Hierarchy, Equality, or Democracy: Examining the Tradeoffs in the Governance of Economic Organizations


Yang-Yang Cheng, University of Toronto

This paper returns to a classical issue in sociological theory – the potentials, constraints, and tradeoffs in organizations that value both democracy and equality, on one hand, as well as complexity and efficiency on the other. The paper investigates what we might call the Standard Hierarchical View (SHV) – the view that the only way to satisfactorily organize business entities in the modern world is through a hierarchical governance structure. Although this view is dominant, it is in need of serious revision. In contrast to the SHV, we advance two main arguments. First, although the SHV assumes that there are only two fundamental possibilities for organizing economic enterprises – firms can be efficient-and-hierarchical or inefficient-and-egalitarian – we argue that the universe of possibilities for organizing economic firms should actually be understood as a spectrum involving three ideal-types. Firms can be organized hierarchically (such as in conventional capitalist businesses) or they can be organized in a strictly egalitarian manner (such as in egalitarian collectives) – in which case there are indeed stark tradeoffs in terms of complexity versus equality. However, there is also a third option which is that firms can be organized via representative democracy (such as in democratic worker cooperatives), which allows for complexity, efficiency, and a high degree of equality (though by no means complete equality of power or pay). Second, the heart of the paper consists of a careful and detailed empirical and normative evaluation of the three organizational types on the basis of widely desired criteria: efficiency, ability to grow, ability to minimize domination, respect and dignity, distributive equality, job security, community impact, and satisfaction. Overall, a careful weighing of the evidence suggests that the Standard Hierarchical View is wrong: democratic cooperatives, though far from perfect, generally perform better than the other two possibilities in terms of avoiding their major pathologies. All things considered they appear to be superior forms of social organization (for much, though perhaps not for every sector of the economy). Democracy, not hierarchy, should be the default form of economic organization.

Non-presenting author: Tom Malleson, King's University College at Western University

This paper will be presented at the following session: