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Structure – don’t kill – chaos

October 14, 2010

As a person running a team of individuals who are responsible for “central planning”,  we have to learn the art of applying just the right amount of structure to solve a problem.

In our class, Fister has paraphrased Patton with  “strategy is great until you hit the beach.” Once you’ve hit the beach, it’s execution. Many times the type of innovative approaches necessary to capture an anti-aircraft battery behind enemy lines (“Band of Brothers”) are invented on the fly. Apply too much central authority in those situations and quite literally, someone gets killed.

The blogosphere has been lit up with commentary about a recent interview given by President Obama at The Caucus:

Obama …realized too late that “there’s no such thing as shovel-ready projects” when it comes to public works.

Doug Powers writing at Michelle Malkin’s site has a very amusing commentary as well…

This is the problem with assuming that central planning by really smart people can solve everything. In “The Japan Syndrome” the author analyzes the thin ice the Chinese are skating in trying to imitate the Japanese economy. The Chinese are hoping to – at the last second – resist the economic ossification that has sucked the Japanese economy into complete stagnation for the last decade

  Japan got rich before it grew old, and China will grow old before it gets rich.

The weaknesses in the Chinese economy stem from the difficulty in transitioning from a manufacturing led economy to one with more personal consumption and small scale entrepreneurial activity.Manufacturing economies function well in ‘command and control’ central planning.  Like in Japan, the entities who did well in China fit a tightly held list:

  1. urban developments – negative consequences of not being market driven: many empty malls, empty cities, infrastructure going nowhere
  2. state-allied businesses – negative consequences of not being market driven: uncompetitive industrial capacity hidden by local government officials

The IMF found that manufacturing driven economies do NOT distribute benefits equitably to workers to the extent service oriented companies do – wages don’t keep pace with productivity gains in manufacturing. 

 Technocrats can calculate where a new bridge or airport will have the greatest positive impact and then build that bridge or airport — but it is much harder to dictate from on high the creation of the next Facebook or to manifest a thriving small business sector…

  A recent study by Li Cui of the Hong Kong Monetary Authority found that small businesses in China have less access to credit and pay much higher rates than larger companies.

And herein lies the issue with too much central planning – even if there was such a thing as a shovel ready project in the USA, those projects aren’t saving China’s bacon. Just enough structure to chaos and you get forward thrust – too much structure in chaos and you get petrification or unintentional spontaneous combustion.

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2 Comments leave one →
  1. Steve permalink
    October 16, 2010 1:53 pm

    THANK YOU SO MUCH FOR POSTING THIS!

    Steve
    Common Cents
    http://www.commoncts.blogspot.com

  2. October 15, 2010 8:13 am

    I’m pretty sure it was Eisenhower, not Patton. Now I have to go check.

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