The New Industrial State: Planning and the Modern Corporation
The great size of the modern corporation and its power to influence life in America are discussed in this first of three articles written for the ATLANTIC by the distinguished Paul M. Warburg Professor of Economics at Harvard. They convey essential theses of Professor Galbraith’s major new work, THE NEW INDUSTRIAL STATE, to be published in June by Houghton Mifflin. His second article will discuss how the corporation manages itself. its prices,and its customers, and how it relates to the state. The third will discuss capitalism, social ism, and the future of the industrial system.
FOUND IN 1857
BY JOHN KENNETH GALBRAITH
FEW things so firmly establish one’s grasp on the commonplace as to list the changes that have occurred in economic life in the last half century. Machines have, of course, extensively replaced crude manpower. Increasingly, one machine instructs other machines in the process called automation. Industrial corporations have become very, very large. They are no longer directed as a matter of right by their owners; they are guided impersonally by their management. They deploy large amounts of capital, much of which they derive from their own earnings. These earnings are now by far the most important source of savings — income that is needed for industrial expansion is no longer allowed to get into the hot and eager hands of those who might choose to use it for their personal consumption.
Economic well-being has also greatly increased — at least in the fortunate countries of Europe and North America. And the market has changed. In the world described by Alfred Marshall, the great English economist of the early decades of this century, prices were established, as he said, by the “higgling and bargaining” of the market after having been, as he also said, “tossed hither and thither like a shuttlecock.” Now, in the world of the large corporation, they are set by the corporation. and they often remain fixed for long periods of time. These companies arc also at considerable pains to persuade the customer on what he should buy. Everyone, including all economists, agrees on consumer sovereignty in principle, but no one wants to trust it unduly in practice.
Finally, even in countries such as the United States, where, as we all agree, faith in free enterprise is one of the minor branches of theology, the state plays a large and increasing role in economic affairs. It stabilizes purchasing power — what economists call aggregate demand; it underwrites expensive technology such as modern weaponry and the supersonic transports; it restrains, or anyhow seeks to restrain, wages and prices to prevent inflation; it educates the technical and specialized manpower that modern industry requires; and the state buys upwards of a fifth of all that the modern industrial community produces. In the presumptively capitalist economy of the United States, one is charmed to reflect, the state plays a very much larger role in almost every facet of economic activity than it does in the avowedly planned and socialist economy of, say, India.
I want to show in these articles that the changes just mentioned are part of an interrelated complex, or matrix, as economists say. And I want to show also that the result is larger than the sum of the parts, that specifically there have been three great consequences. The first is rather comprehensive economic planning; which is to say, producers extensively manage the lives of those whom they are assumed to serve. And they must. By its nature, the modern industrial economy is a planned economy.
The second consequence is that there are strongly convergent tendencies, as there are in all industrial societies. This is despite their very different billing as capitalist or socialist or Communist by those who act as the custodians of our official ideology.
The third consequence is that to a far greater extent than we imagine, our beliefs and cultural attitudes are accommodated to the needs and goals of the industrial mechanism by which we are supplied. These serve the convenience of modern industry. Industrial societies differ not in the fact but in the method by which ideas are patterned to industrial convenience and need.
Let me begin by showing how technology, time, and capital shape the modern economy.
ON JUNE 15, 1903, after some months of preparation, the Ford Motor Company was formed in Detroit, Michigan, for the manufacture of automobiles. The first car reached the market that same October. The firm had an authorized capital of $150,000, although only $100,000 worth was issued and only $28,500 was for cash. Although it does not bear on the present discussion, the company made a handsome profit that year and did not fail to make a very large profit for many years thereafter. In 1903 Ford employed 125 men.
In the spring of 1964, the Ford Motor Company introduced what is now called a new automobile. In accordance with current fashion, it was named, one hopes inappropriately, a “Mustang” — a mustang is a very roughriding animal, as all close students of television are aware. Preparations for the Mustang required three and a half years. From late in the autumn of 1962, when the design was settled, until the spring of 1964, there was a fairly firm commitment to the particular car that eventually emerged. Engineering, “styling,” and development costs were nearly $60 million.1 In 1964, employment in the Ford Motor Company averaged 317,000 men. Assets in 1964 were approximately $6 billion.
Nearly all of the effects of industrial change are revealed in one way or another by these comparisons. Let me list them.
First. With increasingly sophisticated knowledge there is an increasing elapse of time between the beginning and the completion of a task. Technology means the systematic application of scientific or other organized knowledge to practical tasks. It is applied not to the manufacture of a car as a whole. It is brought to bear on very small elements of its manufacture — on the qualities of particular steels or the methods of machining a particular part. Then knowledge is applied to the combination of these parts, and then on assembly, and thus on to final completion. The process of manufacture stretches back in time as the root system of a plant stretches down into the ground, and the longest of these filaments, as it were, sets the total time required in production. The first Ford needed only ordinary steei, obtained from the warehouse in the morning and worked that afternoon. The provision of steel for the Mustang, in contrast, reached back to specifications prepared by the designers, to tests in the laboratory, then to design of the appropriate metalworking machinery, and to production and installation of these tools. Years thus elapse between the beginning of work on a car and its appearance.
Second. There is a great increase in the amount of capital that is committed to production. This is partly the result of the increased elapse of time, for that means increased investment in the work that is in process. But the knowledge which is applied to the various elements of the task also costs money. And so does machinery, which is the most characteristic manifestation of technology.
Only very simple machinery was used in the manufacture of the first Ford. No trained engineers were employed. The frame of the car was moved manually, and it could be lifted by two men. The modern auto factory, in contrast, is itself a complex and closely articulated machine. Nothing is done by muscular effort. Computers control the flow of parts and components to the assembly line. Only the recurrent hideousness of the product remains to remind one that human beings are involved. Thus (along with increased output, of course) the increase in capitalization of Ford to $6 billion.
Third. With increasing technology, time and capital tend to be committed ever more inflexibly to a particular task. Organized knowledge is used to improve the performance of a specific task. That task must be precisely defined before it is divided and subdivided into its component parts. Knowledge and equipment are then brought to bear on these fractions. But they are applied only to the fractions of the task as it was initially conceived. If that task is changed, new knowledge and new equipment will have to be mobilized for each part. So once a decision is made on what to produce, it is very difficult to alter it.
The engine and chassis of the original Ford were made by the Dodge Brothers (who eventually also made an automobile themselves). Their machine shop could have worked as well on bicycles, steam engines, or carriages, and in point of fact, it had been so employed. Had Ford and his associates decided at any point to shift from gasoline to steam power as a source of power for the vehicle, the machine shop could have accommodated itself to this considerable change by modern standards in a few hours.
By contrast, all parts of the Mustang, the tools and equipment that worked on these parts, and the steel and the other materials going into these parts were designed for this car and this car almost alone. The manufacture of a Barracuda, which differs mostly in having an even more bizarre name, would have required a very different tooling up. So would a “Serpent,” a “Roach,” or a “Locust” — if one may look ahead a little on automobile nomenclature.
Fourth. Technology requires specialized manpower. Not surprisingly, organized knowledge can be brought to bear only by those who possess such knowledge. However, technology is not the only thing that requires specialized manpower; so does the planning, which I will come to in a moment. And so does organization, for it takes specialists in organization to manage the organization which results from specialization.
This does not mean that the talent required for modern industry is necessarily more demanding, on some absolute scale of intelligence, than that of an earlier and technically less advanced era. Modern industrial man is not some species of superman; he must be helped to resist the temptation so to regard himself.
Indeed, the makers of the original Ford were men of considerable talent. The Dodge Brothers had previously invented a bicycle and a steam launch. Detroit legend also celebrated their remarkable exuberance when drunk. James Couzens, who was Ford’s partner and who almost certainly had more to do with the early success of the enterprise than Henry Ford himself, went on to be police commissioner and mayor of Detroit and then to the Senate to become, as a Republican, a brilliant and undeviating supporter of Franklin D. Roosevelt. Not even Robert McNamara has shown more reach. What the members of the modern company do have is a much deeper knowledge of the specialized matters for which they are responsible. It is, like all others, a great assemblage of such specialists.
Fifth. Specialization obviously requires organization. Only thus is the work of specialists brought to a coherent result. It is obvious that if there are many specialists, this coordination will be a major task in itself. Next only to machinery, massive and complex organizations are the most visible manifestations of a world of advanced technology. Its manifestation in the case of Ford is the growth from 125 to 317.000 men.
FINALLY. From the time and capital that must be committed and the rigidity of these commitments comes the inevitability of planning. Tasks must be so performed that they arc right not for the time that they are undertaken but for the time in the distant future when they arc completed. Developments, occurring between the time of initiation and the time of accomplishment, must be anticipated. Their effect, if adverse, must be neutralized. Or the events must be prevented.
In the early days of the Ford Motor Company, the future was very close at hand. What was raw material today would be a car next week. To fail to anticipate adverse contingencies was not fatal; anything that went unexpectedly wrong could be quickly remedied. Many things did go wrong. The earliest vehicles, as they came on the market, would have worried Ralph Nader. The cooling system did not always cool, the brakes did not reliably brake, and the carburetor did not always feed fuel to the engine. Once a Los Angeles dealer sent a message that when the cars he was receiving were steered, the “front wheels turn wrong.” But these defects, though not minor, could be promptly remedied. Such faults in the Mustang would have been highly unpleasant and both time-consuming and costly to repair. Similarly, the original Ford used materials, labor, and components of a highly unspecialized character that were available in the open market. A shortage could be remedied by sending someone out to buy what was needed. A failure in delivery for the specialized machinery, materials, or components required for the modern vehicle would be subject to no such remedy. And the situation is the same with labor. In the days of the first Ford, an ordinary laborer or even a firstrate operative could be hired in the nearest saloon. A systems engineer cannot be so recruited. Nor can other specialized talent.
Here I come to a point of great importance. Technology — and associated change — not only requires planning, but also impairs and even destroys the usefulness of the market. Simple things can be bought and sold on the market. Complex things cannot. The farmer can find the things he needs for production in the next town. The automobile manufacturer cannot. There was an open market for muskets in their day. There is not, fortunately, for missiles. Orville Wright was able to buy most of what he needed for the first airplane in Dayton. Ohio. The market will not supply the materials, parts, systems, and engineering talent required for a modern spacecraft. These must be foreseen, and the supply and price arranged months and years in advance.
The modern automobile, by which I have illustrated the foregoing tendencies, is, by many standards, an elementary product. For more sophisticated products, time, capital, inflexibility of commitment, specialization, organization, and planning are all greatly increased. This is remarkably so for, among other things, modern weaponry.
When Philip II settled on the redemption of England at the end of March, 1587, he was not unduly troubled by the circumstance that Spain had no navy. Some men-of-war were available from newly conquered Portugal; but, in the main, merchant ships would suffice. In other words, a navy could be had from the market. At Cadiz three weeks later Sir Francis Drake destroyed quite a few of these vessels. But this was not a fatal blow; more could be bought or quickly built. Accordingly, and despite what historians have always described as unconscionable inefficiency, the Armada sailed in a strength of 130 ships a little over a year later on May 18, 1588. The cost, though it was certainly considerable, was well within the resources of the Spanish Empire.
To create a modern fleet of the numerical size of the Armada, comprising aircraft carriers and an appropriate complement of aircraft, nuclear submarines, Polaris missiles, destroyers, auxiliary and supporting craft, and bases and communications, would take a first-rate industrial power a minimum of twenty years. Though modern Spain is rich beyond the dreams of its monarchs in its most expansive age, it could not for a moment contemplate such an enterprise. In World War II, no combat plane that had not been substantially designed before the outbreak of hostilities saw actual service. Since then, the lead time for comparable weaponry has become very much greater. No one in late middle age stands in any danger of weapons now being designed; they are a menace to the unborn and the unconceived.
IT IS a commonplace of modern technology that we know that problems have solutions before there is knowledge of how they are to be solved. It is reasonably certain that a man can be landed on the moon within the next five years. However, numerous technical details of this journey remain to be worked out. It is known that air can be made breathable and water drinkable for those who must remain behind; but there is still much uncertainty as to the best methods of cleaning up the atmosphere and the lakes and streams.
If methods of performing a specified task have been fully worked out, the cost in time and money of bringing organized intelligence to bear on the task will be much less than if the methods are still uncertain. Uncertainty about the properties of the metal to be used for the skin of a supersonic transport, uncertainty therefore about the proper way of handling and working the metal, and uncertainty therefore about the character and design of the equipment required all can add extravagantly to the time and cost of obtaining such a vehicle. This problem-solving, with its high costs in time and money, is a recognized feature of modern technology. It graces all modern economic discussion under the cachet of industrial research and development.
The need for planning arises from the long period of time that elapses during the production process, the high investment that is involved, the inflexible commitment of that investment to the particular task, and the failure of the market when there is high technology. Where methods are unknown or uncertain, and where, accordingly, there must be this expenditure for research and development, planning is even more essential. It is also more demanding. The time that is involved, the money that is at risk, and the number of things, accordingly, that can go wrong and the magnitude of the possible ensuing disaster all increase. The cost and risk may be beyond the resources of a private firm.
An obvious solution is to have the state absorb the major risks under such circumstances. This is becoming established practice. It can guarantee a market for the weapon, airplane, or other similar technical product. Or it can underwrite the costs of development; if these increase beyond expectation, the firms will not have to carry them. The drift of this argument will be evident. Technology leads to planning. And in its higher manifestations, technology puts the problems of planning beyond the reach of the individual industrial firm. The compulsions of technology, not ideology or political wile, then require the firm to seek the help and the protection of the state. This is true under what has always been called capitalism. It is true, as a matter of course, in the formally planned and Communist economies. Technology and associated change require planning by the producing firm. Both impose a broadly similar role on the state.
But in the Western economics, it is a mistake to think of the state as the main planning instrument. Rather it is the large corporation. This is not without paradox. Large corporations, we were all taught from our prenatal days, are the very essence of unplanned capitalism.
A market economy is an arrangement by which people sally forth and by their purchases make clear what they want or do not want. Their market behavior, in turn, is an instruction to producers in regard to what they should or should not produce. The initiative lies with the individual. He is sovereign. There is something admirably libertarian and democratic about this process. It is not hard to understand why, among the devout, the market, no less than Christianity and Zen Buddhism, evokes such formidable spiritual feeling.
But in the case of the Mustang, the initiative came not from the consumer but the producer. It was not the consumer who established the price in the market. The price was set by the manufacturer. The consumer had no idea that he needed this blessing before it was unveiled, although indubitably he welcomed it thereafter. Nor was he left with a free choice of his purchase. On the contrary, considerable thought was given to the means of ensuring that he would want it and buy it.
When initiative lies with the consumer, we agree that we have a market economy. When it passes to the producer — and when the consumer is accommodated to the needs and convenience of the producer— it is commonly and correctly said that we have a planned economy.
The planning may be imperfect. The consumer retains the right to resist persuasion or otherwise contract out of the management to which he or she is subject. There will be Edsels as well as Mustangs, and the latter may much exceed planned totals. Nevertheless, imperfect or otherwise, there is planning. The modern large corporation can be understood only as an adaptation to the needs of modern technology, related capital requirements, and of organization and the resulting planning.
SUCCESSFUL, planning requires that the planning authority be able to control or sufficiently influence the various contingencies which bear upon the result it seeks. And it must not be subject to the power of those who might frustrate its plans either by ill-considered interference or even by carefully considered interference which reflects other and alien objectives. The modern large business corporation possesses the principal requisites of successful planning. What it cannot do is done by the state.
The modern corporation achieves much of the requisite authority merely by being very large. This enables it to possess and control large amounts of capital and to mobilize and direct the large number of specialists that modern technology requires. Also, if the firm is large, contingencies that cannot be perfectly controlled can be absorbed or offset. If planning for a particular product by General Motors or General Dynamics goes sour, there are other products to offset this misfortune.
A plausible consequence of these advantages of size is that the modern industrial enterprise will be very large. And so it is. In 1962 the five largest industrial corporations in the United States, with combined assets in excess of $36 billion, possessed over 12 percent, almost one eighth, of all the assets used by all companies in manufacturing. The 50 largest firms had over a third of all manufacturing resources. The 500 largest, a number whose presidents could be seated in a moderate-sized theater, had well over two thirds.2 In the mid-nineteenfifties, 23 corporations provided 15 percent of all the employment in manufacturing.
We have difficulty in thinking of the private firm as a planning instrument because we associate planning with the state. But the modern industrial enterprise operates on a scale that is far more nearly comparable with that of government than that of old-fashioned market-oriented activity. In 1965 three American industrial corporations, General Motors, Standard Oil of New Jersey, and Ford Motor Company, together had more gross income than all the farms in the United States. The income of General Motors alone about equaled that of the three million smallest farmers in the country. The gross revenues of each of these three corporations far exceeded those of any single state of the American Union. The revenues of General Motors in 1963 were fifty times those of the state of Nevada, eight times those of the state of New York, and slightly less than one fifth those of the federal gov - ern ment.
Economists have anciently quarreled over the reason for the great size of the modern corporation. Is it because size is essential in order to reap the economies of modern large-scale production? Is it, more insidiously, because the big firm wishes to exercise monopoly power in its markets? There is a little truth in the answers to both of these shopworn questions. The firm must be large enough to carry the large capital commitments of modern technology. It must also be large enough to control its markets. But the modern firm is larger than either of these purposes requires. General Motors is not only large enough to afford the best size of automobile plant but is large enough to afford a dozen of the best size. And it is large enough, in addition, to produce a host of other things as diverse as aircraft engines and refrigerators. Why is this? And why, although ii is large enough to have the market power associated with monopoly, do consumers not complain excessively about exploitation? We have here the answer. The great size of a modern corporation allows economies not possible for the small firm and permits the control of markets, to be sure; but its primary advantage lies in the service it renders to its planning. And for this planning — the control of supply, conrtol of demand, control of capital supply, absorption of risk or minimization of risk where risk cannot be avoided — there is no clear upper limit to the desirable size. It could be that the bigger the better.
A prime requirement of the planning authority is control over its own decisions. This autonomy lias, in fact, a double purpose. It is indispensable if the authority is to pursue the objectives of its planning. 1 shall have more to say on this later. It is also a vitally necessary aspect of decision-making under conditions of advanced technology. I must digress here for a special word about this.
As technology becomes increasingly sophisticated and as it leads on to specialization and planning, decisions in the business enterprise cease to come from individuals. They come necessarily, inescapably, from groups. The groups, as often informal as formal, and subject to constant change in composition, contain the men possessed of the information or with access to the information that bears on the particular decision. They contain also those whose skills consist in extracting and testing this information and obtaining a conclusion. It is through such groups that men act successfully on matters where no single person, however exalted or intelligent, has more than a fraction of the necessary knowledge. It is such groups that make modern business possible, and in other contexts, also make modern government possible.
Effective participation in such decision-making is not closely related to the individual’s nominal rank in the formal hierarchy of the company or corporation. This is something that takes an effort of mind to grasp. Everyone is influenced by the stereotyped organization chart of the business enterprise. At the top is the board of directors, the chairman, the president, and the principal executive officer, thereafter the department or divisional heads. Power is assumed to pass down from this pinnacle. Those at the top give orders; those below relay them on or respond.
Power is employed in this way only in very simple organizations—in the peacetime drill of the National Guard or in a troop of Boy Scouts moving out on Saturday maneuvers. Elsewhere decisions require information, and some power will then pass to the person or persons who have this information. If this knowledge is highly particular to themselves, as in the case of sophisticated technology, their power becomes very great. At Los Alamos, New Mexico, during the development of the atomic bomb, Enrico Fermi rode a bicycle up the hill to his work; Major General Leslie Groves presided in grandeur over the entire Manhattan District. Fermi, in company with a small handful of others, could, at various stages, have brought the entire enterprise to an end. They were also irreplaceable. No such power rested with General Groves at the top. At any moment he could have been replaced by any one of one hundred others without any loss.
WHEN power is exercised in this fashion by a group, not only does it pass into the organization but it passes into the organization irrevocably. If an individual has taken a decision, he can be called before another individual, who is his superior in the hierarchy, and his information can be extracted and examined, and his decision can then be reversed by the greater wisdom or experience of the superior. But if the decision requires the combined information of a group, it cannot be safely reversed by another individual. The individual will have to get the judgment of other specialists. This returns the power once more to the organization.
The modern large business corporation is admirably equipped to protect the autonomy on which the group decision required by technology and planning so deeply depends. The corporate charter accords a large area of independent action to the firm in the conduct of its affairs. And this freedom of conduct is defended as a sacred right. In our business attitudes nothing is held to be so iniquitous as government interference in the internal affairs of the corporation. And attitudes in other countries are similar if somewhat less choleric. There is equally vehement resistance to any invasion by trade unions of the prerogatives of management.
But interference from those who own or supply capital would be equally damaging to the planning of the firm and to the quality of its decisions. The modern firm exempts itself from interference from those who supply current capital requirements first of all by having its own source of capital. The use of earnings returned from profits is wholly at the discretion of those who run the firm. If funds must come from a banker, his views must be treated with respect. He can also intervene. If he isn’t needed, and the funds aren’t coming from him, only politeness is in order.
Few things have resulted in a greater shift in power than the ability of the large modern firm to supply itself with capital. Few things have more altered the character of capitalism. It is hardly surprising that retained earnings of corporations have become such an overwhelmingly important source of capital.
The stockholder too has been separated from all effective power in the large corporation. Many things have led to this result. With the passage of time and the ineluctable effects of distribution by inheritance, of estate taxes, of philanthropy, of alimony, and of the other enjoyments of nonfunctional heirs, even the largest holdings arc dispersed. It is next to impossible to get any considerable number of stockholders together for an action in opposition to management. Instead, the board of directors meets in solemn conclave to select the management, which previously selected that board, The electoral rituals of the modern large company are among our most elaborate exercises in popular and self illusion.
BUT the exercise of authority by the modern enterprise is also protected by the technical complexity of its decision. Some forty years ago it was discovered that Colonel Robert W. Stewart, who was then the head of the Standard Oil Company of Indiana, was transferring an appreciable share of the revenues of the company, at least temporarily, to his own pocket. With colleagues he had arranged to have the firm buy crude petroleum from a Canadian company, which he partly owned and which existed for the sole purpose of buying the oil in Texas and marking up the price to sell it to (among others) Colonel Stewart’s firm. It was an admirable business. There were no costs at all, and Colonel Stewart got the profit. He later explained that he intended to return the bonds in which he put these profits to Standard Oil of Indiana, but had carelessly allowed them to remain in his safe-deposit box for many years and even more carelessly had clipped some of the coupons. The Rockefellers, who owned about 15 percent of the stock of the company, were able, though not without effort and expense, to throw the colonel out. It might not have been possible without the great prestige of John D. Rockefeller, Jr., and it was only possible because the colonel was engaged in a simple and very comprehensible form of skulduggery. Modern malfeasance or misfeasance would turn on some complicated problem of patents, procurement, royalties, government contracts, or the like in the technology of petrochemicals. It would not seem nearly so safe for outsiders to intervene in so difficult a matter, nor would the remedy be so unambiguous. I have said that modern group decision-making requires the exclusion of uninformed interference, This works both ways. The nature of the decision also excludes interference by owners.
One thing docs make the autonomy of the modern corporation vulnerable. That is a failure of earnings. Then the corporation has no source of earnings, so it must turn to banks and other outside investors for savings. The latter, since the firm is doing badly, will have prying tendencies. And the stockholders who arc not being rewarded may also be moved to do something about it. In modern times virtually all proxy battles in major companies have occurred when the firm was doing poorly. We may lay it down as a rule that a management which is making money is secure in its autonomy. One which is losing money is not. We should expect, as a final characteristic of the large corporation, that it would take care to protect its autonomy by always making money.
Here too our expectations are fulfilled. Economists have not yet noticed how completely they are fulfilled.
In the year 1957, a year of mild recession in the United States, not one of the hundred largest industrial corporations failed to return a profit. Onlyone of the largest two hundred finished the year in the red. Seven years later, in 1964, which was a prosperous year by general agreement, all of the first hundred again made money; only two among the first two hundred had losses, and only seven among the first five hundred. None of the fifty largest merchandising trading firms failed to return a profit. Nor did any one of the fifty largest utilities. And among the fifty largest transportation companies, only three railroads, together with the temporarily troubled Eastern Airlines, failed to make money.
Business liturgy has long intoned that profits and losses are symmetrical. One gets the profits at the price of risking losses. “The American competitive enterprise system is an acknowledged profit and loss system, the hope of profits being the incentive and the fear of loss being the spur.” This is not true of that part of the economy in which the firm is able to protect its profits by planning. It isn’t true of the United States Steel Corporation, author of the sentence just cited, which has not had losses for a quarter of a century.
Such is the corporation as a planning authority. It rivals in size the state itself, It has authority extending over and uniting the capital and organized talent that modern technology requires. Its authority extends on to its supply of capital. And its power is safely removed and protected from the extraneous or conflicting authority of either the state or its own owners or creditors.
In next month’s article I propose to examine how the corporation as a planning authority manages its environment — more especially, its prices and customers — and how it relates itself to the state.
- I am grateful to Mr, Walter T. Murphy of the Ford Motor Company for providing these details. I have also drawn on earlier help from Robert McNamara which he gave when he was still an executive of Ford. Details on the early history of Ford are mostly from Allan Nevins, Ford: The Times, the Alan, the Company, Scribner’s, 1954.↩
- Data on the concentration ofindustrial activity in the hands of large firms, and especially any that seem to show an increase in concentration, sustain a controversy in the United States that at times reaches mildly pathological proportions. The reason is that much of the argument between those who see the market as a viable institution and those who feel that it is succumbing to monopolistic influences has long turned on these figures. These figures are defended or attacked according to predilection. However, the orders of magnitude given here are not subject to serious question.↩