33.2 – The Imperatives of Technology
Learning Objectives
By the end of this section, you will be able to:
- Identify the important consequences of technological change for the organization of business
- Explain the implications for the relationship between business enterprises and market structure
As chapter “Costing and Pricing in Going Concerns” explains, modern businesses are treated as going concerns—that is, organizations which are expected to continue to exist into the foreseeable future. This idea, reflected in accounting practices developed in the second half of the 19th century, is central to how heterodox economists understand the nature of the modern business enterprise. Its historical roots are explored in more detail in chapter “The Rise of the Big Business,” but here we want to focus on a particular cause, technological advance, and its implications.
In his classic, The New Industrial State (1967), economist John Kenneth Galbraith compared the Ford Motor Company in the year of its founding, 1903, to the same business at the introduction of the first Mustang in 1964. In 1903 the company employed around 125 people, worked with approximately $150,000 in capital, and required only months of negotiations, preparation, and production to bring an automobile to the market. It would be an understatement to say that six decades later the process was more involved. The Mustang was the result of several years of preparation, millions of dollars on engineering and ‘styling’, and tens of millions on tooling for production. At the time, Ford employed over 300,000 people.
Galbraith argued that the essential cause of this massive increase in preparation, capital, and labor was the tremendous advance in technology (which he defined as “the application of scientific or other organized knowledge to practical tasks”). Increasingly sophisticated technology requires specialization—of machinery and the materials it will work on, as well as of workers. All of which, of course, requires more capital (that is, money). It also means that increasingly specialized workers, machines, and so on must be more carefully managed; and that a commitment to produce something must be made much further in advance of actually having something to sell. As Galbraith explained, the Dodge brothers’ machine shop, responsible for machining the engine and chassis of the original Ford automobiles, could have hypothetically been asked to accommodate significant changes in the car’s design with only a few hours delay. The factories which built the Mustang, on the other hand, were effectively locked into making Mustangs as they were designed for well over a year.
Finally, and most importantly, there is the technological imperative of planning. As Galbraith argued, the large financial and material commitments necessary to design a product and prepare for its production require that each part of the process works today so that, in the distant future, when all the parts are brought toget