American Business Since 1920

Thomas K. McCraw (d. 2012) was former Professor and Isidor Straus Professor of Business History for the Harvard Business School, where he was instrumental in making Business History an important aspect of the MBA program. McCraw received a Pulitzer Prize in History in 1985 for his book, Prophets of Regulation (1984). He also served as editor of the Business History Review, as associate editor of The Encyclopedia of the United States in the Twentieth Century, and as president and trustee of the Business History Conference.  He was a member of the Board of Syndics of Harvard University Press, the Council of the Massachusetts Historical Society, the advisory board of Nomura School of Advanced Management (Tokyo), and the editorial boards of Reviews in American History and Harvard Business Review. William R. Childs was former History Professor at Ohio State University. He retired from teaching in 2014. Tom McCraw was his advisor at The University of Texas at Austin in the 1970s. After McCraw left for the Harvard Business School in 1978, he remained on Childs’ dissertation committee and hired him as a research assistant for his book Prophets of Regulation (1984). In addition to his two books and numerous articles and book reviews, Childs was editor of Essays in Economic and Business History (1995-1998) and has served on the Board of Editors for the Business History Review and Enterprise & Society.

Introduction 1

Past and Present 1

The Story Told Here 2

Trends 3

A Matter of Size 6

The Key Internal Problem 7

Broader Contexts 8

American Business and the World 11

The American Business Achievement 12

Chapter One: Modern Management in the 1920s: GM Defeats Ford 15

Cars, Trucks, and Freedom 15

Henry Ford, Mass Production, and Centralized Management 17

Alfred P. Sloan, Jr. and Decentralized Management 20

General Motors Versus the Ford Motor Company: The Triumph of Decentralized Management 22

Lessons Learned 26

Chapter Two: Overview: Business Welfare Capitalism, the Financial System, and the Great Depression 29

Responding to the Dark Side – Business Welfare Capitalism in the 1920s 29

Functions of Finance 31

Historical Context of American Finance to 1920 33

Wall Street and the Stock Market in the 1920s 34

The Great Depression 36

Successful Firms During the Great Depression 40

Chapter Three: Brand Management at Procter & Gamble 43

Procter & Gamble: Multiple Products and Marketing 43

Firm Culture 45

Building the Market 47

Neil McElroy and Brands 49

Doc Smelser and the Market Research Department 51

Lessons of Brands 53

Changes at P&G in the Early Twenty]first Century 55

People as Brands 56

Chapter Four: The New Deal and World War II: Regulation and Mobilization, 1933–1945 59

Franklin Roosevelt and the New Deal 60

The Extension and Decentralization of Regulation 63

The World at War 66

The Marvel of American War Production 68

The Problem of Mobilization 69

The Solution: Decentralization through the Controlled Materials Plan 71

World War II as a Transformative Event 75

Aviation Matures: Boeing 81

Postscript: Scandals 85

Photo Group 1 87

Chapter Five: Overview: Postwar Prosperity and Social Revolution, 1945–1970s 95

The Cold War and Business 95

Economic Trends 97

The Place of Business in Society 100

Boomers, Social Movements, and the Government 102

Environmentalism 104

Chapter Six: Overview: The Empowerment of Women and Minorities in Business 107

Women 108

Women in the Workforce 111

Women in Top Management 112

African Americans 117

African Americans in Top Management 122

Hispanics 125

Hispanics in Top Management 129

Foreign]born CEOs of American Firms 133

Photo Group 2 135

Chapter Seven: Science and R&D: From TV to Biotechnology 145

R&D During the Cold War 145

David Sarnoff and RCA 146

Sarnoff and Television 152

Lessons from RCA’s Mismanagement 158

The Perils of High]Tech Markets 160

Chemicals, Pharmaceuticals, and Biotechnology 162

Chapter Eight: Franchising and McDonald’s 173

The Economic and Social Context of Franchising 174

The McDonald Brothers 178

Ray Kroc 180

Financial Wizardry at McDonald’s 184

How McDonald’s Worked 187

Internationalization 190

Marketing, Labor, Nutrition, and the Environment: The Positives and Negatives of Franchising 191

Past and Future 197

Chapter Nine: The IT Revolution and Silicon Valley: Relentless Change 199

Early Days 200

IBM 202

Silicon Valley and a New Business Culture 206

The Internet and the World Wide Web 209

Companies and Personalities: Amazon, eBay, and Google 211

Expansion of the Internet: Cloud Computing, the Sharing Economy, and the Internet of Things 223

Chapter Ten: Overview: Financialization of Capitalism, 1980s to 2000s 229

“Deindustrialization” 231

Neoliberalism and the Extension of the Economists’ Hour 233

Surge in Globalization 236

Negatives of Neoliberalism and Globalization 238

Financialization 240

Excessive Pay for Executives and Fund Managers 255

The Problem of Opacity 258

Chapter Eleven: Business and the Great Recession 261

The Mortgage Mess 263

The Government Tries to Catch Up to a Financial Industry Under Duress 266

Reforms 276

Failures of Government Catch]up 279

Photo Group 3 283

Epilogue 297

Bibliographical Essay 307

Acknowledgments 365

Index 367