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Comment by ryandrake | Hacker News Reader

It's funny how the vast majority of capitalist corporations consider capitalism as a sacrosanct principle, yet when you look at how they operate it's basically Soviet-style central planning. The senior executive [nomenklatura] who, often, are treated More Equal Than Others, centrally plan who works on what and what resources they are allocated: a bureaucratic elite picking and choosing how the wealth of the company is redistributed and used among teams, as opposed to letting a market decide which projects live and die. As Ronald Coase pointed out, companies tend to be "islands of central planning in a sea of market relationships."

Another parallel to the Soviets: Things like good-ol-boy networks and elite school alumni [membership in The Party] are largely what drives promotion within the higher ranks.

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I have been thinking the same thing. From the inside a corporation is a planned economy like East Germany. Five year plans, motivational posters and speeches, huge number of bureaucrats and a huge discrepancy between what leaders proclaim and the reality that people on the ground can see.

With a corporation you can always quit but in the eastern block you couldn't do that because of armed border guards.

Hayek says that central planning of an entire economy results in dictatorship, because conflicting interests have to be resolved by non economic means that involves the pressure of a secret police. i think he was right, it doesn't matter how many computers you have for solving planning problems, there always remain conflicting interests when the big father in the ministry has to decide who gets the stuff, central planing turns matters of distribution into political problems

the ezception that proves the rule.

You could, theoretically, leave the USSR, if you paid back what society had invested in you. De facto it was very hard to leave

You can quit your job. Except many of us de facto can't (H1B1, non compete clauses, etc)

Leaving Yugoslavia was probably easier than being an Indian engineer on an H1B working for a company with a non compete clause.

Btw, I don't think Hayek or any of the Austrians had very benign attitudes towards multinationals or large corporations: Begging for tax payer largess, ghostwriting regulations creating artificial barriers to entry, abusing immigration law to have a de facto slave. Mises and Rothbard would tut tut. And they were the hard core anti commies!

Yugoslavia and Poland where the two socialist countries where citizens were allowed to travel to the west. Exceptions: both countries were relatively poor and didn't mind a few people leaving (also in Poland (PPR) the government used to make consessions when it faced popular pressure)

I was not aware that Poland allowed people to leave.

Yugoslavia on the other hand, was more interesting, in the sense that it was not a part of the Warsaw pact, or a puppet state under the USSR. It was a 'non-aligned' communist state, and, after Stalin's death had passable relations with both the East and the West.

No, not really. Poles we're theoretically allowed to get a passport but in practice if one didn't have a good reason to go west and get back one didn't receive passport.

In '68 some Jewish-origin Poles were handed passports and one way tickets if they pleased (https://en.wikipedia.org/wiki/1968_Polish_political_crisis#E...).

Due to anti-semitism, jews were always a special case - they were not wanted across the Soviet block, and were occasionally 'encouraged' to emigrate.

https://en.wikipedia.org/wiki/1970s_Soviet_Union_aliyah

Yugo was way richer than Albania, and I doubt Poland was as poor as Romania. So wasn't just a "we don't care they're mere peasants"

Again, ppl were technically allowed to leave the USSR (and East Germany too). But it might take 10 years and you were a social pariah in the meantime.

You are right, it is hard to generalize: for example Albania did not dependent on Moscow at all and Romania even had its own foreign policy that did not automatically follow Moscow. Go figure...

You could leave the GDR - but you had to wait for the permit for several years and your ability to earn an income was severely restricted during that period; In the USSR Jews could apply for emigration since the seventies, and permission was very dependent on the current political climate and the whims of the higher ups.

"Hayek says that central planning of an entire economy results in dictatorship"

With some corporations becoming bigger and global we have to be a little careful that they don't turn into de-facto dictatorships either. Internally they already behave like one.

Power corrupts; absolute power corrupts absolutely

Some leftists critical of the USSR described the Soviet system as "state capitalism": the state is the only capitalist in the system.

as the saying, at least among Russian immigrants who saw USSR, goes - the bigger the corporation the more of socialism inside it.

In general it just follows from the main principle of Marxism described in the Das Kapital - higher entropy of ownership distribution leads to the higher degree of socialism (as the reverse of that entropy value basically being the strength of coupling between the ownership power and the execution power). From minimum entropy of ownership distribution - one 100% owner - to publicly owned companies to government run agencies and government owned properties to socialist state where nominally all the people collectively own everything. Significant change in entropy of such distribution - when say a significant stake of a public company gets concentrated in some single hand or when the whole company goes private or when some government agency gets privatized - usually leads to significant change in degree of socialism inside the company or the agency.

>higher entropy of ownership distribution leads to the higher degree of socialism

That characterization doesn't fit at all. Capitalist/Market-based societies are far more decentralized, with a higher entropy ownership distribution, than Communist/Socialist ones. In Market-based systems hundreds of thousands of small, medium and large companies and millions (or hundreds of millions) of individuals do day-to-day business with each other without direct oversight or control of a central body.

>where nominally all the people collectively own everything.

Except that's not how collective ownership works. A society of millions of citizens can't collectively manage anything - they need to create representative institutions to do that on their behalf. The bigger the collective, the less entropy the representative institution displays. So collective ownership in practice is a very very low entropy position.

man, you have completely mixed up ownership power with executive/management power.

When everybody owns everything that is maximum possible entropy of ownership power distribution, and that results in practically minimum entropy of executive/management power distribution - the heavily centralized planning&control. By contrast, in capitalist society every piece of property, except for government owned, is owned by a set of people smaller than the whole society and their stakes aren't necessarily equal - thus such distribution has lesser entropy that the socialist one of everybody everything. Where is management and control in the capitalist society and economy being less centralized has thus higher entropy distribution than the socialist centralized.

>man, you have completely mixed up ownership power with executive/management power.

I did not. You have a view of socialism that is not at all grounded in reality. That's where you got confused.

>When everybody owns everything that is maximum possible entropy of ownership power distribution

But that isn't true in practice at all. In every socialist/marxist society collectively ownership is a meaningless idea. It is more of a theoretical concept rather than a practical one. You have no rights as a collective owner to actually influence and decide on how specific resources are managed by some institution charged with exploiting them. The reality is that some central governing body, which under Marxist regimes is usually the communist party, is the one that actually manages all institutions. Usually that body is not even accountable to any democratic action. Worse for you, all power tends to be concentrated in an individual and even the party can be completely inconsequential and used more to rubber-stamp the decrees of the leader.

So I stand by my assertion that in practice, Marxist/Socialist societies actually have a very low-entropy "entropy of ownership power distribution". The central government is the defacto owner and manager of all institutions. That's as low entropy as you're going to get.

>By contrast, in capitalist society every piece of property, except for government owned, is owned by a set of people smaller than the whole society

Sure. But the set of sets of people who own something is itself huge, in theory and in practice, so market-based economies will have a low-entropy 'ownership power distribution' regardless. Even when comparing real market-based societies to your non-existent Utopian socialist societies I'm not sure you can simply assert the latter is more decentralized than the former because in capitalist societies there are more things to own that are in fact owned by more sets of people. Under Marxism, there may be one car manufacturer, and one car model being manufactured. In market-based/capitalist societies, there may be 10 car manufacturers making 10 car models that are then owned by far greater number of people. Each manufacturer can be also be owned by thousands or millions of individuals.

Hell, you can take a thermodynamic view if it helps to illustrate the concept. Historically market-based societies have been far better at increasing universal entropy than Marxist ones.

The difference is that the corporations are still participating in a free market trade, no one is forced to be a customer while communist governments don't have to worry about losing a customer.

It can be vastly more complicated than that. What with the auto industry bailouts, sub-prime lending, subsidized minimum wage jobs, etc. Corporations will take advantage of the government in ways that are very not capitalist if it suits them.

This quickly changes if some companies products become basically required, though, or if companies gain monopolies.

It seems with the bailouts of 2008 and other subsidies we are forced to support companies if we like it or not.

That's true and a sad consequence of increasingly socialist governments.

Didn't the CEO of Sears try the internal-capitalism approach, only to have the company basically self-implode?

It almost destroyed Sony as well. Having a balance sheet per department and letting them compete is the fastest way to crash a company.

An interesting example of this is the modern Israeli kibbutz. These are literal socialist collectives [1] that function as actors in the capitalist economy. And a lot of them are quite good at it! It may be hard to motivate innovation in a nation-size egalitarian society, but it seems to work quite well in an economic unit where everyone knows everyone else and you personally know, or at least recognize, everyone who benefits from your innovation. (And they know you and recognize your accomplishments, which is also a big motivator.)

[1] In the ideologically pure case, which is a common case but not universal or even the majority.

That's a scaling issue. Communes work well up to about 100 people. Today's larger kibbutz is more like a company with worker housing. "Differential pay was introduced into the kibbutz structure; management has become increasingly professionalized; and the community and business structures have been separated"[1]

[1] http://www.jewishvirtuallibrary.org/history-and-overview-of-...

Hence the "ideologically pure" caveat; there is a fascinating subset of kibbutzim which make enough money to essentially function as post-scarcity economies (making things like Humvee armor add-ons for the Americans, or high-end vending machines for e.g. movie rentals). Those have been able to stay ideologically pure by being more effective players in a capitalist system [1], and once they reach that state they are able to maintain it through social forces.

[1] which of course creates some serious cognitive dissonance for all involved

> yet when you look at how they operate it's basically Soviet-style central planning

What are you talking about? Big Corporations will have thousands of suppliers, thousands of partnerships and millions of customers - none of whom are directly (centrally) controlled or managed. They are also far more transparent and truthful about their production numbers and costs. They are far more nimble, far more efficient, and far less corrupt.

The scale matters and managing even not so small companies Soviet Style is quite OK. As the article point out for small number of products optimization problems are solvable in one way or another. I will not even be surprised if few rules of thumb that a good manager instinctively uses give good enough solutions in most cases that matter. But that fails as n growths.

It's probably worth noting that centrally-planned corporations receive feedback from the market in the form of sales but the USSR's central planners didn't really have any equivalent.

This might be surprising to you, but consumers still used currency to buy goods, and both surpluses and shortages were tracked. It isn't exactly the same as market feedback, but it did serve the same function.

It may have served the same function, but it didn't do it as well.

And if GE, say, messes us on jet engines, well, there's always Rolls-Royce. If the central planners mess up, you don't have an alternative.

I guess the equivalent for nations could exist, but it would require free migration. USSR central planning screw up? Guess it's time to emigrate to China. Of course switching the nation you are part of is usually (but not always) more complicated than switching the product you buy.

Actually the central planners did plan backups and alternatives for everything. With all its flaws even the SU was not so flawed to let total idiots make every economic decision.

Just think of Mig and Sukhoi, for a simple example. Or NPO-Saturn and Tumansky, if you prefer jet-engine manufacturers.

> not so flawed to let total idiots make every economic decision

You might want to read up on Khruschev's corn farming plans, Gorbachev's prohibition, Mao's backyard furnaces and many more. Slightly tangent, check on Trofim Lysenko's anti-genetics antics. USSR style socialism explicitly declared ideology over science, engineering and what not. And by ideology they meant whatever The Great Leader says.

Have you read the actual article? It explains in detail why it didn't do as well, namely computational complexity (essentially solved today), and the general non-adoption of ideas.

There's no reason to believe it wouldn't be viable today.

Not quite. There had been two currencies in the USSR, "cash" and "cashless" (нал and безнал). Retail consumers ("physical persons") could only use cash and institutional consumers ("juridical persons") only cashless. There had not been an easy exchange between the two by design. As the result, all consumer goods production ("group B") was flying blindly under the directions from the central planning. The government's own production ("group A") did have market-like feedback loops since it was running on the same currency and few people complained about this area's performance.

Consumer goods were in total ruin by the 1970s. People used word "deficit" to refer to anything desirable. And no, it has not been a common word or its usage in Russian before the advances in planned economy.

As a Russian, and as a Russian interested in economical history of both the Russian Empire and the USSR, I have to notice that before the communists the Empire had serious famine problems [1], and had no serious modern (19-th centure style modern) economy, which did not allow for effective product exchange between regions. For example, the Empire was exporting a lot of grain, but still had regional hungers every 5-10 years.

"Deficit" literally means "lack of something", and hunger is definitely a lack of food.

Food supply problems in the region were only solved by late 30s (if one skips war-related problem of 40s), when painful - like, really painful - communist reforms and modernization settled down.

[1] https://en.wikipedia.org/wiki/Droughts_and_famines_in_Russia...

>"Deficit" literally means "lack of something", and hunger is definitely a lack of food.

Sure. Yet, being a Russian myself also familiar with the history, I cannot recall people using that word to describe "hunger". In Russian of 1970s-1980s the word "deficit" was used to refer to the goods not a lack of them, see this example : https://www.youtube.com/watch?v=ZKWQ2UxXSLY

As for you remarks about RI's economy - I am not sure what you mean. In your own link there is no reference of an economy-related famine. Famines used to be caused by weather and wars all around the world.

Weather acceptable as a famine cause is a clear sign of bad economy, don't you think so?

Which largely parallels one of my recent comments:

https://news.ycombinator.com/item?id=14513718

Downvoted for no apparent reason...

In short, managers often don't pay attention to how the products are created. They instead rely on checklists to "prove" that processes were followed.

Nothing beats "feet on the ground". If you know what's going on, you know how to manage it. If you're managing based on summaries of summaries of summaries... it will go badly.

See Jim Sinegal for a real-world example of this success story:

https://www.usnews.com/news/best-leaders/articles/2009/10/22...

You don't know what you're talking about.

>Nothing beats "feet on the ground".

Except if you're managing a huge global supply chain.

The career of Jim Sinegal largely proves you wrong.

As does the career of Tim Cook. Before he was CEO, he was managing Apple's global supply chain. Which involved a lot of on-site visits.

Try to explain how both of these people could have been just as successful while locked in a cubicle, and digesting reports from underlings.

If you believe that, I have a bridge in Brooklyn to sell you. Cheap. Just read the remote reports, and spend the money without ever visiting the bridge.

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