The idea that big is best has lots of caveats attached, yet many people are still overawed by this commonplace generalization. This is quite understandable but it doesn’t necessarily mean it’s true. My point: more and bigger is not, necessarily, better. Giving some further thought to this might be useful in the context of current events in our globalized economy.
EDITOR’S NOTE – SEE PART I BELOW
Misconceived Bargaining Power – The Historical Failure Of Coercion (Part I)
I would also like to add that there is a general trend to oversimplifying such an immensely complex issue, all of what relates to the Global Economy, creating all sorts of unrealistic expectations. The consequences are not free of extremely adverse economic effects, even if understanding and measuring them is not an easy task if indeed a possible one. Yet, one must have some bearings if one is going to get anywhere.
In the preceding article, I wrote that I was aiming at adding some additional thoughts about the economic aspect of the “scope-coordinate” in my attempt to develop a quick historical analysis of bargaining vs. coercion based on empirical evidence we should all be acquainted with. As the subject is, however, huge and complex and subject to extensive and rigorous analysis, I will try circumscribing myself to some concrete historical socio-economical references within the scope of what I was aiming in Part I. I would not like to fall into the trap of oversimplification, though there may hopefully be some relevant reflections to consider in what follows.
The same type of regulatory mechanisms could apply to nations, even if this theoretical equation – not to speak of how such control mechanisms could actually be applied to nations – becomes an exercise closer to science fiction.
Most are familiar with the fact that size alone does not contribute to success. Big corporations, despite all their muscle, can easily fall into the trap of huge ineffectiveness, a dinosaur’s death trap. In fact, checks and balances mechanisms, such as antitrust laws, exist for this reason, though not only. The same type of regulatory mechanisms could apply to nations, even if this theoretical equation – not to speak of how such control mechanisms could actually be applied to nations – becomes an exercise closer to science fiction. But the competitive rivalry and the inherent forces at play at the international level are not science fiction and neither are its effects. Let’s, therefore, move on and try to take a quick look at the origin of industrial activity and interactivity among its “players”. In doing so, I will circumscribe myself to economic activity that encompasses aspects with a valid degree of similarity to what we have today, though on a much smaller scale.
Max Weber, a renowned German economic and political sociologist, developed an interpretative (vs. empiricist) methodology for understanding market-driven capitalism and the relationship between nations. His writings cover a broad range of subjects and hence his recognition as an important and early contributor to the analysis of economic history, defending positions that were antithetical to those of Karl Marx, even though Weber shared some of his more basic concerns. This led Weber to what is called his Legal-Rationale Model for Bureaucracy; a fascinating subject on its own. Digging more into our subject, Weber differentiated capitalism into two types: predatory and productive. To explain this he referred to productive capitalism as being born in the medieval free cities, particularly those that were strong enough to resist external domination. But he added one other very interesting and important factor in this equation: that the successful, productive and competitive free cities had also to be weak enough in order not to exploit their neighbours. In other words, there was a built-in checks and balances mechanism, inherent, in his view, to productive capitalism vs. his predatory model.
The above can be explained, and even transposed to our present day, through socio-economic theory.
At a much later date, Stanislav Andreski, a prestigious sociologist and a politically astute man with great international exposure, greatly inspired by the works of Max Weber, added more thoughts on this same matter.
In his opinion, industrial-oriented capitalism would ultimately fail when and if the business class exerts its power by both, an excessive accumulation of wealth and by the capability to forcibly extract it from others.
In his view, this lack of equilibrium would not lead to economic growth and greater satisfactory livelihood. On the other hand, he recognized, in clear reference and support of Weber´s findings on the same line of model-consistent expectations, that the business class also needed to be strong enough in order not to be exploited. Andreski took these thoughts a step further when, after living and travelling in Africa, he considered that these same principles of equilibrium, also applied in the context of international relations, that is, in what we now just refer to as our global economy.
These brief reflections, though taking a distance away from pure rational expectation hypothesis, should appear as a warning light against the over-simplification of the idea that sheer force yields best results. This, as Part I also tried to identify in a similar but even broader historical context is a misconception of bargaining power.
The multiple mechanisms that govern globalization are not easy to understand and measure. The mechanisms that govern it are multiple, and the players in it, are countless. In fact, each one of us is a player in the global market. Yet, the same opportunities and pitfalls that affected those industrial medieval cities have relevance today, except that the rules of the game and what is at stake is many times more complex and sophisticated. The interpretative elements required to understand productive capitalism, as explored by the likes of Weber and Andreski, are worth looking into. We must at times try to understand the bigger animal by taking a smaller sample and making that subject to our test-tube sample analysis, much like Weber and Andreski did with their analysis and enlightening exposition of their theories.
A similar analysis today could take us up the ladder, to a different realm, a more unbounded, perhaps even more holistic, perspective; the idea that the concept of nation-state, as we know today, may be reaching a state of obsolescence. What replaces it? Mega-cities? Corporations?
We may be witnessing now some of the symptoms behind this global structural malaise. This will be the subject of a different article. But, once again, my position is that understanding the true nature and value of bargaining power is crucial for economic and social progress.
Ignoring this is the root of many of our present-day global issues and challenges.
