Bureaucracy

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a word coined in 1818 meaning “rule by office” where an administration rules by excessive red tape and mindless routine. Although the term was used before Max Weber’s elaboration of the notion and his well-known analysis of the phenomenon, his work and theories framed all subsequent approaches to the subject. From this perspective, the bureaucratic organization is a professional corps of officials organized in a pyramidal hierarchy characterized by a rational, uniform, and impersonal regulation of inferior–superior relationships. That hierarchy is based on the specialization of tasks and division of labor, with clear and specific supervision and appeal systems. The officials are not elected, and they cannot appropriate their offices. A derivative, popular usage of the term has the pejorative meaning of organizational pathology, functional rigidity, excessive formalism, abuse of official influence, and even corruption.

David Graeber suggests that although the concept was openly ridiculed in the 1970s it has become so ubiquitous as to go unnoticed nowadays. He writes that bureaucracies are not themselves forms of stupidity so much as they are ways of organizing stupidity — of managing relationships that are already characterized by extremely unequal structures of imagination, which exist because of the existence of structural violence. This is why even if a bureaucracy is created for entirely benevolent reasons, it will still produce absurdities.”

Peter Dale Scott observes in ‘The Road To 9/11 that:

Having worked briefly in the Canadian bureaucracy, I have observed that bureaucratic debate where power is involved tends to favor paranoid or worst-case analyses, especially those that justify budget and bureaucratic growth. Today’s bureaucratic paranoia has indeed been institutionalized by what has been popularized as Vice President Cheney’s 1% doctrine:- Even if there is just a 1% of the unimaginable coming due, act as if it is a certainty. It’s not about our analysis, as Cheney said, it’s about our response. Justified or not, fact based or not, our response is what matters. As to evidence, the bar was set so low that the word itself almost didn’t apply. If there was even a 1% chance of terrorists getting a weapon of mass destruction, the United States must act now as if it were a certainty. This doctrine is a license for untrammeled expansion of the secret deep state.”

Ludwig von Mises wrote a book on the subject. In the pages we find the crushing critique of nearly all modern reform movements, summed up in his sweeping conclusion:

The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office. Every man but one a subordinate clerk in a bureau. What an alluring utopia! What a noble cause to fight!

Mises explains that the core choice we face is between rational economic organization by market prices or the arbitrary dictates of government bureaucrats. There is no third way. And here he explains how it is that bureaucracies can’t manage anything well or with an eye for economics at all. It is a devastating and fundamental criticism he makes, an extension of his critique of socialism. It has never been answered.

Written long before Public Choice economists began to take up the subject, Mises describes bureaucracies as both self-interested and economically irrational (thereby improving on the modern Public Choice critique). There is no reinventing government: if we are to have government do things for us, bureaucracies, which cannot behave efficiently, will have to do the work. This small book has grown in stature as Western economies have become more and more bureaucratized.

A blog called Freedom, Prosperity, and Peace does a nice job of summarizing Mises book ‘Bureaucracy‘:

An Overview of Ludwig von Mises' 'Bureaucracy'

In giving the overview of the content of Bureaucracy, Mises divided the Introduction into five sections. I want to reduce them into four for I think the second and the fourth sections (the critique of bureaucratism and the connection between bureaucratism and totalitarianism) are interconnected. These sections are the negative reputation of the term “bureaucracy”, critique of bureaucracy, ” progressives’ ” view of bureaucratism, and the choice between bureaucratic management and profit management.

Bureaucracy – An Ugly Term

The term “bureaucracy” has an ugly reputation. Nobody wants to be called a “bureaucrat”. Even “progressives” deny its need in their dream of an earthly paradise. They will never accept that bureaucracy is the foretaste of their “Promised Land”. To their mind, bureaucracy is a necessary evil inherent in capitalism that will finally be abolished with the ultimate victory of socialism in the future.

Critique of Bureaucratism

The critique of bureaucratism focuses on five areas. I decided to remove the fifth point, which is the choice between free market and statism and placed it instead in connection to the last section of the introduction. The four areas are the increasing power of a bureaucrat, its totalitarian nature and enmity against the free market, its statist source manifesting in the increasing power of the government, and its role in the achievement of the assumed inevitability of statist socialism as the future destiny of humanity.

  1. Increasing power of the bureaucrat. Mises described this increasing power of the bureaucrat: “The bureaucrat does not come into office by election of the voters but by appointment of another bureaucrat. He has arrogated a good deal of the legislative power. Government commissions and bureaus issue decrees and regulations undertaking the management and direction of every aspect of the citizens’ lives. . .By means of this quasi-legislation the bureaus usurp the power to decide many important matters according to their own judgment of the merits of each case, that is, quite arbitrarily. . . Every day the bureaucrats assume more power; pretty soon they will run the whole country.” (p. 3).
  2. Totalitarian nature of bureaucracy and enmity towards the free market. And concerning the totalitarian nature of bureaucracy and its hatred towards the free market, Mises saw that the expected paradise would actually result into deeper suffering: “There cannot be any doubt that this bureaucratic system is essentially antiliberal, undemocratic, . . . and that it is a replica of the totalitarian methods of Stalin and Hitler. It is imbued with a fanatical hostility to free enterprise and private property. It paralyzes the conduct of business and lowers the productivity of labor. By heedless spending it squanders the nation’s wealth. It is inefficient and wasteful. . . Poverty and distress are bound to follow.” (ibid.). He added, ” . . . bureaucracy is imbued with an implacable hatred of private business and free enterprise. But the supporters of the system consider precisely this the most laudable feature of their attitude. Far from being ashamed of their anti-business policies, they are proud of them. They aim at full control of business by the government and see in every businessman who wants to evade this control a public enemy.” (p. 9).
  3. Statist source of bureaucracy. Bureaucratic management is just a manifestation of statism, which basically is most evident through the increasing power of the government. Mises described the process how statism is achieved: “The characteristic feature of present-day policies is the trend toward a substitution of government control for free enterprise. Powerful political parties and pressure groups are fervently asking for public control of all economic activities, for thorough government planning, . . . There is no sphere of human activity that they would not be prepared to subordinate to regimentation by the authorities. In their eyes, state control is the panacea for all ills.” (p. 4). And in order to attain statism, growing number of government agencies needs to be established and they actually “thrive like mushrooms” (p. 4) gradually restricting the citizens’ freedom to act. (ibid.).

However, Mises distinguished between the legitimate and the totalitarian use of bureaucracy. He recognized the limited use of bureaucracy for social cooperation for without it, it is impossible for a civil government to function. What both Mises and the people oppose is not the appropriate use of bureaucracy, but its interference into almost all aspects of the citizens’ life. He narrated that this kind of bureacratism is very old and a tool in the hands of a totalitarian state, which is evident once again in modern socialism where the goal is to control “the individual in tight rein from the womb to the tomb.” (pp. 17-18).

Moreover, though Mises recognized that in this kind of political atmosphere, “the officeholders are no longer the servants of the citizenry but irresponsible and arbitrary masters and tyrants”, he did not want to place the blame on bureaucracy itself, but on the kind of political system dominated by an idea that “assigns more and more tasks to the government. ” (p. 9).

4. The role of bureaucracy to achieve the socialist paradise. Another point of critique against bureaucracy is about its critical role as a tool to attain the statist goal. Socialists believe that socialism is the future of humanity. It is inevitable and no force on earth can stop it. Free market capitalism is destined to die. Mises explained such optimism: “The trend toward socialism, . . . is inevitable. It is the necessary and unavoidable tendency of historical evolution. With Karl Marx they maintain that socialism is bound to come ‘with the inexorability of a law of nature.’ Private ownership of the means of production, free enterprise, capitalism, the profit system are doomed. The ‘wave of the future’ carries men toward the earthly paradise of full government control.” (p. 4).

“Progressives” View of Bureaucratism

Under this section, we see the response of the “progressives” against the critique of government bureaucratism. Instead of accepting the backward outcome of government bureaucratism, “progressives” justify its existence by pointing out that the real danger lies in the bureaucratism of the business enterprise rather than the state’s. They argued that if the growing power of corporations is not stopped, the government would just serve as their “mere puppets” (p. 11) and that would be harmful to the people. And this is the rreason why it is the duty of the government to block companies from expanding their power or what is more popularly known as the monopoly of business.

In response to the misleading analysis of “progressives”, Mises argued that corporate bureaucratism does not occur under free market, but actually a result of government interference in the first place. He actually proved this in his book. He stated: “This book will try to demonstrate that no profit-seeking enterprise, no matter how large, is liable to become bureaucratic provided the hands of its management are not tied by government interference. The trend toward bureaucratic rigidity is not inherent in the evolution of business. It is an outcome of government meddling with business. It is a result of the policies designed to eliminate the profit motive from its role in the framework of society’s economic organization.” (p. 12).

The Choice Between Profit Management and Bureaucratic Management

In closing the Introduction, Mises presented the two options in conducting the politico-economic affairs. He claimed that there was a need to analyze these two systems with their advantages and disadvantages in order to appreciate the free market system. This is not an easy task particularly these days where anti-capitalism is dominant. However, he elaborated the significance of this task: “If we want to find out what bureaucracy really means we must start with an analysis of the operation of the profit motive within the framework of a capitalist society. The essential features of capitalism are no less unknown than those of bureaucracy. Spurious legends, popularized by demagogic propaganda, have entirely misrepresented the capitalist system. Capitalism has succeeded in raising the material well-being of the masses in an unprecedented way.” (p. 18). And concerning the contrast between two, he saw it as obvious: “. . . the private citizens’ way and the way in which the offices of the government and the municipalities are operated. Nobody denies that the principles according to which a police department is operated differ essentially and radically from the principles applied in the conduct of a profit-seeking enterprise.” (p. 19).

The choice between bureaucratic management and profit management is inseparable from the choice between socialism and capitalism. In the earlier pages of the introduction, Mises issued a call to choose between socialism and capitalism for according to him the primary issue in political struggles during his time (which I personally believe remains true to our time) “is whether society should be organized on the basis of private ownership of the means of production (capitalism, the market system) or on the basis of public control of the means of production (socialism, communism, planned economy). Capitalism means free enterprise, sovereignty of the consumers in economic matters, and sovereignty of the voters in political matters. Socialism means full government control of every sphere of the individual’s life and the unrestricted supremacy of the government in its capacity as central board of production management. There is no compromise possible between these two systems. Contrary to a popular fallacy there is no middle way, no third system possible as a pattern of a permanent social order. The citizens must choose between capitalism and socialism . . .” (p. 10).

http://freedompeaceprosperity.blogspot.com/2013/09/an-overview-of-ludwig-von-mises.html

The libertarian perspective focuses mainly on political bureaucracy. It takes as its starting point the Weberian notion, but enlarges the picture by taking a systemic and comparative view. The comparative standpoint emphasizes the fact that the real nature of bureaucracy and bureaucratic management can be fully understood only when compared to profit and market-oriented management. When the ultimate organizational goal is profit, the method by which success or failure is assessed is clear: the assessment of profit or loss. The operational principle is unambiguous, and the degree of its application is measurable for the whole business and for any of its parts. Therefore, the structure and management of the organization are guided by it. However, organizations that do not have profit as an objective and cannot use market-oriented operational principles must find some method to ensure that they are performing their intended functions adequately. Thus, these organizations develop rules, procedures, and monitoring and control systems. The result is bureaucratic management, whose operational principle is compliance with detailed rules and regulations fixed by a hierarchical authority. Consequently, bureaucracy must be seen as a response to the absence of the sanctions provided by profit and loss.

This comparison of bureaucratic organizations with those based on profit maximization reveals just a part of the phenomenon. We are provided an even more comprehensive picture when we consider the systemic aspect of bureaucracies. Bureaucracy is intrinsically connected to the political system; it is part and parcel of its structure and functioning. Thus, the growth of bureaucracy is a symptom of a specific dynamic associated with political systems and not something that can be studied in isolation. The main cause of the bureaucratization of a society is the appropriation of economic and social functions by the government. As Ludwig von Mises put it, “The culprit is not the bureaucrat but the political system.” Officials and bureaucratic structures are just the tools or agents for “exercising whatever powers have been acquired by government.” Once these functions are centralized and are to be exercised by the government, instead of by private enterprise, the need for bureaucratic tools increases. Thus, the number of bureaucrats and offices increases with the volume of decisions entrusted to the government.

There are several noteworthy corollaries that follow from combining both the systemic and comparative approaches to bureaucracy. One corollary is that an organization is not bureaucratic unless it can evade the sanctions of the market. The farther away from the market, the more bureaucratic an organization is. The second corollary is that the analysis of bureaucracy is clearly distinct from an indictment of bureaucracy per se. Bureaucracy and bureaucratic methods are old and they are present in every system of governance of a certain level of complexity. In some cases, some amount of bureaucracy is even indispensable. The problem is not bureaucracy as such, but the intrusion of government into all spheres of private life.

Even if they were to accept the existence and, in some cases, even the necessity of bureaucratic management, libertarians have a rather pessimistic view of its internal workings. Public choice literature initiated by Gordon Tullock is a reliable guide in this respect. First of all, the literature questions the measures by which a bureaucratic organization is able to accomplish its declared objectives. It also notes the significant slippage between what the ostensible function of such an organization is and what actually goes on. Incentives and operating procedures are rarely structured so that individual interests intermesh to achieve whatever explicitly formulated organizational goals have been set. Moreover, certain goals cannot be realized by hierarchical organizations at all. The more complex the coordination of activities needed to achieve the objective, the more inefficient the bureaucratic instrument to achieve it will be. Coordination requires supervisory relationships, and each such relationship results in slippage. In addition, the errors of one supervisory level are accumulated at each subsequent level. The more levels of coordination are necessary, the greater is the amount of cumulative error. Thus, such supervision is costly and difficult to implement, and the costs of achieving organizational objectives get higher and higher. In the end, supervision becomes completely inadequate, and the organization is totally inefficient. Nonetheless, in a bureaucracy, the tendency of the bureaucratic superior is to build ever-larger bureaucratic structures, which fail to achieve their goals while growing increasingly inefficient. Thus, as Tullock put it, “the inefficiency of the overexpanded bureaucracy leads to still further expansion and still further inefficiency,” so that “most modern governmental hierarchies are much beyond their efficient organizational limits.” Finally, the ways in which bureaucrats advance in the bureaucratic world are structurally adversarial to the organization’s objectives. In most cases, the incentives are set up in such a way that, to secure promotion, the situation requires actions contrary to the attainment of the objectives of the organization, and the bureaucrat will never choose a course of action detrimental to one’s own advancement.

In summary, bureaucratic forms of organization have deep structural problems in effectively and efficiently accomplishing their tasks. It rests with decentralized modes of decision making, such as the market, to accomplish such tasks. That is the reason that libertarian literature considers the analysis of bureaucracy a good laboratory for the study of capitalism and socialism as forms of social organization. In thoroughly investigating the problems of bureaucracy, one is likely to discover some of the most fundamental social mechanisms and organizational pathologies that make socialist utopias entirely impracticable.

Sources:

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