In This Review

The Visible Hand: The Managerial Revolution in American Business
The Visible Hand: The Managerial Revolution in American Business
By Alfred D. Chandler, Jr.
Harvard University Press, 1977, 608 pp.
The Soviet Economy
The Soviet Economy
By Alec Nove
George Allen & Unwin, 1961, 328 pp.
Technological Revolutions and  Financial Capital: The Dynamics of Bubbles and Golden Ages
Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages
By Carlota Perez
Edward Elgar, 2002, 224 pp.

Editor’s Note: For our centennial issue, our reviewers each selected a set of books essential to understanding the past century and another set essential for imagining the century ahead.

The signal economic developments of the last century were the rise of the U.S. economy, the collapse of the Soviet economic system, and the increasingly complex interplay of technological progress, finance, and business-cycle instability.

Chandler’s 1977 magnum opus remains the definitive account of U.S. managerial capitalism. The Pulitzer Prize–winning business historian emphasized the key role of corporate managerial decisions but also the structural advantages of the size and reach of U.S. companies, specifically for firms positioned to sell first to a continental market and then to the entire world. In explaining why some firms achieve market dominance, Chandler pointed to “first mover” investments (preempting the market by being first to invest), global distributional networks, and efficient management hierarchies. His arguments were later challenged by critics who argued that new information and communication technologies vitiated the advantages of corporate size and hierarchical control. These new technologies, the skeptics suggested, put small firms on an equal footing with big ones. But the survival of large manufacturing firms that were Chandler’s focus and the ascendancy of a new generation of even larger information technology companies essentially vindicated his claims.

Nove’s work on the Soviet economy, originally published in 1961, has been revised and updated repeatedly; the final edition was released in 1992 in the wake of the disintegration of the Soviet Union. Nove dissected key episodes in Soviet economic history, from the New Economic Policy of the 1920s and farm collectivization in the 1930s to the heavy industry drive and abortive economic reforms under Nikita Khrushchev, Leonid Brezhnev, and other Soviet leaders. His successive editions also showed how scholarly views of the Soviet experiment evolved over time. Nove was able to reconcile the successful growth in the first half of the Soviet period—achieved, to be sure, at immense human cost—with the eventual decline and collapse of the Soviet economy and Soviet society. As he showed, central planning in general, and its Soviet variant in particular, had always been riddled with flaws. These faults came to the fore with a vengeance toward the end of twentieth century.

Neither Chandler nor Nove had much to say about the roles of finance and economic fluctuations in the development of technology. These issues were the focus of Perez’s influential 2002 work. Like the economists Hyman Minsky and Charles Kindleberger before her, Perez emphasized the volatility of investor sentiment, the role of new technologies in precipitating investor manias, and the tendency for financial markets to go through cycles of boom and bust. She described how bubbles, when they burst, can be both destructive and generative: they leave behind not just the detritus of failed financial investments but also tangible infrastructures that underpin subsequent economic growth. The railway boom of the late nineteenth century and the dot-com bubble during the early years of this century illustrate her claim. The financial crashes and crises of the twentieth and early twenty-first centuries may have been costly and disruptive, but they were integral elements of the ongoing, if unsteady, forward march of the market economy.

To paraphrase the economist Paul Krugman: when it comes to economic growth, technological progress is not everything, but it is almost everything. Just as the pace and direction of technological change shaped the last economic century, it will equally shape the next. Gordon advances a pessimistic view of the capacity for technological change to continue raising living standards at the rate to which Americans grew accustomed in the last century. He points to “one great wave” of inventions and innovations between 1870 and 1970, such as electricity, indoor plumbing, and the internal combustion engine, and questions whether current advances in artificial intelligence, human genomics, and robotics can improve living standards to the same extent. Many readers will find Gordon’s skepticism regarding today’s new technologies counterintuitive. But they will be forced to think again about the capacity of these developments to improve the human condition. New technologies also have distributional consequences—as any early-twentieth-century horse-drawn carriage maker would attest. People must acquire skills and training to rise to the demands of new technological competition. Goldin and Katz view this interplay through the lens of U.S. history. They describe how the United States became a leader in the provision of universal education and how it pioneered the “high school movement.” They show how educational attainment advanced faster than technology in the first half of the twentieth century, leading to a drop in economic inequality. In the latter half of the century, however, technology “sprinted ahead” and accentuated distributional problems. The book raises questions about whether educational systems can continue to successfully impart requisite skills and training, whether they will win the political support needed to do so, and how inequality will deepen in the event of their failure. The global economic future will be shaped, in no small part, by the geostrategic contest between China and the United States and by the performance of their respective economic and political systems. One hesitates to recommend a book on the economic competition between these two countries, given the rapidity of change in their respective economies and polities and, no less, in their bilateral relations. But readers probably can’t do better than Pettis’s 2013 work. He emphasizes policy distortions that artificially boost saving and investment in China while depressing them in the United States, producing trade imbalances, financial weakness in China, and deindustrialization in the United States. Pettis did not predict the election of U.S. President Donald Trump or the economic and political clampdown under Chinese President Xi Jinping, but his analysis highlights the economic vulnerabilities of both countries as they face the next century. Finally, any reckoning with the economic future of the planet must include the challenge of climate change, to which the recent book by Nordhaus, the Nobel Prize–winning economist, is an essential introduction.

  • BARRY EICHENGREEN is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley.
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