Pessimists despair as decline fades

Corporate Business and Capitalist Classes - Big Business
November 21, 1997

Big business, its power and influence, and who controls it, has been a subject for endless research and speculation. These two books provide the basis for a much better informed discussion. Between them they give a long historical sweep on European business, and a full descriptive account of the different corporate structures that prevail around the world. Additionally, they interpret what this all means for company performance and social relations, Youssef Cassis's book will not be welcome among British doom-mongers. There is something in the English make-up which takes more pleasure in adversity than triumph, enjoys failure more than success, hails the underdog rather than the hero. "The pound had another bad day on the foreign exchanges", used to be a good opener for the news. When things go well there are ways of that being disguised. "Inflation slumps to new low", was an Evening Standard headline. Did we really want to win the Test series? And so on. So the past 100 years or so have been a good time for the English because the economy is widely held to have been in continuous decline from late in the 19th century. A common part of this story is that British economic performance has been dogged by entrepreneurs who had, to put it at its kindest, lost their way.

Cassis's book is therefore bad news, because it brings a substantial correction to such a view. The book was originally conceived as an examination of business elites across three major European economies: Britain, France, and Germany. Who were the elites and where did they come from, how did they relate to one another, and so on? Later it developed into a much bigger study that compared big business in those three countries across a long time period and set out to see if explanations were available for the nature of big business and of the changes that took place.

He starts by defining big business. And it is not long before the news gets bad. By the early 20th century Britain was the European country where business had reached its highest level of development. In 1907 Britain had more than twice as many large companies as Germany and more than four times as many as in France. Also, British business was spread across more of the economy, not restricted to the old staples of iron and steel. Measured by share capital the single largest British company in 1907 was Imperial Tobacco, almost twice the size of Krupp. Of course, just being big is no great thing. How firms performed is what matters. This is more difficult to establish. The aim is to measure profitability, and one has to rely mostly on published figures on profits and capital, which can be distorted for a variety of reasons. The problem is particularly acute in banking, where distortions were sometimes encouraged. Nevertheless, some sorts of rankings can be obtained and the gloomy story continues with British companies being more profitable than their European counterparts. In the 1920s, British company profits were three times that of German companies, and six times that of the French. By the 1950s these differentials had increased, though inevitably some convergence took place in the following decades. But in the 1970s, British companies were still ahead of their European counterparts, British banks in particular were distinctly more profitable than German or French ones, though the cartel was beginning to take its toll in the 1950s and 1960s, when profits were being taken in the form of leisure.

Does this mean that the British were more fly-by-night - in for a quick profit and then gone - short-termist? No. At selected dates from the 1950s to the present time British companies are shown to have survived longer than their European counterparts. So the question next pursued is, whether profitability and survival were achieved at the expense of growth. The answer is: the large British companies of the 1920s combined higher survival with faster growth. Oh dear, where will this all end? Cassis turns next to the question of business leadership, and examines the background and training of these leaders, and how these changed/improved in the course of the 20th century. The French had the highest level of education and the British have persisted with the lowest, So the news is no better here, for the British achieved what they did with fewer inputs. The British have, of course, long been sceptical of the benefits of a university education. Herbert Austin, the well-known industrialist, declared that "the university mind is a hindrance rather than a help", and he was not alone in thinking like this. And on the evidence presented in this book who is to say he was wrong? On the question of social mobility there is almost no evidence for spectacular upwards movement. There was more mobility in evidence in Britain than France and Germany, but not hugely more. Cassis goes on to explore the social origins of businessmen and the network of directorates that existed, and of the wealth, status, and power of these social elites.

In summary he overturns a widely held view that German business was the leader in Europe and joins a growing band of historians who have been arguing that British decline has been largely exaggerated. All in all this book gives an excellent coverage of European business and a powerful statement of the size and comparative success of British business. Declinists will have to look elsewhere or start to revise their idea of decline. The discussion of social elites comes at the end and even though it was in many ways the reason why this book was written it has now acquired the appearance of being added on.

In sharp contradistinction, it is the social aspects that are at the centre of John Scott's book. This carries a title that suggests investigations of a kind close to Cassis's, but it is quite different. The book began its life in 1979 with the title Corporations, Classes and Capitalism. A second edition appeared in 1985, and the present version is a substantially rewritten and expanded work. So much so that it was thought time to change the title - reluctantly relinquishing the catchy alliteration of the earlier versions. Yet the book retains an older flavour; or is it simply the contrasting approach and language of the sociologist? Whereas Cassis is a business historian with an interest in single companies, individuals, and groups, Scott the sociologist focuses on class and classes. The sources used in the two books are utterly different. Though it does still seem surprising in a bibliography that runs to more than 50 pages not to find any mention of the main histories of the large corporations that form the basis of the author's study. Of course the book should not really be compared with Cassis's; it has different terms of reference. And its real contribution lies elsewhere, in providing a description of the different forms of corporate governance that are found in the variety of models around the world: the American, Anglo-Saxon, German, Central European, Latin, Japanese, Chinese, and post-communist. The discussion of this provides enormous detail, all documented thoroughly, and will undoubtedly be a valuable source.

Scott is primarily interested in issues of control - who owned companies and what power did they have and exercise. Thus there are long sections on "money trust" in the United States, on the City in Britain, on "bank power and financial hegemony". But the analysis is wide-ranging and it all leads to an ambitious and extended treatment of the nature of the world economy, of inequalities of income and wealth, and ultimately of class formation.

Although they come from quite different camps these two books go well together; which is where I shall put them on my shelf.

Forrest Capie is professor of economic history, City University.

Corporate Business and Capitalist Classes

Author - John Scott
ISBN - 0 19 828076 9 and 0828075 0
Publisher - Oxford University Press
Price - £45.00 and £4.99
Pages - 371

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