Question

Briefly trace the development of the American business firm from the 18th century into the first half of the 19th century as discussed by Chandler, Lind, Commons and Gordon. What factors were important in the evolution of production from ‘bespoke shops’ to factories?

Answer 1

Single ownerships and alliances were the two main modes of organization of industry before the 1800s. Such types have had problems in the industrializing society. Organizations may not outlive a proprietor or a partner's death. Moreover, because of the limited capital, they were hard to grow. The corporate organizational structure substituted proprietorship or partnership for larger firms. It encouraged individuals to pool resources to create organizations that could not be generated by single individuals alone.

Even if one of the individuals died, the organization continued. Corporations of the early 1800s were different from today's companies. Not limited to liability. Investors were either subject to double liability (two times their investment) or unlimited liability at most companies. Special legislative action was required for the incorporation. Specifically a bill had to be passed to allow a firm to incorporate. However, as corporations became more common, general acts of incorporation were passed by States. There was a certain skepticism about the companies at the time

By 1810 several banks, insurance companies, and turnpike constructors had been founded. Later, canal and railroad construction could not have taken place without incorporation. In 1860, 96 percent of the U.S. workforce employed in manufacturing worked in 10 industries in light of these economic changes. In the manufacturing sector, labor force was now 1/7 the size of the labor force employed in agriculture. British sales of products returned to US markets after the War of 1812. This had a significant negative impact on American manufacturing. The government has started to enforce protective tariffs to protect home-grown enterprises.

Protectionist sentiment was the highest in the Northeast, most affected by the competition. Industrial interests were able to get Congress to legislate a tariff law in 1816. The tariff rates fluctuated widespread over the next 40 years as seen on the following slide. Note the difference with the tariffs for the period between 1860 and 1910 during this period. New England and mid-Atlantic states favored high tariffs because their manufacturers had been protected. They were opposed by the south and west because they caused the rising prices. Fluctuations were so drastic, since tariffs relied on what concern Congress controlled.