Introduction

The years from 1790 to 1930 underwrote not only a vast increase in the absolute level of manufacturing output, but also a six-fold relative increase. Textbooks discuss the growth of the economy in terms of the ‘rise of big business’, and they mean ‘big manufacturing business’. Moreover, while the country has produced many famous men, it is the Rockefellers, the Carnegies, and the Fords – businessmen associated with the manufacturing sector – who are most often chosen to typify the nation in the period 1850–1929. Despite the importance of the growth of the new manufacturing industries to the development of modern America, arrangemental innovation has played a relatively small role.

Over the past two hundred years arrangemental innovation in the manufacturing sector has been largely limited to attempts to capture profits arising from four sources:

1. (1) those inherent in the technical economies of scale that characterized much of the new manufacturing technology that emerged;

2. (2) those that could be realized from the innovation of a mechanism that could effectively cartelize the large oligopolistic industries;

3. (3) those that could be accrued to the manufacturing sector if that sector could be protected from foreign competition;

4. (4) those that would be realized if the manufacturing sector could be forced to recognize certain external costs of their production decisions.

Even in these relatively limited areas, however, arrangemental innovations have proved far from a universal success – particularly if success is measured by increases in total income.