Pushed Aside by the Visible Hand

 

In his book “The Visible Hand: The Managerial Revolution in American Business,” Alfred D. Chandler, Jr. examines the process of how large, vertically-integrated, and scientifically-managed firms of the 20^th century came to dominate the modern economy.  Chandler argues that advances in the technologies of communication and transportation changed the process of production and distribution which, when combined with the application of scientific knowledge to industrial technology, created the modern business enterprise (Chandler, pp. 376). Chandler shows how the size and scope of a firm’s powers evolved over time.  Scientific Management made them no longer reliant on the invisible hand of the market.  They were now able to determine supply and cost themselves through the visible hand of management. 

In their article “Beyond Markets and Hierarchies: Toward a New Synthesis of American Business History,” the authors Lamoreaux, Raff, and Temin argue that Chandler’s thesis is flawed.  They state that because many of the businesses exemplified by Chandler as fully-integrated and stable have become obsolete and closed that his linear theory of business history is inaccurate. They try to show multiple options can be taken by businesses to succeed. These options are determined by a combination of available technology, per capita income, and personal opinions.  Chandler sees the time when he is writing as the peak of efficiency for this business model. However, they see the hierarchies set up within “The Visible Hand” as a product of the fact that the business model he explores worked best for the time, not because it is the natural end game of all businesses.  Rather than the vertically–integrated, multinational corporations of Chandler being a given, they hold that business models change over time based on conditions in society.

I appreciated the critiques of “Beyond Markets and Hierarchies” because it explains why we see specialized industries today.  They are a result of the digital revolution and high per capita incomes.  However I think that Chandler’s largest weakness was not in his assumption that the 1970’s was the zenith of business efficiency, but rather in who was left out of his analysis.  In all of his 500 pages of writing Chandler does not once reference the workers in these oligopolies. 

Chandler completely leaves out workers and worker’s unions.  At one point he does mention the increase in the work force due to high birth rates, low death rates, and an influx of immigration but goes no further. It is as if the people who work in these factories have no role to play in the managerial styles which were created to control them. Even with the advances in technology, expansion on this scale could not have happened without a large work force.  But the character and influence of this new work force is left out by Chandler.

Similarly, when discussing the expansion of American corporations abroad, Chandler states that industries chose to build factories abroad rather than expanding existing factories in the US “because of tariffs, high transportation costs, lower labor costs, and difficulties in coordinating trans-ocean flows” (pp. 369).  This expansion abroad is said to have taken place in the years before 1914.  There is no further explanation of the “lower labor costs” or situations in the US which would have prompted this corporate flight.  Presumably, transaction costs for international trade would have significantly decreased because of the improvements in technology and transportation.  But why industries chose this particular time to move abroad is not addressed in Chandler’s thesis.  He ignores the changes pushed for by the workers and their unions which would have impacted their industries within the US.  For Chandler changes spurred on by the worker don’t impact the creation of the modern business.  Nope, just those tricky trans-ocean flows.

This neglect of the workers is especially problematic because Chandler does not leave out the human element altogether.  It is not as if he is constructing an economic world devoid of the individual’s role in shaping big business.  Indeed, it is one of the main parts of his thesis that the creation of a professionalized career manager allowed business to flourish with the possibilities provided by technological advances.  But it is Chandler’s prejudices about who is important enough to include in the history of business which leaves out the common factory worker, and ultimately weakens his thesis.

 

Here is a recording of one of my favorite bands, Old Crow Medicine Show, performing their rendition of a classic union ballad, “Union Maid." It is a great song and their version is a lot of fun, especially since they are a group of 20-somethings and this was recorded in 2006.  I suggest you check it out.  

Comments

[Jim&DebbieOverson]

My response to your blog regards your comments concerning Chandler's lack of discussion of "workers." I am going to assume you are referring to the grunts, such as in the factories on the floor, who actually do the work.

Well, Chandler's book really is only concerned with the Rise of the large corporate forms. It was almost a given throughout the entire time frame that Chandler discussed that there would be a nearly unlimited supply of said grunts. People were eager to move from agricultural settings into urban settings with these relatively higher paying jobs. The country was being flooded with immigrants who would have been attracted to these jobs as well.

So in Chandler's discussion in the rise of these corporations, I can understand why he really only dwells on the growth and development of the role of the many layers of salaried middle-managers that were required. And Chandler does do, I think, a thorough job of discussing this topic. He basically said throughout the book that without the rise of these middle-managers that these large, efficient, hugely profitable corporations could never have arisen.

So my response to your blog assumed that you were referring to the vast body of grunts as "workers." The grunts didn't provide an explanation of the Rise, I think they were just taken for granted. So, workers were discussed, but only that class that Chandler felt did contribute to the Rise, that being the birth and development of the salaried midde-managers.

[TJD]

I am going to essentially repeat comments I made on another post

I think it is unfair to critique Chandler for not writing a different book. While I agree with you that workers, etc are important in the big picture of the development of business writ broadly, I don't think they would add much to his thesis, which I read as an interpretation of the rise of hierarchical management and modern accounting systems as a result of technological determinism (over-simplified). What pieces of evidence would add to the analysis? How would you use them? Would the be extraneous? Chandler isn't writing "The Story of American Manufacturing" (or distribution or consumption or ....). His work is different, and the diversity that you suggest is not necessarily appropriate in my view. I don't think the common worker (to borrow a phrase) adds anything to the discussion of how cost accounting methods were developed.

[leeannghajar]

I think you're pointing to an issue that others have had with Chandler's work as well. AND, I think the role of labor history in writing business history is tricky, actually. Maybe this critique of Chandler's work is answered by a look at his place in business historiography. He set the field on a new course--or some would likely argue--he gave it a direction. At the very least, almost every business history you pick up will reference how the author agrees/disagrees/expands upon Chandler.

Thomas McGraw--also a seminal figure in business history after Chandler, and also a Harvard Professor--is among historians who explain that Chandler revolutionized to the chaotic field of business history through his focus on organizational structure and process. When he came along, business history was in kind of a fog and a slump characterized mostly by arguments about whether Robber Barons were good, bad, and/or just plain ugly. According to McGraw, Chandler was well aware of areas he de-emphasized or neglected in all of his work--labor, role of government, human impact of industrialization--but he chose to develop his ideas narrowly and deeply. He was all about frameworks and even generalizations in order to provide form and shape to the history of the American business enterprise.

And, a propos of nothing, he and JFK teamed together on the Harvard sailing team.

(The Essential Alfred Chandler: Essays Toward a Historical Theory of Big Business. Edited and with an Introduction by Thomas K McCraw. I think McCraw's introductory essay was also published as an article somewhere and is available on JSTOR.)

[Salvatore DeGennaro]

While I do agree that Chandler’s work could have been more encompassing had he looked at the labor force more, I agree with some of these comments that his scope was indeed the management of business and perhaps it is unfair to judge his work accordingly. However, I think an issue that certainly deserves consideration for any complete study of this subject may be the role that the improvements in transportation and communication played in improving the work force to make these vast increases in industry possible. Did the new methods of transport and communication have an effect on the ability to bring in expert labor or train labor to meet expert levels? Certainly this may be a part of the entire equation not looked at extensively. These new technologies enhanced the management greatly; a look at the change in labor force according to these technologies would be quite interesting as well.