The Washington Post has an exceptional article observing some deep connections about what the Internet does for organizations, in business or politics, small or large.
A lot of people are talking about this, and making this happen in new kinds of organizations, like the Dean campaign and also what we try to practice at craigslist. (I learned a lot of large corporation sickness at IBM and Bank of America.)
I recommend the article, What will happen when a national political machine can fit on a laptop?
Here's a little excerpt:
Now, however, with internal communications networks and the speed of the Internet, you don't need a horde of people in a big pyramid to handle all that information. Firms have become "flatter" and "faster," and the "networked" or "virtual" company has come into being — groups of firms that use shared networks to behave as if they were part of the same company. A generation ago, GM made all its own parts and IBM all its own chips. Not today. Now, specialized companies use networks to coordinate their activities with GM and IBM, and supply the needed components.
So the end result of the Internet revolution on companies has been exactly what Coase's theory predicted: Cheap information has allowed firms to shrink. Size is now less of an advantage in organizations, and that means more competition in the global marketplace. For companies, it's either reorganize or die. That's what Coase, who won the 1991 Nobel Prize in economics, was talking about.
Coase's ideas are no less true for political organizations, as Dean's success shows. He is the first candidate to use the Internet effectively as a political organizing device.
To put it in perspective, think about how political parties started. They began as a way of bringing like-minded people together to wield political influence, in the best and worst senses of the term. And they were a reflection of transaction costs, because that kind of large-scale, social organization was the most effective way to process political information.