Edited by Michael Dietrich and Jackie Krafft
Chapter 7: Berle and Means
Cécile Cézanne 7.1 INTRODUCTION Law professor Adolf Augustus Berle, Jr (1895–1971) and economist Gardiner Coit Means (1896–1988) coauthored a single and famous book, The Modern Corporation and Private Property, which represents a landmark in the American institutionalist tradition. Published in 1932, in the context of the American New Deal following the 1929 crisis, this book describes the mutations of industrial capitalism during the 1920s and early 1930s. It shows how the traditional personal capitalism regime building on competitive interactions among small firms within industries was challenged by managerial capitalism, which remained dominant until the 1980s. Berle and Means observed that ‘big industry’ was born in most occidental economies as a response to firm restructuring. Firms tended to integrate both upstream and downstream, which resulted in markets dominated by powerful enterprises. Big industry coincided with the emergence of the public corporation. The authors emphasize the ubiquity of these types of large companies in the modern productive process: ‘These great companies form the very framework of American industry’ (Berle and Means, 1932, p. 19). The hierarchical structure and organization of giant companies whose productive activity was based on a large stock of specific physical capital are examined in depth. Thus, Berle and Means’s book can be viewed as a first step toward an analysis of firm boundaries legally delimited by property rights over tangible assets. It also studies the effects of the way modern business corporations are owned and controlled, on inter-individual contractual relationships within the firm. In...
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