The effects of this kind of mismanagement were concealed for decades. Despite all its faults, this corrupted version of 1920s-style management persevered by default. Competition from the outside world was cut off, first by trade restrictions and depression in the interwar years, and then by the destruction of most of the rest of the world's industrial capacity by World War II. American industrial might dominated a ruined world; people mistakenly assumed that this was because and not in spite of American management.
Albeit from a dissident's perspective, John Kenneth Galbraith's writings typified this misperception. In 1967, he celebrated the unrivalled efficiency of the American corporate "planning system" in his bestselling The New Industrial State: "The mature corporation has readily at hand the means for controlling the prices at which it sells as well as those at which it buys. Similarly it has means for managing what the consumer buys at the prices which it controls. This control and management is required by its planning. The planning proceeds from the use of technology and capital, the commitment of time that these require and the diminished effectiveness of the market for specialized technical products and skills."
Galbraith wrote those words just as the Japanese wolf was approaching the door. In the aftermath of World War II, Japanese corporations developed new management systems that stressed continuous product improvement over financial manipulation, and cross-department cooperation over turf consciousness. Those systems were combined with, as described above, a new way of dealing with labor--one that did not ignore workers from the neck up. What followed, in the 1970s and '80s, was a competitive rout of American manufacturing.
The American corporation has been forced by this competitive challenge into a thoroughgoing restructuring along more market-like lines. This restructuring was much needed and will be highly beneficial over the long term; however, it should not be forgotten that the necessity for restructuring has exacted a heavy toll in wasted resources and dislocated lives. Those are the costs of arrogance and error.
The Open Economy
The new technologies and institutions of the industrial revolution opened up vistas of human experience that were previously all but unimagined. They created, for the first time in history, a society of widespread material abundance. They offered unprecedented opportunities for intellectual challenge in work. Brainpower, and its material effects, were transforming the world.
By current standards, however, conditions in the early days of industrialization were still primitive. Many modern comforts did not exist, and the existence or threat of real privation hung over large sections of the populace. Even with the new machines, production required great amounts of punishing manual labor. The factory floor was a rough place, occupied by rough, uneducated men. In the office, much of the work was routine and clerical. In the larger economy, cost structures often allowed profitable production only at a massive scale, thus favoring consolidation and concentration over vigorous competition. Those same cost structures frequently yielded standardized, least-common-denominator products.
The logic of market development, however, was hostile to all of those shortcomings; over time it has brought significant, sometimes sweeping, amelioration. Yet that progress has been seriously impeded by the imposition of top-down control in both the political and economic spheres. The repudiation of market forces and principles was once considered progressive; its true effect, however, was reactionary, retarding the diffusion of brainpower throughout society that industrialization initiated.
The embrace of top-down institutions can thus be seen as a kind of industrial counterrevolution. The legacy of this counterrevolution was to magnify and prolong the harshest and least attractive features of the industrial economy, and squelch its most benign and hopeful ones. We have moved away from the rough edges of the early industrial era in spite of, not because of, the grand designs of social engineers and technocratic elites.
Now, however, this reactionary order is passing from the scene, and the information revolution is upon us. The revolution is not, as some claim, that information has now become the source of all wealth. That has always been true; what is revolutionary is that we finally realize it. Seeing information at the center of things means seeing our own ignorance as the central challenge of social action. It means rejecting the notion that a few of us have all the answers. It means rejecting institutions that were founded on that notion, and embracing institutions that encourage experimentation and openness. In short, it means believing in freedom again.
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