Narrating the Rise of Big Business in the USA “This is a story about stories, and specifically about some of the stories that Americans have told themselves about corporate economic power.” In this book, Anne Mayhew focuses on the stories surrounding the creation of Standard Oil and Wal-Mart and their founders, John D. Rockefeller and Sam Walton, combining the accounts of economists with the somewhat darker pictures painted by writers of fiction to tease out the overarching narratives associated with American big business. Mayhew argues that the diverse views about big business and its effects on welfare can be reconciled and better policies derived from a somewhat unlikely combination of ideas from the business world and from those who have dissented from the most widely accepted story told by econo- mists. This book draws on the work of Chandler, Coase and Williamson, as well as Marx and Veblen’s discussion of supply chains, to address some of the major social and economic problems of the twenty-first century. This book will be of interest to students and researchers engaged with economic theory and public policy as well as those interested in a post- modernist take on big business in the USA. Anne Mayhew is Professor Emerita at the University of Tennessee. Routledge international studies in business history Series editors: Ray Stokes and Matthias Kipping 1 Management, Education and 7 Region and Strategy Competitiveness Business in Lancashire and Europe, Japan and the Kansai 1890–1990 United States Douglas A. Farnie, Edited by Rolv Petter Amdam David J. Jeremy, John F. Wilson, Nakaoka Tetsuro and 2 The Development of Abe Takeshi Accounting in an International Context 8 Foreign Multinationals in the A Festschrift in honour of United States R. H. Parker Management and performance T. E. 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Sluyterman Ben Wubs 12 The Formative Period of 14 Narrating the Rise of Big American Capitalism Business in the USA A materialist interpretation How economists explain Daniel Gaido Standard Oil and Wal-Mart Anne Mayhew Narrating the Rise of Big Business in the USA How economists explain Standard Oil and Wal-Mart Anne Mayhew First published 2008 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2008. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2008 Anne Mayhew All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Mayhew, Anne. Narrating the rise of big business in the USA: how economists explain Standard Oil and Wal-Mart/Anne Mayhew. p. cm. – (Routledge international studies in business history; 14) Includes bibliographical references and index. 1. Big business–United States–History. 2. Corporations–United States–Case studies. 3. Standard Oil Company. 4. Wal-Mart (Firm) I. Title. HD2785.M38 2008 338.6’440973–dc22 2008001046 ISBN 0-203-89438-3 Master e-book ISBN ISBN10: 0-415-77534-5 (hbk) ISBN10: 0-203-89438-3 (ebk) ISBN13: 978-0-415-77534-2 (hbk) ISBN13: 978-0-203-89438-5 (ebk) To Patrick, Adam, and Mattie Anne With hopes for their world Contents Preface xi Acknowledgments xii 1 Introduction 1 2 The agreed upon stories 11 John D. Rockefeller, Sr. and Standard Oil 11 Sam Walton and Wal-Mart 18 A preliminary comparison 29 3 Popular accounts and wider contexts 30 Rockefeller’s context 31 Sam Walton’s context 52 4 Economists, trusts, and big business 60 Theorizing the railroads 61 The challenge of the trusts 65 An associationist detour 74 The invisible hand returns 76 5 Alternative stories 79 Seeing the firm whole 79 Alfred Chandler’s stories 87 A search for theoretical consistency 91 Economies of scale and speed: the modern firm in abstract 92 x Contents 6 Supply chains and M→C→C´→M´ 104 M→C 105 C→C´ 113 C´→M´ 123 Holistic management/holistic problems 127 7 Toward relevance 132 A template to drill by 135 Stories and policies: a final word 147 Notes 149 Bibliography 168 Index 179 Preface My goals in writing this book were two. The first was to combine what can be learned from the separate and often quite different strands of liter- ature that have dealt with the rise of large business firms in the US economy. Economists have told it one way, economic historians another, and historians of economic thought have seen a slightly different truth. Novelists, short story writers and journalists have had their own versions. What has been taught in business schools has been different still. As I have read and talked with students about the growth of business firms I have tried to cobble together the different versions into a more or less cohesive account. This book is the result. The second goal has been to write my account so that intelligent readers who do not have specialized training in any of the academic fields from which I have drawn can understand it. This seems a worthy goal but will prove irritating to some because I have not gone into the details of a number of scholarly discussions but have summarized major points instead. I have also trespassed across disciplines and sub-disciplines and have tried to write without using the specialized language that makes for rapid intradisciplinary communication and group cohesion. I hope that in spite of all this I have managed to preserve the understanding and intent of those whose work I have read and rewritten for this purpose, and apolo- gize if I have not. Acknowledgments This book has been long in the making and there are many, many teachers, students, colleagues and friends who have contributed to my understand- ing. My late husband, Walter C. “Terry” Neale, was both a fierce and con- structive critic of everything I wrote and he made me a better scholar for it. Had he lived to read this manuscript I am sure that it would have been better than it is. My children, Kathleen and Doug, have been my very best friends, always loving and forgiving. Several have read this manuscript in various stages of completion, among them Steve Dandaneau, Emil Friberg, Jr., Janet Knoedler, Nancy McGlasson, Mary Papke, and I thank them all, and especially Mary and Nancy for their reading as non-economists. When they said it did not make sense I went back to the keyboard and worked on it some more. To Steve, Emil, and Janet I apologize for not taking all of the advice offered. They should not be blamed. The students in English 660 and in University Honors 257 in the Spring of 2007 are the most recent in a long line of those who have challenged me to think and reread and rethink. I am most grateful. 1 Introduction This is a story about stories, and specifically about some of the stories that Americans have told themselves about corporate economic power. Stories about the growth of corporate power and the individuals who have led that growth have been written by professional journalists; others are stories told by novelists, short story writers, and film makers; still others are the analytical accounts written by professional experts: economists, other social scientists and historians. Finally, there are the stories that are embodied in legislative history and in the public policies that deal with economic power. These are not all the same stories, even when they purport to be about the same thing. And, the differences among the stories, differences that will be explored in detail in the pages that follow, are not simple matters of emphasis or style. There are, in fact, sharp differences between the profes- sional views of modern economists, who now tend to see the rise of eco- nomic power as a relatively benign process driven by technological progress, and those of historians and other social scientists who take a less sanguine, or at least a less deterministic, view of the evolution of modern American capitalism. There are also sharp differences between the general view of novelists and short story writers who chronicled the lives of Ameri- cans at the end of the nineteenth and the beginning of the twentieth centuries and that of economic historians who have written about the same period.