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EH-NET BOOK REVIEW
Published by H-Business@eh.net (February 1998)
Sanford M. Jacoby. _Modern Manors: Welfare Capitalism Since the New
Deal_. Princeton: Princeton University Press, 1997. xii + 345 pp.
Notes and index. $35.00 (cloth), ISBN 0-691-01570-8.
Reviewed for H-Business by Edward Berkowitz <ber@gwis2.circ.gwu.edu>, George
Washington University
Welfare capitalism represents one of those marginal academic side-shows
that nonetheless has surprising staying power. At various times
historians have shown interest in ways that firms have distinguished
themselves by being model employers. The heads of these firms, unlike
their stereotypical colleagues, do not believe in the classical theory of
labor supply in which workers present themselves in an infinite supply at
the market price. Instead, they understand that workers are valuable
commodities who become even more valuable once they receive some form of
on- the-job training. Hence, these employers, either out of a sense of
paternalistic benevolence or, more likely, a dollars-and-cents
understanding of the labor market, have tried to reduce turnover by
linking pay to the company's productivity and by improving the conditions
of work beyond those of their competitors. In the conventional
historiography, the hey-day of this form of welfare capitalism comes in
the 1920s, when businessmen held a sort of moral sway over the nation.
Then, in the 1930s, welfare capitalism breaks down in the face of the
collapse of the labor market that we call the depression. As the price of
labor falls and the demand for products declines, benevolence no longer
pays substantial dividends. Government steps in to offer a sort of
alternative form of welfare capitalism. Through legislation the
government mandates that workers have the right to bargain through
representatives of their own choosing and workers also have the right to
pensions and unemployment compensation that are supplied by the
government, rather than the company. Historians have argued about the
role of welfare capitalists or corporate liberals in the creation of the
twin peaks of New Deal regulation: the Wagner Act and the Social Security
Act. Whatever the results of this argument, the outcome remains the same.
In the 1930s, the torch gets passed from welfare capitalism to a new world
in which both unions and the government, often acting in tandem, have a
substantial presence. Welfare capitalism is a subject for the first third
of the twentieth century and not more recent times.
Of course, that conventional view is just plain wrong. We know, for
example, that there was a corporate welfare revival in the postwar era and
that welfare capitalism remains alive and well today. In the latest round
of health reform, for example, the Clinton administration, just like the
Nixon administration before it, tried to create a plan that would mandate
health insurance coverage. Clinton had no intention of having the
government become the primary supplier of health care. Instead, he wanted
to make sure that all employers supplied it their employees. He wanted to
enforce a welfare capitalist norm, in other words.
That suggests the need for a comprehensive history of welfare capitalism
since the New Deal, and, within the constraints of the evidence, Sanford
Jacoby has provided it. His book is a scholarly and thoughtful look at
the welfare capitalist practices of three companies in the era from the
1930s to the 1960s. His basic argument is that welfare capitalism did not
die in the 1930s. To be sure, not all firms followed its course. As we
know, many large nationally based industrial firms succumbed to pressures
from the CIO and entered into collective bargaining agreements with
unions. Jacoby's three firms, each for its own reason, escaped from the
union movement. Each developed an alternative management structure that
bound employees to the company.
In the case of Kodak, executives could build on the paternalist traditions
of George Eastman who, for example, offered periodic bonuses to his
employees. In creating welfare capitalist practices, Kodak also took
advantage of its location in Rochester New York, a location that allowed
it to hire ethnically homogeneous workers--plain white bread Wasps--who
were perhaps less susceptible to union influences than members of other
ethnic groups. Even more important, Kodak had a virtual monopoly on
photographic film and suffered less from the depression than did those
companies in more competitive markets where the cross elasticities of
substitution (if I remember my economics right) were greater. Protected
from some of the forces that gave rise to unions in other firms, Kodak
invested a great deal in keeping the unions out, offering its employees
profit sharing plans and a wide array of recreational programs and other
amenities. Above all, Kodak worked hard to minimize lay-offs by planning
ahead for the seasonal variations in the photography business and, if
necessary, by moving workers from one job to another. As a result of all
these practices, Kodak kept unions away and practiced an alternative form
of labor relations that might be called welfare capitalism.
Sears Roebuck, the Chicago company that began as a mail order house and
emerged as the nation's largest retailer in the postwar era, produced a
different style of welfare capitalism. It existed in a much more
competitive product market, and it operated stores in locations from coast
to coast. Like Kodak, Sears experimented with a form of profit-sharing
but, unlike Kodak, Sears could not fight unions through overt means.
Sears had to do business in places like Gary, Indiana or Lansing, Michigan
where it probably would have been a bad practice to bad mouth unions in
the late 1930s and early 1940s. As a means of controlling its work force,
Sears did more than offer good wages and working conditions. It also
initiated an attitude survey program which, as Jacoby notes, "became one
the largest and most sophisticated applications of behavioral and social
science research to personnel problems in industry" (p. 111). Sears used
the data from the survey to identify sources of employee grievances and
correct personnel problems. In a more manipulative sense, Sears also used
the surveys to identify potential union organizers and to keep them from
proselytizing other employees.
Thompson Products, the third of Jacoby's companies, was a much more
traditional industrial manufacturer. Located in Cleveland, a highly
unionized, ethnically heterogeneous town, Thompson products made parts for
automobiles and later for airplanes. Unlike Kodak and Sears Roebuck
(whose leader in its early days was Julius Rosenwald, an important figure
in Chicago and national philanthropic circles), Thompson did not have much
of a welfare capitalist tradition before the New Deal. In 1933 Frederick
C. Crawford took over the company and, among other things, started a
personnel department and new welfare programs. His main contribution,
however, was in the creation and maintenance of a series of what Jacoby
describes as "semiautonomous company unions and a bevy of human relations
programs" (p. 142). In Cleveland, unlike in Rochester, some semblance of
a union was necessary. At Thompson Products, at least in its Cleveland
plants, that union took the form of a company union that was resilient
enough to withstand challenges from the United Auto Workers.
Why did Jacoby choose these three companies? I think it is because the
records of these companies were available to him and, as he notes and
business historians can certainly appreciate, the records of private
companies, particularly the labor relations aspects of those companies,
are not easy to obtain. Because of his choice, he has to strain a bit to
establish these companies as ideal types of welfare capitalist employers,
yet his analysis suggests that particular factors account for developments
in each of the companies. It matters, for example, that Frederick
Crawford took over Thompson Products, that Marion Folsom, an extraordinary
welfare capitalist statesman, worked for Kodak, and that Robert E. Wood
followed Julius Rosenwald as head of Sears. Other companies, no doubt,
have their singular individuals and their particular factors that might
have changed Jacoby's story if he had chosen them.
Still, what is here is more than enough to establish Jacoby's point that,
by the 1950s, there was a non-union alternative in the world of industrial
relations. Most of the nation's attention was focused on labor unions and
on collectively bargained wage agreements. It was an era when labor
relations was still an important journalistic beat and writers like Abe
Raskin of The New York Times wrote about labor relations in the auto and
steel industries. A small academic cottage industry in labor relations
developed, led by professors such as California's Clark Kerr, Princeton's
Fritz Harbison and Richard Lester and Harvard's John Dunlop. These people
tended to write about unions as institutions and about the "mature" form
of collective bargaining. In their spare time, many acted as arbitrators
or mediators and thus took a formal role in the labor relations process.
Intellectuals with a wide audience, such as John Kenneth Galbraith, viewed
union-management relations as an important manifestation of American
pluralism. With all the attention on unions, the commentators overlooked
the robust nature of welfare capitalism. As the appeal of unions faded in
the face of global competition and the general stagnation of the economy
in the 1970s, welfare capitalism once more became visible. It meshed with
the Japanese style of teamwork that came into vogue; it seemed to offer
more flexibility than did the rule-bound style of industrial relations
common to unionized workplaces. More recently, however, as the workforce
has become more educated, the times seem to have once again bypassed
welfare capitalism. Modern workers, particularly educated and advantaged
workers, as Jacoby notes, often appear to be like nineteenth-century
craftsmen. They drift from company to company, adding lines to their
resumes and providing their own form of security through pensions and
health insurance that they maintain on their own. As if to underscore the
importance of these independent workers, the Clinton administration may
soon convert the Social Security system so that part of it becomes a
private savings account.
One of Jacoby's main contributions in this very impressive book is to
illustrate how modern welfare capitalists have come to grips with the
Wagner Act and the Social Security Act. Executives from all three of his
companies became involved in national politics. General Wood of the Sears
Roebuck Company was a traditional conservative, involved in things like
the America First Committee. Frederick Crawford became the head of the
National Association of Manufacturers and played a key role in the
modifications of the Wagner Act that led to the Taft-Hartley law. In
particular, Thompson Products fought to preserve the right to appeal to
its workers on behalf of its company-controlled union, despite warnings
from the National Labor Relations Board that such appeals represented
tampering with representation elections. Marion Folsom of Kodak became
the leading business expert on social insurance and fought to preserve
Social Security and unemployment compensations in forms that blended
seamlessly into welfare capitalist practices. These companies, then, did
not run away from the New Deal so much as they learned to adapt its
regulatory structure to their purposes.
Without a doubt, this book is an important one that will be read both for
the data it provides on the three companies and for its more general
points about the persistence of welfare capitalism beyond the New Deal.
The research is almost overwhelming as is the general degree of erudition
in the book. It is, to be sure, an academic book in which the author
occasionally takes excursions into trendy academic topics to the detriment
of establishing a clear line of argument. Hence, there are digressions on
such topics as the gender composition of the labor force during World War
II, the nature of industrial psychology, and the organizing tactics of the
United Auto Workers. Some of the writing is a little over-elaborate and
demands close attention from the reader, as in this sentence (p. 74): "In
theory, Kodak wage dividends plans should have been a factor in the
company's performance during the early 1930s, since profit sharing makes
wages more sensitive to economic conditions, which, in turn, shields
employment levels during hard times." I could have used more help with
the implicit economic theory in that sentence and would have preferred
that it contain fewer clauses. Still, an academic monograph is an
appropriate place to display one's learning and it is clear that Sanford
Jacoby has much to teach. One can predict with confidence that this book
will exercise an important influence over modern American historiography;
it represents an extremely impressive achievement.
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