David T. Bazelon here continues his discussion, begun last month, of our “Paper Economy.” The series will conclude in November with an analysis of the political issues involved.
America’s massive and bountiful corporations are the institutional bedrock of the Paper Economy under which we live, yet their very existence was for many years neglected, if not denied, by conventional thinking. The revolutionary issue they represent was lost somewhere between Adam Smith’s ideal irrelevancies and what was most often referred to as “the monopoly problem.” It is occasionally even funny that the self-exploitation of the small proprietor still lingers in our minds as a model of American enterprise, while the major corporations which supply most of our needs remain theoretical anomalies.
All this is now beginning to change, however, and a deeply significant discussion has commenced on the basis of two rather more realistic assumptions: (1) that ours is a corporate economy with each industrial or business area typically dominated by a few large organizations, which dominate no less effectively because they are not technical monopolies; and (2) that this rather obvious fact has a welter of far-reaching implications and is going to take an awful lot of explaining.
It may not be saying too much to assert that the new thinking about collective enterprise, or managerialism, is about to be recognized as constituting a great theological crisis, on the order of the one that accompanied the introduction of Darwin’s work, or even the social and political thought that followed the Reformation. For we are experiencing the collapse of the economic and political pillars of the ideology which has dominated Western thought for the past several hundred years.
The two basic points about corporations were seen decades ago, by Veblen and by Berle and Means. Around the turn of the century, Veblen demonstrated that large business organizations were dominating and distorting the new technological forces, and that these control-organizations were using paper—that is, capitalization—primarily to make money out of making goods and out of not making them. The second basic point about corporations was seen thirty years ago by Berle and Means, who suggested in The Modern Corporation and Private Property (1932) that large publicly held corporations were an anomaly in the supposed system of private property. That pronouncement will probably turn out to be one of the more resounding understatements in the history of social thought, since what the big American corporation is actually engaged in is a pleasant, leisurely, and continuingly decisive destruction of the previously existing system of private property.
The most important historical point about corporations is that until recently they were always considered public agencies—in effect, specific grants of governmental power. In the beginning, there was no difference between a charter for a corporation and a franchise for a public utility. Today, the right to incorporate for any purpose at all has become generally available; incorporation is now as common as contract.
In the nature of the case, the technological revolution could not proceed unorganized and unplanned. The major corporations, as stewards of the technological upheaval, came into being in response to the imperatives of such organization and planning. But the necessity to administer men and things in large aggregates does not by itself account for the corporation’s leading role in America today. To complete the picture, we also have to note that toward the middle of the 19th century the federal government and the states began turning over substantial amounts of their power and property to increasingly sizable corporate enterprises. This government give-away to “private” profit-seeking enterprise, in order to accomplish a particular function (whether or not the government could have done the job on its own), has marked American economic history from the building of the railroads to the development of atomic energy and communication by means of space satellites. It is our way of doing things.
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Private Property?
Internally, the corporate order is a system of private government. This privacy, however, is not to be comprehended in terms of private property or the private discretion of individuals. The corporate order is largely private from—from public accountability, whether indirectly, through that other national government, or directly, to any of its various constituencies (i.e. suppliers, dealers, employees, stockholders, and consumers). The rulers of the corporate system are not genuinely elected by anybody, and they are not answerable for the exercise of their more important powers to any elected officials. The privacy of this private government serves mainly to ensure its authoritarian nature. There is probably more law today running in favor of individual rights in the armed services than there is in any of our major corporate communities. Without the fundamental law of a constitution for the corporation (and there is none), it is—to be succinct—a lawless institution.
If the corporation is private property, nobody but the stockholder-owners are legitimately concerned with its government ; and if the stockholders’ vote ensures control for the property-owners by democratic means, the managers who run the corporation are property-servants operating under a legitimate mandate. But if these related propositions are not true, then our major corporations are authoritarian private baronies legitimated by nothing more than their existence. In fact, the propositions are not true—they are simply loudly and continuously endorsed by the people who control the properties of which they are not true.
Large publicly held corporations are not private property and they are not controlled by their shareholders. Where did anybody get the idea that they were? From the vote—which is merely a ritual, for anyone who knows the facts. And it is strangely disturbing that the magic of the vote in corporate affairs has so much in common with the concept in Communist states, where one also votes not to make a choice, but as a ritualistic submission to unassailable power.
Stop and think for a moment: how could an industrial government like AT & T be “owned”? By means of stock certificates? That’s like trying to attach some significance to the notion that I own a piece of Central Park because I live in New York City. The assets of AT & T, well over $20 billion worth, are owned by the corporation itself. There are more than two million shareholders in the Company. Over half of these have investments of less than $2,000. Now what is $2,000 worth of $20 billion? It is obviously nothing but a technical piece of Central Park. And as far as voting goes, New York City is in fact more of an actual political community than any private corporation.
How can anyone call something like this private property? It is owned by a disorganized impotent public, and controlled by a private managerial clique. What is important is the control: the ownership is not.
The fundamental meaning of private property is private control over the property one owns, and all the stockholder owns is a share of stock. The corporation is not private property—only the share of stock is.
What is the real nature of the established corporate power? Simply, that the strength and purpose of the nation are in the hands of the few thousand men who control the few hundred bureaucracies which dominate the economy. (According to Berle, “about two-thirds of the economically productive assets of the United States, excluding agriculture, are owned by a group of not more than 500 corporations.”) These organizations and men are the stewards of the permanent technological revolution which is the economy, and which it is not too dramatic to call the hope and the despair of mankind.
If you rank big corporations and governments according to revenue, you have eight corporations after the federal government before you get to the first state, California; then another five before arriving at New York State and New York City; and ten more before Pennsylvania. Out of fifty-five organizations with a billion or more annual revenue (1958), only nine are official government units.
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More Than Ownership
All this concentration of assets and general institutional size means a good deal more than it seems to mean. A big corporation is much bigger than its balance sheet, and much bigger than the percentage of industry assets that it may own. Corporate governments do not rule by ownership alone.
The reason is that big corporations dominate not only their own industries, but are also centers of power around which are clustered thousands upon thousands of satellite enterprises which are wholly or substantially dependent on the center. The satellites may be suppliers or dealers or customers, but the dependence is not altered by the role.
The markets in which giants and satellites trade are structured and dominated by the giants: it is somewhat gratuitous to call them markets at all, and considerably less than candid to call these dubious markets “free.” The historical purpose of big corporations is to organize markets. In a sense, that is all corporations are—organized markets. Professor Edward S. Mason of Harvard says: “As a firm grows, transactions that could conceivably be organized through the market price mechanism are transferred to the administrative organization of the firm.” In other words, with big corporations, markets are “ingested” or internalized. And these corporations, by “owning” part of the market, can dominate much more of it.
All this could be put under the heading of “technological rationalization,” except for the fact that in the Paper Economy considerations of finance are more important in determining the size of a corporation than is increased efficiency in the production and distribution of goods. GM needs profit instead of production only as a form of self-protection—and of course there is never enough of that. Such self-protection requires maintenance of the price level, especially by curtailing production. Veblen called this “sabotage”: we can call it Scarcity Regained.
As centers of industrial and financial power, market-organizers, and general governing bodies, big corporations are necessarily planning agencies. Planning and technology go together, they are common imperatives. You can, then, easily see that planning is: (1) indispensable; (2) in glaring contradiction to our free enterprise ideology; and (3) something that takes both superior intelligence and training, which signifies the heightened importance of intellectual experts. Since planning is so close to the real issues of power in our day, and since it involves a very significant upgrading of intellectual classes, and since to be accomplished effectively it must be carried out over large industrial areas, thus requiring the use of federal power—therefore, the existing private power centers necessarily oppose it when carried on by groups other than themselves, and always obscure it no matter who does it, or why.
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Prices and Planning
Competent corporate executives are planning everything they can—strenuously, and with great effect. But unfortunately, corporations plan only for themselves. Also unfortunately, one of the things corporations have taken to planning is the early obsolescence of their products. Corporate planning is quite extensive, but we cannot go into the whole revealing story here—or its costly lack of relation to a national plan. We must note the connection between planning and pricing, however, because that is a crucial political fact in the Paper Economy.
There are approximately two ideas current today about how prices are set: one view has it that neither individuals nor institutions exercise discretion, unless they have sinned deeply and are “monopolies,” but that prices are set and reset every hour on the half-hour by a Great Force called the Free Market. The other idea, which is both obvious and not yet quite decent, is that where markets are dominated they are not “free,” and the dominating economic institutions have, among their other powers, the capacity to set prices with a certain independence. The latter have come to be called “administered prices.”
The main thing to be understood about administered prices is that they are not to be understood at all apart from long-range business planning. That is, a particular price is based on the idea that you are going to sell a particular quantity with given fixed costs and given unit costs. In order to figure that way you have to plan to produce and sell X quantity of the thing. Once you decide this, the “right” price follows. So the main thing price does, in the mind of the price administrator, is to determine how much shall be produced in the first place.
Even if the administrators of a big corporation tried their hardest to live up to the principles of automatic competitive pricing which they learned in college economics courses, it would be beyond their best capacity. International Harvester, for instance, establishes prices for 250,000 parts. It takes a large staff of people just to know where a price is, much less what it is (or whether it’s “right”). No, big corporations know what they are even if classical theorists don’t. They set prices and production quantities in tandem according to over-all and long-range objectives. Anything else would be much too dangerous for a major institution.
(The big 500 corporations which dominate two-thirds of the industry of the United States are also in charge of the accumulation of approximately 60 per cent of the capital which is applied to industrial use. So, one of the more important things the corporations administer is the better part of our future. We can think of this as “administered financing,” and it is hardly second in significance to the power that is involved in administering prices.)
Let me state the articulation (planning) problem this way: why tolerate a monstrosity like General Motors at all if you are not going to take the full tour and rationalize the whole automotive industry on the same principles which justify GM’s existence in the first place? You may say that we are not politically prepared for this degree of rational articulation. True enough. We are about as little prepared for it as we were for the whole technological revolution.
A more sophisticated industrial articulation—operating under an imperative to produce—is the major work of the corporate system yet to be accomplished. The problem is that in America this would require a much larger borrowing of federal power, or a more substantial amalgamation with it, which in turn would necessarily call upon the corporations either to legalize themselves, or transform the national government itself into an illegal instrumentality. (Some years ago the latter possibility was called “fascism,” and is still quite unpopular when identified by that name.)
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But Is It Legal?
The dominance of the corporate system finally raises two questions: (1) Is the system technically adequate? and (2) Is the power it represents “legitimate” within the assumptions of the whole society?
The answer to both questions is, No. And the answers are related, primarily through this nagging issue of federal power. Planning for themselves alone, the corporations do not achieve sufficient articulation to ensure the full production and the full growth which the state of technology permits. And, again refusing a more substantial amalgamation with federal power, they do not share the legitimacy which would proceed therefrom. They have no legitimacy of their own—because the private-property legitimation covers them like a moth-eaten umbrella.
The legitimacy of a power system, or the lack of it, is an important issue for any society. No law governing the exercise of power ever equals perfect justice: which is like saying that law is only law. But having experienced the totalitarianisms of this century, we should not doubt that law which is only law is invaluable to us poor mortals who are only mortals. Law can never get very far in contradicting a power system (although it can express the contradictions existing in one); but in its presumptive rationality, it regularizes the exercise of power and it justifies that exercise. Law justifies power—“gives it legitimacy”—by relating its exercise to more basic assumptions of the social order. Such justification can be, and often is, quite thin—which puts you smack in the middle of politics (the solvent and source of law), arguing for a more substantial justification.
Very simply, the corporation is an authoritarian form of industrial government in a purportedly democratic society. The power of the corporation is unavoidable, but it should exist for a particular purpose, not for its own sake. If the purpose is generally accepted, the power is in fact legitimate: if it is actually used for that purpose, it is responsible. The great power of the corporate system is both illegitimate and irresponsible because in form it has not been made coherent with other purposes in the society, and in fact it is not devoted to fulfilling the purpose for which it was created—production.
To state the basic American economic proposition as simply as possible—the major corporations organize and govern industry, the government tries to ensure that the goods are actually produced and distributed. The system does not run itself: the corporations are not able to run it by themselves. This has been clear since the Great Depression. With each advance in productive capacity, it becomes clearer. Indeed, the whole thing would fall apart if it were not for the federal government’s taxing, spending, subsidizing, guaranteeing, organizing, assisting-and-regulating, and generally underwriting the flow of national income. What the Big Underwriter does is to keep Big Business in business in a big way.
But there are some quite naive notions current about this enlarged role of the federal government. Chiefly it is thought that the use of federal power in the economy was, in each additional instance, only “temporarily” called for and should have been abandoned as soon as the “temporary” need had been met. This is quite silly, since the obvious truth of the matter is that, just as the corporate form was required to organize large aggregations of men and wealth to produce goods, according to the historical terms set by 19th-century industrialism and 20th-century technology, so a coherent national power was required by the same history, to sustain and articulate this set-up.
Since the 1929 collapse, there has been a lot of governing called for by the geometrically progressing complexity of the technological system; and, for one reason or another, a substantial amount of such governing authority has finally been relocated in Washington, D.C., which, as the history books inform us, had been the original seat of American power.
In its entire checkered career the United States government has spent about $1.4 trillion. It is not the result of evil conspiracy that 90 per cent of this money has been dispensed in the last twenty years.
At the beginning of 1961, the federal government’s total assets were inventoried at $276 billion. These values are understated, since they are carried at acquisition cost—and some are dated a century ago. For example, the White House, including 18 acres in the center of Washington, is valued at $1,000.
At anything like current market value, the government is worth considerably more than its outstanding public debt. These federal assets are real—some of them even edible, as, for example, the $9 or $10 billion worth of farm surplus. Even the army tanks could probably be converted into bulldozers or tractors, and atom bombs could be used to create harbors and move mountains. I am suggesting that all these assets are inherently valuable and even productive. But of course if they were ever used as such, they would knock the props out from under the inflated price and profit-making posture of the so-called private sector of the Paper Economy. And that sector, specifically, is what the federal government is committed to sustaining—that is, underwriting.
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War, War, War
All other governmental effect is currently dwarfed, of course, by the economic earthquake of military procurement. There is one primary point to be kept in mind: this amount of federal demand cannot possibly be viewed as “temporary.” The military budget has worked profound structural changes in the economy. Big changes are brought about without opposition in the name of the military which, properly identified in candid perspective, would have been resisted to the death by countless traditionalists.
Nothing is more ironic or revealing about our society than the fact that hugely destructive war is a very progressive force in it. The reason is quite clear: when military capacity is the issue or the excuse, there occurs a measure of planning and proper allocation, a strict devotion of resources to a clear and realistic end, that is otherwise inordinately difficult to achieve in the mature Paper Economy.
War production is progressive because it is production that would not otherwise take place. (It is not so widely appreciated, for example, that the civilian standard of living rose during World War II.) The fact that what is produced is essentially useless—and much worse than useless—merely heightens the irony of it all.
The worldwide scope of military expenditure is truly horrifying. Early in 1961, the Associated Press reported that the world was spending $14 million an hour on arms and armies. Almost three-quarters of this amount was accounted for by the United States and the Soviet Union. The cost of armament at that time was “about $140 a year for each man, woman, and child now living”—more than the annual income of most individuals and families on earth. There are 15 million men under arms, and considering that four men work just to keep one soldier supplied, the energies of 75 million men are devoted to the waste of war.
The biggest war spender is the United States: in the nine fiscal years from 1950 on, we spent over $228 billion on supplies and weapons—this involved 38,000,000 purchase transactions. Total military property in the supply system at June 30, 1959 (not including real estate) was $44.5 billion. Total manufacturing inventory in the whole country at July 1960 was $54.9 billion, and total retail inventory a comparatively ridiculous $25.1 billion. (This is what happens when you are big enough not to be frightened by inventory, that bugaboo of the Paper Economy.) It costs $2 billion a year simply to contract for, store, and issue all this stuff. “The tangible assets of the Department of Defense are . . . $150 billion” according to the Joint Economic Committee.
So in a thousand ways and with millions of purchases, the federal government sustains the economy. It is the essential underwriter, conceiving “underwriting” as direct intervention as well as endorsement of paper (which I think is the way great underwriters like Morgan conceived it). Underwriting in the Paper Economy, after all, is simply a sophisticated adjunct to the more ancient act of governing.
Under our paper system, thus sustained, the most valuable “property” is not property at all—it is the institutional control over profit-making enterprises and opportunities. Many of these are created directly by the government, and all are sustained by its underwriting activities. This institutional situation—the capacity or right or opportunity to make a profit—is the keystone, cornerstone, and top-and-bottom-stone of our system of paper-values.
The classical capitalist view assumes that all power is distributed according to the ownership of property, and all power not so distributed is bad, should be kept at a minimum, or its existence denied. But for us, to stress the point again, ownership is no longer decisive. What is most important now is the control of property. Recognition of the prior importance of control and its dissociation from ownership is what, in a general way, is meant by the term “managerialism.” Ours is a managerial, not a traditional, capitalist system.
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Managers and Managerialism
In more or less candid manner, the current discussion of managerialism assumes that the primary productive capacity of the nation is controlled by a self-perpetuating oligarchy of non-owners. It recognizes, again with more or less clarity, that this is quite a different situation from that formerly existing or still envisaged by classical theory. The discussion then becomes downright relevant when it is further assumed that most of the important activities in our society require large organizations, all large organizations must be managed, and there are some fundamental similarities between all the managers of any and all large organizations. On these assumptions, managers emerge as a class—a new class.
The position taken here is that rich people are no longer running things in America; that there is in fact a managerial revolution under way; that it is worldwide; that it more and more requires the participation of the state; and that it is probably as inevitable as any major historical movement. But its evolving character, and some of its important contradictions, have not been properly set forth.
There are two types of managers. The distinction is not black and white, but it is very real.
The larger group consists of people who are technically and even highly trained to do a specific kind of work, and actually do it: this would include engineers, scientists of various kinds, lawyers, accountants, advertising and public-relations men, merchandising experts, personnel people—a very long and varied list of specialized activities. The smaller group is made up of the ruling strata of executives; in every organization there are a few people at the top who direct the work of everyone hierarchically lower in the organization, who control the organization and make its policy and direct its course, who represent it officially in its external relations, and so on. These latter are group-politicians: their work is to adjust conflicts among individuals and sub-groups.
Perhaps the most distinctive fact about the top organizational managers today is their increasing independence from wealthy owners, bankers, and indeed all outside influences; and the most important fact about the technically trained group which actually accomplishes productive work is its enhanced importance, prestige, and income. The picture can also be presented in this way: In order to administer the technological revolution, so many organizations must be created, and these organizations become so important, that we can say the society is essentially made up of them; they clearly require large numbers of trained people to perform and administer the work which is the purpose of the organization; these people are key members of the new society. We call this managerialism, and to make the discussion manageable we might even name the two groups the Politicians and the Intellectuals.
If we can imagine a “first generation” of managers, it is fairly persuasive that they were selected by the big owners: they were heirs of the robber barons. But even if we allow for some continuing influence of the rich, it is also pretty clear that the second-generation managers were chosen by the first generation and so on down to the present. Thus it is also fairly clear and persuasive that what we have is a “self-perpetuating oligarchy.”
Once qualified, the political executive has an enviable style of life in store for him. The texture of prepaid living is the most obvious quality of the executive life—but it is not the most important. This consumption, including its conspicuous-ness, merely adorns and sustains a life of command. The top managers are top dogs in an exceptionally vital political order: they are not ward-heelers hanging around for the graft alone. The primary commitment to consumption is left to the women, the rentier paper-holders who own the system, and indeed to a whole nation of customers. The Politician does not own the system—he is much more interested in running it. Which he does.
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The Intellectuals
In the less widely discussed aspect of the Revolution of Non-Ownership, what we are witnessing, it seems to me, is a rather quiet and mostly polite revolt of the Intellectuals. Many of the people concerned would be horrified to think that they were parties to anything so dangerously improper as a social revolution (most of them don’t even think of themselves as “intellectuals”). But if you asked them whether they wanted to increase their prestige, standard of living, and scope of discretion in work, they would answer affirmatively. If you went on to inquire whether they were going to do this by accumulating capital, they would say, No. These two motives operating in tandem have created a revolution-in-fact, whether or not the participants know it or desire it.
When I speak of “Intellectuals,” I am not thinking of Greenwich Village or the Left Bank. The Intellectuals in question are avant-garde only in spearheading a social revolution; they are not avant-garde in the usual sense, meaning culturally advanced, highbrow, or disaffected. They are Intellectuals in that they are intellectually trained to do, and actually do, intellectual work: They use systematic concepts in their productive, earning-a-living work, and it is necessary that they be trained to do this, which distinguishes them from those who have not received such training. The training, or education, is a new form of income-producing status which replaces and serves the same function as the older bourgeois ownership of income-producing property.
The new class of Intellectuals has increased enormously in size over the last few decades: we are creating a mass of educated people to staff the bureaucracies of the organized society. The result is not a nicely new democratic society, but rather substantial junior additions to the ruling class of the old one. But that’s an advance, certainly. It is exactly the kind of advance we can expect from managerialism.
The Intellectuals and the Politicians are increasingly engaged in an intra-class struggle. The former want, simply, to be less managed by the latter; or, they want a fuller realization and development of the new managerial order—which means an increase in their own power and status—and they want it sooner rather than later. The Politicians—at least in the West—have reason, however, to go more slowly: (1) they (especially the leading financial faction) are the brokers of the big changeover, since they are charged with mediating between the New Class and the paper-rentiers; and (2) they are variously overcautious, inept, frightened, and occasionally downright suicidal in approaching the inevitable amalgam, or further meshing, of public and private governments.
The new intellectual class will eventually be as great a danger to the top ruling strata of the managerial order as the dispossessed workers were to the earlier age of capitalists. The Intellectuals are coming on. They are increasingly strong, confident, and assertive. They know they are needed—and they are in fact needed more and more every day.
A growing segment of the Intellectuals here know that they are exemplars of a social revolution—know it in the most profound way, as a sense of their distinctive identity and the difference of others. Among these self-conscious ones are to be numbered the liberals who were so startlingly catalyzed by Adlai Stevenson’s candidacies. As is well known, they failed to elect their candidate—but this may well have been one of the most penetratingly successful failures in the history of our peculiar nation. Out of pique or whatever, thus galvanized, these people are transforming our political system in the most practical way imaginable—through an attempt to carry out a revolution within the Democratic party. They are apt to be successful in their efforts, too, because this revolution is not all in the head—it is an expression of social/status/ money changes. They are new people—the first of the managerial corps, having arrived, to take the broad view, and their stale New Deal rhetoric is only frosting on the essential managerial cake.
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The Middlebrows of Yesteryear
These new people are administrative intellectuals—what used to be called the “middlebrows,” although you never hear them called that any more, they’ve become so important. The liberal middlebrows are the vanguard of the managerial revolution in this country. They are very strong in teaching, which has had and will have a greatly enhanced status now that everyone feels education to be necessary. They are well placed in all intellectual activities—foundations, mass culture in all forms, governmental bureaus—and seem to be making out, although more slowly, in the corporate bureaucracies as well. They are a considerable self-conscious leavening. Whether their particular self-consciousness will survive in a later, more mature ideology of managerialism is another question. To the extent that it is based on scientism and the administrative view of man, I am afraid that it will survive, because it grows out of their training and circumstance rather than the heritage of liberal rhetoric.
In this society undergoing transition from capitalism in pure plutocratic form to the new and still somewhat unknown managerialism, the meaning of wealth has changed. Wealth once meant power—and nobody found much occasion to distinguish between the two. Today the world can only be misunderstood in such terms. Not that powerful people are ordinarily poor, but that wealthy people are not necessarily powerful. Why? They decided it that way. They didn’t have to, but they did. Ours is one of the only ruling classes in history which has a built-in system of self-abdication. The American rich have not trained their sons to rule.
Discussing the withdrawal from economic activity of the wealthy classes, which is a feature of the advance of managerialism, James Burnham remarks that “to rule society . . . is a full-time job.” To reach a little broadly and dramatically, it might even be said that managerialism derives from the necessity of servants, their consequent proliferation and final elevation to the point where their masters become formal, official, and unimportant: as the Prime Minister of England is said to serve the Queen.
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So Rich, So What?
We might compare property controlled fully by its ownership to political power exercised under the divine right of kings. Just as the absolute discretion of the king became such a burden to his servants that it was circumscribed and finally dispensed with altogether when the servants realized that they were more important than their master, so the servants of property in its modern aggregations have had to take over so much of the owners’ discretion as to make ownership relative rather than absolute, formal rather than operative, and generally less than divine. The divine right of property is disappearing historically because the property concerned has so changed that it cannot be managed or operated by divine right. It can only be managed by technicians (for the things), and full-time organizational operators or “politicians” (for the people).
Today, a big owner must be a competent manager to avoid being reduced to the role of a passive rentier. The latter is the role of his class, and he can avoid it only by himself joining the ranks of the new class. Owning and managing property are two separate roles: having the one, he of course gets first crack at the other. But he has to seize the opportunity, or resign himself to a life of philanthropy and elaborate consumption. The women, who own more and more of the rentier property in this country, do not fight the issue very strenuously.
In the last hundred years, too many people have made too much money too quickly in the United States. This fact has had some very serious consequences. For one thing, the cheapening of wealth has made the problem of consolidating class rule based on it almost impossible.
“Money—sheer, naked, vulgar money—has with few exceptions won its possessors entrance anywhere and everywhere in American society,” says C. Wright Mills in The Power Elite. The historical picture one gets from Mills is of waves of new wealth washing up against hastily fixed status structures, and periodically overwhelming them. In each backwash, the ruling classes have been increased numerically and also made increasingly heterogeneous. But there never was time to housebreak the newcomers and integrate them into a continuing class-cultural pattern (as in England).
One gets the impression that the case was different before the Civil War. There seems to have been a ruling class, based on wealth but consisting of something more, in both the North and the South. These two groups were never able to coalesce—the continent was too big and too rich—and so the Civil War was allowed to happen. (It is worth noting that until this inevitable mistake was made, the American ruling classes did not disdain federal power: the demise of cultured ruling groups is accompanied historically by the rise of private financial government—our dual government is post-Civil War.)
After the great continent-opening conflict, the rule of raw wealth was so free and ferocious that what ruled can hardly be called a class at all. In Washington, non-government was enthroned; necessary law and order were supplied eventually by Wall Street. But the result was merely a set of traffic regulations for making money—not a coherent class that could rule the nation. The idea that there is a nation to be ruled, and that this requires a large group of people prepared and willing to do so for reasons beyond crass personal profit, has only recently been revived in the United States. Its revival is one of the outstanding achievements of managerialism to date.
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Who Owns It?
If all the wealth of America had been divided equally a few years ago, each citizen—man, woman, and child—would have held $6,000. The opportunity for this thrilling egalitarianism was not taken at the time, and the distribution of wealth (according to W. H. Ferry of the Fund for the Republic) now runs as follows: “As of mid-1959 the poorest one-third of Americans own 1 per cent of the wealth of the United States. The next 23 per cent up the scale owns 5 per cent. Thus, well over half the population owns 6 per cent of the wealth of the United States. The richest 1.6 per cent own nearly one-third of the country’s material assets.”
In 1953 (based on a study by Robert J. Lampman of the National Bureau of Economic Research), 1,658,795 top wealth-holders held $309.2 billion—30 per cent of the total personal wealth held by 1.04 per cent of the total population. Of special interest for paper-fanciers are the figures on concentration:
The top group owned at least 80 per cent of the corporate stock held in the personal sector, virtually all of the state and local government bonds, nearly 90 per cent of corporate bonds, and between 10 and 35 per cent of each other type of property. . . .
By inversion, the “other types of property” reveal the kind of holdings spread out among the rest of the population. For example, the 1 per cent on top holds only 12.5 per cent of the real estate and only 5 per cent of the country’s pension and retirement funds, and 11.5 per cent of the insurance equity.
For perspective, let’s look at the not-so-rich owners. Mutual funds are supposed to be the common man’s special area—about $20 billion-plus. A few years ago, representatives of one of the funds offered this financial portrait of the average mutual fund investor: besides his $4,100 in mutual funds, he had $8,200 in other securities and $3,300 in a savings bank. (That lets most of us out.)
The question raised by these figures is—Can the nation afford all this paper-frenzy in perpetuity? I would answer, Certainly—if both the membership and the take of our class of paper-rentiers were limited to something like recent levels. But if their numbers and their take continue to grow, the country might well become dangerously top-heavy, with unforeseen but nerve-wracking consequences. We would then be firmed up as a nation of 200 million well-fed house-servants to a few million professional super-consumers.
The charge upon national production of all this old paper is substantial. But whatever our reason for envying the rich, we must not misunderstand them. They are important and influential—wherever they go, and whatever they do. But they are not, in a great dark conspiracy, running the country—as if there were no other sources and kinds of power in the nation. Indeed, they are less important than they have ever been, and increasingly so year by year.
A lot of paper in one package is still a means of control, of course. What I want to suggest now is that the title to it in one person is almost an adventitious circumstance. If what the title-paper controls is big enough, it has to be managed in the same way as a publicly owned corporation or fund.
For the purposes of our property-managerialism theme, note that the great paper fortunes which in fact remain are substantially in the hands of the managers. I am thinking of more than the big funds that are professionally managed, the trust officers of banks, the lawyers, accountants, investment specialists, foundation managers, and so on. I am referring to the fact that a Rockefeller is a corporation. The circumstance that a Mr. Rockefeller may more or less consistently and competently occupy the position of chairman of the board of directors (or even ambitiously start in the shop and work his way up to the top job), is not so all-important as it appears on the surface. Anybody with title to that much property is necessarily institutionalized. Like great movie actresses, they are soon thingified. The best that the individual can hope for is to function effectively, and perhaps even enjoyably, as chief executive of himself. Title to such an aggregate of property is just another way, like the institutional control of a managerial clique, of ensuring perpetual re-election as the top executive.
L’état, c’est moi. (Mais moi, je suis une corporation.)
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Hothouse Poverty
The American income-picture consists roughly of three panels: (1) several million high-fliers; (2) a growing stratum of consumption-minded middle-level managers, primary beneficiaries of the postwar “income revolution”; and (3) the rest of us. The income curve for (3) begins with a moderate, mannerly decline and ends with an abysmal collapse. Over 32 million people live on less than $50 a week for a family of four and these families include one-fifth of the children and 8 million men and women over sixty-five years.
Out of about 56 million family units in the United States in 1960, half made more than $5,600. At the bottom, we have 7.2 million units with incomes of less than $2,000, which is 13 per cent of all families and unattached individuals. In 1947, there were 7.4 million such units surviving on the same $40 a week or less (in 1960 dollars). In uncorrected dollars, GNP better than doubled in those thirteen years: in 1954 dollars, it went from $314 billion in 1945 to $426 billion in 1959. Conclusion? Over seven million families have benefited not at all from the entire immense postwar boom! (Or each one that did was replaced by one that didn’t.)
I think we must now indulge a concluding moment of pure disgust. In a country of such opulence, it is a morally revolting spectacle to behold the low and even dangerous standards of life of the big minority of citizens at the economic bottom. In his essay on American affluence, J. K. Galbraith noted accurately that economic inequality is no longer the high moral issue it once was in our history. But as the issue ceases to be moral in the old sense, with the old urgency, it becomes an immediate aesthetic issue (or something) on the crest of the fading moral point. Just about everything the poor need is in surplus supply either as existing inventory or productive capacity. This is, then, a new form of inhumanity—not any longer the old rich-against-the-poor stand-off. Both the very rich and the very poor have become somewhat irrelevant, outside the mainstream in a power sense. The relevant historical issue is the inhibition of paper-madness and the distribution of the readily available product. We cannot allow ourselves—at the very threshhold of general abundance—to accept the current static moment in society, which is built around the absurd principle of Scarcity Regained. To do so would be as much a literal act of insanity as to unleash the nuclear war.
American families each owned $131.89 of surplus food in 1958—14 bushels of wheat, 21 of corn, 300 pounds of sorghum, a peck of soybeans, a bushel of barley. The government spends over one billion dollars a year just taking care of it for them. Much of it was harvested by our migrant labor families who desperately need their share of it.
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