Acta Sociologica

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Public Market - Political Firms

Niels Åkerstrøm Andersen
Acta Sociologica 2000; 43; 43
DOI: 10.1177/000169930004300105

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Public Market - Political Firms

Niels Åkerstrøm Andersen

Department of Management, Politics and Philosophy, Copenhagen Business
School. Denmark

ABSTRACT
The main argument in this paper is that private companies become an integral part of
the political system when public services are contracted out. Private companies begin to
compete for influence on political goals to strengthen their positions for future tenders.
Firms that are subcontractors to the public sector find that everyday financial decisions
may have an impact on the political process. It becomes necessary for a private firm in
the public market to internalize the logic of politics. The system theory developed by
Niklas Luhmann is the theoretical point of departure, while the empirical study
examines the Danish firm Scan Care and its attempt to construct a market for services
for elderly people in the first half of the 1990s. The author of this article believes that
when public services are contracted out to the private sector, the size of both sectors
changes, as does the quality of the relationship between public and private and the
semantic meaning of both terms. Contracting out not only leads to a larger market, but
also to more politics. Politics explode out of the framework of the public sector into the
private sector and become a basic condition for the involvement of firms in public
markets.

Niels Åkerstrøm Andersen, Department of Management. Politics and Philosophy.

Blagaardsgade 23b, DK-2200 Copenhagen N, Denmark
© Scandinavian Sociological Association 2000

1. Introduction .

the end and private optional extras,

user

contracting has been regarded as a means

The overall thesis of this article is that private
companies become an integral part of the
political system when public services are con-
tracted out. Private companies begin to compete
for influence on political goals to strengthen
their positions for future tenders. Firms that are
subcontractors to the public sector find that
everyday financial decisions may have an
impact on the political process. It becomes
necessary for a private firm in the public market
to internalize the logic of politics. Firms in the
out
of commercializing the public sector and repla-
cing politics with market. This tendency is
visible in politics when leaders of the national
departments of finance meet in the OECD
exchanging new recipes as well as research
findings, e.g. new public management (OECD
1992).
The problem is that the boundary between
public and private has been discussed as if it
were a line in the sand, as if the character of the
areas on either side of the line remained

public market have to get used to a public life in unaffected by throwing a few grains either
which any internal event could be interpreted way. The boundary has been discussed as
politically. though when public services are moved into
Since the beginning of the 1980s contract- the market. nothing happens except quantita-
ing work out has been advocated as a form of tively : there is a larger market and a smaller
organization of the public sector of the future. public sector. New public management has
Together with privatization, direct payment by ontologized the private and public sectors,
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44
thinking in dualities (Townley 1998). The
author of this article believes that when public
sector work is contracted out. not only does the
size of each sector change, but so do the quality
of the relationship between public and private
and the meaning of both terms (Teubner 1999).
Ignoring these semantic changes means ignor-
ing the major effects of the strategies of
marketization. In this article it will be argued
that we cannot expect to find the same qualities
in private firms in public markets that we expect
in private firms in a private market.
Privatization of public services entails a
redefinition of the relationship between public
and private. The thesis that the logic of politics
moves together with the privatized services into
the private sector will be developed in the
following. Contracting out not only leads to a
larger market, but also to more politics. Politics
explode out of the frame of the public sector into
the private sector and become a basic condition
for the involvement of firms in public markets.
This article focuses on changes in the
conditions of competition and strategy-making.
claiming that these are differentiated into two
orders. First-order competition occurs in an
already existing market, where strategy-making
is a question of internal co-ordination of many
functionally 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 and
its premises for tender. In this order, strategy-
making becomes an inter-organizational matter
of co-ordination of strategies across organiza-
tions, private and public firms, local authorities,
trade unions and government agencies, in the
business of politics.
The development of second-order strategies
and the explosion of politics into the private
sector goes on not only in relation to contract-
ing out. Similar changes may be observed in
relation to reflexive regulation in environmental
policies and in industrial policy networks,
especially in the Scandinavian countries
(Amin & Thomas 1996: Pedersen et al. 199?;
Andersen & Kjaer 1993). What is so special
about contracting out is that the politicization is
an effect of marketization efforts.
A final and verified theory will not be
presented. Instead, a case study will be pre-
sented. based on which heuristic theses will be
developed. The case is the Danish firm Scan
Care. Two leading companies established the
firm in Denmark. Falck and International
Service Systems ( ISS I, in order to open a public
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market for elder care service. The two
companies already in the service sector.
were
Falck is an old family company, established in
1906 and recently bought by a larger insurance
company. Falck has for very many years been
the only private alternative to public fire
service in Denmark, and in recent decades it
has also been a large security firm in Denmark.
Recently it has entered the market for care
provision. Falck’s primary area is Denmark, but
nowadays it is also well established in Norway
and Sweden. The company has more than
10.000 employees and a turnover of
$80?,000.000 IISD per annum (1997 figures).
The ISS is a very large service company, also in
the international market. ISS has divisions not
only in Scandinavia, but also in other parts of
Europe, in Brazil and in Asia. It employs more
than 100.00() people and has a turnover
of almost $20().000.000,000 USD. It provides
cleaning and maintenance, health care, food
hygiene, transport, care, cleaning products and
machinery, landscape gardening and catering.
Elder care service in Denmark is entirely a
public issue. Except for hospitals, the local
authorities control all elder care service. The
regional authority controls hospitals. There is
therefore also a clear-cut distinction between
hospitals and homes for the elderly, for example.
The role of the State has not been to govern
individual health trusts, but only to decide the
overall political and legal framework in which
elder care takes place, including approval and
price control of drugs and recommendation of
treatment. Thus, private firms in the elder
service market were almost non-existent until
the creation of Scan Care in 1994, and until
recently there has been a great deal of resistance
from the majority of the Danish population
against any private initiative in the health
sector. Danes would rather pay higher taxes.
Today, contracting out (not privatization) is on
the agenda. The basic idea is public financing
and private production.
2. Firm and politics as systems of
communication
Most research on contracting out has privileged
one system perspective. Economy research
focuses on the economic benefits of contracting
out (Savas 19H i I. Legal research focuses on the
problems of contracts about products such as
welfare services (Osborne & Gaebler 1993).
Administrative research focuses on the effects of

contracting out on the public capacity of
steering (Hood 1996). These are all of major
importance. But exactly because they set one
system as their point of observation, their blind
spot is the relations and boundaries between
systems. This is where Niklas Luhmann’s
system theory becomes relevant.
The focus of this article is a boundary, the
boundary between public and private, politics
and economy - not economy and not politics -
but the relationship between them. The subject
suggests that a choice of philosophy of difference is
required. Niklas Luhmann’s system theory has
been selected as the point of departure, which
implies that the distinction between system and
environment becomes a guiding tool in obser-
vations of firms in public markets. Exactly
because Luhmann’s system theory is based on
a philosophy of difference and not on a
philosophy of identity, it avoids ontogizing the
public and private sectors as pre-given entities,
instead making their constructions an open
question.
Social systems as communication
According to Luhmann’s system theory, society
consists of social systems, and social systems
consist of nothing but communication. Politics,
economy and firms are different social systems
of communication.
Communication is the basic element of
social systems, be they interactions or more
embracing systems like organizations. Luh-
mann describes communication as a process
including selection of information (what is to be
communicated), selection of form of message
(shouting or e-mail) and selection of under-
standing (what was communicated). In this
definition there is no communication until one
communication has been opened for connection
and another communication has connected.
selecting one understanding from a multitude
of possible understandings. So communication
is not necessarily speech acts, but always
an ongoing process of selection (Luhmann
1995:137-176). Whenever a communication
process selects information, form of message
and understanding, it actualizes the distinction
between the actual and the possible. The
selection of information always stands in rela-
tion to a horizon of possihle information, the
selected form of message to possible forms and
the selected understanding in relation to possihle
understandings.
Communication as an ongoing process of
selection is intimately related to meaning.
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45
defined as the unity of the distinction between
the actual and the possible (Luhmann
198 5:1 O2 ). Whenever something is actualized
in communication, a multitude of possibilities
arises: meaning is the relation between what we
choose and what immediately arises as other
possible choices. For example, the television
news about the Tour de France in 1998 focused
very much on doping scandals. The meaning of
these scandals consists exactly of the fact that
they were highlighted against a background of
other possible highlights, e.g. more direct sport
events. So meaning is not a reference relation-
ship between words and things or signs and
concepts, and it is not one possibility in
preference to another. Meaning is a simulta-
neous unity of the actual and the possible.
In the selection of information, form of
message and understanding, the communica-
tion process simultaneously draws a distinction
between itself and its environment. constantly
referring either to itself or its environment. In
other words, the system is always using the
distinction between self-reference and other-
reference, that is, between system and environ-
ment. Like all other distinctions. this one is, of
course, a distinction in the media of meaning,
and an operation of meaning is always an
operation of a system. Whenever a commu-
nicative-meaning system draws a specific dis-
tinction between itself and the other, it is also
drawing a line between the actual and the
possible: thus. we are talking about the system-
constitutive boundary. This boundary is a
boundary of meaning. It determines that out-
side a particular system (that is, in other
systems), meaning is created by other condi-
tions. Systems are. so to speak, incommensur-
able regarding their production of meaning.
The idea about communicative meaning
systems has multi-faceted implications. First of
all. the environment is not an objective fact in
itself, but only an environment to a specific
system, i.e. an internal construction in a system
of communication. Both system and environ-
ment are constructed when the line between
them is drawn in the communication. In this
perspective environment is not a facticity
shifting with distinctions, but a contingency
(Luhmann 1995:295-297). With shifts in
distinctions, indications and selections, the
system and environment are constituted as
difference and as horizons of possibilities, and
the environment is always more complex than
the system boundary. Outside one system of
communication, meaning is always constructed
46
differently by other systems, and whether or not
the alien constructions are noises heard from
the system depends on its own internal bound-
ary construction (Teubner 1992).
Secondly, communication is only possible
within system. Different systems may com-
a function, medium and code (Luhmann 1968,
municate about each other, but they cannot
communicate with each other, simply because
they produce meaning differently. The radical
consequence of this approach is that every
communicative system establishes its own
environment and, more importantly, only one
environment. From the viewpoint of commu-
nication, the world (space, time and objects) is
mono-contextual. But from the viewpoint of
differentiation, ’the world’ is a polycontextual
flux swarming with ’ontological places’. The
result of differentiation in communication is an
endless number of social systems, each with its
own environment, communicative closedness
and selection of meaning.
Politics and economy as social systems
Politics and economy belong to what Luhmann
calls ’functional systems’, that is, systems that
close themselves around certain functions. Law,
art, religion and science are also functional
systems. They may all be observed as functional
systems consisting of nothing but communica-
tion, and in this communication differentiating
themselves from each other: politic/not politics,
economy/not economy. art/not art. etc.
functional differentiation.
Historically, functional systems have
emerged parallel to different media of commu-
nications. Economy co-evolves as an autono-
mous system with money, politics with power
and science with theories. A medium of com-
munication is a highly generalized loose coup-
ling of possibilities that can be found in an
endless number of communications without
losing its generality. Money can be used to buy
cookies, and ten minutes later the same money
might be used to buy sex. Each of the transac-
tions is bound to a specific meaning, but it does
not influence the money as such.
Bound to the media of communication is
binary codes. A binary code is a difference in
preference with a positive and negative side. The
positive side defines a basic value orientation.
The negative side is the reflexive side. Binary
codes ensure the identity of the functional
systems. Communication in the system may
always connect to one or the other side of the
code. The code divides the world of the
particular system into two: + or A code is,
-.
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of course, open to an endless number of
situations, just as it is open to a supplement of
many other distinctions.
In this framework we might see the
political system as signified by a particular
1971, 1972, 1974, 1977, 1984, 1990). Func-
tionally, the political system emerges as a par-
ticular communication giving itself the function
of making collectively binding decisions. The
medium of communication is power, and in this
connection, two codes provide the boundary of
meaning of the political system. The primary
coding of the political system is government/
governed, where government is the positive
value and governed the reflexive value. It is
always better to be in government than to be
governed. The democratization of the political
system adds a secondary coding. Democratiza-
tion led to a bifurcation of the top of the political
system. Government becomes split into govern-
ment (+) and opposition (-). (designated as
+power/-power), where it is always better to be
in government than in opposition; more power
is always better than less power. Government
here means to have the right to make collec-
tively binding decisions. The primary and
secondary coding of the political system stipu-
lates that all that can be made politically
relevant must serve either government or
governed in the primary coding or government
through or 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 only
reflect upon itself in the relation to the
possibility of government. Connecting to the
positive value simply means connecting to the
value of power, that is, how to stay in power or
how to get into power, and connecting to the
negative value means reflecting on how to do
better, assessing the risk of losing power, etc.
Wherever communications follow the selections
of the code, it is regarded as the political system
of communication. So the political system is not
limited 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 be
signified with a particular function, medium
and code (Luhmann 1994). Functionally, the
economic system emerges as a communication
giving itself the function of determining prices.
The medium of communication is money, and
connected to this medium is the code owner-
ship/not ownership (or operatively pay/not
distribution.

pay). The whole world can be divided into what
I ownand what I do not own, where it is, of
course, better to own than not to own. Again,
the two sides of the code are only positions in the
communication, and the code is open to many
other distinctions.
Economic communications can only com-
municate with economic communications, and
political communications only with political
communications. The two systems may, of
course, observe and communicate about each
other, but never with each other. The economic
system may understand everything it observes
in the political system, but it will always make it
economically meaningful by connecting it to
one side of the economic code, and visa versa.
Everything may be understood in the political
system, but always within the framework of the
distinctions government/governed and govern-
ment/opposition. Taxes provide a very mean-
ingful theme in both systems, but in very
different ways. Increasing taxes may be con-
nected to the reflexive side of the code govern-
ment/opposition discussion, the risk of losing
power in the ruling party. In contrast, taxes may
be seen as potential future economic transac-
tions, a new market of consulting with the
prospect of minimizing taxation.
Organizations as social systems and
forms
Organizations are another type of social system.
Organizations may be defined as decision-
making systems. Organizations consist of
decisions, and they themselves produce the
decisions they consist of. A decision is, then,
a communication, which implies a choice of
attitude to a social expectation (a fixation of an
expectation on an expectation). The decision
makes a distinction between before and after.
Before the decision, alternatives appear as open
contingencies. After the decision, the same
contingencies are fixed; the decision might
have been decided differently.
Decisions are basically based on paradoxes:
only questions, which, in principle, are undecid-
able, mav be decided (Luhmann 199 31. If an
answer can be found by analysis, it is not a
matter of decision, but of calculation. Organiza-
tions as decision-making systems are therefore
thrown into a maelstrom of choices, choices
that do not vanish through careful analysis. To
be able to arrive at a decision, organizations
must unfold the paradox of decision-making :
that is, they must make the paradox invisible. To
create a situation of choice, the organization
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47
must exclude an endless number of possibilities.
This can be done through the creation of a few
alternatives from which to choose. By con-
structing alternatives, decisions are implied
about which alternative alternatives to exclude.
To unfold this paradox organizations often
refer to their environments. A private firm
might refer to the market as a demanding factor
not to be ignored. A public organization might
refer to an authority. A kindergarten might refer
to the needs of the children, etc. What happens
is that the organization decides what belongs to
its environment and what belongs to itself. It
decides what is the relevant environment. The
environment of the organization is an internal
construction within the organization. When the
organization describes its environment, it simul-
taneously defines what is relevant to the
organization, how the organization stands in
relation to its environment and what the
objective conditions for decision-making are
within the organization. When the organization
describes its environment, it simultaneously
draws a boundary between itself and the
environment. Neither organization nor envir-
onment exists as a precondition, but both
emerge drawing the boundary by means of
,
their differences. So the identity of the organiza-
tion consists of nothing but its relationship with
as the internally constructed environment. If the
environment of the organization is the point of
reference that stops the argumentation about
alternative decisions, then the boundary
between organization and environment is the
blind spot that makes decisions possible under
the paradoxical condition of undecidability of
decisions.
Organizations are systems of decision-
making, but they are also forms forming general
media of communication in concrete situations
of decision. Organizations are never a part of a
functional system. Organizations belong to the
environments of the political system, the
economic system, the system of art, of science,
etc. They cannot communicate with each other.
Though organizations always emerge in con-
nection with functional system, they are
a
always linked to at least one functional system.
The link is a relationship between form and
media. Decisions always form a medium. As
mentioned, media are generalized loose coup-
lings of possibilities open to many concrete
forms. Decisions as forms are opposing, tight
couplings of possibilities, bound to a very
specific situation only for a moment. While it
is easy to exchange elements of a medium, e.g.
distribution.
48
one coin with another, it is impossible to
exchange elements of a form, e.g. one decision
for another decision. Though it is given that
organizational communication must link to a
functional system forming its medium. it is
basically open to choice as to which medium to
form or whether to form several media (but
never in the same operation). Again, as men-
tioned, a general medium always carries a
binary code. So the choice of medium in the
organization is a choice of closure of the
organizational communication. Using money
as a medium, decision-making basically
becomes a question of spending or not spending.
Using power as a medium; decision-making
basically becomes a question of government
versus opposition.
We are now very close to a reformulation of
our research question about private companies
in public markets. A firm may be regarded as a
kind of organization. In general it could be said
that private firms are organizations forming the
medium of money, that is, they are organiza-
tions closing themselves around the code
spending/not spending, ownership/not owner-
ship. They are, of course, open to form other
codes, but it is to be expected that the code
spending/not spending should play the most
important role. This also means that the code
spending/not spending is the departure of the
internal communicative description of the
organization itself as well as its environment.
The construction of the environment as a
market divided into segments, customers, com-
petitors, partners, etc. may be seen as a mirror
of this.
Other organizations might form other
codes, thereby constructing themselves as
nization-in-environment, basically as ’different’.
Public organizations form the code government/
governed and parties form the code govern-
ment/opposition, etc.
Thesis
The point is: If the
object of this study is a private
company turning towards a public market, it
must be possible to locate changes in the closure
of the organizational communication, if it is
correct that the logic or code of politics explodes
into the private sector. The basic thesis is that
private companies turning toward the public
market become political in the sense that they
begin 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:
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. The differentiation in a political system and
an economic system suddenly becomes a
differentiation of communications inside the
organization, oscillating between forming the
political codes and the economic codes. We
may therefore expect disagreements or con-
frontations between incommensurable com-
munications within the firm itself.
w The very construction of the decision as a
decision 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 a
decision can be observed, and therefore also
in 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 the
environment can even be observed, depend-
ing on the code of communication.
. The organization will recreate its descriptions
of itself. New types of reflexivity can be
expected to cope with the double coding of
the organizational communication.
In the following, the focus will be on Scan Care,
not given actor, not as a given entity with a
as a
given environment. Scan Care will be observed
as an organizational system emerging in com-
munication: that is, communication and the
distinctions between Scan Care and its environ-
ment as they emerge in the communication will
be observed. It cannot be presumed that there is
only one Scan Care. There may be many
communications referring to themselves as
’Scan Care’ while defining themselves-in-envir-
onment very differently. The observer has to be
orga-
open to discontinuity not only in time (the
distinction Care/environment might
Scan
change significantly over time), but also in
space and from situation to situation.
Data and their construction
The data in this case study are many. First, I
have had full access to the archives of Scan Care
and ISS regarding the case in the broadest sense.
Among the data are included minutes, strategy
papers, internal reports, working papers and
letters. Second, there are official documents and
articles from newspapers and magazines. Third
are the internal materials from selected tllUIllc1-
palities, such as letters and reports. Finally, I
also conducted interviews.
So the data are first of all made up of texts.
The texts have not been read as expressions of
distribution.

an author. Neither they have been read as
manifestations of a kind of structure. They were
read as communicative monuments, as recur-
sive communicative selections, each of them
connecting to earlier selections, opening a
horizon of possible future connections, alto-
gether making a communicative net of articu-
lations (Andersen 1999).
3. Scan Care between politics
Construction of the market for elderly
services and the development of Scan Care
The story of Scan Care begins with the ISS. In
October 1990 the ISS’ department for strategic
marketing wrote a ’Background Paper for a
Project to Develop the Concept of an ISS Service
for the Elderly’ (ISS 1990). This paper provided
the initiative for the company’s first step in the
development of an internal construction of a
market segment for elderly care service. Based
on a population prognosis from the Danish
Office of Statistics (Danmarks Statistik) and on a
market analysis carried out by The Danish
Bureau for Technical Information (Dansk
Teknisk Oplysningsforbund), ’From Baby Boom
to Senior Market’, an expanding market for
elderly care service was identified.
Three trends were highlighted: (1) in the
near future there will be more elderly people.
especially elderly people with very great need of
care; (2)the demands for care of the elderly will
increase; and (3) more and more elderly people
will remain in their own homes longer. Finally,
the financial circumstances of local authorities
had deteriorated during the 1980s, and the
economy did not look like it would improve in
the 1990s. Together, these three tendencies
created a potential drain on resources, which
would force local authorities to think laterally
and use private companies to provide service for
the elderly. It was therefore predicted that local
authorities would be forced to open a new
market. At the same time it was thought that
these circumstances were not uniquely Danish;
similar circumstances prevailed in other coun-
tries such as the USA, Japan and Canada. New
outlines were being drawn not only for the
Danish domestic market, but also for a great
export market for elderly care. The construction
of this potential market became a reference
point in the ISS’ consideration of new product
investment.
With reference to this potential market, it
was proposed that the ISS developDownloaded
a concept for
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49
service for the elderly. The progressive defining
of this concept included elements such as the
creation of a ’think-tank’ and running pilot
projects. It was envisaged that this concept of
service 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 marketing
completed its plan for Project ISS Service for the
and market Elderly in January 1991. The aim of the project
was to develop a service package, which would
contribute to the realization of the socio-
political aims for the elderly care sector as
cheaply as possible. It had to be broadly based.
modular and suitable for export in its entirety. A
draft was developed for a course of action
starting with a clarification phase, during
which a market analysis was carried out, the
need for product development was identified,
the framework for creating a service image was
set, and the aims for exporting the system were
clarified. Furthermore, a series of key questions
were raised about the limits of the market
segment, the structure of the delivery system.
project management and the extent to which
the ISS service for the elderly would be an
independent organizational unit. The argument
for independence was that it is very important
that an organization be perceived and perceive
itself as a unit with its own identity (ISS 1991b).
In August 1991 Project ISS Service for the
Elderly published a quantitative report on the
market for elderly care in Denmark. It included
an analysis of the size of the market, market
shares, extent of coverage, etc. The market was
identified as the world, which is the primary
subject for analysis in this report (ISS 1991a).
Towards the end of 1991 a department for
domestic service was set up with the aim of
providing cleaning of pensioners’ homes. Sev-
eral contacts were made with local authorities
during the autumn of 1991, and the following
spring a series of seminars were held on service
for the elderly, which were attended by staff of
all grades from various local authorities. From
the point of view of the ISS, the aim of these
seminars was to gain insight into the sector
with a view to laying the foundations for
negotiating on equal terms with local auth-
orities. In late summer of 199?, the first major
local co-operative project was commenced with
the municipality of Crcested-Gilleleje.
In 1993, conditions for the Project
changed significantly. Falck bought up ISS-
Securitas, which eliminated competition be-
distribution.
50
tween the ISS and Falck for on-call service. They
could now be said to be ’completely comple-
mentary as regards service delivery’ (Steffensen
1995). Falck had the know-how about alarms
and security, while the ISS were experts on
cleaning and catering. With the purchase, both
companies became contractually obliged to
explore the potential for joint co-operation in
the field of care for the elderly (Falck 1995).
In the summer of 1993 the ISS and Falck
were well into the negotiations about joint work
on elderly care. At the same time the coalition
government led by the Social Democratic Party
sent out messages about co-operation between
the public and private sectors. The report The
Public Sector in a New Light published in June
1993 mentions joint developmental work,
including contracting out and contracts for
development. The report stated that ’creating a
close dialogue and co-operation will be a
challenge which will break down the old
barriers between the sectors and replace them
with common ’growth areas’ where the product
development and export potential of private
companies will be in the centre’ (Finansminis-
teriet 199 3a. 1993b:5).
A subsequent report in September 19933
from the Ministry for the Co-ordination of
Employment Politics caused even greater excite-
ment at Falck and the ISS. It stated, among
other things, that ’There are prospects for both
strategic contracting out and the establishment
of public-cum-private companies in the field of
elderly care. Public-cum-private companies
could be in charge of setting up and running
nursing homes, and such companies will
subsequently have an edge in the competition
for export of the system to other countries’
(Ministeriet for Erhvervspolitisk Samordning
1993:77).
In this positive atmosphere the ISS and
Falck wrote a paper to describe their potential
for joint work (ISS & Falck 1993). In this paper
the environment that the ISS had originally
constructed for its project on service for the
elderly became a shared one of co-operation
between the ISS and Falck. Thus. the par-
ameters for co-operation were established. It
was the purpose of this paper to define a
common position for the ISS and Falck in the
market, based on that originally identified by
the ISS.
Among the objectives of the paper was the
intention of discovering whether there was a
need for care among the elderly, which could be
met by the current product range and delivery
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systems within the two companies. The paper
emphasized that ’... by combining the current
services of Falck and the ISS it will be possible to
offer local authorities a concept which will meet
the need for security for the elderly ... A
combination concept is unique and by making it
possible for the public and the private to
pick’n’mix the services as necessary, the provi-
sion can be tailored to individual needs’. The
paper recommended that a company be set up
not as a provider, but as a buyer of services and
products from the ISS and Falck. This company
would:
. have responsibility for the customers
.
identify and describe the need for products
and services within the field of elderly care
.
gather intelligence about the market and its
possibilities, threats, norms, standards,
agents and interest groups
. a network in the social sector
develop
influence opinion
lobby the public and agents in the sector
create an independent image of the company
initiate and participate in joint product and
method development between the sector and
the managing companies
. take the lead in making,
sustaining and
following up contacts with agents in the
elderly sector (ISS & Falck 199 3 ).
Scan Care was set up in January 1994. It held
itsinaugural management committee meeting
on January 28, at which were discussed, among
other things, Scan Care’s mission statement,
aims, common strategy, organizational plan,
action plan and timetable (until August 1994),
common projects, contacts and the interested
parties surrounding the new company. A
technical committee was set up to co-opt
influential agents within the sector as well
(Scan Care 1994).
Attempts at keeping politics out of Project
Eldercare
Setting up Scan Care was. as shown above,
closely related to a process whereby the image of
a market for elderly care was constructed. Then
a position was developed from which the
company could be active in this market, and
finally a legal framework was established
through which this position could be held and
expanded.
Although the perception of Scan Care in a
market and reference to the economic code
dominated its early development, political
aspects were not absent as a theme. Most
 51

unrest among the workforce’: and (2)I the

consequences of a poorly carried out project
were that the ISS would have to wait years to

penetrate the market, and that its image in the

public sector would be hurt. The risk assessment
is no more comprehensive than is quoted above
(ISS 1991b1.
During late 19933 and early 1994 the
distinction was further refined as part of the
development of the elderly care concept. Three
Fig. l. Pure service distinguished from nursing and care. key products for the elderly were identified:
’service only’, nursing and care. Nursing and
care aspects were each defined by a boundary:
minutes and strategy documents from 1990-94 nursing is limited to physical needs. As soon as
include a brief mention of the political condi- an activity concerns a person’s body, it is defined
tions for the project. However, politics was as an aspect of nursing. Care is correspondingly
classified as ’noise’ to be avoided, and the defined as within a mental boundarv. As soon as
concept was deliberately defined with a view help concerns an elderly person’s mental well-
to de-politicize its work. being, it is considered care. The three areas.
As early as 1990 the relationship with service, nursing and care, naturally overlap.
politics played a part. Attention was drawn to The concept of Scan Care was developed from
the fact that a dialogue with ministries, the beginning with the intention not to cross
government departments and local authorities the boundary between the physical and the
was a necessary precondition for the develop- mental, the body and the soul. It was intended
ment and success of the elderly care concept. to provide ’service only’ (Steffensen 1995; see
Therefore, they wanted to set up a ’think-tank’ Figure 1).
(ISS 1990). The purpose of the dialogue in this Two reasons were given. First, the provi-
think-tank was to ensure that the services on ders had more expertise in the service aspects.
offer would reflect the needs of future customers The products were therefore known, even if they
as precisely as possible. Furthermore, attempts were being gathered together in a new concept.
were made to differentiate between service and directed at new clients. Secondlv. there was the
care: risk of politicization. No actual assessment of the
risk of politicization was carried out: rather, the
In order to keep developmental time and cost low risk was considered based on common sense
and to avoid provoking a strong reaction from the (Steffensen 1995).
local authority, it is recommended that the ISS. at Until the spring of 1994 it was thus
least in the short and medium term. focus on those
aspects of elderly care which Could be described as
accepted that politics is a basic condition when
service for the oldorly. i.e. cleaning, food delivery or considering new public markets, although the
similar and refrain from offering COIIIIIII/1lity nur- political can be minimized and controlled by
sing services, i.e. care of the sick, personal care and redefining the tasks so as to exclude the openly
diet, social activities. (ISS 19901 politically sensitive. For Scan Care, politics had
until then primarily meant limiting its concept
This distinction was used again in 1991. The of elderly However, in the spring the
care.
argument for not getting into nursing-related attempt to out failed. Negotiations
keep politics
care was that such a move ’certainly would be took place with several local authorities and
met with a great deal of professional opposition. proposals were made to provide ’service only’ for
On the other hand, there is hardly likely to be the elderly. However, the local authorities
the same professional-based opposition to the concerned wanted Scan Care to provide not
domestic services aspects of elderly care, as the just service. but also nursing and care. The
staff in this area is not marked by the same distinctions made by the ISS and subsequently
professional consciousness’. This distinction is by Scan Care were not made by the local
loosely connected to a risk assessment, which authorities. On the contrary, the trend here was
identified two risks: (1) that the market could towards the concept of total care, which
turn out to be closed, especially because ’the ISS combines nursing, care and service, so that
could be seen as t,t-(,tititig problems rather than elderly people in their own homes, for instance,
as soltiiig problems if our initiative creates would not have to deal with a whole range of
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52
people carrying out separate duties. Instead one
or two carers would perform several functions
and develop closer relationships with individual
elderly people. At this point Scan Care realized
that 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 immediately
problematic to offer the total service because it
would imply crossing the boundary between
physical and mental care of elderly people.
moving into areas where they currently had no
competence and risking politicization.
However, Scan Care accepted the condi-
tions made by the local authorities. To quote
Scan Care, the company was now ’moving from
a strategic situation focusing on market devel-
opment into a business development situation in
which products as well as clients are new’. This
change of direction meant that Scan Care
became the focus of attention for ISS manage-
ment. It was feared that control would be lost in
a turbulent situation arising from lack of
competence and politics. They were aware that
the automatic response in general would be that
’profit and care don’t mix’, and a political
reaction was expected (Steffensen 1995).
From August 1994 Scan Care worked on
the basis of integrating nursing, care and
’service only’. Care aspects, such as reading
aloud and attending elderly people on holidays.
were developed, as were nursing aspects such as
dispensing medicines, physiotherapy and exer-
cise.
Suddenly, it was no longer possible to keep
politics out. As expressed by a Scan Care
director: ’We were suddenly on the political
agenda. We were knee-deep in it’ (Steffensen
1995). Television and the national papers
covered the issue and demonstrations against
contracting out service for the elderly were held
in some areas.
Crossing the political line effected a shift in
the argumentation model from economic to
political, and a change of view of the outside
world, attaching greater importance to asses-
sing the political environment and thus shifting
the company’s own position.
From economic to political argumentation
In the transition from trying to keep politics out
(by distinguishing between mental and physical
services) to segregating and subsequently poli-
ticizing on all levels. Scan Care shifted in its
argumentation to the outside world (local
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authorities, local government and personnel,
the elderly and local citizens in general)and also
in its internal criteria for decision-making. Scan
Care moved from a natural use of financial
arguments identical with its justification of itself
in relation to the trends in the elderly care
market to creation of a range of comparable
models for argumentation. In the end, its
arguments were political, with the political
code of government/opposition as a background
model implemented by questions such as: ’Does
this line of argument lead to dialogue or
conflict?’ and: ’Which agents can be included
in which argumentation models?’
The three argumentation models used by
Scan Care have been designated as follows: The
Politics of Expenditure Model. The Synergy
Model and the Value Model. These models can
be characterized using three variables:
1.The final argument: what is the final argument.
the last reference, on which all other arguments
are based? If this final argument is rejected, the
entire model is refuted.
2. Subject positions: which possible stands can
agents take and argue from within the model? and
3. Open/closed: to which arguments is the model
open and closed?
Organizations can relate to argumentation
models in two ways. They can either have a
model and base arguments on it, or they can
develop a model and reflect on the argumenta-
tion. In the case of the former, the border
between the organization and the outside world
is a known certainty. In the case of the latter, the
border is played with during learning processes.
The politics of the Expenditure Model
This model is identical to the one on which the
aim of Project Eldercare was based in 199().
This model is therefore connected with the
vision of Project Eldercare within a market. The
basic assertion is, very simply, that there are
trends that will force local authorities to
consider contracting out for financial reasons.
The justifications for contracting out are there-
fore solely financial.
The following quotation is an example of
this model:
’There will be many more senior citizens in the
municipality of Graested-Gilleleje in the years to
come. There will particularly be more of the very
old who will be in need of the greater care services.
Elderly care services in the municipality of
Graested-Gilleleje will therefore need many more
resources to maintain the present quality standard

and methods. It will hardly be possible to increase
resources for elderly care in keeping with this
trend. There will therefore be fewer resources
available to each individual. The quality will be
lowered. What is more, future generations of
elderly will have other needs and make other
demands of future elderly care service. To maintain
the present quality, there will be a need for ...
new methods to solve the problems.’ The models in
question are models which implicitly involve co-
operation with private providers. (Graested-Gille-
leje Kommune 1994)
The last argument of this argumentation model
is obviously the budgetary squeeze. If the
participants do not accept the squeeze, all
arguments are refuted. Correspondingly, the
subject positions that allow you to participate in
the debate without it breaking down are purely
financial. It must be accepted that the problems
of the politics of elderly care are basically of a
financial nature; otherwise it is not possible to
participate.
There is only room for other views in so far
as these offer solutions to the financial problem.
Thus, this model of argumentation is exhibits
very little sensitivity to considerations other
than those with financial clout.
Responsibility here equals financial respon-
sibility for finding a solution to the budgetary
constraints.
Synergy Model
The Synergy Model evolved in 1994 and was
disseminated by the Ministry of Employment.
The basic assertion is that the public sector is
good at certain things and the private sector is
good at other things. Together, both can get the
best of both worlds. In mathematical terms:
2+2=5. To quote the Birkerod Report: ’The
purpose of this [co-operation] is to combine the
best of the public sector with the best of the
private sector to create a synergy which the
municipality of Birkerod could not create alone’
(Styregruppen 1995).
The development of the Synergy Model led
to redefinition of Scan Care. In January 1995
a ness among the elderly, who consider it pointless
Scan Care published and disseminated a new
image of itself, stating, ’The basic idea behind
Scan Care is that by combining the best of the
public sector with the best of the private sector,
a synergy of problem-solving is released in
which 2+2=5’ (Scan Care 1995b). It is now
no longer the potential market that justifies
Scan Care. but the potential for synergy. ’Public’
now means a view of humanity involving self-
respect and a worthy life, professionalism and
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53
responsibility, individualization, flexibility in
service and a personal touch. ’Private’ equals
an unambiguous connection between a busi-
ness foundation, criteria for success and reason
for
being, wide room to manoeuvre in decision-
making, visible management, motivating orga-
nizational culture and being in the forefront
regarding technical equipment, training and
information.
The final argument in the Synergy Model is
to what extent it is possible at all to talk about
an added benefit of synergy in the close working
relationship between public and private. The
Synergy Model opens up some new subject
positions. There is a position for each place,
from which it is possible to contribute to the
synergy. However, at the same time the public-
private division is consolidated: the ’us’ and
’them’, a kind of armistice structure in which no
one seriously needs to move. The Synergy Model
is open to arguments, which increase and
decrease the added benefit of synergy.
Vallie Model
The model of values was the final one to be
developed. It was created in the latter half of
1995and based on the premises that nobody
(local councillors, officers, health care workers,
etc.) is opposed to freedom of choice, and
nobody will defend monopolies and disem-
powerment.
The key point of the argumentation model
was that Scan Care and the public shared a
basic outlook and common values, a ’humanis-
tic outlook’. They both valued the worth of the
individual and his or her ability to look after him
or herself. They both valued health. In spite of
the public-private divide, they had the same
starting point. The problem was, however, that
even if the public sector was full of good
intentions with respect to shared values, public
organizations let the values down because of the
monopoly status of the institutions, the absence
of freedom of choice and the tendency toward
disempowerment, which results in powerless-
to complain because of lack of alternatives.
Scan Care, on the other hand, was in a
better position, as a private company competing
with other companies, to live up to the shared
values. The market demanded that they be
responsive, more flexible. Citizens could opt out
if they wanted to. Finally, Scan Care had a
history of considering the individual. They
argued, in other words, that they could assure
the basic values a real status. They could assure
54
Fig. 2. Argumentation models.
autonomy. They could break the monopoly and
realize the importance of the basics (Steffensen
1995).
The final argument in the Value Model
buys into the importance of human values. It is
not possible to argue against human values as
the basic premise of contracting out. Everybody
is included, and once inside. you cannot be
dogmatic about the means because the end is
the realization of something as fundamental as
human values. One cannot legitimately prefer
public solutions to private ones as long as the
private solutions are better with respect to the
values.
The three argumentation models are sum-
marized in Figure 2. While developing the
Values Model. Scan Care became explicitly
reflexive regarding its argumentation models
and its relation to the outside world. Discussions
commenced in which the argumentation mod-
els were compared in terms of which agents
could, from experience, be persuaded and
seduced by which model. The possible argu-
ments within the various models were com-
pared. Finally, experiments were
conducted with the various models in relation
to 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 of
the Financial Models is in their relation to local
administration and councillors. By contrast, the
Financial Models only arouse suspicion among
health care staff and the elderly. Mads Steffen-
sen summarizes as follows: ’I have tried to talk
money. But forget it. Only political arguments
have clout! My fundamental attitude is that
private/public co-operation means that 2 plus 2
equals 5. But this is a financial argument which
is not bought’ (Steffensen 1995).
This is the very reason Scan Care developed
the Value Model. The question was how Scan
Care would then come through. The Value
Model was seen as the answer because with it,
’the health care staff’s view of the world is put
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into In the development of the model it
shape!’.
was taken into account that everybody is
included when the model is based on values:
’When arguing on the premise of values,
opponents of contracting out are put in a
position where they can only say ’I don’t want
to because I don’t want to’. Then, of course, you
risk war at the same time’ (Steffensen 1995).
The political environment displaces the
market
Giving up its attempts to keep politics at a
distance by segregating pure service further
affected Scan Care’s internal construction of its
surroundings. The focus shifted from the
market to the political environment.
The basic reason for Scan Care’s existence
was, of course, that there was believed to be a
very big potential market for elderly care. The
problem was that this market was not regarded
as accessible until a series of political problems
was overcome. In the meantime, it did not make
sense for Scan Care to perceive itself as a
company in a market. On the other hand. it
did make sense to regard itself as a political
player (with certain limitations) in a political
world. As will become apparent, the construc-
tion of the political world became increasingly
important in Scan Care’s own construction of
itself in the world around it. In the end, it was
actually the political considerations that led to
the decision to drop the idea of aiming for the
market for service for the elderly.
In 1991, as mentioned earlier, the market
consciously was the primary environment to which Scan
Care could relate analytically, but from the
beginning of 1995Scan Care’s management
wished to keep track of developments in the
political world, not those in the market. Thus,
politics had a high profile in the directors’ report
to Scan Care’s first management committee
meeting in 1995. The report reads as follows:
The time since the last committee meeting in
November 1994 may only be described as an
eventful period. The public market share continues
to be assessed as heavy and influenced by a
mixture of political likes and dislikes. We can
report that Scan Care has become widely known in
public and political circles, which furthermore has
meant that Scan Care has got on the political
agenda, which as we know always results in
making friends as well as enemies. It has to be
realized that classical marketing of Scan Care
services is therefore superfluous 1...1 There is
widespread political scepticism about privatizing
distribution.

the key local public services, nursing and
(Scan Care 199 Sa 1)1
On August 24, 1995 another management
meeting was called. According to the agenda.
plans for 1996 were to be discussed, among
other things. This item was supported by two
documents: Developmental Scenarios 1995-
2000 (Scan Care 1995d) and Strntegic Plan
1996 prognosis 2000 (Scan Care 1995c). The
analysis of Scan Care’s political environment is
the decisive factor in these papers. The former
outlines scenarios for each individual existing
project, plus a number of potential projects. For
each project four possible scenarios are
described: the best possible situation, an opti-
mistic assessment, the realistic assessment and
the worst possible case.
It is characteristic of the analysis that the
causes typically identified in the ’realistic’ or
’worst possible’ scenarios are mostly related to
politics. There are. in almost every case, political
reasons for a project failing. The political aspects
are described in the following terms: ’a long
political process’, ’political opposition’, ’political
turbulence delays the start’, ’no political basis’,
’the political majority is maintained’, ’the
political majority is lost at the election’ and
’for political reasons the time is not ripe’ (Scan
Care 1995d). Everywhere politics is referred to.
Politics is not seen risk that can be
as a Conclusion
managed, but as a hazard in the environment.
Politics is also prominent in Strategic Plan
1996 (Scan Care 1995c). The analysis is divided
into two parts. The first part is an analysis of the
political trends that influenced Scan Care’s
potential to open up the public market for
elderly services. Issues include ( 1 ) the tendency
of political opponents of privatization to use the
law as a tool: (2) the Rilws conflict.’’ which
scared the timid but hardly fazed the cold-
blooded ; (3) Poul Nyrup’s (the Prime Minister’s)
pastoral letter of June 1995 to members of the
Social Democratic Party, in which the line for
privatization is drawn at hospital care and care
of elderly: and 1~1 the welfare discussion with
the Welfare Commission, among others, which
is reported as diffuse and without concrete
outcome. All in all, there are no indications that
the question of privatization would be resolved
in favour of Scan Care.
The second part attempts to analyse Scan
Care’s image and external agents’ beliefs about
privatization of service for the elderly. There are
thought to be twelve images of Scan Care held
by the outside world. In summary, Scan Care
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55
care. believes that ’the trend of the undercurrents in
the developments in society is in a direction
which is favourable to Scan Care, all things
being equal; however, the immediate political
manifestations are becoming problematic to
Scan Care. The current is with us; but wind
and waves are p.t. against’ (Scan Care 1995c).
It is concluded that ’The strategic challenge
for Scan Care consists of realizing its aims in
a market and a political situation which
is characterized by a widespread but not un-
equivocal political-ideological opposition, pro-
fessional scepticism and major technical
challenges of setting up a complex and untested
delivery system’ (Scan Care 1995c).
Closing down Scan Care was seriously
considered from September of that year
( Jorgensen 1995). On October 12 a public
announcement was made that Scan Care’s
activities would be wound down in such a way
that it could be revived with 24 hours’ notice
when Denmark is ready for it. The reason given
was Prime Minister Nyrup Rasmussen’s nega-
tive statements about privatizing elderly care.
Internally, the reason for winding down was
understood to be that ’The public market is not
yet sufficiently ripe for Scan Care to maintain an
organization of the present size on a sensible
basis’ (Johansen 1995).
z
This case history clearly shows how Scan Care
moved from forming the economic code to
forming the political code of government/
opposition as well. The starting position was
that all decisions were about spending/not-
spending. The political environment was also
assessed on the basis of this code. The decision
to segregate the political from the economic was
obviously a business decision and not one that
retlected the political code. However, as from the
dissolution of the boundary between the mental
and the physical, the political code permeated
Scan Care. Entering the field of elderly care
became an economic decision to relate to the
political environment with the political code.
We saw how Scan Care articulated a range
of political problems and sought to solve them
via the political system. We also saw how it
moved from a natural use of financial argu-
ments with local authorities and others towards
the creation of a series of comparable argumen-
tation models, which finally was reflected in the
code of government/opposition as its basic
model. It became tinancially decisive to be in
line with the sitting majority and weaken the
distribution.
56
opposition to privatization. Thus, the economic
code took second place, and its realization
became dependent on Scan Care’s political
endeavours.
The shift in code is even more visible in
Scan Care’s observation of the world around it.
Until the dissolution of the boundary between
the mental and physical. Scan Care constructed
its environment as a market. After the dissolu-
tion of the boundary, the environment was
constructed as a political one with political allies
and opponents. The focus was on political risks
and processes.
Finally, we saw how the economic code and
the political code clashed. It became a problem
for Scan Care (and especially the ISS) to be
patient, that is, to decide when to end its
political involvement (with or without success)
and let the economic code take over.
4. Conclusion: language games and
second-order strategies
Does contracting out then lead to more market
and less politics? The experience of this case
study suggests a change towards more market
and more politics. In this last part of the article
seven more theoretical theses about the parti-
cular conditions for a company in a public
market are outlined.
Thesis no. I
Competition will differentiate into two orders. Second-
order competition is about defining premises of future
competition. If a company does not participate in
second-order competitIOn. it risks being excluded from
participating in first-order competition as well.
The public market is in many cases not yet
established. It is a market under construction;
therefore the rules of the game have not yet
been created nor fixed. The companies involved
must relate not only to the market, but also to a
potential market that is not yet open. Even in
areas with a tradition of tendering, the political
game constantly redefines the conditions of the
market, changing budgets, priorities, policies
and procedures. Under such circumstances
competition has to do with the very opening of
the public markets and the definition of its
premises. Competition is about the constructing
of a market already in the making, creating
advantageous opportunities for future expan-
sion.
A distinction between competition of first-
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distribution.
and second-order is therefore suggested. First-
order is competition for a given market with
given premises. Second-order is competition
with the intention of defining the premises of
future competition. Second-order markets are
markets under construction, which involves not
only the creation of demand, but also of
institutional frameworks and the rules of the
game.
In relation to contracting out, second-order
competition is important. When Scan Care was
created, a market for elder care simply did not
exist. Despite this situation, Scan Care defined
itself as a company in the market for service for
the elderly. There was no such thing as first-
order competition. There was no other company
defining itself in the same sector. Scan Care
contextualized itself in an imaginary market, in
a potential but not yet actual market, and it
realized that it could secure an important future
position if it opened and defined the new public
market. Competition was recognized as a
second-order activity.
It could be said that second-order competi-
tion is a passing phase, but it should be
remembered that the conditions of public
markets are political and thus open to change
and influence. The specifications of product
quality in tenders are closely connected with the
policies of the relevant areas of interest, such as
older people’s needs, general health or chil-
dren’s needs. To formulate and decide a policy is
therefore also to define the premises of future
competition.
When companies compete in the second
order, other conditions of strategy-making,
learning, cognition, etc. may be expected to
arise. Second-order companies are not only
economic organizations; they are also political
organizations taking parts in political games of
negotiation together with a whole range of
different actors.
The strategic challenges differ for the two
orders of competition. A distinction between
first- and second-order strategies similar to that
between the two orders of competition is sug-
gested (Andersen 199?: Jessop et al. 1993). In
strategies of first order, an individual company
co-ordinates internal activities and plans for
a known future. In strategies of second order,
various different organizations (e.g. private
firms, local authorities, unions, government
departments and agencies) co-ordinate their
first-order strategies for the long-term future.
In other words, second-order strategies have
to do with the definition of imaginary com-

munities and destiny, where every-
a common
body shares vision of the future differentiated
a decision-making.
in threats and hopes, necessities and possibili-
ties.
Thesis no. 2 strategies. As a result it becomes a problem for private
A distinction hetween two kinds of gnmes in second-
order strategies is suggested. Language games define
imaginary. communities nnd (uture image. In these
communities and images concrete games of negotia-
tions take place making collective decisions
possible across many mutually independent
actors. (Pedersen 1989)
When Scan Care met together with local
authorities and others to present its concept of
service for the elderly, it could not expect its
concept to be understandable to everyone. It
was crucial to the success of Scan Care that it be
able to present not only a well-developed
concept, but also a semantic context in which
the concept would have a particular meaning.
Scan Care had to develop and gain acceptance
of imaginary communities and future images,
which indicated privatization, before it could
begin to expect serious considerations, inter-
pretations and negotiations about its concepts.
Acceptance of a commonvision of the future is
in fact precondition
a for conflicts, problems and
solutions. Even struggles have to have a mean-
ing. The meaning of struggle has to be agreed.
A distinction between two kinds of games
in second-order strategies is suggested: lan-
guage games that define imaginary commu-
nities and visions of the future, and games of
negotiations that make collective decisions
possible for many mutually independent actors.
An imaginary community in this conte~.rt might
be ’the public sector 2000’ defining a horizon of
expectations of the future and a space of
experience. A budgetary squeeze might be one
element in this future horizon, and the labelling
of a number of government styles as traditional
might be an element in the space of experience.
In this imaginary community, privatization can
be framed as a very reasonable instrument. The
imaginary community constructs future possi-
bilities and threats, which subscribe exceptions
of responsible behaviour to individual actors,
motivate collective initiatives and, all in all,
create a context of meaning in which problems
may be articulated and negotiated across the
boundaries of public and private.
In short, the language games construct
possibilities and the negotiationsDownloaded
gamesfromtrans-
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© 2000 Scandinavian Sociological Association. All rights reserved. Not for commercial use or unauthorized
distribution.
57
form these possibilities into real options for
Thesis no. 3
Political codes are formed at the level of second-order
firms to decide when to form the political code and
when to form the economic code. There is no such thing
as a ’third’ code, when it has to be decided which code to
form.
When firms participate in language games
developing second-order strategies, they form
the political code of government/opposition
(+power/-power). They constantly evaluate
their models of argumentation, alliances, net-
works, etc. in light of this code. They constantly
strive for power, to enter alliances with whoever
is in government, and they constantly reflect on
how to avoid being in opposition to the
established power. If they are not able to form
alliances with whoever is in power, they simply
fail at the level of second-order strategy.
Participating in language games therefore
means that decisions within a company regard-
ing matters such as formulation of product
concepts and strategies are no longer automa-
tically perceived as merrely economic, but as
political as well.
Companies then form political as well as
economic codes. The problem then becomes
when to form which code. By forming just one
code it is possible to compare alternatives in
light of the binary scheme of values +/- (power
is better than no power, more money is better
than less money). By forming two or more
codes, it is not possible to compare the different
schemes of values. It makes no sense to compare
different codified values, e.g. power with money,
money with love, justice with health. Their is no
way to determine what is best, to govern or to
own. Each code divides the world in two: into
government and opposition, into what I own
and what I do not own, into justice and
injustice. There is no place for a third position
in this binary division of the world, and there-
fore no extra position from which one code can
be compared with another, no extra position
from which codes can be compared as alter-
natives. The political code might be represented
in a decision-making process forming the
economic code, but then the question is
whether politics pay off or not. In the forming
of 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
58
and government versus opposition. Economy
might also be represented in decisions forming
the political code, e.g. in a question of whether
to use economic argumentation or not in order
to gain power. Which code to form is a decision
that can only be made by forming a code! And
there is no third code, no ’supercode’ beyond the
economic and political codes, in which such a
decision can be made. Exactly because of the
incommensurability of codes, there is no natural
equity between a negative (or positive) eco-
nomic examination and a negative (or positive)
political one.
Llsing the early creation of Scan Care as an
example, the forming of the political code led to
scepticism regarding ’Project Elder Service’,
while the forming of the economic code led to
an optimism based on prognoses of an enor-
mous market. No third code could stabilize or
control the balance of these two very different
worldviews. In the end, the company had to
choose one of the codes as the basic code from
which all codes must be managed. But which
code should be formed in this decision? Logically
any company in this situation ends up con-
tinuously regressing without stable points of
reference.
The presence of incompatible codes within
organizational communication makes collision
of codes possible, e.g. in the balancing of first-
and second-order strategies. The likelihood of
code clashes might increase when the first and
second orders are also separated organization-
ally. as in a company where different subsystems
form different codes and therefore construct
different boundaries between the company and
its environment. To some degree Scan
an example of this. The day-to-day manage-
ment of Scan Care formed the political code of
government/opposition. The board of directors
of Scan Care formed the economic code pay/not
pay. Often the board of directors was informed
about the situation in Scan Care in the code of
the political, although the Board insisted on
making economic and not political decisions.
The message was sent in the political code, but
received in the economic code. The Board
regarded itself as having the final say as to
whether Scan Care and second-order strategies
would pay off or not.
When companies form political codes, not
only does the economic code change, but so
does the background model from which the
companies observe and ascribe meaning to their
environment. The case of Scan Care showed
how perceptions of the environment as a market costs are cult.
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© 2000 Scandinavian Sociological Association. All rights reserved. Not for commercial use or unauthorized
were displaced by perceptions of political
opportunities when Scan Care began forming
the political code. Suddenly the criteria for
selection of relevant events in the environment
changed. Within Scan Care, obstacles in the
environment began to be differentiated into
meaning and ’noise’. Meaning was no longer
produced on the same conditions. For instance,
it was no longer of major importance to possess
analytical tools regarding the market. What
became important was the ability to make
reliable analyses of political opportunities and
risks. Thus, clashes between codes of commu-
nication also mean clashes of different internal
constructions of the environment.
Thesis no. 4
In language’ gnmes and negotiatinns there are many
participants representing di(fi>rent systems. eacl1
rnclny
of them witl1 its own definitions o’f rules ol’at~qiiiiietita-
t1011 and rt’levant contexts. This means that a
participant in second-order strategy compmlles must
learn how to handle the blind spots of other systems.
HTit1wut sensitivity to the blind spots of other systems.
companies do iiot have much chance 0.( creating future
images that will gain acceptance.
We must imagine that in cross-organizational
language games, every organization has its own
internal construction of its environment. Thus,
in language games. a multitude of organizations
and environments is at stake. Each participant
has its own definition of ’relevant environment’.
A private company might contextualize itself as
a firm in a market, a public organization within
a hierarchy, a trade union as a combatant in a
Care was field of struggle, etc. The questions are: how can
so many different systems negotiate at all? How
is it at all possible to construct imaginary
communities and visions of a future that make
sense to all systems?
In language games and negotiation, the
problem is to transgress the mutual ignorance
based on the many blind spots. The involved
systems systematically misread each other
because of their communicative closure, each
drawing a different boundary of meaning
(Teubner 1992). What is meaningful to one
system is noise to another, or even worse: what
is natural to one system is regarded with
suspicion by another. For example, it makes
good sense to the local authorities to use
tendering as a means of accountability, while
this practise is regarded as suspect by staff in a
nursing home. Someone will lose out when
distribution.

The question is: how can each company
deal with the blind spots of the others? This is
what second-order learning is all about: to
’hack’ through models of argumentation,
through the system boundaries of others.
However, models of argumentation can never
be broken from the outside. The ’hacker’ has to
be located inside the model as a prisoner of a
particular semantic and bound to particular
blind spots.
A distinction can be made between first
and second-order learning. Learning of the first
order can be defined as learning based on a non-
reflected system boundary about the effects of
decisions in relation to expected effects.The
system boundary, that is, the boundary of
meaning of the communication system, found
learning of the first order by founding the
expectations of the system, and of course, the
boundary changes slowly as an implicit out-
come of the learning process. In contrast,
second-order learning is defined as learning
based on self-reflexivity of one’s own boundary
about the effects of boundary-making. For
instance, how does this particular distinction
between inside and outside our system reduce
our possibilities of dealing with the blind spots of
other systems? Learning of the second order
assumes that boundary-making affects the
reception of oneself into other systems. The
search to be recognized is a part of what other
systems define as a relevant environment. The
effect of failure is that you turn into pure noise.
Thesis no. 5 identity. When Scan Care moved from the
The firm has to reconcile itself to the fact that it cannot
declare its own image of the environment as a valid
image to all other systems. There can be no hierarchy oJ
‘realities’.’.
To insist on one’s own construction of the
environment as superior would mean ignoring
the fact that systems in general are not able to
be in direct contact with their environment.
They only make sense to their environment and
events in it via an internal construction of the
environment. The internal construction of the
environment enables the system to observe the
environment, but always restricted by a blind
spot. If a system, e.g. a company, still insists on
its superior construction of the environment, it
risks losing credibility in other systems. The
company risks being dismissed as meaningless
noise. Instead, the company has to limit itself to
the presentation of future images open to
different interpretations, and Downloaded
supporting, not
from http://asj.sagepub.com at CAPES on April 24, 2008
© 2000 Scandinavian Sociological Association. All rights reserved. Not for commercial use or unauthorized
distribution.
s 59
blocking, the self-reflexivity of other systems
(Andersen 1995).
Thesis no. 6
Learning about one’s own boundary of meaning is only
possible within a boundary of meaning. The blind spot
ova system may only be displaced and 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 always
observed models of argumentation from within
another model of argumentation (the Politics of
Expenditure Model, the Synergy Model and the
Value Model). When Scan Care discussed the
weakness of the politics of expenditure model, it
always did so from the point of view of another
model. The illumination of a blind spot of one
argumentation model always came from
another model with another blind spot. So the
blind spot can only be displaced, but can never
disappear completely. Learning of the second
order means self-reflexivity of the system/
environment boundary, but a situation is
never without a boundary and never outside a
model of argumentation.
Thesis no. 7
To question your boundary in second-order learning
processes also means putting your identity at stake.
A company can redefine its system/
never
environment a new model of
boundary using
argumentation without also redefining its
Politics of Expenditure Model to the Synergy
Model, it also redefined the very mission of its
work. As a concrete example, the concept of
service for the elderly changed when the model
of argumentation was displaced.
The identity of a company is at stake when
it enters the second-order learning process, and
it is arguable whether this involves the very
character of identification, not of the identity per
se, but of the way identity is constructed. On one
hand, a company might gain greater autonomy,
making itself master of argumentation models
and boundary constructions. On the other, the
company risks becoming a stranger in its own
home because boundaries no longer constitute
a solid universe, protecting the company against
the paradoxes of decision-making.
In short: privatization and the opening of a
public market do not in a general sense lead to
marketization. The dogma of new public man-
agement cannot be taken for granted. Privatiza-
60
tion be reduced to a question of
cannot
flexibility and budget balance. It has been
shown that when the boundary between the
public and private sectors changes, activities do
not simply move from one side to another. The
sectors and their structural linkages are also
redefined, with major constitutive and inherent
effects on their modes of functioning. Taking
this to its ultimate conclusion, privatization is
today the best means to achieve the aim of
increased politicization and inclusion of the
private sector in the political system.
First version received April
Final version accepted November
Notes
1
Scan Care’s political activities are then reported.
2Avery serious labour conflict against competition of
wages in relation to contracting out. The conflict lasted for over
a year.
3Learning of the first order can be divided into different
steps: single-loop learning, double-loop learning and triple-loop
learning (Wisenthal 1995).
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