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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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Thursday, June 22, 2006

New Wine in Old Bottles

You'd think by now it would be natural, when I read something by an author I like, to check whether they've got a blog. I didn't find out until now, though, that Barbara Ehrenreich has a blog--coincidentally after I'd just finished reading Nickel and Dimed and Bait and Switch. Anyway, she's got a good piece on what she calls "Bossism." One thing she says coincides with my own train of thought lately:

When corporations uphold the idea of “teams,” they’re grasping for the kind of ingenuity and creativity people naturally bring to a challenging situation – if they’re allowed to, i.e., if they’re treated like participants instead of like servants or subordinates.

That's exactly my impression of the proposals Tom Peters made in the late '80s and early '90s: organizing production in self-directed teams, eliminating first-line supervisors, and putting product development and marketing people in direct contact with production workers on the shop floor to reduce the turnaround time involved in innovation.

Reading Peters (especially Thriving on Chaos) is a lot like reading Kropotkin's Fields, Factories and Workshops. It's a great study of the seeds of a potentially decentralized and human-scale economic order of worker-managed production, that might actually sprout if the state stopped propping up the current corporate system.

There are two problems with Peters' approach, though. First, he greatly underestimated the inertia of state capitalism. His work of fifteen or twenty years ago was full of warnings that the hierarchical corporation was going the way of the dinosaur or Gosplan, and that his proposals for team self-management and the like were "must dos" if existing corporations were to survive into the near future. Of course, Peters is prone to hyperbole as a marketing tool, as suggested in this article I got from Jesse Walker; and he implicitly confessed his tendencies to self-parody and cartoonishness in his interview with Virginia Postrel. At any rate, the giant hierarchical corporation seems remarkably healthy fifteen years later. Peters greatly exaggerated the market pressures to efficiency in an industry cartelized among a handful of firms with the same organizational culture.

Second, Peters fit his genuinely good ideas of economic decentralism and worker-directed production into a conventional corporate framework. Virtually every radical management reform discussed in Thriving on Chaos is an attempt to artificially simulate, in the hostile environment of a large corporation, the situation that would naturally exist in a small enterprise (especially a worker co-op). His self-managed teams, obviously, are just a corporate version of the self-management that naturally occurs in producer cooperatives. His close contact between customer, marketing, research and production, and the resulting turnaround time, are also attempts to duplicate within the hostile environment of a corporation what would naturally occur in a small enterprise using general-purpose machine tools. In the latter case, product design and market research would be carried out by pretty much the same people setting up the machines. Peters' systems of worker incentives are just a weak version of what would exist in a self-managed cooperative, where the workers directly engaged in the production process would have the power to put their ideas for process improvement into immediate practice, and reap the full rewards for any increased efficiency.

And Peters made it clear that he was perfectly fine with bigness, as such, and preferred adopting such measures in the context of the large corporation. His idea was to combine the advantages of bigness and smallness in the same system. Production itself would be decentralized considerably, but it would take place within the boundaries of a giant mercantilist entity that retained central control over finance, as well as control of IP and branding, and the market power to enforce prices on suppliers and outlets.

Finally, self-directed teams didn't sweep the corporate world with anywhere near the force that Peters imagined they would. "Quality circles" were a popular management fad for a while, and were adopted piecemeal in some firms. And new models of bottom-up management have fared somewhat better in some industries, like information, where peer networking is so suited to the nature of the work. But for the most part, the average corporation as seen from the bottom by one of its employees is at least as authoritarian as ever.

Just how much the radicalism of prospective change was exaggerated by such gurus, and how low the bar was set for achieving it, is indicated by the examples of radically "reengineered" corporations showcased in Hammer's and Champy's Reengineering the Corporation. The reengineered corporation streamlines certain complicated processes that exist at that level of complexity in the first place only because the corporation has hypertrophied several orders of magnitude far beyond maximum economy of scale. The new, streamlined process is a considerable improvement, but the benchmark for measuring the improvement is the typical centralized, bureaucratic corporation. The more efficient processes are still more complicated and costly than would exist in small firms serving local markets. IBM's reengineered finance approval process, for example, in which the same person walks an application through all the stages of the process, in place of an older process that involved countless handoffs: the result is essentially what the manager of a small outlet would have done anyway, by himself, based on a common-sense assessment of the customer's creditworthiness--and probably in a fraction of the time taken even by IBM's reengineered process.

So Peters and likeminded writers are good at depicting the seeds of decentralism and bottom-up management; but they adapt them to the existing corporate system. They put new wine in old bottles.

14 Comments:

Anonymous Wild Pegasus said...

If his ideas are so good, why didn't they work when they were tried? Shareholders don't care about corporate heirarchy - they just want profits. If this method were profitable, I think it would have been widely adopted.

Before you respond, note that although there are government subsidies that allow uneconomical "bigness", I don't know of any that make worker councils unprofitable.

- Josh

June 22, 2006 1:22 PM  
Blogger Larry Gambone said...

It seemed like practically every book written on management in the 80s and early 90's stressed the need for worker empoyerment and decentralization. But it never got anywhere. The slaves were merely asked their opinion but had no power to make any real changes. Middle management feared empowerment and did everything possible to water it down. Thus it had little effect upon productivity and therefore little effect on profits. Now today - as is obvious from the "Who Cut The Cheese?" type books - the social darwinist, vulgar-randist sociopaths have taken over and hierarchy and domination of the work force care now considered beneficial. That this coincides with a contemporary version of the Robber Baron's "Great Barbecue" should not surprise anyone.

June 22, 2006 2:42 PM  
Blogger Kevin Carson said...

Josh and Larry,

Actually, I think experiments with self-directed teams, when thoroughly implemented, were successful in improving productivity. The problem is that the interests of management don't necessarily coincide with those of stockholders. The perceived disruption of managerial prerogatives, and an instinctive aversion to the "inmates running the asylum," are pretty big barriers to overcome. So long as profits can be kept high enough to pacify stockholders and stave off hostile takeovers, it's good enough.

And while none of the government's interventions make worker self-management unprofitable, they do reduce the incentive to avoid inefficiency when you and a handful of competitors are operating on the same business model. So long as profits are adquate, why risk upsetting the apple cart with by competing in terms of radical changes in production methods?

I'm thinking of an ad executive Naomi Klein quoted addressing some corporate gathering, where he warned them of the horrors of competing in terms of price and quality, instead of brand image.

June 22, 2006 3:16 PM  
Anonymous quasibill said...

Another instance of serendipity, Kevin.

Just last week I was talking with my bud at my old company, and he's telling me that project teams have been scrapped. My response was "so it lasted exactly 10 years?" 10 years ago I spent probably 2 days out of every week getting the project team system up at the company. Interestingly enough, we had ex-military guys "consulting" on how to implement them.

And you're right, they were merely a veneer on the same old, same old. They weren't empowered to do anything but embarass middle management, and we peons were smart enough to know that that was a cheap ticket to unemployment.

Josh,

It's dangerous to put too much faith in the wisdom of stockholders. Remember, these are the people who caused the '29 crash with their "irrational exuberance." Stockholders don't necessarily understand the financial basics underpinning the stock market. So often, they confuse asset inflation with earnings growth. As long as their assets continue to inflate, they're happy. Especially since the numbers for inflation are routinely under-reported.

Which doesn't even address the issues of how state capitalism has degraded the culture of society. Just as a quick example, many people think of the military as an example of how business should be run (for example, my old company). This is pervasive in society - it's a social value now. And the market reflects that value. But don't mistake that value as a natural one.

June 22, 2006 3:47 PM  
Blogger Kevin Carson said...

quasibill,

I've often wondered how much of Peters' enthusiasiam about how how spectacularly his reforms worked came from a sort of Potemkin Village experience. Did management in most places just pay lip service to the new ideas, and as you say implement them mainly through buzzwords and shinin' it on, while leading Peters around by the nose?

June 22, 2006 11:28 PM  
Blogger Kevin Carson said...

Interestingly, the military was arguably the managerial model for the first national corporations. The first firms to operate on a national scale under the control of a central headquarters were the railroads. And as their organization was worked out to deal with coordination problems like collisions and such, the people building the new organizations were mainly military engineers.

The railroads, in turn, were the organizational model for subsequent national-scale corporations that arose in the latter 19th century.

June 22, 2006 11:31 PM  
Anonymous Wild Pegasus said...

Even in market as thoroughly regulated as ours, there is still considerable room for alternative business models. Most of the biggest business don't thrive on direct subsidy but on structural subsidies benefitting the biggest. Businesses are still mostly about entrepreneurship.

The extent to which shareholders have actual control over a corporation is hotly debated in academic circles. I won't bore you or me by reprinting the articles here. Interestingly enough, there is a line of argument saying that large institutional shareholders are gaining more power over corporations. Although those corporations are usually heirarchical themselves, the funds are largely run by independent managers, and those managers couldn't give a shit about who is in charge so long as profits keep flowing. See that screaming guy on CNBC, for example.

I find it hard to believe, in a society still as open as ours, that no one's put Peters' ideas to the test and succeeded, if the ideas be good.

- Josh

June 23, 2006 12:00 AM  
Anonymous quasibill said...

Josh,

I don't dipute any of what you say, but (well, you knew that was coming, didn't you :)?) the problem is that the sort of change envisioned is one that can't be imposed from the top down - it's an issue of liberty, it grows from the bottom up.

So, for it to gain a foothold in the market, it will have to come in from a start-up. And as Kevin has done a good job showing, current gov't creates significant barriers to entry in most industries.

I'll agree that we don't know if it would be different in the absence of these barriers, but Kevin's arguments on the issue made enough sense to me to change my mind.

June 23, 2006 6:31 AM  
Blogger Jeremy said...

Specifically with regards to "old wine in new bottles" managerial philosophy, I'm not entirely convinced that incremental changes don't demonstrate something. It just really depends on getting sufficient competition into play, and certain managers are open to redefining their roles and leveling the hierarchy in the pursuit of profitability. See this discussion about mangaging tech workers for a look into how attidudes - if not practices - are changing, even in the managerial class. The author - a manager - responds favorably to my arguments that are basically echoing Studies.

He's receptive to the idea that, while decentralization can conceivably be applied to MegaCorp, it's basically always playing organizational catchup with the smaller, better scaled competitors. I just think he should be consistent and not act like self-direction is a desire or capability particular to geeks. I think it's rather that geeks are simply in a better position to demand autonomy, and their work is misunderstood enough to get away with it. We haven't yet been "deskilled" (it's coming, though).

The key as I see it is the same as what you said: convincing capitalists that the oversized corporation contributes to all the pathologies that neccesitate top-down, overweaning management in the first place. I perceive that's what you mean when you say, "The reengineered corporation streamlines certain complicated processes that exist at that level of complexity in the first place only because the corporation has hypertrophied several orders of magnitude far beyond maximum economy of scale." That's a more precise way of what I was essentially trying to say here.

June 23, 2006 9:15 AM  
Anonymous Wild Pegasus said...

I don't see why it has to come from the bottom up. Shareholders care about profit, and if there were a way to fire management without sacrificing profit, they'd do it in a second.

- Josh

June 23, 2006 2:32 PM  
Anonymous quasibill said...

Josh,

It's related to the concept that you can't impose freedom. It's a contradiction in terms.

These sorts of policies hope to harness the knowledge and motivation of the workers as if they were free to address problems in their own way - as if they were entrepreneurs. You can't impose that freedom and responsibility - you've got to just let it happen.

And that is inherently contradictory to the control freak types who are attracted to, and excel at, middle and upper management jobs. They can't let go - it's institutional inertia, a fact in any large institution. So, if you're hoping a large institution will be pathbreaking in this area, I think you'll be waiting a long time.

That's the point of entrepreneurs - they're more nimble, react quicker, and more risk taking. That's why the change will come from there (small start-ups)- if they're allowed to enter the market.

June 23, 2006 4:05 PM  
Anonymous Wild Pegasus said...

The problem is that the managers are not the owners. Ownership resides in the shareholders. In many small- and medium-sized business, the maangement and shareholders are one and the same. But they're not the businesses that supposedly need the workers' knowledge. It's the large businesses that supposedly need it, and they are the businesses least likely to be owned by the people in charge.

Although you can't "impose freedom" - whatever that means in this context - you can impose a different business model if you're the owner. And in large businesses, owners are not managers.

- Josh

June 23, 2006 4:59 PM  
Anonymous quasibill said...

"ownership resides in the shareholders" - yes, and they are absentee owners, by definition, in a corporation. They can't be too involved in day to day. Also, they are only one voice among many. But, really, all of this is irrelevant.

You can't impose freedom is exactly what this is about. Empowering, and motivating, the employees to solve problems themselves is what we're talking about. That's freedom. And you can't impose that from above - you've got to let it happen. And if you do that, all those people who are "letting it happen" will no longer be needed - their jobs become superfluous.

I've worked in a small, entrepreneurial firm and a large established firm, and the difference in culture is striking. In the first, you know that if you don't do it, it might not get done, and the company, and your job, will be gone tomorrow. That's quite a motivator. Further, the owner/manager needs such behavior, and knows it - he's gotta be a self-starter himself.

In the large companies, you know that if you don't do it, someone will throw some money at the problem sooner or later to try to fix it. If you do it yourself, your manager might get angry because he was hoping to use it as a reason to increase funding. But even more fundamental, if you do something you are not explicitly told to do from above, you are putting yourself (your job) on the line for really no good reason. If you screw up, you can get fired, as your middle management is generally not self-starters themselves - they are bureaucrats. If you succeed, you might get an "attaboy" or, in a really progressive company, a check for like $100 (my one company did that). Neither of those are sufficient motivators to get you to be a self-starting problem solver.

"And in large businesses, owners are not managers."

And in democratic governments, the owners aren't politicians. So? The same problems of institutional inertia arise in each. By your logic, we shouldn't have any problems in the Fedgov, either. People can vote in politicians to fix the problems. Or they can move to Canada. Or England. You would think one of those democracies would get it right, right?

June 24, 2006 5:44 AM  
Blogger Jeremy said...

And in democratic governments, the owners aren't politicians. So?

Exactly. And remember, stockholder "ownership" is moderated by securities regulations that really limit the amount of direct say they have over operations UNLESS they can raise a majority. The system is built to be run by managers - especially when you look at all the funds, banks, and other institutions that own a hefty amount of stock in all these big corporations. They themselves are corporations with a management class, so of course they're going to defer to the management of the company they own. Ownership of fungible shares is not a one to one with true, organic ownership of an enterprise for any number of reasons.

This is why I'm so interested in the eventual work on Organizational Theory that Kevin's hinted at writing in the future. Once we get to the heart of the issues that govern how people associate with one another, we can have a reasonably good idea of how the market will tend to organize us. This will give us anarchists a better and better idea of what to tell people when they ask all those questions about "So how would XYZ work in an anarchist society?"

June 24, 2006 6:57 AM  

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