equalled disposable income inequality - rose with a very
comparable uniformity. Measured figures are available for Britain, Sweden, some German states, or the
Netherlands (Lindert and Williamson 1985), but the uniformity of literal descriptions of the so-called "so-
cial question" make it clear in retrospect that this earlier dynamic of rising inequality was no less general
and uniform than the current one.
Shorter, again, global resource shifts, democratizations and globalizations support the déjà-vu feel-
ing, as well:
Current shifts in the global resource distribution add another parallel to this picture, despite the fact
that it is an anti-parallel with regards to its specific contents. But the unprecedented rise of Europe
and its offshoots (plus Japan) over the rest of the world that dominated the whole era from the 19th
century onwards and the likewise unprecedented fact that the old industrial core is not able to uphold
this outstanding position since the 1970s, are in their generality and long-run impact another parallel
aspect of such a comparision.
The democratizations of the 1980s and 1990s can be seen as a clear parallel to those that occurred
between the 1880s and after the end of World War I - although Huntingtons influential description
(1991) terms them the first and third wave of democratization, a closer inspection shows that the so-
called second wave of democratization was in fact little more than a consolidation of what had al-
ready been reached in 1921.
Globalization as a whole, with its combination of new technologies, new institutions, and resulting
rising levels of global exchange of goods, people, and ideas is a phenomenon that is mostly perceived
as new to current decades - but in fact, it was only in 1992 and after two decades of increasing glob-
alization, that the level of international trade as share of world GDP was reached that been already
reached in the first globalization that ended in 1913.
As migration is a part of globalization, the number of parallels is still added up to only six.
Unfortunately, space limitations render it impossible to follow all of these six parallels in the follow-
ing. We will hence use them in their entirety only to substantiate the comparability of the periods of about
1870 to 1949 and since 1970. Based on the assumption that they constitute a major base for all other par-
allels, the current paper will delineate the occurrence of global shifts and rising inequalities and leave the
exact relations with the explanatory mechanisms proposed and the other four parallels to subsequent re-
search.
– 4 –
2 An analytical model of first and second modernity
Discussing this stunning parallel raises the explanatory question. Why do we observe such a parallel?
The construction of an analytical model that explains the stunning parallels has to proceed in four
steps: The first step is to conceptualize the dependent variable; the second to decide which macro inputs
are the unmoved moving outside force that leads to the dynamics observed. The third step is to under-
stand why the dynamics of discontinuous social change get the specific shape we observe and the last is
to delineate how the parallels described above derive from the general model described.
2.1 Dependent variable: institutions
What does essentially change over the course of two centuries? For the conceptualization of the de-
pendent variable we can turn to Émile Durkheim who defined sociology as the “science of institutions”
(Durkheim [1895] 1973), hence based the core of the whole discipline on a concept that has been almost
neglected in the times of stable industrial society from the 1950s to the 1970s, but was and is central to
the discipline precisely during the first and the current crises of modernity, in the late 19th and early 20th
century and currently since the 1990s (Rutherford 2001). Industrial society was based on a set of institu-
tions, pre-industrial society implied another set of different institutions, and the period of the parallels are
times of institutional change.
Analytically, institutions are characterized by the two facts that they are man-made or “humanly de-
vised”, based on some newly created elements that alter human interactions (North 1990) and that they
are more or less stable, allowing to co-ordinate mutual expectations over some time (Lewis 1969;
Hindriks and Guala 2015). To keep things simple, we can define institutions as set of humanly devised
elements in the game-structure of human interaction together with the equilibria of social behavior they
induce (Scholtz 2016). If the underlying game structure changes, it may be that the institutions are not
longer seen as optimal and actors will start to try and eventually succeed with institutional change.
This simple definition already allows to make some inferences about the current situation:
Since the change between institutions implies changing from one to another equilibrium, institutional
change is discontinuous.
Since a new equilibrium is always one of multiple possible equilibria and the co-ordination of mutual
expectations has to be secured, institutional change implies communication.
Since equilibria solve co-ordination problems, the new equilibrium is not completely known before
and people do not know in advance how the co-ordination problems will be solved in the future, in-
stitutional change implies fears.
Since it is not known before which new set of game elements and equilibrium are the most appropri-
ate, while it is not even clear whether different institutions will yield a better result even as the per-
formance of prevailing institutions is going down, institutional change implies crises.
Since institutional change implies crises, “false friends” occur, solution proposals that are said to im-
plement new institutions and may require lower short-time adaptation but turn out not to be sustaina-
ble in the long run. (Scholtz 2014)
In situations under insecurity, this main aim of institutions is transformed into the objective to provide
information that allows to make the right decisions as base for individually optimal and socially non-neg-
ative action. Individuals have to be brought into an adequate social structure, and the have to be given the
– 5 –
adequate incentives. In setting incentives for individual action, good institutions create both intrinsic and
extrinsic motivation. Intrinsic motivation through setting and pursuing of self-chosen goals that give indi-
viduals the chance to experience efficacy (and, at best, flow) is more efficient, but extrinsic motivation
through external incentives as social reputation or simply money is more robust against external shocks,
so good institutions need both.
2.2 External driver: growth
The first step of explanation (Coleman 1986) refers to what Weber ([1922] 1947) called "interpretive
understanding" ("deutend verstehen") and is hence often based on qualitative inquiry. But in understand-
ing the dynamics of modernity, it is a mere step of abstraction. What are the main aspects of situations of
individual action that have changed in the course of modernity?
The central heuristic of understanding the logic of selection refers to the triple of resources, expecta-
tions, and motivations, or, in a different sequence, desires, beliefs, and opportunities (Hedström 2005).
Motivations or desires can be left out for the moment: Motivations have changed in the progress of mod-
ernization, but this is not an autonomous change but one that stems from risen average wealth, i.e. an in-
creased availability of resources (Inglehart and Baker 2000).
But the other two changed autonomously. The development of scientific knowledge and hence infor-
mation and improved expectations stems from the scientific revolution in the 15th, the rise in per-capita
incomes and hence an increased availability of resources from the industrial revolution in the 18th cen-
tury.
Together, they make up the increased complexity of indivual interaction situations: Due to the in-
creased availability of resources, individual actors have more strategic option to their disposal. As this
applies to all other actors, too, their need for information grows. But as the increased availability of re-
sources can be partly transformed into obtaining information, the information needs are paired by infor-
mation supply, too.
The increased complexity leads to two “principles of modernity”, specific changes in the structure of
human interaction. The first change is the one from tradition to rationality (Weber [1922] 1947):
In a poor world with few resources and information, one is bound to once-found solutions. Having
found a solution to co-ordination problems and hence created social order has higher priority than,
for example, worrying about the distributive consequences of the prevailing institutions. In case of
communicative challenges by reference to seemingly superior institutions that are effective else-
where, the prevailing solutions are defended as having been handed down by previous generations.
This is tradition.
In a world with abundant resources and information however, enough information can be made avail-
able to discover the results of different solutions, and enough resources to bear the cost of an eventual
change. In such a situation, the argument of tradition, habitual practice, and emotional attachment
may still be one that is counted, but it does no longer have the only decision. “[W]hereas traditional
man tended to reject innovation by saying ‘It has never been thus,’ [modern man] is more likely to
ask ‘Does it work?’ and try the new way”. (Lerner [1958] 1965, p. 49)
A second change has been observed by Habermas (1992). Although he states it as a normative concept, it
is essentially an empirical one, namely the change from domination to deliberation:
– 6 –
In a poor world with few resources and information, whenever decision has to be made, the cost-ben-
efit relation with regards to decision-making is best if information retrieval and hence decision mak-
ing is delegated to the actor with the highest endowment with resources and information, hence to the
individual with the highest social status.
In a world with abundant resources and information, the cost-benefit relation with regards to deci-
sion-making is best if information retrieval is dispersed among all involved actors and the decision is
made together or through a general decision-making mechanism, as for example competition.
This mechanism has led to the high importance of social status and its apparent demarcations in tradi-
tional societies, especially to the creation and later abandonment of luxury laws in Europe (Hunt 1996)
and more generally the necessity of distinction (Bourdieu 1979) that has so surprisingly changed its form
in recent years. (Peterson and Kern 1996)
The first two steps together already make up a theory of modernity, but with a simplified understand-
ing of modernization as a single step open to all societies alike that characterized the naïve modernization
theory of the 1950s (Lerner [1958] 1965) and led to its almost complete abandonment later, despite the
fact that modernization shapes the lifes of millions of people. (Knöbl 2003)
2.3 Intervening concept: organizations
It is hence necessary to understand why modernity does not have the simple form of a single step.
The answer to this question is found in the structure of human interaction.
Not all individuals on earth interact with each other directly. Instead there are many forms groups
that have internal institutions that allow the group to act as an unitary actor in superordinate interactions:
organizations (Arrow 1964). Individuals interact in households, and the internal institutions of these
households allow them to hold houses and reproduce. Individuals interact in firms, and internal institu-
tions allow them to act as unitary actors within markets. Individuals interact in parties, and internal insti-
tutions allow them to act as unitary actors within political life. Individuals interact in schools, and internal
institutions allow them to act as unitary actors within the education system. And so on: Organizations
form an intermediate level in the structure of human interaction.
Despite this general definition, the existence of organizations is not ahistorical. Organizations exist
everywhere, but not everywhere with the same significance. When the Roman empire broke down and
inherited Europe as a continent that was too connected for isolation but still too harsh for central domina-
tion, Western Christianity made its career by providing an institutional setting that promoted level differ-
entiation and the mutual co-existence of different institutional levels. The jewish idea of separating mun-
dane and clerical authority was adopted and allowed for different state organizations under a common in-
stitutional roof of beliefs, the insolubility of marriage strengthened the nuclear family as organization
against competing claims of extended kinship, the structure of trinity allowed to assign different images
of transcendental others to the behavioral expectations of different levels, all supporting a training in
equilibrating the demands of interactions within and interactions between organizations. Through inciting
competition, the existence of organizations under a common institutional roof in Europe already played a
role in starting the modern growth process.
Independent of cultural legacy, however, the existence of organizations has two important conse-
quences for the implementation of rationality and deliberation. Interactions and their structuring institu-
– 7 –
tions exist on two level, within organizations and above or around organizations: The term “around or-
ganizations” is used since it captures better the fact that important changes relate to the process of form-
ing organizations, not only to the interaction of existing organizations. This two-level structure of interac-
tion and institutions is affected twice, in the very process and in its institutional formation. The principles
of modernity have to be introduced on both levels separately, and the structuring institutions have to be
introduced on both levels, as well. This twofold structuration transforms modernity into a 2x2 process:
Organizations matter in where principles of modernity are introduced. This happens first around or-
ganizations, later within organizations. In the process of modernity, the threshold is reached earlier
on which it becomes useful to introduce the principles of modernity around organizations but to leave
their internal structure untouched. Only later, in the West since 1968, has the threshold been reached
from which onwards it became useful to introduce the principles of modernity within organizations.
This is why we see a first and a second transition, T1 and T2.
Organizations matter in forming the appropriate institutions. This happens first within organizations,
later around organizations. It is much easier to find new appropriate institutions within organizations
– the number of involved individuals is smaller, and through the higher number of entities that have
the same problem, it is easier to use trial and error and to imitate succesful attempts, hence we see a
continuous or “fluid” wave of institutional innovation. To create the appropriate institutions that or-
ganize adequate linkages and feedback loops on the macro levels is much more complicated and
much more subject to fears, crises, and communication demands, but after some Black Swan event
(Taleb 2007), we observe a “rushed” implementation of new institutions. This is why we see a first,
fluid, and a second, rushed, part in each transition.
The two transitions distinguish three stages of social development in the Western societies of Europe
and its offshoots: At the beginning a stage in which both levels of interactions followed pre-modern prin-
ciples of tradition and authority, at the end a stage in which both levels of interactions followed modern
principles of rationality and deliberation, and in-between industrial society with interactions around or-
ganizations already structured by principles of modernity and at the same time interactions within organi-
zations still following traditional rules of status hierarchy and authority. The stable normative base for or-
ganzational structure and for linkages and feedback loops on the macro level is in the first stage tradition,
and hence mainly religion, in the industrial stage it is the group, and in the third stage it is the individual.
2.4 The model and the parallels
The two parallels of global shifts and rising inequality can be derived from this model.
Different distributions of global resources are parts of the different stages because their institutions fit
cultural traditions to a different degree. While no specific difference can be derived from the model with
regards to the fitness of both pre- and post-industrial institutions, the institutions of industrial society with
their systems of conjoint but autonomous organizations did much better match the cultural traditions of
Western European Christianity than those of the rest of the world, with the exception of Japan and a very
partial exception of India. The specific European tradition of autonomous organizations under common
institutional roofs was a unique preparation for industrial institutions: Group-based linkages like party
representation or differentiated schooling could successfully build on this tradition. The exceptional paral-
lel of Japan may explained through the experience of a long period of factual nobility competition under a
common imperial roof since the 14th century (Smith 1956), but this has to be left for further research.
– 8 –
On the other hand, the two waves of increasing social inequality can be attributed to the diminishing
effect of the linkages and feedback loops of the respective “old” institutional setting while organizations
already follow the “new” institutional logic. What has been observed as a first “Kuznets cycle” of increas-
ing and later-on decreasing inequality in the becoming industrial societies (Kuznets 1955) was in fact a
process of decoupling and reintegration: In the first stage of decoupling linkages and feedback loops of
pre-industrial societies broke down while economic organizations applied the new logic of market soci-
ety. Later-on, in the second stage of reintegration new linkages and feedback loops were created in the
form of group-based organizations that provided differentiated skills and differentiated negotiation sup-
port. The last decades of increasing inequality can be interpreted as another first stage of decoupling when
linkages and feedback loops of industrial societies broke down while economic organizations applied the
new logic of global competition and more individualist recruitment demands. (Snower 1999) We follow
up on this in the examination of the empirical evidence.
3 Empirical evidence
3.1 General considerations and hypotheses
Analytical models have to be validated by evidence that shows (apart from the doubt stemming from
unexplained aspects) that the relations induced from the model can be observed in empirical reality. This
is done by deriving hypotheses that can be tested in confrontation with data, mainly through applying sta-
tistical tests of hypotheses derived from the model. In this specific case where the model covers develop-
mental dynamics of whole societies over a period of two centuries, it is however currently not possible to
find one single dataset that would allow a quantitative test of the model. It is, however, possible to derive
predictions that can be qualitatively measured against empirical evidence.
The model predicts four waves of institutional innovation over the course of economic growth, and
we assume that three of these waves have already occured. The fact that the model covers whole societies
allows the additional assumption that these three waves of instututional innovation have not got com-
pletely unnoticed but observed and described by scholars that are specialists of respective parts of socie-
ties in which the respective institutional innovations took place.
The hypotheses derived are as follows:
(H1) In the first wave of institutional innovation (the first, fluid part of the first transition), organiza-
tions occur that exhibit an internally still pre-modern structure with emphasis on tradition and hierarchical
authority-relations, while the interactions around these organizations, namely the processes that form
them and the interactions in which they behave as actors, are already modern, with emphasis on rational-
ity, deliberation and competition.
(H2) Insofar as these organizations have negative externalities, we expect a first social crisis to occur
due to the fact that neither pre-modern macro-social institutions nor the experiences of organizational in-
novation are able to provide an adequate feedback of responsiblity for the behavior of these intermediate
modern organizations.
(H3) In the second wave of institutional innovation, we expect the occurence of macro-social institu-
tions that provide the adequate feedback of responsible linkage for intermediate modern organizations
that was lacking during the first social crisis.
– 9 –
(H4) In the third wave of institutional innovation, we expect the occurrence of organizations that do
not only act within modern upper-level interactions but exhibit an internally modern structure with ration-
ality and deliberation applied within the organization and empower individuals to act across organiza-
tional boundaries.
We assume that these phenomena occur in all sub-systems of society and study them in three specific
fields: (1) of decision-making in reproduction and private resource distribution in households and intimate
relations, (2) of decision-making in the development of and remuneration negotiation for individual quali-
fications in education and work, and (3) of decision-making in public affairs in politics.
3.2 Institutional innovations in households and intimate relations
The institutional innovation that meets hypothesis 1 in the field of households and intimate relations
is the “modern family” as described in the historical sociology of the family (Shorter 1975), that emerged
starting in the 18th century and diffused into Western societies mainly during the 19th century. The institu-
tional agreements around it are already modern, while its internal structure is still very traditional. The
most visible aspect of modernized institutional agreements around the modern family is the changed way
in which it emerges: The romantic period received its name from the fact that marriage partners were no
longer chosen by the family but young people, especially young women, fought successfully for the right
to determine for themselves with whom they wanted to share their lifes. But after marriage, role assign-
ments including the authority of husbands were at least as fixed as in the past. And the traditional conven-
tion with regards to form and scope of intimacy, including its lifelong form, restriction to heterosexual
relations, and the acceptance of intimacy only within marriage, were kept. H1 is hence met with regards
to the institutional innovation of the “modern” family which was still so internally traditional.
Despite the prevalent discourse on “morale”, household formation lacks substantiative externalities,
so H2 and H3 are not applicable here.
The institutional innovation that meets H4 is the emergence of diversity in household formation and
the regulation of intimacy since the 1960. The decades since have been shaped by a continuous replace-
ment of the traditional conception of marriage by a contractual conception of intimacy centering on the
individual will of the involved participants and their long-term well-being that are pursued with rational-
ity and deliberation. The acceptance of cohabitation, divorce, same-sex partnerships, and blurred gender
identities (see, e.g., Chambers 2012) all are part of this final modernization of intimate relations.
3.3 Institutional innovations in education and work
Education and work are two distinct fields of social action and related social institutions, and there
are arguments to keep them analytically distinct, as education prepares its students for other fields of soci-
ety than work, too. Empirically, the institutional relation of education to the field of politics was even
stronger in the fluid part of both transformations. But under the perspective of resources, education has to
be linked to work due to its important functionality to distribute qualifications that are later transformed
into resources in the field of work.
In the first transition, the institutional innovations that met hypothesis 1 here were Weber’s bureau-
cratic organization and primary schooling. In the second half of the 19th century, a fluid wave of institu-
tional innovation introduced hierarchical firms (Chandler 1977) and compulsory schooling (Flora et al.
1983, Ramirez and Boli 1987, Benavot and Riddle 1988). The modern firm was an organization that oper-
ated in modern environments characterized by competition and freedom of choice, and schools prepared
– 10 –
young people for a life that on the macro-level of society had become rational, deliberative and competi-
tive. Organizations acted within markets and faced competition. Young people were free to decide if they
wanted to join one of the emerging large organizations, and within these, some of them managed to climb
career ladders and make decisions which were far out of reach of earlier generations. Generally, new de-
cisions and the related responsibilities arose out of the new institutional setting. However, most of these
decisions were made “around organizations”, namely either at the entrance door (like in the case of mar-
riage), or in the occasions (that remained socially exclusive) decisions had to be made that were not pre-
described by rules. Internally, both bureaucratic organization and school remained to a large extent pre-
modern. School was organized mainly as an appendix to state bureaucracies which demanded discipline
not initiative. As if to underline the hierarchical (and hence, not in Weber’s but the terminology used
here, internally non-modern) nature of the bureaucratic enterprise, Weber’s theory is not developed in the
context of economic sociology but in the context of his three forms of domination (Weber [1922] 1947,
p. 217ff.), with lists of organizational attributes that constitute the modern bureaucratic form of organiza-
tion (Merton et al. 1952, esp. Friedrich 1952; Hall 1963) that comprise task-specific rules and a hierarchy
of authority in which they were socially embedded, i.e. created and their fulfillment controlled, that both
underline the compliance of the bureaucratic organization with H1.
But this kind of new organization had negative externalities that created a social crisis in the 1930s.
One part of traditional agreements were traditional expectations of paternalist care that, together with a
modern free market ideology that had grown on the experienced productivity of liberalism, hindered mac-
roeconomic institutions to efficiently protect differentiation and to counter the close oligopolies and even
monopolies that had emerged with modern enterprises. An adequate feedback to the destructive results of
this oligopolistic market structure was missing. Another point was a traditional understanding of educa-
tion. Apart of small elites, schooling was reserved for unproductive ages. The qualifications primary
schooling created were not differentiated and essentially equal for everyone, so workers were basically
productive, but easily substitutable and had no bargaining power, especially as unions consequentially
aimed for revolution, i.e. top positions in traditional hierarchies (Lees 1982, Lipold and Isaac 2009), in-
stead of for using bargaining power to press for higher wages. The resulting high inequality created eco-
nomic instability as a higher share of national production was assigned depending on return expectations,
leaving a lower share for more stable consumption. But an adequate feedback to the destructive results of
this oversimplified conception of qualification was missing. Both the absence of effective competition
laws and the homogeneity of primary schooling hence correspond to the expectations of H2.
These flaws were corrected in the second wave of institutional innovation, in the U.S., Britain and
Switzerland from the late 1930s onwards and in the rest of Western Europe after World War II was over.
With the rise of secondary schooling (Flora et al. 1983, Goldin 1998, Rangazas 2002) began the differen-
tiation of qualifications, unions accepted a non-revolutionary role in bargaining and became accepted and
responsible social partners, effective competition laws were established, and all three added to a frame-
work of responsibility for the long-run consequences of organizational action as expected by H3.
While industrial society had constructed firms as unitary actors due to the inability of individual
workers to escape the "iron cage" of instrumental organization-level rationality due to the nonavailability
of resources and information on the shopfloor level, this changed in the decades of post-War growth. In
the late 1970s, the new sociology of organizations (Meyer and Rowan 1977) described Weber's iron cage
– 11 –
of rules and hierarchies as a constructed myth. In the historical perspective of this model, this was not the
unexpected discovery of a hidden fact that had managed to avoid discovery but the timely description of a
new social fact. At the same time, the complete individual-to-group mappings that unescapably had
linked the individual to a firm and linked it to an occupation, lost their former implicitness. The commu-
nicative necessities of the “new”, necessarily communicative firm and the boundarylessness of careers
hence are parts of internally modernized firm structures corresponding to H4.
3.4 Institutional innovations in politics
For public, i.e. political decisions, the European concept of the complete individual-to-group map-
ping had, different from the other institutional fields, created already before the industrial revolution a
system of territorial states as political organizations that makes it necessary to distinguish two levels of
the introduction of modern interaction and the related institutions. The first three hypotheses have hence
to be examined for both levels separately, while H4, as part of a development that marks the descent of
complete individual-to-group mapping as organizing principle, has to be discussed together.
On the upper level that was in Europe defined through territorial states, the organizations with inter-
nally hierarchical structure within a modern, competitive framework complying with H1 were nation
states. This concept that was (after two special cases that are not discussed here due to space limitations)
introduced as new normality of political organization in Latin America (Anderson [1983] 1991), the sub-
continent that had most efficiently implanted European concepts on top of the brutal eradication of pre-
Christian institutions. From here onwards, the diffusion of the concept proceeded until it shaped the West-
ern core in the 1870s and the globe in the 1970s. (Wimmer and Feinstein 2010)
But the old macro institutions of diplomatic networks and limited warfare that had provided feedback
in the traditional setting were no longer able to cope with the new dynamics of national sentiments, lead-
ing to the long crisis from (at least) 1914 to 1945 in compliance with H2.
It was only the UN system with its balance between the one-organization-one-vote General Assem-
bly and the Security Council that established a rough measure of military power resources able to give
efficient feedback to aggressors that established a stable institutional system that, despite repeated tooth-
lessness, worked throughout the whole period of stable complete individual-to-group mappings, comply-
ing with H3.
On the lower level within state organization, a new social type of organization emerged in the first
wave: elite factions and social movements merged into mass parties. They comply with H1 with their ex-
ternally modern orientation on seeking citizens’ support and their internal “iron law of oligarchy” (Mi-
chels [1925] 2002).
But seeking citizen’s support did not for every party imply the acceptance of continuous feedback
through measuring citizen’s support in democratic institutions. An important part of the social crisis of
the first transition, as expected by H2, were two social movements and their respective parties that were
“false friends” in the crisis (Scholtz 2014), being only partly modern and relying either on traditionalist
ideology in the case of Fascism or on traditionalist top-down decision making in the case of Communism.
For both of them, electoral failure was not an acceptable feedback to negative consequences of political
decisions, but either "culturally Western-decadent" or "part of capitalist infatuation" as part of their com-
mon refusion to accept democracy.
– 12 –
While the combination of modern ideology and traditional practice proved short-run stable and died
out only decades later due to its internal inefficiency, the combination of traditional ideology and modern
practice soon collapsed and gave rise to the general acceptance of democracy as the adequate feedback of
responsibility for parties in the second part of the first transition, as expected by H3. Churchills dictum
about democracy as “the worst form of government except all those other forms that have been tried from
time to time” (1947) received its prominence from the fact that suddenly everyone accepted that democ-
racy was not a Anglo-Saxon (and Swiss) peculiarity but a general necessity for any industrial society.
But the comparable dictum of expecting an “end of history” (Fukuyama 1992) after the end of Com-
munism turned out to be so much more short-lived due to the fact that this end of Communism was in it-
self a part of the third wave of institutional innovation that made organizations permeable and internally
modern.
In this first part of the second transition since 1968, the European complete individual-to-organiza-
tion mapping lost its former monopoly in several ways. In operative politics, the industrial mapping of
issues to institutional levels became impractical, as the growing importance of supra-national co-ordina-
tion could not lead to a new form of traditional hierarchies but required participation in decision-making
processes through complex multi-level governance systems. Normatively, the identification with the own
organization faded, giving room for the acceptance of national responsibilty that started with the two soci-
eties that shared the highest development level and the most ostensible burden of misdoing at that time
(the U.S. during the Vietnam war) and historically (Germany), but quickly diffused as new norm. On the
grassroots level however, the most ostensible organizational development is the rise of advocacy organi-
zations (“NGOs”) that in contrast to the social movement organizations of the 19th century (that had be-
come parties) do not involve the individual supporter as a whole person, but answer to specific interests.
Multilevel governance, the awareness of national responsibility and the rise of advocacy organizations on
all levels do hence all comply with H4.
4 Predictions and policy recommendations
4.1 General assessment
For effiency reasons, modernization abandons the inherent eurocentrism of industrial society. The
complete individual-to-group mappings that allowed for party-centered democracy and occupation-cen-
tered work life were a very special case that created a lot of suffering in its implementation, never worked
outside of the European tradition, and have lost their appeal even there. The functionality of collective
actors as parties and occupation-based organizations (unions and differentiated schools) was to support
individuals in making appropriate decisions, through an macro-institutional setting that gave them respon-
sibility and hence made them responsible. This functionality has to be transferred into a structure that is
open for all actors who are willing to become responsible for supporting individuals in making appropri-
ate decisions. Actor-openness is a question of efficiency – many things can be done better by organiza-
tions, other things can be done better by individuals, and none of them, and none of the very different
types of organizations, should be excluded a priori, but all should be judged in their capacity according to
their performance.
– 13 –
4.2 Responsible support
For decisions of individual productivity, the European concept of the complete individual-to-group
mapping in a life-long occupation allowed to divide the the life course into two distinct stages, education
in which the individual acquired a occupation-specific set of qualifications, and work in which it applied
these qualifications into creating resources and income. On the intermediate level of resource availability
in industrial times, the flexibility of this setting was enough to allow for adaptations over time and for as-
sembling combinations of qualifications into production processes. It involved secondary schools that cre-
ated occupations, and unions that negotiated the wages for individuals in occupations. The two were
rarely linked, but stabilized each other: Secondary schooling created the sets of specialized qualifications
unions were able to bargain for, and unionized bargaining created the social value of differentiated grades
to motivate the co-operation of teenagers in school. Incentives for adequate decision-making were on the
level of occupation: Unions benefitted both in internal motivations and in resources from being successful
in bargaining for their members, and schools were mainly concerned with bringing their students to the
successful grade ceremony without disciplinary problems.
Currently, qualification profiles become more complex, and there is no institutional structure to pro-
vide incentives for individualized responsibility, namely for actors who are willing to become responsible
for supporting individuals in making appropriate decisions. And this absence of an institutional structure
adequate to the necessities of efficient career management beyond the industrial (and European) complete
individual-to-group mappings is at the heart of the inequality problem. (Snower 1999)
Parallel to the group-based responsibility expressed in a general acceptance of differentiation in
schooling and bargaining that emerged in about the 1940s, it can however be expected and has with some
organizational innovators already begun that the next decades will bring institutions for individualized
responsibility. It will let them enjoy their successes and bear their losses. Such a shared responsibility is
already established on a macro level within the welfare state: The welfare state enjoys the successes of its
citizens as they are able to pay taxes, and it bears their losses as they become entitled for social benefits as
support or direct transfers, or in the worst case if their victims have to be supported and their incarceration
to be paid. In its industrial shape, however, this is a bureaucratic regime in which the shiny spots of actor-
openness are always soon re-nationalized into public responsibility: Some polities pay for actors as career
couselors supporting their clients. But none of them does really share the responsibility: The end of col-
laboration marks in most cases the end of contact with the clients, and in almost all cases the point when
the bill is paid. Despite the ambitions to keep track of alumni (and hence to enjoy parts of their suc-
cesses), this is even more true for school, the main organization "responsible" for bringing people onto a
good track in life.
As the social problem involves both intrinsic and extrinsic motivation, social life has already created
institutions that answer to that problem. Intrinsic motivation to responsibly support individuals is created
bottom-up in networks of support and top-down in mentoring (a follow-up to the pre-modern god-
parenthood), and both forms have been shown to be effective (e.g. Eby et al. 2008, Murphy and Kram
2010, DuBois et al. 2011). They are, however, limited in coverage, duration and robustness: Many people
do not get the chance to get supporting relationships, supporting relationships (and especially formal men-
toring) often do not last very long, and people who lose track in life and work have an especially low
chance to maintain and reestablish supporting relationships.
– 14 –
To build extrinsic motivation (and some intrinsic, too) for responsibility towards general phenomena
social life has created the institution of property rights as investment rights, which give incentives to in-
vest by linking investor and investment for the future (Coase 1960). Investments rights are, however, not
yet applied to the support of individuals. This is due to the fact that property rights in individuals have
historically been linked to coercion. But coercion is directly opposed to the values and the functional
logic of modern societies: The individual bears ultimate responsibility and has to have the freedom to do
so. Hence, despite the spillovers to society, all co-operation with actors of responsible support has to be
voluntary.
Given this precondition of individual freedom, the creation of appropriate investments rights will be
the crucial point in the upcoming institutional innovations for decisions of individual productivity, as they
answer to the logic of responsibility. Investment rights will be defined in parts of the individual’s balance
vis-à-vis the welfare state: Actors that hold them will enjoy their successes by receiving a part of the taxes
their clients pay, and will bear their losses as by paying a part of the social support they receive, and in
the worst case by engaging in support for their victims and paying their incarceration. The aim to maxim-
ize income from their investment will serve as incentive to establish, support and maintain supporting re-
lationships, to keep track cautiously especially in times of individual crisis, and to give any help needed
that can be given more efficiently from an extrinsically motivated actor.
4.3 Individualized democracy
For public, i.e. political decisions, the European concept of the complete individual-to-group map-
ping in industrial times had created party democracy and the UN system. As both parties and nation states
can no longer be the universally accepted responsible representants of their constituting individuals, ac-
tors are needed that bear the ultimate responsibility for political decisions. As before, the explanatory
model answers this question in an individualist way: The individual bears the ultimate responsibility.
This was already accepted in industrial politics, as the competition for organizational success in in-
dustrial politicss was already decided by popular, i.e. individual support. The founding fathers of indus-
trial democracy stated that the “ultimate authority, wherever the derivative may be found, resides in the
people alone” (Madison [1788] 2012, p. 65) or, respectively, that “[a]ll state power of emanates from the
people” (Grundgesetz 1949, art. 1:2), but the concrete form of the “derivative” in which the “emanation”
was translated into specific decisions rested on the assumption of complete individual-organization map-
pings that comprised the whole individual. The fact that these complete mappings are fading, however,
does not render the base insight invalid.
Notwithstanding occasional countertendencies based on inequality or new, seemingly overarching
questions, current political life shows a clear tendency towards a lower integrative capacity for the Euro-
pean and industrial complete individual-to-group mappings. As shown above, new actors and new deci-
sion procedures have already emerged, but they are not yet linked in a framework of responsibility.
Parallel to the group-based responsibility that became implemented in the general acceptance of de-
mocracy and the UN system in the late 1940s, it can however be expected that the next decades will bring
institutions for individualized responsibility. In the form of occasional referenda, individualized citizen
responsibility is already spreading, but it is being opposed for good reasons: Being scattered in a world
where politicians who balance on top of dithering party and nation state authorities cling to deciding eve-
rything else, referenda spark rather irresponsible protest instead of public responsibility. Institutionalized
– 15 –
direct democracy however, the more the closer it is to the ideal of general individual responsibility, nur-
tures responsible citizen decision-making.
Of course, the institutionalization of general citizen responsibility has to cope with the problems of
limited citizen capacity, differentiated citizen interest, and inter-issue linkage. Individual citizens form
opinions only over subsets of the decisions to be made and avoid individual cost in expressing opinions,
not every decision is equally important for everyone, and if a minority becomes outvoted on several is-
sues, it has to compensated to keep social peace (“tyranny of the majority”). Party democracy and na-
tional representation promised and largely met to solve these problems due to the group-based linkage
they provided. But individualized linkage is hindered through the institutionalization of vote detachment:
Citizens throw their vote into the ballot box and draw their hands away, cutting of the linkage between
themselves and their votes.
In other fields, social life has solved the problem of individual-based linkage in recent decades by
using electronic storage. Parallel to the normative problems of investment rights above, currently histori-
cal images and derived norms hinder this solution for politics due to the historical fear that ballot secrecy
might be violated. Despite all progress in encryption, it might still be that ballot secrecy violations may
not be excluded with absolute certainty. But it can probably be secured to a degree that is large enough to
maintain the freedom of individual decisions that has to be linked to their responsibility.
Electronic storage allows to keep trust assignments between individuals and political actors of all
kind. It allows individuals to feed trust assignments or issue opinions whenever they are formed. It allows
to make an own decision whenever an issue opinion is formed and to be represented by trusted political
actors (insofar as these have formed an issue opinion) whenever an issue is too complex or less important.
It allows to balance votes between decisions and thereby to cope with degrees of importance and minority
experiences. As in the case of industrial democracy, mechanism to provide centripetal incentives have to
and can be integrated. (Scholtz 2002) Through its actor-openness, a responsible individualism in democ-
racy implemented through electronic storage will integrate responsible individuals and corporate bodies
in non-European traditions and the growing body of networks and small organizations of individual citi-
zens for specific purposes into political resonbility, hence stimulate intrinsic motivation to support good
decision making in politics.
5 Conclusion
It is possible to make temporal assessments about the timing of the upcoming institutional change.
The adoption of innovations follows diffusion curves, and this is true also for institutional innovations on
the organizational and on the macro-social level, the difference is only in diffusion speed. In what became
and was the core of the industrialized societies, the main stage of the diffusion, i.e. the period from 20
percent to 80 percent adoption, took a time from the early- to mid-19th to the first decade of the 20th cen-
tury in the first transition and from the 1970s to the the turn of the millenium in the second. In both transi-
tions, the ostensible outbreak of violence in 1914 and 2001 hence made clear that very generally organi-
zations were no longer as they had been, and macro level institutions had to follow by changing. In the
first transition, it took a long generation of 35 years from the start of violence to the establishment of in-
dustrial institutions in 1949, the time that was needed to replace a generation that had grown up in pre-
– 16 –
1914 confidence in the old institutions with a generation that had accepted that the old agreements were
gone and had to be replaced by new ones. Between these two dates, social problems and violence esca-
lated.
It is very probable that this time the escalation of problems and violence will continue as well as long
as the old institutions are taken as the necessary base for going ahead. It is likewise very probable that
other solutions with a greater proximity to established routines, but a lower informational efficiency will
rise and gain followers, as Fascism and Communism did in the first transition. It is probable that those of
these “false friends” who propagate tradition but in fact exercise new elements will collapse at some time
as Fascism did, while others who propagate progress but in fact exercise old routines will last and col-
lapse only decades later from their lower long-run efficiency, as Communism did.
But it is very probable that after the generation that grew up in the pre-2001 confidence in old institu-
tions will be replaced by those that have accepted that the industrial agreements have to be replaced by
new ones, the new long generation of problems and violence will end in the mid-2030s, with individual-
ized responsibility established in career support and democracy.
Until then, there is a lot of research to do to contour the framework, and a long political process to
decide the details. So far, the current transition has not been as bloody as its predecessor, despite the high
death toll of terrorism, civil war, and even migration. Due to the inherent complexity of new institutions
that make their introduction more complicated compared to those in the 1940s, in the attempt to keep that
death toll low on the way to a next sustainable institutional setting, social science is and will be able to
make a difference.
– 17 –
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Figures
Figure 1: Probability of head of state assassinations, for two world regions, 1850-2000
– 20 –
Contents
1 A déjà-vu of parallels ............................................................................................................................2
2 An analytical model of first and second modernity ...............................................................................4
2.1 Dependent variable: institutions ....................................................................................................4
2.2 External driver: growth .................................................................................................................5
2.3 Intervening concept: organizations................................................................................................6
2.4 The model and the parallels ...........................................................................................................7
3 Empirical evidence ................................................................................................................................8
3.1 General considerations and hypotheses .........................................................................................8
3.2 Institutional innovations in households and intimate relations .....................................................9
3.3 Institutional innovations in education and work ...........................................................................9
3.4 Institutional innovations in politics .............................................................................................11
4 Predictions and policy recommendations ............................................................................................12
4.1 General assessment ......................................................................................................................12
4.2 Responsible support ....................................................................................................................13
4.3 Individualized democracy ...........................................................................................................14
5 Conclusion ...........................................................................................................................................15
References ...................................................................................................................................................17
Figures .........................................................................................................................................................19
Contents .......................................................................................................................................................20
