Capita, capital, capitalism

What do capita (as in per capita) and capital (as in capital punishment) have to do with capitalism, wonders a friend in northern MN. Up there it's been really cold--serious double-digits below zero--which gives people lots of time to think up questions like this. His answer: capita is the plural of caput, which mean "head," and capital means wealth. So if you own many coins with the ceasar's head on them, you have much capital. Well, maybe, but it's clearly time to refresh my memory of the history of the words capital and capitalism.

Wordorigins.com: "The . . . term, capital, has various senses, meaning punishable by death, principal, a seat of government, and wealth used in an investment. This word derives from the Latin caput, meaning head. It made its way into English from Old French via the Normans."

OED Online: Among its definitions of capital as a noun is the following: "3. A capital stock or fund. a. Commerce. The stock of a company, corporation, or individual with which they enter into business and on which profits or dividends are calculated; in a joint-stock company, it consists of the total sum of the contributions of the shareholders. Also, the general body of capitalists or employers of labour, esp. with regard to its political interests and claims (cf. LABOUR n. 2b). b. Pol. Econ. The accumulated wealth of an individual, company, or community, used as a fund for carrying on fresh production; wealth in any form used to help in producing more wealth. " First instance of use cited: "1611 COTGR., Capital, wealth, worth; a stocke, a man's principall, or chiefe, substance" (= Randle Cotgrave, A dictionarie of the French and English tongues 1611).

It defines capitalism as: "The condition of possessing capital; the position of a capitalist; a system which favours the existence of capitalists." First use: "1854 THACKERAY Newcomes II. 75 The sense of capitalism sobered and dignified Paul de Florac."

Finally, a small extract from the entry on capitalism in Raymond Williams, Keywords: A Vocabulary of Culture and Society, rev. ed (Oxford, 1983), 50-51 (original emphasis):

Capitalism as a word describing a particular economic system began to appear in English from eC19 [early 19th century], and almost simultaneously in French and German. Capitalist as a noun is a bit older . . . [he then cites Thomas Hodgskin's use of it in Labour Defended against the Claims of Capital (1825).] This is clearly the description of an economic system.

The economic sense of capital had been present in English from C17 and in a fully developed form from C18. Chambers Cyclopaedia (1727-51) has 'power given by Parliament to the South-Sea company to increase their cpaital' and definition of 'circulating capital' is in Adam Smith (1776). The word had acquired this specialized meaning from its general sense of 'head' or 'chief': fw [immediate forerunner word] capital, F[rench], capitalis, L[atin], rw [root or ultimately traceable word], caput, L -- head.

More coming soon -- life has been exceptionally hectic in the last week or two with the beginning of the semester, a kitty with diarrhea, and local rezoning issues coming to a head.

Diminishing varieties of capitalism?

Yesterday's Handelsblatt reported that Allianz, Münchener Rück, and Commerzbank just sold their shares of MAN (Maschinenfabrik Augsburg-Nürnberg). Their combined holdings amounted to 25% of MAN's capital (valued at more than a billion euros), and they had held the shares for more than thirty years. "The sale [translating roughly] constitututes one more step down the road to dismantling the close relationship between financial and industrial firms in Germany," the article observes. MAN now has only one major shareholder (the insurance firm Axa), which has 5% of its shares; the other 95% are widely dispersed (= "Streubesitz"), which is more in line with U.S. conditions.

"Großaktionäre steigen aus -- MAN jetzt allein unterwegs," Handelsblatt, 13 January 2005, 1.

By the way, newspaper readers, if you haven't checked out Pressdisplay.com, do so! It offers (for a modest price) access to some 200 newspapers from around the world, and the resolution is fabulous.

Worldly history

Yesterday's New York Times carried an obituary for Robert Heilbroner, author of The Worldly Philsophers: The Lives, Times, and Ideas of the Great Economic Thinkers. Currently in its seventh edition, the book has been in print continuously since 1953. What an amazing achievement (not to mention that he wrote it as a twerp, academically speaking).

Teaching "worldly history"--that is, the history of capitalism or any of the subfields that compose it: business, economic, political economic, technological, etc. history--is always a challenge because most students who are attracted to history gravitate to social, political, or cultural history and are put off by anything smacking of the "economic." This semester I will be teaching a comparative history seminar on the U.S. and German political economies since the 1870s. I'm using Heilbroner's Worldly Philosophers as one of the course's foundation stones in hopes that it will get the students past their fears of the economic and give them a basic knowledge of the historical range of perspectives on economic change before we delve into the details of the U.S. and German political economies.

The seminar should be a lot of fun since the U.S. and Germany, industrial upstarts that they were, looked more similar than different in the 1870s but ended up in our own time as exemplars of opposing models of capitalism (liberal vs. coordinated market economies--see, for example, Peter A. Hall and David Soskice, Varieties of Capitalism).

Corporate governance has arrived?

As a New York Times editorial observes today: "corporate governance, a relatively obscure issue a few years ago, has now grown big enough to generate its own scandals."

"New Twist on Corporate Goverance," NYT, 1/11/05, A26, emphasis added--the rest of piece is about the "forced resignation" of the director of Yale's International Institute for Corporate Governance.

The creation of Yale's institute in 1999 was one sign that corporate governance had become a recognized "issue" in the academy, its importance affirmed by the corporate scandals of recent years. But business historians have been much slower on the uptake. Aside from a few works by legal historians and the 1932 classic, Private Property and the Modern Corporation by Berle and Means, there are hardly any studies of the history of corporate governance, especially in the years before the 1930s.

Why so little attention by historians? One reason is that business historians tend to conflate the history of big business, on which a great deal of research has been done, with the history of corporations. As a result, most of my colleagues don't realize how little we actually know about the history of corporations per se.

More on Yukos and jurisdiction shifting

Is it me or the season? Doesn't seem like there's much of interest these days in the business pages -- or maybe it's just that I'm too swamped with the approaching semester and a variety of other obligations to keep up.

In any case, here's the only item of note recently: More on Yukos' efforts to shift its battle with the Russian government to U.S. terrain in Simon Romero and Erin E. Arvedlund, "U.S. Court to Hear Arguments for Dismissal of Yukos Case," NYT, 1/7/05, C5.

Catching up - quick notes on clippings

Survived the holidays (sans snow); two new kitties are keeping the household busy; and only two weeks until the new semester begins - ye gads.

More on the transnational, transcultural aspects of the IBM-Lenovo deal: David Barboza, "Outsourcing to the U.S.," NYT, 12/25/04, c1, 2, on Lenovo's relocation of its headquarters to Armonk, NY, in the wake of its purchase of IBM's PC unit.

Obituary for Richard J. Barnet, co-author of Global Reach (1974) on multinationals: NYT, 12/24/04, A16.

On the mysteries of hedge funds that trade convertible bonds (an innovation of nineteenth-century railroads, by the way): Susan Pulliam, "How Hedge-Fund Trading Sent a Company's Stock on Wild Ride," WSJ, 12/28/04, A1, 6.

One advantage of the online edition of the Wall Street Journal over that of the New York Times: WSJ articles include illustrations; those for the NYT don't, although one may purchase copies of photos (not graphics, which is a big loss for teachers like me who like to use them in the classroom--guess I'll keep clipping in some instances).

Wal-Mart, together with the Department of Defense and the Food and Drug Administration, is pushing its suppliers to adopt the new technology of radio tags and meeting some resistance: Barnaby J. Feder, "Despite Wal-Mart's Edict, Radio Tags Wil Take Time," NYT, 12/27/04, C3. Historical echoes: the fate of Philadelphia's independent, small-scale textile producers after the rise of powerful customers (department stores), and the U.S. Ordnance Department's lengthy efforts to develop interchangeable parts manufacturing technology.

Obituary for James L. Ling, builder of conglomerates: NYT, 12/26/04, 31.

Backyard temps

The temperature seems to be moving in the wrong direction this morning. When I got up, our thermometer reported 0.7F in the backyard; now it's down to 0.0F.

"The Evolution of Manufacturing"

From the email list H-Business@H-Net.msu.edu comes the following. Compare the earliest piece--Henry Ford's 1909 article on "System"--with the NYT article on Dell the other day (see my post on "flexible mass production"):

[Forwarded from AIB-L, a list for the Academy of International Business. Note that the format of this sponsored archive, in which the company selects the articles with which it wishes to be associated, is itself an interesting development. The focus on narratives of technological progress is hardly surprising; others may wish to comment on the specific articles that have been reproduced. Also, from a practical perspective, H-Business members may wish to store soft copies of some of the articles for future use. - ed.]

For those interested in a historical perspective on manufacturing operations in the U.S., there is a collection of original New York Times articles that is being made freely available online for a limited time. The collection consists of 12 articles published between 1909 and 2000. The archive is sponsored by PeopleSoft, and it is not apparent how long it will be available. The articles can be accessed from a link in the Business section of www.nytimes.com or with the direct link shown below.

The Evolution of Manufacturing
http://www.nytimes.com/ads/peoplesoft/
--
David A. Kirsch
Co-editor, H-Business

Capitalism and democracy

This morning's NYT article on the Yukos auction quotes Robert Mabro, chairman of the Oxford Institute for Energy Studies:

"You've got to compare Russia to other oil producers like Iran or Saudi Arabia, not democracies like Denmark or Holland. After 80 years of communism, you don't turn into a liberal democracy overnight. That's a romantic notion that has no historic foundation."

That "romantic notion" likely derives from the theoretical economic determinism that sees capitalism as automatically giving rise to democracy. Certainly there are liberalizing pressures at work, visible in this case in the response of international investors to the Russian government's actions. But historically more accurate is sociologist Theda Skocpol's observation that capitalism has proven compatible with a wide variety of political systems: "capitalism in general has no politics," she notes, "only (extremely flexible) outer limits for the kinds of support for property ownership and controls on the labor force that it can tolerate." (Politics and Society 10 [1980]: 200.)

Flexible mass production

Fordism + scientific management + computers = flexible mass production, aka Dell: Gary Rivlin, "Who's Afraid of China? How Dell Became the World's Most Efficient Computer Maker," New York Times, 12/19/04, sec. 3, pp. 1, 4.

Govt. & business in a global age

The news last week that the Russian oil company Yukos had sought bankruptcy protection in American courts offered an interesting example of the phenomenon of "jurisdiction-shifting," one of several ways of exploiting fractures in a political structure to gain political advantage. In this case, Yukos is seeking protection in U.S. courts from the Russian state, in essence seeking to shift the struggle from one jurisdiction to another in hopes of gaining a more favorable hearing. Other techniques that emerged in battles between railroads and the American states in context of the U.S.'s federal-legislative structure in the 19th century: branch-shifting and level-shifting.

(For more, see Colleen A. Dunlavy, "Bursting Through State Limits: Lessons from American Railroad History," in Private Actors and Public Interest: The Role of the State in Regulated Economies, eds. Lars Magnusson and Jan Ottosson [Edward Elgar, 2001], which was inspired originally by legal historian Harry Scheiber's article "Federalism and the American Economic Order.")

The business of slavery

Catching up on the news . . . (I've been consumed with end-of-the-semester obligations, which included giving an exam on Saturday evening [sic]).

Thursday's New York Times had an article (NYT, 12/16/04, D1, 9) about small steps taken recently to commemorate the slave market in Natchez, which was second in sales only to the New Orleans market. Although slavery is a standard topic in American economic history, the business of slavery has been flat-out ignored by business historians. This is not so surprising, given the historical orientation of the field of business history around big business and mass production, but it is shocking to realize that we know so little about a business that was so signficant and pervasive in the antebellum period, in North and South. Walter Johnson is not a business historian himself, but his book, Soul By Soul: Life in the New Orleans Slave Market (if I remember the subtitle right), does an admirable job of opening up the subject--"must" reading for business historians.

In the "holy smokes" category

Wow. The Google-organized project to digitize library materials is breathtaking in its ambitions (NYT, 12/14/04, A1, C3; WSJ, 12/14/04, D1, 4). And what a boon for historians in search of primary sources, since only works on which copyrights have expired will be available in their entirety.

No appreciable snow in sight here in Madison, Wisconsin. This reminds me of Decembers when I was growing up on the farm in Minnesota and worried that we wouldn't have snow in time for Christmas. The temperature this morning reminded us with all the crystal clarity of a sunny-cold morning (11.4 F--"bitter cold" in NY/NJ televison parlance) just how spoiled we've been so far this fall.

Signs of a new era of capitalism?

Noteworthy in the New York Time this morning: Adam Cohen's piece on the editorial page (NYT, 12/14/04, xxx) about efforts to return to the pre-1937 state of regulation in the U.S. Advocates, he reports, refer to the U.S. Constitution before 1937 (by which he means, I assume, before the 1937 Supreme Court decision upholding the Wagner Act) as the "Constitution-in-Exile."

In my last lecture of the semester this afternoon, I talked about some of the changes in the world of American business since the 1970s that strike the eye of a business historian. Regulation is one of several arenas in which, it seems to me, one can discern fundamental discontinuities, radical departures from the patterns of change that have prevailed since the late nineteenth century. The subject of Cohen's article is a piece of that history.

Also of note: the German stock exchange (Deutsche Boerse) is proposing to buy the London stock exchange (NYT, 12/14/04, B1?). The concept of nationality may be losing its meaning faster in the world of business than anywhere else; certainly the best evidence of globalization is to be found in the world of finance. Or we may discover that the nationality of ownership has little to do with political nationalism. Or that corporations have become extremely skilled at disguising their nationality.

Good and poor quality business reporting

Nice article by Steve Lohr this morning in the New York Times on the IBM-Lenovo deal. Just as I thought: "I.B.M. Sought a China Partnership, Not Just a Sale" (NYT, 12/13/04, C1, 6). Too often the graphs that accompany business reporting cover such a brief period of time that it's difficult or impossible to discern the long-term trends. This story offers a nice exception: a chart of the sources of IBM revenue that actually covers 20-odd years (1982-2003). It shows clearly a relative shift away from hardware between 1988 and 1994.

Now if the chart had only presented the data in real as well as current dollars. In current dollars, it shows IBM's total revenue increasing 159% (from $34.4 billion in 1982 to $89.1 billion in 2003), which averages out at 7.57% annually. But in 2003 dollars (deflated with the CPI), its 1982 revenue stood at $65.6 billion, so in real terms its revenue increased only 35.8% or 1.7% annually over the twenty-one year period. Rather a different picture.

Maybe I'm just a bit sleepy this morning but I cannot figure out what Andrew Ross Sorkin's article, "Icahn Accuses A Hedge Fund Of Stock Manipulation" (NYT, 12/13/04, C1, 2), has to do with buying shareholder votes. It refers to the allegation twice, mentioning it in the third paragraph and ending the article with this: "But there has been a long debate about whether shareholder voting rights must be tied to shareholder ownership." But the article never makes explicit how this issue relates to Icahn's dispute with the companies in question.

Last item of note: M.I.T.'s Technology Review has been revamped once again (NYT, 12/13/04, C4). As the reporter, Victoria Shannon, notes, the last go-around in 1998 "injected a cheerleading breathlessness into its coverage that left some academics cold." Its rah-rah approach to technology reporting certainly left me feeling frigid. But what is that at the end of the article? "'The earlier Technology Review was more likely to look at the social and political dimensions of science and technology.' [The Review's editor] Mr. [Jason] Pontin promised a grounded approach this time. 'We want to be skeptical.'" Maybe Pontin was quoted inacurately, but if not, how could he possibly equate attention to "the social and political dimensions of science and technology" with a lack of skepticism? Mr. Pontin clearly needs to spend some time talking with the faculty in M.IT.'s own Program in Science, Technology, and Society. (Is a disclaimer called for here? I'm an alum of the program.) For more balanced coverage, I prefer Wired.

Sunday morning reading + viewing tips

Recommended reading in the New York Times (national edition) this morning and some viewing tips:

• Peter Applebome, "Our Towns: How a Working Man's Money Went Into a Closet and Came Out of Fortune," NYT, 12/12/04, 33,
• on the soon-to-be-auctioned-off currency collection of Malcolm A. Trask (1901-1889), New York subway motorman. The story includes a photo of a $10 note issued in 1878.
  
• For more images of currency and coins, try the American Numismatics Association's Virtual Museum.
• Timothy L. O'Brien and Larry Rohter, "The Pinochet Money Trail: A Dictator's Mysterious Cash at Riggs Bank," NYT, 12/12/04, Sec. 3, pp. 1, 12.
• Of documentaries on multinationals, producer Larry Adelman's "Controlling Interest" (California Newsreel, 1978) is exceptional for the interviews that he conducted with MNC executives in the mid-1970s.
  

Corporate governance in China

In my undergraduate lecture course on American business history, I often take a few minutes at the beginning of class to talk about stories in the news recently. Most of those are stories in the New York Times simply because I read it before the Wall Street Journal every morning and some days I don't get to the WSJ until the evening. So today's "harvest" marks a change of sorts: the interesting news seems mainly to come from the Journal.

Case in point: In the "World Watch" column (WSJ, 12/09/04, A14), a brief report entitled "China Gives Minority Shareholders Bigger Role" from Dow Jones Newswires. Unfortunately, it's a tad opaque (incoherent?), so I will have to dig up more/better information elsewhere. But the gist of it is that the Chinese government is limiting the governance power of government investors, who hold "nontradable shares accounting for two-thirds of the value of the average listed company in China," thus enhancing the power of private shareholders. But, interestingly, shareholders cannot vote by proxy--they must actually attend shareholder meetings in order to vote. Here's where the murkiness enters in: it is unclear in the report whether the new regulations establish this practice or encourage companies to permit voting by proxy.

I'll dig up more info on this when I have chance. But first I have to tackle a pile of student paper drafts that need grading. Good task for a dark and wet afternoon in the Upper Midwest. I have my fingers crossed that we'll finally get a few flakes of snow.

Thinking of Thinkpads, etc.

The IBM-Lenovo stories remind me of my ongoing search for an ultra-ultralight laptop. Will anyone ever break the two-pound barrier with a 12" screen so I can live with my laptop in hand (or in purse/briefcase)? The Thinkpad X40 and Panasonic's Toughbook W2 both reportedly weigh in at about 2.7 lbs. But the Thinkpad doesn't have a touchpad, so that's out for me. Now if the Toughbook would just forego its built-in optical drive and beef up its max. RAM to a gigabyte or so, shedding a pound in the process . . . .

IBM-Lenovo

How twenty-first century! The most interesting aspects of this cross-border, cross-culture deal are the ongoing entanglements: IBM will reportedly buy 20% of Lenovo, while Lenovo will buy "world-wide service and warranty work" from IBM (on the latter point: WSJ, 12/10/04, B4). Sounds more like a joint venture than a sale.

Most interesting story I've read about the IBM-Lenovo deal: Yale computer science Prof. David Gelernter's column in the Wall Street Journal this morning: "How to Build a Better PC? Don't Give Up." (WSJ, 12/9/04, A16) His basic point: other pathbreaking technologies (automobiles, airplanes) underwent transformations when they were as old or older than the PC, and the PC could, too. I'd love to have all of the (mainly software based) features he envisions, especially the email "acknowledge" function.