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Prophet of Perspective: Thomas K. McCraw

Published online by Cambridge University Press:  06 February 2015

Richard R. John
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Thomas K. McCraw is justly admired as a consummate prose stylist, a talented editor, a perceptive historian of the United States, and an inspiring teacher whose mastery of the biographical form led to a string of elegantly written prize-winning publications that are widely read and often taught. The publication one month before McCraw's death in November 2012 of his last book, The Founders and Finance, provides the occasion for this essay, which contends that McCraw also deserves to be remembered as a founder of two thriving academic subfields—policy history and the history of capitalism—despite the fact that he trained relatively few history PhD students, and rarely appeared in public during the final years of his life as the result of a debilitating illness that greatly limited his mobility.

Type
Review Essay
Information
Business History Review , Volume 89 , Issue 1 , Spring 2015 , pp. 129 - 153
Copyright
Copyright © The President and Fellows of Harvard College 2015 

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References

1 McCraw, Thomas K., “Alfred Chandler: His Vision and Achievement,” Business History Review 82, no. 2 (Summer 2008): 209Google Scholar.

2 McCraw, Thomas K., “Ideas, Policies, and Outcomes in Business History,” Business and Economic History, 2nd ser., 19 (1990): 6Google Scholar.

3 Ibid., 6.

4 William R. Childs, email communication with author, July 2014; Susan McCraw, email communication with author, Aug. 2014.

5 McCraw, “Ideas, Policies, and Outcomes,” 7.

6 McCraw, Thomas K., “Introduction,” in Regulation in Perspective: Historical Essays, ed. McCraw, Thomas K. (Cambridge, Mass., 1981), viiiGoogle Scholar.

7 McCraw, Thomas K., National Competition Policy: Historians' Perspectives on Antitrust and Government-Business Relationships in the United States (Washington, D.C., 1981), 263Google Scholar. This remarkable government document grew out of a series of seminars that McCraw organized for the Federal Trade Commission (FTC) in the fall of 1979. It included extensive historical commentary for FTC staffers on the history of government-business relations in the United States by five historians: McCraw, Alfred D. Chandler Jr., Ellis W. Hawley, Louis Galambos, and Robert D. Cuff.

8 McCraw, Thomas K., “The Progressive Legacy,” in The Progressive Era, ed. Gould, Lewis L. (Syracuse, N.Y., 1974), 181–201Google Scholar; McCraw, Thomas K., “The New Deal and the Mixed Economy,” in Fifty Years Later: The New Deal Evaluated, ed. Sitkoff, Harvard (New York, 1985), 37–67Google Scholar.

9 Thomas K. McCraw, review of End of Reform, by Brinkley, Alan, Journal of American History 82, no. 3 (Dec. 1995): 1170–71Google Scholar.

10 McCraw, “New Deal,” 65–66.

11 McCraw, Thomas K., American Business since 1920: How It Worked, 2nd ed. (Arlington Heights, Ill., 2008), 255Google Scholar.

12 McCraw, Thomas K., “Government, Big Business, and the Wealth of Nations,” in Big Business and the Wealth of Nations, ed. Chandler, Alfred D. Jr., Amatori, Franco, and Hikino, Takashi (Cambridge, U.K., 1997), 541CrossRefGoogle Scholar; McCraw, Thomas K., “The Trouble with Adam Smith,” American Scholar 61, no. 3 (Summer 1992): 371Google Scholar; McCraw, Thomas K., “What Economists Have Thought about Competition, and What Difference It Makes,” Proceedings of the Massachusetts Historical Society 101 (1989): 26Google Scholar.

13 W. Mark Fruin, review of America versus Japan, by McCraw, Thomas K., Business History Review 61, no. 3 (Autumn 1987): 526–28Google Scholar.

14 McCraw, “Ideas, Policies, and Outcomes,” 3.

15 Ibid.

16 McCraw, Thomas K., Koehn, Nancy F., and Nelles, H. V., “Business History,” in The Intellectual Venture Capitalist: John H. McArthur and the Work of the Harvard Business School, 1980–1995, ed. McCraw, Thomas K. and Cruikshank, Jeffrey L. (Boston, 1999), 265Google Scholar.

17 McCraw, Thomas K., Prophet of Innovation: Joseph Schumpeter and Creative Destruction (Cambridge, Mass., 2007), 8Google Scholar.

18 Ibid., 32.

19 Ibid., 9.

20 Ibid., 149, 422.

21 Ibid., 358. Schumpeter's analysis of the mainsprings of capitalist dynamism had much in common with McCraw's, a similarity that some reviewers of Prophet of Innovation found hard to square with Schumpeter's loathing of Franklin D. Roosevelt, his Nietzschean contempt for the kind of market-stabilizing regulatory policies that McCraw admired, and his solicitude toward Nazi Germany. As late as 1939, Schumpeter contended that a German victory in the looming world conflict would promote European stability. See Richard N. Langlois, review of Prophet of Innovation, by Thomas K. McCraw, EH.net (Nov. 2007), http://eh.net/book_reviews/prophet-of-innovation-joseph-schumpeter-and-creative-destruction/.

22 Smith, Jason Scott, Building New Deal Liberalism: The Political Economy of Public Works, 1933–1956 (Cambridge, U.K., 2006)Google Scholar.

23 Zelizer, Julian E., “Clio's Lost Tribe: Public Policy History since 1978,” Journal of Policy History 12, no. 3 (2000): 369–94Google Scholar, esp. 373. See also Kelley, Robert, “The History of Public Policy: Does It Have a Distinctive Character and Method?” in Federal Social Policy: The Historical Dimension, ed. Critchlow, Donald T. and Hawley, Ellis W. (University Park, Pa., 1988), 1Google Scholar. Kelley for some reason dated the first meeting to 1979, an error that Zelizer corrected by consulting the papers of one of the participants.

24 Berk, Gerald K., Alternative Tracks: The Constitution of American Industrial Order, 1865–1917 (Baltimore, 1994)Google Scholar; Berk, , Louis D. Brandeis and the Making of Regulated Competition, 1900–1932 (Cambridge, U.K., 2009)CrossRefGoogle Scholar. My own monograph on American telecommunications was also shaped, in part, by a critical engagement with McCraw's interpretation of Chandlerian assumptions about the relationship of business strategy to public policy. John, Richard R., Network Nation: Inventing American Telecommunications (Cambridge, Mass., 2010)Google Scholar, esp. chap. 1.

25 For one self-conscious attempt to push the policy history subfield backward in time, see John, Richard R., ed., Ruling Passions: Political Economy in Nineteenth-Century America (University Park, Pa., 2006)Google Scholar. The essays in this collection originally appeared as a special issue of the Journal of Policy History.

26 John, Richard R., “Elaborations, Revisions, Dissents: Alfred D. Chandler, Jr.'s, The Visible Hand after Twenty Years,” Business History Review 71, no. 2 (Summer 1997): 151–200Google Scholar, esp. 152n1.

27 McCraw, Thomas K., “Regulation in America: A Review Essay,” Business History Review 49, no. 2 (Summer 1975): 159–83Google Scholar; McCraw, Thomas K., “The Intellectual Odyssey of Alfred D. Chandler, Jr.,” in The Essential Alfred Chandler: Essays Toward a Historical Theory of Big Business, ed. McCraw, Thomas K. (Boston, 1988), 1–21Google Scholar.

28 Thomas K. McCraw, review of The Great Merger Movement, by Lamoreaux, Naomi R., Journal of American History 73 (Dec. 1986): 777Google Scholar.

29 Thomas K. McCraw, “Rethinking the Trust Question,” in Regulation in Perspective, ed. McCraw, 24; McCraw, “Regulation in America,” 181. Italics in original.

30 McCraw, Thomas K., Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn (Cambridge, Mass., 1984), 77Google Scholar.

31 McCraw, Thomas K., “The Public and Private Spheres in Historical Perspective,” in Public-Private Partnership: New Opportunities and Meeting Social Needs, ed. Brooks, Harvey, Liebman, Lance, and Schelling, Corinne S. (Cambridge, Mass., 1984), 44Google Scholar. For Chandler's fullest statement of the “adversarial relationship” thesis, see Alfred D. Chandler Jr., “Government versus Business: An American Phenomenon” [1979], in Essential Alfred Chandler, ed. McCraw, 425–31. For a condensed version of McCraw's “Public and Private Spheres” essay, see McCraw, , “Business and Government: The Origins of the Adversary Relationship,” California Management Review 26 (Winter 1984): 33–52Google Scholar.

32 McCraw, “Ideas, Policies, and Outcomes,” 1–9.

33 McCraw, Prophet of Innovation, 481–82.

34 McCraw, Thomas K., “Retrospect and Prospect,” in Creating Modern Capitalism: How Entrepreneurs, Companies, and Countries Triumphed in Three Industrial Revolutions, ed. McCraw, Thomas K. (Cambridge, Mass., 1997), 540Google Scholar.

35 McCraw, “Introduction,” in Creating Modern Capitalism, ed. McCraw, 4.

36 McCraw, “Retrospect and Prospect,” 533.

37 McCraw's characterization of the American financial sector echoed Schumpeter's; McCraw was well aware of this, having recently completed a biography of the Austrian economist. In looking back on the Great Depression in the United States, Schumpeter concluded that the United States had far too many banks, adding that, because the financial sector had been so decentralized, banks had played a relatively small role in American economic development. The United States was the “most entrepreneurial country on earth”—McCraw wrote, glossing Schumpeter—but “not because of its banks” (Prophet of Innovation, 532–33n21).

38 McCraw, , The Founders and Finance: How Hamilton, Gallatin, and Other Immigrants Forged a New Economy (Cambridge, Mass., 2012), 349Google Scholar.

39 Ibid., 1.

40 Ibid., 131.

41 Ibid., 130.

42 Ibid., 128. For a somewhat different interpretation of Federalist fiscal policy, which places less emphasis on British trade and more on the fears of slaveholders terrified by the future implications for slavery of a powerful central government, see Einhorn, Robin L., American Taxation, American Slavery (Chicago, 2008)Google Scholar.

43 McCraw, Founders and Finance, 151.

44 Ibid., 326.

45 To be sure, Gallatin made an early false start, investing in a farm in western Pennsylvania—“Friendship Hill”—that failed to turn a profit. Luckily for the country, Gallatin proved better at managing liquid capital than at farming the land. McCraw, Founders and Finance, 183, 330.

46 Ibid., 326.

47 Ibid., 348.

48 Ibid., 348–49.

49 Ibid., 357.

50 Ibid., 364.

51 Ibid., 439.

52 McCraw, , “Immigrant Entrepreneurs in U.S. Financial History, 1775–1914,” Capitalism and Society 5, no. 1 (2010): 7Google Scholar.

53 Appleby, Joyce, Relentless Revolution: A History of Capitalism (New York, 2010), 174–76Google Scholar.

54 Perkins, Edwin J., American Public Finance and Financial Services, 1700–1815 (Columbus, Ohio, 1994)Google Scholar.

55 Wood, Gordon S., Empire of Liberty: A History of the Early American Republic, 1789–1815 (New York, 2009)CrossRefGoogle Scholar, chaps. 2–4; Gordon S. Wood, “The Birth of American Finance,” review of Founders and Finance, by Thomas K. McCraw, New Republic, 12 Dec. 2012. For a related discussion that emphasizes the Jeffersonian origins of American financial institutions, see Calomiris, Charles W. and Haber, Stephen H., Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (Princeton, 2014)Google Scholar.

56 Wood, “Birth of American Finance”; McCraw, Founders and Finance, 485.

57 McCraw, Founders and Finance, 342–43.

58 Ibid., 283.

59 Ibid., 296.

60 McCraw, Thomas K., “The Strategic Vision of Alexander Hamilton,” American Scholar 63, no. 1 (Winter 1994): 31–57Google Scholar.

61 McCraw, Thomas K., “Mercantilism and the Market: Antecedents of American Industrial Policy,” in The Politics of Industrial Policy, ed. Barfield, Claude E. and Schambra, William A. (Washington, D.C., 1986), 33–62Google Scholar; McCraw, , “The Evolution of the Corporation in the United States,” in The U.S. Business Corporation: An Institution in Transition, ed. Meyer, John R. and Gustafson, James M. (Cambridge, Mass., 1988), 1–20Google Scholar.

62 McCraw, “Public and Private Spheres”; McCraw, “The Trouble with Adam Smith.”

63 See, for example, McCraw, “The Trouble with Adam Smith,” 373; McCraw, “Strategic Vision,” 56–57; McCraw, “Government, Big Business,” 541.

64 On McCraw, Hurst, and the “release of energy,” see McCraw, “Government, Big Business,” 537, and McCraw, “Strategic Vision,” 55.

65 John, Richard R., “Governmental Institutions as Agents of Change: Rethinking American Political Development in the Early Republic, 1787–1835,” Studies in American Political Development 11, no. 2 (Fall 1997): 347–80Google Scholar; Richard R. John, “Ruling Passions: Political Economy in Nineteenth-Century America,” in Ruling Passions, ed. John, 1–20.

66 Sylla, Richard, “Experimental Federalism: The Economics of American Government, 1789–1914,” in The Cambridge Economic History of the United States, vol. 2, The Long Nineteenth Century, ed. Engerman, Stanley L. and Gallman, Robert E. (Cambridge, U.K., 2000), 483–542Google Scholar; Sylla, “U.S. Securities Markets and the Banking System, 1790–1840,” Review of the Federal Reserve Bank of St. Louis 80 (May/June 1998): 83–98; Irwin, Douglas A. and Sylla, Richard, eds., Founding Choices: American Economic Policy in the 1790s (Chicago, 2011)Google Scholar; Edling, Max M., A Revolution in Favor of Government: Origins of the U.S. Constitution and the Making of the American State (New York, 2003)Google Scholar; Wright, Robert E. and Cowen, David J., Financial Founding Fathers: The Men Who Made America Rich (Chicago, 2006)Google Scholar.

67 The new literature on the nineteenth-century state has been capably synthesized in Balogh, Brian, A Government Out of Sight: The Mystery of National Authority in Nineteenth-Century America (Cambridge, U.K., 2009)Google Scholar. The primary limitation of Balogh's synthesis is his neglect of public policy at the state and local levels. This lacuna is characteristic of historians who, like Balogh, were trained as twentieth-century specialists, and who intended their scholarship primarily for a general audience, whom they presumed to be mostly interested in the recent past. Broader in scope will be Gary Gerstle's forthcoming history of the American state. For a preview of Gerstle's argument, see Gerstle, , “The Resilient Power of the States across the Long Nineteenth Century,” in The Unsustainable American State, ed. Jacobs, Lawrence and King, Desmond (Oxford, 2009), 61–87Google Scholar.

68 Louis Galambos, comments on panel on “Is the History of Capitalism the New Business History?” Annual Meeting of the American Historical Association, Washington. D.C., January 2014; Jennifer Schuessler, “In History Departments, It's Up With Capitalism,” New York Times, 6 Apr. 2013. For a recent survey of this field by a leading practitioner who had himself spent a formative year at Harvard Business School as a postdoctoral fellow, see Beckert, Sven, “History of American Capitalism,” in American History Now, ed. Foner, Eric and McGirr, Lisa (Philadelphia, 2011), 314–36Google Scholar.

69 For a sampling of recent scholarship in this vein, see Zakim, Michael and Kornblith, Gary J., eds., Capitalism Takes Command: The Social Transformation of Nineteenth-Century America (Chicago, 2011)Google Scholar. The essays on the history of capitalism in Capitalism Takes Command are, on balance, far more critical of their subject—and far more representative of recent work on this topic by academic historians—than is Joyce Appleby's upbeat, neolibertarian Relentless Revolution.

70 Indeed, if historians of capitalism were in search of a foundational text, one plausible candidate would be McCraw's essays “American Capitalism” and “Retrospect and Prospect” in Creating Modern Capitalism.

71 McCraw, Founders and Finance, 2.

72 Early Americanists have long quibbled about whether Hamilton was really an immigrant. Though St. Croix was ostensibly Danish, the island had passed into de facto British hands by the time of his birth. Yet Hamilton always regarded himself—and was so regarded by the colonial elite—as an outsider. Gallatin's foreign status was undeniable. To be sure, he would briefly try to insinuate himself into landed gentry by buying land and building an estate in western Pennsylvania. Yet the venture failed, prompting him to return to the seaboard, where he would spend most of the rest his life in Washington, D.C., and New York City.

73 McCraw, Founders and Finance, 365.

74 Immigrant entrepreneurship furnished the theme for the last major scholarly essay that McCraw published, as well as for an op-ed piece in the New York Times that appeared two days before his death: McCraw, “Immigrant Entrepreneurs”; Thomas K. McCraw, “Innovative Immigrants,” New York Times, 1 Nov. 2012.

75 McCraw, Founders and Finance, 352–53.

76 Ibid., 351.

77 Ibid. As McCraw got older he placed more stress on Schumpeter's writings on credit creation. Credit creation figured little in, for example, the essay on Schumpeter that McCraw published in 1991. Far more important was the legacy of Schumpeter's ideas for postwar economic planning in Japan and the supposed affinities between Schumpeterian “creative destruction” and Chandlerian organizational capabilities. In Founders and Finance, in contrast, as in Creating Modern Capitalism and Prophet of Innovation, Schumpeter became a prophet not only of credit creation, the “money of the mind,” but also of an extraordinarily dynamic kind of capitalism that, unlike Chandler's managerial capitalism, was, at its core, chaotic and unpredictable. “Above all else,” McCraw declared in Creating Modern Capitalism, “capitalism is a perpetual motion machine. . . . As Joseph Schumpeter wrote, ‘Stabilized capitalism is a contradiction in terms.’” No longer would McCraw associate innovation primarily with the large-scale managerial firm. In fact, McCraw went so far in his Schumpeter biography as to proclaim the “Schumpeter hypothesis” linking large-scale organization with fundamental innovation to be wrongheaded. On the contrary, McCraw concluded, Schumpeter admired start-ups and was agnostic with regard to the relationship of innovation and scale. McCraw, Thomas K., “Schumpeter Ascending,” American Scholar 60, no. 3 (Summer 1991): 389–91Google Scholar; McCraw, “Retrospect and Prospect,” 533; McCraw, Prophet of Innovation, 639n25. For a prefiguration of this revisionist interpretation of Schumpeter, see Louis Galambos's testimony in National Competition Policy, 184–85.

78 McCraw, Founders and Finance, 353.

79 I am grateful to Susan McCraw for helping to clarify McCraw's evolving view on the relationship between business strategy and political structure.

80 McCraw, Koehn, and Nelles, “Business History,” 266–67.

81 Thomas K. McCraw, “Just Trust Us,” Forbes, 26 Oct. 2007, 32.

82 McCraw, American Business, 253.

83 McCraw, Founders and Finance, 326.

84 Ibid.