Clearly, the hollowing out of the American middle class is bad news. A nation divided between the rich and the rest is not going to be a very efficient, effective or harmonious place.
According to Adam Davidson, we have lost the middle class because we have given up on bureaucratic hierarchy. In particular, we have been trying to surpass the hierarchical organization that exists in the military. With it we have lost middle management and much of the middle class.
Since the traditional American corporate hierarchies were modeled on the military, a culture that disparages all things military will lose its middle class. It’s an intriguing notion.
Surely, it is important that the New York Times publishing such a favorable story about the Army War College. Much of the contempt that many Americans feel for the military and for corporate hierarchies derives from the Vietnam era anti-militarism—supported, among others, by major media outlets like the New York Times.
Military hierarchies also fell out of fashion when new business models were introduced. Among them, Hollywood and high tech. Hollywood movie productions involve collections of free lancers who come together for a project and who then disperse. And, high tech companies are supposed to be far more free-wheeling than the military, disparaging such things as uniforms, working together in the same place and salutes. Their leaders seem to believe in creativity more than in regimentation.
And yet, one can only wonder how much of this debate has been skewed by bias. Military organizations have not gone out of style. And paramilitary organizations are seriously in vogue in our age of terrorism. Davidson does well to ask what we can learn from military cultures, especially in an increasingly competitive world.
After all, these organizations are involved in the most serious forms of competition. If they malfunction, the consequences are dire.
What works or doesn’t work in the military often has considerable impact on cultural values and thus on social organizations.
Davidson does not mention it, but we do have the bureaucratic hierarchy called government. If the corporate hierarchy is becoming less prevalent, government hierarchy is becoming more intrusive and invasive. In effect, government is involved in competition, but only indirectly. In principle, government exists to serve the people, to help the nation to function efficiently and effectively, to allow the private economy to create wealth and compete against other nations and civilizations.
And yet, sometimes the government bureaucracy becomes a parasitic organism that sucks the life out of the economy. Then, it will rationalize its activities by saying that it is helping the nation to live up to its ideals. Any deviation from perfection in the marketplace is considered reason for the government to expand, to step in and to take control. Adherents of big government will tell you that only government regulations can prevent the nation from becoming a dog-eat-dog, law-of-the-jungle world. Government is supposed to protect us from our worst tendencies.
Government hierarchies can be efficient and effective or they can be inefficient and ineffective; they can help the nation to produce wealth and to compete in the world markets or they can make it more difficult for the nation to produce wealth and to compete in world markets.
We all know that corporations expend considerable effort to influence government policy and regulations. But, sometimes government workers unions buy politicians who then negotiate extremely generous compensation packages for their workers an expand government so that the unions can have more members. Government officials beholden to labor unions must also raise taxes in order to shift money from the private economy to themselves. Whatever one thinks of military hierarchies, government bureaucracies have not exactly been showing themselves to be models of efficiency.
America today has far more government workers per capita than China. What does that tell you?
It says that government bureaucracies no longer live by the laws of competition. They no longer allow themselves to be judged by how well the nation is faring in economic competition. And especially, by how well the nation's people have access to gainful employment and a middle class life style.
If the nation is not competitive, the bureaucrats will say that the reason lies in the fact that it does not have big enough government. For those who believe in big government, it never does anything wrong.
When it comes to taxes, the rich do not really care. They have so much money and so many ways to shelter it that it makes no difference if a government raises taxes. And keep in mind, the poor do not pay taxes. They receive transfer payments and welfare payments from the government. The burden of taxation, to the extent that it impacts lifestyle, falls on the middle class, or better, on the upper middle class.
Do high taxes and regulation suck money from the middle class? Of course, they do. Do high taxes and regulations make it more difficult for companies to hire and promote and invest in employees? Of course, they do.
If we are going to examine what happens when a nation rejects military hierarchies we need also to examine what happens when politicians and government bureaucrats are less than efficient and when they reject taking any responsibility for the state of the national economy.
If the middle class is declining, one of the few remaining remnants lies in government bureaucrats.
In the meantime, Davidson draws some useful lessons from the Army War College. He proposes that we rebuild the American middle class by taking lessons from the military, by using it as a role model.
He opens with a reflection about the difference between strategy and tactics. Apparently, corporate America has embraced this distinction without really knowing what it is:
In modern business, ‘‘thinking strategically’’ has become a cliché entirely devoid of meaning. But in the military, its meaning remains quite precise. As one person in the class told me, as a lieutenant colonel in a tank battalion, he was engaged in tactics: making sure that his tankers and their tanks were ready to fight. As a colonel, he would be concerned with strategy: advising on which enemies those tanks should engage and how.
Allowing higher level executives to deal with strategy while charging lower level executives with the tactics produces a hierarchy of responsibilities:
Interestingly, as laid out in what may be the single most important book of American business history, Alfred Chandler’s ‘‘The Visible Hand,’’ this military model was copied a century ago as the model for the hierarchical American corporation. In particular, these organizations borrowed the delineation between executives tasked with strategy — the corporate equivalent of colonels and generals — and tactical workers (enlisted soldiers) and midlevel managers, who played the role of captains, majors and lieutenant colonels.
American corporations often reject the military model because it is too slow. In the modern tech world information must flow more quickly between different managers. Moreover, decision-making is more widely distributed throughout the organization and people throughout the organization can make executive decisions:
But then came global trade, computers and the Internet, and we learned that the military-inspired corporate hierarchy didn’t work so well when information needed to flow far more quickly throughout an organization and decisions had to be made with haste. Many of the structural economic challenges we face today can be explained by the decline of this organizational form. Uber, Airbnb and Google are examples of new corporate forms that scramble the roles of managers and managed, strategy and tactics. There has been a continuous onslaught, over the last 40 years, on the midlevel managers Chandler once applauded. They have been replaced by email and Excel and outsourcing. Even many traditional-seeming companies brag about their flatter, leaner, less-hierarchical style.
And yet, the military model is not working as well as it should in America. Subordinates are loath to criticize their superiors and even withhold information that their superiors do not want to hear.
To do its job, the military needs middle managers; it needs officers who understand the strategic vision of their superiors and who can translate it into a plan for battle. But the bureaucracy could be made more agile and effective if it was better able to send information up the chain, too, encouraging senior officers to pay more heed to those middle ranks. Gerras led a discussion of the many ways the military discourages candor from below.
One is reminded of recent reports to the effect that military intelligence officers have skewing reports to affirm the views of the White House. Military officers seem to have gotten the message that it was a bad career move to report information that the Obama White House did not want to hear.
With corporate hierarchies going out of fashion, many middle managers have lost their positions. The notion of making a career at one company, rising up the corporate hierarchy is also disappearing. This, Davidson suggests, has hollowed out the middle class. He recommends that corporations go to school with the military, to learn new ways of functioning:
The disappearance of middle management is a central part of the disappearance of the middle class. Without large corporations that have a place for people at many levels of skill and ability and a reasonably clear path of promotion, tens of millions of Americans are left underemployed and underpaid. For much of the 20th century, companies would employ young people with few skills and invest in them, knowing that they would most likely be paid back over the employees’ long tenure. Today, the United States military is one of the few employers in America that still makes this kind of investment in a demographically broad group of people. If we wanted to find a 21st-century form of organization that can help rebuild the middle class, we would need it to retain at least a little something from the institution most responsible for building the American middle class in the first place.