Hunter Hastings

Aberrant Capitalism is a title in the Cambridge University Press Elements Series, Reinventing Capitalism. The series' thesis is that some emerging flaws have tarnished perceptions of capitalism, the economic system that has raised the standard of living for billions of people worldwide over centuries, and that we should honestly recognize and address them. Aberrant Capitalism looks at one of the major protagonists of capitalism, the corporation—a recent and timely innovation that enabled the creation of value at new levels of scope and scale. We review the golden age of the corporation from roughly 1855 to 1914, noting that the so-called Robber Barons like Rockefeller and Carnegie were actually the "good guys" - owner-entrepreneurs who employed their own capital to bring affordable illumination, transportation, nutritious food, and productive tools to a burgeoning population spreading out over a wider and wider geography. The result was greater well-being: better health and education, more comfort and convenience, higher productivity, and greater social cohesion. After World War 1, entropy began to erode the resilience of the system. Central planning from the war economy infiltrated both the private sector and the peacetime government, and World War II exacerbated the problem. Executives who headed war boards transferred their methods to the private sector in the form of strategic planning and command-and-control hierarchy and bureaucracy. Then, the financialization of business took hold - when customer value was superseded by shareholder value, i.e., production primarily for the sake of making money for shareholders rather than primarily creating new value for customers. At the end of the twentieth century, corporate capitalism was truly aberrant. But there is hope that customer sovereignty will return. The new companies of the digital age have new business models that connect them directly to the customer via networks, and change can be introduced from the outside in. We demonstrate how this can occur, but with the caveat that the new digital corporations must shed the aberrant processes and methods of the previous century.