Course Unit: ECONOMIC AND BUSINESS HISTORY Credits ECTS: 6 Contact hours: 45.5 (lectures / practicals) + 22.75 (tutorial) Total workload: 160 Professor: Nuno Valério Contact adresses: R. Miguel Lupi, 20, 1249-078 Lisboa - Gabinete 410 e-mail: valerio@iseg.utl.pt Tel: +351 213925973 Objectives of the course unit Taking in consideration the academic and professional profiles of 1st cycle degree graduates in the economics, business and financial areas, the Economic and Business History course (EBH) aims to develop relevant generic and specific competences, while specific learning outcomes are expected. — Competences to be acquired: learning skills, working in groups, time management, choosing and working on relevant data, analytical and synthetic skills, oral and written skills. — Expected learning outcomes: the relevance of time and space variables in explaining social and economic facts, ultimately in explaining the formation and evolution of the contemporary world economy, the asymmetric performance of partial economies along modern economic growth and the systemic nature of economic growth; the relationship and interacting mechanisms among technological, institutional and space innovations, and business strategies and structures changes. Course contents Main subjects — On the eve of modern economic growth: Europe and the world in the 18th century. — Modern economic growth: a theoretical approach. — Business structures and economic growth: 19th and 20th centuries. — The contemporary world economy in the context of globalization processes and globalization backlashes. Programme Introduction: — From a world of multiple self-sufficient economies to a world of a single self-sufficient economy. The contemporary world economy today. Part I – Modern economic growth (MEG) from a long-run perspective I – 1. MEG from a global perspective. I – 2. The diffusion of modern economic growth in the 19th century and the first globalization process. The formation of the contemporary world economy. I – 3. MEG in the inter-war period. The setbacks of the contemporary world economy and the globalization backlash. I – 4. MEG since World War II. The contemporary world economy towards the second globalization process. Part II – Organization design for performance and growth along modern economic growth. II – 1. Organization design in a theoretical and global perspective. II – 2. Personal capitalism. The ‘traditional enterprise’ at the beginning of MEG. II – 3. Managerial capitalism. The ‘modern business enterprise’ and the evolution to the managerial form of organization. II – 4. The specificities of multinationals. II – 5. Flexible networks and ‘the second industrial divide’. The decline of ‘big business’ in the second globalization process? Readings Introduction Wallerstein, Immanuel (1974), The modern world-system I, N.Y. Academic Press, pp. 347-351. Part I Berend, Ivan (2006), An economic history of twenty-century Europe, Cambridge, Cambridge University Press, pp. 92-111; 123-132; 139-150. Freeman, C.; Louça, Francisco (2001), As time goes by, Oxford, Oxford University Press, pp. 139-151. Gerschenkron, Alexander (1966), Economic backwardness in historical perspective, Cambridge (Massachusettes), The Belknap Press of Harvard University Press, pp 5-30. Maddison, Angus (1994), “Explaining the economic performance of nations: 1820-1989”, in Baumol, W.; Nelson. Richard; Wolf, Eduard, Convergence of productivity: cross-national studies and historical evidence, Oxford, Oxford University Press, pp 20-61. Maddison, Angus, (1991), Dynamic forces in capitalist development New York, Oxford University Press, pp. 85-105; 167-192. Kenwood, A.G.; Loughheed, A.L. ((2005) [1999], The growth of the international economy, 1820-2000, Abingdon, Routledge, pp. 9-90; 104-117; 181-233; 237-267. Kuznets, Simon (1966) [1987], Modern economic growth. Rate, structure and spread, New Haven, Yale University Press, pp. 487-502. Nunes, Ana Bela (1998), "Globalisation in historical perspective - what is new in the process of globalisation?", in Estudos de Economia vol. XIX, nº 1, 1999, pp. 67-85. Part II Chandler, Alfred (1977), The visible hand. The managerial revolution in American Business, Cambridge (Mass.), The Belknap Press, pp 6-12. Chandler, Alfred (1981), “The United States: seedbed of managerial capitalism” in Managerial hierarchies: comparative perspectives on the rise of the modern industrial enterprise, Cambridge, Harvard University Press, pp 9-40. Chandler Jr., Alfred, (1992), "What is a firm? A historical perspective", European Economic Review vol. 36 nº 2/3 pp. 483-490. Chandler Jr, Alfred, 2004 [1990], Scale and scope. The dynamics of Industrial capitalism, Cambridge (Mass.), The Belknap Press-Hrvard University Press. pp 14-46. Friedenson, Patrick (1986), “The growth of multinational activities in the French motor industry, 1890-1979” in Hertner, Peter; Jones, Geoffrey, Multinationals: theory and history Aldershot, Gower Publishing Co., pp 157-166. Harrison, Bennett (2003), “Lean and mean: The changing landscape of corporate power in the age of flexibility”, in Handel, Michael J. (ed.), The sociology of organizations. Classic, contemporary and critical readings, Sage Publications, London. pp 331-345. Kirby, Maurice; Rose, Mary (1994), “ The origin of factory system in Great Britain, technology, transaction costs or exploitation?” in Business enterprise in Modern Britain, London & NY, Routledge, pp. 31-57. Jones, Geoffrey (2005), Multinationals and global capitalism from the nineteenth to the twenty-first century, Oxford University Press, pp. 3-41. Bibliography Baumol, W.; Nelson, Richard; Wolf, Eduard (1994), Convergence of productivity: cross-national studies and historical evidence, Oxford, Oxford University Press. Berend, Ivan T. (2006), An economic history of twenty-century Europe, Cambridge, Cambridge University Press. Chandler, Alfred (1977), The visible hand. The managerial revolution in American Business, Cambridge (Mass.), The Belknap Press, pp 6-12. Chandler, Alfred (1981), Managerial hierarchies: comparative perspectives on the rise of the modern industrial enterprise, Cambridge, Harvard University Press. Chandler Jr., Alfred, et alii (ed.) (1997), Big business and the wealth of nations, Cambridge, Cambridge University Press. Chandler Jr, Alfred, 2004 [1990], Scale and scope. The dynamics of industrial capitalism, Cambridge (Mass.), The Belknap Press — Harvard University Press. Freeman, C.; Louça, Francisco (2001), As time goes by, Oxford, Oxford University Press. Gerschenkron, Alexander (1966), Economic backwardness in historical perspective, Cambridge (Massachusettes), The Belknap Press of Harvard University Press. Handel, Michael J. (ed.) (2003), The sociology of organizations. Classic, contemporary and critical readings, London, Sage Publications. Hertner, Peter; Jones, Geoffrey(1986), Multinationals: theory and history Aldershot, Gower Publishing Co.. Hirst, Paul; Thompson, Grahame (1996), Globalization in question, Cambridge, Polity Press. Jones, Geoffrey (2005), Multinationals and global capitalism from the nineteenth to the twenty-first century, Oxford University Press. Kenwood, A.G.; Loughheed, A.L. (2005) [1999], The growth of the international economy, 1820-2000, Abingdon, Routledge. Kirby, Maurice; Rose, Mary (1994), “ The origin of factory system in Great Britain, technology, transaction costs or exploitation?” in Business enterprise in Modern Britain, London & NY, Routledge. Kuznets, Simon (1966) [1987], Modern economic growth. Rate, structure and spread, New Haven, Yale University Press. Maddison, Angus, (1991), Dynamic forces in capitalist development, New York, Oxford University Press. Maddison, Angus, (2001), The word economy. A millennial Perspective, Paris, OCDE. Nunes, Ana Bela (1998), "Globalisation in historical perspective - what is new in the process of globalisation?", in Estudos de Economia vol. XIX, nº 1, 1999. O’Rouke, Kevin; Williamson, Jeofrey (2000), Globalization and history, Cambridge (Mass.), The MIT Press. Piore, Michael; Sabel, Charles (1981), The second industrial divide, New York, Basic Books. Rhode, Paul W.; Toniolo, Gianni (2006), The global economy in the 1990s. A long-run perspective, Cambridge, Cambridge University Press. Williamson, Oliver E.; Winter, Sidney G. (1991), The nature of the firm: origins, evolution, and development, New York : Oxford University Press. Schimtz, C. J. (1995), The growth of big business in the United States and Western Europe, 1850-1939, Cambridge, Cambridge University Press. Wallerstein, Immanuel (1974-1989), The modern world-system, New York, Academic Press (3 volumes). Assessment rules A – Normal Assessment Period There will be 3 types of assessment elements, all of individual character: ?A compulsory written, close-book examination ?The semester-based assessment ?A possible oral examination –The final grade (on a 0-20 scale) is awarded on the basis of the simple average of the grades obtained in the two first types of assessment elements. When the work completed along the semester is inexistent or ranks below the written examination grade, the final grade will be that of the written examination. A successful assessment requires a written examination grade above 9 (on a 0-20 scale). Students attaining grades above 17 in the written examination must be further assessed through an oral examination, unless the performance of the work along the semester is of a similar level. In the former case, the final classification will be the average of the classifications of the written and the oral examinations. If the student chooses not to sit the oral examination, his final classification will be 17. B – Repeat Examination Period The above-mentioned rules concerning the normal assessment period will apply. For students opting to the semester-based assessement 1. Students opting to complete work and be assessed along the semester should conform to the following work organization and fulfil the following requirements: -— to reach a very high level of attendance in classes. -— to consistently participate actively and constructively in classes, especially those dedicated to discussing selected topics and texts, oral presentations or analysing different types of materials to support and test the correct understanding of readings and lectures. -— to develop team work. -— to hand in all exercises completed out of the contact hours (with possible support in tutorial hours), including a short final report. 2. The work and assessment along the semester will be focused on the following main texts (in chronological order). Other complementary materials will be given out. Specific readings other than those presented above will be recommended to keep up with each of these texts. Kuznets Simon (1966) [1987], Modern economic growth. Rate, structure and spread, New Haven, Yale University Press, pp. 487-509 (ch. 10). Gerschenkron, Alexander (1966), Economic backwardness in historical perspective, Cambridge (Mass.), The Belknap Press of Harvard University Press, pp 5-30. Maddison, Angus (1994), “Explaining the economic performance of nations: 1820-1989”, in Baumol, W.; Nelson, Richard; Wolf, Eduard, Convergence of productivity: cross-national studies and historical evidence, Oxford, Oxford University Press, pp 20-61. Chandler, Alfred (1981), “The United States: seedbed of managerial capitalism” in Managerial hierarchies: comparative perspectives on the rise of the modern industrial enterprise, Cambridge, Harvard University Press, pp 9-40. Friedenson, Patrick (1986), “The growth of multinational activities in the French motor industry, 1890-1979” in Hertner, Peter; Jones, Geoffrey, Multinationals: theory and history Aldershot, Gower Publishing Co., pp 157-166. 3. Recalling the assessment rules referred to above: -This type of work and assessment is optional and it will only be taken into consideration (weighting 50% in the final grade) should it rank above the compulsory written examination grade (weighting 50%). -Though a significant part of the work is team work, assessment is individual. The professor will be free to ask for further individual discussion, namely of the final report, in case doubts still remain concerning the participation and performance of any of the elements of the team. -The work completed during the semester may also be taken into consideration as an assement element in the Repeat Examination Period. Lecture outlines INTRODUCTION From a world of multiple self-sufficient economies to a world of a single self-sufficient economy. The contemporary world economy today = Global economies in the world in the18th century: local and world-economies. = World-economies in the world in the 18th century: capitalist world-economies and world-empires. = The contemporary world economy as a single capitalist world-economy since the beginning of the 20th century. = National economies as partial economies in the contemporary world economy. PART I — Modern economic growth (MEG) from a long-run perspective I - 1. MEG from a global perspective. I - 1.1. Modern economic growth: a new economic epoch and its basic epochal innovation. = Main indicators: aggregate aspects. = The causes of MEG: epochal innovation and increasing (total) factor productivity. = Related aspects: structural and international aspects. I - 1.2. Sustained growth and economic fluctuations. Economic cycles. = Economic fluctuations and economic cycles. = Main economic cycles: Kondratieff’s and Juglar’s. = Explicative hypotheses. The legacy of J. Schumpeter. I - 1.3. Waves of innovations along MEG. = The 4 (5?) Kondratieff cycles. = Technological, managerial and organizational, spatial and institutional innovations. I - 1.4. The world impact of the diffusion of MEG. = Convergence and divergence along modern economic growth. = Constraints of the economic system: national and world-economy perspectives. I - 2. Diffusion of modern economic growth in the 19th century and the first globalization process. Formation of the contemporary world economy. I - 2.1. Causes of the growth of the international economy in the 19th century. = Technological and technical progress and the accumulation of productive factors. = World population growth. = The growth in living standards. = The growth of international trade. = Institutional causes: liberalization and free-trade; the international monetary system. I – 2.2. International long-term movements of productive factors in the 19th century. = Capital movements: foreign investment and external public debt in the context of gold standard. = Labour movements: international migrations. I – 2.3. Formation of the contemporary world economy. = The integration process of world-economies. = The integration process of local, crop growing economies. = The integration of local, predatory economies. I - 3. Modern economic growth in the inter-war period. The setbacks of the contemporary world economy and the globalization backlash. I – 3.1. The disruptions of the First World War and the attempt to return to the international liberal economic order. = Decline in international trade. Commercial policies and import substitution policies. = Decline in factor mobility: the decline in intercontinental migrations and capital movements. = The disintegration of gold standard and post-war inflation. The gold exchange standard as a surrogate to gold standard. The war reparations and debts. I – 3.2. The disruption of the Great Depression and the collapse of the international economic order. = The decline in international trade. ‘Beggar-my-neighbour’ commercial policies and the contraction of income and employment. = The decline in intercontinental migrations = The decline in capital movements and the managed exchange rates regime. I – 3.3. New doctrines and economic systems in the globalization backlash. Economic performance in the inter-war period. New doctrines and economic systems: = The Soviet economic system. = The Nazi German economic system. = Interventionism. Economic performance in the inter-war period: = Short-term economic fluctuations. = Significant diffusion of technological and technical innovations. = Disparities in sector performance. = Disparities in the national economic performances. I - 4. Modern economic growth since World War II. The contemporary world economy towards the second globalization process. I – 4.1. The post-war international economic order. The basic framework was set during the war … = The economic international relations during the war. USA hegemony and the Mutual Aid Agreement. The weakness of the European colonial powers. = Bretton Woods agreement: The FMI and the international monetary system; the BIRD. … and immediately after = The UNRRA. = Marshall Plan and the West European reconstruction. = The GATT agreement. = The cold war and the East Europe reconstruction. I – 4.2. The world economic boom under an interventionist form of economic liberalism and a managed liberal trade order. Technology, economic resources and trade patterns in capitalist economies. = New technology and international transfer. The impact on developed and less developed economies. = Natural resources. = Labour and capital supply and mobility. = Trade patterns. Institutional and policy aspects in capitalist economies: = The mixed economy and the welfare state in the capitalist economies. The role of the state. = Trade policies. European economic integration. Centrally planned, socialist economies: = Growth and stagnation. Causes. = The COMECON and its limits. The less developed economies’ block breaking up. Convergence and divergence in the World economy. I - 4.3. The collapse of the international economic order in the 1970s and the changes in national economic institutions in the 1980s. The breakdown of the golden age. Towards the second globalization process. = ‘External’ shocks: the collapse of Bretton Woods International Monetary system and the oil shock. = The changes in economic policy’s main objectives: from unemployment to inflation. The neo-liberal state. The search for a new international order: = Technological and technical constraints = Labour and capital mobility under flexible exchange rates = Trade policies = Centrally planned economies towards market economies Convergence and divergence in the World economy PART II — The organization design for performance and growth along modern economic growth 1. Organization design in a theoretical and global perspective. The nature and purpose of the firm. = Neoclassical and Coasian approaches to the firm. Transaction costs theory. = The evolutionary theory of the firm. Strategy, structure and capabilities. Technology, market structures and institutions as main constraints. = Management within business: strategic, functional, operational levels. = The three stages’ model of business evolution: centralised, non-departmentalized firm; centralised, functionally departmentalized firm (U-firm); and the decentralized, multidivisional firm (M-firm). 2. The ‘personal' form of organization. The ‘traditional’ firm at the beginning of MEG. = The first industrial revolution and the factory system: technological, market and institutional constraints. = The personal stage of modern business: close relationship between control and ownership; a small, single-unit business. = Cultural aspects behind the atomistic industrial structure. = The financial aspects: fixed and working capital. Self-finance and the ‘web of credit’. 3. Modern business and the evolution to managerial capitalism. From the personal form of organization to the managerial stage. = The second industrial revolution: technological, market and institutional constraints. Transport and communications facilities. = Mass production and the ‘automatic-line’. The cost advantage of scale economies. = Modern business as big business. = Modern business as a result of horizontal and typically vertical integration processes (defensive strategies). = The internal growth of firms: the integrated firm. The centralized multifunctional structure and the hierarchy of managers. 4. Modern business and the evolution to managerial capitalism. From the centralized multifunctional structure to the decentralized multidivisional structure. = Modern business as a result of geographical expansion and product diversification (aggressive strategies). = The internal growth of firms: multi-plant operations, geographical diffusion and product diversification. The decentralized multidivisional structure and further management complexity. = The competitive advantages of first movers. The oligopolistic business structure. = Institutional and financial constraints: legal and political responses; educational response; outsourcing financial response. Banking and stock markets. Equity diffusion. = Integration of legally separate firms: informal networks, trusts, cartel agreements. National specificities. 5. The specificities of multinationals. = Multinational firms: a special case of multi-plant operation firm = Foreign direct investment and portfolio investment. Acquisition and greenfield investment. = Costs and risks of crossing borders. = Explaining why firms cross borders: the eclectic paradigm. = Multinationals along the contemporary world economy. 6. The small firm, flexible networks and ‘the second industrial divide’. The decline of ‘big business’ in the second globalized economy ? = The third industrial revolution: technological, market and institutional constraints. The importance of communication facilities. = Is technological change led by small firms? Are big firms faced with organizational rigidity and obsolete technological capabilities slow to adjust? = Fragmented markets vs. mass markets. … Lean production and the keiretsu and chaebol examples. … Big firms’ control over networks.