The relentless revolution: a history of capitalism (50 page)

Unhappily this glory period in the history of capitalism brought more environmental damage than all the horrendous destruction of the First and Second World Wars. A new term, “ecology,” the study of the relations of living organisms to their surroundings, began to penetrate public consciousness. What were we doing to our ecology? From an ecological perspective, economic progress had entailed a concerted assault on all facets of the environment. World population had grown from 1.6 billion in 1900 to more than 6 billion in 2007. These new people—burning fossil fuel, disposing of their waste, diverting rivers, dredging, earth moving, and plowing the earth’s surface—polluted, contaminated, and despoiled their habitat. Reversing this appalling process would not be easy.

Constructing magnificent dams in fact became the cherished achievement of nation builders. Their words capture the spirit of economic advance with no hint of the consequences. Winston Churchill, visiting Lake Victoria, saw the waters of Owen Falls rush into the Nile River below and rhapsodized not about the spectacular beauty but about the failure to tap into its force: “So much power running to waste…such a lever to control the natural forces of Africa ungripped, cannot but vex and stimulate the imagination. And what fun to make the immemorial Nile begin its journey by diving into a turbine.” Colonel Gamal Abdel Nasser, who came to power in Egypt in 1952, agreed. With unabated zeal he planned and funded the Aswan Dam, remarking: “In antiquity we built pyramids for the dead. Now we build pyramids for the living.” More briefly, Prime Minister Jawaharlal Nehru called his country’s new dams “temples of modern India.” These dams delivered cheap electricity and regular irrigation water, but at the high cost of interrupting the deposit of river silt on depleted soil, destroying fisheries, and causing salination.
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Environmentalists, a new phenomenon in themselves, delivered a wake-up call about this complex pattern of environmental degradation.

German scientists in the United States continued their research on radiobiology, ophthalmology, and the new field of medicine for those in outer space. All were subject to inquiry about the German use of prisoners in medical experiments without any very satisfactory resolution of the issue. The war created imperatives for combating infections, treating malaria, and healing the wounds of soldiers. This acted as a hothouse for medical research. The British scientist Alexander Fleming, had first isolated penicillin when he grew a mold that could dissolve disease-causing bacteria. British scientists came to the United States to continue this research during the war. The Pfizer Company took a heroic risk on a new way to produce penicillin that worked. By D-day, when Allied troops landed in France in June 1944, penicillin was available to treat the wounded. In three years the cost of a dose dropped from twenty dollars to fifty-five cents.

Working off Fleming’s penicillin, biochemists discovered a new class of drugs that proved particularly effective in combating pneumonia, meningitis, and other bacterial diseases. Fleming published his research results in 1929. His sulfanilamides, or sulfas, as people quickly shortened the name, became available in the treatment of the war wounded on both sides. Produced in powder form, soldiers carried their own rations into battle. When the Japanese cut off the Allies’ access to the quinine used to treat malaria, research produced a synthetic drug. Called atabrine, it saved the lives of thousands of Americans fighting in the South Pacific. The American Charles Drew discovered that blood plasma could replace whole blood that deteriorated rapidly. Soon the Red Cross began operating blood banks. By war’s end it had collected and sent to the battlefronts more than thirteen million units of blood. The pharmaceutical company Squibb pioneered a hypodermic syringe of morphine that medics could easily use on the battlefield.

The deployment of these new drugs and treatments to the civilian population laid the foundation for the postwar expansion of the pharmaceuticals industry. By 1952 Pfizer’s Lloyd Conover had taken a naturally produced drug and modified it to produce the antibiotic tetracycline. From this research a succession of antibiotics directed to specific infections became available throughout the United States and Western Europe. In Europe, governments provided universal health care while the United States stuck to a private system, extending help with the mounting costs of the myriad ways of staying well only to the old and the very poor.

The money the government spent advancing the science and technology behind computers, medical care, and aeronautics had a tremendous impact on the postwar economy, contributing significantly to the innovations that reached the market in the 1970s and 1980s. Not only did government pay for research hard to justify with future profits, but its contracts enhanced the size of each industry’s leaders, leaving them with enough revenues to continue costly research and development programs. The extended period of government support for research demonstrated the critical importance of maintaining a learning base not only for defense but for economic growth as well. Between 1941 and 1960 the government’s share of R&D funding increased thirteenfold until it represented 64 percent of the national total.

Another new element in the postwar economy was the rapidity of technological change. Corporate leaders had constantly to be on the lookout for the next significant racehorse. Yet they always risked betting on the wrong animal or moving their prospect too early or too late. On top of these problems, any new product inevitably destroyed its predecessor, which usually had been bringing in steady revenue and was familiar to both the fabricating and sales staffs.

The Entrance of Computers

One of the great success stories of the postwar era was IBM, which benefited from government research and an inspiring chief executive officer. Starting in 1911 with a line of scales, coffee grinders, time clocks, and adding machines, IBM found its Alfred Sloan when Thomas Watson joined the firm three years later. Like the great entrepreneurs of the nineteenth century, Watson infused his ideas and values into every facet of his firm, creating a loyal group of employees. A generous employer, he paid well and provided good benefits. He even built a country club accessible to all for a dollar a year and saw that regular dinners served there would spare wives some cooking. His obsession with teaching his staff how to please customers prompted him to create a company song and publish a monthly magazine filled with pep talks and product information. His employees responded fervently, imitating their boss in dress and behavior, often hanging Watson’s photograph on their office walls.
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The career of International Business Machines captures all the drama of staying out in front. IBM benefited more than other firms from government’s spending; various federal contracts paid half its research costs. Major contracts with the Defense Department gave IBM engineers access to the most advanced technology in magnetic core memories and circuit boards. IBM’s key product before the war had been the punch card, a little rectangle that conveyed data through punched holes. IBM steadily refined these cards, going from mechanical to electric to electronic processing. Watson’s idea was to confine all the elaborate collecting of information to one punch, which then could be stored, correlated, or printed. Hating to fire anyone, Watson continued making punch card machines when sales began to fall during the Depression. Happily for him, federal programs like the National Recovery Act and Social Security Administration required the manipulation of enormous amounts of data. When calls came for more IBM processing, there they were, stored in warehouses! The Nazis used IBM cards to code and manipulate the German census, with grim results.

Because of the complexity of the giant corporations that now dominated the economy, handling data became very important. All the statistics garnered to separate fixed from variable costs, returns on investments, and inventory ratios could be fed into an IBM machine to sort out. “Number crunching” entered the lexicon of management. Postwar insurance companies and banks relied on IBM punch card machines or, more exactly, relied upon IBM, for the company offered leasing contracts that included maintenance services. These were highly desirable because the apparatus became increasingly complex.

Relying heavily upon well-trained sales personnel, IBM spent considerable sums on their training. The company’s emphasis upon customer relations kept it in first place. Costly as it was to maintain sales staffs of thousands of men and women knowledgeable about IBM’s products, the firm prospered. Computers were too new and complicated for most customers to understand, but they did have confidence that IBM knew what it was doing. Watson kept IBM focused first on punch card machines and then on computers, eschewing the opportunity to become a conglomerate like Remington Rand or RCA. He even turned down the chance to buy the patent for the Xerox machine. Where people once wrote words, they now “processed” them! And all the while the amount of data that could be stored was doubling and tripling while the price of computers dropped. It was a rare technological trajectory, which subsequently became more familiar. In the first three decades after the war, the use of computers spread from the government to businesses to private persons.

IBM teetered on the edge of the computer revolution, uncertain about abandoning its punch card machines. Not until 1950 did it move from electrical to electronic data processing and then mainly because of the influence of Tom Watson, Jr., who became president in 1952. The critical shift was going from cards to magnetic tape. It proved the right move; IBM became the world’s largest producer of computers. In the late 1950s IBM added as many as twenty thousand new employees in some years. The data needing to be filed and manipulated in these marvelous new machines grew exponentially too. IBM also operated a separate branch, World Trade, where computers were made and sold abroad. Watson Senior was not an engineer, but he had an engineer’s cast of mind. Like Ford, he also thought like a salesman, educating his sales force and encouraging close relations with the firm’s customers, whose opinions were carefully weighed in management decisions. Despite all this, Watson remained old-fashioned. When his son decided that it was high time to make an organizational chart, he discovered that forty-seven units had been reporting directly to his father!
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Laws and litigation in the United States promoted and protected competition. After the war, European countries began to follow this American lead. Backed by the authority of the Sherman Antitrust Act, the Justice Department kept pretty close watch on America’s giant corporations. Its lawyers viewed IBM’s leasing policy as a restraint of trade because its comprehensiveness closed out companies that sold peripherals like monitors, printers, synchronous motors, gearboxes, keyboards, and scanners. They also challenged the Radio Corporation of America and American Telephone and Telegraph for their unwillingness to license patents.
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A 1956 consent decree stopped monopoly practices, opening up opportunities in data processing, consumer electronics, and telecommunications. Now both American and foreign companies could obtain precious licenses and develop their own lines in the growing field of electronics. A second antitrust suit in 1969, lodged against IBM’s bundling of services, enlarged competition in the field of plug compatibles.
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Soon the telecommunications industry would feel the sting of antitrust investigations.

Meanwhile IBM designed a computer system that could be disassembled for delivery and reassembled quickly. Over time customers had begun to complain about the fact that IBM’s seven different computers could be used only with their specific peripheries. At this juncture, developing something more adaptable would be risky, but so too would be not doing so. In 1961 IBM committed itself and five billion dollars, the equal of three years’ revenue, to designing a swifter, smaller all-purpose computer to replace all its special use ones. Its architecture was totally different. Its reception rewarded the risk taken. The impact on the computer industry of the System/360 was revolutionary, but alas, in the postwar environment of constant technological advance, even revolutionary systems hold the day for only a decade or two. Since any innovation kills its predecessors, stakes were high.
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The New Social Force of Labor

In the seventeenth and eighteenth centuries and in much of the nineteenth century, labor in the United States had been scarce. Farmer owners had represented a large proportion of the working class. With abundant land, American colonies had reversed the European ratio between abundant population and scarce land. This had a long-lasting effect on attitudes toward workers. European travelers were always astounded by the independence of servants in America. They also remarked on the intelligence and knowledge of men and women in rural areas. The flood of foreign labor into American factories at the end of the nineteenth century changed the character of the working class and created a large social gap between laborers and managers. After World War I, millions of black men and women moved into northern and southern cities to become part of the new proletariat.

It had been a stiff challenge organizing a work force riven by racial, ethnic, and religious differences. Unions, when successful, replaced the paternalism operating in most factories with explicit processes for hiring, firing, promoting, and evaluating workers. Elected stewards became the most important persons on the shop floor.
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For black workers the benefits were enormous, for within segregated plants—and most of them were—bargaining required that they cultivate their own leaders. Union halls offered sociability, entertainment, and education. Organizing had also provoked demonstrations, protests, walkouts, and the famous sit-down strikes in the automobile industry in 1936 and 1937.