U. S. Capitalism: A Tarnished Model?

Whitley, Richard. U.S. capitalism: A tarnished model? Academy of Management Perspectives, May 2009, Vol. 23 Issue 2, p 11 – 22, 12p. Retrieved April 24, 2010 from: http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?vid=5&hid=15&sid=5bf6b5d6-7f83-4277-94bb-9ca09fbf232e%40sessionmgr10

This article discusses the viability of capitalism as it is practiced in the United States and whether it is now a tarnished model after the financial collapse and ensuing recession that followed. The essay takes the reader through some of the history that leads to today’s capitalistic economy, starting with the WWII postwar era. In the 1950s and 1960s the American model, at least in manufacturing, consisted of a lot of large diversified companies that made use of mass production of standardized goods and distributed those goods largely through mass marketing. The companies were operated by a managerial hierarchy that specified and controlled the routine operations with mostly semiskilled workers. This is referred to as a Fordist strategy and its focus is on achieving high levels of labor productivity. By increasing productivity and keeping costs low, firms were able to compete primarily on price in large consumer markets for standard goods. The next era discussed starts after the recession of the early 1990s, which is largely driven by the Internet and dotcom companies. The so called “Silicon Valley” pattern of economic organization became very appealing during this period. One of the major shifts in this model is concerning “the flexibility of firms and the ability to reconfigure the nature and organization of core activities and skills to respond to rapid and radical changes in markets and technologies”. The labor force in this model is different also; instead of semiskilled workers, these firms need technical workers whose knowledge and contributions are crucial to the firms’ success, “but whose knowledge and skills are vulnerable to environmental changes”. The author makes five points regarding the likely effects of the financial crisis and recession on the influence of the U.S. capitalism model on forms of economic organization elsewhere in the world. First, there is little doubt that the expanded role of the financial services sector in the U.S. and U.K. will decline. The deregulation of the past has enabled lenders to avoid responsibility for their decisions and to exit quickly from commitments. Secondly, “the expansion of such transaction-based banking business models and rapid exits from financial commitments seem likely to reinforce more general doubts about the viability of ultraliberal market economies in which ownership rights can be traded very easily with few constraints on short-term economic opportunism”. Third, there is growing interest in different business systems, which highlights the variety of effective forms of economic organization to be found in the U.S. and other capitalistic societies. Fourth, despite the reaction against ultraliberal market contracting, the Silicon Valley model will probably remain popular to some because it offers hope economic growth. Lastly, more government control and regulations, due to the current financial crisis is likely to follow. This article is very informative in the subject of how a capitalistic economy works and where its future is likely heading. This subject is important for managers to understand because it affects their firms and their competitor’s as well. It is also an important political subject because if a manager is interested in which way the U.S. economy is going to be regulated and steered, he or she must know the point of view of the candidates for public office they are voting for.