She Ji. The Journal of Design Economics (3)

Volume 2, Issue 3, Autumn 2016

Editorial Scope

Author Enquires

She Ji is a peer-reviewed, transdisciplinary design journal
with a focus on economics and
innovation, design process and
design thinking. The journal
invites papers that enrich the
understanding and practice
that enable design innovation
in industry, business,
non-profit services, and
government through economic
and social value creation.
These papers may explore how
design thinking can inform
wider social, managerial, and
intellectual discourses with

an added focus on strategy
and management. She Ji also
publishes articles in research
methods and methodology,
philosophy, and philosophy
of science to support the core
journal area.
She Ji is fully open access.
Tongji University and Tongji
University Press support She Ji
as a contribution to the design
field and a public service to
design research. Authors are
not liable for any publication
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site.
A CC user license which
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Editorial Ofice
Correspondence
She Ji
c/o Jin Ma

Tongji University
College of Design and
Innovation
Building No. 2, Room IS-112
281 Fu-Xin Road
Shanghai, 200092 China
Tel: +86 21 6598 7990
majin.sheji@icloud.com

About the Cover
In Chinese, the name “Tongji”
(同济) denotes people sailing
in the same boat as they work
together for a common goal.
Togetherness and collaboration
are deeply rooted in the
culture of Tongji University.
In the changing social and
economic context of design,
Tongji University is revitalizing

this culture. As a young,
energetic part of Tongji,
the College of Design and
Innovation (D&I) contributes
the texture of the community.
D&I works closely with the
neighborhood, the community,
and the city of Shanghai to
explore the opportunities that
design can create for industrial
transformation and sustainable
ways of living.
The cover of this issue comes
from the workshop on
building the City Science Lab
@ Shanghai—a joint efort
of the MIT Media Lab and
the College of Design and
Innovation, Tongji University.
The workshop developed an

interactive tool to visualize
the multiple trajectories of
day-to-day activities by people
living and working in our
neighborhood to facilitate
communication between local
stakeholders.
The workshop participants are:
Jintian Shi, Ke Ma, Shengchen
Zhang, Jan Dornig, Jiabin Wei,
Hangping Yang, Shengxiu Zhu,
Shuai Liu, Jinnuo Yang, Prof.
Jarmo Suominen, Prof. Xiaohua
Sun, and Prof. Yongqi Lou from
Tongji D&I; and Yan Zhang,
Ariel Noyman, Dr. Luis Alonso,
Dr. Arnaud Grignard, and Prof.
Kent Larson from the MIT
Media Lab. Photo by Jiaying Hu.


She Ji: The Journal of Design,
Economics, and Innovation is a
peer-reviewed, open access
journal published quarterly
(spring, summer, autumn, and
winter).
For information about She Ji,
visit:
http://www.journals.elsevier.
com/she-ji-the-journal-ofdesign-economics-andinnovation
Copyright © 2016, Tongji
University and Tongji
University Press. Production
and hosting by Elsevier B.V. on
behalf of the owner.
Full text available on
ScienceDirect®.
She Ji: The Journal of Design,
Economics, and Innovation
Volume 2, Issue 3, Autumn

2016
ISSN 2405-8726

Table of Contents

Editorial
179

Tongji University: 110 Years of Research and Education
Ken Friedman

183

What Is Good for General Motors Is Bad for America:The 2009
Bailout Through the Lens of Heskett’s Design-Oriented Theory
of Value
Cameron M. Weber

199


Examining the Types of Knowledge Claims Made in Design
Research
Jordan Beck, Erik Stolterman

215

Can College Rankings Be Believed?
Meredith Davis
Commentary

231
233
235
236

University Rankings and the Coming of the Auto-Industrial Age
Peter Murphy
Outstanding in Your Field
Pradeep Sharma
University Rankings Need Improvement
Ninghua Zhong
College Rankings: Can’t Love ’Em, Can’t Leave ’Em
Carma Gorman
Authors’ Response

238

Making Judgments of Educational Quality
Meredith Davis

243

Zen and the Art of University Rankings in Art and Design
Scott Thompson-Whiteside

In Conversation
256

Christian Bason: Design for Public Service
Maria Camacho

Book Review
269

Economies of Design by Guy Julier
Cees de Bont

Tongji University: 110 Years of
Research and Education

With this issue of She Ji, we celebrate a century and a decade in the life of Tongji
University. The university came into being in May 1907.
Frank Rhodes, the former president of Cornell University, describes the university as “the most significant creation of the second millennium.” 1
The institutions that we now know as universities date back nearly five millennia. The early roots of the professional school begin in the scribal schools of ancient Egypt and Sumer. Early institutions that undertook some of the functions of
modern universities include Plato’s Academy, the Library of Alexandria, Pushpagiri
and Nalanda in India, Taxila in Pakistan, and the Imperial Academy in China.
Today’s modern universities began in the Middle Ages at Bologna, Paris, and
Oxford. 2 The oldest modern university with a continuous history was established at
Fez, Morocco, in 859—Al Quaraouiyine University. 3
The modern research university is much younger. The concept of the modern
research university dates to a debate that began when Prussian authorities asked a
theology faculty to review and censor a book on religion by philosopher Emmanuel
Kant, a practice dating to the requirement of “imprimatur” for books with the censor's “nihil obstat” to certify books on religion. The government argued that Kant,
as a philosopher, had no authority to write about religion unless a faculty of theology certified his book. In response Kant, a member of the philosophy faculty at
another university, wrote The Conflict of the Faculties. 4 In this book, Kant argues that
the university rests on the foundation of the philosophical and scientific faculty.
This faculty was the “lower faculty” of the medieval university. The lower faculty
was the foundation of the university, just as the ground floor of a building is lower
than any higher floor. Everyone at university studied in the lower faculty because
every scholar in all disciplines built on the curriculum the trivium of grammar,
logic, and rhetoric and the quadrivium of arithmetic, geometry, music, and astronomy. The “higher faculties” were the professional schools of law, theology, and
medicine. Kant argued that it was the business of the lower faculty to consider and
debate on all issues, a debate on academic freedom in the university that continues
from Kant’s time to our own. Kant’s book and the debate it engendered 5 set the
stage for Wilhelm von Humboldt’s university reforms. 6
The next great advance in university development came when Humboldt established the University of Berlin in 1809. 7 While older universities became research
universities in the years that followed, Berlin was the first research university in
the sense that we use the word today. The abiding principles of the modern research university date to Kant’s debate.
Universities prepare citizens for life in industrial and post-industrial society.

1 Frank H.T. Rhodes, The Creation of the Future:The Role of
the American University (Ithaca,
New York: Cornell University
Press, 2001), xi.
2 Ken Friedman, “Design Education in the University: A Philosophical and Socio-Economic
Inquiry,” Design Philosophy
Papers 1, no. 5 (2015): 248, DOI:
http://dx.doi.org/10.2752/144871
303X13965299302596.
3 Larbi Arbaoui, “Al Karaouin of
Fez:The Oldest University in the
World,” Morocco World News,
ODVWPRGLÀHG2FWREHU
https://www.moroccoworldnews.
com/2012/10/59056/al-karaouinof-fez-the-oldest-university-inthe-world/.
4 Immanuel Kant, 7KH&RQÁLFW
of the Faculties, trans. Mary J.
Gregor (Lincoln, Nebraska:
University of Nebraska Press,
1992).
5 Ibid., vii-xxix.
6 Claudius Gellert, “The
German Model of Research and
Advanced Education,” in The
Research Foundations of Graduate Education: Germany, Britain,
France, United States, Japan,
ed. Burton R. Clark (Berkeley:
University of California Press,
1993), 5–44.
7 Ibid., 5–11.

Copyright © 2016, Tongji University and Tongji University Press.
Publishing services by Elsevier B.V. This is an open access article under the
CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
http://www.journals.elsevier.com/she-ji-the-journal-of-design-economics-and-innovation
DOI: http://dx.doi.org/10.1016/j.sheji.2017.03.006

Editorial

179

8 John Heskett, “Creative
Destruction:The Nature and
Consequences of Change
through Design,” in A John
Heskett Reader: Design, History,
Economics, ed. Clive Dilnot (New
York: Bloomsbury, 2016), 283–86.
First published as “Creative
Destruction,” I.D. International
Design, September/October
(1993): 8–9.
9 Cameron Weber, “What
Is Good for General Motors
Is Bad for America:The 2009
Bailout Through the Lens of
Heskett’s Design-Oriented
Theory of Value,” She Ji:The
Journal of Design, Economies,
and Innovation 2, no. 3 (Autumn
2016): 183–98, DOI: http://dx.doi.
org/10.1016/j.sheji.2016.11.001.
10 David Halberstam, The
Reckoning (New York: William
Morrow and Company, 1986).
11 Jordan Beck and Erik Stolterman, “Examining the Types of
Knowledge Claims Made in
Design Research,” She Ji:The
Journal of Design, Economies,
and Innovation 2, no. 3 (Autumn
2016): 210, DOI: http://dx.doi.
org/10.1016/j.sheji.2017.02.001.
12 Ibid., 214.
13 Meredith Davis, “Can College
Rankings Be Believed?,” She Ji:
The Journal of Design, Economies,
and Innovation 2, no. 3 (Autumn
2016): 215–30, DOI: http://dx.doi.
org/10.1016/j.sheji.2016.11.002.
14 William Bruce Cameron,
“Tell Me Not in Mournful
Numbers,” National Education
Association Journal 47, no. 3
(March 1958): 173.
15 Mats Alvesson, The Triumph
of Emptiness: Consumption,
Higher Education, and Work
Organization (Oxford: Oxford
University Press, 2013), 89.
16 Simon Marginson, “Dynamics
of National and Global Competition in Higher Education,”
Higher Education 52, no. 1
(2006): 3.

180

They train people to work in demanding jobs. They enable individuals to understand and interpret the world around them. They ofer individuals the opportunity
to think about fields of inquiry and study. They host research programs that create
new knowledge. They establish projects to apply the knowledge that reach generates. Universities fill all these functions and more.
Today’s universities have four great goals:
1) Creating new knowledge,
2) Preserving existing knowledge,
3) Training specialists, and
4) Educating citizens.
Tongji University has now been meeting these goals for one hundred and ten years.
She Ji joins our friends and colleagues in celebrating the first decade of Tongji’s
second century.

In This Issue
In the first article of this issue, Cameron Weber uses the late John Heskett’s 1993
economic analysis of General Motors 8 to examine the 2009 bailout of General
Motors by the United States government. 9 Heskett described the ongoing problem
of the United States automobile industry quite well back in 1993: “change is disruptive, and many people aren’t comfortable with it.” Weber deploys Heskett’s ideas
to examine GM’s ongoing problems in the quarter century since, with its shrinking
market share and declining profits.
The most astonishing aspect of this article is not the continuing value and the
incisive quality of Heskett’s analysis. It is the apparent inability of General Motors
to learn from its past. David Halberstam told the story of how the American automobile industry lost its way in his 1986 masterpiece, The Reckoning. 10 John Heskett
and Cameron Weber bring us up to date.
In the second article, Jordan Beck and Erik Stolterman address an epistemological question in design research. There has been much discussion on what design
professionals know and how they know it. There has been far less consideration of
knowledge in design as a research discipline. In their article, Beck and Stolterman
examine the concept of knowledge claims, distinguishing the disciplines of design
from other disciplines. To do so, they compare publications in the natural sciences,
the social sciences, and design.
The design disciplines lack a consensus on the nature and status of knowledge
claims. As Beck and Stolterman write, “Without a clearer sense of what kind of
knowledge a field produces, or of its unique evaluative tools and methods, scholars
must rely on their expertise and experience, which does not always overlap with
that of their colleagues.” 11 They conclude by suggesting that those of us in the
design disciplines should “begin to think more intentionally about the kinds of
knowledge we are producing and what the consequences of its production might
be.” 12
Several times a year, diferent organizations rank colleges and universities in
global, national, or regional league tables, as well as with respect to specific professions or disciplines. In the third article of She Ji, Meredith Davis asks whether we
can believe college rankings. 13 In a broad sense, she is not simply asking whether
we can believe the rankings—but whether they are useful in any serious sense.
Davis examines the worldwide literature on college and university rankings
and the quite diferent approaches that diferent rankings use to reach their
conclusions. Like many others, Davis asks what it is that rankings really rank. In
her view, there seems to be little efort to measure educational quality—instead,

she ji The Journal of Design, Economics, and Innovation

Volume 2, Number 3, Autumn 2016

rankings measure data that can easily be counted. As the sociologist William Bruce
Cameron famously said, “Counting sounds easy until we actually attempt it, and
then we quickly discover that often we cannot recognize what we ought to count.
Numbers are no substitute for clear definitions, and not everything that can be
counted counts.” 14 This applies well to university rankings.
In his critique of higher education today, Mats Alvesson writes, “the rapid
development of a global commercial mass market for education, headed by US, UK,
and Australian universities, means that rankings are becoming more important,” 15
citing Simon Marginson’s observation on the pyramid of rankings as “steeper in
some nations than others, and more powerfully felt in some places than others,
but [it] always exists.” 16 Highly critical of what he calls the “greasy rankings pole,”
Alvesson 17 argues that rankings are yet another meaningless game that university
administrators play in an efort to impress governments, potential students—and
each other.
We follow Davis with four astute commentators—Peter Murphy with “University Rankings and the Coming of the Auto-Industrial Age,” 18 Pradeep Sharma with
“Outstanding in Your Field,” 19 Ninghua Zhong with “University Rankings Need Improvement,” 20 and Carma Gorman with “College Rankings: Can’t Love ’Em, Can’t
Leave ’Em.” 21 Davis replies in “Making Judgments of Educational Quality.” 22
Scott Thompson-Whiteside takes yet another look at the same problem in “Zen
and the Art of University Rankings in Art and Design.” 23
Thompson-Whiteside focuses more deeply on the question of what rankings
mean and whether they measure quality, whatever that might be. What, indeed,
is quality? Thompson-Whiteside starts with sources as divergent as Robert Pirsig,
Frederick Winslow Taylor, W. Edwards Deming, and Joseph Juran. Moving on to
discuss the main ranking systems today, his article provides useful visualizations
that allow readers to contrast and compare the main, criteria-based systems now in
use—as well as pointing to the U-Multirank system that allows users to develop a
custom-tailored ranking system based on their personal criteria. Established as an
initiative of the European Commission, U-Multirank now covers more than 1,300
universities in 90 nations, with data on more than 3,250 faculties and over 10,000
degree programs. 24
The articles and comments in this issue of She Ji, together with Thompson-Whiteside’s graphics and his discussion of the broad U-Multirank system ofer a useful
summary to readers. While we focus on the design field and the design disciplines,
we are confident that the broader and more general issues will interest scholars,
scientists, academics, and professionals across a wide spectrum of disciplines and
fields.
Nearly everyone involved in universities today is concerned with ranking
schemes and league tables. These systems interest government leaders, those who
make education policy, and university councils—sometimes to the point of obsession. As a result, we must all consider these issues. Davis, Murphy, Sharma, Zhong,
Gorman, and Thompson-Whiteside bring years of experience and a broad global
perspective to bear on these issues.
In this issue of She Ji, Christian Bason and Maria Camacho meet in conversation to discuss “Design for Public Service.” 25 At a time when government agencies,
businesses, and organizations use design methods to solve large-scale problems,
Christian Bason has been a thought leader on how to do this. Today, he is the head
of the Danish Design Center, Denmark’s design council.26 From 2007 to 2014, Bason
served as Director of MindLab, a cross-governmental innovation consultancy in
Denmark owned jointly by the Ministry of Industry, Business and Financial Afairs,
the Ministry of Employment, the Ministry of Education and Odense Municipality,
working as well with the Ministry for Economic Afairs and the Interior. 27

Editorial

17 Alvesson, Triumph of Emptiness, 79.
18 Peter Murphy, “University
Rankings and the Coming
of the Auto-Industrial Age,”
commentary on “Can College
Rankings Be Believed?,” She Ji:
The Journal of Design, Economies,
and Innovation 2, no. 3 (Autumn
2016): 231–33, DOI: http://dx.doi.
org/10.1016/j.sheji.2017.03.001.
19 Pradeep Sharma, “Outstanding in Your Field,” commentary
on Meredith Davis, “Can College
Rankings Be Believed?,” She Ji:
The Journal of Design, Economies,
and Innovation 2, no. 3 (Autumn
2016): 233–35, DOI: http://dx.doi.
org/10.1016/j.sheji.2017.03.002.
20 Ninghua Zhong, “University
Rankings Need Improvement,”
commentary on Meredith Davis,
“Can College Rankings Be
Believed?,” She Ji:The Journal
of Design, Economies, and
Innovation 2, no. 3 (Autumn
2016): 235–36, DOI: http://dx.doi.
org/10.1016/j.sheji.2017.03.003.
21 Carma Gorman, “College
Rankings: Can’t Love ’Em, Can’t
Leave ’Em,” commentary on
Meredith Davis, “Can College
Rankings Be Believed?,” She Ji:
The Journal of Design, Economies,
and Innovation 2, no. 3 (Autumn
2016): 236–38, DOI: http://dx.doi.
org/10.1016/j.sheji.2017.03.004.
22 Meredith Davis, “Making
Judgments of Educational
Quality,” response to commentaries on “Can College
Rankings Be Believed?,” She Ji:
The Journal of Design, Economies,
and Innovation 2, no. 3 (Autumn
2016): 238–42, DOI: http://dx.doi.
org/10.1016/j.sheji.2017.03.005.
23 Scott Thompson-Whiteside,
“Zen and the Art of University
Rankings in Art and Design,”
She Ji:The Journal of Design,
Economies, and Innovation 2,
no. 3 (Autumn 2016): 243–55,
DOI: http://dx.doi.org/10.1016/j.
sheji.2017.01.001.
24 U-Multirank, accessed March
1, 2017, http://www.umultirank.
org/.
25 Maria Camacho, “Christian
Bason: Design for Public
Service,” She Ji:The Journal
of Design, Economies, and
Innovation 2, no. 3 (Autumn
2016): 256–68, DOI: http://dx.doi.
org/10.1016/j.sheji.2017.02.002.

181

26 Dansk Design Center,
accessed March 1, 2017, http://
danskdesigncenter.dk/en/
frontpage.
27 MindLab, accessed March 1,
2017, http://mind-lab.dk/en/.
28 Christian Bason, Leading
Public Sector Innovation:
Co-creating for a Better Society
(Bristol: Policy Press, 2010);
Christian Bason, Design for
Policy (Milton Park: Gower,
2014); Christian Bason, Leading
Public Design: Discovering
Human-Centred Governance
(Bristol: Policy Press, 2017).
29 Cees de Bont, “Economies
of Design by Guy Julier,” She Ji:
The Journal of Design, Economies,
and Innovation 2, no. 3 (Autumn
2016): 269–70, DOI: http://dx.doi.
org/10.1016/j.sheji.10.1016/j.
sheji.2017.03.007.
30 Guy Julier, Economies of
Design (London: Sage Publications, 2017).

182

In this conversation, Bason reflects on his experiences—and on the ways that
design methods can help business, industry, and government develop better systems, services, and products. Bason is responsible for three groundbreaking books
in the field—the most recent being Leading Public Design: Discovering Human-Centred
Governance, published this year by Policy Press. 28
She Ji conversations focus on vital issues in design, economics, and innovation.
This conversation ofers useful ideas on all three.
Finally, we feature a book review 29 by Cees de Bont on Guy Julier’s new book,
Economies of Design. 30 Julier is the Victoria & Albert Museum Principal Research
Fellow in Contemporary Design and Professor of Design Culture at the University
of Brighton. In this book, Julier brings a broad and thoughtful perspective to the
topic. De Bont is an economic psychologist and former senior executive at Phillips
who is now Dean of the School of Design at Hong Kong Polytechnic University. De
Bont’s review explains why this book is relevant today in political terms that transcend the economic.
Welcome to the latest issue of She Ji. We wish you good reading.

Ken Friedman
Editor-in-Chief

she ji The Journal of Design, Economics, and Innovation

Volume 2, Number 3, Autumn 2016

Cameron M. Weber, St. John’s University, USA

What Is Good for General Motors Is
Bad for America: The 2009 Bailout
Through the Lens of Heskett’s DesignOriented Theory of Value
Abstract This research is an applied case study of the 2009 General Motors
bailout using John Heskett’s economics as a starting point for analysis. In
1993, Heskett (1937–2014) wrote in International Design that GM’s myopic
design vision at the corporate strategy level led to the company’s stagnation and an inability to compete. Professor Heskett had not only captured
GM’s competitive position at the time—he had foretold its future decline.
Shortly after that article was published, GM declared losses of $23 billion—
the largest in US corporate history. In 2009, despite accumulated losses
totaling $35 billion, GM was bailed out and nationalized by the US government in another unprecedented event. Through the lens of the GM bailout,
this article examines Heskett’s critique of mainstream economics and uses
his research into institutional economics and the national system to help
define the rent-seeking asset regime that led to the GM bailout. Key observations will benefit firm management, policy-makers, and those interested
in political economics from an historical and institutional point of view.

Keywords
General Motors
Institutional economics
Design as strategy
$VVHWVSHFLÀFLW\
Rent-seeking
Creative destruction
Economic nationalism

Received July 31, 2016
Accepted October 31, 2016

Emails
Cameron M. Weber
(corresponding author)
cameron_weber@hotmail.com

Copyright © 2016, Tongji University and Tongji University Press.
Publishing services by Elsevier B.V. This is an open access article under the
CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
The peer review process is the responsibility of Tongji University and Tongji University Press.
http://www.journals.elsevier.com/she-ji-the-journal-of-design-economics-and-innovation
http://dx.doi.org/10.1016/j.sheji.2016.11.001

What Is Good for General Motors Is Bad for America

183

1 This article draws on the
economics of John Heskett as
found in John Heskett, A John
Heskett Reader: Design, History,
Economics, ed. Clive Dilnot
(New York: Bloomsbury, 2016),
and John Heskett, Design and
the Creation of Value, ed. Clive
Dilnot (New York: Bloomsbury,
2017, forthcoming).
 6HH*0SURÀWKLVWRU\LQ$Spendix of this article. In addition
to accumulated operational
losses from 1982 to year-end
2015, GM has almost $83 billion
in non-current liabilities—mostly
for employee and employee
UHWLUHPHQWEHQHÀWV³PRUH
than half of GM’s total liabilities.
“General Motors Co. (GM),”
Stock Analysis on Net, last
PRGLÀHG'HFHPEHU
accessed November 30, 2016,
https://www.stock-analysis-on.
net/NYSE/Company/General-Motors-Co/Financial-Statement/Liabilities-and-Stockholders-Equity.
3 Doron P. Levin, “COMPANY
REPORTS; G.M. Lost $23.5
Billion Last Year,” The New
York Times, February 12,
1993, accessed November 30,
2017, http://www.nytimes.
com/1993/02/12/business/company-reports-gm-lost-23.5-billionlast-year.html.
4 Borrowing from Max Weber,
this article uses two “ideal
types” to describe what happens
during the downward portion of
the business cycle. “Creative destruction” is a process wherein
assets are freed-up—typically
through bankruptcy—to seek
their highest return. A “bailout”
is when the state steps in to
subsidize bankrupt or illiquid investments—usually in the name
of stability, or to lessen unemployment. Creative destruction
affords more economic growth
over the long term than a
bailout does. A bailout effectively
prevents creative destruction.
See Joseph A. Schumpeter,
Capitalism, Socialism and
Democracy, 5th ed. (Abingdon,
UK: Routledge Classics, 2010) for
further information.
5 First published as “Creative
Destruction,” I.D. International
Design, September/October
(1993): 8–9, and reprinted in
Heskett, A John Heskett Reader,
285.

184

Introduction
This research is an applied case study of the 2009 General Motors bailout using
John Heskett’s economics as a starting point for analysis. 1 Prof. Heskett (1937–2014)
wrote in International Design in 1993 how GM’s lack of foresight at the corporate
strategy level had led to a stagnating car company that was unable to compete.
Heskett both captures GM’s competitive position at the time and foretells its future
decline.
For example, GM’s US market share fell from approximately 43% in 1982 to
nearly 20% at the time of its nationalization and restructuring in 2009 (see Figure
2). GM had accumulated losses in excess of $35 billion between 1982 and the restructuring in 2009. 2 Later on in 1992, shortly after Heskett’s article was published,
GM declared losses of more than $23 billion, the largest corporate loss in US
history. 3
Although some of the ideas used here lack empirical development in Heskett’s
own work, this article takes a fresh look at how Heskett’s concurrent and subsequent writings on economic theory can shed new light on the GM bailout. Heskett’s
economic theory is a critique of mainstream neo-classical economics. He found that
mainstream economic models could not adequately explore the ways that “creative
destruction” 4 can create value in design-based entrepreneurship.
“If designers are to cope with the demands of varying cycles of change, the
concept of innovation must be understood on many diferent levels—from
radical and incremental innovation. Radical innovations are the basis of
Schumpeter’s ‘creative destruction’ concept, which provides new industries
and needs.” 5
In retrospect, the GM bailout in 2009 was a direct intervention against creative
destruction. ‘Stability’ was prioritized over economic innovation using an unprecedented combination of fiscal measures and national and monetary policy changes.
Heskett’s work leaves unexplored some of the economic concepts he contrasts
with mainstream models of the economy. Tore Kristensen writes,
“According to Karl Popper’s ‘falsificationism,’ we may ask if he [Heskett] proposed falsifiable hypotheses and whether some important ones have indeed
been falsified. If this is the case, then we may leave it here. We must admit
that, although many of the writings are good approximations to an empirical reality, we find few real testable hypotheses; on the other hand many of
Heskett’s descriptions, assessments and predictions seem well corroborated.
Heskett himself did not test hypotheses as such and his style of research was
explorative rather than corroborative. That is perhaps a very good idea, because Heskett’s interest was much more to stimulate the fire of contemporary
designers and others interested in these issues rather than digging up the
ashes of the past.” 6
Through the lens of the 2009 United States federal bailout of General Motors, this
article will attempt to fill in some of the missing empirics related to two of Heskett’s theses:
1) A user-focused design strategy at the highest levels of the firm is necessary
for long-term value-creation, and
2) Heterodox thinking in economics is needed to better understand a design-based economy. 7
In the 1970s, cars made by General Motors—and by smaller automakers Ford and
Chrysler—came to lose their competitive edge to the more user-responsive designs
of foreign competitors. This trend began and continued in earnest after the OPEC

she ji The Journal of Design, Economics, and Innovation

Volume 2, Number 3, Autumn 2016

oil ‘shocks’ in 1973 and 1979. It prompted buyers worldwide to opt for cheaper,
more compact car models. The US automotive industry would never recover their
earlier advantage, due to protectionist interventions (see below) fostered at the
national policy level.
Heskett uncovered a major concept absent from mainstream “perfect competition” models which can help account for the phenomenon of “state capitalism”
in the United States— exemplified at its most extreme by the case of GM in 2009.
Borrowed from new institutional economics, Heskett discusses “asset specificity”—
investment in specialized or dedicated tools, production methods, expertise, and
so on—which leads to market distortions and economic rents, as in the case of
unionized wage increases, for example. Unlike the perfect competition model, asset
specificity shows how factors of production can have specific historical trajectories
where it can become political decisions and not economic (creative destruction)
decisions which determine the allocation of resources. And this article draws upon
that analysis. GM’s illiquidity, nationalization, and restructuring—its “bailout”—
took place within a larger context of industrial relations, as also described by
Heskett.
The following section draws on Heskett’s use of the National System category
to place the historical evolution of the US political economy in context, and to
show how the idea of “economic nationalism” might further explain the bailout of
General Motors.

John Heskett on the National System
We know that nation states use industrial policy to encourage the development of
domestic industries deemed to be of national interest, and/or which can provide
economic rents under the categories of “national defense,” “energy,” or “food security,” and so on. The failure of world trade agreements under the wto is due—
broadly—to “rich,” “developed,” or “industrialized” nations subsidizing and protecting domestic agricultural production, whereas “developing” or “poor” nations’
special-interests seek to prevent competition against local manufacturing production, whose means are usually under the control of domestic elites. Although most
nations try to protect both, it can be a matter of degrees when making category
judgments.
National trade protection regimes depend uniquely on each country’s circumstances and historical development. 8 National interest industries have included
railroads, rights in ownership and access to shipping and ports, military-industrial
research and manufacturing, airlines and automobiles, aluminum and steel production, export bans on ‘strategic materials,’ and interventions into energy technology,
food labeling, domestic content, intellectual property rights … and this is only a
partial listing. These interventions occur with such regularity that the perfect-competition model cannot adequately explain many of the major historical changes in
technology and markets.
Heskett’s research includes the relationships between design and national industrial policy as related to diferent forms of economic nationalism. For example,
in his 1999 article “National Design Policy and Economic Change,” 9 Heskett finds
that, historically, there have been two types of national design regimes—those that
fused the state with industry, seen in the fascist reaction to diminished power of
the state relative to the power of the corporation, and those that were used to gain
competitive trade advantage, seen in mercantilism and neo-mercantilism. He finds
that countries such as Taiwan, South Korea, and Japan have been more successful
in mercantilist interventions than has the U.K.
In his exposition of the national system in Design and the Creation of Value, 10

What Is Good for General Motors Is Bad for America

6 Tore Kristensen, “Creating
Value by Design: John Heskett’s
Contribution to the Business
and Economics of Design,” in
Heskett, A John Heskett Reader,
279.
7 It is important to note that
Heskett’s critique of mainstream
economics was meant to be constructive. In his introduction to
Design and the Creation of Value,
editor Clive Dilnot states, “The
critique of neo-classical economic models is not conducted
merely negatively. What Heskett
shows—and this becomes
apparent in the key series of
diagrams of economic models
that illuminate the text—is that
as one contrasts neo-classical
WKHRU\ÀUVWZLWK$XVWULDQWKHRU\
and then with the insights gained
from institutional theory and
New Growth theory, that it
is possible to see a successive
deepening of understanding
of economic relations.” Clive
Dilnot in Heskett, Design and the
Creation of Value, introduction.
8 “Americans tend to view
the automobile (auto) as the
archetypal American product.
Not only does auto production
loom large economically, but
the automobile itself bears a
unique social relationship to the
national self image.” Douglas R.
Nelson, “The Political Economy
of U.S. Automobile Protection,”
National Bureau of Economic
Research (NBER), Working
Paper No. 4746, May 1994,
accessed November 30, 2016,
http://www.nber.org/papers/
w4746, 1.
9 Originally published as
“National Design Policy and
Economic Change,” in MD-Magazine, August (1999, in German
and English), reprinted in!
Heskett, A John Heskett Reader,
229–32.
10 Heskett, Design and the
Creation of Value, 124–34.

185

11 John Heskett, “A Design
Policy for the UK:Three Suggestions,” John Heskett Reader,
252–67.This article was originally unpublished, and written
as a contribution to The Cox
Review of Creativity in Business:
Building the UK’s Strengths,
commissioned by the UK government in 2005. In it, Heskett
calls for changes in awareness
and practices on behalf of
businesses and designers, not for
DQ\VSHFLÀFJRYHUQPHQWDFWLRQ
Heskett’s is a “design entrepreneurial” form of industrial policy
where entrepreneurs—especially
VPDOOEXVLQHVVHVZKHUHKHÀQGV
growth—must be free to
compete.The role of the state is
to encourage education in design
and policy that lowers the barriers of entry of change-making
technologies to be introduced by
designer-entrepreneurs. Heskett’s focus on entrepreneurship
draws on Austrian economics.
For more information see
Chapter 4 of Design and the
Creation of Value.

Heskett draws from writings on German state craft during the early Republic in
the mid to late 19th century—specifically the work of Friedrich List—to support the
idea that perfect competition atomistic economic models miss the larger national
context. He also finds that in the case of Germany and Japan, present-day national
strategies have resulted in high quality design, export-oriented economies based on
exceptional design and manufacturing.
Despite these results, Heskett does not call for active government subsidy and/
or protectionist programs to encourage economic growth. 11
“The evidence that design policy can promote economic competitiveness is
therefore mixed. Success seems to depend on two factors—the existence of
authoritarian characteristics in government, such as absolutist France, or the
guided economy of Japan; and relative industrial stability, as in ceramics and
tapestries in the eighteenth century, or automobiles and domestic electrical
products in the late twentieth century, in which innovation tends to be incremental and gradual. How then can national governments handle the dramatic
changes on multiple levels and technologies of global markets and business
organization … that are currently causing major economic disruption and
unemployment? The answer, I believe, is they cannot—government policy
exercised through bureaucratic organizations is ill-equipped to understand and
dynamically respond to change on any level. The world economy is at present
so diverse and dynamic that attempts to control it through mercantilist-style
policies will be not only be futile but extremely damaging.” 12

12 Heskett, A John Heskett
Reader, 231.

For Heskett, it is important for governments to signal that state policy prioritizes
innovation and introduction of the new, and not protection of the old. “Establishing clear concepts of entrepreneurial approaches to design in small companies
should be at the heart of any national design policy.” 13 The creative destruction of
user-based design—rather than inertia-causing producer-based design—is especially
important in the new ‘sharing’ or ‘gig’ economy facilitated by novel mobile and
Internet technologies. “Similar developments are currently apparent with companies being established on the Internet on the basis of new approaches to interactive
design.” 14
Governments should lead by example—not pick winners and losers. The US
government did not prioritize creative destruction during the bailouts of 2009, nor
in its industrial policies leading up to 2009, especially in the case of General Motors.
It is also important to note today that vested interests—hotel and taxi-driver associations, labor unions—and city, state, and national governments are making
it diicult for sharing apps such as Airbnb and Uber to compete with politically
entrenched asset regimes. 15
“If governments wish to encourage such developments [designed-based value
creation], they will need to understand what they can and cannot do well. They
can continue on the basis of the status quo, attempting to control or influence
overall trends, or they can encourage a diversity of new design initiatives. They
can do this by building infrastructure and exploring possibilities of how to
use design in their own activities, demonstrating in environments, communications and products not just an aesthetic veneer for bureaucratic inertia, but
leadership through an encouragement of possibility.” 16

13 Ibid., 232.
14 Ibid.
15 In July of 2016, The Economist
reported that the city of San
Francisco will be requiring that
Airbnb renters register with the
FLW\DQGLVWRÀQH$LUEQE
per day for each renter not
registered. Airbnb claims that
it is not responsible for clients’
failure to register as renters.
City and other governments and
their vested interests do not like
the sharing/gig economy because
LWLVGLIÀFXOWWRORFDWHWD[DQG
unionize. We also note that the
US Treasury declares Bitcoin an
asset, so that the IRS can collect
capital gains taxes on it and
prevent currency competition
against the US dollar (USD),
the Federal Reserve Bank being
a trusted purchaser of US
government debt denominated
in US dollars. “Business this
Week,” The Economist, June 30,
2016, http://www.economist.
com/news/world-week/21701546business-week.
16 Heskett, A John Heskett
Reader, 232.
17 Ibid., 232, author’s italics.

186

“Above all, policies for promoting design and for design education are the most
powerful tools available to governments, but these need to emphasize the new
demands being made on business and design practice. Businesses that do not
adapt to change disappear.” 17

she ji The Journal of Design, Economics, and Innovation

Volume 2, Number 3, Autumn 2016

John Heskett on Institutional Theory
This section discusses how Heskett’s engagement with institutional theory can
help explain why a bankrupt GM might not disappear. Economic thought based
on perfect competition models cannot explain why a bankrupt company receives
bailouts. However, in the neo-classical synthesis—perfect competition in the shortterm, with Keynesian macroeconomic management in the long-term—we can find
an argument for government intervention intended to increase aggregate demand
during times of economic slowdown, when the economy is not creating enough
jobs to maintain acceptable levels of unemployment. 18
Keynesian economic fiscal intervention is, in theory, supposed to transfer
resources from those who are saving to those will spend in the short term, in order
to seed the ‘multiplier’ which will reverberate spending increases through the
economy. Demand management provides the why for intervention, but we need
insights from institutional theory for the how and who of redistribution.
Heskett starts with the work of Ronald Coase to illustrate the “transaction-based approach” 19 of new institutional economics. Firms are faced not just
with the allocation of scarce economic resources—land, labor, capital, and entrepreneurial talent—but with management of social and political environments as
well. He then brings in the work of Oliver Williamson to describe how decisions regarding resource allocation—and the cost of managing these resources—are based
on “asset specificity.” 20 Assets are not perfectly substitutable—they are specific to a
given time and place based on the historically derived institutional environment.
“In what has become known as New Institutional Theory (NIE), examining this
pattern of complexity has given alternatives to Neo-classicism a new impetus.
A seminal paper in this direction was by Ronald Coase in 1937, ‘The Nature of
the Firm,’ in which he questioned the Neo-classical argument that the price
mechanism is the determinant in how markets allocate resources. If this was
so, he asked, what was the reason for the existence of firms? In examining the
actual workings of firms he identified a layer of functions beyond those associated with production that he termed ‘transaction costs.’ These, he argued, were
of equal importance to manufacturing costs in explaining the existence and
workings of a firm. By transaction costs, he included all the costs that were an
essential part of how a firm undertook its business, such as purchases of materials and supplies, banking, legal and insurance costs, information and promotion, design and delivery. Minimizing transaction costs was therefore suggested
as the primary function for firms but Coase also envisaged how transaction
innovations and eiciencies contributed more widely to an economic model
involving product innovations and dynamic imperfect competition.” 21

18 In Design and the Creation of
Value—his most complete work
on value theory—Heskett does
not discuss Keynesian economics
nor the neo-classical synthesis
LQKLVXQLÀHGYDOXHWKHRU\:H
introduce Keynesianism here—
the macroeconomic mainstream—to illustrate why the
bailouts of 2009 are the result of
conventional economic wisdom
DQGDQ\DVVRFLDWHGMXVWLÀFDWLRQV
for statist interventions, and
also to support the notion that
this type of mainstream thought
GRHVQRWDSSO\WRVSHFLÀFFDVHV
of resource redistribution during
the downward portion of the
business cycle. Heskett is correct
in noting that institutional
WKHRU\FDQKHOSH[SODLQVSHFLÀF
cases, while Keynesian theory is
a general theory.
19 Ronald H. Coase, “The
Nature of the Firm,” Economica
4, no. 16 (1937): 386–405.
20 Oliver E. Williamson, Markets
and Hierarchies: Antitrust Analysis
and Implications (New York:
The Free Press, 1975); Oliver
E. Williamson, The Economic
Institutions of Capitalism: Firms
Markets Relational Contracting
(New York:The Free Press,1985).
21 Heskett, Design and the
Creation of Value, 96.
22 North co-shared the Noble
Prize in 1993 for his research
into the effect of institutions on
long-period economic growth,
see for example Douglass C.
North, Institutions, Institutional
Change and Economic Performance (Cambridge University
Press, 1990), 101.
23 Heskett, Design and the
Creation of Value, author’s italics.

In a creative destruction policy environment, resources are allocated more by
the market—and consumer sovereignty—while under firm-based allocation decisions resource allocation becomes more political. Heskett uses the work of Williamson and Douglass North 22 to demarcate the limits to human rationality when
making resource allocation decisions—entrepreneurs are not all-knowing, as in
the neo-classical models—in modern capitalism, some economic actors have more
information than others, and can use this information for strategic purposes to
curtail competition or gain other economic rents.
“This is typical of modern economies, which are more impersonal, requiring
complex contractual relationships for their functioning. Personalized relationships and codes of conduct might still be important but the returns for opportunism and dishonesty require some form of coercive third party, which is best
achieved by creating a set of rules that make constraints efective.” 23

What Is Good for General Motors Is Bad for America

187

Figure 1 1972 Chevrolet Vega.
© 2014 by Jalopnik.com.

24 Douglas Nelson uses the
notion of a “regime” to refer to
what we would now call asset
VSHFLÀFLW\´7KHFRQFHSWRID
regime … refers to the institutions, rules and norms that
regulate relations among the
members of the regime. We are
interested here in the sectoral
regime regulating relations
among producers of automoELOHV³HVSHFLDOO\WKHÀUPVODERU
and the US government. In
addition … independent producers of intermediate goods for
the auto industry [especially the
steel and parts industries] have
RFFDVLRQDOO\EHHQVLJQLÀFDQW
participants in the politics of
auto trade policy.” See Nelson,
“The Political-Economy of U.S.
Automobile Protection,” 1,
note 3.

It is this opportunism that concerns the present research on GM. In the case of the
GM restructuring of 2009, it is the US government—supposedly the impartially
coercive third party—that is in fact party to the opportunism. Instead of creating
value through user-centered design, we find that GM focuses attention on gaming
the rule-makers to gain advantage. In return, the rule-makers get political patronage and discretionary power. 24
To provide a pop culture take on GM’s legendary poor quality during the
period discussed in this article, within the text are three examples (photos) of cars
found by Jalopnik.com 25 to be among GM’s worst. The caption for the photo in
Figure 1 reads “Quite possibly the most-hyped car of all time turned out to be a
classically GM nickel-and-dimed turd.” 26

$%ULHI+LVWRU\RQWKH5LVHRI´$VVHW6SHFLÀFLW\µLQWKH86$XWR
Industry

29 “Some Random $GM
Thoughts,” Prudens Speculari
(blog), August 1, 2012, accessed

Until the oil shocks of the 1970s, US automakers had dominated the US market,
and thus there was little call for economic rents. However, starting in the mid-1970s
the United Auto Workers trade union begin to agitate for protectionism in the
form of anti-dumping policy, and in 1976 the US Treasury Department announced
that it would seek a “negotiated solution” with foreign automakers. 27 In 1