FINDING THOSE MISSING MARKETS?

Branko Milanovic returns to one of the eternal questions.  "Democracy or dictatorship: which works better?"

When I arrived in the United States, coming from the worker-management world of Titoist Yugoslavia, I was somewhat surprised how Americans took the strongly hierarchical, quasi dictatorial relations in the business world as fully “normal”. I was half expecting that workers would have a say in the choice of their “managers” (actually, for a long time, I could not even figure out who exactly is a “manager”) but of course they did not. The promotions were made by cooption or even direct appointment of lower echelons by the higher echelons. And of course, the management was selected by the owners themselves. So the system was entirely top-down: the top selected the down it liked to have.

Read the post through, and search in vain for any distinction between routine and idiosyncratic transactions.  Shorter version: if the consumers don't buy what the top pushes, the top gets fired.  It doesn't work that way with governments.

Formally speaking, American companies were organized like the Communist Party. In both cases, to paraphrase Bertold Brecht, the leadership selected their employees, or their citizens. In one case the dictatorship was in the social sphere, in another in the work sphere.

Democracy that in the US existed in the social sphere (with lower levels electing their own political “managers”) was replicated in the Titoist Yugoslavia in the workplace with workers electing their own workers councils and those electing directors (except in enterprises that were seen of special importance where the top-down system of Communist Party appointment held).

If I had a survey of political economy course to teach, I could have a lot of fun with that! The leadership might select from among the consumers who gets hired, but the totality of the consumers hires the leadership.  If Mr Milanovic understood that, he might not have written this.

One of them won, another lost. The one that lost, lost because organizing the work sphere according to democratic principles is not efficient. When you do so, an enormous amount of time is spent on negotiating minutest details of work, pay, holidays, sick leave, right to take leave when a family member is not well, payment of overtime, cleaning of bathrooms, supplies of papers etc. etc. Academic departments in the US are what comes closest to labor management as existed in the socialist Yugoslavia. And hardly anyone would argue the academic department are organized in an efficient way. People who in such an organizational context win and become successful are those who are not really interested in working at all, but debating every issue until everybody gets exhausted and gives up. They have the patience to outsit and outlast everybody else in interminable discussions and negotiations. No issue is small enough that they would not discuss it ad nauseam. Obviously, hardly anything ever gets done under such circumstances.

Wouldn't it be simpler to suggest that, where individuals can disagree over the terms of employment, the ordinary higgling and dickering of the labor market determines a lot of that minutiae? On the other hand, that tedium in the academic departments is one part dictatorship of the sociable, one part seeking Platonic perfection in things that can be perfected, whilst neglecting that which cannot.

Meanwhile, the universities are self-destructing, and sooner or later, the technocrats in the political sphere will also come croppers.

This is where more technocratic political capitalism of the Chinese or Singaporean variety comes to mind. What it tells you is that the same efficient and dictatorial way in which the production of cell phones is organized ought to be extended to the political sphere. It argues that the two spheres are essentially the same. In both efficiency is reached by clear goal-directed activities which are technical in nature and which should not be subject to the constant approval by workers or citizens.

If these societies continue to consistently outperform societies where the social sphere is organized in a democratic fashion, there is, I think, little doubt that their appeal will be such that, in a hundred years, it may seem to those who are around so very quaint that people thought that in a complex society decisions should taken by democratic vote. The same as it seems to us today so very quaint to believe that people once thought that a decision about what a company should produce was supposed to be made by the majority vote of shop-floor workers.

The knowledge problems he compares in that final sentence are very different, which renders me dubious of his argument.  In any event, Tieboutian competition, which we ordinarily understand as among small jurisdictions over sometimes small differences in bundles of government services, works on larger scales as well.