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Entrepreneurial Persistence Through the Bureaucratic Age*

Published online by Cambridge University Press:  11 June 2012

Harold C. Livesay
Harold C. Livesay
Affiliation:
Associate Professor of History, University of Michigan, Ann Arbor
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Abstract

Taking issue with such earlier theorists as Schumpeter, who believed that the rise of bureaucratic structures would stifle the innovative process that lies at the heart of capitalism and thus lead on to socialism, Professor Livesay discusses the careers of three innovative leaders who used the bureaucratic form of organization to keep innovation alive and to realize its implications. He argues that with shrewd leaders like Andrew Carnegie and Henry Ford II (and less well-known ones like Howard Stoddard) at the helm, bureaucratic organizations have been the mechanism of highly dynamic policies rather than the agency of socialistic stasis.

Type
Research Article
Information
Business History Review , Volume 51 , Issue 4 , Winter 1977 , pp. 415 - 443
Copyright
Copyright © The President and Fellows of Harvard College 1977

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Footnotes

*

I want to express my deep appreciation to the Horace H. Rackham Foundation at the University of Michigan, the Carnegie Foundation for World Peace, the National Endowment for the Humanities, and the American Council of Learned Societies for their support of my research and writing.

References

1 U.S. Statutes at Large. 73d Congress, First Session, XLVIII (June 16, 1933), 195, 198 and 74th Congress, First Session, XLIX (July 5, 1935), 440-450. Emphasis added.

2 Galambos, Louis, “The Emerging Organizational Synthesis in Modern American History,” Business History Review, XLIV (Autumn, 1970), 288.Google Scholar

3 This is not to say that nothing has heen written on bureaucracies, for a great deal has. Most of it deals with either ideal types or contemporary behavior. Given the significance of bureaucracies in the development of American societies, the amount of serious historical work done thus far remains surprisingly small, though sometimes of excellent quality, for example, Chandler, Alfred D., Jr.'s Strategy and Structure (Cambridge, 1962),Google Scholar as well as his many other works. For other sources, considered in historiographic perspective, see Louis Galambos, “Organizational Synthesis.”

4 Schumpeter, Joseph, Capitalism, Socialism, and Democracy (New York, 1942), 61.Google Scholar

5 Schumpeter, Capitalism, 132.

6 For a more lengthy discussion of Carnegie's career, see Livesay, Harold C., Andrew Carnegie and the Rise of Big Business (Boston, 1975).Google Scholar The discussion below derives largely from Chaps. 3, 6, 7, and 8.

7 Judge Reed, James H., quoted in Burton J. Hendrick, The Life of Andrew Carnegie (New York, 1932), I, 197.Google Scholar

8 Carnegie, Andrew, Autobiography of Andrew Carnegie (Boston, 1920), 135.Google Scholar

9 Report of the Investigating Committee of the Pennsylvania Railroad, 1874, p. 102.

10 Carnegie, Autobiography, 135.

11 Carnegie, Autobiography, 135.

12 Schwab, Charles M., quoted in David Brody, Steel Workers in America: The Nonunion Era (Cambridge, Mass., 1960), 2;Google Scholar “Charlie Schwab's View of Andrew Carnegie,” Literary Digest, LXIV (February, 1920), 56.Google Scholar

13 Quoted in Hendrick, Carnegie, I, 298.

14 “Quoted in Wall, Joseph F., Andrew Carnegie (New York, 1970), 506.Google Scholar

15 Wall, Carnegie, 505.

16 Hendrick, Carnegie, I, 203.

17 Various testimony given to the Stanley Committee, quoted in Hendrick, Carnegie, II, 146.

18 Michigan National Bank, Annual Report, 1952. Miscellaneous data on size, earnings, and offices came from the appropriate volumes of Moody's Bank and Financial Manual and the annual reports of Michigan National Bank, on file at the Business Administration Library, University of Michigan.

19 Interview with Howard Stoddard's brother, Waldo Stoddard, Grand Rapids, Michigan, June 15, 1973; interview with Fred Lavery, former president, Michigan National Bank of Flint, Flint, Michigan, October 26, 1973.

20 Interview with Marriner S. Eccles, Salt Lake City, Utah, March 17 and 18, 1973; interview with James B. Alley, New York City, February 10, 1973, and with Joseph Verhelle, Detroit, Michigan, October 4, 1973. Both Alley, who was associated with the Reconstruction Finance Corporation in 1933, and Verhelle, then affiliated with the First National Bank of Detroit, worked closely with Howard Stoddard during his early years in Michigan; interview with Russell Fairles, former senior vice-president, Michigan National Bank, Lansing, Michigan, October 22, 1973. See also Eccles, Marriner S., Beckoning Frontiers (New York, 1951).Google Scholar Virtually everyone interviewed spoke of Stoddard's admiration for and friendship with A. P. Giannini. Fairles, who worked more closely with Stoddard than anyone, emphasized this influence, as did Stoddard's son and successor. Stanford G. Stoddard, in several conversations in 1972 and 1973.

21 The Detroit banking crisis frightened the national financial community at the time, and has received much scholarly attention in several fields. For a fine account, listing the more important sources, see Kennedy, Susan Estabrook, The Banking Crisis of 1933 (Lexington, Kentucky, 1973).Google Scholar

22 Alley interview; Fairles interview.

23 Ibid.

24 Michigan National Bank, Annual Report, 1970; Fortune's top list of the 50 commercial banks for 1972, in the July, 1973 issue.

25 Fairles interview; Flint Journal, December 1, 1946; Salt Lake Tribune, March 24, 1949.

26 Fairles interview.

27 Interview with M. F. Cotes, Palm Beach, Florida, March 4, 1973.

29 The Ford Motor Company's post-war revival and Henry Ford II's role therein has been the subject of a series of Fortune magazine articles, including “Rebirth of Ford” (May, 1947), “Ford's Fight for First” (September, 1954), “It's a New Kind of Ford Motor Company” (February, 1962), “There's a New Generation of Whiz Kids at Ford” (January, 1967), and “Henry Ford, Superstar” (May, 1973), as well as a plethora of other articles in journals in the United States and abroad. The quotation from Henry Ford II is in Fortune, January, 1967; statistical data and other factual information also was taken from the Fortune series. For a Ford president's view of Henry Ford II's primacy see the statement by Arjay Miller cited in footnote 33 below. The opinion of the “other ranks” is part of the information I collected in a series of interviews with Ford Motor Company management personnel, past and present, in Europe, Australia, and New Zealand in the spring and summer of 1975, some arranged by the company itself; some set up by me independently. These interviews covered a wide range of people in rank, in type of responsibility, and in nationality, ranging from Frank Erdman, the American President of Ford Asia Pacific and Brian S. Inglis, Australian Managing Director of Ford Australia, to industrial relations people on the shop floor and junior accountants in Ford of Europe offices, including Englishmen in New Zealand, Germans in Britain, and so on. They included members of all three of Ford's functional divisions: Product Development, Production, and Sales. Their universal spirit of cooperation characterizes a Ford Motor Company willingness to subject itself to a study of its past and present that is unusual among American corporations and unique among American automobile manufacturers. I am grateful to them all, and particularly to Ken Dowling and Stuart Knowlton of the Ford Management Training Program at World Headquarters in Dearborn. These gentlemen not only encouraged my study, but bore the brunt of making the complex arrangements.

29 Ford believed, for example, that people essentially bought what they needed, rather than what they wanted, that is they bought cars for utilitarian rather than aesthetic reasons. Like Carnegie, he thought the market was infinitely elastic, that is, you could always sell all you could make if you cut the price enough. These attitudes contrast strongly with those of more modern industrialists such as James B. Duke of American Tobacco, who built an empire selling a product that no one “needed” by persuading people that they wanted it, and Alfred Sloan, who restructured General Motors to produce a limited number of cars at various prices, based on costs, maximum return on investment, and advance estimates of market size at specific price levels. I hope to explore these contrasting views, their origins and implications in a future paper.

30 My father, and his father before him, for example, would buy nothing but Fords, and probably would have done so had they been made of peanut butter. The number of such die-hards was astonishing, but not enough to keep the company abreast of the competition.

31 Fortune, May, 1947.

32 Ibid.

33 Ibid.

34 Fortune, February, 1962.

33 Fortune, May, 1973.

36 Ford Motor's overseas operation received detailed treatment in Wilkins, Mira and Hill, Frank E., American Business Abroad: Ford on Six Continents (Detroit, 1964).Google Scholar These authors, too, enjoyed a high level of cooperation from the company.

37 From “Mr. Ford's Remarks at IBM Conference,” Ford Motor Company document (1973).

38 Ibid.

39 Quoted in Wilkins and Hill, American Business, 414.

40 Fortune, May, 1973.

41 Quoted in Wilkins and Hill, American Business, 153.

42 Quoted in ibid., 404.

43 Ford's global plans also include the integration of extensive facilities in Latin America, but space precludes discussing them here.

44 Quoted in Wilkins and Hill, American Business, 423.

45 The original document (called the “Learned Report”), outlining the various strategic alternatives including the one recommended and adopted, is part of the materials supplied to me by the Company.

46 “Ford's Remarks at IBM.”

47 Ibid.

48 Fortune, May, 1973.

49 “Ford Asia-Pacific 1980 Plan: Presentation to Mr. Henry Ford II at Melbourne Australia, February 2, 1971.” Ford Motor Company document.

50 Interview with D. L. Blue, Melbourne, Australia, August 21, 1975. Article 1 of the Ford-United Auto Workers Agreement specifies the company's sole right to manage its affairs and the union's exclusive right to act as bargaining agent. Ford's international operations have historically tended to reflect rather than transcend local cultural and political conditions. Such behavior may characterize manufacturing multinationals more than other types. This possibility I also intend to explore in the future.

51 Interviews with Ray Kennedy, Public Relations Manager, Ford Asia-Pacific (FASPAC), Doug Jacobi, Staff Director, Sales and Marketing, FASPAC, and W. N. Hartigan, Staff Director, Governmental Affairs and Direct Markets, FASPAC, Melbourne, Australia, August 14, 1975. (All Ford Motor Company personnel positions as of date of interview.)

52 Interview with John Marshall, Staff Director, Manufacturing and Supply, FASPAC, Melbourne, August 14, 1975; “Fiera Sourcing with Thailand as an Example,” Ford Motor Company document.

53 See for example Averitt, Robert T., The Dual Economy (New York, 1971).Google Scholar