Bureaucracy Is an Organism
In general, we study systems so that we may be able to predict their behavior. Complex systems can be difficult to comprehend. There are too many hidden forces at play for our first-cut models to be useful. So, we break things down into simpler sub-systems. By figuring out how these sub-systems work, we can then start to guess how they fit together to form the broader whole.
Complex systems that survive evolve from simple building blocks. It’s impossible to build a complex system from scratch. This is known as Gall’s Law, explained here:
“Gall’s Law states that all complex systems that work evolved from simpler systems that worked. If you want to build a complex system that works, build a simpler system first, and then improve it over time.”
The note goes on to explain it in greater detail:
“Complex systems are full of variables and Interdependencies that must be arranged just right in order to function. Complex systems designed from scratch will never work in the real world, since they haven’t been subject to environmental selection forces while being designed.
“Uncertainty ensures you will never be able to anticipate all of these interdependencies and variables in advance, so a complex system built from scratch will continually fail in all sorts of unexpected ways.”
When we see phrases like “environmental selection forces,” it is natural to think of evolution.
We generate hypotheses. We test them, judging our success by how well or how poorly our predictions fit what we observe.
This is what we’re trying to do in our study of bureaucracy.
Can we develop a set of general, contemporary principles that at least describe what we see in the world? And can we extend this description into something that helps us forecast events?
In modern civilization, corporations, governments, bureaucratic agencies, non-profits, families, and individuals (and undoubtedly many more types of corporate person) interact to create a rich fabric of outcomes.
These are synthetic organisms created by man.
Going back to high school biology for a moment, we recall that:
“Organisms have goals. The short-term goal is to self-generate and self-maintain in a given context. The long-term goal is to pass genome copies on to offspring, a goal that succeeds only if self-generation and self-maintenance succeed.”
This sense of purpose is encoded in the genetic material of the bureaucratic organism no less than it is in the DNA of any living entity.
This imperative to propagate also means that the organism needs to deal with forces that threaten its existence.
A great example of this is China. This FT article talks about the changes to the social contract there.
“’The old contract was a pretty simple one which is: `We’ll stay out of politics, we won’t express sensitive opinions, provided we can expect to be prosperous in the future,`’ says George Magnus, author of Red Flags: Why Xi’s China is in Jeopardy, and a research associate at the University of Oxford’s China Centre.”
Changes in this arrangement can be traced to Xi Jinping’s rise to dominance.
“But Xi declared China was facing a new challenge. After decades of rapid growth, he said the ‘principal contradiction’ was between unbalanced and inadequate development and the people’s ever-growing needs for a better life.
“These ‘needs,’ he said, included ‘demands for democracy, rule of law, fairness and justice, security, and a better environment.’
“Security was the keyword, analysts say. When Xi became party leader in 2012, the organization was concerned that the growing private sector was empowering entrepreneurs and eclipsing the apparatchiks. In 2013, the party circulated an internal memo, Document Number Nine, attacking western constitutional democracy and other ideas, such as universal human rights and ardently pro-market ‘neoliberalism.’” [emphasis added]
Xi’s campaign accelerated during the Pandemic in 2021, using the Orwellian-sounding phrase “common prosperity” to describe his initiative:
“But it was in 2021, as the economy was recovering from the first shock of the onset of Covid-19, that Xi launched one of the most decisive campaigns yet to meet the people’s aspirations for a ‘better life’ – what he called ‘common prosperity.’
“Beijing cracked down on the internet empire of billionaire Jack Ma, leading him to largely disappear from public, and the country’s other important internet groups, shutting down overnight the whole industry of online tutoring and restricting online gaming for children.
“In a speech on common prosperity at the party’s central committee for financial and economic affairs in August 2021, Xi expounded on the policy’s deeper aims. Cadres must ‘resolutely oppose the unlimited sprawl of capital’ and ‘uphold the dominant role of the public sector,’ he said while also somehow mobilizing ‘the zeal of entrepreneurs.’” [emphasis added]
The Chinese public sector is massive despite the entrepreneurial growth since 1978’s Deng reforms that put in place this version of the social contract.
“When China launched its economic reforms in 1978, SOEs [Stated-Owned Enterprises] generated about 80% of China’s gross domestic product. This has now dropped to about 18%, but SOEs remain powerful force in the Chinese economy as they still employ about half of China’s 750 million workforce and control just over 50% of its industrial assets. Further, they dominate some key sectors of the economic landscape such as power, telecommunications, financial service and transport.”
The faster growth in GDP took place in categories dominated by the private sector such as property development and technology.
Xi feels like he must clamp down on the private sector before the errant entrepreneurs push for change and threaten the party’s dominant control. Western pundits theorized for years that economic freedom would lead to political freedom. Xi’s actions tell us that economic freedom succeeded too well, leading to reduced political freedom.
If self-generation and propagation were general attributes of all bureaucratic actors, we would expect to see similar behavior in the West.
This is precisely what we do see.
If we were to generalize our model of bureaucracy as interested in self-generation and self-maintenance, this would predict bureaucracies attacking threats from the private sector once they obtain a certain scale. What would constitute an assault, as distinct from normal administrative action? Anything that departs from the norms individual actors in the economy expect.
In the movie Minority Report, the actor Tom Cruise plays a detective decades from now who arrests people before they perpetrate a crime, relying on the judgment of so-called “pre-cogs”: people with the ability to foretell the future.
The beauty of the story is that it challenges the standard that we have come to expect: in our world, the police arrest people only once they have committed the crime, not before. It is impossible to determine what anyone might or might not do in the future with the kind of certainty our society requires.
Yet, that is precisely what the Federal Trade Commission has started to do.
Here, the FTC attempted and failed to block Meta Platform’s acquisition of smaller company called Within Unlimited based on the FTC’s speculative theories of future conduct.
“In its amended complaint, the FTC focused on a more unusual theory that the Meta Within deal is a threat to potential competition in the future. The agency said blocking the deal would enhance competition because Meta would be forced to develop an app that competes with Within’s product.
“The mere prospect of Meta’s potential entry into the market for virtual reality fitness apps spurs Within and others to compete harder to retain customers and improve their products, the agency added.”
This argument is pure conjecture. How do the FTC pre-cogs know that Meta would develop an app that competes with Within’s product? How does the FTC know that the possibility of Meta’s development of VR apps would incite new product generation in the space? Isn’t it also possible that companies would lose venture funding for such efforts upon Meta’s entry? Isn’t it true that companies like Within and other startups see the willingness of larger companies to purchase them in the future as an incentive to develop new products? Wouldn’t preventing larger tech companies from making strategic acquisitions inhibit competition and new market development given its historic role in motivating such innovation?
What would drive the FTC to behave this way? Experts have their doubts.
“’I think they looked at the merger and thought `we need to stop it, what is our best theory?`’ said John E. Lopatka, an antitrust law professor at Pennsylvania State University. ‘They came up with the ones they have, which one can doubt are very strong.’”
This motivation to push back against business comes straight from the top.
“The order, the centerpiece of a new Democratic emphasis on restraining the nation’s most powerful companies, lays out a detailed plan to address what the Biden administration sees as trouble spots across industries, from everyday consumer concerns – hearing aids and baggage fees – to some of the most cutting-edge issues facing the government, such as first-ever antitrust regulations for internet platforms.”
Would there be as much (or any) interest in the internet platforms if they were not big?
Also notice the coincidence of targeting large technology companies, as in China.
In updating the traditional Hart-Scott-Rodino regulatory guidance in June 2023, the administrative tax on business explodes:
“The government estimates that the new rules would roughly quadruple the average paperwork hours per filing, from 37 hours to 144. Those 107 extra hours per filing mean about $350 million in added labor costs. Lawyers who charge many of those billable hours think that that is a lowball estimate and that the actual increase will likely be ‘multiple times that figure.’”
The losing continues. Here are the FTC pre-cogs at work against Microsoft in their acquisition of Activision:
“The agency alleges that the deal would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription and cloud gaming business.”
The FTC argued that, despite Microsoft’s assurances that it would not do so, the company would deny other gaming platforms economic access to leading Activision titles or somehow inhibit the evolution of competitive streaming. The theoretical possibility of such bad behavior was deemed to be ipso facto its guarantee, in essence.
As companies get wise to this abnormal activism, they are willing to fight.
“Xbox parent Microsoft closed its $75 billion acquisition of the video game giant Acquisition Blizzard on Friday – despite the Federal Trade Commission’s ongoing fight to prevent the landmark deal.
“Microsoft officially bought the ‘Call of Duty’ and ‘World of Warcraft’ maker – the biggest acquisition in the history of the video game industry – after the UK’s Competition and Markets Authority said it would drop its opposition to the deal earlier in the day.
“To satisfy British regulators, Microsoft agreed to sell streaming rights to rival Ubisoft.
“Despite the UK’s approval, the FTC is actively trying to halt the deal. The agency, led by antitrust crusader Lina Khan, is still challenging the merger in an administrative case to be brought before its own in-house judge.
“If the challenge is successful, the FTC could still force Microsoft and Activision to unwind the deal – though it is considered a long shot.”
Microsoft had to jump through hoops to make it clear that the intentions the FTC invented and attributed to them were fictitious.
“Microsoft slowly flipped competitors into allies, signing private deals to pre-empt concerns that it anticipated from regulators. When diplomacy didn’t work, it made a substantial concession and used expansive legal resources to grind the government agencies down.
“The strategy worked. European regulators turned the private arrangements with rivals into a formal settlement.”
The hits keep on coming at WFTC, though.
Next up on the docket was Amazon. The press release states in black and white that they are not going after Amazon because it is big. Don’t think of an elephant.
“The complaint alleges that Amazon violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents competitors from growing and new competitors from emerging.”
The subtext of these complaints is that in becoming such a dominant player in the ecommerce space, Amazon somehow owes a public duty to its competitors to provide services for free. For example, where search results on Amazon (including listings for third-party sellers) were once free, the emergence of the Amazon advertising model prioritized listings that sellers paid to elevate in the search rankings. See this wonderfully titled article from vice.
Not to be forgotten, there is the DoJ case against Google. The core argument is that Google paid billions to other large tech companies to be the default search engine on new products, such as Apple’s iPhone. This echoes the Internet Explorer case of the late 1990s.
This isn’t to dispute the fact that most people would choose Google by default anyway and that people are free to change their defaults at any time. It plays on the laziness of the consumer who, we are told, would change their default to something smaller like DuckDuckGo, but for their own human frailty. Don’t worry. The FTC is here to spot you.
It would be ironic if, as a consequence of this litigation, Google stopped making payments to other large technology companies resulting in little to no change in their share of the search market. The FTC would have succeeded only in enriching Google at the expense of Apple and others.
Perhaps this blitzkrieg of regulatory activity is about the sense that the power of the large technology companies presents an existential threat to the maintenance and the growth of large administrative agencies at the state and federal level in reducing their status in the public forum.
The influence these companies, many of whom didn’t exist even thirty years ago, have over the lives of people all over the world limits the impact of government agencies, just as the Chinese internet companies got too big for their britches.
What is the general principle then?
If we want to predict bureaucratic behavior, we should model the administrative actor as any other organism focused on its self-generation and self-sustainment so that it can transmit its genetic code to subsequent iterations of itself. Once the agency determines that something threatens its untrammeled growth or challenges its status and power, then we can forecast with reasonable confidence that there will be a backlash.
I suppose the corollary is that individuals who seek to lead these bureaucracies can leverage them for their own personal gain by exploiting their power in a political manner.
But that’s a topic for another day.