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

Published by EH.Net (August 2003)

Charles Perrow, Organizing America: Wealth, Power, and the Origins of Corporate Capitalism. Princeton, New Jersey: Princeton University Press, 2002. ix + 259 pp., ISBN: 0-691-08954-X.

Reviewed for EH.Net by Vicki Howard, Hartwick College, Oneonta, New York.

The last few years have seen a growing popular and scholarly interest in globalism. In an era when the power of large transnational organizations seems absolute and inevitable, works that uncover alternate ways or paths not taken in the history of American economic life perform a useful service. Charles Perrow’s new synthesis, Organizing America: Wealth, Power, and the Origins of Corporate Capitalism, tells the story of the nineteenth-century beginnings of the hierarchical, bureaucratic organizational form that would eventually transform all social and economic relationships. Perrow focuses largely on the early textile mills of Manayunk, Pennsylvania, Lowell, Massachusetts, the Kensington area mills of Philadelphia, and finally, the railroads. Although a mass-production model that celebrated and legitimized a ruthless drive for the accumulation of wealth became hegemonic by the beginning of the twentieth century, much of the nineteenth century, he argues, was typified by a flexible-production model that reinforced artisanal values and moderate wealth, and had fewer social costs and negative externalities — a model that privatized railroads would help destroy. Drawing on the insights of organizational sociology, he explains how the large, privately held, minimally regulated corporation came to dominate over other business forms in the United States. Applying organizational variables to several case studies, he attempts to construct a new paradigm for industrialization in the nineteenth century.

Organizing America privileges large bureaucratic organizations over “culture, politics, technology, efficiency concerns, and entrepreneurship” (p. 20). Such a claim requires substantial theorizing, which Perrow provides in his introduction and a chapter titled, “Preparing the Ground.” He justifies his organizational focus, arguing that while organizations are influenced by culture, they also shape culture. Drawing on Max Weber and Karl Marx, he holds that organizations worked as tools that serve particular interests and had the ability to centralize power and wealth, often at great social cost. They generated wage dependence, created divisions between different groups, and had tremendous negative effects on their external environment. Moreover, they often interacted with each other in unanticipated ways. When combined with a weak state and a legal framework that worked in favor of large organizations, corporations were able to take the form they did in the United States in the twentieth century.

Drawing on studies by Cynthia Shelton, Philip Scranton, Frank Dobbin, Walter Licht, and others, Perrow recasts his subject “in light of the organizational requisites” and finds an economically diverse America (p. 47). In the shift from an agricultural to an industrial economy, communal organization was replaced by markets, networks, and then hierarchies, though this transition did not proceed in a completely linear fashion. In a world characterized by the socioeconomic form of “community,” producers were “subsistence farmers” that engaged in little market behavior (p. 23). As economic relationships were more market-oriented, monetary exchange became more prevalent. The market stage produced a “system of small, autonomous firms with relatively skilled workers, with minimal local government units, and small cultural institutions” (p. 26). At the other end of this economic relationship was the hierarchical form, characterized by large, centralized units employing mass production and bureaucratic organizations. Some communities, like the “walking city” of Philadelphia in the early years of the century, were a mixture of market and community (p. 27). In other places, like the Lowell textile mills of the Boston Associates, organizations moved towns directly from a community relationship to a hierarchical form, without passing through a significant market or network phase. The Lowell mills continued to have elements of community, such as long-term employment, payments in kind as wages, and patriarchal authority over leisure time and religious expression. In the early nineteenth century, Manayunk and Lowell prefigured the hierarchical format that would come to dominate in the late nineteenth century. Organizing America makes the good point that this economic path was never inevitable. Drawing on Philip Scranton’s Proprietary Capitalism, Perrow puts forth an alternate model of the network system of Philadelphia, which was more typical up to the 1880s. Using the case of the highly networked textile firms in the Kensington area of Philadelphia, he shows how, unlike the hierarchically organized, large, centralized, bureaucratic firm involved in mass production and mass distribution, the smaller, innovative firms in Kensington had “more positive externalities for workers and the community” (p. 95). This network model allowed for cooperation as well as competition.

Unfortunately, with the rise of railroads, “the second big business,” this network model disappeared and the middle way gave ground to the mass-production model by the end of the century (p. 96). Moving away from the efficiency argument of Alfred Chandler, and the neoinstitutionalist argument of Frank Dobbin that argued for the importance of culture, Perrow attributed the rise of the privatized railroad organization in the United States to their campaign for private ownership and their power as “corrupters” (p. 159). Railroads, for logistical and technical reasons had to be controlled completely by whoever owned them, though this ownership could be private or public. This need for control brought about new organizations that were larger and more powerful than any seen before. In the United States, as opposed to his comparison cases in France and Britain, railroad ownership was privatized and went largely unregulated from 1830 to about 1880, after which it became a lightly regulated oligopoly. Railroad organizations were corrupt, involved in bribery, illegal financial dealings, and violation of regulatory statutes, and significantly, he argues, this corruption was organizational in origin, made possible by weak governmental institutions. In a way that was “important for the future of corporate capitalism,” railroad organizations’ corruption removed legal restraints, allowing corporations to amass greater wealth, rather than return it to the government or private investors (p. 142).

As in the rise of hierarchical organization in the textile industries, however, unregulated privatized railroads were not an inevitable outcome of history. Alternatives were possible, as the interesting case of the successfully state-owned and operated Western & Atlantic Railroad in Georgia (1836-1870) demonstrates. While divisionalization in railroad organization became the norm and the means for the creation of modern bureaucracies that allowed for the growth of massive corporations, he investigates two alternate organizational arrangements that would have distributed power and wealth more widely, without loss of efficiency. Arguing against Chandler’s inevitability thesis, he suggests that the centralized, departmental structure serving regional lines and the contracting out system were successful paths that could have been taken.

In each of his organizational interpretations of textile industries and the railroads, Perrow downplays cultural factors. Over the last decade or so many excellent histories of business and culture have appeared, all of which are absent in this story. Readers persuaded by such works might object to way Perrow privileges the organization over culture and fails to consider other categories of analysis, such as class, gender, race, or ethnicity, factors that certainly played a crucial role in labor-industrial relations and corporate life. However, readers interested in the history of economic life and in the origins of corporate capitalism in the United States will appreciate Organizing America’s new interpretation of the nineteenth-century and of paths not taken.

Vicki Howard recently received her Ph.D. in American Studies from the University of Texas at Austin. She is an Adjunct Assistant Professor at Hartwick College and is working on a book about the American wedding industry.