Thursday, May 19, 2016

Why America can't be Denmark

Why America can't be Denmark. It took me a couple reads, but it's an intriguing idea:
But Davis argues the opposite (and was helped by the data that go this way). His argument is that large hierarchical structures have to engage in some evening out of salaries (internal redistribution) in order to keep cooperation, needed for the success of the enterprise, going. On the contrary, if the big bureaucratic machines get divested, and jobs hitherto performed within company get outsourced to different contractors, there is nothing to keep the new small, lean and mean company from extracting all the surplus from each and every contractor the way that Amazon is credited (or “credited”) of doing it. So take a General Motors and break it into thousands of independent companies producing components, then outsource cleaning, marketing, food catering and legal services, offshore accounting and customer relations, and you end up with today’s enterprise structure. Those who have remained at the core can pay themselves huge salaries since they do not depend on the goodwill and cooperation of the outsourcing companies. If the accountants in Chicago feel they are paid too little, GM will gladly hire accountants in Calcutta.
The core idea in the essay is too valuable to be titled something so distant in relation. The comparison to Denmark is really an afterthought to the really important stuff.