Economic History Association
Factory Size, Economies of Scale, and the Great Merger Wave of 1898-1902
Author(s): Anthony Patrick O'Brien
Source: The Journal of Economic History, Vol. 48, No. 3 (Sep., 1988), pp. 639-649
Published by: Cambridge University Press on behalf of the Economic History Association
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Factory Size, Economies of Scale, and
the Great Merger Wave of 1898-1902
ANTHONY
PATRICK O'BRIEN
Analysis of census data reveals that the size of the average factory in the United
States grew more rapidly during the 1870s and 1880s than during any subsequent
decade through the 1920s. While the average factory doubled in size between 1869
and 1889, it increased by only about a quarter between 1899 and 1929. These
results support the view that the reaping of economies of scale was not an
important motive for the great merger wave.
here are two views on the importanceof the mergerwave of 1898to
1902 in the evolution of the industrial structure of the American
economy. The first holds that duringthe 1870sand 1880sthe completion
of basic economic infrastructureand the appearance of important
technological and organizationalinnovations led to an increase in the
minimumoptimalscale of plants in many manufacturingindustries.The
result was the developmentof large firmsand an attendantoligopolistic
structure.The mergerwave, in this view, was a temporaryacceleration
in the growth of firm size and in industrial concentration and was
motivated by a desire for horizontalcombinationto suppress competition-especially price competition.' It was dependentmainly on events
in the immediatelyprecedingperiod, particularlythe depression of the
1890s, the spreadof generalincorporationlaws, and the development of
tradingin industrialsecurities on the New York Stock Exchange. The
other view sees the mergerwave as a structuralchange. More stress is
placed on the existence of previously unexploited economies of scale,
and, consequently, the rise of large factories is said to date from this
T
period.2
New data on the timingof increases in factory size, discussed in detail
below, indicate that the first view of the mergerwave is correct. If the
merger wave was primarilymotivated by the existence of unexploited
economies of scale, it would, presumably,have been followed by large
increases in the size of the average plant or factory (and, most likely,
permanent or long-lived increases.in concentration). If, on the other
changes in manufacturhand, the most importantstructure-determining
TheJournalof EconomicHistory, Vol. XLVII1,No. 3 (Sept. 1988).C The Economic History
Association. All rightsreserved. ISSN 0022-0507.
The authoris Assistant Professorof Economics, College of Business and Economics, Lehigh
University. Bethlehem.PA 18015.
1 The most recent statementof the positionthatthe mergerswere motivatedmainlyby the desire
o suppressprice competitionappearsin Naomi R. Lamoreaux,The GreatMergerMovementin
imerican Business, 1895-1904 (Cambridge, Mass., 1985), esp. chap. 4.
2 See
the referencesgiven below.
639
640
O'Brien
ing had taken place earlier, in the 1870sand 1880s, and if these changes
had already been exploited, then increases in average plant or factory
size should have been greaterduringthe 1870sand 1880sthan duringthe
period of the mergerwave.3
I. THE OPPOSING
VIEWS
Some good reasons exist for doubtingthe importanceof the long-run
impact of the merger wave. J. Fred Weston, after considering the
meager evidence on the state of industrialconcentrationprior to 1890,
warned that: ". . . care should be exercised to avoid exaggeratingthe
effects of the early mergermovements on industrialconcentration." He
concluded that many of the firms involved in the merger wave were
already large absolutely and relative to their markets and that "appreciable concentration" already existed prior to 1898.4
Many firms created during the merger wave subsequently failed.
Shaw Livermorecompiled a list of 156consolidationsduringthe period
1890 to 1905 that "could rightfully claim to be mergers with power
enough to influence markedly conditions in their industry. . . ." Of
these, 63, or 40.4 percent, failed financially;53 failed within 10 years of
being founded; and another 17 were only "limping" successes. A
second groupof 172less importantmergerscontained78 failures and 11
limpingsuccesses.5 Similarly,George Stiglerestimatedthat for a sample
of 19 manufacturingindustries, 14 experienced substantialdecreases in
concentrationbetween 1904and 1937, 4 experienced minor changes in
concentration, and only one-the automobile industry-experienced a
substantialincrease in concentration.6There is also some aggregatedata
available. G. Warren Nutter estimated that 32.9 percent of national
income originatingin manufacturingin 1904was producedin industries
whose four largestfirmsaccounted for 50 percent or more of sales some
I There is a possibilitythat economies existed in the late 1890sthat could have been reapedby
combiningseveral independentlyowned plants into one firm, withoutexpandingthe size of any
individualplant. The reapingof multi-planteconomies has never been proposedas an important
motive behindthe mergerwave. For instance,the distributionaland organizationalchangesAlfred
Chandlersees as importantsources of efficiencygains in the evolutionof the modem corporation
do not requirea multi-plantorganization.Furthermore,the carefulanalysis by F. M. Schererand
in the post-WorldWarII period
his colleaguesof multi-planteconomiesin Americanmanufacturing
has found them to be quite small. F. M. Scherer, et al., The Economics of Multi-Plant Operation:
An International Comparisons Study (Cambridge, Mass., 1975).
'J. Fred Weston, The Role of Mergers in the Growth of Large Firms (Berkeley, 1953), p. 103.
5 Shaw Livermore,"The Success of IndustrialMergers," QuarterlyJournalof Economics, 49
(Nov. 1935), pp. 68-96. There are some curious discrepanciesin Livermore's account of the
numberof firmsincludedin this primarygroup. On p. 72 the numberis given as 157. On p. 75,
directlyabove table 1, the numberis given as 159. In the table the numberis 156. In appendixA
only 155firmsare listed.
6 George J. Stigler,Five Lectures on Economic Problems (New York, 1950),p. 53 and table 4,
p. 62.
Great Merger Wave
641
time between 1895 and 1904.7In 1935, the first subsequent year for
which a comparableestimate is possible, 20.4 percent of all value added
in manufacturingoriginated in industries whose four largest firms
accounted for 50 percent or more of sales.8 This is a substantialdecline
in concentration.
Two recent studies support the view that economies of scale played
only a minorrole in the mergerwave. John James estimated production
functions for a small group of manufacturingindustries during 1850 to
1890.9The rate of labor-saving technological change, he found, was
greater in industries in which concentration increased significantlyat
the end of the century than in industries in which it did not. He
concluded that at least part of the increase in concentration that had
occurredby the end of the century was due to increases in optimalfirm
size.10 James is not clear, however, in specifying whether or not
economies of scale were largely reaped by 1890, in which case they
could not have caused the mergerwave. The extent of the labor-saving
technologicalchange James identifiedas having occurredpriorto 1890,
leads one to suspect that the fundamentalstructuralchanges in American manufacturingdate from thatperiod. A similarimpressionis gained
from readingAlfred Chandler'snow-celebrateddiscussion in The Visible Hand. Chandlerargues that the large, integratedmodern business
enterprisebased on high-volume,continuous-processproductiontechnologies or on marketing and distributionalinnovations had already
appeared during the 1880s in industries such as food processing,
chemicals, petroleum, primarymetals, machinery, and transportation
1
equipment.
Despite evidence to the contrary,the view that the mergerwave was
7F. M. Scherer, Industrial Market Structure and Economic Performance (2nd edn., Boston,
1980), p. 68. Calculated from data in G. Warren Nutter, The Extent of Enterprise Monopoly in the
United States, 1899-1939: A Quantitative Study of Some Aspects of Monopoly (Chicago, 1951),
table 39, p. 147.
8 Calculatedfrom data in U.S. Bureauof the Census, Census of Manufactures:1935 (Washington, D.C., 1938); and in United States National Resources Committee, The Structure of the
American Economy, Part I, Basic Characteristics (1st edn. 1939; reprinted New York, 1966),
appendix7.
9JohnA. James, "StructuralChangein AmericanManufacturing:
1850-1890,"this JOURNAL, 43
(June 1983),pp. 433-59.
11James'scalculationsof optimalfirmsize indicatethateconomiesof scale by 1890hadresulted
in naturalmonopoliesor naturaloligopoliesin distilling,flourand meal, pig iron, and iron-rolling
mills, while the chemicals, machinery, meat packing, and soap industries, all of which were
concentratedat the end of the century,mighthave remainedcompetitive.Whateverthe accuracy
of James'sparticularestimates,clearlysome but not all mergeractivityhadits roots in the ongoing
process of capital deepeningand increases in optimalplant size. The argumenthere is that the
period of most rapid capital deepening and increases in plant size considerablyantedatedthe
mergerwave.
11Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business
(Cambridge,Mass., 1977),pp. 337-38; and "The United States: Seedbed of ManagerialCapitalism," in AlfredD. Chandler,Jr. and HermanDaems, eds., ManagerialHierarchies:Comparative
Perspectives in the Rise of the Modern Industrial Enterprise (Cambridge, Mass., 1980), pp. 28-29.
642
O'Brien
of lasting importancehas many adherents. Ralph Nelson notes: "[The
merger wave] transformedmany industries, formerly characterizedby
many small and medium-sizedfirms, into those in which one or a few
very large enterprisesoccupied leading positions."'12 Economic history
textbooks, usually good reflections of the prevailing views among
economic historians, also emphasize the importance of the merger
wave. Several offer numericalestimates indicatingthat the rise of large
factories dates from the merger period. According to Robert Puth,
employment in the "average productionunit" in American manufacturing tripled between 1900 and 1920. Albert Niemi states that the
number of employees per manufacturingplant quadrupledduring the
same period, while Ralph Grey and John Peterson state it increased by
50 percent.'3 Although differingin detail, these accounts all reflect the
sense that average factory size increased slowly to 1900 and then
rapidly.
During the last decade criticism of the Department of Justice for
undervaluingthe efficiency gains from mergers has increased.'4 The
economists making this criticism have tended to see important efficiency gains from the great mergerwave. Yale Brozen argues that the
failureof the federalgovernmentto forestallthe mergersof 1898to 1902
benefited the economy and that a vigorous antimergerpolicy would
have forestalled substantialincreases in efficiency:
Concentratedindustries become concentrated (and some firms become and remain
"dominant")because that is the road to greater efficiency and lower costs in those
industries.... The increased concentrationbroughtabout by substantialhorizontal
mergers [early in the century] lowered prices relative to those in industries where
concentrationwas not increasedby mergers.'5
12
Ralph L. Nelson, Merger Movements in American Industry, 1895-1956 (Princeton, 1959), p. 5.
Nelson doubts that scale economies playeda significantrole in the mergers;see pp. 103-4.
13
RobertC. Puth,AmericanEconomicHistory(New York, 1982),p. 246;AlbertW. Niemi, Jr.,
U.S. Economic History (2nd edn., Chicago, 1980), p. 85; Ralph Gray and John M. Peterson,
Economic Development of the United States (revised edn., Homewood, 1974), pp. 338-39.
14
See, for instance, RichardA. Posner, AntitrustLaw: An Economic Perspective (Chicago,
1976); Robert H. Bork, Antitrust Paradox: A Policy at War with Itself (New York, 1978); Sam
Peltzman,"The Gains and Losses from IndustrialConcentration,"Journalof Law and Economics, 22 (Apr. 1979), pp. 191-208; and Yale Brozen, Concentration, Mergers, and Public Policy
(New York, 1982).
15 Brozen, Concentration,pp. 11, 65 (emphasisin original). In makingthis assertion Brozen
relies on a 1929 National IndustrialConference Board study. This study shows that for 16
industriesin which significantconsolidationshad taken place, wholesaleprices fell by an average
of 13 percentbetween 1900and 1913,while for 17industriesin which no importantconsolidations
had taken place, wholesale prices rose by an averageof 11 percent. Brozen interpretsthe price
declines as resultingfrom the cost reductionsmade possible by merger.A more likely interpretation is that they representthe erosion over time of the supracompetitiveprices the consolidations
had been able to charge.The latterinterpretationis consistentwith the workof DariusGaskinson
dominantfirm pricing.Darius W. Gaskins, Jr., "Dynamic Limit Pricing:OptimalPricingunder
Threatof Entry," Journalof Economic Theory,3 (Sept. 1971),pp. 306-22.
Great Merger Wave
643
Althoughtheir reasons differ, the authorscited above see the merger
wave as a watershedevent in which legal consolidationmade possible a
permanentlyaltered industrialstructure.
II. NEW MEASURES
OF FACTORY
SIZE
New measures of the timing of increases in factory size in American
manufacturingindicate that it is unlikely the typical consolidation
formed duringthe mergerwave took advantageof previously unreaped
economies of scale. The conventionalmeasureof factory size is its level
of physical output (on the assumptionthat it is producingat capacity).
A difficultyarises, however, in using census data on value of production
(or value added) per factory because complex price level and relative
price adjustment problems arise (especially when, as here, disaggregated measures are also needed).
Average capital stock per factory and the average level of employment per factory are alternative measures. The former might be
preferred, because the usual account of economies of scale in late
nineteenth-centurymanufacturinginvolves a process of rapid capital
accumulation."6There are, however, two problems with the census
capital stock data. One is they, too, require deflation; although the
difficultyis not as great as with the value of productiondata, errors of
unknown magnitudemay be introducedinto the analysis. The greater
problem lies in the fundamentalunreliabilityof the capital stock data.
Every census duringthe periodcontains warningsabout the accuracy of
the reported capital stock figures.17
The most reliable measure of factory size would seem to be average
employmentper factory.18 The measureis not without problems. Using
average employment of wage earners per factory as a measure of
minimumoptimal scale of productioncould lead to misleadingresults if
labor-savingtechnologicalchange caused the minimumoptimalscale as
measuredby volume of productionto increase without a corresponding
increase in employment. In that case rapid increases in manufacturing
output would be observed duringperiods when employmentgrew little.
In fact, as discussed below, factory size as measured by wage earner
employment grew more rapidly during the 1869 to 1879 decade than
during the 1889 to 1899 or 1899 to 1909 decades, while, according to
John Kendrick's estimates, output per worker in manufacturinggrew
more rapidlyin the latter decades. Hence, the main aggregateresults of
this article cannot be artifacts of the effects of labor-savingtechnolog16 See
17See,
James, "StructuralChange."
for instance, U.S. Bureau of the Census, Ninth Census of the United States: 1870
(Washington,D.C., 1872),p. 381; or U.S. Bureauof the Census, TwelfthCensus of the United
States: 1900(Washington,D.C., 1902),pp. xcvi-cii.
1 The only data on employmentavailablefor each census are for wage earners.
644
O'Brien
ical change.'9 Furtherreassurancecomes from the work of Louis Cain
and Donald Paterson. Their work allows a rankingof eighteen two-digit
SIC industries by the extent of labor-savingtechnical change experienced between 1850and 1919.20These industriesmay also be rankedby
increases in the average employment of wage earners per factory
between 1869and 1919.21The two rankingsare strongly and positively
correlated, indicatingthat even over a long period of time and focusing
exclusively on labor-saving change, the more rapid technological
change was in an industry, the largerthe increase in wage earners per
factory.22
Two potential difficultiesarise in using the census employment data
for factories. First, the census collected data on "establishments" not
"factories." In all censuses during the period, data on two or more
factories owned by the same firmand located in the same county were
reportedas a single establishment,but, as is discussed below, this is not
a problem.23Anotherpossible difficultyis that the census twice changed
the types of establishments enumerated. Prior to 1904, the census
included production taking place outside of factories in "hand and
neighborhood"industries.24Beginningin 1904,only factory production
was included. I therefore exclude from the estimates industries with
significant production in hand and neighborhood industries. Prior to
1914, establishments producing output valued at $500 or more were
included. Beginning in 1914, the lower limit was raised to $5,000. 1
handle this problem by constructing two sets of index numbers for
factory size, one from 1869to 1914and anotherfrom 1914to 1929. The
two indexes are linked in 1914 when the change in enumeration
occurred.
Table 1 presents informationon averagenumbersof wage earnersper
establishment. The importance of the changes in census coverage is
evident. An index of factory size computedusing the data is given in the
last column. The index is not reliable for years prior to 1899 because
movements in it may be produced by changes in the hand and neighborhood industries. Eliminatingthe hand and neighborhoodindustries
from the census data leaves 171 industries for which data on factory
"9John W. Kendrick, Productivity Trends in the United States (Princeton, 1961), p. 465.
rankingis based on the size of the regressioncoefficientsreportedin table I of Louis P.
Cain and Donald G. Paterson, "Factor Biases and Technical Change in Manufacturing:The
AmericanSystem, 1850-1919,"this JOURNAL, 41 (June 1981),pp. 341-60. It should be noted that
because Cain and Patersonmake use of census capitalstock data, their estimates are suspect.
21 Using the groupof 171 industriesdescribedbelow.
22 The rankcorrelationis .477, which is significantlydifferentfrom zero at the 5 percentlevel.
23 See, for instance, U.S. Bureauof the Census, Twelfth Census of the United States: 1900, vol.
7, p. lxii.
24 "Establishmentsengaged in the so-called neighborhoodindustriesand hand trades, such as
blacksmithing,harnessmaking,and tinsmithing,in which little, if any, power machineryis used,
and which usuallydo only a local business." U.S. Bureauof the Census, FourteenthCensusof the
United States: 1920(Washington,D.C., 1923),vol. 8, p. 9.
20
Great Merger Wave
645
TABLE 1
WAGE EARNERS PER ESTABLISHMENT,1849-1929
Census Hand and Neighborhood
Year IndustriesPlus Factories
1849
1859
1869
1879
1889
1899
1904
1909
1914
1919
1929
7.8
9.3
8.1
10.8
12.0
10.4
11.5
Factories with at Factorieswith at Index of Wage Earners
Least $5,000 in
per Establishment
Least $500 in
(1899 = 100)
Output
Output
22.7
25.3
24.6
25.8
38.9
42.0
41.9
75
90
79
104
115
100
111
108
114
123
123
Sources:The value for 1904in the second columnwas computedfromdata in U.S. Bureauof the
Census, Census of Manufactures:1905 (Washington,D.C., 1907),PartI, p. xxxvi. All the other
values were computedfrom data in U.S. Bureauof the Census, Census of Manufactures:1931
(Washington,D.C., 1935),pp. 19-20.
production are available for each census from 1869 to 1919.25The
average numberof wage earners per establishmentfor these industries
is given in the first row of Table 2.26 The second row of Table 2 is an
index of wage earners per establishmentcomputed from the pre-1899
values from Table 2 and the post-1899values from Table 1.27 This index
is probably the best measure of changes in factory size that can be
constructed from the available data.
The index reveals that almost two-thirdsof the increase in factory size
that was to take place between 1869 and 1929 had occurred by 1889well before the beginningof the mergerwave.28Transformingthe index
into average annual rates of change, given in the third row of Table 2,
shows that growth in establishmentsize was greatestin the 1869to 1879
and 1879to 1889decades. The result is consistent with the view that the
Americanindustrialstructureevolved largelybecause of the technolog25Thereis no way to construct a sample of industrieswith fully comparabledata across all
census years. In the absence of the manuscriptreturns for every census, there is no way to
eliminatefrom the pre-1914data establishmentswith productionworth less than $5,000.
26 The shipbuilding
industrywas excludedbecausethe largeincreasein its averageestablishment
size in 1919was clearly due to WorldWarI. Includingthis industrywould change the results as
given in the table as follows:
1869 1879 1889 1899 1904 1909 1919
10.95 15.69 21.88 23.12 25.88 24.62 31.06
27 Constructingthe index using only the datafor the 171industriesyields aboutthe same results:
1869 1879 1889 1899 1904 1909 1919
48
69
95
100 112 107 126
28The index shows that averagefactory size doubledbetween 1869and 1899and increasedby
about25 percentbetween 1899and 1919,contraryto the assertionsby Niemi, Puth, and Grayand
Petersonthat factory size was roughlyconstantpriorto 1900.
646
O'Brien
TABLE 2
WAGE EARNERS PER ESTABLISHMENT AND RATES OF INCREASE IN FACTORY
SIZE, 1869-1919
171 industries
Indexb
Average annual rate of
increase in
factory size'
a
1869
1879
1889
1899
1904
1909
1919
10.92
48
15.79
69
21.88
95
22.96
100
25.73
111
24.58
108
29.01
123
1869-1879
1879-1889
1889-1899
1899-1904
1904-1909
1909-1919
3.7%
3.2%
0.5%
2.1%
-0.5%
1.3%
Industries for which consistent data are available for each census from 1869 to 1919.
b The index is computed from the pre-1899 values given in the first row of this table and the post-
1899 values given in Table 1.
Computed from the index numbers given in the second row.
Sources: See text.
c
ical and organizationalinnovations of the 1870s and 1880s and that the
great mergerwave cannot be explainedby unreapedeconomies of scale.
There does appearto have been an accelerationin the increase in the
average numberof wage earnersper establishmentin the period 1899to
1904, following the mergerwave. But this does not indicate that newly
combined firmsexpanded to achieve minimumoptimal scale. First, the
period 1904 to 1909 witnessed a decline in the average employment of
wage earners per establishment.This is consistent with other evidence
concerningthe failureof many mergersundertakenduring1898to 1902,
suggestingthey did not benefitfrom scale economies. Second, a merger
involving firmsproducingthe same productin the same locality would,
given the census definition of establishment noted above, reduce the
numberof reportedestablishments,even if no physical consolidationof
establishmentshad taken place. Hence, some of the measuredincrease
in factory size is illusory because some factories that continued to
produce were dropped from the census returns. This thesis can be
assessed using the 171 industriesfor which full informationis available
for all census years between 1869 and 1919. Of the 53 industries that
experienced their greatest increase in wage earnersper establishmentin
the 1899 to 1904 period, almost 70 percent experienced a decrease in
establishments. Only 49 percent of industries that experienced their
greatest increase in wage earners per establishmentduringsome other
period experienced a decline in reportedestablishmentsfor that period.
The differencebetween these two proportionsis statistically significant
at the 1 percent level.
It is by no means clear that the mergerwave was the dominantfactor
increasing factory size even in the 1899 to 1904 period. Table 3 ranks
thirteen two-digit SIC industries by increases in wage earners per
establishmentand by relative mergeractivity. Althoughthe coefficients
of rankcorrelationbetween increases in wage earnersper establishment
Great Merger Wave
647
TABLE 3
CORRELATIONBETWEENINCREASESIN FACTORYSIZE AND MERGERACTIVITY
Rank by Rate of Increase Rankby MergerCapital Rankby FirmDisappearances
in Wage Earnersper
as Percentageof
in Mergersas Percentageof
Two-Digit
Establishment
IndustryCapital
IndustryEstablishments
SIC
(1899-1904)
(1895-1907)
(1895-1907)
Industry
(1)
(2)
(3)
20
21
22
24,25
26
27
28
29
31
32
33
35,36
37
11
10
8
4
3
13
12
7
6
2
9
5
1
8
6
10
11
4
12
5
13
9
7
1
3
2
11
3
10
12
4
13
6
5
9
8
1
7
2
Notes: The coefficientof rankcorrelationbetween columns 1 and 2 is .264. The coefficientof rank
correlationbetween columns 1 and 3 is .253. Two-digitSIC industriesare given in Table 4.
Sources: Columns 2 and 3 are from Ralph L. Nelson, Merger Movements in American Industry,
1895-1956(Princeton,1959),p. 171.No dataare availablein Nelson on SIC numbers23, 30, 34, 38,
or 39. Nelson combinedSIC numbers24 and 25. I combinedSIC numbers35 and 36.
and each of the two measures of mergeractivity are positive, neither is
statistically significant.To point out two particularinconsistencies, the
table indicates that while the primarymetals productsindustry(SIC 33)
experienced the most merger activity, there was no corresponding
increase in average factory size. Conversely, the stone, clay, and glass
products industry (SIC 32) experienced a large increase in average
factory size, while undergoinglittle mergeractivity.
The results from consideringthe manufacturingsector as a whole are
reinforcedby data disaggregatedat the two-digit SIC industry level.29
These data are presented in Table 4 and indicate that in all manufacturing industriesin which, accordingto Chandler,large integratedmodern
business enterprises were most characteristicallyfound, factory size
increased more rapidly before 1889 than after.30This is not surprising
because many of the technological innovations that allowed for the
initialdevelopmentof largefirmsin these industriesappearedduringthe
29 The distributionof census industriesamongcurrenttwo-digitlevel classificationsis consistent
with the categorizationin Albert W. Niemi, Jr., State and Regional Patterns in American
Manufacturing:1860-1900(Westport,1974).
30The industries referred to are: food processing, chemicals, petroleum, primary metals,
machinery,andtransportationequipment;see Chandler,"Seedbedof ManagerialCapitalism,"pp.
28-29; and Cainand Paterson,"FactorBiases," p. 354, fn. 24. In most of these industriesfactory
size actually increasedfaster between 1889 and 1899than between 1899 and 1909. Thus, even
Chandlerwould seem to have overestimatedthe efficiency gains from the merger wave; see
Chandler,The VisibleHand, pp. 331-39.
O'Brien
648
TABLE 4
WAGEEARNERS PER ESTABLISHMENTBY 2-DIGITSIC INDUSTRIES, 1869-1919
Industry
Food and kindredproducts(20)
1869
1879
1889
1899
1904
1909
1919
5.86
8.70
8.99
8.12
7.74
8.86
123.49
65.35
26.42
30.23
17.43
17.48
46.26
37.55
52.17
50.14
11.94
8.26
16.72
18.72
59.97
35.49
404.05
32.04
43.96
21.93
252.46
216.38
34.40
32.92
8.53
8.24
9.47
145.66
73.28
34.34
37.71
20.38
20.41
43.16
36.28
62.67
60.05
12.64
8.00
16.14
19.36
65.55
39.84
553.39
39.12
49.67
30.50
298.62
236.17
37.30
36.55
7.79
7.96
10.54
153.27
71.76
35.53
39.14
16.94
17.06
39.97
32.88
66.59
62.76
11.94
8.34
15.19
18.47
68.66
40.02
568.58
40.17
53.81
35.13
316.57
247.23
34.67
34.39
10.03
11.52
15.27
148.25
49.68
28.10
30.49
18.50
18.79
42.83
33.34
86.23
80.72
11.08
9.01
19.98
26.55
107.22
53.80
967.53
46.09
54.50
48.44
432.62
322.31
39.95
38.73
48.35
54.77
55.51
71.72
53.64
10.89
35.97
36.91
29.12
22.32
20.12
61.96
13.98
52.98
51.50
40.81
28.73
24.98
67.65 112.16
12.80 9.77
62.14 151.50
47.58 51.22
41.04 45.17
27.67 27.75
24.27 24.63
Tobaccoaand tobacco products(21)
Textile mill products(22)
9.19
50.63
1-1.29 10.29
81.83 99.17
Appareland relatedproducts(23)
13.37
29.24
30.39
Lumberand wood products(24)
6.31
6.94
18.00
Furnitureand fixtures(25)
8.90
11.28
36.77
Paperand allied products(26)
24.83
33.04
41.23
Printingand publishing(27)
17.41
17.34
14.08
Chemicalsand allied products(28)
10.12
13.70
14.34
Petroleumand coal products(29)
12.25
43.37
46.26
5.60
8.71
20.09
Rubber and plastics products(30)
Leatherand leatherproducts(31)
Stone, clay, and glass products(32)a
Primarymetals products(33)
Fabricatedmetals products(34)
Machinery (35,36)c
Transportationequipment(37)
13.55 14.73 22.91
85.48 157.96 202.62
9.01
11.14
15.06
14.30
21.30
35.19
4.67
12.43
13.06
Instrumentsand relatedproducts(38) 19.73
32.35
37.48
Miscellaneousmanufacturing,
includingordnance(39)
16.55
18.08
a
13.66
No additionalindustrieswere includedin the 286-industrygroup.
bNo industrieswere includedin the 171-industrygroup.
c The "non-electricalmachinery"and "electricalmachinery"industrieswere combined.
Notes: The numbersin the first line for each industrywere calculatedfromthe 171industriesfor
whichcomparabledatawere availablein each census from 1869to 1919.The numbersin the second
line were calculatedfrom the 286 industriesfor which comparabledata were availablein each
census from 1899to 1919.
Sources: See text.
1870s and 1880s.31To repeat a ratherfamiliarroll call: duringthe 1870s
and 1880sthe rollermill was introducedin the processingof oatmeal and
31 In Chandler'sview, these innovationsincludecontinuous-processmachinery,which allowed
for mass production,and refrigeratedrailroadcars, which allowedfor mass distribution.Chandler
also discusses purely organizationalinnovations, such as the meat storage and retail delivery
systems set up by GustavusSwift.
Great Merger Wave
649
flour, refrigeratedcars in meat packing, the pneumaticmaltingprocess
and temperature-controlledtank car in brewing, and food preparation
and can-sealing machinery allowed for the mass productionof canned
meat, vegetables, fish, and soups. During the 1880s, the chemical
industrysaw the introductionfirstof the Solvay and then the electrolytic
processes in the productionof alkalis, and the discovery of the process
of producingacetic acid and acetates as byproductsof charcoalproduction. In the petroleum industry, John Merril's development of the
seamless wrought-iron or steel-bottomed still allowed for a sharp
increase in plant size between 1867 and 1873.32The 1870s saw the
development of the long-distance crude oil pipeline and the steel tank
car. In the 1870s and 1880s the Bessemer and open-hearthprocesses
were widely adopted in steel making. In the mid-1880s, new developments in electro-metallurgy made commercial mass production of
aluminumpossible. Duringthe same period, a large numberof mechanical and chemical innovations were devised that greatly facilitated the
process of refining and working various metals. The development,
beginningin 1880, of improved metal-workingmachinerybased on the
use of high-speed-toolsteel allowed for the productionof a wide variety
of better machines with finertolerances. The typewriter,invented in the
late 1870s, was mass produced duringthe 1880s. The electrical street
railwaycar came into widespreaduse duringthe late 1880s. In addition,
of course, the basic transcontinentalrailroad and national telegraph
networks-infrastructure necessary for the rise of firms capable of
distributingproducts on a nationalbasis-were complete by 1880.33
The conclusion, then, is that the role of the great mergerwave of 1898
to 1902 in the evolution of the American economy should be downplayed; instead greater emphasis should be placed on developments of
the 1870sand 1880s. Increases in concentrationduringthe mergerwave
were motivated more by the desire to reduce price competitionthan by
the desire to exploit scale economies. The contrary view is not
consistent with the extent to which increases in concentrationthat took
place from 1898to 1902in many industrieswere subsequentlyreversed
or with the estimates presented here on the growth path of average
factory size. It has not been previously recognized that in American
manufacturing,particularlyin the most modernand progressivesectors,
factories grew in size more rapidly duringthe 1870s and 1880s than at
any time thereafter, at least throughthe 1920s.
32 Harold F. Williamson and Arnold R. Daum, The American Petroleum Industry: The Age of
Illumination, 1859-1899 (Evanston, 1959), pp. 252-63, 273-75.
33 Except wherenoted, this paragraph
is basedon materialin Chandler,TheVisibleHand;Victor
S. Clark, History of Manufactures in the United States. Volume 2: 1860-1893 (1st edn. 1929;
reprinted New York, 1949); and Peter George, The Emergence of Industrial America: Strategic
Factors in American Economic Growth Since 1879 (New York, 1982).