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B. Power Elite Theory
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B. Power Elite Theory.

The state capitalism of the twentieth century differed fundamentally from the misnamed "laissez-faire" capitalism of the nineteenth century in two regards: 1) the growth of direct organizational ties between corporations and the state, and the circulation of managerial personnel between them; and 2) the eclipse of surplus value extraction from the worker through the production process (as described by classical Marxism), by the extraction of "super-profits" a) from the consumer through the exchange process and b) from the taxpayer through the fiscal process.

Although microeconomics texts generally describe the functioning of supply and demand curves as though the nature of the market actors were unchanged since Adam Smith's day, in fact the rise of the large corporation as the dominant type of economic actor has been a revolution as profound as any in history. It occurred parallel to the rise of the "positive" state (i.e., the omnicompetent, centralized regulatory state) in the nineteenth and early twentieth century. And, vitally important to remember, the two phenomena were mutually reinforcing. The state's subsidies, privileges and other interventions in the market were the major force behind the centralization of the economy and the concentration of productive power. In turn, the corporate economy's need for stability and rationality, and for state-guaranteed profits, has been the central force behind the continuing growth of the leviathan state.

The rise of the centralized state and the centralized corporation has created a system in which the two are organizationally connected, and run by essentially the same recirculating elites (a study of the careers of David Rockefeller, Averell Harriman, or Robert McNamara should be instructive on the last point). This phenomenon has been most ably described by the "power elite" school of sociologists, particularly C. Wright Mills and G. William Domhoff.

According to Mills, the capitalist class was not supplanted by a "managerial revolution," as James Burnham had claimed; but the elite's structure was still most profoundly affected by the corporate revolution. The plutocracy ceased to be a social "class" in the sense described by Marx: an autonomous social formation or amorphous mass of wealthy families, perpetuated largely through family lines of transmission and informal social ties, with its organizational links of firm ownership clearly secondary to its existence in the "social" realm. The plutocracy were no longer just a few hundred rich families who happened to invest their old money in one firm or another. Rather, Mills described it as "the managerial reorganization of the propertied classes into the more or less unified stratum of the corporate rich."59 Rather than an amorphous collection of wealthy families, in which legal claims to an income from property were the defining characteristic, the ruling class came to be defined by the organizational structure through which it gained its wealth. It was because of this new importance of the institutional forms of the power structure that Mills preferred the term "power elite" to "ruling class": "'Class' is an economic term; 'rule' a political one. The phrase, 'ruling class,' thus contains the theory that an economic class rules politically.60

Domhoff, who retained more of the traditional Marxist idea of class than did Mill, described the situation in this way:

The upper class as a whole does not do the ruling. Instead, class rule is manifested through the activities of a wide variety of organizations and institutions. These organizations and institutions are financed and directed by those members of the upper class who have the interest and ability to involve themselves in protecting and enhancing the privileged social position of their class. Leaders within the upper class join with high-level employees in the organizations they control to make up what will be called the power elite. This power elite is the leadership group of the upper class as a whole, but it is not the same thing as the upper class, for not all members of the upper class are members of the power elite and not all members of the power elite are part of the upper class. It is members of the power elite who take part in the processes that maintain the class structure.61

While Mills virtually replaced the traditional idea of a ruling class with that of the transcendent power elite, Domhoff saw the power elite as an action arm of the upper class; this action arm incorporated both elements of the upper class itself, who were active in business and government, and their managerial servants.62

In language quite similar to that of Domhoff, Martin Sklar described the "corporate reconstruction of American capitalism," as it affected the nature of the ruling class, in this way:

It was characteristic of the transition from competitive to corporate capitalism in the United States that although no family alliances and family-based wealth continued to be no less important than before, the families actively involved in engineering the transition shifted their base of income, power, and prestige from the proprietary enterprise to the bureaucratic corporation, usually multifunctional and multilocational in operation, and to the diversified investment portfolio.63

Because of the corporate reorganization of the ruling class, senior corporate management has been incorporated as junior partners in the power elite. Contrary to theories of the "managerial revolution," senior management is kept firmly subordinated, through informal social ties and the corporate socialization process, to the goals of the owners. Even a Welch or Eisner understands that his career depends on being a "team player," and the team's objectives are set by the Rockefellers and Du Ponts.64 The corporate reorganization of the economy has led to permanent organizational links between large corporations, government agencies, research institutions, and foundation money, and resulted in the plutocracy functioning organizationally on a class-wide basis.65

The power elite theory of Mills and Domhoff had been anticipated, in many ways, by Bukharin. He wrote, in language that prefigured Mills, of intersecting corporate and state elites:

With the growth of the importance of state power, its inner structure also changes. The state becomes more than ever before an "executive committee of the ruling classes." It is true that state power always reflected the interests of the "upper strata," but inasmuch as the top layer itself was a more or less amorphous mass, the organised state apparatus faced an unorganised class (or classes) whose interests it embodied. Matters are totally different now. The state apparatus not only embodies the interests of the ruling classes in general, but also their collectively expressed will. It faces no more atomised members of the ruling classes, but their organisations. Thus the government is de facto transformed into a "committee" elected by the representatives of entrepreneurs' organizations, and it becomes the highest guiding force of the state capitalist trust.66

In a passage that could have been written by Mills, Bukharin described the rotation of personnel between "private" and "public" offices in the interlocking directorate of state and capitalist bureaucracies:

The bourgeoisie loses nothing from shifting production from one of its hands into another, since present-day state power is nothing but an entrepreneurs' company of tremendous power, headed even by the same persons that occupy the leading positions in the banking and syndicate offices.67

It is the common class background of the state and corporate elites, and the constant circulation of them between institutions, that underscores the utter ridiculousness of controlling corporate power through such nostrums as "clean election" reforms. The promotion of corporate aims by high-level policy makers is the result mainly, not of soft money and other forms of cartoonishly corrupt villainy, but of the policy makers' cultural background and world view. Mills commented ironically on the "pitiful hearings" on confirmation of corporate leaders appointed to government office:

The revealing point... is not the cynicism toward the law and toward the lawmakers on the middle levels of power which they display, nor their reluctance to dispose of their personal stock. The interesting point is how impossible it is for such men to divest themselves of their engagement with the corporate world in general and with their own corporations in particular. Not only their money, but their friends, their interests, their training--their lives in short--are deeply involved in this world.... The point is not so much financial or personal interests in a given corporation, but identification with the corporate world.68

Although the structuralist Marxists have created an artificial dichotomy between their position and that of institutional elitists like Mill and Domhoff,69 they are entirely correct in pointing out that the political leadership does not have to be subject, in any crude way, to corporate control. Instead, the very structure of the corporate economy and the situations it creates compel the leadership to promote corporate interests out of perceived "objective necessity." Given not just the background and assumptions of the policy elite, but the dependence of political on economic stability, policies that stabilize the corporate economy and guarantee steady output and profits are the only imaginable alternatives. And regardless of how "progressive" the regulatory state's ostensible aims, the organizational imperative will make the corporate economy's managers and directors the main source of the processed data and technical expertise on which policy makers depend.

The public's control over the system's overall structure, besides, is severely constrained by the fact that people who work inside the corporate and state apparatus inevitably have an advantage in time, information, attention span, and agenda control over the theoretically "sovereign" outsiders in whose name they act. The very organs of cultural reproduction--the statist school system, the corporate press, etc.--shape the public's "common sense" understanding of what is possible, and what is to be relegated to the outer darkness of "extremism." So long as wire service and network news foreign correspondents write their copy in hotel rooms from government handouts, and half the column inches in newspapers are generated by government and corporate public relations departments, the "moderate" understanding will always be conditioned by institutional culture.

In making use of the "Power Elite" model of Mills and Domhoff, one must be prepared to counter the inevitable "tinfoil hat" charges from certain quarters. Power Elite theory, despite a superficial resemblance to some right-wing conspiracy theories, has key differences from them. The latter take, as the primary motive force of history, personal cabals united around some esoteric or gratuitously evil ideology.70 Now, the concentration of political and economic power in the control of small, interlocking elites, is indeed likely to result in informal personal ties, and therefore to have as its side-effect sporadic conspiracies (Stinnett's Day of Deceit theory of Pearl Harbor is a leading example). But such conspiracy is not necessary to the working of the system--it simply occurs as a secondary phenomenon, and occasionally speeds up or intensifies processes that happen for the most part automatically. Although the CFR is an excellent proxy for the foreign policy elite, and some informal networking and coordination of policy no doubt get done through it, it is essentially a secondary organization, whose membership are ex officio representatives of the major institutions regulating national life. The primary phenomenon is the institutional concentration of power that brings such people into contact with each other, in the first place, in their official capacities.