21st Century Capitalism by Heilbroner Robert L

Author:Heilbroner, Robert L. [Heilbroner, Robert L.]
Language: eng
Format: azw3
Publisher: W. W. Norton & Company
Published: 1994-08-16T16:00:00+00:00

III

It is important to bear in mind how a market system acts in theory, because most of the time it also works more or less that way in practice—if it did not, capitalism would long ago have collapsed. I say “most of the time” because markets are working even when we are wholly unaware of them—indeed, they are working at their best at those times. As long as markets provide coherence and order, we are quite unconscious of their presence, as we would be of a planning system if it too worked satisfactorily most of the time. I need hardly add that markets do not always behave in this orderly and invisible fashion. On the contrary, from time to time they work in highly disorderly and attention-attracting ways, for example, when the stock market crashes or the oil market runs amok. What we need to understand now is why markets sometimes behave and sometimes do not.

Perhaps the oldest reason for market-caused problems lies in their changed characteristics in economies whose typical units of operation are no longer small, adaptable enterprises but large-scale, technologically “fixed” undertakings. The difference between the two can be described by the difference between a sand pile and a girdered structure. A pile of sand will hold its shape against many blows, but a structure of girders, although incomparably larger and stronger than the sand pile, can be toppled by the collapse of a single, strategically placed beam.

Capitalist societies start as sandpiles and end up as girdered structures. This is a direct outcome of the accumulation of capital—pin factories evolving over the course of time into industrial structures as large as small towns. Smith saw the competitive process as essentially one of securing and maintaining an equality of rewards within, or among, occupations and industries. That may have been an accurate perception in the time of pin manufactories but it was increasingly less so as the nineteenth century wore on, and the contending firms became large-scale textile mills and mechanized coal mines and then truly giant enterprises, such as railways. Such enterprises required expensive capital structures, and these structures in turn imposed large fixed costs, such as interest, which had to be met to remain solvent. The result was the rise of cutthroat competition that forced many weaker firms to the wall, where they were bought up cheaply by the firms that survived. Later, when cutthroat competition became too costly, the pressures of competition led instead to amalgamation by merger and trusts. In the United States, for example, most companies in 1865 were highly competitive, with no single company dominating any single field. By 1904 one or two giant firms controlled at least half the output in seventy-eight different industries.36

Thus the dynamics of competition itself became a major source of the transformation of an atomistic economy into one of structured strength and vulnerability. Alfred Chandler has shown how different national capitalisms have dealt with the ensuing threat to industrial stability—some working out uneasy arrangements of live and

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