THE COMPANY

Is the corporation a soulless and soul-killing construct, an instrument of unmitigated evil, as Genoese streetfighters and latter-day Naderites are wont to argue? Not necessarily—and not even usually—write two Economist reporters.

Whoever came up with it—and several nations and times can lay claim to it—the company is a brilliant idea. From the outset, the creation of a business entity that had some of the rights, and some of the traits, of an individual person allowed cash-strapped governments to secure the wherewithal for projects ranging from securing shipping lanes to conquering half the world, and it allowed single investors to form blocs and gain wealth unattainable to anyone without a cannon. Some of the earliest companies, write Micklethwait and Coolidge, were quasi-governments in themselves. The British East India Company, for instance, commanded a private army a quarter of a million soldiers strong, far larger than the British army. The Virginia Company transported goods to and from the American colonies while encouraging democratic ideas that helped get the king’s hand out of the till—for which reason James I called the firm “a seminary for a seditious parliament.” Fueled by a logic that the economist Ronald Coase identified as the desire to minimize the transaction costs involved in coordinating a particular economic activity—get everyone under one roof, and coordination is a breeze—such companies grew and diversified, yet did not become giants until the late-19th and early-20th centuries, when master planners such as James Buchanan Duke, the tobacco giant; Thomas Watson, the paternalistic founder of IBM; and the good folks at Procter & Gamble pulled together to corporatize all aspects of society—in the case of the last, the authors wryly remark, also “ruining modern culture by creating the soap opera.” Yet, they argue, despite widespread fears to the contrary, big corporations are steadily losing their power, while small ones—and there are more than 5.5 million in the US alone—are becoming the norm, allowing for healthy diversity and even doing some good.

An entertaining and even charming excursion in business history, largely unburdened by formulas and numbers but full of debate-stirring data all the same.