The Traditional Enterprise in Production: Technological Limits to Institutional Change in Production

Until the 1840s traditional enterprise remained as all-pervasive in pro-duction as in commerce, and for the same reason. The volume of activity was not large and owners had no difficulty in administering their enter- prises. In farming, lumbering, mining, manufacturing, and construction the enterprise remained small and personal. In nearly all cases it was a family affair. When it acquired a legal form, it was that of a partnership.

In production, the relative scarcity of labor in the United States was a more significant constraint on the size of the enterprise than it was in distribution, simply because more men were usually needed to produce a given quantity of goods than to distribute them. In the early years of the republic, rapid geographical expansion and growth meant that hired labor was difficult to find and costly to keep. In agriculture, except where crops were suitable for cultivation by slave labor, the output of a farm was limited by the amount a family and a small number of hired hands could plant and harvest.1 In manufacturing, workers who were not members of the family were normally apprentices and journeymen who were working as part of their training to become independent producers.

Nevertheless, the technological limitations on output appear to have been even more of a constraint to the growth of the enterprise than the scarcity of labor. Until the 1840s farmers continued to rely almost com- pletely on traditional tools. So too did the builders of ships, wharves, houses, and commercial buildings, and the extractors of ores and other materials from the ground. In manufacturing, simple machines began to replace men in a number of operations, but these machines continued to be moved by the traditional sources of energy. As long as the processes of production remained powered by humans, animals, wind, and water, the volume of output was rarely large enough to require the creation of subunits within the enterprise or to call for the services of a salaried manager to coordinate and monitor the work of these subunits. In pro- duction as in distribution, existing institutions were more than adequate to manage the basic processes.

Before the 1840s manufacturers expanded output in three ways. Crafts- men added more apprentices and journeymen to their work force. Entre- preneurs distributed work for processing in the homes of neighboring families. Other manufacturers used simple machinery powered by the flow of small creeks and streams. The large industrial establishment, with its battery of machines, foundries, or furnaces that relied on a central source of power and heat and was operated by a large number of workers who had no other source of income than their wages, remained a rarity in the United States until the 1840s. Before then the factory—as such establishments will be termed in this study—appeared in substantial numbers only in the textile industry. The one other type of manufacturing enterprise to have similar characteristics was that producing firearms for the American army. The textile manufacturers overcame technological constraints by harnessing the power of large rivers. The firearms manufacturers were willing to pay the high costs of production and distribution because the army guaranteed their market in order to have a domestic supply of arms.

Source: Chandler Alfred D. Jr. (1977), The Visible Hand: The Managerial Revolution in American Business, Harvard University Press.

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