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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Location: Northwest Arkansas, United States

Friday, April 07, 2006

Managerialism and the State

Karen De Coster has an interesting article at Lew Rockwell, "Dilbertville for Dummies," speculating on the role of the state in promoting the bureaucratic corporate culture that is currently the dominant form of business organization. Her point of departure is a Stephen Carson post at Mises Blog on how federal tax policy has encouraged the proliferation of cubicles. Cubicles count as furniture, it seems, and thus depreciate in only seven years, compared to 39.5 years for permanent structures. That spurred Carson to write:

How many unpleasant aspects of corporate life are traceable back to government intervention?

Not much more than a week before his death, Dr. Chris Tame posted an email to the Libertarian Alliance Forum on "the world of 'managerialism'"

- straight out of the pages of "Dilbert" - nothing do with a real free market, but the result of limited liability and the separation of ownership and control.

Not long ago, I was reading David M. Gordon's book Fat and Mean: the Myth of Managerial Downsizing. He demonstrated that, contrary to popular impressions, the total portion of the labor force devoted to managerial functions actually increased through the '80s and '90s. What's more, the average American corporation has about three times as many supervisory employees, proportionally, as its counterparts in Europe and Japan. And a much higher proportion of total wages and salaries (about 40%) goes to supervisory workers than was the case thirty years ago. The main reason, Gordon argued, is the mushrooming need for internal surveillance and tracking systems to cope with an increasingly disgruntled work force, as the pay of non-supervisory production workers has remained flat for three decades. The amount of resources devoted to supervision correlates closely with the degree of income polarization in a country.

But Gordon also argued that management autonomy had something to do with it. In many cases, the interests of stockholders would be better served if management staff were drastically cut, resources were shifted into more production workers and higher wages, and production workers had more control over the process. But that would be a death blow to the managerial culture in the average large American corporation. I don't go so far as Gardiner and Means or J.K. Galbraith in asserting management independence from stockholder control. But management does have a great deal of autonomy, bounded as it is, in promoting its own interests within the corporation. And one aspect of this is management featherbedding, with corporate bureaucrats demonstrating prestige through the number of liveried retainers in their respective domains. What's more, part of it is genuine cluelessness: they can't think of any way to improve how workers are doing things except to increase the number of managers swarming around and poking into everything they do.

Tax policy alone, in my opinion, has had a huge effect in promoting centralization, hierarchy, and the culture of managerialism. Capital depreciation, for example, artificially shifts the competitive advantage toward those corporations engaged in the most capital-intensive forms of production. The R&D tax credit, likewise, has promoted higher tech forms of production. The tax deduction for interest on corporate debt, along with the capital gains tax exemption of securities transactions involved in mergers, has the effect of subsidizing concentration. Not, I stress, that such tax expenditures are government "handouts." But their effect is exactly the same as if the state started with a corporate tax rate of zero and then imposed a punitive tax only on those firms engaged in low-tech, labor-intensive production. The form of production associated with these changes involves the deskilling of blue collar work, and the upward shift of control over production decisions into the hierarchy of managers and engineers.

But regulatory policy also has a large effect. For example, I recently learned that the Arkansas state health department actually requires hospitals to have a "quality" committee or an internal system of "process improvement" in every department. I'm surprised they haven't yet legislatively mandated having a mission statement, vision statement, and statement of core values. (JCAHO inspectors, whose accreditation process is still nominally private and voluntary, do in fact place a high priority on asking employees what the mission statement says and similar inanity.)

As you might guess, any time it is left to middle managers to find new ways of improving "quality," their solution is likely to be everything but increasing the resources and autonomy of production workers; again, as you might expect, it will rather involve expanding the power of middle managers with even more committees, meetings, tracking forms, etc., so that production workers have even more interference and paperwork to deal with, and less time to get their real work done. And "productivity" will be increased, to make up for these increased middle management costs, by cutting staffing even more and driving everybody even harder. In turn, the resulting proliferation of medication errors, hospital-acquired infections, and so forth, will spur management to devote still more resources to committee meetings and tracking forms. Any "reform" carried out by management will serve mainly to increase the power of managers.

Several years ago, Scott Adams wrote an appendix to The Dilbert Principle on his "OA5" management philosophy. That philosophy entailed, mainly, ruthlessly weeding out those not directly involved in producing or improving the product. As I understand it, that means in practice that the average American corporation would 1) streamline its hierarchy until it had supervisory staff in the same proportions as its European or Japanese counterpart; 2) put the savings into increased production staff and increased pay; and 3) replace all the "quality" and "process improvement" committees with a great deal more direct worker control over how the production process is organized on the shop floor (perhaps along the lines of the Coventry system). The result would likely be skyrocketing productivity and morale.

I've written a lot about how the state has contributed to the present system of absentee ownership and the separation of labor from ownership of the means of production, and artificially inflates rentier incomes. I stand by it. Certainly in the past few decades, the income of the very top plutocracy has exploded upward. But on the whole, I suspect that the average worker suffers almost as much from managerialism and the resources eaten up by bureaucratic overhead than from the income of rentiers.

To some extent, I suppose, the owners are held hostage by their dependence on the managerial class. The monopoly profits of big business depend on cartelization by the state; and given this situation, even at bare minimum a considerable power is entailed for the managerial bureaucracy. Such empowerment of labor over the production process, despite its almost certain benefits to productivity in the short run, would greatly increase the bargaining power of labor in the long run, and likely imperil profits as much as management salaries.


Anonymous Anonymous said...

Why can't I an my mutualist defense agency just take over your house when you leave it in the morning? You're obviously an "absentee landowner" then, so first one on the scene gets all your stuff!

April 07, 2006 11:59 PM  
Blogger Kevin Carson said...

You must have just dropped in here for the first time. That's a red herring occupancy-and-use adherents have been answering at least as far back as Tucker wrote for liberty. All systems of private property rules, including Lockean, have a mostly conventionalized procedure for determining constructive abandonment and salvage, and the like. And since a local occupancy-and-use law is intended to serve the needs of a majority of occupant-owners in an area, it's pretty unlikely the majority represented in local juries will screw themselves with a system of common law that makes them afraid to trot out to the market or go on a long vacation.

April 08, 2006 11:44 AM  
Blogger Bbo Wallace said...

A few years ago I wrote an article for LRC on the problems we had at a Fortune 100 company. It took us seven years to get rid of one of our managerial competents because of the bureaucracy. The article was rejected with the comment that bureacracy only exists in government, not in the free market. Perhaps so...if we ever had a free market. As things stand now -- and have for quite a few years -- the movie "Office Space" is more indicative of our "capitalist" economy than Ayn Randian fantasies about poor, persecuted Big Business.

April 08, 2006 12:58 PM  
Blogger Bbo Wallace said...

Drats, I meant "incompetents."

April 08, 2006 12:58 PM  
Anonymous Anonymous said...

And since a local occupancy-and-use law is intended to serve the needs of a majority of occupant-owners in an area, it's pretty unlikely the majority represented in local juries will screw themselves with a system of common law that makes them afraid to trot out to the market or go on a long vacation.

I thought anarcho-capitalist defense agencies didn't have to be associated with a certain geographical area, hence the rulings made by juries might not be applied to themselves. Are mutualist agencies different, or do you just think defense is a natural monopoly over geographical areas?

Even if you're right about that, it seems a bit hypocritical to chase "renters" out of the apartment complexes they own but leave individuals alone when they go to the store. If I start renting out my spare bedroom, will the mutualist PDA's come after me when my "guest" doesn't want to leave? Will they dismantle Walmart stores because the shareholders don't directly occupy and use each individual store? I'm sorry, but some of us LIKE corporations and the business they bring to an area, even if it involves (gasp!) wage-labor and more than 1 person directly occupying and using the Walmart.

April 08, 2006 2:50 PM  
Blogger Jesse said...

If I start renting out my spare bedroom, will the mutualist PDA's come after me when my "guest" doesn't want to leave?

Was Tucker morally opposed to house-rent? I thought he only opposed land-rent.

April 08, 2006 3:20 PM  
Anonymous Sparrow said...

Kevin, have you mentioned the Coventry system before? I can't recall what that is if you have.

I'm sorry, but some of us LIKE corporations and the business they bring to an area.

Of course, if the corporations didn't own all the land and control all the capital, then local people could create their own business in the area. That would be a lot better than slavery, don't you think?

April 08, 2006 6:27 PM  
Anonymous Anonymous said...

Was Tucker morally opposed to house-rent? I thought he only opposed land-rent.

Well even if he was it's a distinction without a difference. Sure, if some rich guy claims to own land never-before occupied or used in any way, that's illegitimate. But what's more relevant is determining when the land is "abandoned" AFTER it was used at some point, which use usually involves erecting buildings on the land. Hence my question about whether Kevin thinks Walmart stores are open to any and all squatters to settle in. As far as I know the individual manager didn't build the building, but some other people did. Do they get to "own" it, or maybe the employees, or someone else? I ask because Kevin not only seems to think walmart won't exist in libertopia, but that it's in fact immoral for walmart or any similarly-sized company to exist, since no matter how they operate it will have to involve "absentee landowners" of some kind. But what exactly would Kevin consider absentee owners to be?

April 08, 2006 11:36 PM  
Anonymous Wild Pegasus said...

In practice, the difference between classical property rules and occupancy-use property rules is pretty minimal. No one's going to lose their house because they left for a long vacation. And if someone builds an apartment complex and rents out rooms, no jury with any brains is going to say that the renters own the complex. And if they do, the apartment owners will simply call them condos instead (and charge fees for the maintenance of the property).

Most of property law rose up in a different era with a distant legislature and very independent judges. As such, most of it is based on old-fashioned common sense and a sense of fairness and justice in land holdings.

- Josh

April 09, 2006 11:40 AM  
Blogger Kevin Carson said...


Under the Coventry system, a work team leased access to production facilities from factory management, received some negotiated price for their output. Within those parameters, the work team organized production, pay distribution, hiring and firing for itself. Seymour Melman wrote a book about it.

Jesse, Anon and Josh,

I don't have time to get into the nitty gritty of all these property rights issues right now, but maybe I'll do a post on it in the near future.

For now, suffice it to say that whether Tucker distinguished house rent from land rent varied from one piece of writing to the next. At times, he seemed to advocate tenant non-payment of rent under all circumstances, in the same way he advocated non-payment of taxes. At others, he argued that landlords would still collect building rent even under an occupancy-and-use regime, and only free access to vacant land would (through market competition) lower rent on occupied land to the equivalent of house rent alone. Of course, the latter view adds all sorts of complications, and makes the distinction between Lockeanism and Tuckerism a lot more blurry.

April 14, 2006 7:51 PM  

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