The Online Library of Liberty

A project of Liberty Fund, Inc.

• Editor’s Foreword
• Preface to the First Edition
• Preface to the 1962 Edition
• Bureaucracy
• Introduction
• 1.: The Opprobrious Connotation of the Term Bureaucracy
• 2.: The American Citizen’s Indictment of Bureaucratism
• 3.: The “progressives’” View of Bureaucratism
• 4.: Bureaucratism and Totalitarianism
• 5.: The Alternative: Profit Management Or Bureaucratic Management
• I: Profit Management
• 1.: The Operation of the Market Mechanism
• 2.: Economic Calculation
• 3.: Management Under the Profit System
• 4.: Personnel Management Under an Unhampered Labor Market
• II: Bureaucratic Management
• 1.: Bureaucracy Under Despotic Government
• 2.: Bureaucracy Within a Democracy
• 3.: The Essential Features of Bureaucratic Management
• 4.: The Crux of Bureaucratic Management
• 5.: Bureaucratic Personnel Management
• III: Bureaucratic Management of Publicly Owned Enterprises
• 1.: The Impracticability of Government All-round Control
• 2.: Public Enterprise Within a Market Economy
• IV: Bureaucratic Management of Private Enterprises
• 1.: How Government Interference and the Impairment of the Profit Motive Drive Business Toward Bureaucratization
• 2.: Interference With the Height of Profit
• 3.: Interference With the Choice of Personnel
• 4.: Unlimited Dependence On the Discretion of Government Bureaus
• V: The Social and Political Implications of Bureaucratization
• 1.: The Philosophy of Bureaucratism
• 2.: Bureaucratic Complacency
• 3.: The Bureaucrat As a Voter
• 4.: The Bureaucratization of the Mind
• 5.: Who Should Be the Master?
• VI: The Psychological Consequences of Bureaucratization
• 1.: The German Youth Movement
• 2.: The Fate of the Rising Generation Within a Bureaucratic Environment
• 3.: Authoritarian Guardianship and Progress
• 4.: The Selection of the Dictator
• 5.: The Vanishing of the Critical Sense
• VII: Is There Any Remedy Available?
• 1.: Past Failures
• 2.: Economics Versus Planning and Totalitarianism
• 3.: The Plain Citizen Versus the Professional Propagandist of Bureaucratization
• Conclusion

5.

The Alternative: Profit Management or Bureaucratic Management

If we want to find out what bureaucracy really means, we must start with an analysis of the operation of the profit motive within the framework of a capitalist society. The essential features of capitalism are no less unknown than those of bureaucracy. Spurious legends, popularized by demagogic propaganda, have entirely misrepresented the capitalist system. Capitalism has succeeded in raising the material well-being of the masses in an unprecedented way. In the capitalist countries population figures are now several times higher than they were at the eve of the “industrial revolution,” and every citizen of these nations enjoys a standard of living much higher than that of the well-to-do of earlier ages. Nevertheless a great part of public opinion disparages free enterprise and private ownership of the means of production as dismal institutions that are detrimental to the immense majority of the nation and further only the selfish class interests of a small group of exploiters. Politicians whose main achievement consisted in restricting agricultural output and in attempts to put obstacles in the way of technical improvement of methods of manufacturing discredit capitalism as an “economy of scarcity” and talk about the abundance that socialism will bring about. The heads of labor unions, whose members drive their own motor cars, are enthusiastic in exalting the conditions of the ragged and barefooted Russian proletarians and in praising the freedom that the workers enjoy in Russia where labor unions have been suppressed and strikes are a criminal offense.

There is no need to enter into a detailed scrutiny of these fables. Our intention is neither to praise nor to condemn. We want to know what the two systems in question are, how they work, and how they serve the needs of the people.

In spite of all the vagueness in the use of the term bureaucracy there seems to be unanimity with regard to the distinction between two contrary methods of doing things: the private citizens’ way and the way in which the offices of the government and the municipalities are operated. Nobody denies that the principles according to which a police department is operated differ essentially and radically from the principles applied in the conduct of a profit-seeking enterprise. It will therefore be appropriate to begin with an investigation of the methods in use in these two classes of institutions and to compare them with each other.

Bureaucracy, its merits and its demerits, its working and its operation, can be understood only by contrasting it with the operation of the profit motive as it functions in the capitalistic market society.

I

Profit Management