Discussion Group Summary: Bell and Gallbraith
In "The Breakup of Family Capitalism" and The New Industrial State, Bell and Galbraith describe the bureaucratic system that has come to dominate the economy and replace "classical", or entrepreneurial capitalism. The mature firm of the bureaucratic system, as described by Bell and Galbraith, is marked by its technological complexity, large size, organization of employees, and systematic planning. In order to operate, it is necessary for the firm to maximize its control and autonomy. This is accomplished by increased control, both of the market and the consumer. These factors cooperate with each other to create a complex system.
Increasingly specialized technology necessitates the mature firm with its large size and underlying technostructure of specialists. In older, entrepreneurial firms, technology is fairly simple, and doesn't require specialized machinery or knowledge. Because the technology is simple, machines can be restructured if the entrepreneur needs to change production. The specialized machinery and knowledge that are required in products utilizing more advanced technology necessitate a different system. This requires a larger expenditure of capital and a greater commitment to the product, as producers are unable to change the product at a given time. The large size of the neo-capitalist firm allows it to produce machinery, while planning and control of demand insure that the corporation will retain its capital and autonomy. Specialization does not only apply to the machinery, but also to knowledge. The mature firm consists of many individuals with specialized knowledge over aspects of the corporation, rather than an entrepreneur who is able to oversee and understand the various aspects of the buisiness. This is necessary, as complex technology incorporates so many elements that a single person wouldn't be able to fully understand it. Additionally, it is necessary for the firm to use planning, as the corporation must know how the product will be received long before it is actually produced. Complex technology cannot be applied except in the context of the neo-capitalist firm.
Large size is also an important factor of the corporation. In the first place, a large firm promotes the stability and autonomy that is required by planning. Compared to a smaller corporation, a large firm is more able to control the prices of necessary supplies by virtue of its size and importance. This increases the corporation's amount of market control, thereby allowing the firm to effectively plan. In addition, the large firm can withstand unexpected fluctuations and mistakes without losing its autonomy, as it has enough resources to insulate and maintain itself in times of crisis. In addition, a large firm must necessarily become a mature firm, as a large, consolidated firm has too large a scope to be run by a single entrepreneur. Entrepreneurs who tried to control large enterprises, such as Henry Ford and Sewell Avery, met with disaster and were eventually replaced by the technostructure.
Another factor in the neo-capitalist system is the manner in which it organizes its personnel into a technostructure. Because of the large scope of the mature firm, it is necessary that many specialists fill various positions in the "machine" of the firm. The use of replaceable specialists allows the corporation to function in a predictable, stable manner. The information that is necessary for planning necessitates the specialized knowledge of these individuals, who are able to contribute their insight to reach a decision as a group, maximizing the efficiency of the corporation. Significantly, specialists are less readily accessible than either land or capital, and education becomes the manner in which people gain status. Another important factor in the development of the technostructure is the fact that it is hindered by the decisions of individuals. While executives who are nominally at the top of the buisiness hierarchy may take credit, the decision is actually the result of a group effort, and the leader is not able to second-guess the decision made by organized intelligence. In order to maintain this system, it is important that the corporation does not allow outside influence from the suppliers of capital. This can be accomplished when the corporation is large, the value of the stock and the secure flow of earnings prevent the possibility of a takeover bid. Another danger to the structure is contraction, as an organization that makes decisions through groups cannot withstand the loss of employees as easily as an entrepreneurial firm, which follows the impetus of a single industrialist. This danger can be offset by growth and technological innovations, which allow the firm and technostructure to expand. Firms must stress growth over profit margin to avoid contraction and maintain their value. One can see this trend in internet-based companies such as Amazon.com, who reinvest their earnings rather than make a profit.
Finally, a corporation necessitates organized planning. Whereas earlier methods of production applied simple technology and could respond quickly to demand in a market economy, the mature firm must predict the market as well as try and control consumer demand. While the entrepreneur was able to test demand directly by putting his or her product directly on the market, the corporation cannot expend its resources in that manner. In order for the corporation to remain stable, it must use its resources to predict and control the demand for its products. Processes of product development, and consumer control through advertising allow the firm to achieve these ends. Additionally, the state is able to assist the corporation in its planning. Through the application of the income tax, the state creates levels of public expenditure that are both stable and high, insuring a demand for products. In addition, government spending on programs such as industrial research, space exploration, and especially military expenditures, are able to underwrite the risks of planning. Interestingly, while the corporation isn't able to influence the government as much as an individual entrepreneur, the government has increasingly favored the corporate system, possibly because the government was following the economic trends.
The factors that contribute to a neo-capitalistic system share several common ties. The corporation must be immune to outside control, such as that of stockholders, in order to work efficiently as a "machine". This autonomy is maintained by the system through corporate size, economic self-sufficiency and an insistence of growth. In addition, it is necessary for the firm to maintain a maximum amount of control over outside forces that could, if neglected, destabilize the corporation, thereby endangering its autonomy. This control is affected through planning and relies on the firm's resources, such as its size and its technostructure. The corporation's demands for control and autonomy interact with each other and the elements of the neo-capitalist firm, determining its growth.
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