Vital Signs

What’s Good for General Motors . . .

How did big corporations become the prevailing form of enterprise in the United States?  The standard answer is that bigger is better.  Concentrated industry, we are told, allows managerial efficiency, huge economies of scale, and the ability to undertake bold research and development and apply it to better products and increasingly efficient process technology.  But the reality is that the big corporate world primarily evolved from mergers and conglomerations, not excellence in the market.

General Motors is, perhaps, the best example.  By 1955, General Motors controlled over half of the automotive market in the United States.  Was this the result of superior technology and managerial ability?  No: It was the result of the conglomeration of Chevrolet, Pontiac, Buick, Oldsmobile, and Cadillac—all formerly independent corporations.  Unsatisfied with this hegemony, General Motors “back integrated” some of its most vital suppliers.  General Motors also excluded other automaker’s vehicles from the dealerships where its automobiles were sold, eliminating competition.  The result was the demise of Packard, then Hudson, then Studebaker.  One by one, the grand old names of the automotive industry closed their doors.

That same year, 1955, General Motors was hauled before the U.S. Senate to explain how it had become the largest corporation in both the United...

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