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Bureaucracy (book)
Bureaucracy is a political book written by Austrian School economist and libertarian thinker Ludwig von Mises. The author's motivation in writing the book is his concern with the spread of socialist ideals and the increasing bureaucratization of economic life. While he does not deny the necessity of certain bureaucratic structures for the smooth operation of any civilized state, he disagrees with the extent to which it has come to dominate the public life of European countries and the United States. The author's purpose is to demonstrate that the negative aspects of bureaucracy are not a result of bad policies or corruption, as the public tends to think. Instead, he explains, those problems are necessarily built into bureaucratic structures. They are due to the very tasks such a system has to deal with. The main body of the book is therefore devoted to a comparison between private enterprise on the one hand and bureaucratic agencies/public enterprise on the other. Private enterprise vs. bureaucratic agenciesPrivate enterprises are managed on the sole basis of the profit criterion. A company's sole purpose is to increase revenue while minimizing cost, as reflected in the profit and loss accounts and other accounting tools. Companies or company branches that operate on a loss must either reform or shut down. Due to these simple facts it is relatively easy to devolve responsibilities from company headquarters to the various branches, no matter how large the company might be. Headquarters gives the branch manager a free hand to operate his concern as he sees fit so long as he returns a profit. In this way initiative and innovation are not only permitted but even encouraged and rewarded. It is quite a different matter when it comes to public services and other bureaucratic structures. A structure like the FBI or an embassy in a foreign country has no criterion of efficiency that is anywhere nearly as easily evaluated as the profit criterion. 'Success' here is a more vague concept, and one that is more open to subjective interpretation. Precisely because the product of public services has no price on the market, the traditional tools of management that have proven successful in private enterprise (scientific management, time studies etc.) cannot be applied in the public sphere. To 'increase output' and 'minimize production time' are concepts that cannot be applied to something like a police department. But an even more important consequence of the absence of the profit criterion is the necessity of centralizing administration and restricting the freedom of the branch or department manager: since his performance cannot be easily assessed in monetary terms, the safest way to prevent excesses and the abuse of power is to ensure everyone adheres to the government's directives. Thus the most important quality of the successful bureaucrat is obeying orders. Private enterprise vs. publicly owned enterprisesIn contrast to private enterprises, government-owned corporation or municipality owned enterprises are not always or even usually managed on the basis of the profit motive. A deficit in this latter case does not spell the end of the enterprise or even the beginning of reforms, because it is generally assumed that the reason the enterprise exists is to 'render useful services to the public' (i.e. employ a large part of the local population as its workforce or charge an artificially low price for its products or services), not become a slave of the profit motive. For this reason enterprises that are in the red are allowed to operate for years or decades, with the result being that its losses are eventually passed on to every citizen. But as von Mises asserts, to disregard the profit motive is not, as is widely believed, to serve the public better. On the contrary, to operate under the restraints of the profit criterion is the best way to serve the public interest:
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