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.)

8: The Decline of Manufacturing

“As Smith noted, the division of labour was limited by the extent of the market, and the growth in the geographical scope of markets has steadily increased the geographical division of labour. Switzerland and Denmark are among the richest countries in the world, but neither produces automobiles.

Contrary to many people’s images of a society focused on tourism and banking secrecy, Switzerland is an outlier in the Global North, with 20 per cent of the working population engaged in manufacturing, particularly speciality chemicals and precision engineering. But little of this manufacturing is of the kind that requires its exhausted workers to wash off the dust and sweat of the day as they return home.

When I joined the board in 1991, ‘the Halifax’ was the largest mortgage lender in the world. Its head office was still in the modest Yorkshire town of Halifax (which it now dominated), and most of the people who worked there had been born and brought up locally. The organisation – like the Marks & Spencer of that time – was a powerful illustration of how strong systems and culture can enable otherwise unremarkable people to do remarkable things. The contrast with Oxford University, which relied on the services of remarkable people but as an organisation was remarkable only for its ineptitude, was striking. I could not help noticing that even the most junior teller in the Halifax would use the pronoun ‘we’ in talking about the organisation, while in Oxford even the vice-chancellor would talk about ‘the University’ as though it were an organisation over which he had little real influence – which was perhaps true.

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.