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As with many memorable blog posts, Paul Denlinger’s excellent article about China and its outdated version of capitalism holds a few hidden gems not to be overlooked. On second reading, this one popped out at me:

“Most of the reasons which [Ronald Harry] Coase outlined for the creation of the corporation in “The Nature of the Firm” no longer exist. Thanks to Google and other tools, small organizations can resolve all of these issues for almost no costs at all. Isn’t it time we start thinking and talking about deprecating large corporations?

Of course, many in the US and China would argue that only a very small and select minority would be able to work on different time zones and in remote locations with minimal supervision; I would beg to differ. For many service jobs where key personal relationships are not important, this will become the norm within 20 years. It’s just that the US and Chinese government haven’t figured it out yet.”

There are still many industries in which scale makes sense, perhaps not because large enterprises are the best loci of production, but because they are as yet unused to the challenges of integrating large-scale projects across multiple businesses. Boeing’s challenges with the 787 Dreamliner leap to mind.

But in his book Free Agent Nation, Daniel Pink made the case that for a growing number businesses, the traditional corporate structure had become a relic of the industrial revolution. Pink’s point was simply this: when the means of production for an industry can fit into a medium-sized backpack or a largish purse, the future belongs to the post-modern equivalent of the skilled craftsman.

Pink was writing about America, but Denlinger’s article poses a question: is China’s future, like America’s, more about forging coalitions of small firms – or even independent professionals – than the massive enterprises that currently dominate her landscape?

Much depends on a factor Pink identifies in the US: the need for an infrastructure to support such enterprises and individuals. Pink calls out several areas where America falls short in supporting free agents, and China has a long way to go.

As the nation begins to debate the issue of political reform, one of the matters on the agenda must be the final liberation of labor, the crafting of a legal and political infrastructure designed to empower not only small and medium businesses, but what Pink calls the “micro-enterprise.” This will be more difficult than it sounds in a nation whose very ideology is rooted in the industrial revolution.

Source: Freeing China’s Free Agents