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American Capitalism Redux

But for how long

"The American system is universal," a Wall Street Journal editor told us recently. "When Europeans comes to their senses they will adopt the system 100%."

Oh how times can change! In the 1980s our bookshelves stocked works such as Theory Z or The Art of Japanese Management: Applications for American Executives. These frantic tomes warned us about how we short-sighted North Americans needed to borrow the then-triumphant Japanese model. We all know what happened next. When the Japanese bubble burst in 1989 the triumphant march of American capitalism resumed.

Or so we have been told.

Today’s economic pundits debate such questions as: Should the industrial world-- Canada included--become American to the point where we faithfully copy their management styles and economic methods? One of us taught business at Oxford University these last five years and has seen first hand how this question has been debated by knowledgeable Europeans on a frequent basis.

What’s needed is the long view—a very long view.

People have been buying and selling for almost 6000 years. Economic history did not begin in 1776 or 1945. The Canadian style of business, with its mixed economy of free and crown enterprise, hearkens back not just to the heyday of the British colonial empire but back beyond that—back to Rome, Greece, and the ancient Near East.

Does that sound far-fetched? Not at all. As one wag put it, when Adam and Eve took the apple the garment industry was born. But seriously, for thousands of years nations and empires have prospered in spite of some very un-American ways of doing business. A long range view can engender a little humility, and—in business, as in life--a little humility rarely hurts.

For starters, market investments, registered business transactions and contracts, and even CEO's, partnerships, branch-plants and investors date way back beyond 2000 BC. In what is now Iraq, the ancient Sumerians started the first capitalist economy. Farmers owned their own land and grew wheat for export, while metalworkers made weapons and tools that helped protect the first city-states. Temple priests were the first bankers and their scribes the first chartered accountants utilising clay tablets as ledgers. These original Sumerian merchants were the first CEO's, trading wheat and textiles as far afield as India, Egypt, and Turkey.

What about the first multinationals? These originated with Assyrian and Babylonian family businesses led by CEO's with such unlikely names as Pusu-Ken who set up his sons and nephews as branch mangers in such outposts as the Persian Gulf and Turkey. Designing women, such as Lamassi and Ana-é also made the history books. These activist marketeers often lived and worked apart from their husbands for months at a time, an arrangement regarded as advanced even by today’s standards.

What about the Japanese model or our Canadian crown corporations? Anything new here? Hardly. Canaanite traders in such thriving centers as Ugarit, Tyre, and Carthage had similar arrangements going before Hannibal was a pup. For over one thousand years, crown-supported shipping companies throve and prospered and supported other merchant adventurers much like Elizabeth I would do much later. In these ancient Mediterranean port cities bigger merchants had honour-bound relationships with smaller ones much like the Japanese keiretsu system today, where companies such as Mitsubishi have special ties with their banks and suppliers.

Meanwhile the Carthiginian Navy was actively involved in commerce and their admirals were more like CEO's. The temples of Baal, of biblical fame, collected intelligence on overseas markets and doubled as banks and warehouses. Trade in Tyre was supervised by a no-nonsense harbourmaster who restricted foreign investors. By 700 BC Tyre, Inc. ran subsidiary operations from Spain to Babylon, all joined together by a network of temples and aristocrats.

How about the free market system? Was this the product of Puritan Yankees or the Fortune 500? Nope. The ancient Greeks were the world’s first entrepreneurs. The freedom loving Greeks enjoyed a limited, tolerant government and pioneered the rights of citizenship and property for us all. In the teeming little city-sates most freemen were equal before the law and even slaves had some protection. There are records of imported slaves who worked their way from rags to riches, becoming banking and armament tycoons along the way. Lean--and sometimes mean--independent Greek traders cut into lucrative Canaanite markets and launched banking and insurance business wherein private contracts replaced personal and temple loyalties.

What about limited liability, company law, and mass production? These are all gifts from the Romans. The Romans put together big companies based on partnerships of shareholders. They were run by directors called magistii who elected a CEO called a manceps. If the manceps died, the firm just selected a new one, and its contracts still stood, as with today’s corporation. Roman companies became rich making togas, shields, swords, and warships to equip the far-flung legions or by collecting taxes.

Many Roman firms were family run, such as the Sestii wine business or the brick business of the Emperor Domitian. Roman companies also pioneered in mass production of jugs and lamps and prefabricated many of their monuments and buildings. Roman senators created a whole body of business law to regulate these companies, from which we ultimately derive our notion of the corporation.

And what of today’s buzzword—globalization. Is this new? Two millennia before New York led the garment industry, the Chinese exported silk through Iran and India where it could be traded for Roman wine. The Chinese State, once hostile to markets, soon took to them with a unique form of family capitalism, which endures today. Some of their natural law thinkers helped inspire the theories of Adam Smith. The Indians also encouraged a mixed socialist economy where business was done by an entire trader caste. One of India's writers, Kautilya, recorded and advocated a form of supply-side economics. As Marco Polo well knew, this global trading regime stretched, by the first century A.D., from Cadiz in Spain to Canton in China.

The American model fits today’s post-World War Two version of free trade rather nicely. Being built on the dollar it forces foreign managers to more-or-less play the shareholder game. But they play it by their own rules. Canadians, Germans, Japanese, and others, will strive to be leaner economies but not much meaner. The American system of painful downsizing and costly manpower-trimming fails to entrance in Helsinki and Hampshire. Many economists in London, Antwerp and Dusseldorf are willing to bet that nations less-dependent upon stock market vagaries and with social safety nets intact will prove more socially stable in the face of economic downturns.

In recent times the world has celebrated first the Japanese, then the Chinese, now the American model. By 2010 could we be celebrating the Finnish, the German, or maybe the Canadian model? In the long run of business history it doesn’t look impossible.

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