Organizing America: Wealth, Power, and the Origins of Corporate Capitalism

Chapter 1
INTRODUCTION
THIS BOOK SEEKS to tell us how and why it happened that the most important feature of our social landscape is the large organization, public or private. Americans celebrate individualism and entrepreneurship, and some see organizations as getting smaller or more decentralized; so concern with bigness and bureaucracy may have abated. But we should be reminded that today, well over 90 percent of the work force works for someone else--as wage and salary employees--up from 20 percent in 1800; over half of the gainfully employed people in the country work for organizations with 500 or more employees, up from 0 percent in 1800. Today, although establishments have an average size of about thirty employees, organizations can own and control many separate establishments. And control is the important factor, not the size of the branch bank or the factory site or the fast food outlet or the service franchise. The truly big organizations, public and private, have come to define and even absorb much of our society.
Despite all the talk of downsizing, our organizational population has not become perceptibly thinner; the Fortune 500 industrials have declined in size by about 8 percent in a decade, but their average size changed little, from about 3,000 employees in 1979, the peak year, to 2,750 in 1993. That is still very big. Meanwhile, the average size of the 500 largest service corporations rose from 1,700 in 1982 to 2,750 in 1993, making them as big as the industrials (Useem 1996, 165). Even with the government contracting out many activities to private firms (generally large ones), government has not shrunk appreciably.
The American population increases, and so does the number of big organizations. More and more they have come to constitute societies in themselves, providing, on their own terms, the cradle-to-grave services that communities and small organizations used to provide. We could not have our level of affluence without organizations, of course, and some of them, including certain government organizations such as the armed forces or the social security administration, are bound to be huge.
But most do not need to be very large, and their size and power is troubling. Our economic organizations--business and industry--concentrate wealth and power; socialize employees and customers alike to meet their needs; and pass off to the rest of society the cost of their pollution, crowding, accidents, and encouragement of destructive life styles. In the vaunted "free market" economy of the United States, regulation of business and industry to prevent or mitigate this market failure is relatively ineffective, as compared to that enacted by other industrialized countries.
Big noneconomic organizations also trouble me. Big churches and school systems and local, state, and federal governments also centralize power, socialize employees to bureaucratic values, "de-skill" them unnecessarily, and generate their own "externalities"--the costs of doing their business that are shifted onto a fragile environment or fragile groups within the polity.
Increasingly, especially since the mid-twentieth century, politicians and government leaders have tried to ameliorate these problems, saying that we need big organizations but that they need to be more responsive to citizens. In this area we have made some progress. But perhaps not enough. Antitrust enforcement has waxed and waned; conceptions of unfair competition are relaxed; big organizations and their masters dominate campaign financing and shape regulatory procedures. Cleaning up after the economic organizations has generated more big organizations to do the clean up, and they bring more externalities, and more incorporation of social functions that once were filled by small groups, families, neighborhoods, and small local governmental units. Elsewhere I have explored the possibilities, faint but real, for networks of small firms that can drive innovation and also distribute wealth and power more equitably (Perrow 1992). Networks of small firms have appeared in some parts of the industrialized world, such as Northern Italy, the Scandinavian countries, Japan and Taiwan to some extent, and even in parts of the United States (Sabel and Zeitlin 1997). An economy that allowed extensive use of small-firm networks was a possibility in the United States in the nineteenth century, and I will explain why that possibility disappeared.
Why did the United States grow big organizations and come to accept them? I will start with the early days of the Republic, with the first mass-production organizations using "wage dependent" labor, the textile mills, and the legal revolution that made big organizations possible before they even appeared.