The Institutional Imperatives of Sloanism

Download: MOLOCH: Mass-Production Industry as a Statist Construct.

I. The Origins of Sloanist Mass Production

A Fork in the Road
A Wrong Turn
The Role of the State in Tipping the Balance

II. The Institutional Imperatives of Sloanism

Economies of Scale, Economies of Speed, and Push Distribution
Microeconomic Institutional Forms for Providing Stability
Mass Consumption to Absorb Surplus
Political Capitalism
State Action to Absorb Surplus: Imperialism
State Action to Absorb Surplus: Creation of New Industries

III. Conclusion

The mass-production model carried some strong imperatives: first, it required large-batch production, running the enormously expensive product-specific machinery at full capacity, to minimize unit costs; and second, it required social control and predictability to ensure that the output would be consumed, lest growing inventories and glutted markets cause the wheels of industry to stop turning. Here’s Lewis Mumford on the principle:

As mechanical methods have become more productive, the notion has grown up that consumption should become more voracious. In back of this lies an anxiety lest the productivity of the machine create a glut in the market….

This threat is overcome by “the devices of competitive waste, of shoddy workmanship, and of fashion…” [34]

As described by Piore and Sabel, the problem was that product-specific resources could not be reallocated when the market shifted; under such conditions, the cost of market unpredictability was unacceptably high. Markets for the output of mass-production industry had to be guaranteed because highly specialized machinery could not be reallocated to other uses with changes in demand. [35]

Mass production was therefore profitable only with markets that were large enough to absorb an enormous output of a single, standardized commodity, and stable enough to keep the resources involved in the production of that commodity continuously employed. Markets of this kind… did not occur naturally. They had to be created. [36]

….It became necessary for firms to organize the market so as to avoid fluctuations in demand and create a stable atmosphere for profitable, long-term investment. [37]

Ralph Borsodi argued that

“[w]ith serial production, … man has ventured into a topsy-turvy world in which goods that wear out rapidly or that go out of style before they have a chance to be worn out seem more desirable than goods which are durable and endurable. Goods now have to be consumed quickly or discarded quickly so that the buying of goods to take their place will keep the factory busy. [38]

With continuous operation of [the factory’s] machinery, much larger quantities of its products must be sold to the public. The public buys normally only as fast as it consumes the product. The factory is therefore confronted by a dilemma; if it makes things well, its products will be consumed but slowly, while if it makes them poorly, its products will be consumed rapidly.

It naturally makes its products as poorly as it dares.

It encourages premature depreciation. [39]

(In a free market, of course, firms that made stuff well would have a competitive advantage. But in our unfree market, the state’s subsidies to inefficiency cost, “intellectual property” laws, and other restraints on competition insulate firms from the full competitive disadvantage of offering inferior products.)

Because of the imperative for overcapitalized industry to operate at full capacity, on round-the-clock shifts, in order to spread the cost of its expensive machinery over the greatest possible number of units of output, the imperative of guaranteeing consumption of the output was equally great.

This is not just a caricature by the enemies of Sloanist mass-production. It has been a constant theme of the model’s most enthusiastic advocates and defenders. They disagree with economic decentralists, not on the systemic requirements of the mass-production model, but only on whether or not it has on the whole been a good thing, and whether there is any viable alternative.

In The New Industrial State, Galbraith wrote about the connection between capital intensiveness and the “technostructure’s” need for predictability and control:

…[Machines and sophisticated technology] require… heavy investment of capital…. They involve, also, a greatly increased lapse of time between any decision to produce and the emergence of a salable product.

From these changes come the need and the opportunity for the large organization. It alone can deploy the requisite capital; it alone can mobilize the requisite skills…. The large commitment of capital and organization well in advance of result requires that there be foresight and also that all feasible steps be taken to insure that what is foreseen will transpire. [40]

…From the time and capital that must be committed, the inflexibility of this commitment, the needs of large organization and the problems of market performance under conditions of advanced technology, comes the necessity for planning. [41]

The need for planning… arises from the long period of time that elapses during the production process, the high investment that is involved and the inflexible commitment of that investment to the particular task. [42]

Planning exists because [the market] process has ceased to be reliable. Technology, with its companion commitment of time and capital, means that the needs of the consumer must be anticipated—by months or years…. [I]n addition to deciding what the consumer will want and will pay, the firm must make every feasible step to see that what it decides to produce is wanted by the consumer at a remunerative price…. It must exercise control over what is sold…. It must replace the market with planning. [43]

…The need to control consumer behavior is a requirement of planning. Planning, in turn, is made necessary by extensive use of advanced technology and capital and by the relative scale and complexity of organization. These produce goods efficiently; the result is a very large volume of production. As a further consequence, goods that are related only to elementary physical sensation–that merely prevent hunger, protect against cold, provide shelter, suppress pain–have come to comprise a small and diminishing part of all production. Most goods serve needs that are discovered to the individual not by the palpable discomfort that accompanies deprivation, but by some psychic response to their possession…. [44]

For Galbraith, the “accepted sequence” of consumer sovereignty, in which consumer demand determines what is produced, was replaced by a “revised sequence” in which oligopoly corporations determine what is produced and then dispose of it by managing consumer behavior. In contemporary terms, the demand-pull economy is replaced by a supply-push model.

Notes: 

34. Mumford, Technics and Civilization, pp. 396-397.

35. Piore and Sabel, p. 50.

36. Ibid., p. 49.

37. Ibid., p. 54.

38. Ralph Borsodi, This Ugly Civilization (Philadelphia: Porcupine Press, 1929, 1975), pp. 64-65.

39. Ibid., p. 126.

40. John Kenneth Galbraith, The New Industrial State (New York: Signet Books, 1967), p. 16

41. Ibid., p. 28.

42. Ibid., p. 31.

43. Ibid., pp. 34-35.

44. Ibid., pp. 210-212.

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