Structure, as the management theorist Alfred Chandler noted in his study of early industrial age corporations, follows strategy. Where a goal-driven strategy succeeds, the temporary scope of the original problem hardens into an enduring and policed organizational boundary. Temporary and specific claims on societal resources transform into indefinite and general captive property rights for the victors of specific political, cultural or military wars.
As a result we get containers with eternally privileged insiders and eternally excluded outsiders: geographic-world organizations. By their very design, such organizations are what Daron Acemoglu and James Robinson call extractive institutions. They are designed not just to solve a specific problem and secure the gains, but to continue extracting wealth indefinitely. Whatever the broader environmental conditions, ideally wealth, harmony and order accumulate inside the victor’s boundaries, while waste, social costs, and strife accumulate outside, to be dealt with by the losers of resource conflicts.
This description does not apply just to large banks or crony capitalist corporations. Even an organization that seems unquestionably like a universal good, such as the industrial age traditional family, comes with a societal cost. In the United States for example, laws designed to encourage marriage and home-ownership systematically disadvantage single adults and non-traditional families (who now collectively form more than half the population). Even the traditional family, as defined and subsidized by politics, is an extractive institution.
Where extractive institutions start to form, it becomes progressively harder to solve future problems in goal-driven ways. Each new problem-solving effort has more entrenched boundaries to deal with. Solving new problems usually means taking on increasingly expensive conflict to redraw boundaries as a first step. In the developed world, energy, healthcare and education are examples of sectors where problem-solving has slowed to a crawl due to a maze of regulatory and other boundaries. The result has been escalating costs and declining innovation — what economist William Baumol has labeled the “cost disease.”
The cost disease is an example of how, in their terminal state, goal-driven problem solving cultures exhaust themselves. Without open-ended innovation, the growing complexity of boundary redrawing makes most problems seem impossible. The planetary computer that is the geographic world effectively seizes up.
On the cusp of the first Internet boom, the landscape of organizations that defines the geographic world was already in deep trouble. As Giles Deleuze noted around 1992:1
We are in a generalized crisis in relation to all environments of enclosure — prison, hospital, factory, school, family…The administrations in charge never cease announcing supposedly necessary reforms…But everyone knows these environments are finished, whatever the length of their expiration periods. It’s only a matter of administering their last rites and of keeping people employed until the installation of new forces knocking at the door.
The “crisis in environments of enclosure” is a natural terminal state for the geographic world. When every shared societal resource has been claimed by a few as an eternal and inalienable right, and secured behind regulated boundaries, the only way to gain something is to deprive somebody else of it through ideology-driven conflict.
This is the zero-sum logic of mercantile economic organization, and dates to the sixteenth century. In fact, because some value is lost through conflict, in the absence of open-ended innovation, it can be worse than zero-sum: what decision theorists call negative-sum (the ultimate example of which is of course war).
By the early twentieth century, mercantilist economic logic had led to the world being completely carved up in terms of inflexible land, water, air, mineral and — perhaps most relevant today — spectrum rights. Rights that could not be freely traded or renegotiated in light of changing circumstances.
This is a grim reality we have a tendency to romanticize. As the etymology of words like organization and corporation suggests, we tend to view our social containers through anthropomorphic metaphors. We extend metaphoric and legal fictions of identity, personality, birth and death far beyond the point of diminishing marginal utility. We assume the “life” of these entities to be self-evidently worth extending into immortality. We even mourn them when they do occasionally enter irreversible decline. Companies like Kodak and Radio Shack for example, evoke such strong positive memories for many Americans that their decline seems truly tragic to many, despite the obvious irrelevance of the business models that originally fueled their rise. We assume that the fates of actual living humans is irreversibly tied to the fates of the artificial organisms they inhabit.
In fact, in the late crisis-ridden state of the geographic world, the “goal” of a typical problem-solving effort is often to “save” some anthropomorphically conceived part of society, without any critical attention devoted to whether it is still necessary, or whether better alternatives are already serendipitously emerging. If innovation is considered a necessary ingredient in the solution at all, only sustaining innovations — those that help preserve and perfect the organization in question — are considered.
Whether the intent is to “save” the traditional family, a failing corporation, a city in decline, or an entire societal class like the “American middle class,” the idea that the continued existence of any organization might be both unnecessary and unjustifiable is rejected as unthinkable. The persistence of geographic world organizations is prized for its own sake, whatever the changes in the environment.
The dark side of such anthropomorphic romanticization is what we might call geographic dualism: a stable planet-wide separation of local utopian zones secured for a privileged few and increasingly dystopian zones for many, maintained through policed boundaries. The greater the degree of geographic dualism, the clearer the divides between slums and high-rises, home owners and home renters, developing and developed nations, wrong and right sides of the tracks, regions with landfills and regions with rent-controlled housing. And perhaps the most glaring divide: secure jobs in regulated sectors with guaranteed lifelong benefits for some, at the cost of needlessly heightened precarity in a rapidly changing world for others.
In a changing environment, organizational stability valued for its own sake becomes a kind of immorality. Seeking such stability means allowing the winners of historic conflicts to enjoy the steady, fixed benefits of stability by imposing increasing adaptation costs on the losers.
In the late eighteenth century, two important developments planted the seeds of a new morality, which sparked the industrial revolution. As a result new wealth began to be created despite the extractive, stability-seeking nature of the geographic world.