Bureaucracy is unquestionably one of the chief cornerstones of the process we call modernization. There is no industrial nation which has been able to avoid the use of bureaucratic technique as a means of administrative control over almost every sphere of human existence. Bureaucratization appears to be relentless, irreversible, all-pervasive. Adopted in the name of efficiency—which it undoubtedly is; in comparison to feudal patrimonialism or oriental satrapy—it shows extraordinary capacity for fouling up. Technically a superior form of control, due to their impersonalism, routinized planning, and predictability, bureaucracies are found to be bastions of arbitrariness, inertia, and back-stabbing (both intrabureaucratic and extrabureaucratic). They appear to be efficient up to a point, but their very insatiability for control draws them into counterproductive expansion. The bigger their budgets, the more they resemble institutional dinosaurs.
TRADITIONAL BUREAUCRATIC THEORY The work of the great German sociologist, Max Weber, was (and remains) the indispensable starting point for any serious discussion of the forms of bureaucracy. Standing before the students of Munich University in 1918, he predicted that the spread of bureaucracy would continue, undaunted by opposition from politicians, impelled by the inner logic of its structure. Weber explained why political power is incapable of reversing this trend:
The power position of a fully developed bureaucracy is always great, under normal conditions overtowering. The political "master" always finds himself, vis-a-vis the trained official, in the position of a dilettante facing the expert. This holds whether the "master," whom the bureaucracy serves, is the "people" equipped with the weapons of legislative initiative, referendum, and the right to remove officials; or a parliament elected on a more aristocratic or more democratic basis and equipped with the right or the de facto power to vote a lack of confidence; or an aristocratic collegiate body, legally or actually based on self-recruitment; or a popularly elected president or an "absolute" or "constitutional" hereditary monarch.
But for those of us who see such an irreversible force in our lives as a threat to personal freedom, what can be done? A half a century before Theodore Roszak gave us THE MAKING OF A COUNTER CULTURE, Weber predicted its arrival. People will, he said, turn to nonrational forms of expression in art, sexuality, and religion. What he did not see was the extent to which even sexual activity and nonrational religion could be subjected to the bureaucratic canons of technique and planning, and how modern irrational art could be mass-produced to meet market demand. On his terms, there is no escape.
Weber's contemporary, Ludwig von Mises, went a step beyond Weber in his crucial book, BUREAUCRACY, published first in 1944. Mises argued that classical bureaucracy is only half of the picture. There are two forms of organization in the modern world, similar in appearance, but very different in goals and structure. The first is bureaucracy; the second is profit management.
Bureaucracy operates in the way that it does because of its method of financing. It is supported by taxation. Thus, political representatives are required to delegate the authority to supervise expenditures to officials within the bureaucratic chain of command. Each official is responsible to a higher authority for the expenditures made by his subordinates. This insures that, in theory, there will be no administrative cost overruns, and that each dollar will be spent for a specific, previously agreed upon, function. Bureaucracies are past-oriented: past budgetary allocations, past rules, past administrative decisions. Bureaucracy is therefore suited to law enforcement, where you do not want instant creativity, but where you do need formal legal predictability to preserve freedom and to plan rationally. For creative purposes, another system is necessary.
PROFIT MANAGEMENT The profit management system is the alternative. It has no guaranteed budget, no coercive power to tax, no predictable response for every situation. It produces for a market, requiring entrepreneurs to predict the future and plan for it rationally. (That is why a free market requires a formally rational legal system, as Hayek has argued for decades, and which Weber argued before him.) Customers are sovereign, and they can change their minds. Where bureaucracy's universal rule is "don't make a mistake," the universal rule for profit management, sent out to each level of the structure, is "make a profit." Where the bureaucrat is a master at "looking it up," the entrepreneur must guess, take risks, and deal with uncertainty. The firm must be flexible; responsibility must be delegated; and success can be measured directly, unlike in a monopolistic bureaucracy which does not face competition.
Modern corporate structures seem to be bureaucratic. How can we explain this? Look to the financing; that is where sovereignty lies. The State is remaking corporate management in its own image. It imposes controls, bureaucratically administered: price and wage controls, profit maximums, minimum wage laws, fair employment rules, tax schemes favoring centralization and concentration, tariffs, direct subsidies, below-cost loans, administrative law by executive fiat. The State buys products, but only from companies following guidelines set by the State—guidelines for social change favored by the bureaucrats and politicians—and not simply in terms of low bids. Everywhere it reaches, the State furthers the creation of more bureaucracy.
Sadly, people fail to recognize the distinctions between the bureaucracy and the free market management structure. Martin Luther King used a voluntary boycott of the local municipal bus system, and brought the limited, but meaningful, changes that he aimed at. Then he pressured the State to enact new laws, write new rules, redefine old statutes. The result was discrimination: urban renewal (Negro removal), minimum wage laws, bureaucratic inefficiency. Ralph Nader helped to destroy the Corvair's sales, and he achieved his goal: the elimination of a substandard product. Now he appeals to the State to cure the problem, relying upon bureaucracy rather than the profit motive to bring change. But bureaucracy, above all, opposes change—nonbureaucratic, private change, that is. Nader would regulate industry rather than exercise his sovereignty as a consumer. He will fail. If you want change, on a free market you can buy it.
WHAT TO DO? How, then, can we reduce bureaucracy? The least efficient way to change a bureaucracy is to elect a new government. As Weber said, bureaucracy goes on, even when a foreign power conquers. It resists tampering by "dilettantes." When Nixon entered the White House he had the option of firing some 15 State Department officials; the other 20,000 were under civil service or union protection. Besides, institutional secrecy shields those who deviate from the President's instructions. How can the political official know what is going on, unless he relies on an occasional Otto Otepka?* And Otepkas are unpredictable; they sometimes turn out to be Ellsbergs. As Weber wrote:
This superiority of the professional insider every bureaucracy seeks further to increase through the means of keeping secret its knowledge and intentions. Bureaucratic administration always tends to exclude the public, to hide its knowledge and action from criticism as well as it can.…This tendency toward secrecy is in certain administrative fields a consequence of their objective nature: namely, wherever power interests of the given structure of domination toward the outside are at stake.
Therefore, political power against the bureaucracy can be wielded effectively only through indirect means. The first, and most crucial, means of control is the budget. If legislators will not face this fact and exercise power, there is no hope for real change in the expansion of bureaucracy. The taxrevolt is our best weapon. Vote no on the bonds, always. Vote no on every tax override. Vote no on men who will not vote no. Avoid all political messiahs, avoid faith in political salvation, but vote no on tax increases.
This, however, does not solve the secrecy problem. I therefore make the following proposal. For every lie offered to a Congressional investigating committee by a senior bureaucrat, cut that department's budget by one percent next year—one percent below this year's budget. For every lie made by a cabinet official to the committee, cut the budget by two percent. Make them pay for lying. If lying is necessary for institutional survival, let the bureaucrats learn to allocate their lies efficiently. Let them count the cost for deception.
MONEY MOTIVATES Now, for an incentive system. For every outright lie brought to the attention of the Congressional committee by a member of any other government agency, that agency will receive all funds saved by reducing the lying agency's budget. To make it even more interesting, for every dollar wasted by one branch on any project, let its budget be cut by two next year, and give the savings to the informing agency. I don't believe in 100% financial accountability; let each agency have a 5% leeway. The costs of paperwork and policing that last 5% get astronomical. But once that 5% margin of budget safety is reached, then it's every bureaucrat for himself.
By placing a bounty on falsified data, the politicians have a new tool to be used against bureaucratic secrecy, perhaps the only realistic tool: bureaucratic snoopiness. These men are trained to ferret out information. Put these talents to work. Let them use up time, money, and energy in spying on each other. Let the Secretary of the Army watch the Navy like a hawk. Let the Air Force watch them both. Let bureaucratic snooping turn upon itself. Let intrabureaucratic transfer payments make it more profitable to spy on each other than to spy on the private citizen or firm. Let the bloodhounds sniff each other's messes.
There is no political salvation. There is no formal tinkering with externals that can reverse the drift into tyranny if the majority of people want it, or are willing to tolerate it for a price. But at least you can make it hot for the bureaucrats. Maybe you can't fight city hall. But you can pee on the steps and run.
Gary North is an economist on the staff of the Foundation for Economic Education in Irvington-on-Hudson, NY. He holds a Ph.D. from University of California, Riverside. Dr. North has written several books and his articles and reviews have appeared in numerous periodicals, including THE JOURNAL OF POLITICAL ECONOMY, MODERN AGE and THE FREEMAN.
*ln the early 1960's, Otto Otepka, a State Department official, blew the whistle on some of his superiors by slipping crucial data to Congressional investigators. This breach in bureaucratic procedure was in poor taste, Liberals said, and pure patriotism, Conservatives said. He is not to be confused with Daniel Ellsberg, both Conservatives and Liberals assert.