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Socializing Capital

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Roy, William G., Socializing Capital: The Rise of the Large Industrial Corporation in America, Princeton, 1997.

Socializing Capital examines the rise of large corporations in America. While the book focuses on the period around 1900, it examines the development of corporations from the founding of the United States until the twentieth century. Originally, corporations were chartered by state legislatures to perform needed public services especially for developing transportation through canals, turnpikes, and railroads. The economic difficulties of the 1830s and 1840s brought pressure for the separation of state control over corporations. At the same time corporations became an inalienable right rather than a privilege. According to the author, railroads were the first to develop corporations as we know them today; the Civil war being the precipitating event for the creation of the corporate infrastructure. The water shed years for incorporation were 1898 to 1904 in which most transformations occurred. Instead of individual or private owners, companies were owned by groups of investors and stockholders, which in turn led to a new type of property in which the owners actual surrender many of their rights and responsibilities in running a company. In return, they receive limited liability and other benefits of incorporation such as eminent domain and free public land. The author uses the term "socialized capital" to denote this type of property which is held in common by many instead of one or a few. Overall, the author's main thesis is that Efficiency Theory, the theory that corporations thrived because of the increased efficiency of technology and integration, fails to account for the dominance of corporations in America. Instead, the author argues that it reflects the power of business and government leaders to define the situation, a critical feature of the institutionalization process of corporations. In essence, the predominance of corporations in America can best be understood in terms of the power and influence their socialized capital was able to exert. The author tells us that it is better to understand the future of corporate America in terms of its power rather than efficiency.

The book is written on a very high level and appears to be more for a person with a background in business or sociology. It uses many technical terms in long wordy sentences. To the initiated it may prove a profound and thought provoking book. From an historical perspective it is interesting because it reveals the origins of corporate America and reveals the important transformations which it has undergone to bring it to its present day status.

The rise of huge industrial corporations after 1890 is a fascinating story fraught with implications for our view of modern American capitalism. The prevailing view is that large corporations, like them or not, arose as an efficient response to the demands of markets and technologies. "Socializing Capital" takes issue with this claim. It argues that corporations arose because of contingent historical factors, such as changes in corporate law. Corporations came to dominate the landscape because of their economic power, not their efficiency.

Re-examining the dogmas that surround free markets is one of the most urgent tasks facing social science today. Unfortunately, "Socializing Capital" will turn off most readers. It's repetitive, drenched in sociological jargon, and too quick to editorialize against the sins of corporations. It almost completely ignores the rise of industrial corporations in other countries, which suggests that factors deeper than sheer historical accidents were at work. Worst of all, the author seems more intent on scoring points off of competing schools and scholars then in telling a story gracefully. I'd recommend the book only for specialists already familiar with the literature.