Rise of the Managerial Class

Posted on Jun 19, 2012

By William Pfaff

At a time when corporate America is exploring and exploiting its new Supreme-Court-bestowed role in the management of American election results, an earlier transformation in the composition and political role of American business leadership should be recalled. This was the replacement of the Gilded Age capitalists and industrialists—audacious, rapacious and innovative, who created the post-Civil War American industrial economy—by the early 20th-century professional managers who took their place.

James Burnham (1905-1987), before becoming the godfather of neoconservatism (as he is best known today, to those who recall him) was an eminent American Trotskyist during the period when Trotskyism was a serious matter among American intellectuals. His father was an English immigrant who became an executive of the Burlington Railroad. His mother was a Catholic.

The young Burnham, after Princeton and Balliol, converted to the secular religion of Trotskyism, and became a founder of the American Workers Party, which in 1934 merged with another dissident Marxist group to create the Trotskyist Workers Party of the United States, which attracted an intellectual membership (Sydney Hook, James Rorty, etc.).

In 1941, he caused a considerable international stir with his book, The Managerial Revolution. It was the only important American contribution to the Marxist debates surrounding the Crash and Great Depression—although in George Orwell’s view (writing in 1946), Burnham was actually more a Machiavellian thinker than a Marxist.

Orwell did not live to see Burnham’s ultimate conversion to aggressive American nationalism.

Burnham’s Trotskyist period ended with a declaration in 1940 that he had decided that Marxism was merely a form of imperialistic class politics, and he proposed a new theory which said that the managerial class was the new force in the class struggle, seizing privilege and control over society. Capitalism, he said, as a form of social organization, was finished. His new managerial class was taking over in German Nazism, Soviet Stalinism and in F.D.R.‘s New Deal.

This idea had been heard before in Trotskyist circles. As Daniel Bell later wrote, Burnham’s theory about capitalist management had been anticipated eight years earlier by A.A. Berle and Gardiner Means who had identified the same change inside the modern corporation, where the capitalist owner ceded control to the professional manager (on the way to being eventually replaced by a board of directors, supposedly representing the anonymous mass of stockholder “owners,” but actually nominees of the new managers themselves, usually their friends and counterparts from other corporations).

Orwell accused Burnham of an inordinate fascination with power, which led him to predict that Germany and Japan would win the Second World War and would remain the centers of world power afterwards. Burnham took for granted that “managerial” Germany was in all respects more efficient than a capitalist democracy such as the U.S. or France. He expected Hitler to attack and defeat Stalinist Russia (“a great man,” Burnham earlier had said of Stalin). He saw society generally on its way to oligarchy and the concentration of industrial and financial power.

This predilection for both colossal error and world-historical theory never left Burnham. By the end of the Second World War, he was an anti-Soviet rightist, author of such books as The Struggle for the World (1947) and The Suicide of the West (1964)—national suicide allegedly the result of the malign influence of America’s liberals.

Burnham was a great influence on William Buckley and on the oddly xenophobic, reactionary and anti-intellectual version of “conservatism” that developed in the postwar United States (with its cultish infatuation with the heroic capitalism of Ayn Rand) and continues today, finding its bizarre culmination in the tea-party upheaval in the Republican Party.

Burnham’s theory that a new class of professional and technocratic managers were taking control of modern economies accompanied another phenomenon of the wartime and postwar years in the U.S. Intellectually moribund university business schools were reawakened by the influence of “scientific” and strategic management theories and practices developed by military staffs and at such institutions as the RAND Corporation. These made use of mathematical models, behavioral theory and operations research (usually a glamorized and heavily numerate version of empirical or common-sense analysis) and gave business executives an aura of scientific professionalism.

This combination eventually gave us the version of global finance and industry that has given us world crisis. It generally is run by managers who, without necessarily investing a farthing of their own money, control the American (and increasingly European) economies, enriching themselves by assigning to one another titanic emoluments as rewards for having been hired, for carrying out executive duties that earlier professional managers performed for unexceptional rewards and eventually rewarding themselves for leaving their jobs.

These individuals usually are not founders or creators but hired hands, graduates of American business colleges. They form the American plutocracy today, and the Supreme Court has authorized them to make use of the (technically stockholder-owned) resources of the enterprises they control to devote unlimited and unregulated wealth to promoting the election of political figures sharing their views on national policy.

Since American elections, in contrast to the 1930s, tend to be decided by broadcast political advertising, and during the Reagan administration the legally mandated “Fairness Doctrine” that since 1934 had required impartiality in broadcast political debate was ended, it would seem that this plutocratic power is permanently installed in the United States government, since nearly all of the economic, political and communication groups in a position to change the situation richly profit from it.

The apparently imminent installation in the United States of irreversible oligarchy, in succession to constitutional democracy, characterized by a morbid concentration of money and power, validates what Burnham anticipated in his first two books (Managerial Revolution in 1941 and The Machavellians in 1943). They claimed that oligarchy is the natural form of society, and its power rests on force and fraud. Quoting George Orwell’s summary of the early Burnham, democracy never existed—“and so far as we can see never will.”
While Burnham later changed his mind, the prescience of his earliest books must be saluted.

Visit William Pfaff’s website for more on his latest book, The Irony of Manifest Destiny: The Tragedy of America’s Foreign Policy (Walker & Co., 2010)
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