Alfred Chandler:
A Visible Hand
Chandler’s seminal work, ‘The Visible Hand,’ argued that the rise of giant corporations that integrated mass production with mass distribution have shown that the role of coordinating economic activities passed from the marketplace to the visible hand of managers.
Dr. Alfred Chandler’s death on May 9 came at a time when we are caught in an intense debate between the two schools of thought, representing two newly revived neoclassical principles on economic organisation. A globally revived principle on neoclassical economics competes in Nepal with its own revival of Marxism and Communism. This debate might want to spare some thought to the business history dimension posited by Chandler , a leading business historian from the Harvard Business School , through his analysis on the American transition from the primordial to modern managerial economics in the late 19 th century.
When it comes to pursuit of knowledge, business studies rely more on short and crisp consultant advice than on thick academic books. Chandler , the dean of American business historians, could not have constructed the history of the big corporation as an ivory-tower academic. Indeed, the three things that pushed him into studying business history’s rollercoaster were all pragmatic and worldly. First, his army service during the World War II intrigued him about the operations of large outfits like the US navy. Second, the works of Talcott Parsons and Joseph Schumpeter persuaded him that economic organisation is multifaceted and is more full of character than what fiscal economists would depict. And third, his family heritage which included the mighty du Pont family from Delaware gave him the very first material that earned him his PhD – business documents of one of his ancestors, Henry Varnum Poor, of the Standard & Poor’s Corporation.
Against Adam Smith’s notion that economic transactions are guided by an ‘invisible hand’ of the market and the moral, Chandler ’s seminal work, ‘The Visible Hand,’ seriously questioned some of the basic assumptions of neoclassical economics. He argued that the rise of giant corporations that integrated mass production with mass distribution have shown that the role of coordinating economic activities passed from the marketplace to the visible hand of managers. In other words, that the ‘managerial capitalism’ of the late 19 th century has displaced the earlier wisdom on abstract and anonymous capitalism.
‘The Visible Hand’ argued that American business history can be separated into two phases: pre-1850 and post-1850. The first phase represented the market economy, as characterised by what economists called perfect competition. The second phase represented managerial capitalism, which marked the evolution of complex intra- and inter-firm business structures that constituted a revolution in American business enterprise. Two outcomes came to the forefront as compositions of business entities became more and more sophisticated: Within firms, ownership was differentiated from management; between firms, the rise of oligopolies reconfigured the market terrain and differentiated access to consumer demand. For Chandler, industry-building was no longer about a myriad of undetectable transactions occurring randomly, simultaneously, and anonymously; instead, it was a grand architectural process that evolved through a brick-by-brick construction made by expert hands and minds.
