The Demise of Large Top Down Organizations: Will China Be the Exception?
Monday, July 19, 2010 at 5:00AM Sometime during World War II the large centrally controlled organization started to be undermined by the rise of smaller autonomous actors. While the Americans and the Russians are still arguing over who won the war, everyone agrees that the Germans and the Japanese lost. And they were defeated by a scattered array of small semi autonomous units from an informally coordinated group of Allies. D day and Hiroshima were big institutional operations for sure, but the Allies made it happen, and the coordination was minimal or ineffective.
Ever since then the large organizations has been on the decline. The world was re-ordered and marshaling the resources of an enterprise has been in rapid evolution from centralized to decentralized.
I bring this up now because evidence of this evolution is presented to us every day. From our ineptitude in every war since WW II, to our inability to manage healthcare cost or quality, to the steady decline in the effectiveness of our education system, or our failure to regulate the financial markets and the protection of the environment, top down administration on a large scale is failing and doing so quite spectacularly.
I have a hard time imagining that China can be exempt from this trend away from large centralized institutions. One significant contributor to their demise is their ability to deceive themselves about reality. I don't know about Hitler, but the Japanese Emperor clearly was not getting accurate information towards the end of the war. Later, the fall of the USSR was sudden and dramatic because those in power were deceiving the public and probably themselves too. It would be interesting to look into how well China is doing in assessing the effectiveness of its policies. When in complete control of the information, changing the results reported is often easier than changing the actual outcomes.
This will be an interesting area to watch.
China in Economics, Management, Politics
Reader Comments (2)
I would re-state the premise; large centralized organizations are no longer able to create higher levels of productivity at a rate necessary for continued economic growth and development. The last 60 years have seen the creation of the largest organizations in human history in both nominal and numerical terms; governments, business, military organizations and Facebook to name a few. These organizations will survive for a long time as their edifaces may erode and suffer enthrophy but not disappear. The question is can these gaints dance? The healthcare crisis is the result of technical advances which have provided solutions at a much higher price. If individuals made good choices for themselves in their lifestyle choices the demand for modern healthcare and its costs would be significantly less. At what point will the social contract implied in Social Securtity and Medicare break? When the money runs out? When young workers refuse to pay for benifits they will never recieve which are consuming greater percentages of their income and reducing the control they have over the money they earn. Declining real incomes for individuals combined with greater personal debt and burdened by greater public debt demand new solutions. Smaller decentralized organizations will be the incubator where solutions will be found. These ants will need to play at the feet of giants.
On China I just finished a book 'The Party' about the CCP. It speaks directly to the contortions the CCP is going through to remain in power. The contradiction of an open market economy and a single party communist state are clear. At the present time the CCP is still benefiting from large organizations adding to productivity and gerneral well being. Big banks. big oil, big businesses in manufacturing etc. seem able to work well with big government and centralized party control. Just like in the west the question is when will the benifits of centralized control expire and how well will the players adapt to more de-centrized challengers?
Thanks for the comment J.Mark. Could it be that the centralized model works for a while? Clearly China has done a great job lifting 500 million of its citizens from below to above the poverty line. However, when it comes to competing head to head one would think the central control model will be inferior. I guess those of us in the US hope so anyway.