Tavis and others brought up the case of U.S. Steel.
Many of the great industrial organizations were built by industrialists,
whose main interest was industry. Carnegie was a sharper, but he was
still very interested in making steel at the lowest possible cost. Over
time, many of these became more financially oriented, erasing the
distinction between finance and industrial capital. Today U.S. Steel is
USX, you can guess what the x stands for.
Here is a short section from my End of Economics book dealing with the
transformation of U.S. Steel.
In the midst of the Great Depression, the editors of "Fortune• magazine
reported:
##Now there are two possible ways to look at a steel plant or an ore
mine. One is as an investment that must be protected. The other is as
an instrument of production, to be cherished only so long as it cannot
be replaced by a more efficient instrument. The first may be called the
banker's point of view; the second, the industrialist's. [Anon. 1936,
p. 170]
According to the investigators at Fortune, United States Steel "has
always been a management with a financial rather than an industrial turn
of mind" (Anon., p. 63). This perspective reflected the origins of the
corporation. "The Steel Corporation was founded by financiers, has been
dominated ever since by financially-minded men" (ibid., p. 170).
While many industries used the expansive conditions of the 1920s to
develop improved technologies, the management of United States Steel
chose a different track. As a result:
##the chief energies of the men who guided the Corporation were directed
to preventing deterioration in the investment value of the enormous
properties confided to their care. To achieve this, they consistently
tried to freeze the steel at present, or better yet, past levels ....
Any radical change in steel technology would render worthless millions
of dollars of the Corporation's plant investment. [ibid., pp. 170 and
173]
While firms in less concentrated industries attempted to rationalize
their operations and prune costs, the financially-oriented management of
United States Steel was intent on maintaining the status quo. Perhaps
Hoover, the engineer, realized that protecting the corporate sector from
competitive forces would allow more firms to emulate United States
Steel, making an economic disaster inevitable.
Even the Great Depression was insufficient to make this firm change its
ways. Over time, the firm's stodgy, hidebound management found itself
humbled both by foreign competition and aggressive mini-mills.
Management changed the corporate name to USX and considered retreating
from the steel altogether. Perhaps, United States Steel represented the
ultimate verdict on Morgan and the corporatists.
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 916-898-5321
E-Mail [EMAIL PROTECTED]
