Big Mistake

When Progressive intellectuals convinced Americans that bigger is best--for business, labor, and government--they corrupted capitalism and dumbed down work. We're finally correcting their error, but at a price.

Big Labor felt it first. Caught between surging import competition and the progress of factory automation, workers in heavily organized manufacturing industries saw their ranks decimated during the 1970s and '80s. Steel industry employment plummeted by two-thirds from 512,000 in 1980 to 170,000 today; membership in the United Auto Workers has been cut in half, from 1.4 million to 700,000, since 1969.

Meanwhile, as overall manufacturing employment has remained more or less flat for decades, employment in the much less unionized service sector ballooned. As a result, unionization of the private sector labor force has declined from 36 percent in 1953 to only 11 percent today.

Next came Big Business. In the 1960s it was argued, most eloquently by John Kenneth Galbraith, that large American corporations were so powerful that they were effectively immune from market forces. Then came the '80s and '90s. One blue-chip giant after another began hemorrhaging red ink. General Motors saw its market share drop from 45 percent to 35 percent during the '80s; IBM's stock price collapsed from $140 to $40 between 1991 and 1993; Sears Roebuck was forced out of the catalog business. Foreign competition walloped not just smokestack dinosaurs, but Silicon Valley as well. Restructuring and reengineering became codewords for middle-management layoffs; while middle managers make up only 8 percent of the work force, they accounted for 19 percent of the job losses between 1988 and 1993.

Now it's Big Government's turn. Disillusionment with government can be traced back to the grand betrayals and failures of the 1960s and '70s: Vietnam, Watergate, stagflation, the growth of the underclass. But the current anti-Washington fervor ignited in the late '80s and was fueled by a succession of scandals featuring a sleazy mix of public power and private gain: the Keating Five, the Jim Wright book deal, the HUD mess, honoraria, the flap over congressional pay raises, and check kiting at the House bank. Throw in the chronic irresponsibility of deficit spending, George Bush's broken "no new taxes" promise, and Bill Clinton's general fecklessness, and distrust of politicians finally appears to have reached a healthy level.

Thus far the new anti-Washington mood has produced two electoral spasms: the 19 million votes cast for the bizarre Ross Perot in 1992, and the sweep of Republicans into control of Congress (as well as numerous state houses and state legislatures) in 1994. The first was a dead end; the fate of the second remains unclear. What is clear, however, is that we are far, far removed from the heady days of the New Frontier and the Great Society. Omnicompetent government has lost its luster, and its legitimacy; it is only a matter of time before it loses significant amounts of power.

One by one, the three great institutions of modern American political economy have come under sustained and furious assault. Those events are interrelated, and their combined historical significance is profound: A whole way of life is coming to an end. The triumvirate of Big Government, Big Business, and Big Labor--whose rise and ascendancy have done so much to shape American society over the course of this century--is collapsing, and something new is emerging in its stead.

A lot of ink has already been spilled in describing these changes. Virtually every popular business book these days is filled with talk of flattening organization charts, replacing functional departments with ad hoc teams, downsizing, outsourcing, speeding up response times and product cycles--in short, breaking up creaky old corporate empires and replacing them with something more flexible, more dynamic, more market-like. Meanwhile, authors such as George Gilder and Alvin Toffler (and politicians, notably Newt Gingrich) have spied a larger social transformation--from Machine Age to Information Age--and identified its defining feature as, in Toffler's words, "demassification": the decline of mass production, mass media, and mass politics, and their replacement by social institutions less centralized and hierarchical, more individualized and interactive.

What has been missing, though, is a satisfying explanation of why those changes are necessary. Overwhelmingly, the analysis up to now has focused on technology: Our institutions must change because they are technologically obsolete. According to this view, the technology of the industrial era was inherently centralizing and homogenizing (the assembly line, the skyscraper, broadcast television), while that of the information age is centrifugal and variegating (the personal computer, the fax machine, desktop publishing). The fundamental character of technology has changed, and so economics, culture, and politics must adapt accordingly.

Even as a rough generalization, this view of historical change is incomplete at best. Yes, new information and communications technologies have changed the workplace, making it easier to push decision making away from the center and closer to the customer. And yes, the entrepreneurial rambunctiousness and extravagant productivity of the electronics industry have shown private enterprise at its best just as government's stock has been dropping.

Nevertheless, there is a lot more to the old regime's decline and fall than the invention of the microprocessor. Up to now at least, foreign competition has done more to reshape American business practices than have computers--particularly competition from Japan, a nation much less computerized than our own. And in the political realm, primary credit for the present disaffection from government must be given to two factors: a string of government-caused disasters that has sapped public faith in statist "solutions"; and set against that backdrop, an ongoing war of ideas against collectivism in all its forms.

As to the rise of the old regime, it is fair to say that the concentration of people and resources begotten by mass production made the case for top-down control more plausible, and thus helped its imposition. But the idea, or even the implication, that the governmental and economic institutions now under attack were appropriate to a certain level of technological development is utterly wrongheaded. Those institutions have been flawed from their inception.

The transformation currently in progress is needed not to update the obsolete, but to correct the mistaken. What we are witnessing around us now is the uprooting of error--false assumptions and confusion buried so deep at the foundations of economic and political life that their excavation and removal leave the structures built upon them in ruins. Specifically, the old order now passing from the scene was less the institutional incarnation of the industrial revolution than a tragic misinterpretation of it. Indeed, it is not going too far to say that this order was the result of an industrial counterrevolution.

The Brainpower Revolution

The American industrial revolution represented a blazing efflorescence of creativity, invention, and analytical genius--in short, of brainpower--in the economic realm. The result was a radical break in human affairs: New energy sources, new electro-mechanical technologies, and new forms of organization were combined to increase the capacity for creating wealth beyond any prior imagining.

Thomas Hughes, in American Genesis, has compared the burst of technical genius during this period to the accomplishments of Periclean Athens and Renaissance Florence. It is exemplified by the careers of Bell and Edison, and charted by the increase in U.S. patents issued annually from 683 in 1846 to 22,508 only 40 years later.

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