by Daniel Bell
The adequacy of political structures. It should strike anyone, on momentary reflection, that in a society confronting the kind of problems we have, the existing organization of fifty states makes no economic, political, or social sense. What is the rationale for the boundaries of New Jersey, Delaware, Rhode Island, or Maryland? Under the Constitution, such concerns as education, welfare, local services, and the like are powers reserved to the states and municipalities. But these entities are no longer able to perform such services. Their tax bases are inadequate, their administrative structures archaic and inefficient.
Our problems are compounded when we go to a lower-level unit of government. In the past, advances in transportation technology served as the strategic variable in determining the scale of urbanization. The limits to urban growth in the nineteenth century were set, at first, by natural waterways and canals, later by railroads and steamships. Since World War I the automobile and the truck have advanced the pace of urbanization and changed its nature. With them have come the central city, the suburb, and the metropolis. By 1975, it is estimated that three-fourths of all Americans will be living an urban life. As suburbs spread farther away from the central city, the expanding metropolitan areas merge to form a new social and economic unit—the megalopolis. The skeletal outlines of a northeast megalopolis from Boston to Washington are already visible. The large crescent around Lake Michigan forms another. The stretches from San Francisco to San Jose and from Los Angeles to San Diego already form ribbon cities. The development of the megalopolis intensifies the need to organize the common use of water, land, recreational resources, and transportation systems for large areas that cut across the boundaries of existing state and local governments.
Yet the situation at the local level is chaotic. There is no decentralization—just disarray. The proliferation of government at the local level gives rise to serious problems in the coordination of public programs, in reducing public accountability, in making decisions affecting multi-unit areas, and in contributing to the wide disparities between available financial resources and community and human needs. The complexity of the problem can be seen from the fact that in 1962 the San Diego metropolitan area had 11 municipalities; Phoenix, 17; Houston, 25; Cleveland, 75; St. Louis, 163; Chicago, 246; and the New York metropolitan region, 1,400 local governments—small villages, school districts, sewerage districts, health districts, park districts, police districts, each with its own restrictive powers. These boundaries, historic growths, once adaptive to local needs, are no longer meaningful.35 Air pollution, waste disposal, and mass transportation are at least metropolitan in scope. Adequate housing can be obtained only if mass-production techniques are introduced into the industry, but the research and development of new materials and methods of construction, or the creation of markets large enough to warrant mass production, are not possible so long as there are thousands of different local building codes—often as many as fifty in a single metropolitan area—in the United States.
Centralization and decentralization. Clearly what is necessary in the next several decades is a comprehensive overhaul and modernization of governmental structures to find the appropriate size and scope of units which can handle the appropriate tasks. No one expects, of course, that the existing state boundaries will be abolished—for historic, traditional, or political reasons they are likely to be retained. But all sorts of functions can be “detached” and lodged in multi-state or regional “compacts” which can take over such functions. Clearly there are no pat answers. Even the favorite theme of regionalism is not an easy solution, for the definition of what is a region varies not on the basis of geography but on the function to be performed: A water region, a transport region, an educational region, and even an economic region have different “overlays” on the map. One has to define first what it is that one wants to centralize, and what to decentralize.
If a single principle can be established it would be this: that the function of the federal government should be primarily in the areas of policy and funding, and that operative functions be in the hands of regions, metropolises, and non-profit corporations whose size and scope would be appropriate to the function that had to be performed. It is a principle that leads us to the next distinction we seek to make.
THE PUBLIC AND THE PRIVATE
The conventional model of the economy concentrates on the private, profit-seeking center. Yet what is public and what is private, and what is profit and what is not-for-profit, is no longer an easy distinction. The aerospace companies are private, yet the federal government purchases 94 percent of their entire output. Instead of retaining as profits their revenues above costs, all profits above a negotiated sum are returned to the government; the government, rather than the competitive market, determines their profitability, and even their survival. The New York Port Authority and the Triborough Bridge Authority are non-profit public corporations, yet they make enormous profits which, though they do not go to stockholders, are reinvested in new enterprises far beyond the original charter of these corporations. In practical effect, they differ little from private utilities which pay off a fixed sum of their indebtedness and use profits for reinvestment. The Battelle Institute is a non-profit research foundation, the Arthur D. Little Company is profit-seeking, yet the activities of the two are quite similar and they are competitive. (Battelle did the development work on xerography and now reaps large royalties; Arthur D. Little does a considerable amount of public service work at no fee.) Mutual insurance companies and mutual savings banks are non-profit, yet their rates, salaries, and practices are virtually identical with capital stock insurance companies and savings banks. The University of California at Berkeley is a state university, yet it receives large amounts in corporate gifts and other private contributions. Columbia University is a private school, yet more than half of its annual $160 million budget comes from federal contracts and grants. The medical and health service field, the largest “growth industry” in the country, is a commingling of private, profit, nonprofit, and government activities. Most physicians are self-employed and operate within the private sector, yet are connected with hospitals, most of which are non-private, while the federal government increasingly underwrites a large share of hospital construction, medical care for the aged, and the overwhelming portion of research funds in medicine.
It is, in the main, the distinctive role of government as the “funder,” but not the operator, of activities that makes for these confusions. One can take as a specific instance the emergence in the ten years after World War II of the non-profit “systems research and development” corporations as a paradigm. The archaic civil service rules and the rigid bureaucratic structure made it almost impossible for the government to develop quickly a necessary “in-house’ capacity in a number of scientific and defense fields. The creation of Rand (an acronym for Research and Development), housed originally in the Douglas Aircraft Corporation, as a “think factory” for the air force provided a model which was quickly used by the Defense Department and other government agencies to create what is, essentially, a new social form. In some instances, these new groupings are independent corporations, in other instances they are housed in universities or are managed by a consortium of universities. The Lincoln Laboratory of MIT, under contract to the Defense Department, worked out the feasibility of a distant-early-warning signal system for continental defense, and then set up MITRE (MIT Research and Engineering) to do some of the necessary design work on the system. Since MITRE did not involve any fundamental research, and was not intrinsic to the purposes of the university, it was “spun off” as an independent non-profit corporation. The need to train thousands of persons quickly to manage new computer systems involved in continental defense led the air force to create the Systems Development Corporation (a spin-off from Rand), and this organization, having pioneered new systems of programmed learning and of computer capabilities, has extended its effort into the educational field, seeking contracts from many organizations far out
side the Defense Department. It would take one too far afield here to trace the complicated pattern of relationships that emerged between the government— principally through the Defense Department, the Atomic Energy Commission, the National Science Foundation, the National Aeronautical and Space Administration, and the National Institutes of Health—and the different kinds of research and development organizations, public and private.
If one looks at the non-profit sector as a whole, taking into account the wide range of government, educational, and health services, the striking fact is that about one-fourth of GNP and “not less than one-third and possibly almost two-fifths of all employment” is accounted for by the activities of that sector.36 In the 1950-1960 decade, in fact, nine out of every ten new jobs added to the economy were generated in the non-profit sector—i.e. by the vastly enlarged role of the federal government in connection with the cold war, the expanded activities of state and local governments in providing community services, and the growth of the education and health and welfare fields.
The growth of the non-profit sector brings into focus as employers of significant amounts of manpower a whole array of organizations whose structure and form differ to a considerable extent from the usual model of “bureaucracy.” These are universities, research laboratories, hospitals, community welfare organizations, and the like. The “received” doctrine, as drawn from Max Weber and accepted by most students of stratification theory, posits a bureaucracy as having a division of labor based on functional specialization, a well-defined hierarchy of authority, recruitment, selection, and promotion based on technical criteria, impersonal, “bureaucratic” rules of behavior, and so on. This is the “ideal type” model which is often best exemplified in corporate business structure. Yet the variety of new kinds of organizations that are emerging (particularly ones with a high component of technical and research personnel) indicates that the older models, patterned on pyramidical structures, may no longer be applicable, ana that in the coming decades the “traditional” bureaucratic form will have given way to organizational modes more adaptive to the needs for initiative, tree time, joint consultation, and the like.37 The emergence of new structural forms of non-bureaucratic organization is one more item on the long agenda of new problems for the post-industrial society.
A SYSTEM OF SOCIAL ACCOUNTS
We have learned in recent years how to chart economic growth and thus to identify at various points the kinds of policies that may be necessary to stimulate growth. We have begun to perfect an economic reporting system and to establish economic indicators that give us a measure of national performance. But as yet we do not have a continuous charting of social changes and we have been ill-prepared (in such matters as housing, education, or the status of the black) to determine our needs, establish some goals, and measure our performance. We have had no coherent accounting of our results, no assessment of gaps or short-falls, no reckoning of social costs and social gains. Lacking any systematic assessment, we have few criteria which allow us to test the effectiveness of present policies or weigh alternatives regarding future programs.
The development of national economic accounting provides us with an instructive picture of the workings of a modern economy. There are at present, for example, four types of accounting systems which allows us to measure different kinds of economic phenomena and transactions: National Income and Product Accounts sums up the total value of goods and services transacted in the economy and the allocation of net income among households, government, business, and foreign units; National Moneyflow Accounts traces the flow of funds between financial and non-financial units, including households and government; National Inter-Industry Accounts sets forth the value of purchases and sales of goods and services among variously “disaggregated” units of business, government, household and foreign sectors; and National Wealth Accounting, in effect a national assets inventory, evaluates the reproducible assets and resources of the nation.
Yet these economic instruments, particularly the GNP, are limited in their use, and sometimes—more by popular opinion than by professional economists—give us a distorted picture of the social economy. The GNP measures the sum total of goods and services transacted in the market economy. It is immediately apparent that services performed within a household by a wife, for example, are not “valued.” (The British economist A. C. Pigou, the pioneer of welfare economics, once remarked that if a widowed vicar paid his housekeeper a weekly wage, this was an addition to the national income; if he married her, it became a subtraction.) The point at issue is that “income” in rural areas (where a substantial amount of food may be produced at home) is often “undervalued” as against urban income—a fact neglected not only in some discussions about poverty in the United States, but in the international comparisons between the United Sates and some well-to-do agrarian countries (e.g. Denmark and New Zealand), which on the scale of GNP rank lower than their real income would put them.38
One can have a meaningful sense of progress only by knowing its costs, direct and indirect. A difficulty in national economic accounting today is that of directly assigning the costs generated by one group which often are borne by others (e.g. the costs to the community of strip mining, gouging out a countryside). But the problem is not only the social costs, unfairly generated and widely orne, but the broader cost matrix which would allow us to balance gains against costs.
What we need, in effect, is a System of Social Accounts which would broaden our concept of costs and benefits, and put economic accounting into a broader framework. The eventual purpose would be to create a “balance sheet” that would be useful in clarifying policy choices.39
What would a system of social accounts allow us to do? The word “accounts,” as it stands now, is perhaps a misnomer. Sociologists have been able to establish few completely consistent sets of relationships. Even where sophisticated social analysis can establish relationships it is difficult to do so in measurable terms. But we can begin by seeking to establish a conceptual framework.
A System of Social Accounts would begin with a series of social indicators that would give us a broader and more balanced reckoning of the meaning of economic progress as we know it. This effort to set up a System of Social Accounts would move us toward measurement of the utilization of human resources in our society in four areas: (i) the measurement of social costs and net returns of innovations; (2) the measurement of social ills (e.g. crime, family disruption); (3) the creation of “performance budgets” in areas of defined social needs (e.g. housing, education); and (4) indicators of economic opportunity and social mobility.
The following elaborations of the four areas referred to above are meant to be illustrative rather than prescriptive. They are intended to suggest the range of problems and the scope of application.
Social costs and net returns. Technological advances create new investment opportunities. These investments are expected to be paid out of the enhanced earnings they produce. But clearly there are losses as well. The major loss is the unemployment created by technological change, particularly in those instances where the advanced age of the worker whose particular skill is displaced makes it difficult for him to find new employment. Or a new plant in an area may create new employment opportunities, yet its by-products—water pollution and air pollution—may create additional costs for the community.
The question of which costs should be borne by the firm and which by the community is clearly a matter of public policy. Increasingly, for example, the firms responsible for polluting the waters of a river are asked to bear the costs of filtration. The Ruhr, flowing through West Germany’s densest industrial region, is at present less polluted than it was twenty years ago. Swimming and boating are commonplace. This happy circumstance is the result of a cooperative arrangement between 259 municipalities and 2,200 industries along the river which have developed a system of effluent fees calculated to encourage the construction of waste-disposal systems. In this case the entire cost of pollutio
n is assigned to the source. On the other hand, certain costs of severance pay or maintenance of an older labor force on a firm’s payroll may be so huge as to inhibit the introduction of useful technological devices and such costs might better be borne by the community than by a firm itself. But these questions of public policy can only be decided when we have a clearer picture of the actual social costs and returns of innovations.40
The measurement of social ills. Every society pays a hugeprice for crime, juvenile delinquency, and disruption of the family. The costs of child care and mental health are also high. There are no simple causes, such as unemployment, of such social ills. Yet such ills and social tensions have measurable effects on the economy (from the loss of able-bodied workers because of mental illness, to direct losses of property because of thefts and riots). Although data on crime, on health, dependent children, and the like are collected by government agencies, there is rarely any effort to link these problems to underlying conditions; nor is there a full measure of the cost of these ills. Systematic analysis of such data might suggest possible courses of remedial action.
Performance budgets. America is committed not only to raising the standard of living but to improve the quality of life. But we have few yardsticks to tell us how we are doing. A system of social accounts would contain “performance budgets” in various areas to serve as such yardsticks. A national housing budget, for example, would indicate where we stand in regard to the goal of a “decent home for every American family.” It would also enable us to locate, city and region, the areas of greatest needs and so provide the basis for effective public policy. A series of community health indices would tell us how well we are meeting the medical needs of our people.
