by Gary North: The
U.S. Constitution: Tool of Centralization and Debt, 1788-Today
The main reason
why I have been able to make a lot of money, as well as crank out
50 volumes of books and so many articles that I cannot count them,
is that no one told me to do it.
it? It's called laissez-faire: let us alone.
One of the
best presentations I have ever seen on applying this principle in
One of the
reasons why the commercial real estate market is not going to recover
to its 2007 heights is because companies that refuse to honor this
principle are not growing or hiring, while companies that do honor
it are growing and hiring. When the principle of laissez-faire is
honored, the size of headquarters shrinks. Thus, the demand for
existing commercial real estate shrinks.
of laissez faire is a free market principle. My first five full-time
jobs were with organizations run by free market advocates. All five
men understood how to apply this libertarian principle.
So, why don't
most large organizations adopt this principle? If it's profitable,
the free market should adopt it. First, because the free market
is not allowed to operate. Second, because people who get to the
top of today's institutional pyramids want power more than money.
They sacrifice profitability for personal power. They think that
centralized power is more productive. They refuse to imitate profitable
firms that are more decentralized.
opportunities for smaller organizations whose owners and managers
are more interested in output than control. Admittedly, there are
not many of these people, but this is to their advantage . . . and
yours, if you work for one of them.
was a sociologist and economist in the late 19th century. He discovered
what is now known as Pareto's law or the Pareto principle: the 20-80
law. I have found that it applies to what I do. About 80% of my
output comes from what I do 20% of the time.
In any organization,
80% of the profits comes from 20% of the employees.
When you identify
such employees, leave them alone. Give them general objectives.
Give them measurable success indicators. Then get out of their way.
staffers must be more predictable. They must show up on time if
the firm involves walk-in customers. These people must be predictable
performers. But of necessity, they are replaceable, because they
goal is to get the unpredictable people unleashed. Unpredictable
customers demand this.
The story of
Henry Ford and Alfred Sloan illustrates the two approaches. Ford
was a meddler. He ran a centralized firm. It was very productive
from 1910 to 1920. But then General Motors overcame Ford's lead
and far surpassed it.
the company. He set up multiple divisions. He had them compete against
each other. He had them sell to specific income segments in the
economy. He cut costs by large-scale purchases of common inputs.
He hired an
inventor named Charles
Kettering. He left Kettering alone. He paid him to invent. Kettering
got partial ownership of his inventions. His inventions could then
be used by all of the car brands within the company. He was incredibly
productive. He also got rich. So did Sloan.
want to be left alone to do their work. The more that a firm can
find ways to free up its employees, the more it can profit from
prefer direction. They should be put in positions that are repetitive
and predictable. Even in these jobs, life without interference from
above is better. The managers should judge output more than labor
inputs. They should offer training for staffers whose jobs require
interaction with customers. Customers are not predictable.
MINDSET IN EDUCATION
All of this
seems counter-intuitive to the person who believes in output through
central planning. This person sees himself as the key to other's
productivity. Smart people tend to trust their own judgment. They
do not trust the free market's ability to call forth productivity
on a decentralized basis what economist F. A. Hayek called
the spontaneous order.
in the salaried expert is the mindset of the classroom teacher,
who sees academic success in terms of formal examinations, maintaining
classroom order, and rote performance by students.
The great contemporary
critic of this approach to education is John Taylor Gatto. Three
times he was the Teacher of the Year in the New York City school
systems. He was teacher of the year for New York state. Then he
wrote an article for The Wall Street Journal on why he
was leaving the tax-funded school system.
received so much support from readers that he decided to start a
new career: persuading parents and students to become more creative
in their formal educations, meaning dropping out of the tax-funded
schools. He wrote his book, The
Underground History of American Education. It covers the
economic motivation of the founders of tax-funded compulsory education
in America. He
has posted it for free on his site.
His book complements
R. J. Rushdoony's detailed study of the religious motivation of
these pioneers, The
Messianic Character of American Education (1963).
Rockwell has interviewed Gatto on his experiences inside the
educational system. Gatto makes the case of letting students alone.
is this: the system educates students until they finally leave school.
This may be as late as age 30 if they go on to graduate school.
Their training is geared to meeting formal criteria set by tenured
bureaucrats. They take business courses from people who have never
run a business. They take education courses from people who have
never taught in a non-government institution.
of performance is therefore bureaucratic. It is top-down. But the
free market is bottom-up. The customer has the most marketable commodity:
money. He is in control, because everyone wants his money. Not everyone
wants specific products and services. The seller is at a disadvantage:
a narrower market for what he has to sell.
of training young people to meet demand by customers, the system
trains them to meet demands imposed by bureaucrats who are not dependent
on customers. The result is an education that must be replaced on
the job, once the graduate enters the free market.
to this is the Khan Academy.
It is a free site that takes students through the basics of a growing
number of courses by video. From all over the world, students come
24x7. They can access the site at any time, study the courses at
their own speed, review what they do not understand, and take exams.
There is no one overseeing them. There is no one handing out grades.
This is laissez
faire in action. It threatens the survival of bureaucratic education.
The state-enforced certification system is now under assault. There
is an alternative for self-motivated students.
When you look
for institutions to support, look for those that are committed to
decentralization, both philosophically and operationally.
When you think
about your career, consider carefully the degree of independence
that your present employer offers you. Are you subject to the constraints
described in the initial video that I linked to? If so, you should
think through the limits placed on your productivity.
me from a life of middle-class income was the Ph.D. glut that hit
in 1969. I was still in graduate school. By the time I was ready
for the job market, there were almost no academic jobs.
I wrote my
way into my first job in 1971. My employer had been publishing my
articles for four years: the Foundation for Economic Education.
I wrote because I liked to write, but also because FEE paid its
outside authors well. I needed the money in grad school. When a
senior staff member quit at FEE to take over as president of Hillsdale
College, I was available. It was the right timing for all of us.
So, in graduate
school, which is bureaucratic to the core, I learned how to produce
for a publishing organization that was not certified by any government
agency. It was not regulated, except to this extent: it could not
publish politically partisan materials. I had no interest in doing
that, then or now.
was my life preserver. It had been thrown to me by someone who had
gotten his start in the private sector, a man with no college education:
Leonard E. Read. It was that life preserver that pulled me out of
the swamp of higher education.
In the 1970s,
I increased my skills in marketing. By 1979, I was completely independent
of any single employer. I was dependent on 22,000 paying subscribers.
We are always
dependent on others. The division of labor assures this. But to
be independent of any one employer is a great benefit. This is not
what the system of formal education teaches. It teaches the opposite.
is also what parents teach their children by paying them a fixed,
guaranteed allowance. Stop!
When we pursue
output in service of others, we master the fundamental principle
of profitability. We learn that the customer is the source of our
wealth. The sooner we learn this, the better.
Yet our society
does not teach this principle.
in a republican political system officially teaches that employees
of civil government are public servants. That has always been a
myth, but systematically mythical after the implementation of Civil
Service in the 1880s. That system insulates salaried bureaucrats
from both the free market and the voters.
seek regulation by government to keep out more efficient competitors.
academic freedom: the right to teach anything, at taxpayers' expense,
so long as what they teach is approved by the self-screening, self-policing
academic guild. They are granted lifelong tenure, but only after
their departmental superiors have determined that they stick to
the Party Line.
So, the pursuit
of customer-satisfying output is de-railed by the system of employment
restrictions imposed by the government. Men seek this protection
from competition. They surrender their liberty (and ours) in order
to purchase this protection.
imitate the bureaucratic structure of government whenever government
intervenes into the marketplace. When success is based on meeting
government rules rather than meeting customer demand, individuals
imitate the bureaucratic model, which is based on income provided
by taxpayers. Ludwig von Mises called this the bureaucratic management
model. He contrasted this with the profit-management model. The
difference is based on funding: secure funding based on past legislation
vs. funding based on future decisions of customers. Funding makes
all the difference.
liberty, we must affirm the legitimacy of uncertainty. When we demand
security at the expense of uncertainty, we surrender liberty.
Yet we never
escape uncertainty. We merely change its magnitude. We may deal
with the day-to-day uncertainties of the free market. We win sometimes.
We lose sometimes. But we do so incrementally.
When we hand
over the task of dealing with uncertainty to government bureaucrats,
we create the environment for major uncertainties.
in Japan exposed the uncertainty of a form of government-regulated,
government-licensed, and government-protected nuclear power generation.
Whenever a major natural disaster strikes, we hear a universal excuse:
"We did everything we could to protect the public." Translation:
"Don't blame us." This means: "Don't cut our budget next year."
We cannot avoid
uncertainty. We can decide how the social order will deal with it,
either through private property or government funding and government
regulation. When we adopt private property, we get little setbacks
and occasional breakthroughs that produce large profits. When we
adopt government bureaucracy, we get big setbacks with huge losses
losses that are funded by taxpayers, not the people who made
the bad decisions.
and "Army Corps of Engineers." Think "big bank bailout, 2008" and
"big bank bonuses, 2010."
is always risky. It is much more risky that what the educators,
politicians, and tenured bureaucrats tell the public, "Too big to
fail" is always sustained by the taxpayers. The more protection
that a civil government can extend, the larger the catastrophes
are when they hit.
is the method of liberty. It works in private industry. It works
in civil government. When it comes to centralization, less is better
than more in the vast majority of cases. At this late date, decentralization
is a nearly universal cure-all.
For fast, fast,
fast relief, decentralize.
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 20-volume series, An
Economic Commentary on the Bible.
2011 Gary North
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