08/25/01

Format for printing

Three pillars of modern society

We have already discussed two of the main pillars of modern society:  industrialization and urbanization.  Modern society is urban industrial society.  This great transformation began about 300 years ago in the West and is continuing today throughout the world at what some feel is an exponential pace.

But there is a third pillar of modern society as well, something in addition to urbanization and industrialization that distinguishes our age.  It is generally called bureaucratization, but that term may be too limited or too tainted.  More generally we have seen the rise of what we call modern organizations, complex organizations, formal organizations or large-scale organizations.
 

Revealed and Empirical Truth:  The rise of science and the distinction between science and religion

As the western world came into the urban-industrial transition, there also arose a new way of thinking about things, a scientific way of thinking.  This involved the use of observation and critical (theoretical) thinking to discover the truth.  In the Western world this involved a break with the Church, bringing a powerful distinction between science and religion.  Religion relies on sacred texts and prophets to reveal the truth.  Science relies on observation and theory to arrive at a truth we call empirical. 
 

The rise of social science, and the observation of new forms of relationships.

Mathematics and astronomy emerged first, followed later by physics, chemistry, biology, and geology.  But science did not stop with what we call the natural world.  Observations (systematic, scientific) moved to the human or social world as well and we saw the rise of anthropology, economics, political science, psychology and sociology, especially in the late 18th and 19th centuries.

Some of the first empirical observations of the social sciences had to do with the changing relations between people that were brought about by the urban-industrial revolution.  Here are some of the terms commonly used in these discoveries of the great differences between the old society and the new emerging society.
 

Old Society	New Society	Observer
Gemeinschaft (“community”)	Geselleschaft (”association’)	F. Toennies
Primary relationships  dominant	Secondary relationships dominant	C. Cooley
Mechanical solidarity (People held together through their similarities.)	Organic solidarity (People held together by their mutual dependence on the different specializations of others	E. Durkheim
Traditional authority (Based on tradition:  the way things have always been done)	Legal-Rational Authority (Based on constitutions and laws.)	M. Weber

All were saying that in the old society there was a great deal of face to face interaction over long periods of time.  People knew each other as full and complete persons.  They lived a lifetime together.  They saw each other grow up and perform all manner of tasks.  The community was, in effect, a collection of human beings.

In the new society people came together not as full individuals but as specialized role players:  worker and boss, merchant and customer, police and public, teacher and student.  Organizations are not collections of persons or human beings, they are collections of roles, or of people playing specialized roles.
 

Modern Organizations

What produced, underlay, and caused this change was the rise modern organizations.  These are collections of people that are oriented to action, and have specialized and limited goals.  In effect, they are collections not of people but of specialized roles.  We can trace the modern organization to the 12th century, and can find traces of it in many societies at different times.  But only in the modern world, Max Weber said the 19th century, did the modern form of organization come to dominate all forms of human social relationships.

Today modern (formal, complex, bureaucratic) organizations dominate all aspects of our lives.  Birth, education, work, marriage, sickness, death are all dominated by some modern organization.  Organizations are everywhere, performing all manner of tasks, embracing most of human life and drawing everyone into them to a very large degree.

Think about this in another way.  What is not a modern organization?  What kind of social relationship involve total persons, not just people playing a specialized role?
 

The Power of Modern Organizations 

It is difficult to overestimate the power of these new forms of organization.  Let me give just two examples, from the realms of military and finances.  In both cases the new organizations brought together not full persons, but the specialized and limited roles that people played.

The powers of a modern military organization.  (note 1.)
 

• In 1518-21 Hernan Cortez, with a force of 600 men, 17 horses and 10 cannons conquered the Aztec Empire of perhaps 30 million people. 
• In 1531-33 Francisco Pizzzaro, with a force of 180 men, 27 horses and 2 cannons conquered the Inca Empire of perhaps 25 million.
• From 1757 the British fought the Battle of Plassey (near what is now Calcutta), defeating an Indian force of perhaps 50,000 with a force of just 3,200.  This began a 100 years of battles by which the British conquered all of India.   The British often faced and defeated much larger Indian armies.
• In 1882 a French force of only 700 captured Hanoi and Hue, bringing Vietnam under French colonial rule.

This modern military organization emerged from the 15th through the 19th centuries.  It was based on a division of labor, specialization of tasks and a close integration of the different tasks. These armies used specialized units of infantry, cavalry and artillery, closed integrated into a single fighting force by a unified command with rationally developed strategies and battle field tactics. On the field of battle they faced traditional armies that were most often mere masses of individual fighters and heroes.
 
 

The Power of modern financial organization.
  
 One of the great inventions of the late 18th and early 19th centuries was the limited liability company. This allowed large numbers of individual investors to put their money into a new business with the protection that if the business went bad, the investors would only lose the amount they had invested.  Their overall and household wealth was protected from seizure by creditors of a failed company by the law that defined them as “investors” not persons.

 With this legal invention, it became possible to bring together huge amounts of capital to finance new productive organizations.

Analyzing organizations:  goals, compliance structures and technologies

How are we to think about these organizations?  How can we analyze them; ask what they are doing and how they are doing?  How can we assess their performance?  These are central questions in the rapidly growing field of organizational analysis in all the social sciences and in a wide range of professional areas from business administration to defense, government, medicine and health, and to science itself.

Goals and Compliance Structures

One useful set of analytical categories begins with the observation that any modern organization must induce people to acts in ways it wishes them to act, to get people to do what the organization (or its leaders) want them to do.  How do we induce people to do what we want them to do?  By the use of some kind of power.  This analytical system thus focuses on the kinds of power organizations use. (note 2.)

There are three types of power:  

1. Physical: the use or threat of use of force; e.g. guns and bayonets in prisons, police or military organizations.
2. Economic:  manipulation of material rewards; e.g. paying more for more work, less for less work in factories and businesses.
3. Cultural or Social: manipulation of symbolic rewards; e.g. giving grades or praise and condemnation in such organizations as schools and churches.

Organizational goals can be similarly analyzed in a three-part classification.

1.  Custodial Goals, for organizations that seek to maintain order.
2.  Economic goals, for organizations that seek to produce some good or service.
3.  Cultural goals, for organizations that seek to change or create a new culture.

This classification has some intuitive appeal, which we can see in the terms we use to describe people in these different types of organizations.  

• People in prisons are called inmates;  those in police and military are troops, who carry special insignia (badges and uniforms) that signify their legitimate use of force.
• People in economic organizations are called employees, workers, or hands.
• People in cultural organizations are called members.

Note another things about these types of power.  Physical power is used mostly in a negative way.  It is not used as long as people do what the organization wants them to do, maintain peace and quiet.  It is applied when people don’t do what the organization wishes them to do.  

Economic power is used primarily in a positive, and marginal, manner.  Gradients of awards are given according to similar gradients in time and effort given to the organization.  This power also relies on the utility of money.  If people don’t need (or want)  money, it is difficult to induce them to work for you.  Under many colonial regimes this resulted in a deliberate taxation policy, which gave native populations previously living in nearly pure subsistence economies to need money.  Once they needed money to pay taxes, colonial leaders could induce them to work in mines and plantations.

Cultural power is used both negatively (damning or excommunicating the sinners, or giving low or failing grades) and positively (praising the virtuous, and giving high grades).  But not this.  Before such rewards and punishments can be used, the individual must first come to believe in their value.  Religious power is impotent against unbelievers.  Grades mean nothing to someone not using the education system to gain advancement.  By the time students enter the university, for example, they have endured 12 years of training and conditioning, leading them to believe that an A is better than a B, C, D, or E.  

Another observation proposes that these goals and compliance structures fit well together.  It is difficult to mix the two.  Prisoners are usually not very effective workers; using force to get people to produce things is not very efficient. (note 3.)   If you wish to produce things efficiently it is better to pay people to do work for you.

Physical power is not very effective to make people believe as you wish them to believe.  Nor is economic power.  
 

Technology

There is yet another dimension by which organizations differ:  in the technology they use to accomplish their aims.  Moreover, as organizations move through time, they experience a kind of natural history.  They evolve, often moving increasingly to a distinctive type of technology, which tends to restrict the things they can do.  There are many different typologies of technologies, and none is very effective.  Technologies are best described close to the day to day behavior and realities of an organization.   But we can give a few examples that might be useful.

American automobile manufacturing is dominated by mass-production technology.  It is quite effective in producing large numbers of very similar products at relatively low cost.  This is why it has been adopted throughout the world.  But if one wishes to produce a distinctive and high quality type of automobile, this technology does not work very well.  To produce a “hand-crafted” motor car, auto manufacturers must create specialized organizations that can develop the specific technology for hand-crafted cars.

More relevant to our discussions of development, the World Bank is one of the world’s leading organizations attempting to promote economic development.  It is staffed primarily by economists, whose distinctive technology is assessing the returns to investment.  Moreover, its mandate focuses on what is often considered the major cause of underdevelopment, the lack of capital.  Thus development needs the infusion of foreign capital, especially to pay for the costs of importing technology to an economically backward country.  This is very useful if you need to build ports, roads, railroads and factories.  It is not very useful to address problems of poverty, poor health, or many forms of agricultural development, or social development.

In lecture we will consider further examples of different technologies and how the shape what an organization does.

Governments can be usefully compared using this three-part classification.  Governments must do many things: maintain order and security; produce various goods and services; and develop laws and institutions, such as education, that create and pass on a culture from one generation to another.  Note that governments typically develop different specialized organizations to carry out these different tasks.  From this we can begin to analyze the goals of government by asking what resources they put into these different tasks.  Heavy emphasis on the military and police indicate a strongly custodial government.  Heavy emphasis on production indicates more economic goals.  A heavy emphasis on education and science or religion indicates am emphasis on cultural or social goals.

But each of these specializations carries with it s distinctive technology, and perhaps more important, gives power to those   who specialize in that technology.

Think of a series of countries and how you might classify their general goals, the kind of technologies they use and the people who wield power.  We shall deal with these extensively in class presentations.
 

Global Capital Movements:  Foreign Aid and Foreign Direct Investment.

One of the major forces moving the modern world is the international flow of capital.  Marx remarked on this and made it a centerpiece of his views of the spread of capitalism. You can see in his 1848 Communist Manifesto a succinct and powerful vision of how the inexorable spread of capitalism was revolutionizing the entire world.  Almost all modern historians, social scientists, especially economists, have noted the same thing.  Private individuals and companies have amassed great quantities of capital and have moved it around the world to produce various forms of economic development.

In the past half century, however, we have seen the rise of a new type of organizational system in the globalization of capital flows.  Before 1950 international capital flows were dominated by the private sector.  Banks and companies have moved capital abroad to earn interest and to build productive capacities (factories, farms, plantations etc.).  Since about 1950, we have seen the rise of public capital flows that have been in some respects revolutionary.

They begin with the Marshall Plan, a US program of to move capital first to Europe to rebuild the continent after the devastation of WW II.  But the program quickly moved beyond Europe to encompass the entire world.  It came to be called “foreign aid,” today an extensive system national organizations to move capital.  Today there are some 25-30 countries that provide foreign aid as part of their normal functions.  The largest group is the 17 countries bound together in the Organization for Economic Cooperation and Development (OECD), with its headquarters in Paris. (note 4.)   In addition the major oil producing nations have created the Organization of Oil Producers (OPEC), adding another nine countries that provide some forms of foreign aid. (note 5.)

For the past four decades, these public capital flows have been a major feature of the process of globalization.  They have been revolutionary in a number of ways.

First, the Marshall Plan and the program of US foreign aid represented a radical change in international relations.  Typically, a conquering country in a war took as much wealth (booty, loot) as it could possibly carry from the vanquished country.  When a country lost a war it could expect to be looted.  Nazi Germany and Japan did this to their conquests in 1939-44.  At the end of World War II, however, the conquering countries (“The Allies” but essentially the United States) undertook to rebuild the conquered countries.  Today the two major conquered nations of WWII, German and Japan, are the second and third largest economies in the world.  They were essentially rebuilt by their conquerors.

The reasons for this revolutionary approach to the vanquished countries are mixed and complex.  They can be classified under our three major power or goal headings.  Reconstruction was good for security, business and values.  

1. Security was a major reason.  It was well understood that the poverty and displacement that followed the First World War helped to bring on the Nazi government in Germany and the Second World War. Reconstruction is good for security.   There was also an intense military competition with the USSR, and US theories had it that impoverished peoples would easily succumb to Communist promises and ideas.  
2. Economic interests were also in evidence.  We can sell more to rich countries than to impoverished countries.  If we rebuild war shattered countries, they will be able to afford more of our goods.  Reconstruction is good for business. 
3. There was also a more altruistic basis for the foreign aid and reconstruction.  The United States wanted to help the less well-off.  As important was the sense that we could help others built a society and culture like ours.  Reconstruction would help build a world culture more like the American culture.

The organization of international capital flows. 

International capital flows can be conceived of as moving through four types of organizational carriers, illustrated in the following diagram.
 
 

	S o u r ce
Terms	Public	Private
Concessional (Grants and no-to-low interest loans)	Official Development Assistance (ODA) (Bilateral, multilateral)	NGO assistance (CARE, WWF, Catholic Relief, IPPF) etc.)
	Commercial (Loans and investment at market rates)	World Bank commercial loans  Foreign Direct Investment (FDI), Commercial bank loans

    
ODA uses public government funds (usually from taxpayers) to promote economic and social development in the less developed countries, and more recently to what are called countries in transition – from communism to capitalism.  Some flows are bilateral, from government to government through specialized foreign aid agencies.  (The US agency, for example, is called the Agency for International Development or AID.  The Japanese equivalent is called the Japanese International Cooperation Agency, of JICA.) These are typically part of the organizations of foreign policy (US State Department, Japanese Foreign Ministry etc.)  These tend to be staffed by a variety of specialized professionals, from economists to agriculturists to energy specialists to medical doctors, organized in special units to promote specific aspects of development.

In addition, there are many international organizations, like the United Nations, World Bank, and Regional Development Banks, which receive funds from the major country donors, and distribute these to less developed countries.  Again, there are many specialized agencies, like the United National Development Fund, the UN Population Fund, World Health Organization, Food and Agricultural Organization, etc.  Specialization is everywhere.

NGOs, or Non-Governmental Organizations, also include a wide variety of specialized private organizations that provide assistance.  There are environmental organizations, like WWF, population organizations like the International Planned Parenthood Federation (IPPF), religious organizations (like Catholic Relief), and more, again usually specialized in some form of development assistance.

The World Bank is an autonomous United Nations organization that provides both low or interest free loans and loans at commercial rates for development activities.  The Bank draws its funds from the major OECD donor countries.

Finally there are both private banks that make loans to foreign governments and private companies that invest directly in productive activities abroad.  These are usually planned to earn returns at market rates.

Below are charts showing an estimate of the annual and cumulative flow of ODA since 1960 in both current and constant prices.  The latter is a very rough estimate, as I used the US 1982-4 consumer price index to deflate the current dollar amounts of ODA.  Much of the ODA, however, is provided in non-dollar funds, such as Japanese Yen, Swedish Kroner, or Dutch Guilders.  My use of the US CPI assumes that other countries, both donor and recipient, had the same price changes we had, which was clearly not the case.  There is, however, no way to make this estimate more precise, since funds given are used to pay for goods and services that come from a large number of different countries.
  

 

As you can see, there has been a very substantial capital flow attempting to promote development.  ODA hovered around 20 million dollars a year from 1960 to about 1975, then rose rapidly to around 40 million and has fluctuated around that level since then.  Cumulatively, the total flow has amounted to about one trillion dollars.

Now you must ask whether, or how much, this large flow of funds has promoted economic development, what kind of development it has promoted, and what the impact of this has been on human welfare and on the environment?
 

Notes to the text 

1.  I have traced the European military campaigns in Asia in “Western Imperialism Armies in Asia,” Comparative Studies in Society and History, Vol. XIX, No. 1, January 1977.

2.  At least two major social scientists have developed this classification roughly independently.  Amitai Etzioni’s The Comparative Analysis on Complex Organizations (1961) and John K. Galbraith’s,   The Anatomy of Power (19XX), use essentially the same framework

3.  There are very interesting deviant cases.  See for example Solzhenitsyn’s, Inner Circle (1954), for the use of scientists as political prisoners in Soviet Russia to carry out scientific development.

4.   This includes Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, The Netherlands, New Zealand, Norway, Sweden, Switzerland, United Kingdom, and the United States.  Together these are usually referred to as the DAC, or Development Assistance Countries.

5.   OPEC aid donors include Algeria, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.  In the past few years war and political turmoil have forced some of these countries to reduce or eliminate foreign aid.