"Big Corporations Almost Never Lose Money"
That’s an actual quote from Galbraith’s New Industrial State. And somehow the last two years are supposed to show that Friedman was out of touch with reality? I’m speechless, but fortunately Amar Bhide gives me a rhetorical bail-out in F2P2:
Arnold Kling and Nick Schulz: There was a time in economics and management circles where people believed that large corporations were, in a sense, omnipotent. As John Kenneth Galbraith once put it, “The big corporations do not lose money.” But there has been a sea change in the perception of large firms, which were once thought to be so powerful. What are some of the things that have forced that change in perception?
Amar Bhide: Companies are not exactly like human beings, but they do have an inherent tendency to decay and die, and I think Galbraith was looking at these firms in their middle-age. We didn’t have three hundred years of history when Galbraith was looking at these firms. The game had not fully played itself out.
In a capitalist society, and particularly the American capitalist society, there is a very strong pressure to either grow or die. You cannot sit still. No matter how large you’ve become, there’s a great deal of pressure from the labor markets, from the capital markets, from your customers, to keep growing. And there’s a point in which it is literally impossible to grow, or it’s virtually impossible to grow. What I think of as the inevitable mortality induced by this grow-die imperative had not played itself out by the 1950s.
P.S. While we’re on the subject of big corporations losing money, check out EW‘s enlightening cover story on the 50 Biggest Bombs in the history of television. People don’t buy stuff just because it’s in stores, and they don’t watch it just because it’s on the air. The bigger they are… you know the rest.