David Bollier engages with our Peak Hierarchy hypothesis in his remarkable On the Commons blog.
Peak Hierarchy is the hypothetical inflection point at which time at which distributed organizations become stronger and more versatile than centralized hierarchies.
Bollier asks: what if the financial meltdown would be a sign of this happening?
He states:
“The fall of Bear Stearns and Lehman Brothers, the bailout of AIG and Citicorp, and the impending bankruptcies of General Motors and Chrysler – and not to mention troubles at dozens of lesser-known but important corporations – might be seen as different aspects of the same financial crisis. But it may make equal or better sense to see the current turmoil as evidence of structural deficiencies of large institutions.”
His first key argument centers on the lack of transparency of large institutions:
“Why should we trust large, centralized institutions that are not transparent in their dealings, and that allow well-placed insiders to game the system to their own advantage? There are all sorts of legal and regulatory checks that are supposed to prevent abuses of the system, of course. But when these safeguards are vested with large, centralized institutions that have themselves been compromised and gamed – the credit rating companies, the SEC and other regulatory agencies, Congress itself – then it should not be surprising that fraudulent, self-serving behaviors occur. The financial crisis is simply a confirmation of what many people already knew: we were (and are) caught up in big-time institutional lying (and evasion, spin and denial).
It always makes for better drama to have a Michael Milken, Ivan Boesky or villain who betrayed his duties or the public trust as an individual. But the crisis that we now find ourselves in is not just about a few bad apples (though there are plenty of them!). It’s about institutional failure on a colossal scale supported by pathological cultural norms.
The real problem is getting the economy started again is restoring trust. Existing institutional structures are not trusted. The culture of spin, evasion and lying has become so pervasive, and so institutionalized in the everyday practices of business, that it is hard to imagine re-booting the economy afresh. Everyone has the reasonable suspicion that no one is to be trusted. Everyone clings tightly to his or her money. And the economy stagnates and declines.
The common denominator of large institutions is their ability to manipulate and escape the on-the-ground realities that lesser mortals must abide by.
Which brings us back to “peak hierarchy.” The vignettes I cite may be explainable by all sorts of industry-specific realities and by the collapse of financial markets. Yet the larger point may be that large, centralized institutions are more brittle and less trustworthy than we may have suspected. And there are increasingly viable alternatives that are smaller and more innovative, flexible and socially attractive.
In a more diversified, modular marketplace, the failure of a company is no big deal. In a concentrated market dominated by a few big players, the incentive structures are all wrong. Why innovate and compete? Why operate transparently? Why work to cultivate social trust? If sheer market power or political lobbying won’t solve a problem (or steamroller over it), glitzy marketing will at least tamp it down.
Large institutions invariably find ways to leverage their powers to serve their own interests and defeat accountability – especially when their overseers (politicians and government agencies) are themselves large institutions who share the same bed. Large companies can often structure their markets and business practices in self-serving ways. They can carry out questionable dealings in the shadows. They can deploy their lobbyists to win government sanction for dubious business practices. And then, if anything goes wrong, they can invoke their sheer size and number of employees, are argue that they are too big to fail. Government must come to the rescue or the consequences for innocent third parties will be too severe.”
The second argument is constructive, i.e.: there is now an existing alternative:
“What is new about our times – the age of the Internet – is that you can now functionally coordinate small groups of people on a global scale. Social trust doesn’t need to be organized by hierarchical organizations; it can arise from the bottom up and self-organize into small groups that share common values and purposes. Such distributed networks have given us GNU Linux and open source software, Wikipedia, social networking, the Public Library of Science and other open-access journals, and countless other online commons.
This is something new under the sun: a new and functional mode of organizational life.”
Read the full article here.