Capitalism, the foundation of many countries, is today the most widely spread economic system in the world. It goes without mentioning that capitalism was and still is most concentrated in one country in the world, and that is the United States of America (USA). But how did this happen? How come the USA developed into such a big capitalist superpower? It maybe has a little bit to do with luck, but it has a lot to do with the decisions made throughout the history of the country. A lot of important decisions were made, that have shifted the country in the right direction and have shaped it to the country that we know and live in today. As much as the USA is so closely associated with capitalism, it is not the only country in the world where certain aspects of capitalism have emerged. Each capitalist country in the world has gone through a similar process of growth. Countries such as Great Britain, Germany and Japan, have all gone through their version of capitalist growth. This process of development is not only complicated, but it is dependent on a lot of variables. Therefore, today we see many differences in capitalism around the world. In this essay, I will look at two important aspects of American capitalism that are closely related, labor structure and management system, and explain how they have evolved into the system we know today. Furthermore, I will compare these aspects of American capitalism to the same aspects in Germany, Great Britain and Japan.
During the early years of the United States, there were a lot of immigrants coming to the country creating a very large labor force. These immigrants came from all over the world in the hope to find a better life on the new continent. Most of the people that came were young and hard-working adults, the prefect labor force for America. Furthermore, these immigrants were not the only labor force available at the time. During the early years in America, there were a lot of slaves brought to the country, and they were the cheapest labor force available. As America made the progression from the agricultural industry to the manufacturing industry, workers moved from plantations into the factories. This created a demand for certain types of workers, the ones that could run the factories and motivate the workers, or also knowns as managers.
During the 20th century in the United States, the demand for managers in companies across the country was growing at a fast rate, much faster than for any other kind of workers. Managers were of high importance to the company, and they were one of the key factors that could make it or break it. The demand for managers in the USA was born with the construction of railroads, it was not until a couple of years later, that they have made their way into the big corporations and factories. One of the key factors that added to the importance of managers in big business in America was that the management was separated from the owners or stockholders. So, in reality, the managers were in control of the company, and they had the power to make a lot of important business decisions. This new power given to the managers proved to be a beneficial thing for the company, and for many reasons. One of the reasons is that the managers could make important company decisions without having to consult the owner of the company. Which allows managers to make quick decisions on urgent matters. Furthermore, this separation allowed the managers to decide how much money they would like to pay out to the shareholders, and how much they would keep in the company for reinvestment. The role of managers at this point was major. Controlling the assets of the company meant that the managers could keep the company's best interests in mind, instead of worrying about the stockholders. Moreover, this way the managers were keeping the workers best interests in mind as well. Since the ownership and management were separated, if there was ever a change of ownership in the company, the managers could make sure that the company still exists and that all workers keep their positions. Giving managers such important roles has led to a hierarchy in the companies. The workers knew exactly who their superior was, who they report to and what is expected of them. This meant that the workers were more organized and more efficient, and therefore the whole company was more productive. The majority of American companies still follow this model today. When it comes to unionized labor in America it wasn't until the 1930s that the structure was starting to form. That change started with the National Labor Relations Act of 1935. More and more Americans started to join unions, but even at its peak, the number of workers in unions was still lower than in European countries. Unions were not as popular in America, and after the 1940s the number of workers in unions started to decline.
As much as separation of ownership and management sound good in theory, sometimes in practice, some managers did not make good decisions for their companies. Like any other human being, the managers got greedy and would pay themselves big salaries even if the company was not earning any profits. Furthermore, the money that they decided to reinvest would not always yield a profit and therefore the owners or stockholder would be paid lower dividences. The role of managers continued evolving, as the country was developing. New technologies were invented and managers job in American companies was expanding. With the introduction of economics, the managers had to be educated, and they were more and more separated from regular workers. American managers had a difficult job, to convincing the workers to come together and be productive, so therefore we can say with ease that if it was not for them, the economy of the United States today would be much different than it is.
While in America the management and ownership were separated from each other, in Britain for example that was rarely the case. British managers were mostly family that owned the company or someone that they have a lot of trust in. British managers could not make decisions as freely as Americans and would have to consult the owners first. Furthermore, British managers usually paid higher dividends to the stockholders or owners, therefore leaving less money in the company for future investments and development. Since there was less money left in the company for reinvestment the majority of the companies did not grow as rapidly as companies in America. This is a good example of what could happen when managers have no freedom to implement their plans for further improvement of the company. In my opinion, their way of management was not benefiting the company as much as the American system did. Moreover, unlike America, Britain did not have nearly as big labor force. One other problem Britain had was that during the first industrial revolution their workers were exploited and were unhappy with the conditions in the factories. This started to change with the unionization, and as soon as the British Labor Party was created the conditions started to get better. America also had their problems with unionization, but the unions were never as popular there, as they were in the European countries.
On the other hand, in Germany the managerial position was a little bit different. Germany’s approach to labor was to have the government regulate the labor laws. When the process of unionization started in Germany the goal was to have a unified labor force, and they did a much better job than Americans. After the implementation of the unions, there were fewer strikes in the factories, and the working conditions were better. During the time of unionization in Germany the managers had an important role of negotiating the amount of wages the workers will receive, the number of hours they will work, and much more, something that American managers did not have to worry about. Through unions, the workers could affect the decisions made by the company’s management. This made the job of managers harder. This was not the problem for American managers since the rate of unionization in America was much smaller compared to Germany. Furthermore, since the unionization, the managerial board had a labor representative on their board, that in case of a split tie between the board member could decide which way the vote would go, this was also one of the characteristics that the American managers did not have at the time.
At the same time, in Japan, the managerial system was much different than the one in America. Unlike the American system, the Japanese management system devotes more time and resources to their human resources department. The majority of decisions regarding the workers are left to the local management, and they could even hire new workers. Like I mentioned before the American system has a hierarchy in place, and the managers make decisions according to the information they get through the hierarchy, on the other hand, the Japanese let their lower-level managers take care of the easier decisions, leaving room for the managers on top to make only very important business decisions. These more important decisions fall into the category of long-term plans. Somewhat like German and American managers, the Japanese were more focused on long term plans rather than just paying high dividends to their stockholders like the British. Furthermore, unlike the Americans, the Japanese focused more on manufacturing products rather than investing in new development. This is one of the main differences between American and Japanese investment and labor focuses.
In conclusion, all of these three countries have their labor and management structures set up in a much different way than the United States. Some aspects of it are for better, but in the end most of the American implementations of the labor force yielded much higher results than any of the countries. It is interesting to see how certain managerial decisions can influence the course of economic progress in the country. The two aspects of capitalism that I have compared in this essay, are just a little part of what made American capitalism so successful. Multiple political decisions have influenced the capitalist growth greatly. If we look at the economies of these countries today, we can still see that there are certain differences in their economies. America is still the world's leading capitalist country in many ways, but it seems like in the last few years there have been many countries that have been experiencing high economic growth, but it is still much lower than the Americas during the mid-1900s. As for Germany, Great Britain, and Japan, today their economies are even more different than Americans, and in some cases for better and in some for worse. Nevertheless, all of these four countries are today the leading capitalistic superpowers, and none of this would be possible if there was not a well-implemented and organized managerial and labor system throughout their biggest economic growth times.