The Rise and Transformation of the American Corporation
GEORGE DAVID SMITH DAVIS DYER
"The joint-stock companies, which are established for the public spirited purpose of promoting some particular manufacture," the great champion of free enterprise Adam Smith warned in 1776, "can...scarce ever fail to do more harm than good." 1 We have come a long way from the pristine, agrarian world of small traders and craftspeople in which buyers and sellers could meet and satisfy one another's needs with scarcely little more coordination than that provided by the "invisible hand" of the free market. Today, even in the freest of markets, the production and exchange of goods and services are highly managed, rigorously planned, and controlled by the heir to the joint stock company: the modern corporation.
The corporation has become the fundamental organizing unit of the capitalist economy, the institutional basis for bringing capital and labor together in a common enterprise. The textbook definition of the corporation as a privately owned "person," endowed with potentially perpetual life and limited liability for its investors, overlooks the fact that its most important attribute today is its capacity for managing, especially those large-scale processes required for the conversion of raw materials and energy into mass-produced and widely distributed goods and services to consumers. As Peter Drucker noted in a famous essay written at the end of World War II, the complex corporate form, even where shorn of its private ownership, had become central to the development of noncapitalist societies as well, as the principal means of organizing production and distribution. 2