Post-War Industrial Transformation: Corporate Models and Policy (1945–1970s)

Industry Maturity and Corporate Models (1945–1970s)

The industries of the Second Industrial Revolution reached full maturity during the 30 years following the Second World War. Big business grew in size and number, especially in the three largest European economies (Britain, France, and Germany). As in earlier periods, American firms were the largest.

• Large corporations were vertically integrated. For example, the automobile company Ford used to own a tire company, a glass company, a metal company, and distribution centers. All of these were related to car production.

A large body of literature focuses on the difference between the American model of enterprise (shareholder) and the European model of corporation (stakeholder). As we have seen, in Europe shareholders are not the sole owners of enterprises; other actors also have a say: the community, banks, and workers (through co-determination in Germany).

Another problem has been that management has had too much power everywhere, due to their superior knowledge. This is the so-called Management Capitalism.

Industrial Policy and Addressing Market Failures

Market failures are circumstances when the market does not work properly. Examples include:

1. Economies of Scale: They make products cheaper to produce. But they lead to great corporations, oligopolies, and barriers to entry for developing countries, as they find it difficult to invest in such large and expensive facilities.
2. Lack of Information: This is also a basic failure. Thus, technology is neither free nor easy to acquire.

Due to the existence of market failures, the state often steps in to solve them through industrial policy. Many countries applied strong industrial policy, including measures such as nationalization of enterprises, linking of finance and industry, and developing innovation systems.

Global Models of Management and Production

Management improvements were notably seen in Japan, Germany, the Nordic countries, and the Third Italy, which served as models.

Japan: Toyotism and Post-Fordism

• The Japanese introduced a series of organizational innovations through which Japanese competition became a major concern for industrialized countries. Its organizational improvements were applied to other countries of the world. This is sometimes called Toyotism or Post-Fordism (Piore and Sabel, 1984). In the 1970s, Japan was the reference.

Germany: Diversified Quality Production (DQP)

• For example, in Germany, it was very useful during the 1980s to follow the strategy of "Diversified Quality Production" (DQP), which incorporated an adequate social commitment to the system. In exchange for greater flexibility and the acceptance of new technologies, workers obtained labor protection.