Arnold Kling

Naim's End of Power

Arnold Kling*
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"It seems to me that in small countries and in emerging markets, the trend is toward economic liberalization. The United States, unfortunately, is not part of this trend."
Moises Naim has recently attempted a grand synthesis to document and explain a trend toward decentralization. His new book is called The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being In Charge Isn't What It Used to Be.1 His thesis is that one can see decaying power everywhere one looks: in business, politics, the military, religion—even in chess, which he uses to illustrate his point.

Chess used to be dominated by long-term champions from a few chess powers, notably Russia. Naim points out that turnover at the top of the chess rankings has gone up, and today's contenders come from many countries.

In this essay, I want to look at Naim's thesis from a libertarian perspective. Is the decay of power as real and as widespread as Naim claims it to be? If so, will this decay permit the triumph of a Hayekian spontaneous order? Or is Naim correct to regard it as a decidedly mixed blessing?

Naim brings a diverse and impressive background. He earned a Ph.D. from MIT's Sloan School of Business, served as Minister of Trade and Industry in Venezuela prior to the Chavez regime, and edited the journal Foreign Policy.2

Naim's background, particularly in journalism, has given him access to many powerful individuals. In the preface to The End of Power, he writes:

I have attended the World Economic Forum's annual meeting in Davos, frequented by the world's most powerful people in business, government, politics, the media, nongovernmental organizations, science, religion, and culture. In fact, I have been lucky enough to attend and speak at almost all of the exclusive power-fests in the world... My conversations each year with fellow participants confirmed my hunch: the powerful are experiencing increasingly greater limits on their power.

Naim is wise enough to know that the complaints of leaders are not a reliable indicator of trends in power. However, he seems more sympathetic toward them then I would be. Today's leading political and corporate organizations will inevitably select for leaders with extreme drive, ambition, and self-regard. Accordingly, I would expect them to be temperamentally inclined always to wish that they had more power.

Naim sees an era of greater concentration of power that lasted from roughly 1800 to 1960. This period saw the emergence of large states and large businesses.

A crucial element in achieving great organizational scale was the development of bureaucracy, as described by Max Weber. Naim writes:

Weber enumerated bureaucratic organizations' fundamental characteristics: specific jobs with detailed rights, obligations, responsibilities, and scope of authority as well as a clear system of supervision, subordination, and unity of command. Such organizations also relied heavily on written communications and documents, and on the training of personnel according to each job's requirements and the skills it needed. Importantly, the inner workings of bureaucratic organizations were based on the application of consistent and comprehensive rules for everyone regardless of socioeconomic status or family, religious, or political links. Therefore, recruitments, responsibilities, and promotions were based on competence and experience—not, as in the past, on the basis of family connections or personal relationships.

Weberian bureaucracy helps to organize and maintain a centrally-planned order. It ensures reliability and consistency. It provides for continuity after the death of a company founder or national leader, so that people can count on the organization keeping its long-term commitments. Invoking Ronald Coase, Naim says that bureaucratic organizations were able to reduce internal transaction costs, facilitating vertical integration.

How should power be defined? Naim writes:

Power is the ability to direct or prevent the current or future actions of other groups and individuals. Or, put differently, power is what we exercise over others that leads them to behave in ways they would not otherwise have behaved.

I found this definition to be overly terse. For example, it does not say whether we should think of power as residing in an individual, in an office, or in an organization. For example, Naim documents increased turnover among CEO's and characterizes this as an indicator of the decay of power. However, high turnover might say little of significance about the power of the office of CEO, and even less about the power of the organization over which the CEO presides.

Naim's definition of power also does not embody a distinction, important in libertarian thought, between coercive power and non-coercive power. In addition to coercion (which he calls "muscle"), Naim lists three other instruments of power: social norms ("code"), incentives ("reward"), and persuasion ("pitch").

Naim sees these four instruments of power undermined by three trends, which he calls revolutions. One trend is broader affluence (the "More Revolution"), which enables people to be more self-reliant. A second trend is greater opportunity to migrate (the "Mobility Revolution"). The third trend is a decreased willingness to abide by tradition and instead to demand reasonable explanations from authorities (the "Mentality Revolution").

These four types of power and three trends are collected in the matrix below:3

Instruments of Power More Revolution Mobility Revolution Mentality Revolution
Muscle People have resources to resist authority Borders matter less People are reluctant to defer to authority
Code Old norms out of synch with new realities More contact with different norms Alternatives to traditional values
Pitch Mass markets give way to niches People have more alternatives Preferences are less stable and controllable
Reward People may respond only to tailored incentives Hard to tailor incentives when population is not stable Less loyalty to status quo

The three revolutions serve to disperse power. In the military realm of muscle, Naim writes:

According to a remarkable Harvard study, in the asymmetric wars that broke out between 1800 and 1849, the weaker side (in terms of soldiers and weapons) achieved its strategic goals in 12 percent of cases. But in the wars that erupted between 1950 and 1998, the weak side prevailed more often: 55 percent of the time.

In my view, this statistic is not necessarily persuasive. The value to a ruler of a strong military force may be reflected in the ruler's ability to deter a weaker opponent from starting a war to resist the ruler. It is not possible to tell from the results of wars alone whether the ability of a group with a weak military force to defy a ruler with a strong military force has actually increased or declined.

I am also not persuaded by Naim's attempt to put religion into his framework. Traditional religious organizations are presumed to have the power to determine "code," the set of norms that people follow. However, one does not always find religions organized along hierarchical, Weberian lines. Also, in my view, in the United States today, a lot of the power over the "code" seems to come from Hollywood and the academy, and in neither case is that power exercised by a centralized, Weberian bureaucracy.

On the other hand, I believe that Naim is correct in his perception of the trends in political governance and in business. In governance, autocracy has been waning, and there seems to be a tendency for central governments to loosen their grip on regions and cities. It seems to me that in small countries and in emerging markets, the trend is toward economic liberalization. The United States, unfortunately, is not part of this trend.

In business, Naim cites an impressive array of statistics showing that the market power of large U.S. firms has declined, while countries headquartered in countries like Brazil and India have much more global significance than was true in the twentieth century. Vertical integration has given way to global supply chains. Business is no longer symbolized by the great Weberian enterprises of the 1920s, such as General Motors and U.S. Steel. Instead, more creative and nimble firms, such as Apple or many smaller technology companies, are more representative of the current climate.

In the United States, Naim sees the Occupy Wall Street movement and the Tea Party as evidence of the decline of political power. Of the former, he writes:

In terms of speed, impact, and new forms of horizontal organization, the Occupy movements also revealed the erosion of the monopoly that traditional political parties once had over the channels through which members of society transmitted their grievances, hopes, and demands.

Of the latter, he writes:

... most old-line political parties are unable to muster the power they once had. An illustrative example is the hostile takeover of the Republican Party by the Tea Party.

Naim's respect for the Occupy movement and disparagement of the Tea Party suggest something about his ideological leanings. He sees Barack Obama's political victories as exemplifying good popular involvement, notwithstanding the statism of his economic agenda.

Indeed, in his concluding chapter, Naim argues, in effect, that the "mentality revolution" has gone too far in leading people to spurn political parties and central government. He writes,

Trust in NGOs grew as fast as trust in political parties dwindled...

The growth of NGOs is, on balance, a welcome trend. What is far less welcome, and indeed ought to be reversed, is the erosion in the public standing of political parties, which in many countries—Italy, Russia, Venezuela, and so on—has led to their virtual disappearance and replacement with ad hoc electoral machines.

Just as relatively flat, less hierarchical structures have enabled NGOs to be more nimble, adaptable, and more attuned to the needs and expectations of their members, so they might also help political parties reach new members, become more agile, advance their agendas, and hopefully become better at fighting the terrible simplifiers that seek power inside and outside the party...

Only when we restore trust in the political system at home—and thus endow our leaders with the capacity to contain the decay of power and enable them to make hard decisions and avoid gridlock—will we be able to tackle the most pressing global challenges...

Restoring trust, reinventing political parties, finding new ways in which average citizens can meaningfully participate in the political process, creating new mechanisms of effective governance, limiting the worst impacts of checks and balances while averting excessive concentrations of unaccountable power, and enhancing the capacity of nation-states to work together should be the central goals of our time.

Naim writes as if Weberian bureaucracy has become less effective because people have lost trust. In my opinion, the causality is reversed. That is, people have lost trust in government power because Weberian bureaucracy has become less effective.

Naim's three revolutions, consisting of broader affluence, easier travel and migration, and greater reliance on reason than on faith, all serve to make hierarchies less efficient. Instead, networks and markets are better at coping with an information-intensive world. I believe that what we need today is not more deference to government officials but instead more devolution of power away from those officials.

Notwithstanding these sorts of disagreements, I believe that The End of Power is a profound and important book. Naim combines strong conceptual thinking with an ability to summon impressive statistical evidence. His book is particularly valuable in showing the importance of growth and change happening in the emerging economies of the world. If those of us who lean libertarian differ from Naim's conclusions, we should still be aware that his views are much closer than ours to those of most of the world's elite.


Footnotes
1.

Moises Naim. The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being In Charge Isn't What It Used to Be. Basic Books (New York), 2013.

3.

Naim's The End of Power, page 72.


*Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of five books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; and Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy. He contributed to EconLog from January 2003 through August 2012.

For more articles by Arnold Kling, see the Archive.

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