Organizational Learning and the Progressive Model

The natural evolution of organizational learning should over time shift the relationship between business and government from more to less. Early in their history, capitalist firms lacked the ability to think and plan strategically; to research markets; to assess competition. Over time, the professionalization of management, the development of tools and learning processes, new methods of management and new planning processes and models not only provide businesses with tools that were not available to them in the 19th century, but also are less accessible to government because the personnel are not available. In David Ames Wells's time, Wells did not believe that firms could strategically plan investment; could perform market research; could persuade workers to purchase consumer goods; or could assess the long run profitability of a plant or business unit. By the 1960s, John Kenneth Galbraith overstating the case argued that firms plan and manage demand. Clearly the role of the state must change in response to the evolution of managerial knowledge. But the state's role can change only if it develops sophistication about the same processes that the firms learn about. But of course such learning is beyond the budget, the ability and the organizational flexibility of government agencies. Hence, the role of government will quickly become outdated.

The problem facing government is not just a matter of organizational learning. It is a matter of being able to anticipate the insights, deviations and failures of ever-evolving organizations. Such learning is so far beyond the ability of government, that government will inevitably prove to be disruptive to firms' learning processes.

An example is the case of Enron. Enron's failure was in large part due to its accounting emphasis on mark to market accounting. But mark to market accounting was the very policy that the SEC approved in response to Jeff Skilling's application. Another example is the California degregulation of the power market. The state adopted a regulatory system that facilitated Enron's and other power firms' manipulation of the power grid that caused massive power outages.

The results of the relationship between a state which aims to guide organizations that learn at a faster rate than the state does is one of four things. One, the state becomes irrelevant and adopts a de facto laissez faire approach. Two, the state enforces its prerogatives to control or influence industry and limits organizational learning and economic progress. Three the state attempts to ritually mimic firms' organizational learning and its supposed role of providing support to industry, squandering resources while in fact adopting a laissez faire approach. Four, the state becomes captive or subject to the influence of the industry and competing interest groups, resulting in policies that reflect political power and economic resources rather than rationality.

Government has adopted all three approaches. In human resource regulation such as OSHA and ERISA, the federal government has adopted costly regulation that has done little to improve safety or security, reducing economic opportunity. With respect to education, education schools continue to advocate progressive education approaches that reduce educational outcomes. In finance, the state has gradually backed off various regulations but continues to maintain regulation that makes it difficult for entrepreneurial financial firms to compete. In most fields the fourth likelihood has occurred. The brokerage of special interests has become a key characteristic of the American economy.