Fifty Things that Made the Modern Economy

by Tim Harford

Part of the explanation is surprising: government regulators cleared a niche for them. The Glass-Steagall Act of 1933 was a far-reaching piece of American financial legislation. Among many provisions, Glass-Steagall made it compulsory for investment banks to commission independent financial research into the deals they were brokering; fearing conflicts of interest, Glass-Steagall forbade law firms, accountancy firms and the banks themselves from conducting this work. In effect, the Glass-Steagall Act made it a legal requirement for banks to hire management consultants. For a follow-up, in 1956 the Justice Department banned the emerging computer giant IBM from providing advice about how to install or use computers: another business opportunity for the management consultants.