Kirt Sechooler March, 1996
News Note: The New York Times, March 3, 1996, begins a
week-long series entitled The Downsizing of America.
The Historic Purpose of Industrialization
Two hundred years ago, at the beginning of the American Industrial Revolution, the United
States was a nation of approximately four million people, the overwhelming majority of
whom lived in rural circumstances. Today the population of America stands at something
over two hundred and sixty million, the vast majority living in and around urban centers.
What made this massive trans-formation possible was the development, in the four
technological cycles we have previously described, of capital as an economic
factor of production and the corresponding creation of a vast store of capital wealth.
It is impossible to overstate the magnitude of this accomplishment.
Capital and the Capital Base
The development of the great capital base produced during the industrial period represents
more then just a mere quantitative or numerical increase in wealth, however, for the truth
is that the increase in capital wealth in the Industrial Age has been so prodigious that
it has resulted in a qualitative economic change, a change that fundamentally separates
the Industrial and Post Industrial Ages.
Efficiency Defined as Increasing Scale and Resource Intensity
It can readily be seen then, that the historic mission of the Industrial Age was to
develop capital as an economic factor of production and to create for a capital starved
world a vast store of capital wealth. The creation of this great stock of capital was
driven by a real need on the part of the human race and it gave to economic activity
during the Industrial Era its central organizing attribute. The drive to increase capital
during the Industrial Age would mean that the technologies of the age would inevitably
sacrifice efficiency in a quest for scale. This is a very critical point, for during the
Industrial Age, efficiency had in fact been defined as increases in scale.
The result of the relentless pursuit of scale during the Industrial Period has meant that
the technologies of the age have over time became increasingly large scale and
increasingly resource intensive, with the last period of the Industrial Age, the
Automotive-Petroleum Mass Suburbanization Age, being particularly so.
The Industrial Age Is Ending Because Its Historic
Mission Has Been Accomplished.
The End of Industrialism
What is critical to understand today, however, is the simple fact that the Industrial Age
is ending and that it is ending precisely because its great historical mission has been
accomplished. There is in existence today in the world in general and in the United States
in particular a truly vast store of capital wealth, wealth on a scale that would have been
completely unimaginable two hundred years ago. There are also, today, tremendous problems
associated with our overly intensive utilization of resources and in later issues of the Millennial Files, we will discuss those aspects of the
transformation from the Industrial to the Post Industrial Age, but for now we need to deal
with the end of Industrialization and its effects on the organizational structures of our
The Four Cycles of Technology
File #1 of The
Millennial Files discussed the fact that the Industrial Age is ending
and that the end of this Age represents one of the most significant events in history.
Since virtually all the major problems confronting America today can only be understood in
light of this watershed historical event the more that is understood about the movement
from the Industrial Age to the Post Industrial Age the better the country's chances of
successfully making this great historical transition. To that end, file #1 of The Millennial Files described how the Industrial Age has
consisted of four distinct historical phases or cycles of development: the Textile-Cotton
Cycle, the Railroad Cycle, the Cycle of Mass Production and Mass Urbanization and the
Automotive-Petroleum Mass Suburbanization Age. Also as stated before, these four cycles
were more than just a series of random or disconnected economic periods, rather they
represent a series of interlinked cycles of development that constitute the mechanism that
America employed to become an industrial giant, with each succeeding period built on the
progress of the last.
Structures of Industrialism
The previous file of this newsletter, in
further exploring the underlying nature of industrialization, described the fact the a
modern industrial economy has four specific structures, two tangible and two
intangible. The two tangible structures are: 1) a production superstructure
of factories, mines, and power plants; 2) a transportation and communication
infrastructure. The third and fourth structures are intangible: 3) a financial
structure that is responsible for allocating capital within the economy; and 4)
the structure that concerns us now, the organizational structure within
which work itself is controlled.
Throughout the history of the last two hundred years the specific relationship between
the cycles of industrialization and the structure of industrialization has always been
extremely important, with each technological cycle being integrally involved with the
development of one of the two tangible structures of an industrial society. Additionally,
in the last two cycles, the Cycle of Mass Production and Mass Urbanization and the
Automotive-Petroleum Mass Suburbanization Cycle, the two intangible structures have become
increasingly important, with the collapse of the financial structure at the onset
of the declining phase of the Mass Production and Mass Urbanization Cycle, the Great
Depression, being the critical factor in turning that period into one of the most
difficult times in history.
The Present and the Future
Today, however, at the end of the Automotive-Petroleum Mass Suburbanization Cycle, it is
the second intangible structure, the organizational structure that is now coming under
tremendous stress. That stress is do to the fact that the very organizational structures
that control work and thus define our very lives are themselves products of industrial
society; and the end of the fourth cycle, the end of the Automotive-Petroleum Mass
Suburbanization Cycle, is also the end of the Industrial Age.
J.P. Morgans United States Steel Corporation Was
the Prototype of the 20th Century American Corporation.
J. P. Morgan and United States Steel
To achieve a really clear understanding of how the end of the Industrial Period is placing
such stress on our organizations, it will be helpful to go back in time for a moment and
examine how and why our modern organizational structures were created. The business
organizations of the nineteenth century, the textile mills of the early part of the
century, the railroads of the later part of the century and the individual factories
throughout the age were run by their founders, often in what seemed to be a somewhat
idiosyncratic and arbitrary manner. Then on March 1, 1901 J.P. Morgan, the great financier
of the Gilded Age, remedied that situation when he announced to the world the formation of
United States Steel. U.S. Steel was formed by Morgan when he consolidated industrialist
Andrew Carniege's steel works with those of smaller steel producers, thereby creating the
first corporation ever to be capitalized at over a billion dollars.
United States Steel was also the prototype of the modern American corporation,
the organizational colossus of the twentieth century. What is important to understand is
that U.S. Steel and the other great American corporations formed at the beginning of this
century were constructed to be formal, rational structures designed along legal and
objective lines and not the personal and subjective lines of the business organizations of
the nineteenth century. It is even more critically important to understand that this
formal structure was deliberate and that the great industrial corporations was
specifically created to formalize management and thus enable industrial production
to advance on an ever increasing scale and that this was the key to the phenomenal growth
that these organizations experienced in this century and to the massive increases in the
scale of industrial production that accompanied that growth.
In the Industrialized World, It is through Market
Mechanisms that Abstract Historical Forces Manifest Themselves.
The Present: Downsizing as Market Response
It becomes essential to understand now, however, that while the great business
organizations of the twentieth century are, obviously, not going to simply disappear, they
will no longer be in an expansionary phase and that fact has enormous consequences. All of
this can easily be seen today. When the senior management of a modern corporation decides
to downsize they are, of course, responding, just as Morgan did a century ago, to what
they see as competitive market forces and not abstract historical analysis. BUT IN THE
INDUSTRIALIZED WORLD IT IS THROUGH MARKET MECHANISMS THAT ABSTRACT HISTORICAL FORCES
MANIFEST THEM-SELVES. Thus, for example, when AT&T made the decision recently to split
into three separate companies and to reduce its labor force by 40,000 employees they, just
as all the other downsizing American corporations, decried their actions in terms of the
need to respond to increased competitive forces by becoming more efficient. They were,
however, as all downsizing corporations, also acknowledging the same inexorable phenomenon
namely that the age of ever increasing scale is over.
The Principle Organizing Tenet of the Post Industrial
Age Will Be Its Emphasis on and Rewarding of Efficiency over Scale.
The Future: Efficiency over Scale
One way or another the United States will have to come to terms with the fact that the
historic mission of the Post industrial Age is to reverse the central trend of the
Industrial Period- namely the favoring of scale over efficiency. THE PRINCIPAL ORGANIZING
TENANT OF THE POST INDUSTRIAL AGE WILL BE ITS EMPHASIS ON AND REWARDING OF EFFICIENCY OVER
SCALE. This new historic trend is irreversible and is the driving reality behind not only
the wave of corporate downsizing occurring today, but is also a key factor in the powerful
calls for a smaller national government that now have so much political appeal.
There are two other critical points that need to be made here. First, the national
media that exists today in the United States is itself the by product of the great
organizational structures created at the turn of this century. Because of this
organizational inheritance, the media finds it difficult to discuss any of the great
issues of the day in terms that make much sense.
The end of the Automotive-Petroleum Mass Suburbanization Cycle, and the end of the
Industrial Period represent the most significant events of our time. Historical events
this significant must sooner or later to be confronted. To begin to deal effectively with
these changes, however, a clear understanding of the purpose of industrialization itself
This is why The
Millennial Files was created, to address Post Industrialism in a Post
Industrial forum. The end of Industrialism and the current organizational crisis will be
addressed as a continuing topic in the future files of this newsletter.
The second point that needs to be made here is that the transition from Industrialism
to Post Industrialism has a very distinct generational aspect to it. For both the Boomers
born after the end of World War Two and the succeeding members of Generation X, coming to
terms the end of the Age of Increasing Scale and the beginning of the Age of Efficiency
will represent the defining acts of their lives. mmm
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