You’ve always got to start somewhere, so I think I’ll start as the nineteenth century was turning into the twentieth. As the scale and technical complexity of production increased, the previously existing world of businesses that were run either as sole proprietorships or small partnerships were inadequate to the task. They gave way to what would become the large, professionally managed corporation, many of which were assembled from smaller pieces by the likes of J. P. Morgan. Morgan hated competition as a destructive force, and while his preference for private monopolies controlled by the likes of him is not our social ideal, neither should we romanticize the old world of small competitive firms.

In his book on the Morgans (which I reviewed long ago, here), Vincent Carosso quotes an unnamed socialist observing on J. P.’s death: “We grieve that he could not live longer, to further organize the productive forces of the world, because he proved in practice what we hold in theory, that competition is not essential to trade and development.” Competition has never been a socialist virtue.

These new large firms were marked by what later would be called the separation of ownership from control. The official owners were outside investors, stockholders, who could sell those shares to other investors if they liked but they had little influence over corporate policy. That was set by an increasingly professionalized caste of formally trained managers. The first US business school, University of Pennsylvania’s Wharton, was founded in 1881, and over the next couple of decades others sprang to life, including Harvard’s in 1908. The professionals’ victory wasn’t complete; financial operators still played a big role in what we call today corporate governance — how firms are run and for whom.