Corporate Dreams: Big Business in American Democracy from the Great Depression to the Great Recession

Chapter 19 - Corporate America Loses World Supremacy

130 Chapter 19 Corporate America Loses World Supremacy If many American intellectuals in the late 1960s believed it beneath their dignity to study corporations, their European counterparts believed that American firms were too dangerous to ignore. “Fifteen years from now it is quite possible that the world’s third greatest industrial power, just after the United States and Russia, will not be Europe but American industry in Europe.”1 So warned Jean-Jacques Servan-Schreiber in his 1967 jeremiad, Le défi americain (The American Challenge), which outsold any book, fiction or nonfiction, published in France since World War II. Servan-Schreiber, a famous French intellectual and founder of the news magazine L’Express, adopted Galbraith’s idea of the corporate technostructure to explain why American businesses were outcompeting French companies in Europe. American corporations were doing better than European companies at exploiting the new free trade across borders allowed by the Common Market (predecessor of today’s European Union). IBM, American Express, Union Carbide, and dozens of other American firms set up headquarters in Brussels or Paris and operated on a continental scale while many French firms remained locked in their own country. Europeans often attributed American success at large-scale operations to American corporations’ greater capital resources. But Servan-Schreiber followed Galbraith in positing that marketing skills and the stimulation of consumer demand were the key to American corporate success. American companies’ ability to market their goods through advertising and the creation of demand allowed them to make large investments that would have seemed too risky to European companies devoid of marketing skills. “This science of marketing is new in Europe,” wrote Servan-Schreiber.2 Marketing was only one aspect of a manifold American advantage. American corporations understood the “art of organization that is still a mystery” in Europe.3 French corporations lacked, according to ServanSchreiber , the “remarkable integrated entity that John Kenneth Galbraith calls a ‘technostructure.’”4 Group spirit reaching far down into the organization explained why corporate America was leaping across national borders and, “in its own special way, unifying Europe.”5 Servan-Schreiber’s French echo of Galbraith produced yet another reverberation in the United States. Quickly translated into English, The American Challenge was published in New York with an introduction by Galbraith’s close friend, the Harvard historian Arthur Schlesinger Jr. Although Servan-Schreiber had written to warn Europeans that they must become corporate in the American style, Schlesinger read ServanSchreiber as an anticorporatist, saying that Servan-Schreiber saw “social justice” as the key to economic development.6 Liberals like Schlesinger in the 1960s believed they had it all figured out. American organizational superiority in the corporate technostructure meant that economic competitiveness was not an issue for the United States and that the nation’s only challenges lay in culture and politics, in education and social reform. Caught up in their trans-Atlantic pas de deux, American liberals and the European intelligentsia missed the impending economic challenge from Japan. The land of the rising sun was extending corporate organizational arts far beyond anything that Galbraith had envisioned in his notion of the technostructure. Whereas Galbraith thought the source of corporate productivity resided not in top management but in the group identity of the business and professional staff, the Japanese were about to show that competitive advantage could be got from better relations with suppliers and with frontline employees. The secret lay in a new approach to quality. Corporate America’s idea had been to inspect defects out. The Japanese aimed to build quality in.7 This seemingly simple difference would transform the industrial world and move supremacy in managerial technique to Japan. Yet the Japanese approach was born in America or, more specifically , at Bell Labs, the research arm of AT&T, which enjoyed a national telephone monopoly for much of the twentieth century. At Bell Labs in the 1920s, a scientist named Walter Shewhart had faced the problem of Corporate America Loses World Supremacy 131 variation in the quality of telephone equipment that could leave one customer pleased and another with a piercing earache from echo-back. Shewhart’s solution was to focus on the biggest variations in telephone equipment, or what he called “assignable” or large errors. The biggest mistakes in the manufacturing process were those whose causes could most likely be found and fixed, thus narrowing but not eliminating variation in telephone equipment. In other words, Shewhart aimed to make better...