The President and Fellows of Harvard College

Review: A Review Article

Reviewed Work(s): The American Business System: A Historical Perspective, 1900-1955 by
Thomas C. Cochran
Review by: Kenneth E. Boulding and John Kenneth Galbraith
Source: The Business History Review, Vol. 32, No. 1 (Spring, 1958), pp. 116-121
Published by: The President and Fellows of Harvard College
Stable URL: https://www.jstor.org/stable/3111902
Accessed: 05-04-2019 00:58 UTC

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 By Kenneth E. Boulding
PROFESSOR OF ECONOMICS

AT UNIVERSITY OF MICHIGAN

John Kenneth Galbraith

PROFESSOR OF ECONOMICS

AT HARVARD UNIVERSITY

A Review Article

The American Business System: A Historical Perspectiv

By Thomas C. Cochran. Cambridge, Harvard Univer
1957. Pp. viii + 227. $4.75.
1 Historians have awaited with great interest a new endeav
story of business in America - not in a narrow or techn
broadly related to the social environment of which busines
Economic historians, business historians, sociologists, and
specialists have gathered extensive data on phases of busin
and are continuing to do so at a commendably prolific ra
synthesis, however, has been neglected, perhaps because of
demands. No two scholars would be likely to agree on the
emphasis of any volume, such as the one reviewed here, t
the development of American business. This circumstance
tract from either the usefulness of the effort or the value of
The increasingly specialized nature of scholarship deman
stimulus of a general thesis and wide reactions to that thesi
perception is to be kept abreast of accumulating evidence.

There is an ancient, intermittent, and inconclusive

the economic theorists and the economic historians in
this review will be a minor skirmish. Professor Cochran is an eco-
nomic historian. He has written what is essentially an elementary
economic history of the United States from 1900 to the present, with
especial reference to business as the cardinal institution of the sys-
tem. It is written in a clear, straightforward, if somewhat dehydrated
style, and it is aimed, I would judge, at the high school senior or the
college freshman whose teachers want to give him a broad view of
the role and the environment of business - especially industrial busi-
ness - in the past five and a half decades. It would have been still
more useful for this purpose if it had quite frankly been an economic
history, and had added a chapter or two on the rise of the labor

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 THE AMERICAN BUSINESS SYSTEM 117

movement, or agricultural policy, and of government econ

icy generally, instead of treating these topics (quite legitim
course, within the limited framework) as merely part of t
of business enterprise. There are minor faults; in spite o
prejudice against fussy documentation, one would have li
a little more attention paid to the identification of source
"rough estimates," for instance, say that the share of natio
received by the top 10 per cent had been increasing since
had reached nearly 40 per cent of the total by 1929? P. 9
are too many large and rather dubious generalizations, e.
the Roosevelt inauguration (of 1933) new reforms, regula
taxes continued to inhibit the risk taking activity of entr
and investors" (p. 113). (In fact investment rose sharply f
to 1936.) There are too many simple errors, whether mere
would still be confusing to the student (such as crediting
Chamber of Commerce with the Survey of Current Busines
or of a more serious kind. For instance, taxes are said to
third of national income in 1933: total expenditure of all gover
(federal, state, and local) was $8 billion out of a national i
$40.2 billion; from 1933 to 1934 federal, state, and loca
creased by $5.3 billion, which would suggest that tax c
cannot have been more than $3 or $4 billion - say 10 p
national income, and of course a still smaller percentage o
product (above figures from the Economic Report of the P
January, 1957). Gross errors like the above are not numer
are, however, innumerable statements and generalizations
debatable, but which are presented as straightforward
haps this is inevitable in a more or less popular, expository
is not unreasonable to ask of historians, however, that they
finicky!
In spite of these defects, this is a good book of its kind. The ques-
tion is whether this is a good kind, and especially whether economic
history of this discursive, literary, generalized type really gives either
the student or the general reader the best image of the period. The
most fundamental complaint is the absence not merely of quantita-
tive data but of what one might call the quantitative "sense." There
are no charts, and only one table (on p. 109), and that is seriously
misleading as it gives absolute figures for the number employed in
five sectors of the economy without giving the total, so that the read-
er has no way of calculating, even if he wishes, the proportionate
changes, which are really significant in the context. What might be

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118 REVIEW ARTICLE

called the "great series" - Gross Natio

and distribution, together with the p
clothesline on which virtually all the e
must be hung. Granted that a knowled
not enough, and that the skeleton of h
with the flesh of names and dates, law
personal achievements, still without th
pery and amorphous as an oyster.
Another fundamental complaint of t
torian is the use of what might be call
ally goes hand in hand with a somewh
existing, explicit theory. Thus, the wo
what ominously with the remark (p.
ories regarding the operation and cont
system at mid-century are lacking." T
remarkably fruitful not only in the f
ceptance and use of general theories!
Keynesian revolution, operations rese
competition theories, and so on. Some
widely accepted and used than others
extraordinary change in atmosphere in
years is due to the formulation and wi
ries which happened to give some sor
problems of the day. This change in t
of the most important "facts" in the e
the business history of the period: ye
cussed in the book.
As we cannot have any history witho
torian who rejects or neglects the explici
home-brewed theory implicit in his
theory is implicit it is hard to criticiz
To take but a single example: a senten
ferred to is the 1940's): "Shortage of la
to collective bargaining produced a sha
that led to both higher consumption
postwar years." The amount of implic
parently simple sentence like this wo
ravel. Why was there a shortage of lab
really increase real wages? (Wages of
faster than wages of organized labor i
nowhere mentioned.) How can an in

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 THE AMERICAN BUSINESS SYSTEM 119

lead to higher production and consumption: or isn't it

production that leads to increased real wages? How
increase in real wages is due simply to rising national
proportion of national income going to labor fell sharp
to 1943, another fact which is not mentioned). Granted
wage theory is in a deplorable state, is Dr. Cochran's im
theory any betterl The whole work, I fear, leaves the
that whatever may be the condition in other minds, a g
is certainly absent from the mind of the present author, a
suffers in consequence. We still await, alas, an econo
which shall be constructed around a good quantitative a
cal skeleton.
KENNETH E. BOULDING
University of Michigan

This book is rather a puzzle for a reviewer. The author has done
a great deal very well. His purpose, broadly, was to provide an
interpretative history of businessmen and business in this century.
He brings to the task insights that are always shrewd and on occa-
sion brilliant. He is a lucid and economical writer with a gift for
illustration. His task requires a good deal of economic analysis, and
this he handles skilfully and with a skeptical view of the stereotypes.
He takes a friendly and sympathetic view of businessmen without
making any concessions to the archaic and pompous liturgy of the
luncheon speeches. He shows, incidentally, what a hideous mistake
business orators and other spokesmen make in leaving these social
documents behind them. Thus from Henry Clews: "In the course of
evolution and a higher civilization, we might be able to get along
comfortably without Congress, but without Wall Street never"; and
from Paul Litchfield (in a statement which, if possibly true, begs
some remarkable questions of proof and timing): "I do not think
there is any question that America would have worked its way out
of that depression if the Hoover Administration had remained in
office . . ."; or there was Bruce Barton with his immortal picture of
Christ in the image of the business executive.
On the other hand, one can fairly say that Professor Cochran
should have done either a great deal more or quite a bit less. He
divides his book into two periods - 1900-1930 and 1930-1955 - and
in each of these he attempts to evoke the main currents of business
and economic change. Some of this, depending on the topic, he does

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120 REmVEW ARTICLE

exceedingly well. The transition from the

century entrepreneur to the mid-century
epitomized by Carnegie's advice to a gr
coons at Cornell - the businessman "is a
just as soon as you can" - and that of a
"Industry and cooperation are very imp
develop a pleasing and friendly persona
of the public and political attitudes of
sketchily) on the changing cultural impa
is also interesting.
But elsewhere one is less satisfied. His
change, at least so it seems to me, lacks
these sections seem very often to be a li
and changes, and one has the uneasy fe
would come up with an equally persuasi
to show what had changed. The autho
business structure and economic climate
and the trade associations; the merger
ments; the role of the antitrust laws; the a
agencies; and the emergent concepts of
ment - has yet another fault. The autho
little room for what must be said if any
cannot say anything about the antitrus
graph or two. Condensation and impress
their role in history. And on occasion, a
of the Bankers," it seems to me that th
where I don't quite think he succeeded.'
Professor Cochran's central thesis, if on

'He also makes occasional errors. Few wou

that farmers were "well organized" at the end
organizations, but with the exception of the
fairs not destined to last very long, and by th
litical decline. He is also in error (page 150)
Farm Bureau Federation was a central Washin
zations in the thirties. Though it was suspecte
some dubious business lobbying in the twenties,
And if economists are right in insisting that th
should, like Pickett's Charge, be treated me
about his treatment of the stock market crash
29, was much worse than on Thursday, October
On October 24 the bankers met, not early in
so far as that day was concerned - Professor
that is specifically to the contrary - their eff
quite a success.

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 THE AMERICAN BUSINESS SYSTEM 121

overlay of historical narrative, is that in the American busine

entrepreneurship has given way to organization and that
broad limits, the pursuit of profits has become secondary
occupation with security. At the same time businessmen,
the liturgical lag, have made their adjustment to the
political environment appropriate to this change. (H
might have argued that the Eisenhower Administration
not only a coming to terms with the political environme
appropriation.) To have remained more closely with t
would have produced a more compact and, I think, ra
effective book.
JOHN KENNETH GALBRAITH
Harvard University

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