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Decentralizing Business: How Less Government, Not More, Will Help the Workers

We need something that avoids the problem of having a commander with limited knowledge and potentially other advantages. The proper method is decentralizing authority.

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By Mason Mohon | @mohonofficial

Business is bad – or at least that’s the contemporary cultural outlook. To the disdain of the Randian acolytes, society really hates businessmen. They are seen as gross, mean, and evil cheaters that act for nothing but profit. They would see the world burn for the fattening of their checkbooks. This seems to primarily be the product of the modern film and television industry. The mantra “it’s just business” has infected our entertainment and shows no signs of going away.

But the outlook we have toward businesspeople is not completely accurate. Absent government involvement, those running businesses have to serve the needs of consumers. The good entrepreneur is always looking out for demand that they can provide supply for. If they do not, they will gain no customers and thus no profits. It is the nature of private industry.

So, at a basic level of analysis, the cultural view of traditional business is inaccurate. But they may be onto something. Maybe the nature of “being business” isn’t bad, but the traditional structure could be. To explore the workings of human interaction and development, we can look towards the economist and philosopher F.A. Hayek. In Hayek’s Individualism and Economic Order, he explains:

[W]e discover many of the achievments on which human institutions rest have arisen and are functioning without a designing and directing mind… the sponatneous collaboration of free men often creates things greater than their individual minds can ever comprehend. (Page 7)

Often, this analysis is purely extended to governments. After all, this is part of the Hayekian critique of command economics and collectivist governments. Yet, I believe that Hayek’s analysis could extend further than the government. Somewhat ironically, this analysis could be extended so far as to protect the communist goal of protecting the sovereignty of workers.

When applied to governance, Hayek’s critique makes clear that one man at the top cannot do any project justice. Especially when it comes to large economies, no one human can hold all of the information in their mind so as to properly organize. This is the fatal flaw of any command economy. Technocrats and central planners don’t know what they’re doing – but are they really to blame? They’re only human.

Because of the human inability to hold so much information at any point, command economies are ultimately doomed to failure. This is seen most recently in Venezuela, an economy that seems to merely echo the broader downfall of command economies in the 20th century. One in charge cannot make a proper decision about what to produce, in what quantities, and with what material.

This is where business as an edge of state-based industry. Because of the profit and loss mechanism of private firms, they can accurately determine what to produce. If consumers do not want what a firm produces, the firm will go under. If the business produces too much, the surplus of goods will result in damage to the business’s profits, thus causing them to reduce production. If they are using bad material that damages the quality of the product, consumers will move to a competitor. If they are using material that is too good, it will hike up prices past the equilibrium price level, once again resulting in consumers going to a competitor for a less luxurious yet more affordable product.

But this does not mean that all is perfect in the traditional business structure. Samuel Edward Konkin II explained that the contemporary business model, “especially the corporate hierarchy, [is] an imitation of the state and not the market.” Large corporations have presidents with subordinates, along with a board of directors, making up a congress of sorts. Business has begun to echo the state because the state has entrenched itself into the minds of society. Instead of being the spontaneously organized collection of minds that Hayek described, business has become a rigid corporate structure mirroring the process of traditional government.

And this has its tolls. Top-down business approaches will be slower, simply because of the problem of knowledge. Hayek’s argument about knowledge being the limitation of human leadership applies to business too. As firms get larger, it gets increasingly difficult to make decisions that will benefit the company as well as the consumers.

In addition, as a business grows, it gets clunkier. Bureaucracy begins to develop, resulting in sluggishness when it comes to consumer service. In addition, once a business is large enough, it can become detached from the wants and needs of consumers, sometimes even ignoring them altogether. This has become especially apparent in tech giants such as Facebook and YouTube. The platform users were originally consumers that the platforms aimed to serve. This took a turn, though, when users turned into products in the form of psychological profiles to sell to advertisers. These massive corporate structures have become detached from those they originally aimed to serve. They have become more intent on developing tools to get users psychologically addicted rather than develop products that the conscious mind of the user actually desires.

So what would an alternative look like? We need something that avoids the problem of having a commander with limited knowledge and potentially other advantages. The proper alternative is decentralizing authority. This could take various forms when it comes to larger corporations. In some instances, it may look like a pure workplace democracy. In others, it may look like a technologically integrated workspace, utilizing blockchain to maintain order but reduce the need for corporate hierarchy.

Workplace democracy is already somewhat commonplace and seems to have some benefits. Nigel Nicholson, a professor of organizational behavior at London Business School, wrote in the Harvard Business Review that a democratized workplace that includes the workers in business decisions is the only type of workplace model that takes human nature and behavior into consideration. Once again looking back to Hayek, we can see that this makes sense. The combined knowledge of those that are hands-on with the day to day business will usually be more effective than a detached administrator and his one-man knowledge.

Furthermore, workplace democracy seems to have psychological benefits. Depression researcher Johann Hari explained that individuals like to feel like they’re in control of their own lives, and if they work a job where someone makes all decisions for them, it can lead to a feeling of helplessness. As a result, some workers may develop depression. When the workers are put in control, the depression dissipates. In addition, morale is boosted and so is productivity in turn.

Moreover, blockchain technology could prove to be phenomenally beneficial when it comes to larger businesses. The nature of blockchain means that it is decentralized, removing the need for a central authority. Code is law, so if done right, the system cannot be cheated. Blockchain has various other benefits in the business sphere, including supply-chain management and in-company voting.

Decentralizing business through various means has many benefits. Destruction of the traditional hierarchy in business would prove beneficial for the workers and, in turn, the well being of the business. Hayek’s problem of knowledge has more to offer than a traditional critique of the workings of government.


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