The Rise of the Corporate Commonwealth: U.S. Business and Public Policy in the Twentieth Century by Louis Galambos, Joseph Pratt

Abstract

Book Reviews The Rise ofthe Corporate Commonwealth: U.S. Business and Public Policy in the Twentieth Century. By Louis Galambos and Joseph Pratt. New York: Basic Books, 1988. Pp. xiv + 286; figures, tables, bibliography, index. $19.95 (cloth); $9.95 (paper). Louis Galambos and Joseph Pratt provide an excellent survey of the development of the business firm and public policy toward business in 20th-century America. A synthesizing work based on the research of the authors and a wide range ofsecondary sources, this study aims both to explain the evolution of business and government in the United States and to use an understanding of that history to make sense of the current economic problems the nation faces. The avowed audience for this work comprises “those students who will in a few decades become leaders of our most important business and governmental organiza­ tions” (p. xii). Well written, logically organized, and illustrated with appropriate tables, charts, and graphs, The Rise of the Corporate Com­ monwealth will serve as a solid introduction to an important subject. An up-to-date list of suggested readings arranged by chapter will lead students to further work. Galambos and Pratt see the business firm as passing through several major stages in its development, with trade-offs between the ability of firms to innovate, achieve efficiency in their day-to-day operations, and control their external environments occurring at each stage. In the 19th century most companies were small, flexible entrepreneurial businesses that were very innovative but lacked stability in their operations. In the 20th century much larger businesses arose in key segments of the American economy. Run first by centralized and later by decentralized management systems, these companies gained inter­ nal efficiencies at the expense of flexibility and the capability for innovation. As the firm evolved, so did government-business relations. Galambos and Pratt examine changes in three types of government-business re­ lations in the United States: single-industry regulation (such as the In­ terstate Commerce Commission regulating railroads), cross-industry regulation (such as the Environmental Protection Agency’s efforts to improve the environment), and government-directed activities that shape the business environment (such as macroeconomic planning). Of special interest to readers of thisjournal is the capable discussion of al­ terations in business research and development—from the establish­ ment of the earliest corporate research laboratories to the post—World Permission to reprint a book review in this section may be obtained only from the reviewer. 132 TECHNOLOGY AND CULTURE Book Reviews 133 War II rise of a military-industrial complex—and their relation to changes taking place in the nature of the firm and public policy toward business. While largely succeeding in explaining the historical development of American business and government-business relations, this study is weaker in its attempts to unravel present-day trends and to prescribe solutions to the problems currently afflicting America’s business system. Throughout their work, Galambos and Pratt show that America has lacked a coherent set of policies designed to foster business development, and they strongly argue that this is proving especially harmful in today’s extremely competitive global economy. True enough. Just how this situation is to be changed is, however, unclear. Galambos and Pratt suggest “the creation of a narrowly focused independent agency ... to serve as a combined mediator and investment banker” (p. 255). Precisely how this agency would func­ tion, and especially how it would decide which industries and com­ panies to help, is not adequately explained. The implication made at several points that Americans might look at Japan’s MITI for inspiration is, I think, unwise. There were many reasons for Japan’s postwar economic “miracle,” and MITI’s actions were only part of the story, perhaps only a minor part at best. Americans would do better, as Galambos and Pratt themselves point out in the introduction, to examine the historical flexibility of America’s business system to find solutions to their nation’s current difficulties. Mansel G. Blackford Dr. Blackford is a professor of history at Ohio State University, where he teaches business history. He is the coauthor of Business Enterprise in American History (Houghton Mifflin, 1986) and the author of The Rise...