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.

PART 6: The Corporation in the 21st Century

24: Combinations and Capabilities

“The modern firm is a community, rather than an office or a factory. It is defined not by its plant and machinery but by its capabilities. The successful business is characterised by the distinctive nature of its collection of capabilities and the match between these capabilities and the needs of its customers – and other stakeholders. The claim that George W. Bush told Tony Blair that ‘the problem with the French is that they don’t have a word for entrepreneur’ is, sadly, apocryphal.

As the economic historian Deirdre McCloskey has pointed out, we do not talk about waterism, essential though running water is to our personal and commercial lives. Or power-ism, although the new availability of first steam and then electric power may have been a more important contributor to the modernity of economic life than any change in the availability of capital. If the managers of a modern business do not want to succumb to the demands of their capital supplier, they can buy their capital services elsewhere. In fact, it is often rather easier for them to exercise that choice than it is to change their water or electricity provider. That these points seem novel, even disturbing, is a measure of the extent to which outdated rhetoric developed to describe the Carron Works and the plant at the River Rouge continues to frame our thought.

33: After Capitalism

“Materials constitute a negligible proportion of the cost of these products. What you are paying for is the collective intelligence within these companies which is incorporated in the product design, rather than the transformation of raw materials into finished goods. This dematerialisation of the value of product is associated with dematerialisation of the means of production. Twenty-first-century business needs little capital, mostly does not own the capital it uses and is not controlled by the people who provide that capital. A modern firm buys capital services just as it buys water, electricity and transport – and as it purchases the services of workers, accountants, executives and suppliers.