15_Riech_on_The_Work_of_Nations - ISS 315 Lecture15...

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ISS 315 Lecture15 Discussion of Reich: The Work of Nations The REAL Economy in the Atlantic Monthly. I. Origin of Giant American Corporations A. Reduction of Competition by Consolidating Production was the third step (following tariffs and 'spheres of influence') to solving the problem of overproduction. B. European (1870s) and Japanese (1890s) strategy. 1. Cultural tradition of cartels, guilds, royal monopolies and other mechanics to restrain trade, therefore not concerned by large industrial consolidations. 2. Strong bureaucracy experienced in mobilizing resources and directing trade. E.g. Commissariat General du Plan in France, and MITI and shingi kai in Japan. (Harrop:133) a. Organized manufacturers when the markets became unruly - coordinated investment, shared capital, joint purchase of raw material and marketing of goods. b. Fixed prices and policed against price cutting. c. Major industrial consolidations completed by late 19th century. C. American strategy 1. Cultural distrust of monopolies and any concentration of political or economic power led to the Sherman Anti-Trust Act of 1890 prohibiting price fixing and monopolies. a. No strong bureaucracy in 19th century capable of directing or coordinating an industrial policy. b. Since American corporations could not coordinate activities as their European competitors could, the solution was to merge the component parts into one huge corporation. [US Steel owned fleet of ore freighters on the Great Lakes] c. High tariffs made raw material costly, therefore buy up the domestic sources of the raw material. [U.S. Steel owned taconite mines in northern Minnesota] d. Permitted the vertical integration of industries and protected by tariffs could fix prices as well. D. Controlling the Giant Corporation 1. Debated the legitimacy of powerful Corporations free from democratic oversight and immune to political demands by the public. a. WWI and the Origins of National Corporate Planning b. Federal bureaucracy created to finance war industries, to provide housing, to settle industrial disputes, and to allocate fuel, food and shipping resources.
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15_Riech_on_The_Work_of_Nations - ISS 315 Lecture15...

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