Large Corporations, Political Regulation, Fordism, Mass Production, and Economies of Scale
In the last quarter of the nineteenth-century, the control and direction of large areas of industry came increasingly into the hands of banks and financiers. This era has thus come to be dominated by finance capitalism, characterized by the growth of large corporations – some of them developing into mammoth industrial cartels. The development of increasingly complex systems of banking and equity markets, the corporate holdings of capital through stock ownership, and a widening separation between the owners of capital and the production process are further key features of this phase of capitalism. The emergence of large industrial trusts provoked legislation in the USA aimed at reducing the monopolistic tendencies then prevailing. The US federal government thus assumed a widening role in this period in the regulation of industrial standards for key industries of special public concern and in the passing of antitrust laws. Such regulation in the late 1800s and early 1900s marked a move away from laissez faire economics.
In 1913 Henry Ford famously introduced the assembly line in his automobile manufacturing plant at Dearborn, Detroit. Drawing on both the earlier experience of highly organized working methods adopted in the Chicago meatpacking industry and the time and motion ideas of F. W. Taylor, Ford took the concept of the division of labor to a new level whereby every manufacturing task was carefully timed and the production process was accordingly split into a meticulously devised sequence of equal duration operations – each usually requiring less than a minute to perform. Fordist principles were adopted in other US manufacturing districts, in the British West Midlands, and in the German Ruhr. Thus, the term Fordism, denoting efficiency, economies of scale, assembly line productions, standardization, and effective marketing, was coined to encapsulate the ingredients of the approach.
Liberal Capitalism under Pressure
Economic depressions and boom and bust business cycles became a recurring problem in the late nineteenth and twentieth centuries. The so called Long Depression of the 1870s and 1880s and the Great Depression triggered by the stock market crash in 1929 affected almost the entire capitalist world and prompted discussions about the long term survival prospects of capitalism as a system. During the Great Depression, Marxists confidently predicted the complete collapse of capitalism and pointed to the ability of the Soviet communist regime (which is discussed below) to avoid the worst extremes of the global economic downturn. However, economic recovery after the Depression and World War II undermined communist forecasts of capitalism's imminent demise. Nevertheless, this era saw yet another round of state intervention as governments tried to soften the harshness of the spatial and social impacts of capitalism. Notwithstanding the importance in classical economic theory of a laissez faire approach, it was claimed by economists such as John Maynard Keynes (1883–1946) that capitalism could be made compatible with interventionist government. Against the background of the 1930s Depression, Keynesian economics urged state intervention (e.g., through adjustments to personal and corporate taxation levels and to interest rates) to promote higher levels of aggregate demand, to fight unemployment, and to counter deflation. Together with the inexorable rise in the ratio of government expenditure to gross national product (GNP), further new terms were coined by commentators and politicians attempting to explain and understand the workings of evermore tightly managed forms of capitalism: these terms include mixed economy, welfare state, and state capitalism.
The lengthy post war boom came to an abrupt halt amid problems of a sudden embargo imposed in 1973 by the Middle East producing states on oil supplies that led to a leap in crude oil prices and resulted in prolonged stagflation – an episode that reignited interest among some economic theorists in nineteenth-century laissez faire capitalism. Neoliberal policy prescriptions were urged as the best means of curing the ills of late twentieth century capitalism. Though retaining adherents, the ideas of Keynesian economics were most decisively countered in this time of oil crises, inflation, high unemployment, and low economic growth. Theorists such as Milton Friedman (1912–2006) pointed to a contraction in the money supply (controlled by the US Federal Reserve Bank), rather than a lack of investment, as a key cause of similar conditions that had prevailed in the 1930s slump. Friedman's monetarist ideas urged a return to the free market principles of classical economic theory as the solution to the problems current in the 1970s. Monetarism – a theoretical alternative to Keynesian regulation and interventionism – emerged as a policy approach more compatible with classical liberal capitalism and it was embraced in the 1980s in some parts of the capitalist world, most notably in the USA and the UK.
The Challenge of Command Economies and Communism
In the twentieth century, Marxist style communism undoubtedly posed the most significant challenge to capitalism. Although Karl Marx predicted that communism would find support among the exploited industrial working classes of core economies such as Britain and the USA, paradoxically, the doctrine secured its first victory in 1917 in the least industrialized of the great powers, namely Russia. The Bolsheviks who led the Russian Revolution were therefore faced with the task of introducing a Marxist socialist system not among a predominantly urbanized proletariat, but in a largely peasant rural society. In the newly created Soviet Union, a highly centralized political system was built on the ashes of the Czarist regime and, by the end of the 1920s, a centrally planned, command economy had been developed in which private enterprise and free trade were abolished and agriculture and industry were collectivized. Military power was strengthened against the perceived threat of the capitalist world. Victory in World War II (achieved at an appalling cost in loss of life), and the subsequent opportunistic territorial expansion of communism across most of Eastern and Central Europe, thereafter divided the world into two starkly contrasting ideological, political, and economic entities – capitalist and communist – separated byWinston Churchill's famously evocative iron curtain. With both sides possessing a growing arsenal of nuclear weaponry, a confrontation arose that was characterized by an equal and mutual threat, which came to be known as the Cold War.
Communism spread elsewhere, perhaps most notably to China but also, for example, to parts of Southeast Asia. Once again, these recipients did not fit Marx's capitalist– proletarian model and the ideology therefore required adaptation according to particular circumstances. Notwithstanding the lack of Marxist purity in its application, communism was regarded as a highly dangerous challenge to both the philosophy and the practical operation of capitalism. It became clear, however, that the stifling and inflexible constraints of the command economies of Soviet Bloc countries severely encumbered their ability to compete with capitalism in terms of productivity and innovation. By the early 1980s, the communist world was in economic and political crisis. Unable to prevent the secession from communism of its client states in Central and Eastern Europe, in 1991 the Soviet Union itself crumbled into 15 separate states – once more becoming open to capitalist penetration. The chill of the Cold War began to thaw.
Intriguing debates ensued on the reasons for the collapse of communism in its pioneering heartland. Some argue that Marx's teachings are fundamentally flawed and communism was bound to fail; others blame Lenin for his inept attempt to build communism in a country that was an underdeveloped peasant farming society. Those who champion the notion of the irresistible forces of capitalism see communism's demise as a victory for Adam Smith's notion of the invisible hand of the market. Whatever the truth, the reintroduction of capitalism into the social and economic spaces of former communist countries has engendered a raft of severe social and economic problems that have not yet been resolved. Moreover, while communist rule survives, the forces of capitalism have more recently been unleashed in China with extraordinary, paradoxical, and startling consequences for the entire world. Again, the full range of impacts and outcomes has yet to emerge.
The Challenge of Fascism and Nazism
Other potent twentieth century challenges to capitalism include fascism and Nazism. Under Benito Mussolini, a fascist government ruled Italy from 1922, and Adolf Hitler led the Nazi (National Socialist) government in Germany from 1933. Both regimes were militarily defeated in 1945. Although the reactionary political philosophies and ideologies of fascism and Nazism extended across many spheres, one key aspect of its challenge was against the individualism, liberal commercialism, and unchecked materialism of the decadentWestern capitalist democracies.While the economic principles of capitalism were not rejected by Europe's fascist and Nazi regimes, strengthening central controls were steadily imposed. Especially in Germany, new kinds of highly regulated capitalist enterprises were therefore developed in the years preceding the outbreak of World War II.
The Challenge of the Islamic Revival/Radicalism
While a full discussion, from a human geography point of view, of the Islamic revival is beyond the immediate scope of this article, it is important to note that the powerful dislike of what is seen as the secularism, colonialism, and social modernization ofWestern style liberal capitalism is a major feature of a movement that dates particularly from the second half of the twentieth cen tury. Though there are immensely complicated and fundamental cultural, philosophical, political, and ethical issues involved in the Islamic challenge to those aspects of the Western way of life that are regarded as degenerate, there are also some clearly identifiable, tangible objections to the tenets of capitalism. For example, the conspicuous consumption, profligate spending, and the stark social inequalities that pervade some of the strongest capitalist democracies offend Muslim teachings on charity and social justice. There are also important ethical objections to the interest charges imposed on borrowers by the West's capitalist banking system. Rather like the current penetration, at breakneck speed, of capitalism in communist China, the Islamic revival is a rapidly changing and ongoing phenomenon about which it is far too early to predict a final outcome.
Post-Fordism, Globalization, and the Anticapitalist Backlash
While the phenomenon arguably has much deeper chronological roots, the term globalization is commonly invoked to explain the changes that have affected the world's economic geography in the past two or three decades. A startling revolution in all forms of communication has undeniably made the world a much more accessible place. Markets have become truly internationalized and finance now moves across the world in an unfettered way. Speculative trading in 'futures' has become a significant feature of finance capitalism. There has been a rise to prominence of transnational corporations (TNCs), which are vast commercial conglomerates, whose immense commercial strength has severely diminished the power of individual states to regulate their own economies. With their vast wealth and growing political potency, TNCs – usually headquartered in the great cities of the traditional core countries – freely switch their activities and investments from one country to another as economic circumstances demand. Much industrial production has been relocated to the Third World where TNCs seek the benefits of lower costs, cheap labor, and fewer restrictions. The exploitation of workers in ThirdWorld countries producing goods for TNCs in poor factory conditions for very low wages may be seen as the latest manifestation of the spatial division of labor. For the West, the corollary of these processes has been the painful experience of deindustrialization and a rapid shift into the services sector and the so called sunrise industries.
The increasing power and sophistication of computing and information technologies have further aided and intensified the development of more flexible production, capable as never before of responding swiftly to changing market demands and fashions. Thus those divisions of labor that once energized the factories and mills of the industrial revolution now occur in new forms on an international scale whereby the bespoke component elements of a product are often manufactured in plants spread across several continents. The rigid, standardized concept of manufacture where uniform products spilled with regularity in great quantity from the Fordist production lines of the past has given way to flexible, market led approaches that, perhaps inevitably, have come to be known as post Fordist.
Globalized capitalism is an ongoing phenomenon. The social changes that it has wrought across the world have already proved to be seismic in their power. In the years after World War II, Western capitalist democracies experienced an economic revival and a commercial boom; new state sponsored welfare systems provided an unprecedented level of security; average standards of living soared to new heights. The benefits of mass production and consumerism were reflected in massively rising car ownership, house purchase and the building of suburbs, international travel, and the purchase of an endless array of consumer goods. But, in the post Fordist era, the uncertainties caused by de industrialization, unemployment, and social inequalities have multiplied. Some commentators, noting the growing vociferousness in the past few years of anticapitalist protesters, have coined another term that rivals post Fordism: we are now, they argue, in an era of disorganized capitalism. While it is hard to foresee with clarity the human geographies that will be created as a result of this phase of disorganized capitalism, we can nonetheless be certain that they will be no less fascinating for human geographers than all those engendered during previous iterations of this most remarkable socioeconomic system.