Centralization and Self-Governance: How to Get from Here to There

By Shann Turnbull

This statement is based on the law of requisite variety. This principle, discovered by scientists about 50 years ago, provides the design rules for building self-governing machinery, electronic equipment and robots.

The legislative gridlock in the U.S. Congress illustrates the complexity of governing the United States even on a nonsustainable basis. Changing the individuals elected to Congress will not, on its own, provide a solution. It is the system of government itself which needs to be changed.

Even in a much smaller country like Australia, voters are demoralized by unemployment, alienated by insensitive bureaucracies, exploited by business, depressed by environmental degeneration, and disempowered in regard to decisions affecting their own lives. Australians, like Americans, are highly cynical about politicians' ability to make things better.

The required changes are much more profound than just "reinventing" the operation of government departments. The activities of government need to be decentralized so that no function is carried out at a higher level when it can be better performed at a lower level. (This principle is illustrated in the table which appeared in the March 1993 edition of World Citizen News.)

In addition, all levels of government require a far richer information and control system to provide requisite variety for managing the complex variables of a modern society. But most importantly, the role of governments needs to change-away from delivering goods and services and toward promoting self-governance at subsidiary levels. This would be a practical way of giving power to the people.

The theory and practice of self-governing entities has rapidly developed in the pure and applied sciences but has not spread sufficiently to the social sciences. This lack of understanding of the principles of self-governance is why many social commentators claim that self-regulation cannot work.

Most political scientists and economists, along with the general public, have yet to appreciate the limitations inherent in the existing structure of government. Albert Gore, vice president of the United States, is an exception. At the 1996 meeting of the American Association for the Advancement of Science, Gore pointed out that people still describe the role of government in the language and metaphors of the industrial revolution. Economists, he said, continue to think of government as a "pump-priming" operation. Gore suggested that a better metaphor for describing the role of government was "imprinting the DNA."

DNA provides the instructions for molecules to organize themselves into a human who becomes self-governing. To my knowledge, there is no institution anywhere in the world which provides courses on how to design self-governing social organizations-be they in the public or private sector. Library and Internet searches provide little evidence that institutions of advance learning are even conducting research on this topic. (I would appreciate hearing from anyone with information on work being carried out on the self-governance of social institutions. Please contact me by mail through World Citizen News, by fax in Australia [+612-327-1497] or by e-mail [shann@peg.apc.org].)

A basic requirement for any mechanical device to become self-regulating is that it must obtain feedback information on its functioning in order to gauge its performance. Air conditioners need to measure the temperature to gain information for its self-setting mechanisms. If humidity is also to be controlled, then an additional information system is required. The more variables that need to be managed, the more channels of information and control are required. In other words, requisite variety is required to manage increases in complexity.

If social institutions in either the public or private sector are to become self-governing, then they will require requisite variety in their information and control systems. Centralized control of a social institution through a single governing board and/or chief executive will not provide sufficient variety to manage complexity either competitively or competently, let alone provide a basis for achieving sustainable self-governance.

In order for social institutions to become self-governing, they will require feedback information from all individuals affected by their operations. Mechanisms must be put in place to allow affected individuals to provide feedback information.

There are four types of social information and control systems, as described on page 10 of World Citizen News for Dec. 1995/Jan. 1996. The strengths and weaknesses of these four systems are set forth in the table that appears on page 7 of WCN for February/March 1996.

Control centers have to be decentralized through a number of boards, councils and panels. Otherwise, feedback will not be effective in controlling the organization. Only through decentralized control can government organizations, corporations and any other social institution obtain requisite variety to manage complexity. As well as providing checks and balances, the division of power among several control centers actually simplifies decision-making. This allows ordinary people to achieve extraordinary results.

I shall use the word "stakeholder" to describe any individual who is operationally affected by a social institution. Operational stakeholders in government or private institutions would include employees, clients, suppliers and members of the host community. To become self-governing, social institutions must set up mechanisms enabling all their stakeholders to provide feedback information.

Very few organizations in the English-speaking world even attempt to increase their effectiveness, efficiency and sustainability by involving stakeholders in their governance structure. However, such arrangements are common among Japanese corporations. They routinely issue shares to their employees, customers and suppliers. European corporations do the same, though to a lesser extent.

Spain provides the most outstanding examples of firms owned and controlled by their operational stakeholders rather than by investors. These worker-controlled enterprises, highly responsive to their customers and suppliers, are clustered around the town of Mondragon in the Basque region.

Because they include multiple boards and/or councils, such stakeholder cooperatives also illustrate the competitive advantage of requisite variety in information and control systems. They also show how complexity can be reduced by limiting the size of an organization, and how hundreds of human-sized enterprises can be collectively governed through nested networks of stakeholders. (A detailed analysis is provided in my paper, "Innovations in Corporate Governance: The Mondragon Experience," which appeared in Corporate Governance: An International Review, July 1995, Blackwell, Oxford.)

Citizens Utility Boards (CUBs) represent a form of stakeholder feedback associated with some U.S. public utilities. CUBs were established with the encouragement of Ralph Nader as a way to make regulated monopolies accountable to rate-payers.

Customer assemblies, worker councils and supplier panels are other means of introducing requisite variety into the control of public or private sector organizations. Such arrangements could begin to create a "stakeholder economy."

Stakeholder governance could be introduced in the private sector with or without stakeholders' ownership, as is described on page five of WCN for November 1992, and on page nine in the August/September 1994 edition.

The stakeholder concept offers very powerful attractions for politicians running for office. Whether or not Tony Blair, leader of Britain's Labor Party, has been reading WCN or my other writings, he is now calling for construction of a "stakeholder economy." It is an idea whose time may come with the next British general election. It is an idea that would create the building blocks for a system of world governance, which would in turn provide the basis for establishing sustainable ecological republics.

Shann Turnbull is economic consultant to the World Government of World Citizens. He can be reached at P.O. Box 266, Woollahra, Sydney, NSW 2025, Australia.