Introduction
Therefore, in a poor community the issue of venture size is double-edged. Certain ventures that are seen as requiring great resources are likely to be rejected out of hand. Real opportunities may thus be overlooked or passed by. At the same time, ventures that are conventionally regarded as amenable to a small scale of operation tend to be those least likely to generate significant capital returns, to provide a solid and extensible economic base for the community, and to capture any significant share of the wealth-producing instruments for the community’s benefit.
To the extent, then, that the need for larger firms is exaggerated by the conventional wisdom, that perception itself becomes a limiting factor in the generation of and public support for strategies of social/economic change based on smaller, less centralized productive entities. On the other hand, there are real and important advantages which accrue from increased size, and it would be equally foolish to underestimate these. The critical questions, to which this monograph is addressed, concern the nature of these advantages and disadvantages, and how their importance and extent changes with size.
In addition, it is necessary to look at the effects of size and scale in a larger and more encompassing context, since it is clear that social welfare does not necessarily increase along with enterprise or firm scale. Ultimately, this work argues that the conventional wisdom considerably overstates the virtues of size, at least as regards its effect on efficient operation and potential competitive strength. It argues further that the present state of the American economic system is such as to enhance the benefits and opportunities for smaller enterprises, as contrasted to larger ones, and that visible trends indicate that this will be even more true in the future. In short, there are not only some definite advantages to smaller size, but certain equally definite disadvantages to larger size.
These conclusions do not, in and of themselves, suggest particular approaches for decentralized community industries, but they provide a basis for further research toward that end. (@vii)
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The Economic Findings
Conclusions
It appears that the following conclusions are justified. All empirical studies indicate that below a certain size, firms (or plants) are, on the average, technically less efficient, although that “certain size” is not known with any precision. Moreover, it differs markedly with the specific industry evaluated. Such uncertainty and variability suggest that technical economies of scale are not the primary determinant of either competitive ability or true efficiency. Available data indicate first, that in most industries the penalties for operating plants well below the apparent optimal scale are not great; second, the presence of substantial relatively constant costs (added to those directly associated with production) dilutes even those clear advantages of greater production scale; and third, there is no strong case to be made for significant economies of firm (as against plant) size. The facts may be quite the opposite. (@24-25)
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The Operating Efficiency of Firms
…there is every reason to believe that smaller firms or private individuals have as much, or more, opportunity in this regard as the giants. In fact, there are probable diseconomies of scale in the large entities due to the difficulty of accepting or implement change. The attempt of large firms to replicate the virtues of small organizations by project teams, profit centers, and the like is an admission of the difficulty. Such tactics cannot, however, do more than reduce the extent the problem. Real change would require breaking up large entities.
As to the problem of planning—large firms are said to be needed here because the requirements of sophisticated technology and increasingly specialized knowledge call for long lead times to develop, design, and produce products. Firms must therefore have enough control over the market to assure that the demand needed to justify that time-consuming and costly investment will exist. This argument rests on a foundation of sand; first, because the needs of society should precede, not follow, decisions about what to produce, and, second, because the data do not substantiate the need for large production organizations except in rare and unusual instances, like space flight. On the contrary, planning for social needs requires organizations and decision-making capabilities in which the feedback and interplay between productive enterprises and the market in question is accurate and timely—conditions more consistent with smaller organizations than large ones.
Large size, in and of itself, is a decided deterrent to worker satisfaction (blue- and white-collar) and motivation. Rates of absenteeism, grievances, and strikes have been shown to be correlated directly with size; mental health is inversely correlated. Moreover, competitive efficiency, based on both new product utility and internal innovations in process and technology, is more consistent with small firms in which workers can better understand the relationship of their work to both the organization and its market. @58
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The Changing Marketplace
It is the conclusion of this analysis that in certain selected industrial sectors, the potential cost saving is sufficiently great to minimize or eliminate the theoretical risk of apparent short-term cost inefficiency,. To do otherwise would be to run the risk of placing technical efficient bureaucratic modes of organization above the social purpose of the enterprise, thus recreating the very system being challenged.
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A Few Final Words
Large organizations are not, by virtue of their size, inherently super smaller ones. Indeed, as this paper has attempted to show, the reverse is often more nearly the case, at least within certain segments of the economy and above certain very modest limits on smallness. Economic institutions or businesses, exist for social purposes, and it is therefore appropriate to evaluate the virtues of size—or for that matter, any other characteristic—as they influence those purposes. Nor can size, taken alone, serve as an adequate differentiating feature of organizations. One must consider instead, the balance between growth and form . . . contrary to contemporary social thought, which becomes hysterical if it fails to push it at constantly accelerating rates, growth must actually be stopped when a thing reaches the form best suited to its function.
If size is seen as the servant of function, then, as the foregoing discussion has attempted to indicate, it is not independent of the nature of the system in which that size is to be realized. Community-based enterprises will have options and advantages at a given scale quite different from those that would attend the same type of enterprise if privately controlled and owned. That is not to say that the data on size and efficiency are irrelevant to private enterprise, for they are not. Nevertheless, it is more instructive for present purposes to consider alternatives of size as tools that, in the hands of communities, offer more benefits than those which would accrue to it in any case @90
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Course Outline
1. Introduction: Conceptual and Philosophical Roots
Selections from:
Leopold Kohr, The Breakdown of Nations
Thomas Hobbes, Leviathan
James Madison and others, The Federalist Papers
George Bernard Shaw, The Road to Equality
H. Tawney; The Acquisitive Society
2. Scale and Control in Organizations and Societies: Issues of Measurement and Analysis
Selections from:
Barry Stein, Statement to Senate Select Committee on Small Business
Fortune 500, 1977
Brian J. L. Berry, “The ~ecgraphy of the United States in the Year 2000”
U.S. Senate Small Business Committee, The USA Business Community: Its Composition and Changing Nature
James S. Coleman , Power and the Structure of Society
Warner, Umwalla and Trimm, The Emergent American Society: Large Scale Organizations
3.The Size and Structure of Organizations: Functional Effectiveness
Selections from:
John H. Blair, Economic Concentration
John S. McGee, In Defense of Industrial Concentration
Graham Bannock, The Juggernauts
Fred Weston, Large Corporations in a Changing Society
Cohen, Gadon and Miaoulis , “Decision Making in Firms: The Impact of Non-Economic Factors”
K. Galbraith, The New Industrial Society
4.The Size and Structure of Organizations: Human Resources
Selections from:
K. Ingham,’ Size of Industrial Organization and Worker Behavior
Lyman W. Porter and Edward E. Lawler III, “Properties of Organizational Structure in Relation to Job Attitudes and Job Behavior”
John R. Kimberly, “Organizational Size and the Structuralist Perspective: A Review, Critique and Proposal”
U.S. Department of HEW Task Force, Work in America
Rosabeth Moss Kanter, Men and Women of the Corporation
5.Size and Structure in Political Life: Communities. Cities. and Countries
Selections from:
Robert A. Dahl and Edward R. Tufte. Size and Democracy
Leopold Kohr. Wales Independent
Michael Walzer. “A Day in the Life of A Socialist Citizen”
Wilbur R. Thompson. “The National System of Cities as an Object of Public Policy”
Rosabeth Moss Kanter. Commitment and Community
World Bank, Urbanization
Roland Warren. The Community in America
6. Technology and Social Institutions
Selections from:
Murray Bookchin, “Towards A Liberatory Technology”
Langden Winner, Autonomous Technology: Technics Out-of-Control as a Theme in Political Thought
Seymour Melman, “The Impact of Economics on Technology”
Dennis Livingston, “Intermediate Technology and the Decentralized Society”
Samuel C. Florman, The Existential Pleasures of Engineering
Jewkes, Sawer and Stillerman, The Sources of Invention
David F. Noble, America by Design: Science, Technology and the Rise of Corporate Capitalism
7. A Framework for Alternatives: Concepts of Participation, Control and Decentralization
Selections from:
Barry Stein, “Decentralizing the American Economy”
Paul Goodman, People vs. Personnel
Malik Hulder, “Power Equalization through Participation”
Jane Hansbridge, “Time, Emotion and Inequality: Three Problems of Participatory Groups”
Michel Crozier, The Stalled Society
Norman Macrae, “The Coming Entrepreneurial Revolution”
Robert A. Dahl, After the Revolution
Paul Bernstein, “Necessary Elements for Worker Participation in Decision Making”
8. Consequences and Outcomes: Distributional Equity and the Social Welfare
Selections from:
Jan Pen, Income Distribution
Gunnar Myrdal, “What Is Development?”
Christopher Jencks, Inequality
Wilfred Beckerman. Two Cheers for the Affluent Society
Shail Jain, Size Distribution of Income (World Bank 1975)
A. G. Robinson, Economic Consequences of the Size of Nations
U.S. Senate, “City Size and the Quality of Life”
William Alonso, “The Economics of Urban Siz e”
Roland Warren, “The Good Community: What Would It Be?”
Scott Burns, Home, Inc.
9. Alternative Forms of Work Organization
Selections from:
Paul Blumberg, Industrial Democracy
Stein, Gadon and Cohen, “Flextime”
Be1los, Industrial Democracy and the Worker-Owned Firm
Perry, Hochner and Russell, “The Worker-Owned Refuse Companies of San Francisco”
Seymour Melman, “Industrial Efficiency Under Managerial vs. Cooperative
Decision Making”
Pehr G. Gyllenhammar, People at Work
Joel B. Dirlam and James Plummer, An Introduction to the Yugoslav Economy
Jaroslav Vanek, The Participatory Economy
Richard G. Walton, “Innovative Restructuring of Work”
Clair Bishop, All Things Common
Daniel Zwerdling, “At IGP, It’s Not Business as Usual
10. Alternative Forms of Political/Economic Life
Selections from:
David Morris and Karl Hess, Neighborhood Power
Rosabeth Moss Kanter, Communes “.
Haim Barkai, “The Kibbutz as Social Institution”
Cambridge Institute, Prospectus for a New City
U.S. Congress Joint Economic Committee, China: A Reassessment of the Economy
Barry Stein, “How Successful are the CDC’s? An Interim Response”
Stein and Hadox, “Competitive Scale in Manufacturing: The Case of Consumer Goods”
Barry Stein, The Lummi Indians: Economic Development and Social Continuity
Percival and Paul Goodman, Communitas
11. A Framework for Alternatives: Autonomy, Independence and Interdependence
Selections from:
Barry Stein, “The Case for Autonomy”
Peter Kropotkin, Mutual Aid
Raymond Vernon, Sovereignty at Bay
Wright Mills and Melville J. Ulmer, “Small Business and Civic Welfare”
Irving A. Fowler, “Local Industrial Structures, Economic Power and Community Welfare”
Gar Alperovitz and Staughton Lynd , Strategy and Program
12. The Institutional Framework: Public Policy and the Legal System
Selections from:
Erazim Kohak, “Possessing, Owning, Belonging”
Barry Stein, “Collective Ownership, Property Rights, and Control of the Corporation”
Derek Shearer and Lee Webb, Reader on Alternative Public Policies
U.S. Senate Small Business Committee, Small Business and Society
13. Conclusion: Deliberate Change and Social Values
Selections from:
Rosabeth Moss Kanter and Louis A. Zurcher, Jr., “Evaluating Alternatives and Alternative Valuing”
Angus Campbell, P.E. Converse and W. Rodgers, The Quality of American Life