------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (May 2006)
Michael Stephen Smith, _The Emergence of Modern Business Enterprise
in France, 1800-1930 _. Cambridge, MA: Harvard University Press,
2005. x + 575 pp. $60 (hardcover), ISBN: 0-674-01939-3.
Reviewed for EH.NET by Pierre-Cyrille Hautcoeur, Ecole des Hautes
Etudes en Sciences Sociales.
Michael S. Smith, associate professor of history at the University of
North Carolina, proposes a synthesis on the emergence of big business
in France in the tradition of Alfred Chandler. The book "seeks to
explain how and why France acquired the roster of large corporate
enterprises that would come to dominate France's domestic economy and
project French economic influence throughout Europe and the world
over the course of the twentieth century" (p. 1). It "argues that the
same forces that were giving rise to a new kind of very large, very
complex business organization in the United States, Germany, and
Great Britain between 1880 and 1930 were also at work in France" (p.
2), contrary to the idea of a special or a backward path for French
economic development.
The book is well written and structured, revealing an exceptional
knowledge of a large historiography and a capacity to organize it in
a simple and mostly convincing narrative. It is also well presented,
with minor typographical errors (usually in references to French
names or publications, e.g. note 6, p. 501). The index includes all
personal and firms names mentioned in the main text (not including
the notes), as well as some analytical categories.
The book is divided into three parts and sixteen chapters, plus an
introduction and a conclusion. Part one deals in less than one
hundred pages with commerce, banking and transportation, in three
chronological chapters (1800-1840s; 1850s-1870s; 1870s-1900s), with
no discussion of the twentieth century.
Part two deals in two hundred pages with "the flowering of industrial
capitalism." It starts with seven chapters on particular industries
(textiles, coal, iron and steel, "hardware, machinery and
construction," consumer goods, chemicals, "glass, paper and print").
It ends with a transversal chapter on "the new world of industrial
capitalism" that deals with problems common to many industries and
not dealt with elsewhere.
Part three analyzes in 160 pages the second industrial revolution and
the beginnings of managerial capitalism, from 1880 onward. It
includes four "industry based" chapters on the steel, electrical,
automobile and "chemicals and materials" industries, and ends with a
transversal chapter on "the new world of managerial capitalism."
In order to make visible the method followed by the author, I will
discuss a few chapters in more detail.
After an introduction in which the author presents a well-balanced
(although not always up-to-date) synthesis on the "foundations for
modern capitalism" before 1800, the first chapter centers on merchant
capitalism, which it studies on a local basis and on an individual
basis more than in terms of formal organization. It then follows the
traditional historiography, sometimes missing the most recent works
(even if it would be more consistent with its overall thesis, e.g.,
J.P. Hirsch, C. Lemercier). The role of the Haute-banque is presented
in the conventional way.
Chapter two describes the interrelated revolutions in banking and
transportation, which were grounded in Saint-Simonian ideas and
networks during the Second Empire. The chapter clearly shows the role
of the relationship between the government and these networks in
these changes. It does not discuss the conventional wisdom, nor look
at the organizational consequences of these relationships (government
administrations were structured, not only business ones). The
organization of the railroads is not really discussed, except for its
"grande politique" dimensions. The internal organization of the banks
is not discussed either, and the concept of a financial system is not
introduced.
Chapter eight presents the chemical industry. Like most
industry-based chapters, it is mostly organized as a succession of
firms' histories in relation with the invention of new products and
processes, but says almost nothing of firm or market organization.
Technological innovation seems the only important way to success, and
its origins are not much discussed.
The transversal chapter 11 discusses three major themes: how
industrial enterprises were financed, how they recruited and managed
their labor force, and how they managed their external environment,
especially the state. Finance and accounting practices are briefly
described, but they are not analyzed as strategic choices and/or
major explanations with responsibility for the varying success of
firms or industries. The main conclusion is "the normality of the
French industrial experience -- that is, its similarity to the
British experience" (p. 303) in finance, accounting and labor
relations. As concerns the management of the external environment,
the author concentrates on three subjects: tariff policy, competition
policy and railroad policy (network subsidies and rate regulation).
The precise organization of business and the instruments of its
intervention in policymaking or in policy application (industry-level
or local-level organizations, such as the chambers of commerce) is
not examined (except, briefly, for the iron and steel, chemical and
textiles industries, mostly in terms of restriction to competition).
In the view of this reviewer, this chapter is too brief and comes too
late in comparison with its strategic importance in understanding the
rise of big business as a major economic phenomenon.
The third part focuses on those few industries in which French firms
underwent a true Chandlerian revolution from the point of view of the
author. Chapters on iron and steel, the electrical, automobile and
chemical industries show how concentration, both through vertical and
horizontal integration, allowed for the creation of important and
complex organizations (although the internal organization is always
treated only briefly).
One important question is whether the factors behind the smaller size
of French firms had an impact on their efficiency and their ability
to develop all the economies of scale and scope favored by
Chandlerian business historians. These factors certainly included
market sharing (in iron and steel), interlocking directorates and
participation, and family firms' preoccupation with secrecy and
family control, all elements mentioned by the author but without
providing a satisfactory answer to the above question.
Like chapter 11, chapter 16 has a crucial role and could well have
been extended beyond its twenty pages. It discusses the creation of
complex organizational structures, the growing role of professional
managers and the new challenges in corporate policies that made them
necessary. After a rapid presentation of the railroad's pioneering
role in organization, it presents the changes in management in
industrial firms. It describes examples of divisional organization as
early as the late nineteenth century, and emphasizes rightly the
importance of holding structures from the 1920s onwards. It mostly
insists on the rise of engineers as the main managers of French
industrial firms, but discusses little their education, their
efficiency, or the importance for their management style or their
links with public administration. Overall, it suggests that new
techniques of management or organization (including assembly lines)
were already well developed in France prior to World War II.
The conclusion describes briefly the evolution of French big business
in the second half of the twentieth century.
As a whole, the book gives a quite complete picture of French big
(mostly manufacturing) firms in the nineteenth and early twentieth
centuries. It reflects the many and important developments in the
recent historiography of French business, and also its shortcomings,
which explain most of the quibbles mentioned above.
Nevertheless, the reader (especially if he is an economic and not a
business historian) could have expected something more. Although in
the prologue, the author presents a short survey of
(English-speaking) macroeconomic interpretations of French
development, he is not really in a position to discuss the views
expressed at the macroeconomic level. Some assertions such as
"firm-level research demonstrated that French industry was more
expansive and technologically advanced ... than once thought" (p. 4),
or "by the end of the nineteenth century, the activities [of the big
firms] had become the focal point of economic life in France" (p.
324), suffer from a methodological bias, since the overall importance
of big business in the economy is neither discussed nor compared to
that in other countries. The book focuses on firms, not economic
development, with an ambiguity since the only reason to discuss
French firms separately is their link with French economic
development. Bringing in more data comparing big firms with
macroeconomic data (which exist at the industry level at least for
the period after 1890) could have helped solve that problem. A short
discussion of industries where big firms did not develop -- and why
-- would also have been useful.
A second, related quibble: the international position of French firms
is mentioned but little discussed, even though some of them had major
international operations. If "it is with an eye to France's eventual
success in the late twentieth century that this book tells the story
of the modernization of French business" (p. 5), one cannot but point
out to the author that today's big firms make most of their business
abroad (not only by exports, but also by producing abroad), so much
so that their impact on the French economy is sometimes questioned.
A third point, related to the two previous ones: the book is not very
quantitative. It deals with a great number of firms, but provides
little quantified comparisons among them (which could give way to
typologies, for example) or between them and the rest of the economy
or their foreign equivalents. The few tables (eight for the entire
book, no figures) list the biggest firms in a given industry at a
particular date; only the last two give some international
comparison, and they provide few elements of comparison (total assets
in general).
Fourth point: the relationship between French firms and the state is
discussed in the very first chapters for the early nineteenth
century, and somewhat in chapter 11, but almost never thereafter,
although discussions of nationalization are widespread in the
interwar period. The relationships between government and big
business people or organizational practices are worth more
discussion. The role of governments regulations (major in the 1930s),
but also of semi-public bodies such as the chambers of commerce
(important during the all period), is under-appreciated. (Actually
neither the Code de commerce, nor the chambers of commerce, the
commercial courts, nor the commerce minister appear in the index,
even if some of them occasionally appear in the text.)
In conclusion, the book is a very useful synthesis for American
students or scholars (French readers will find it strange that the
discussion centers only on English-language historiographical
debates, even if they are mostly based on French scholarship), more
than an original contribution to our knowledge.
Pierre-Cyrille Hautcoeur is Professor of Economic History, Ecole des
Hautes Etudes en Sciences Sociales and Research Fellow, Paris Jourdan
Sciences Economiques (PSE) (joint research unit,
CNRS-EHESS-ENPC-ENS). He specializes in monetary and financial
history. His recent publications include "Efficiency, Competition and
the Development of Life Insurance in France (1870-1939); or: Why Some
People Don't Trust Pension Funds," _Explorations in Economic History_
41 (2004): 205-32; "Was the Great War a Watershed? The Economics of
World War One in France," in S. Broadberry and M. Harrisson, editors,
_The Economics of World War One_ (2005); and "Why Didn't France
Follow the British Stabilization after World War One?" (with M.
Bordo), NBER Working Paper 9860, forthcoming in the _European Review
of Economic History_.
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Published by EH.Net (May 2006). All EH.Net reviews are archived at
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