Over the course of the seventeenth and eighteenth centuries, the desire of poorer people in cities across Europe to consume what were once luxuries enjoyed only by the very rich was just as influential in shaping the history of work as the invention of technologies to exploit the energy in fossil fuels. Without it, there would have been no markets for mass-produced items, and without markets the factories would never have been built. It also rewrote the rules by which much of the economy operated. The growth of Britain’s economy increasingly came to depend on people employed in manufacturing and other industries reinvesting their wages in the very same products they and their factory workers manufactured.

Leslie Hannah, an eminent business historian, has shown how the ‘rationalisation’ of industry, which was favoured by the British Government (represented by the Bank of England), set the stage for the new ‘corporate economy’ which would characterise Britain for decades. The 1920s saw the creation by merger of ICI (chemicals), the Distillers Company (Scotch whisky) and Unilever (soap and margarine). A similar wave of mergers in Germany established IG Farben and Vereinigte Stahlwerke as the dominant chemical and steel producers respectively. (Both these companies were dissolved by the victorious Allies in 1945.)

The manufacturing obsession has no economic basis but considerable social and political significance. Many of the roots of the white working-class resentment which in the US supports Donald Trump and in the UK voted for Brexit are to be found in the disappearance of traditionally masculine jobs in the Global North as a result of economic globalisation. It would be an absurd response to look nostalgically at pictures of men whose bare torsos were covered in sweat as they worked in the light and heat of rivers of molten iron, or who heaved coal as they spent their day working underground; these may have been ‘real jobs’, but they were awful jobs, and our society is better off for no longer needing them. But their very awfulness generated solidarity and stability that have been lost. Martin Wolf has written powerfully on the social and political consequences of that loss, which are reflected in the fragility of today’s political order, while recognising the vast gains that globalisation has brought.

These hollow corporations share the characteristic that the activities of the business have been pared down to the single link in the chain of production at which the corporation holds a distinctive capability and enjoys a competitive advantage. Richard Langlois, a business historian, identifies this as a key reason for the change in the corporate landscape, enabled by the growth of ‘market-supporting institutions’ which enabled entrepreneurs to easily access support for business functions where they didn’t have a comparative advantage. If the assembly line was the defining innovation in business method of twentieth-century manufacturing activity, the hollow corporation may be the defining innovation in business method of twenty-first-century digital activity.

PART 7: Capitals in the Twenty-First Century

28: Capital as a Service

“And it would be foolish to think that, if one went out to buy the quantities of capital and labour that Apple purchases, one would be able to produce iPhones and MacBooks – any more than one could do so by purchasing appropriate quantities of silicon and glass. The ingredients list is not the recipe. Thomas Thwaites laboriously demonstrated the fallacy of this mechanistic analysis of production through his efforts to make a far simpler item. Capital and labour, silicon and glass: all these factors of production are necessary but no physical description is ever sufficient, or even close to sufficient.