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This chapter provides an introduction and overview. This book aims to make it clear that along with the shift from the managed economy to the entrepreneurial society, must come a reassessment of institutions and government policies, and the paths that individuals take to attain a viable and successful life. During the post-war era of the managed economy, the direction, energy, and pulse of society remained fixed on the large corporation. Individuals, particularly young people, viewed large corporations as the source of jobs and opportunities. Globalization destroyed the managed economy. What generated unprecedented wealth and job creation for Americans were new industries, such as computers, software, information technology, biotechnology, financial, health, and educational services. Many of these new industries were created by new firms started by entrepreneurs. This book provides a framework for understanding how and why the driving force underlying the economy has fundamentally changed. Such a framework is useful for understanding why such problems have become exacerbated and for creating new approaches and solutions.

This chapter explains the era and institutions of the managed economy. Emerging from the Second World War, the United States found itself almost alone with a relative abundance of the factor that mattered the most for growth, jobs, and prosperity — capital. During the era of the managed economy, it was first and foremost capital that mattered, and everything that helped it — machines, factories, and labour which would work it and organize it. With the dazzling unprecedented post-war prosperity pouring out of US factories and plants, transforming first a country overcome by economic depression following a country at war, there seemed to be plenty enough for every American to go around.

This chapter first explains why post-war internationalization, which was the precursor to globalization, eroded the effectiveness of the managed economy. Globalization rendered the ability of public policy to control the external environment in which large corporations were operating and competing ineffective. When competition was primarily domestic, firms, markets, and industries could be managed to enhance targeted firms. With the emergence of global competition, such management of competition no longer works. The chapter documents the shift in competitiveness of leading developed countries, such as the United States and Europe, away from physical-capital based industries and towards knowledge and ideas. As a result of globalization, Europe, like the United States, lost competitiveness in the traditional manufacturing industries. Globalization made it first possible and then essential to locate new investments in capital, that is in factories, plants and establishments, not only in Eastern and Central Europe, but increasingly in Asia, especially China and India. Unless large western firms increasingly located production outside of high-cost Europe and in low-cost regions such as Asia, they would no longer be able to compete in globally linked markets.

The goals of the managed economy were maintenance of Britain's power and influence, full employment, stable prices, a sound balance of payments, and increased prosperity. Effective management of the economy depended upon effective control of public expenditure, the level of which limited the scope for tax reliefs, although Treasury officials were keen to reduce high rates of direct taxation so as to encourage enterprise and investment in the private sector. Inflationary influences in the economy included the boom in private investment from 1954 to 1957 and trade unionists' demands for higher wages. The traditional system of public finance was under strain, and it is not surprising that at the end of the 1950s the Treasury should have been seeking ways in which to improve its control over expenditure.

This chapter presents a proposal to promote firms run by their employees and extensive employee involvement in the governance of conventional firms. Democratic firms build up capital for future generations, keep more profit in the firm, and have more powerful incentives to keep the firm in operation in the medium and long term than investor-owned firms. They involve younger generations in decisions. Although labour-managed firms may not necessarily be environment-friendly without appropriate regulation, their negative impact is likely to be lighter than that of conventional firms. Democratic firms may also indirectly benefit future generations by limiting unchecked firm growth and the loss of skills and jobs that can have dramatic compounded effects on communities far into the future. Labour-managed firms are efficient, but incentives for individual entrepreneurship may have to be retained in a labour-managed economy. Multi-stakeholder governance is proposed in sectors that are not appropriate for private ownership.