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 / Fourth Quarter 2001 / Issue 25(originally published by Booz & Company)


Best Business Books: Economic History

That, in the end, is Chandler’s value to America’s corporate managers, and Jared Diamond’s, too. Although he earned a Ph.D. in physiology, Diamond is a polymath, and his book draws on many fields of scholarship in telling the story of humankind’s innumerable responses to innumerable changing circumstances over the past 13,000 years.

Almost always the responses are optimal, given the circumstances. Or certainly they seemed so at the time. Indeed, with the benefit of hindsight, Diamond suggests that the Chinese might have colonized Africa and the Americas before the Europeans did, and even Europe itself. The Chinese had the technology. By the early 15th century, they had built hundreds of ships up to 400-feet long, and they had sent them “across the Indian Ocean, as far as the east coast of Africa, decades before Columbus’s three puny ships crossed the narrow Atlantic Ocean to America’s east coast,” writes Diamond. Those ships could have crossed the Pacific to colonize America, or they could have proceeded “around Africa’s southern cape westward and colonize[d] Europe, before Vasco da Gama’s own three puny ships rounded the Cape of Good Hope eastward and launched Europe’s colonization of East Asia.”

Why did China fail to capitalize on its technological superiority? As Diamond explains it, a power struggle erupted between two factions at the Chinese court; the one that opposed oceangoing ventures won. In China’s top-down, rigidly unified political and social structure, the voyages were stopped, and shipbuilding ceased. This outcome was probably inevitable: Given the power of political and cultural forces, China missed its empire-building opportunity.

In contrast to the Chinese, the Europeans emerged from the Middle Ages independent, adventuresome, and competitive, particularly the merchants in the growing cities. Embracing technologies born in China and the Middle East, the Europeans gave birth to the Industrial Revolution, improvising as they went and dominating commerce until the late 19th century. From England, in particular, came the concept of the factory and the first high-speed industrial machinery.

All this industrial activity quickly crossed the ocean to America, and then the Americans added the missing ingredient: people. The Europeans had the technology, the same unifying railroads and telegraph as the Americans. But Europe’s numerous national borders and tariffs meant there could be no single mass market. In America, in contrast, a huge, energetic consumer population, swollen with immigrants and spreading westward, was ripe for the picking by the end of the Civil War.

In response, the modern corporation and its management techniques came to life, first in the railroad industry, then in the fields that new technologies made possible, particularly the telephone, electric motor, and gasoline combustion engine. Only after World War II did Japan and Western Europe become mass-production powerhouses. Increasing world trade, falling tariffs, instantaneous communication, and rapid, inexpensive transportation gave their corporations access to a global marketplace. America finally had to share its windfall.

Today, the United States struggles to regain its global economic preeminence and, ignoring the insights that history offers, focuses on minor shortcomings. For example, policymakers wring their hands over the poor reading and math skills of so many young Americans, as if that were somehow the problem. We insist that if only we could hit on the right formula for repairing the schools and sending more children to college, enhanced human capital would revive the golden days.

That is not the way education has worked for America. For Uncle Abe and his generation, education was not a cause; it kicked into gear as a natural and enthusiastic response to the new circumstances that arose in the late 19th century. The first mechanical engineers did not think of themselves as educated men. Forced to build new machines and to constantly modify older ones for the ever-evolving factories, they wrote about their achievements in new professional journals with such names as American Machinist and Engineering News. Colleges and universities then trained subsequent generations in the accumulated engineering knowledge, “although many mechanical engineers continued to preach that the shop apprenticeship was of more value than formal book learning,” writes Chandler in The Invisible Hand. American capitalism in its formative years, particularly with the rise of the giant corporation, forced education on the populace. So, for that matter, did the electronic age. The modern computer engineer evolved (from the garage) much as Uncle Abe and the mechanical engineers evolved: opportunistically, in response to the prevailing circumstances. While colleges trained engineers, an expanding secondary-school system provided a necessary basic education for millions of production workers. By 1950 a high school education had become nearly universal.

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