Bureaucracies In 21st Century

Paul Krugman calls 1913 the high-water mark of the First Global Economy. He notes, that over the preceding century, the world economy had been transformed by technology and the widespread acceptance of the belief that free markets, with secure property rights, were the best way to achieve economic progress.

After 1913 the market atrophied -- long-distance trade shrunk, private international movements of capital virtually disappeared, and a third of the world rejected private property.

How does one explain this reversal? Perhaps, more importantly, how does one explain the even more astonishing reversal of fortune that, at the start of the 21st century, the world has returned to more or less the same ideology of free markets, small governments, and sound money that prevailed at the beginning of the 20th.

The answer to the first question must be that bureaucracies replaced alternative institutional arrangements, primarily markets in the first half of the 20th century because they outperformed them. How? Presumably, or so Alfred Chandler argues, because of technological innovations that led to massive economies of scale and/or scope.

What were the changes in technology that caused bureaucracies to out-perform markets? Here the surprising answer is changes in organizational arrangements themselves.
Old style bureaucracy is authoritarian and hierarchical, those attributes never comported well with democratic values. Moreover, the requirements of directing giant, vertically integrated, functional organizations has tended to overwhelm the capacity of the public and its elected representatives to attend to the general welfare. Limiting the scope of the public sector to the provision of services that truly are infused with the common interest cannot but enhance the efficacy of democratic governance