American farmers have utilized the same basic model as American industry in their pursuit of profits. That model is commonly referred to as industrialization. The fundamental characteristics of the industrial model are specialization, standardization, and centralization of control. Profits are achieved through the economic efficiencies of division of labor, comparative advantage, and economies of scale.
Over most of the past century, however, profits from farming have gone primarily to those who found ways to reduce costs first and expand production the fastest. Each new round of cost cutting technology has resulted in increased production and lower prices, erasing initial profitability. Late adopters have been motivated by survival rather than profitability, and chronically declining prices have forced the laggards out of business. A relentless, never-ending search for new sources of profits has been a necessity for survival.
Industrialization of agriculture has consistently lagged behind industrialization in most other sectors, but the process accelerated dramatically in the early 1900s. At that time, the potential societal gains from continuing the industrial revolution in the larger society were undeniable. We were still an agrarian society. More than half of the people of this country either were farmers or lived in rural communities, and it took about half of our total resources -- money, time, and effort -- just to feed and clothe ourselves. If we as a nation were to realize the emerging opportunities of the industrial revolution -- to become the modern society we know today -- we had to accomplish two things. First, we had to free people from the task of farming to go to work in the factories and offices of the emerging industrial economy. Second, we had to free up income spent for food and clothing so people could buy the things these new industries were going to produce. In short, American agriculture had to become more efficient. We had to make it possible for fewer farmers to feed more people and feed them better at a lower real cost.
Industrialization allowed agriculture to fulfill its public mandate. Through specialization, standardization and centralization of control nature was bent to serve the needs of humanity. Farmers gradually harnessed the vagaries of nature and transformed their farms into factories without roofs. Fields and feed lots became biological assembly lines with inputs coming in one side and commodities coming out the other. Economic efficiencies of large-scale production were achieved as the principles, strategies, and technologies of industrialization were applied to farming. Publicly funded research and education developed many of those new industrial technologies and transferred them from the experiment station to the farm.
Through industrialization, American agriculture became the most efficient agriculture in the world, at least in terms of the dollar and cent costs of production. This in turn made it possible for this nation to build the strongest economy in world. The agricultural sector takes just pride in its past successes. But the objectives of industrialization have been achieved. The things that industrialization could do for America have already been done.
Today, less than two percent of the people in this country are farmers. Today, as a nation, we spend only about ten-percent, or a dime out of each dollar, of our disposable income for food. Equally important, the farmer gets only a single penny out of that dime, while nine cents goes to the marketing and input firms. We now pay more for packaging and advertising that we pay the farmer to produce the food. Future societal gains from the further industrialization of agriculture must be squeezed from the farmer's penny, because that’s the only possible source of consumer benefit from increasing the economic efficiency of farming. Food would cost only ten percent less on average if the farmer got nothing. It simply doesn't make much difference to society today whether there are more farmers or fewer farmers or whether farmers are more or less efficient.
The industrial model made it possible for societies to rise above subsistence living. It removed much of the drudgery from work and made possible increased leisure time for pursuit of entertainment. But, industrialization now appears fundamentally incapable of sustaining human progress. The economic benefits of industrialization have declined as its ecological and social costs have risen. The goal of sustainable development reflects a new worldview of sustainable human progress. Sustainable agriculture is just one little piece of something far greater that is literally transforming human civilization.
By John Ikerd, from "The Economist’s Role in the Agricultural Sustainability Paradigm," a paper presented the Extension Pre-conference on Sustainable Agriculture, at the American Agricultural Economics Association Annual Meeting, San Antonio, TX, July 1996.
My transition from college to the business world did not go as smoothly as I had hoped. My shaky first step onto the corporate ladder was to be a warning of what lay further ahead. But in those days, I wasn’t into reading warning signs or relying on intuition or insight. I was determined to be the master of my destiny.
I had interviewed with the personnel manager from Wilson Packing Company during my senior year in college. Wilson & Co. was one of the largest livestock slaughter and meat processing companies in the country at that time. Swift, Armor, Wilson, and Cudahy had been known as the big four in meatpacking, although some new players, like Oscar Mayer and Iowa Beef Packers (IBP) were coming on. When Wilson made me a tentative offer of employment, I accepted.
Back in the 1960s, military service was an obligation of every able-bodied young male. I had been through two years of ROTC in college, but I wasn’t very gung-ho about the military. I chose the path of least resistance. I signed up with the Army Reserve – six months of active duty followed by six years of being on call to go anywhere they might need me and to do anything they might need me to do. I had to get my six months of active duty out of the way before I could go to work.
I was scheduled to go on active duty immediately after graduation, but tenacity got in the way of progress. One evening during one of many senior celebrations at a local tavern, a fellow Crudder challenged me to an arm wrestling match. He was far bigger and stronger, but I was tenacious and could sometimes outlast a stronger opponent. We sat down at a booth, scooted the empty beer bottles aside, and the struggle began. His arm was powerful, but I gritted my teeth, summoned up all energy, and managed to hold my own – for a while. Suddenly, I heard something hit the table – the beer bottles flew. I turned my head to look – it was my arm. My shoulder was still pointed forward toward victory, but behind me, my arm lay on table in defeat. The bone between my elbow and shoulder had been twisted and broken.
At the student clinic, they gave me a choice between lying on my back for six weeks, with a weight holding my upper arm bone in place until it healed, or letting them operate and put in a few screws to hold the bone together until it healed. I chose the screws. I was able to graduate standing up, but in a body cast, unable to go either to war or to work. Life would have to wait a while. By the time I was physically able for active duty, the world was in crisis over the Russian blockade of Berlin. The army had no time to train new reservists; they were preparing for war. My induction into the Army was again put on hold and so was my job with Wilson & Co.
I had spent the summer between my junior and senior year on an internship working at the Kansas City Stockyards. We interns had done a little bit of everything, including driving cattle and cleaning pens, and everyone had seemed to be pleased with our work. So I called Jim Leathers, our contact at the Stockyards Foundation, and told him I needed a job for a while. He said that if it were going to be temporary, I would have to do the same work as anyone else who had just walked in off the street. I agreed and headed for Kansas City.
The work was menial, but I gained a lot from it – not the least of which was the refreshing of my memory as to what life is like for common laborers. I knew I would be chasing hogs and scrapping manure for only a few months, but many of the people I worked with would be doing this kind of work for the rest of their lives. For these people, the American Dream can never be anything but a dream. Perhaps they could achieve anything they might hope for, but many have lost the will to hope, and no one seems willing to help them find it. In February of ‘62, after graduating in June of ‘61, I finally got the call to report to Fort Leonard Wood, in the hills of south central Missouri, for activity military duty.
My six months of activity duty seemed like a waste at the time for me and for the Army. However, I still managed to learn some important lessons. For example, people who lack control over their lives often feel compelled to do things that just don’t make sense. Maybe following orders, even seemingly nonsensical orders, does make sense, at least in a way, when you are fighting a war. War doesn’t make sense. So, I guess we shouldn’t expect things that seem to make sense in fighting wars to make sense under any other circumstances. I’m not arguing against discipline – it’s often necessary. But, I am arguing against doing things that don’t make common sense, and that includes fighting wars. We’ve lost the victory the minute we give up on working out our differences peacefully. We fight then for survival – not victory. We have to be prepared to make war, because we know we may fail at making peace. But we should never be seduced by the illusion that the survivor of a war is a winner. And, war should never be viewed as a strategy or as a tool of foreign policy. I learned these common sense lessons first from some fellow soldiers who had actually known war.
In the Army, I also learned that most people rise only to the level expected of them. I was bored most of the time I was in the Army and gladly would have volunteered for nearly any work assignment, just to have something to do. But, volunteering was seen as a sign of brown-nosing. We were expected to try to avoid being put on work details if we wanted to be one of the troopers. So I learned to fall in near the middle of the platoon because they tended to pick people around the edges for details. I was in the middle anyway when we fell in alphabetically and would ignore anyone who mispronounced my name when troops were being selected for details. The detail sergeants would call out something like “ekert” or “Ikeman,” and I would stare silently ahead. Most would then say, “Ah hell, Jones, fall in over here,” picking someone near me with an easier name. I became pretty good at doing what was expected of me. In fact, I excelled in mediocrity.
Six months of military life was more than enough for me. I was ready to get on with my life. As soon as I was released, I headed for Kansas City. I went to the offices of the Wilson & Co. meat packing plant and told them I was ready to go to work. The personnel manager who had interviewed me had retired, but I was carrying his last letter to me instructing me to report to work whenever I was through with the Army. So they gave me a job. I was a management trainee, but all management trainees had to start on the sales desk, taking meat orders called in by salesmen from the field. It seemed a lot like clerical work to me, but I accepted the fact that everyone had to start somewhere. After all, I knew where I was headed. I was going to amount to something in this business.
What I didn’t realize at the time was that I had just become a part of American industry. I was taking my place in a company that epitomized the industrial model of production and distribution. A packing plant might be more accurately described as a disassembly line, rather than assembly line, but the basic characteristics are the same. Only far later in life would I realize that the industrial model; characterized by specialization, standardization, and consolidation; has come to dominate nearly every aspect of contemporary American society. Not only does industrialization dominate business, but also nearly all public services – including education, research, and national defense. Volunteer groups, non-profit organizations, and even our religious institutions have become industrialized. The age of reason took on its physical being in the age of industrialization.
Most people probably haven’t stopped to think about it, but the ideas of industrialization and capitalism are only a couple of hundred years old. During the medieval era, people had completely different ideas about how business ought to be organized and how things in general ought to be done.
Before the industrial era, most independent merchants and craftspeople were organized into local guilds. Some guilds were formed for social and religious purposes – performing many of the functions of today’s civic organizations and local governments. Merchant guilds were formed to regulate and control local markets – the buying and selling of specific commodities. Craft guilds were producer organizations with members classified by the specific products they produced. In general, guilds were a sort of combination of local government, trade association, local monopoly, and consumer protection associations. They established quality standards, set prices, and defined the rules of trade. Guilds ensured that all within the community were treated equitably – if not always well. But the guilds were openly hostile to outsiders. Their rules of trade and methods of operation were more strongly influenced by local customs and religious values than by economic principles.
Just as the industrial era replaced the medieval era, the industrial era is now being replaced with new ways of thinking about how people ought to organize for business and other purposes and how things in general ought to be done. Some refer to this post-industrial era as the information age or the knowledge-based era of development. Admittedly, this new era is still in its infancy; however, a fundamental transition in ways of thinking is quite clearly underway. The invention of the silicone computer chip, and associated computer hardware and software, has revolutionized the use of information – affecting everything from business accounting practices and home appliances to communications and entertainment. Some believe that biotechnology, which in essence is genetic information technology, could bring about similar changes in the realm of living things. The most important changes, however, are not the new technologies, but rather the new ways of thinking that gave birth to these technologies and the new ways of thinking made possible by these technologies.
Industrial methods are fundamentally mechanical in nature. The industrial organization is designed for a specific purpose, it is built according to a plan, and it functions according to some predetermined method of operation. The industrial organization works like a machine. If it functions according to plan, its purpose will be achieved. Inputs will be transformed into some more useful or valuable output. If it malfunctions, it has to be fixed. But it has replaceable parts – replaceable people who can be fired and someone else hired. If the industrial organization no longer serves a useful purpose, it must be redesigned, replaced, or abandoned.
Information, on the other hand, is biological rather than mechanical in nature. Information is created. It comes into existence through the act of combining related observations or data. When information is integrated with existing knowledge, it can grow into new knowledge and increase understanding. Information also multiplies in value as it is transformed into knowledge. If two people trade cars, each will end up with the other’s car. If two people trade ideas, each has the benefit of their own ideas, plus the other’s ideas, and possibly some new ideas formed by combining the two. New information also may cause some old knowledge to be discarded, as it becomes discredited thorough use of new or better information. Thus, knowledge is continually multiplied, regenerated, and renewed as it is used. Instead of being used up, it grows. Information, like living things and unlike machines, is self-renewing and regenerative.
Ultimately, new organizational principles will emerge to nurture and support the creation and transformation of information and knowledge. Some of the new information-based organizations already have abandoned the old industrial model of linear, sequential processes and hierarchical command and control. Instead, they operate as networks of individuals or small groups who work simultaneously on different aspects of the same project, and work with a great deal of individual autonomy. They share information, and the structure of the project evolves and changes as new information and knowledge emerges from the product development process. These new post-industrial organizations depend on a strong commitment to a common purpose and set of guiding principles to hold the organization together. These new principles of organization may prove far more important than the new technologies in shaping the future of humanity.
The emergence of humanity from the industrial age into a new post-industrial, knowledge-based era of human progress will share many traits with the transition from the dark ages, through the renaissance, and into the industrial era. The new technologies may be different, but the principles of transition will be the same. Renaissance thinking failed to evolve to accommodate the changing world and to cope with the growing corruption of guilds and the other religious, social, and political institutions that dominated human society at the time. The dominant institutions failed to meet the needs of the common people. The industrial revolution was a consequence of this failure. But industrial thinking also has failed to evolve to accommodate the changing needs of a changing world since the industrial revolution. Our dominant institutions again are failing to meet the needs of the common people. Again, a new revolution will be the inevitable consequence of this failure.
The industrial revolution was supported by mechanical inventions, which in principle were not unlike the information-based inventions of today. The transition began in the late 1700s with development of the British factory system for mass-producing textiles.[i] Inventions patented during a span of two decades fundamentally transformed the future of human society, beginning with John Key’s spinning jenny in 1764 and ending with Edmund Cartwright’s power loom in 1785. In 1769, James Watt, a Scotsman, patented the steam engine, providing power for British textile mills of the late-eighteenth century and for most of nineteenth century industry. Eli Whitney, an American inventor, provided a missing link when he invented the cotton gin in 1793, bringing a fifty-fold increase in efficiency of labor in removing seed from cotton bolls and opening a floodgate of raw material to feed the textile industry. The industrial revolution took a quantum leap forward.
However, it is doubtful that the technical revolution of the late 1700s could have occurred without a simultaneous political and social revolution. In 1776, Adam Smith, a British economist, wrote his landmark book commonly referred to as Wealth of Nations. Smith’s economic philosophies quickly spread around the world and provided the conceptual foundation for contemporary economic thinking. The foundation of Smith’s economic thesis was his observation that division of labor could generate large gains in efficiency, and consequently, could increase the wealth of individuals as well as nations.
If a group of laborers, who were each producing a given product (i.e. transforming raw materials into finished products), would instead each specialize in performing only one or two tasks involved in producing the product, they could perform these tasks much more efficiently than when performing all the tasks. Smith used the example of several workers making straight pins. He hypothesized that by specializing in cutting wire, sharpening, and forming heads, and then coordinating their functions, a group of workers might increase their output by as much as two-hundred-and-forty-fold over that of each worker making pins separately. Smith’s observations concerning division of labor and the potential gains from specialization provided the conceptual blueprint for organization of factory work, for assembly lines, and in general, for industrialized mass production.
Smith also provided the foundation for the political environment needed to support the industrial revolution. He observed, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self love, and never talk to them of our necessities but of their advantages.” [ii] Later, in reference to international trade, Smith states, “he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention… By pursuing his own interest he frequently promotes that of the society more effectually (sic) than when he intends to promote it.”[iii] These statements provided the foundation of today’s contemporary economic thinking – that the pursuit of short run self-interest is transformed into achievement of the public good. It has become conventional wisdom across American society: free markets transform individual greed into societal good.
The French Physiocrats preceded Smith by a few years in writing about the benefits of trade and free markets. But, Smith expanded the discussion beyond gains from trade to gains from specialized production. Perhaps more important, he put his thoughts together in a particularly compelling way at a time when the world was ready for a new way of thinking. These new beliefs, which Karl Marx would later label as capitalism, quickly spread from Great Britain to America and Germany and later to elsewhere around the globe.
Several fundamental beliefs serve to define capitalism. First, capitalists believe in individual, private ownership of capital – privately owned means of production – rather than collective ownership through government. Capitalists also believe that the best way to organize the economy is through the actions of buyers and sellers interacting in free markets – rather than through central planning. Under capitalism, each consumer and producer is encouraged to pursue their individual self-interest, with a minimum of interference from government, as a means of ensuring the greatest societal benefit.
In 1776, the year Wealth of Nations was published, the American Colonies declared their independence. It was no accident or oversight that the Constitution of the United States makes no mention of protecting citizens from economic oppression. It stresses the right to ownership of personal property along with protection of personal liberties and gives great attention to protection of the individual from political oppression. But the constitution doesn’t address the need to protect people from economic exploitation.
The writers of the U.S. Constitution apparently shared the beliefs of Adam Smith. Apparently, they trusted the invisible hand not only to transform individual greed into societal good but also to protect the economically weak from the economically strong. They apparently believed, along with Smith, that the best strategy for a nation to pursue in enhancing its wealth was to ensure that the government did not interfere with free and open competition among individuals – either within or among nations.
Many people today automatically associate capitalism and democracy, but it’s important to realize that the two are fundamentally different concepts. Democracy refers to how people govern their society, while capitalism refers to how people organize and manage their economy. Democracy certainly is not a prerequisite for capitalism, as attested to historically by numerous capitalistic dictatorships around the world. Likewise, capitalism most certainly is not a prerequisite for democracy, as democracy arose first in ancient Greece and Rome, long before Adam Smith and Karl Marx.
A fundamental principle of modern representative democracy is one person, one vote at the polling place, no matter how many, or how few, dollars each one may possess. On the other hand, a fundamental principle of capitalism is one dollar, one vote in the market place, no matter how needy or affluent one may be. While democracy and capitalism are complementary in many respects, inherent conflicts exist between economic endowment and social equality. People, in general, do not have equal numbers of dollars with which to vote in the marketplace, nor equal abilities to earn dollars. The democratic proclamation that all men are created equal has a hollow ring in a free market economy. A nation that proclaims both capitalism and democracy as guiding philosophies, while failing to recognize and deal with this fundamental conflict, is a nation at risk.
Industrialism dominated the U.S. economy during the nineteenth century. Corporations played a major role in this domination. Specialization and standardization of production processes allowed consolidation of decision-making and control. One manager could control far more laborers producing far greater output under industrialization than under the old craftsman economy of pre-industrial days. Capital then became the primary factor limiting the size of industrial operations. The corporation, a concept dating back to the Middle Ages, was an ideal mechanism for consolidating capital from many individual investors to form large industrial enterprises.
Through corporations, large numbers of investors could acquire shares in the ownership of a company while limiting their individual liability. For sole proprietors and partnerships, individuals are liable for the debts of their companies to the extent of their total personal assets. But under corporate ownership, liability is limited to the amounts of the individual’s investments in the corporation. In addition, shares in corporations could be easily bought and sold, transferring ownership from investor to investor. Transferability of ownership gives the corporation an infinite life span over which to pursue profits, to grow, and to accumulate more capital. To amass still more capital, two or more corporations also can consolidate assets by combining shares held by of their stockholders.
In the U.S., consolidation of firms producing basic commodities, such as sugar, salt, leather, whiskey, kerosene, meats, and rubber goods, took place following the Civil War. This set the stage for American-style industrialization, when John D. Rockefeller formed his first corporate trust in late 1882. He persuaded stockholders in some forty different corporations to exchange their stock for shares in the Standard Oil Company of Ohio. This allowed Rockefeller to consolidate management and centralize decision making across a large segment of the entire petroleum industry under one board of directors, which he chaired. Rockefeller exerted market power over the petroleum industry, manipulating supplies, and influencing prices and profits, in ways that were totally contradictory to the conditions under which Adam Smith imagined the working of an invisible hand. American industrialists ever since that time have attempted to follow Rockefeller’s lead.
By 1893, American Sugar Refining Company and the United States Rubber Company had joined Standard Oil in the merger game before a severe downturn in economic activity brought a temporary halt to further mergers. A second flurry of mergers, beginning in the early 1900s, led to the formation of such well-known companies as United States Steel, Du Pont, American Can, and International Harvester. Soon, large corporations not only controlled the American economy but dominated the American political process as well. Politicians and elections were routinely, often openly, bought and sold through bribes, lobbying, and corporate financing of campaigns.
Upton Sinclair’s book, The Jungle, published in 1906 gives the reader a vivid insight into the nature of early-twentieth century industrialism.[iv] Sinclair documented the inhumane and unethical treatment of both animals and people by the companies making up the powerful beef trust. He also illuminated the pervasive corrupting influence of the trust on the politics and government of Chicago during the early 1900s. Other trusts controlled the lives and livelihoods of other people and other cities, and together the trusts pretty much controlled the country.
However, the people rebelled. They demanded political and economic reform. Reform didn’t come easy, but at the urging of Teddy Roosevelt, Congress passed a number of laws designed to help enforce antitrust laws already on the books, such as the Sherman Antitrust Act of 1890. The new laws included the Elkins Act of 1903, aimed at the discriminatory trade practice of railroads, and the Hepburn Act of 1906, which strengthening the Interstate Commerce Commission.[v] During Roosevelt’s two administrations, the Justice Department brought 43 suits against the corporate trusts and won several important judgments. One judgment resulted in the break up of Rockefeller’s Standard Oil Company Trust.
The Progressive Era in American politics continued through the Woodrow Wilson administration. In politics, the Civil Service replaced political patronage, crippling the powerful political machines, primary elections were instituted to select candidates for offices, replacing corporate deals in smoke filled rooms, and direct elections were mandated for election of U.S. Senators, replacing election of senators by state legislators in some states. All of these progressive era policies were direct attempts to limit, if not eliminate, corporate influence in politics.
The Progressive Movement, however, brought but a temporary pause in the industrialization of America. Henry Ford, the creator of the Model T, is credited with opening the modern era of American industrialization in the early 1900s. Invention of the internal combustion engine and discovery of abundant supplies of petroleum fuel paved the way for Fordian-style industrialization. In 1913, Ford opened his first automobile plant. Ford didn’t invent the automobile, and he was not the first to use interchangeable parts or assembly line production, but he was the first to combine successfully the concepts of specialization and standardization in developing a new and different industry.
Each person on a Ford assembly line, as on all assembly lines since, carried out a specific set of activities in a specific manner – performing as little more than a sophisticated machine. All parts were standardized and interchangeable. Each Model T was identical to all other Model Ts, allowing them to be assembled piece by piece and step by step, without regard to their individual identity. In addition, a corporate business structure allowed the Ford Motor Company, formed with capital from eleven individual investors in the Detroit area, to expand and eventually grow into one of the largest business organizations in the world.
Ford workers at first rebelled at the boredom of specialized, standardized, assembly line work. People were unaccustomed to such routinized, repetitive, mechanistic work, and worker turnover, at forth to sixty percent per month, was intolerably high. Ford is quoted as saying that his biggest problem was that he had to hire whole workers when all he really needed was their two hands. But in response to the worker revolt, Ford doubled his worker’s wages from $2.5 to $5 per day. Worker turnover dropped, productivity increased, and profits doubled within two years. Ford discovered that the American worker could be bribed to tolerate some degree of dehumanization. The modern era of industrialization was under way.
[i] See Industrial Revolution. Microsoft® Encarta® Encyclopedia 2003. © 1993-2002 Microsoft Corporation
[ii] Adam Smith. Wealth of Nations. 1776. Great Mind Series, 1991. Prometheus Books, Amherst, NY (p. 7).
[iii] Adam Smith. Wealth of Nations. 1776. Great Mind Series, 1991. Prometheus Books, Amherst, NY (p. 199).
[iv] Upton Sinclair. 1906. The Jungle. Republished in 1981, Bantam Book, New York, NY.
[v] See Progressive Movement. Microsoft® Encarta® Encyclopedia 2003. © 1993-2002 Microsoft Corporation