During his life, economist/philosopher F.A. Hayek was concerned about socialism. Born in 1899, he grew up seeing the economic chaos that resulted from World War I- and the central planning which was adopted as a solution. The Weimar Republic, which ruled Germany from 1918 to 1933, had become infamous for its hyper-inflationary policies which caused people to bring wheelbarrows full of money to buy a single loaf of bread- or to burn the money in fireplaces just to stay warm for a night. Hayek, who grew up in Austria, could not have failed to notice this.
Studying at the University of Vienna in the early 1920s and working with fellow economist Ludvig von Mises helped shape Hayek’s thought process to be distrustful of government planning while seeing free enterprise in a favorable light.
Thus it was that, in 1945, when Hayek wrote “The Use of Knowledge in Society” for The American Economic Review journal, he was by then focused on proving that that socialism didn’t work while suggesting that leaving business up to businessmen- rather than politicians who knew nothing about the enterprises they sought to regulate- would be more beneficial to society as a whole. Couched in well-written, expressive, erudite language, Hayek basically gave government socialists a slap on the wrist.
However, he was so enamored of private business as being a savior and edifier of humanity that he failed to take his unique ideas as far as he could. In the article, Hayek suggests that those who know any situation best ought to be the ones who make decisions about how to handle it. He uses the example of tin production.
Certainly, it may safely be asserted that most politicians don’t know how to run a tin factory or a mine designed to extract tin from the ground. What Hayek failed to mention, much less understand, is that not only do company owners have unique knowledge which allows them to more profitably run their business, but that employees- even entry-level employees- have unique knowledge that allows them to complete their tasks in an efficient, productive manner.
This, of course, only applies to company employees who have been with the company long enough to learn how to become a better worker. This is another way of saying, “practice makes perfect.” The important point to note here is that employees will teach themselves the best way to complete a task without having been told what they are supposed to do- provided that they have the mental capacity to do so. They are also more familiar than their bosses with how other departments they work with may screw up and how to get around such situations.
Eventually, over the course of time, the employee becomes more knowledgeable about the job he’s working. He is better able to formulate solutions, to offer advice on how to increase efficiency. The boss, manager, supervisor, or whatever authority, is often likely to reject such advice due to a combination of hubris and overwork.
When bosses are overworked, they treat employees less fairly– simply because they don’t have the time to acquaint themselves with the particular circumstances that each employee faces. When this happens, production declines, the workplace becomes a bad place to be.
Bosses who are perceived as being incompetent are ultimately the ones who are least acquainted with the particular knowledge that each employee gains during the course of their employment. While there are some bosses out there who are absolutely toxic individuals, there are others who are not.
Those who are not toxic, who strive to be nice, may nevertheless lose the respect of their employees if they fail to notice or completely ignore what people around them have to say. Bosses who want to want to act in a fair manner may instead act in an unfair manner by enabling that one bad department or person to continually screw up without any consequences. No matter how much of a nice person they are, no matter how well they actually behave, such bosses can nevertheless garner the ire of their employees by simply not knowing how to rectify a situation- something that seems blatantly obvious to those who experience it on a daily basis.
What’s worse, upper management types don’t even seem to understand that the dynamic between boss and employee ends up breaking on a daily basis. Rather, they’d rather blame the boss’s personal failings as to why he’s not doing well with his employees. There doesn’t appear to be any self-critical analysis that I’ve seen suggesting that some authority ought to be delegated, or that asking one human being responsible for an entire department to do everything limits that person’s ability to make calm, rational decisions that help the company as a whole.
Rather, overworked bosses (and even those who are not) tend to focus on task completion. That’s what they’ve been put in charge to ensure, after all. They haven’t been given a mission statement demanding increased efficiency. Rather, all upper management- a group of people who is even further disconnected from the daily experience of the average employee- focuses on numbers, on production figures, on profits.
Many such people are unable to see that, rather than hiring organizational development consultants, such as these people, to tell them how to operate their business better, they need only go on the floor and ask their employees what needs to change in order for greater efficiency to be obtained.
An organizational development consultant is basically a scammer who uses silly buzzwords and fancy pie charts and graphs to justify their salaries. They dress up in nice suits to convey the notion that they know what they are talking about it (in fact, the acquisition of knowledge does not depend on how well-dressed someone is). They seem to have all the answers. But this is only because their purpose is to gather information that bosses at all levels of authority have neglected to gain on their own.
They then help develop a specifically tailored game plan for how the company can improve. The fact that companies so often fail to do this on their own- especially when they stand to make more money after having done it- suggests that bosses just downright suck. Seen in this light, they are closer to production facilitators rather than catalysts for growth and positive change.
All they would have to do to make their company better would be to listen to what each employee has to say. Not every employee will be right. Not every one will have a good idea. There will be some employees mixed in who are just punching time cards each day without any interest on helping out anyone but themselves. Yet there will be honest, motivated individuals mixed in. If such individuals are ignored, they will go elsewhere- sooner or later. Under these circumstances, stagnation not only becomes possible, but probable.
Rather than the savior and edifier of human society that Hayek envisioned in the previous century, it becomes clear that, while offering a better alternative to government-sponsored socialism or communism, private enterprise nevertheless tends to centralize power and authority in the hands of a few who ignore the local knowledge that could best help their companies progress. Had Hayek worked in a European factory for half of his life rather than for various think tanks and universities, he may have discovered this on own. Ironically enough, he did not possess the local knowledge needed to know how the local knowledge problem was being ignored on a daily basis in capitalist enterprises everywhere.