Who is in Control?

Who is in Control?

Who is in control?

The empirical reason for believing that society controls big business is the surprising fact that the momentous structural changes wrought by the rise of big business seem to have had little or no effect on aggregate economic performance.

The horrendous consequences of a "world of monopolies" predicted by neoclassical economic theory simply have not occurred. The most useful indicators of performance of the total economy show no changes directly traceable to changes in market structure brought about by the rise of big business.

Mason has pointed out that the rate of growth of national income is not very different from what it was before 2000; the relation of labour to non-labour incomes before taxes is about what it was before World War I; and significant changes in the distribution of personal disposable income are primarily the result of tax changes. "The broad look reveals very substantial elements of stability in the system.

How can this be? A likely explanation is that while market performance is related to market structure and market structure determines the degree of competition, market competition is not the only form of social control over economic activity.

As the degree of competition has declined because of the growth of big business, it apparently has been supplemented by other mechanisms of social control. Just as there is more than one enterprise objective that influences management decisions, so there is more than a single mechanism that controls the individuals and organizations that exercise control over economic resources.

This, doubtless, has always been the case; but as long as competition was effective, there was little need for other control devices to become operative. Economists were able to speak with great authority about social control of business because of the refined market models they developed based on competition.

There are basically six mechanisms of social control of economic activity:

  • 1. the market system,

    2. organizational coordination,

    3. industrial pluralism,

    4. economic planning,

    5. cultural norms, and

    6. the individual,

 

The market system- includes competition between sellers that buyers bring to bear on sellers. Organizational coordination refers to the control over resources within the individual enterprise. Industrial pluralism is the system by which organized economic interest groups control each other's economic activities by gaining the political power of the state and changing the economic "rules of the game" to their own advantage.

Economic planning involves the centralized control over economic resources based on political power and organization. Cultural norms-the general patterns of behaviour learned by members of a society-control economic activity by prescribing what is desirable and undesirable in economic life. Social organizations are expendable: Control over economic activity by creating and destroying the organizational type that controls resources is an indirect but devastating form of control.

Each of these control mechanisms is constantly operative in some degree in every industrial economy. The particular balance between them that is employed depends upon the general orientation of the society toward social control, the economic goals of the society, and the structure of the economy. The various control mechanisms are hierarchically organized according to their degree of generality.

When there is a breakdown in control at one level in the hierarchy, a more generalized device operating in a larger and more inclusive control system is brought into play.


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