When I was growing up, I noticed that the educated adults in my St. Louis suburb had strong faith in three big ideas—Darwinian evolution, Freudian psychology, and the Protestant ethic.
Since then, Darwinian evolution has held its own, but Freud has given way to other psychologies, and the Protestant ethic—the subject of this column—is rarely to be seen.
The German sociologist Max Weber developed the idea of the Protestant ethic, first in essays written in 1904 and 1905 and then in his 1920 book The Protestant Ethic and the Spirit of Capitalism.[1]
In a sense, “ascetic Puritans,” primarily Calvinists, transferred the mystical spiritual asceticism of Catholic saints to a less stringent but more productive real-world discipline, making possible a dynamic capitalistic world, according to Weber.
Puritans were supposed to work, even make money—but not for the sake of enjoying it. “[T]he pursuit of wealth as an end in itself [was] highly reprehensible; but the attainment of it as a fruit of labour in a calling was a sign of God’s blessing.” [2] Among other things, wealth would indicate that one was among the “elect,” that is, predestined to go to heaven.Continue reading “Is Max Weber’s Protestant Ethic Worth Another Look?”
Readers of history know that government efforts to reduce monopoly power and protect the consumer often fall short. Some protect competitors rather than the consumer. Famous break-ups of large companies like Standard Oil and Alcoa have had little impact on the companies’ success. And regulators tend to be captured by the regulated [1]. So can government intervention be beneficial to a company—and also serve the community? Let me introduce you to Theodore Vail, president of AT&T in its early days. I learned about him from the great management guru Peter Drucker. You be the judge.
Theodore Vail, AT &T President
If you were reading the New York Times in 1913—or even Wikipeda’s “History of AT&T” today—you might think that Theodore Vail had succumbed to government pressure: The New York Times wrote about AT&T on Dec. 20, 1913: Continue reading “Theodore Vail Chooses Regulation”
You may remember the extremely cold winter of 2021. In Texas, the system of electricity collapsed; 4.5 million homes lost power—for days. More than 200 people died, half of them of hypothermia (cold). This wasn’t supposed to happen, of course. Texas’s electric utilities are regulated and the regulation had been modernized beginning in 1999.
Why wasn’t the public interest served?
The issue is so complicated that I can’t answer that question. But the ongoing debate over the Texas tragedy has plunged me into a new project: trying to understand why electric utilities are regulated in the first place. Why do state commissions control the activities of companies like Duke and PNG that produce and send electricity to our homes?
That effort sends us back to colonial days in America. [1]
Since I haven’t had many deep thoughts lately, I want to share with you some essays about history that have caught my attention. In this case, the history is pretty recent—it’s about the late Jack Welch, CEO of General Electric from 1981 to 2001.
When I was an economics editor at Business Week in the 1980s, Jack Welch was becoming a legend. My editor-in-chief admired him, talked with him a lot, and featured him as a speaker at magazine functions. In 1999, Fortune called him the “manager of the century.” He was bold, smart, and unafraid.
But did he bring General Electric down?
General Electric was founded by Thomas Edison and J. P. Morgan in 1892. It developed a ubiquitous brand name and seemed to “own” the field of electric appliances.
By 1981, however, when Welch became CEO, it lacked vigor. It was a $12 billion company, but stodgy and bureaucratic. Welch attacked that bureaucracy, laid off workers, and started acquiring companies. When Welch left in 2001 the company was worth $600 billion and in terms of revenues was the fifth-largest company in the U.S.
I recently stumbled on the fact that eight states, mostly in the Midwest, defaulted on their state bonds in the 1840s. Okay, that may not seem too exciting, but when I learned about it, I also discovered a realm of American history I had not come across before: “canal mania.”
Many of those states had spent a lot of money on canals, much of it borrowed money (bonds rather than taxes), which ultimately they could not pay back. Other problems also plagued these states such as investments in railroads and banks, but canals were big.
Most of these canal ventures were kicked off by one success—the amazing Erie Canal, which opened in 1825. A few canals had been built in the East before that, such as the 27-mile canal between the Merrimack River and Boston. But the Erie Canal ran from Albany, New York, across the state to Buffalo: 363 miles. The canal required 83 locks. Continue reading ““Canal Mania”—A Waste of Money?”
