Throughout the twentieth century, management played an ever more influential part in the evolution of business. The American economy grew rapidly in size, but the complexity of its operations increased even faster. The need for managers therefore rose more quickly than that for other kinds of workers. At the end of the twentieth century, several million men and women could legitimately call themselves “managers” (Fine, 82).
American managers generally had more autonomy than their German or Japanese counterparts, but not necessarily their British ones. They were much more free from oversight by financial institutions and government agencies. Apart from a brief period of “financial capitalism”, there were few American parallels to the active supervision practiced by German universal banks (Radnitzky, 38). Nor did any American agency, at least in peacetime, exercise the broad planning power sometimes wielded by Japan’s Ministry of International Trade and Industry (Deutsch, 92).
Managers were also remarkably insulated from the interference of owners. The separation of management from ownership (stockholders), which first became conspicuous with the rise of big companies during the nineteenth century, grew in the twentieth to be a hallmark of major firms throughout the world. This trend had mixed results, but on the whole it was a beneficial development.
On the positive side, managers acquired the power to make quick decisions without consulting owners. Even more important, they gained the authority to make crucial choices about the disposition of corporate earnings. At their own discretion, they were able to retain within the firm significant amounts of money for reinvestment. They could therefore concentrate on the long-term good of the company. They could ignore plaintive pressures from family owners for high dividend payments.
There was a downside to the separation of ownership and control, however. Independent managers sometimes over-invested in unpromising ideas (McCraw, 83). They could, if they chose, indulge in generous advantages. And they could pay themselves excessive salaries even if their companies were not performing well. But whether or not the positive elements of professional management exceeded the negative elements, one thing remained clear. Throughout the twentieth century, in the United States and elsewhere, professional managers with little equity ownership made most of the strategic decisions for major companies (Haney, 11).
At the beginning of the century, there were not very many American “managers” in the modern sense of that term. They probably numbered in the low hundred thousands among a total population of 76 million (Brush, 20). American firms had grown big enough to need hierarchies of salaried managers only in the mid-nineteenth century, and even then only in the case of railroads. Soon enough, however, a few thousand big firms, plus tens of thousands of other companies within the big firms’ networks of suppliers and subcontractors, began to require active, self-conscious management in order to prosper within the competitive marketplace (McCraw, 93). So did several hundred thousand medium-sized companies operating in the industries not dominated by big business. By 1938, the management scholar Chester Barnard estimated that “not less than 5,000,000 individuals are engaged in the work of executives, of whom 100,000 occupy major executive positions (McCraw, 91). Managers’ functions included the use of increasingly sophisticated tools of information retrieval, cost control, and financial accounting. Innovators such as Albert Fink, the “father of railway economics,” who in the 1870s perfected a system for separating fixed and variable costs, were the ones who pioneered costing techniques (McCraw, 91). Even more influential was Frederick Winslow Taylor, who, in the 1880s, began to develop for manufacturing companies a system of controls and motivational devices, which he called “scientific management” (McCraw, 91). Taylor’s short book Principles of Scientific Management (1911) became an international bestseller, admired by readers as different as the Russian revolutionary Vladimir Lenin and the French premier Georges Clemenceau (Baran, 32).
Other management pioneers included the young financial officer F. Donaldson Brown of DuPont, who, in 1914, invented the concept “return on investment” (McCraw, 91). This useful idea spread quickly through American business after Brown took it to General Motors in the early 1920s. By the late twentieth century, statistical controls of all kinds (net present value calculations, breakevens, inventory ratios), had become routine elements in complex information systems.
With the arrival of the computer, these systems could be shared much more widely and used cooperatively by management and the workforce. From the primitive punch-card systems of the 1890s to the invention of the computer in the 1940s, both the utility and the burdens of information management grew at only a moderate pace. Then, starting with mainframes in the 1960s and then exploding with the arrival of personal computers in the 1980s, the use of integrated-circuit technology thrust the American business system into a new era (Bolino, 26). The spread of computers to desktops, workstations, and home offices all over the country meant an unprecedented degree of access to information. For individual firms, it implied constant flux. The technology changed so fast that today’s hardware and software might become obsolete tomorrow. In the midst of all the technological upheaval, professional management remained as much art as science. Executives spent most of their time in the tedious, but rewarding, task of convincing others to pull together in developing new products, increasing market share, and seeking steady profits. As one of the greatest managers in American history, long- time General Motors president Alfred P. Sloan Jr., put it, “I got better results by selling my ideas than by telling people what to do” (Fine, 12). Chester Barnard expressed the same kind of point in his classic book The Functions of the Executive (1938): “The fine art of executive decision consists in not deciding questions that are not now pertinent, in not deciding prematurely, in not making decisions that cannot be made effective, and in not making decisions that others should make”. (McCraw, 143).
For managers in the Third Industrial Revolution, the availability to all employees of almost unlimited amounts of data made possible the flattening of hierarchies and the broadening of management’s control area. Yet even toward the end of the twentieth century the full implications of the change had not become wholly clear. And the trend was not just an American phenomenon, but also a full-fledged global movement (Haney, 96).
Management, as well as many other aspects, were important landmarks in tracing the growth of American Capitalism throughout the late 19th and 20th centuries. Such sociological changes aided just as much, if not more, in the growth of the economic system as did the technological revolutions that occurred in the earlier development of the country. Once the tools had been found, it was time for the thinkers to start thinking. Systematically, they began to mold what is now regarded as American Capitalism, in a country that grew faster economically than any other country in the world.
So as it was, people invented. People thought and people changed. Just as one could say that hope is invariantly reliant upon action, action is invariantly reliant upon hope as well. The people of the United States who worked to form the economic system put their trust in the ideas and inventions that we have come to know as everyday parts of our lives, and often they are not given the credit due. As the years went by, and more and more sophisticated aspects were added to American Capitalism, it?s integrity still remained the same as was intended when the Constitution was introduced, over 200 years ago.
Bibliography
Annotated Bibliography
Entrepreneurial Adventure: The Development of Economics in The United States
1) Baran, Paul A. (1966). Monopoly Capital.
New York, New York: Modern Reader Paperbacks.
This book systematically analyzes monopoly capitalism on the basis of the experience of the most developed monopoly capitalist society. The Absorption of Surplus: Militarism and Imperialism. Monopoly Capitalism and Race Relations. On the Quality of Monopoly Capitalist Society: Rational or Irrational.
2) Bowden, Witt. (1967). The Industrial History of The United States.
New York, NY: Augustus M. Kelley Publishers.
Study in the Industrial History of the United States and it?s social and economic effects. Specifically sections about subordination, independence, interdependence, section and class development as it relates to industrial technological advances.
3) Brush, Stephen G. (1988). A Guide to The Second Scientific Revolution, 1800-1950.
Ames, Iowa: Iowa State University Press.
Specifically what the title says. This is a guide to the Second Scientific Revolution from 1800-1950, specifically in the United States. Discusses how Scientific Advances relate directly to economics and the development of American Capitalism.
4) Bolino, August C. (1966). The Development of The American Economy.
Columbus, Ohio: Charles E Merrill Books, Inc.
This book is a study in the development of American Capitalism. It traces the origins and growth of the new U.S. and discusses how long capitalism has been around and how it relates to the continuation of America. Chapter topics include: Transition to industrial capitalism, Agrarian expansion, and the development of the transportation system.
5) Deutsch, Karl W. (1953). Nationalism and Social Communication.
New York, NY: The Technology Press of The Massachusetts Institute of Technology.
Study in the nationalistic history of The United States and the social/economic effects of it. Specifically sections about subordination, interdependence, independence, section and class development as it relates to economics.
6) Feibleman, James K. (1977). Understanding Human Nature.
New York, NY: Horizon Press.
Speaks about the specific features in understanding the character of early and contemporary capitalism. One is the internationalization of capital, through multi-national corporations and as reflected in the penetration within the advanced capitalist countries of the trade, mainly the U.S.
7) Fine, Ben. (1984). Macroeconomics and Monopoly Capitalism.
New York, NY: St. Martin’s Press.
Speaks about the specific features in understanding the character of early and contemporary capitalism. One is the internationalization of capital, through multi-national corporations and as reflected in the penetration within the advanced capitalist countries of the trade, mainly the U.S.
8) Flugel, Felix. (1929). Readings in the Economic and Social History of The United States.
New York, NY: Harper Brothers Publishers.
This book discusses the industrial progress of the United States between 1783-1820. How it relates directly to the struggle for economic independence. Contains sections about currency & banking, commercial development, expansion to the west, labour forces, and economic imperialism.
9) Haney, Lewis H. (1949). History of Economic Thought.
New York, NY: The Macmillian Company.
Discusses the nature and importance of Economic Thought. Traces economic thought back to ancient times before there was a science of economics and takes it all the way to modern America. Criticism of the Theory of Capital. Economic thought from 1870 to World War II.
10) McCraw, Thomas K. (1997). Creating Modern Capitalism.
Cambridge, Massachusetts: Harvard University Press.
Selection of essays by various authors concerning the development of Modern Capitalism, The First Industrial Revolution, American Capitalism, & Rise of the High-Technology Industry.
11) Radnitzky, Gerard. (1987). Economic Imperialism.
New York, NY: Pargon House Publishers.
A compilation of writings by Economic Philosophers about the history of Economics throughout the world. Includes topics on: Economic Considerations in History: Theory and a Little Practice. Intellectual Styles and the Evolution of American Corporation Law.
12) Taylor, George R. (1951). The Transportation Revolution. 1815-1860.
New York, NY: Rinehart & Company, Inc.
This book takes the reader through the years of 1815-1860 when technological advances made the transportation revolution possible. The revolution relates directly to the economics of the United States at this time because the newfound technology is what caused the economic change. Chapter topics include: Costs & speed of transportation, working conditions, wages, and the factory system.
13) Williams, B.R. (1973). Science and Technology in Economic Growth.
New York, NY: John Wiley & Sons.
This is almost exactly what I?m writing this paper on. This is a collection of essays by various writers, concerning science and technology in economic growth. Much of this book relates to countries other than America, and in later times. But it helps with comparison to the economic system of America.