Coordination

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Coordination
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Main Mechanisms

• Bureaucratic
• hierarchical decision making
• asymmetric superiority-subordination
• subordinate depends on superior far more than
  superior depends on subordinate

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• information flows through vertical channels
• information in non-additive, physical units
  describing outputs, inputs, inventories,
  capacities, etc. flowing primarily from bottom to
  top
• information primarily in the form of commands
  flows from top to bottom

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• subordinates motivated by material and moral
  incentives
• moral
• wish to please superior
• sense of job well done
• positive material
• bonus
• promotion
• negative material
• demotion
• termination
• prosecution

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• bureaucratic coordination exists in all modern
  economies
• military
• corporations
• government agencies

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• Market
• non-hierarchical decision making
• lateral relationship between buyer and seller
• information flows through horizontal channels
• primary type of data is price signals
• motivation material
• exchange of goods for money (or other goods)

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• Self-governing
• fundamentally non- hierarchical
• lateral relationship between equally ranked
  members who come together to accomplish a
  mutually beneficial goal
• may elect a governing body to handle day-to-day
  activities
• creates hierarchical, vertical linkages but of a
  different nature from bureaucratic coordination
• governing body answers to membership, which can
  dismiss it

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• information primarily votes and decisions
• motivation may be material or moral
• depends on goals of the association

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• Ethical
• non-hierarchical, donor-recipient relationship
• lateral linkage
• recipient not legally subordinate to donor
• positive, moral incentive
• cannot be negative (fear of recipient)
• that would make it bureaucratic
• cannot be material
• that would make it market

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• Family
• mix of lateral and vertical relationships
• depending on family structure
• motivation mainly moral
• family love, duty, etc.

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• Traditional
• mix of lateral and vertical relationships
• as defined by tradition
• everyone behaves as everyone is expected by
  tradition according ones place in society
• motivation primarily moral, both positive and
  negative
• primitive, tribal societies use coordination by
  tradition but elements of traditional
  coordination exist in modern societies
• Indias caste system
• UKs aristocracy

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Coordination in Planned Socialist Economies

• Bureaucratic coordination dominates
• all coordination mechanisms exist in all
  economies but the planned socialist economy aims
  to minimize all but bureaucratic coordination
• the only system that attempts to organize whole
  economy as a single bureaucratic entity
• typical capitalist economy, on the other hand, is
  a large collection of bureaucratically, family,
  etc. coordinated entities linked together through
  market coordination

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• This single bureaucratic entity is a complex of
  interrelated and intertwined entities all joined
  together at the top
• any given individual will have multiple immediate
  superiors
• within Party
• within place of work
• within labor union
• within other mass organizations
• any given individual will be a subject of
  surveillance by multiple entities
• political police
• economic police
• residential watchdogs

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• Influence of superior far greater than that of
  subordinate
• superior issues orders to subordinates
• subordinates have limited voice to influence
  superiors
• subordinates can advance proposals and criticisms
  within tight constraints
• certain things can not be criticized or are
  off-limits for suggestions or proposals
• basic principles of the system
• main Party line
• economic plan once determined
• criticizing individuals higher up can be very
  dangerous

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• Expressing voice through exit almost impossible
• cannot quit job without permission from place of
  employment
• even changing jobs means working for the same
  ultimate employer the state
• and it means losing position in housing queue
• changing residence very difficult
• need official permission to change city or region
• housing shortage makes it hard

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• members cannot quit Party without devastating
  career consequences and even risk of prosecution
• same true of mass organizations
• emigration very difficult
• even applying can be dangerous
• system substantially denies itself the benefits
  of feedback from below

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Market Coordination

• Table below shows the sectors of the socialist
  economy and whether the dominant coordinating
  mechanism is bureaucratic, market, or a mix
• Details to follow throughout course

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• Sales of SOEs (row 1)
• to SOEs and cooperatives (1.1 and 1.2)
  bureaucratic
• rigidity of bureaucratic coordination relieved
  somewhat by use of expeditors
• workers expert at finding supplies outside of
  plan
• a form of illegal, but tolerated, market
  coordination
• to formal private sector (1.3) and households
  (1.5) mix of market and bureaucratic
• purchases at market price, which is higher than
  planned price
• purchases at planned prices with bribes
• to informal private sector (1.4) not permitted

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• Sales of cooperatives (row 2)
• same as SOEs in all respects
• Sales of formal private sector (row 3)
• to SOEs and cooperatives (3.1 and 3.2) not
  permitted
• to formal private sector and households (3.3 and
  3.5) market with bureaucratic intervention,
  especially on pricing
• to informal private sector (3.4) market
• Sales of informal sector (row 4)
• to SOEs and cooperatives (4.1 and 4.2) not
  permitted
• to private sector and households (4.3, 4.4, and
  4.5) market

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• Supply of labor by households (row 5)
• to SOEs and cooperatives (5.1 and 5.2) mix of
  bureaucratic and market
• to formal private sector (5.3) not permitted
• to informal private sector (5.4) market
• Allocation of capital (row 6)
• to SOEs and cooperatives (6.1 and 6.2)
  bureaucratic
• to private sector (6.3 and 6.4) any capital must
  come out of own savings
• no loans or outside financing

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Self-Governing Coordination

• Basically incompatible with classical socialism
• Socialist institutions superficially established
  as self-governing
• democratic centralism of the Communist Party
• cooperatives
• Reality is that coordination is bureaucratic
• elections a sham
• leadership imposed by state-party apparatus

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Ethical Coordination

• Not a formal part of the system
• official ideology discourages charity as a
  capitalist institution
• emphasis on sacrifice for the state, not for
  individuals
• true (as opposed to forced, bureaucratically
  organized) voluntary projects represents loss of
  central control
• Many examples of behavior in the daily lives of
  people giving and receiving without regard to
  return
• if nothing else, it relieves the rigidity of
  their bureaucratically controlled lives
• gifts
• flowers

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Family Coordination

• Role of family diminished in several ways
• for the most part, the family concern (eg peasant
  farming) has been replaced by collective
  production
• the shortage economy leaves little time for
  family life
• forced growth and rapid industrialization forced
  men off the land to seek work in factories away
  from families

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• forced growth and industrialization forced women
  into workforce
• there does not seem to have been a shifting of
  household responsibilities to men
• women continue to have the primary role in taking
  care of the household and raising the children in
  addition to working full time
• many of the traditional activities have been
  taken over by institutions under bureaucratic
  control
• participation in these institutions or in
  activities organized by them occupy much of
  family time
• enterprises
• schools
• day care
• summer camps
• clubs
• mass organizations

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• Some factors serve to strengthen family
  coordination
• private plots and other forms of household
  production in formal or informal economy
• lack of mobility
• tends to keep extended family together
• housing shortage
• lack of consumer services to occupy people
  outside of home
• nightclubs
• restaurants
• shopping
• lack of personal transportation
• the kids arent going to be spending all their
  time cruising the mall if there are no malls and
  no way to get there even if there were

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Summary

• A major characteristic of the classical planned
  socialist system is the artificial replacement of
  market coordination with bureaucratic
  coordination
• From this artificially imposed change naturally
  evolved others
• atrophy of self-governing mechanisms
• reduced enthusiasm or opportunity for community
  work
• relegation of family and community life to a
  subordinate role