New self-directed machines (automation) are installed on
production
lines as soon as they are created.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
Whatever it does not make it does not make because it doesn't want to.
Thus far its automobile line is its main source of profit.
Ford Motor is similarly in the household appliance field and heavily committed to electronics, including TV sets.
Both own an assortment of underlying material-supplying companies.
Both are really multi-faceted states, and with their credit companies and dealership-franchise arms are not very different from IT&T.
The diversified mixture of products of each was achieved by combining many different existing companies, as IT&T has done in a broader spectrum. In the case of some companies the product mixture has come about gradually. In the case of others the decision to diversify has come suddenly, as though recognizing an opportunity that others stumbled upon earlier. Companies suddenly and radically shift their operating emphases, always in quest of maximum return on capital.
Thus, W. R. Grace and Company, eighty-fifth in corporate size, originally operated ships to Latin America (the Grace Line) but more recently has diversified its activities so that it is now a big chemical and fertilizer producer, banker, Latin-American manufacturer, exporter-importer and oil company. This former ship operator and banker
now derives 65 per cent of its sales and 66 per cent of its pretax earnings from its chemical division. As in the case of IT&T, we may ask of W. R. Grace: What, really, is its business?
Sears, Roebuck and Great Atlantic & Pacific Tea would be defined, correctly, as merchandising enterprises. But each owns a great many supplemental manufacturing and financial enterprises which have been developed or acquired. Each does much more than mobilize, stock and deliver a wide variety of merchandise. A&P, like many of its counterparts, would ordinarily be described as a vast retail grocery chain. Yet it now also carries a big line of cosmetics, pharmaceuticals, household hardware and certain items of clothing (aprons, gloves, etc. ). It and Sears, Roebuck and their smaller counterparts are obviously on the way to becoming general national manufacturing and merchandising enterprises oriented toward the ultimate consumer. Sears, Roebuck is usually thought of as a mail-order house; yet it operates chains of department stores as well, and engages in the general insurance business. In many phases it is a manufacturer. Both are giant transport companies.
What is Du Pont? A big chemical combine, it will be said. But it is also a big manufacturer of synthetic textiles, paints and explosives. It can build, and has built, nuclear energy plants. It could just as easily build cities. The big oil companies are chemical companies as well as huge operators of seaborne shipping, tank-car fleets and continental pipelines, and some of the big chemical companies are becoming to some extent oil companies. What is Tennessee Gas Transmission? A transmitter of natural gas, of course; but it is also a huge chemical, petroleum and fertilizer enterprise as well as other things.
The trend among all the big companies is increasingly toward nonspecialization and to the merging of seemingly incompatible enterprises, as when Columbia Broadcasting acquires the New York Yankees baseball club and IT&T acquires American Broadcasting. Radio Corporation and other electronic firms acquire big book publishers with a view to gaining literary and educational properties. Many big newspaper enterprises also publish books, magazines and operate TV and radio stations, pulp and paper mills, deepwater ships, etc.
AT&T itself, publicly looked upon as "the telephone company," operating about 85 per cent of the nation's telephones, long owned 99. 8 per cent of Western Electric, manufacturer of telephones, switchboards and a wide array of electrical apparatus. AT&T is also heavily committed to research and holds patents relating to the whole electronic field, including computers. It is deep in the satellite enterprise.
What all the expansion reflects is: investment of earnings not paid out. As we have noted, payouts incur additional taxes for stockholders; retained invested earnings are not taxed, are like money in the bank and get accelerated depreciation allowances. As there are not sufficient opportunities at home, the companies are now acquiring foreign enterprises at a great rate--in France, Germany, Belgium, Switzerland, Japan, everywhere--and since World War II have invested abroad about $40 billion. Ownership is preferred over income.
The cases cited are not at all untypical. One could go on for a long time detailing odd combinations of corporate activity. Thus, Hunt Foods & Industries, Inc. , originally the Ohio Match Company, in addition to making and marketing a broad line of food products operates companies in lumber, glass, aluminum, real estate, chemicals, glass and metal containers, gin, paints, varnishes, wallpaper, floor coverings and so on. It has a line of big corporate investments that is every bit as odd as the IT&T labyrinth. It is, first, the largest stockholder in Wheeling Steel, with 8. 8 per cent. It owns 22. 7 per cent of Canada Dry and 35. 8 per cent of the McCall Corporation, publisher of McCall's
Magazine, Redbook, Bluebook and the Saturday Review. It has it 4. 5 per cent interest in ABC-Paramount, giving it a foothold in film-making, radio and television broadcasting.
Let us take a more sober-seeming company, the Mississippi River Fuel Corporation, originally formed to transport natural gas by pipeline from Louisiana to St. Louis. There was first formed the Mississippi River Corporation to exchange stock with it, and this company now owns 94. 2 per cent of the Mississippi Transmission Corporation, 100 per cent of several cement companies and 58 per cent of the Class A stock of the big Missouri Pacific Railroad. As the change in its name suggests, it is apparently going to concern itself with everything in the Mississippi Valley, perhaps the Valley as a whole.
The Illinois Central Railroad may become its rival, might even merge with it. For the railroad has caused to be formed Illinois Central Industries, Inc. , with which it exchanged 95 per cent of its stock; and Illinois Central Industries has already acquired a big electrical equipment maker. As its name suggests, it is ready to operate anything along its right of way from Chicago to Florida and the Gulf of Mexico.
Operating companies become holding companies and some of the holding companies become general investment companies such as Adams Express Company, until 1918 a leading express and money-order house that sold out its business to American Express and transformed itself into a closed-end investment trust. The chief difference between a standard investment trust and a heterogeneous holding company is that the latter holds a dominant to 100 per cent interest in companies in which it plays a directorial role; the investment trust has only a fractional position in each company and is not involved in the management. The investment trust is a pure rentier.
The time, then, is near at hand when a company's name will give no clue at all to its line of business apart from the business of making money.
Studying the reasons for the crazy-quilt expansion, the Federal Trade Commission in 1955 noted them as follows:
Building new capacity adds to existing capacity and intensifies competition; but by buying, a manufacturer acquires additional capacity without adding to total capacity and may also reduce some external competition. "These competitive considerations are especially important if he is diversifying into products new to him, but in the production of which others are well established. "
Selling companies are motivated to sell because they lack the financial resources for expansion. Here lies the opportunity of the resource-rich company.
"The same factor is to be noted in instances in which a company having surplus cash not immediately needed in its operations invests it in the securities of other companies, either in the same or an unrelated industry. Such investments may subsequently prove to be the initial step in acquisitions carried out either as further investment and diversification of the acquirer's business, or as a means of salvaging the investments already made.
"Tax savings possible under various provisions of the Internal Revenue Act granting more favorable rates on capital gains as compared with the rates applicable to operating profits of corporations and personal incomes of individuals, the provisions covering tax- free exchanges of stock, and the provisions governing the carrying forward of past operating losses as credits against future earnings are also important factors. " 18
Said the Federal Trade Commission stiffly: ". . . the economic forces and motives discernible are not per se different from those upon which all business judgments are based respecting the ownership and exchange of property in a free economy. The operation of these forces on a large scale, however, carries with it such adverse
economic effects on third parties, and on the economy as a whole, as to bring their unrestrained operation into conflict with public policy and law. " 19
What is happening may perhaps be better depicted by showing it as a small fictitious model, as follows: One man, owning all of the highly profitable Super-Cosmos Corporation, is causing it to hold back most of its earnings, thus enabling him to bypass personal income taxes. With these withheld tax-free earnings he is gradually buying up all other companies, large and small, causing them also to hold back earnings in order to buy other companies which in turn generate profits to buy others, etc. , etc. If this Super- Cosmos Corporation paid its earnings to him in dividends he would be heavily taxed and not richer but poorer. As it is, he grows richer and richer, owns more and more property, expands and expands, so that finally he owns every shoe-shine stand and peanut stand. He finally owns every single enterprise there is,
It is not true, of course, that one man is doing this. But several clusters of men, capitalists, are doing something like it and are producing the strange multifarious sort of companies we have noted, which are becoming typical companies among the biggest ones. And concentration is being intensified.
What of the antitrust laws? Why don't they prevent the erection of these huge, expanding multifarious trusts or finpolities?
The average citizen is not aware that the antitrust laws are highly selective in their application at those relatively rare times when the pubpols decide to make them operative. Their application is permissive, not mandatory. The avowed purpose of the antitrust laws is to protect competition. Thus, if a company in one line of business tries to take over a company in the same line of business they may be called into play; also, if a company through ownership in a functionally unrelated company--such as Du Pont in General Motors--seems likely to divert subsidiary business from others to itself, they may also be put into play.
As it is said, the antitrust laws forbid only horizontal mergers or horizontal restraint of trade. Under those laws General Motors could not acquire Ford Motor or vice versa.
But other kinds of mergers are not forbidden.
There are possible, for example, vertical mergers. Here a manufacturing company may acquire suppliers, all the way back to the mine or field, or may acquire distributors to the retail market. This does not appear to be illegal unless competition is directly affected with someone in the same line of endeavor. Actually, the company that engages in vertical mergers, far from ending competition, is externally intensifying it, forcing others to do likewise or to fall behind in the blind race for dominion.
There are, too, circular mergers, in which a company acquires a good many companies, neither in exactly the same line of business, but the whole tending to come back into a closed circle so that all these companies only or largely do business with and for each other, excluding others from the magic circle. Such a combination might well come under fire of the antitrust laws, particularly if the White House occupant decided to parade his muscle.
There are, finally, these latter-day heterogeneous mergers and acquisitions we have discussed and in which the large companies now so largely figure. The antitrust laws do not apply against them because the various acquisitions are not in directly competing lines. A ship company that acquires chemical companies, an automobile company that acquires a household-appliance-maker or a telegraph company that acquires insurance companies does not appear to have acquired any of its competitors.
But in a very real sense basic competition is diminished. For large pools of liquid capital, retained profits, acquiring most of the economy for themselves, are gradually ending competitive endeavors in making money and in running enterprises. As far as economic creativity is concerned, competition has been stifled at its very roots. Most of the population is in the process reduced to the passive status of the Russian and Chinese populations but by different means.
The antitrust laws, as justice Oliver Wendell Holmes noted, are a joke. They have signally failed to preserve competition, their avowed intent. While the economists go about vainly seeking perfect monopoly, a single company in a single industry making a single item, and debate among themselves the semantic differences of oligopoly, monopoly and price leadership, we see around us a rising and all-embracing financial monopoly, quasimonopoly or semi-oligopoly. It isn't that there is monopoly in one industry--such as steel, oil or motors--but that industry in general totality is monopolized in ownership, control and direction by a very few people, the rich and super-rich. The moneybund is a concrete literal reality rather than a hyperbolic figure of speech.
The next step may be the merging, as it becomes profitably tax-saving, of the huge heterogeneous trusts. There is nothing in the antitrust laws as now written, seemingly, that would prevent the merger of U. S. Steel with Great Atlantic & Pacific Tea and the fusion of this combination with IT&T and W. R. Grace. Another possible combination among many is General Motors, Sears, Roebuck, Standard Oil of New Jersey and Heinz pickles. Why not? They don't offer competing products or services. They are simply competitive in making money, which is the mainspring of all the activity. Take away the money-making incentive in the form of extremely peculiar tax laws and such mergers would not occur.
What is happening is not only of economic and political concern but is of profound cultural concern. Under the system of many competing enterprises, each independent of the other, independent and candid voices were encouraged. The old-time merchant, for example, was often a man of forthright, informed opinions, which he forcibly expressed. The object of going into business for oneself in the American ethos was to become "independent," so that one needed nobody's permission to speak out, or anyone's aid or charity.
The institutional foundations of independent expression, however, are being as eroded under spreading corporate giantism as under Communist or Fascist totalitarianism. Neither finpols, their managers or employees dare speak out on anything for fear of compromising the corporate image before a heterogeneous public. What does the corporate crowd really think about birth control, religion in the schools, civil rights, conscription and the like? Nobody knows because they play it cool, say nothing. The mass media under their control are similarly noncommunicative, carrying water on both shoulders, reflecting the world as an entertaining circus of clowns, idiots, heroes, villains and random events. The growing corporate philistinism spreads slowly over the seats of learning.
To what extent can an employee of any one of the multiple parts of the corporate octopi commit himself on public questions? As a middle-range executive of the Super- Cosmos Corporation, to what extent can he express himself on, say, traditional versus progressive education? If he manages to make himself effectively heard on either side he is sure to make a large emotion-ridden crowd angry. Indeed, the more effectively he speaks on any aspect of a topic the angrier they get. They send letters to the management of the company, threatening to raise a boycott against its many branches, subsidiaries, affiliates and coordinates. But rarely do matters go this far; if they do, the
offending middle-range executive is told to "lay off, forget about different approaches to education, stick to business. "
As nearly everybody works for one or the other of these finpolities, nearly everybody is reduced to mouthing mild banalities if called upon to speak at all. Everybody toes the approved corporate line, designed to avoid making anybody angry about anything. "Don't be a trouble maker," is the operational motto. Meanwhile, the world itself poses more and more difficulties. As for politics, leave that to the pubpols and their minions. As General Motors goes, so goes the nation: I'd die for Standard Oil: I have but one Ford to give to my country: Fifty-four-forty or AT&T: Nylon ueber alles.
Independent merchants and lawyers, once noted for their forthright views on public affairs, spoke out as the occasion seemed to require. Now that they are gone down the corporate drain, theirs and other voices are frozen in corporate silence. In their place the finpols, if they feel anything of public concern requires attention, summon their public relations men, legislative representatives and lawyers and map out a quiet undercover campaign--but only as the interests of the finpolity itself dictate. Do the political parties themselves need an overhauling? That is something best left to the pubpols, "Mind your own business" becomes the prevailing rule. "Live and let live. "
The outcome is much the same as though a totalitarian regime had imposed its will. The organization man in the grey flannel suit becomes endemic, not only on the corporate circuit but in politics and the groves of academe. The independent, autonomous mind is more and more seen as an eccentric, a knocker, a trouble-maker, an agitator. "Don't rock the boat," he is admonished. "You are simply playing into the hands of our enemies abroad. Be patriotic and rally behind the four-square guesswork of Mr. Big. "
The uniformity is perfectly reflected in the glacial technical slicknesses of the watered-down mass media. The pay-off comes in one catastrophe or the other--Bay of Pigs, Vietnam, Watts. Catastrophe itself becomes endemic, built-in--as in the ghettos.
The source of it all surely is found in the need to preserve the well-being of the really huge investments of the finpolities. Any real or apparent deviation from a bland public- relations norm, in word or deed, can hurt profitability, and this is the new unforgivable sin. For as profits go down, unemployment rises, parents despair, children grow hungry. Then riots begin, suicides proliferate. It is easy to see that the general well-being depends wholly upon the well-being and good temper of the finpolities. The national maxim becomes, "Shut tip. "
Engineering Enterprises
A difficulty in writing about corporations is that the idea of a corporation brings different things to people's minds.
What people usually think of when they think of corporations is the engineering structure owned by the corporations. People sometimes visit corporations, as they say, by which they mean they visit their plants or offices.
Nevertheless, nobody, not even a corporation lawyer, has ever seen a corporation, which as a juridical concept is beyond sensory experience and almost as impalpable as a metaphysical abstraction. Yet one can sue or be sued by a corporation, injure or be injured by one. The corporation is actualized, concretized, only in a set of papers, the provisions of which the courts stand ready if necessary to implement. Whatever is tangible about the corporation is in these papers--its charter of incorporation, its by-laws and the titles to its properties. Even when a corporation owns a single plant and office combined, one cannot go and look at it; one can look only at its properties, which it can sell or otherwise dispose of and still remain intact in full corporativeness.
Public relations departments, in presuming to show the corporation to public view, in almost all cases show only some of its property, mostly consisting of engineering enterprises. All the leading 200 corporations listed in Appendix B are the legal representatives of such engineering enterprises. The corporation itself is a business--or finpolity; the business is an adjunct of an engineering process, which could be carried on by other legal means.
While there may be little difficulty in seeing U. S. Steel, General Motors, AT&T and their industrial counterparts as operators of engineering enterprises (a brief visit to their plants will convert doubters), there may be some difficulty in seeing certain other companies as conducting such operations. The electric, gas transmission and railroad companies, of course, all clearly stand out as operators of engineering enterprises. But there might be some opposition to the assertion that Sears, Roebuck, Great Atlantic & Pacific Tea and R. H. Macy and Company are also operators of engineering enterprises. It is nevertheless herewith asserted that they are.
Even if we eliminate all manufacturing--that is, machinefacturing--from their jurisdiction, they remain engineering enterprises, their engineering function being to gather, transport, store, display, deliver and offer to view a great variety of merchandise. Their engineering task is logistical. Of course, if anybody wishes to deny that R. H. Macy & Company is engaged in engineering we need not worry; one either sees the point or not. But it cannot be rationally denied that all the so-called industrial and public utility companies are engaged in pure engineering as well as in trade for profit.
Engineering is one form of applied science, and we find the industries, taken altogether, using the full range of mathematics, physics, chemistry, biology and even, more or less to suit the taste, the social proto-sciences. With more or less growing consciousness they apply pure science to their problems of production. The discovery of a new scientific principle, such as is involved in the transistor, is instantly incorporated into radios.
New self-directed machines (automation) are installed on production lines as soon as they are created.
Now, if anyone wishes to contend that all these corporate engineering plants are marvels of modern human ingenuity, he will not bear any demurrer from this observer. He may find, instead, that he has a rival in eloquent advocacy, for I would be the first to agree that all these big corporations in their engineering aspects are among the wonders of the modern world.
But we are not considering them in this aspect--we are taking this showy aspect wholly for granted. We are considering them only in their corporate aspect, their juridical and quasi-political as well as financial-economic aspects. One not only concedes but proclaims and insists upon the fact that E. I. du Pont de Nemours and all the others have marvelous plants and general offices, based upon the latest scientific principles.
Few of the finpols, however, are au courant with their enterprises in their scientific and engineering aspects. Like the man in the street, they couldn't tell one much about molecules, atoms and sub-atomic particles nor about the principles of mechanics. Their knowledge has to do largely with principles of accounting and finance, law, cost analysis, taxes, prices, political negotiation, marketing, general organization--and profitability. They are largely creatures of the executive suite and boardrooms and the higher political caucuses rather than of the plant. They know far more about tax structure than about atomic structure.
And it is just these societal aspects, their particular area of interest, that is our area of interest. We take for granted the work of the scientists in the laboratory and the
technicians and engineers in the plants. They have those, too, in Soviet Russia and Communist China where, however, they do not have finpols.
Portent of good or evil, depending upon one's point of view, it is nevertheless a differentiating descriptive fact.
What most basically confronts us is not only different legal systems but different types of legal systems. The finpols and finpolities have come into historic view, chiefly with the aid of modern technology which they neither invented nor developed, in our sort of political system They constitute our problem, if problem they are, and this problem is in the truest sense political rather than economic or technical.
We are, then, interested in the finpols and finpolities from a political point of view. We do not identify the corporations in their essence either with their plants, which are among the most praiseworthy structures in the land, or with their products. While nylon to the average citizen may connote Do Pont, to us it connotes only chemistry. What Do Pont connotes to us--and Ford, Rockefeller, Mellon and the rest--is finpolity.
Eight
UNDERSTRUCTURE OF THE FINPOLITAN ELITE
As the various finpols and finpolities are rivalrous at least in respect to making and retaining money, how and in what way do they act in concert, if they act in concert at all? Do they, in fact, act in concert in imposing faits accompli and policies on the nation?
To conclude that they more or less loosely act together as a moneybund is to proclaim oneself at once an adherent to what is pejoratively called the conspiracy theory, widely frowned upon by latter-day organizational academics in grey flannel suits (many of them briskly on the way up to the State, Defense or Treasury Departments or to the foundation refreshment troughs). In a broad sense, as it has been observed by unabashed exponents of the conspiracy theory, all history is a conspiracy. In this sense the word no more than broadly and perhaps privately and even unconsciously indicates coordinated action toward some mutually agreed upon end or ends at variance with public expectations; manifestly it does not have its specialized meaning in law.
In any event, overeager members of the financial elite have been caught and convicted in American courts of many literal subconspiracies, so that even in the narrow juristic sense many of them stand forth individually as certified, simon-pure conspirators. Consequently, even if there is not a single all-embracing conspiracy in juristic terms, it is a fact that there are and have been hundreds of adjudicated single conspiracies. The conspiracy theory, then, has a little more to it than honors-bouond academics concede.
Three Theories
There are in fact three major sociological theories, academically certified in all solemnity, to account for the phenomenon of socio-economic decision-making, the recondite problem being to determine: Who, if anybody in particular, really makes the basic decisions that govern society? Who calls the shots?
To a considerable extent this is a pseudo-problem, for virtually every person knows that he isn't calling the shots nor are any of his neighbors, co-workers or acquaintances. Everybody knows it is some distant and obscure "they. " But this fact (evident to any intelligent person) is not at all evident to many academics, who have made quite a scholastic mystery out of the whole business. Doubt is raised by some that any individual whatever makes any decisions; the theory is advanced that the entire process is occultly collective.
There is, first, the theory of an elite, which is employed by some masterful investigators.
Next, there is the theory of an inert, apathetic, partially alienated mass society, consisting largely of P. T. Barnum's myriad suckers and H. L. Mencken's swarming booboisie--the denizens of the grandstands and taverns. According to this theory, as most people are supine, unresponsive, childishly credulous and seeking no more than a job, diversion and comfortable mediocrity for themselves, the few who are seriously active emerge spontaneously at the decision-making level, more or less by default. As Tom, Dick and Harry won't bestir themselves and George the doer does, George finds himself willy-nilly among the decision-makers, a natural leader. But he got there more by chance than design, chosen if at all merely by fitting into the pattern of things and events. No conspirator he, no boob and no elitist.
There is, finally, the pluralist theory, according to which many diverse groups, individuals and forces confront each other in various ways, and under various cultural auspices arrive after debate by consensus or compromise at decisions, a notion that fits in neatly with democratic prescriptions. The process is presented as one of mutual accommodation.
There is something to be said for each of these theories, as each explains some of the data. Obviously a single synthesizing theory would be preferable. Lacking such, one can, and many sociologists do, attempt to blend them or to use them all. But as this is eclectic, theoretical purists are offended. The world, however--even the small world of society--is more complex than any all-embracing theory about it.
My own tacit use of these theories with respect to our subject is hierarchical and eclectic in the order stated. The facts strongly suggest to me, in other words, that the elitist theory best explains the facts. Whatever it fails to explain is then explained by the concept of the mass society. Finally, in many matters, less paramount in almost every single case, the pluralistic theory does come into play as it finds supporting data. But it is far less often significantly applicable than its sponsors suppose.
Actually. the elitist theory presupposes or implies the theory of the mass society. One could hardly have an elite without a mass. If everyone was alert and on his toes, how could an elite ever show itself? The mass itself paradoxically, would be an elite, and perfect high-level democracy would prevail. The mass-society theory, then, does not stand separately. If one has an elite, one must have a mass and, if society is to survive, vice versa. The uninspired mass team, in brief, must have a quarterback and, preferably, a coach or set of coaches. If the elite is truly aristocratic, selecting only the best, so much the better.
These theories and some of their prominent adherents are briefly dealt with by a voting sociologist in an interesting book; 1 there is, of course, a rather large literature about them. He himself found it necessary to apply them eclectically, although he believes in the greater inclusiveness of the pluralist view. As his attention was centered upon community decision-making in a small California town, the pluralist view is most serviceable; for its most fruitful application is on lower levels that are of little interest to
the financial elite. But it would plainly be useless if applied to a company or white- supremacy town.
He objects to the elitist theory because it allegedly imputes motivations to covert leadership groups. If they are covert by definition they cannot, he believes, be investigated by rational methods. Next, he holds, the elitist theory smooths over and obscures the many internal struggles over decisions within an elite. With such struggles in mind, it would seem that one must apply the pluralist theory to the operations of the elite itself, a logically well-taken point certainly germane to the paramountcy of theory. Thirdly, the theory of the elite must rely on the impact of events outside the elite system to explain changes within the system itself; for the elite, which does indeed change, does not change spontaneously. Most importantly, "elitist studies of community power typically do not present data to support their contentions that all major decision-making rests in the hands of single leadership groups. "
While I recoil from the operative "all," which I have emphasized, it is clearly incumbent upon anyone utilizing the elitist approach to show major decisions emanating from the elite group--decisions at variance with some established consensus. If such decisions are made, and are made to stick, then I think it may fairly be deduced that other decisions are similarly made. It isn't the general consuming public, we may say in a preliminary way, that decides to raise the prices. Nor is it, in view of the system of corporately administered prices, an automatic free market. It is clearly some distant and popularly distasteful "they" who decide this.
The elitist theory most broadly stated, holds that the United States, for example, is a society of many dominant elites. The elite levels of science, scholarship, the arts, entertainment and sports (but not politics or finance) are open to anyone of ability. These are, therefore "open" elites, and consonant with the democratic bias. But there is, it is asserted or implied by a variety of writers, a politico-economic elite of elites, which is a "closed" elite. It is closed because something other than personal ability is required to belong to it. The main although not exclusive qualification for membership, it is here contended, is money. This elite has been referred to as the moneybund-- the complex of finpolities. Its leading members, I suggest, are finpols. This moneybund is different from C. Wright Mills's "power elite," which is a somewhat fanciful and highly personal embroidery upon the old-established basic idea of a moneyed elite. Take the money crowd away and Mills' "power elite" crumbles into verbal dust.
Now, while the moneyed elite no doubt is pluralistically structured internally, toward the outside world it presents itself as a rather solid, small, coherent entity. Its decisions once having been taken or not taken (a decision in itself)--and we can obtain at least glimpses of some of its decision-making processes--it presents to the world pretty much of a united front even if it is not always unified internally in its views. Its members, at any rate, have various ways of knowing the difference between insiders and outsiders. *
(*The idea of an elite does not necessarily imply that it is homogeneous. Thus, Albert Mathiez, the French historian on the subject of the French nobility. says: "The nobility consisted, in fact, of distinct and rival castes, the most powerful of which were not those who could point to the longest pedigrees. Side by side with the old hereditary or military nobility, there had sprung tip in the course of the last two centuries a nobility 'of the long robe' (noblesse de robe); that is to say, an official nobility which monopolized administrative and judicial offices. This new caste, which was as proud as the old nobility, and perhaps richer, was headed by the members of the parlements, or courts of appeal," This new nobility, as Mathiez goes on to show. was in many ways more powerful than the old nobility, Albert Mathiez, The French Revolution, Alfred A. Knopf, Inc. , N. Y. , 1926; Universal Library, N. Y. , 1964, pp. 6-7. One could similarly
divide the American elite into the old and new money and the leading corporate officials and corporation lawyers. )
As for motivations, it is, first, surely possible to deduce certain over-riding motivations in the moneyed elite by the way its members conduct their worldly affairs. One doesn't need to tap their telephones or induce their psychoanalysts to break confidences to see that they are nearly all motivated (1) to retain their money and power; (2) to add to money and power if possible; (3) to make use of all the resources of modern science, technology and politics in the retention and expansion of their power; (4) to keep their share of the tax burden as low as possible; (5) to support whatever politico-economic policies support or improve their position and to struggle against those which seem likely to diminish it; and (6) to have themselves presented to the world as especially worthy people.
What they want more specifically is shown by. their legislative lobbyists, trade association spokesmen and newspapers. Fortune, the Wall Street Journal and similar publications consciously and unconsciously tell us much about what they want. Beyond this, public inquiries, the taking of testimonies, the massing of evidence in the courts and occasional books by insiders have done much to reveal motivations. There have been memoirs such as those of the late Clarence W. Barron, critical and friendly biographies and even letters (although collections of letters, as in the case of the elder J. P. Morgan, have often been ordered burned by testamentary prescription) This in itself seems a bit conspiratorial.
The major ends of the moneyed elite are clearer, it must be confessed, than the devious means often used to attain those ends.
In view of this elite (judging purely by their outward behavior) what's good for them is good for the United States. They see their personal pecuniary interests as identical with the complex interests of the nation. This elite is known to favor, among other things, a minimum of government regulation of their corporate instrumentalities; they openly talk to this end and work to achieve it. Society, they feel, should be subject to minimal direction. Would anyone wish to assert there is any doubt about this?
As far as motivations go, it is not a difficulty that inheres peculiarly in the theory of an elite; in this day of Freudian psychology the motivations of every individual are a mystery even to himself. What are the motivations of participants in a pluralist decision- making process? If it is said, "How can we know what the elite is up to and why? " one may reply with another question: "How can we know what pluralists are up to and why? " Not being able to look inside people's heads, one makes deductions from external behavior. If a man hoards money in a hole in the floor we conclude that he is a miser. Can we be wrong? Can it be that he is in fact a spendthrift? As to why he does it, we turn to the psychoanalyst and hear talk about feelings of insecurity, inadequacy, rejection, alienation. Hoarding, it seems, makes him feel less anxious. Yet, he remains a miser vis-a`-vis others, an objective phenomenon. He is not merely a psychiatric case.
The theoretical objections to the theory of the elite, at any rate, are not nearly so compelling as they may seem when viewed only dialectically on the purely theoretical level, before testing against the facts.
But there are stronger reasons, compelling to any rational mind, for rejecting the idea of the greater serviceability of the pluralist theory in explaining decision-making on the national level. For if the pluralist theory indeed held, if major decisions in the United States were in fact the product of countervailing and balanced groups, with each group element of society making itself fully heard, the outcome in terms of money, position and prestige would be a great deal more equitable than it is. Sociologists can indeed show many decisions arrived at by pluralist means. But we are talking now about the
humanly fundamental decisions--the decisions about who gets what, where, how and why. Those decisions, I assert, are elitely determined, sometimes against considerable opposition.
If the decision about the distribution of the basic economic means is arrived at pluralistically, why is the payoff so uneven? If one goes along with the. pluralist view we must conclude that people have acquiesced in their relatively low reward by the economic system. Yet millions of people protest all the time that they are being underpaid, They sound as though they had not consented to the decision-making about the distribution of money.
Most people in the United States, including very many outstandingly intelligent and highly trained, are much like the participants in a dice game in which the opponent throws a long series of 7's and 11's, losing seldom; but when the dice change hands it develops that they follow the laws of randomness and show no runs of 7's and 11's. In a real dice game, most such losers would quickly conclude that the dice were loaded and they were being rooked.
Now, if the social dice weren't subject to manipulation from behind the scenes, would so many people be so far below par in the matter of money and property? Such subparity elements, it is often said by way of explanation, are the no-goods, without ambition or energy. But, we may ask, is this also true of Nobel laureates, university professors in general, the trained professional classes, whose pay in comparison with that of corporation executives and big dividend recipients is absurdly meager? Are we to suppose that highly skilled professionals have acquiesced in their relatively niggardly compensation? Hearing them complain, reading their complaints in professional journals, one would not suppose so. They sound very much as though they are complaining futilely against loaded dice.
Again, to look at the bottom of the labor force, are we to suppose that the poverty- stricken itinerant agricultural worker or the ghetto denizen has acquiesced through some pluralistic decision-making process in his low estate?
In looking at the history of organized labor, the long record of anti-labor violence and counter-violence, one gets the strong impression that basic decisions were imposed upon unwilling and eventually maddened victims. Those who worked in Andrew Carnegie's steel mills at $10 for a seventy-two-hour (and longer) week of punishing effort under intense heat had never willingly, agreed to perform in this manner. Nobody had ever asked them or their representatives. They were driven by stark necessity to accept a one-sided bargain.
It is true that all the persons to whom I refer have their compensation determined by a market. The elite, however, do not have their revenues impersonally determined by a market, to the dictates of which they submit. They make market rules pretty much to suit their inclinations.
It does, then, look as though members of the labor force, high and low, have come up against a decree that says: So far and no further. They have not acquiesced in this decree; they have not been consulted about it. They are often opposed to it, but are as powerless to push it aside as Russian workers are powerless to push aside a state decree.
It looks very much as though this decree has been handed down from some esoteric group, for there is no general rule against having an expansive income in a booming economy.
In any play against the socio-economic elite of finpols with a view to, participating in its inner decisions, few--indeed, none--of the members of the various open elites find
they can make it. They don't have the hereditary tickets; and even if they had the tickets they might not possess other qualifications.
What, precisely, is the understructure of the top elite of finpolity? Intermarriage of the Elite
Largely headquartered in the East, this elite, first of all, is heavily intermarried . This fact has been shown in great detail and need not detain us. 2 Most of the world of finpolity and its environs is interlaced by complicated cousinages, as in the case of the longer established European nobility. Intermarriage among the big propertied elite--the bourgeosie, the finpols-- continues, as the "society" pages of newspapers show nearly every week.
As a fairly recent and uncomplicated example of upper-crust family structure let us take the Fords. Edsel, the only child of grass-roots Henry, had four children. Henry Ford II, one of Edsel's three sons, married Anne McDonnell, a Catholic socialite by whom he had three children. His daughter Charlotte, twenty-four, in 1965 married the off-the- beach Greek shipping magnate Stavros Spiros Niarchos, fifty-six, reputed to be worth a minimal $260 million. 3 Her coming accouchement was duly announced early in February, 1966; not long thereafter a prospective divorce. Her debut in 1959, according to the Times, took a year to plan, was attended by 1,200 guests and cost about $250,000, of which 860,000 went for flowers alone. Recalled the Times nostalgically (December 17, 1965): "Two million magnolia leaves were flown from Mississippi and were used to cover the walls of the corridors leading to the reception room in the Country Club of Detroit, which had been redecorated to look like an eighteenth-century French chateau. " Sister Anne Ford, twenty-two, was married with less fanfare a few days later to Giancario Uzielli, an international stockbroker of New York. Henry Ford II in his second marital venture, after a divorce that led to his excommunication from the Catholic Church, married the divorced, also excommunicant, Mrs. Maria Christina Vettore Austin, of Italy and England, who is more particularly one of the European Rothschilds of pecuniary repute. William Ford, another of Edsel's sons, married Martha Firestone of the rubber fortune, by whom he has three children.
Here, among the comparatively late-arriving Fords, one finds a rococo interlacing of diverse elements the common social denominator of which is property, and this is typical of the upper ownership strata.
As to inward and outward twining cousinages among the moneyed elite, the Du Ponts provide perhaps the most spectacular example, interlinking with a number of other established and unlikely cousinages such as the Peabodys and Roosevelts. It is not usually easy in the hereditary strata of wealth to find someone unjoined to one or more other wealthy families by cousinly ties, and many of them link with what in Europe is known as nobility. Consinage threads through many apparently disparate propertied families.
To avoid detention here by details readily available elsewhere, let it simply be said that much about the affairs of the finpolities is a family matter. These families, it is true, are often subject to strains within themselves and vis-a-vis other families (pluralism); but they together present pretty much of a unified front to the world (eliteness).
Pretensions to Aristocracy
The American wealthy, as Cleveland Amory shows in considerable diverting detail, have confused money, ostentatious partying, politico-economic position and far-ranging power with aristocracy, of which they very commonly think themselves representative. 4 By the hundreds they have dug up for themselves, or caused to be devised, European coats of arms, more than 500 of which have been suitably proved and registered with
the New England Historic and Genealogical Society "easily the country's outstanding authority on coats of arms. " 5
The stress on coats of arms, both among bearers and disappointed nonbearers suggests that the wealthy themselves, unlike some unaccountably obtuse outside investigators, regard themselves as part of family enterprises, not as isolated persons who have won in an individualistic rat race. These families, to be sure, are placed within a certain setting of historically developed institutions of which American children sing innocently in school.
As the redoubtable H. L. Mencken remarked in 1926, "the plutocracy, in a democratic state, tends to take the place of the missing aristocracy, and even to be mistaken for it. It is, of course, something quite different.
The diversified mixture of products of each was achieved by combining many different existing companies, as IT&T has done in a broader spectrum. In the case of some companies the product mixture has come about gradually. In the case of others the decision to diversify has come suddenly, as though recognizing an opportunity that others stumbled upon earlier. Companies suddenly and radically shift their operating emphases, always in quest of maximum return on capital.
Thus, W. R. Grace and Company, eighty-fifth in corporate size, originally operated ships to Latin America (the Grace Line) but more recently has diversified its activities so that it is now a big chemical and fertilizer producer, banker, Latin-American manufacturer, exporter-importer and oil company. This former ship operator and banker
now derives 65 per cent of its sales and 66 per cent of its pretax earnings from its chemical division. As in the case of IT&T, we may ask of W. R. Grace: What, really, is its business?
Sears, Roebuck and Great Atlantic & Pacific Tea would be defined, correctly, as merchandising enterprises. But each owns a great many supplemental manufacturing and financial enterprises which have been developed or acquired. Each does much more than mobilize, stock and deliver a wide variety of merchandise. A&P, like many of its counterparts, would ordinarily be described as a vast retail grocery chain. Yet it now also carries a big line of cosmetics, pharmaceuticals, household hardware and certain items of clothing (aprons, gloves, etc. ). It and Sears, Roebuck and their smaller counterparts are obviously on the way to becoming general national manufacturing and merchandising enterprises oriented toward the ultimate consumer. Sears, Roebuck is usually thought of as a mail-order house; yet it operates chains of department stores as well, and engages in the general insurance business. In many phases it is a manufacturer. Both are giant transport companies.
What is Du Pont? A big chemical combine, it will be said. But it is also a big manufacturer of synthetic textiles, paints and explosives. It can build, and has built, nuclear energy plants. It could just as easily build cities. The big oil companies are chemical companies as well as huge operators of seaborne shipping, tank-car fleets and continental pipelines, and some of the big chemical companies are becoming to some extent oil companies. What is Tennessee Gas Transmission? A transmitter of natural gas, of course; but it is also a huge chemical, petroleum and fertilizer enterprise as well as other things.
The trend among all the big companies is increasingly toward nonspecialization and to the merging of seemingly incompatible enterprises, as when Columbia Broadcasting acquires the New York Yankees baseball club and IT&T acquires American Broadcasting. Radio Corporation and other electronic firms acquire big book publishers with a view to gaining literary and educational properties. Many big newspaper enterprises also publish books, magazines and operate TV and radio stations, pulp and paper mills, deepwater ships, etc.
AT&T itself, publicly looked upon as "the telephone company," operating about 85 per cent of the nation's telephones, long owned 99. 8 per cent of Western Electric, manufacturer of telephones, switchboards and a wide array of electrical apparatus. AT&T is also heavily committed to research and holds patents relating to the whole electronic field, including computers. It is deep in the satellite enterprise.
What all the expansion reflects is: investment of earnings not paid out. As we have noted, payouts incur additional taxes for stockholders; retained invested earnings are not taxed, are like money in the bank and get accelerated depreciation allowances. As there are not sufficient opportunities at home, the companies are now acquiring foreign enterprises at a great rate--in France, Germany, Belgium, Switzerland, Japan, everywhere--and since World War II have invested abroad about $40 billion. Ownership is preferred over income.
The cases cited are not at all untypical. One could go on for a long time detailing odd combinations of corporate activity. Thus, Hunt Foods & Industries, Inc. , originally the Ohio Match Company, in addition to making and marketing a broad line of food products operates companies in lumber, glass, aluminum, real estate, chemicals, glass and metal containers, gin, paints, varnishes, wallpaper, floor coverings and so on. It has a line of big corporate investments that is every bit as odd as the IT&T labyrinth. It is, first, the largest stockholder in Wheeling Steel, with 8. 8 per cent. It owns 22. 7 per cent of Canada Dry and 35. 8 per cent of the McCall Corporation, publisher of McCall's
Magazine, Redbook, Bluebook and the Saturday Review. It has it 4. 5 per cent interest in ABC-Paramount, giving it a foothold in film-making, radio and television broadcasting.
Let us take a more sober-seeming company, the Mississippi River Fuel Corporation, originally formed to transport natural gas by pipeline from Louisiana to St. Louis. There was first formed the Mississippi River Corporation to exchange stock with it, and this company now owns 94. 2 per cent of the Mississippi Transmission Corporation, 100 per cent of several cement companies and 58 per cent of the Class A stock of the big Missouri Pacific Railroad. As the change in its name suggests, it is apparently going to concern itself with everything in the Mississippi Valley, perhaps the Valley as a whole.
The Illinois Central Railroad may become its rival, might even merge with it. For the railroad has caused to be formed Illinois Central Industries, Inc. , with which it exchanged 95 per cent of its stock; and Illinois Central Industries has already acquired a big electrical equipment maker. As its name suggests, it is ready to operate anything along its right of way from Chicago to Florida and the Gulf of Mexico.
Operating companies become holding companies and some of the holding companies become general investment companies such as Adams Express Company, until 1918 a leading express and money-order house that sold out its business to American Express and transformed itself into a closed-end investment trust. The chief difference between a standard investment trust and a heterogeneous holding company is that the latter holds a dominant to 100 per cent interest in companies in which it plays a directorial role; the investment trust has only a fractional position in each company and is not involved in the management. The investment trust is a pure rentier.
The time, then, is near at hand when a company's name will give no clue at all to its line of business apart from the business of making money.
Studying the reasons for the crazy-quilt expansion, the Federal Trade Commission in 1955 noted them as follows:
Building new capacity adds to existing capacity and intensifies competition; but by buying, a manufacturer acquires additional capacity without adding to total capacity and may also reduce some external competition. "These competitive considerations are especially important if he is diversifying into products new to him, but in the production of which others are well established. "
Selling companies are motivated to sell because they lack the financial resources for expansion. Here lies the opportunity of the resource-rich company.
"The same factor is to be noted in instances in which a company having surplus cash not immediately needed in its operations invests it in the securities of other companies, either in the same or an unrelated industry. Such investments may subsequently prove to be the initial step in acquisitions carried out either as further investment and diversification of the acquirer's business, or as a means of salvaging the investments already made.
"Tax savings possible under various provisions of the Internal Revenue Act granting more favorable rates on capital gains as compared with the rates applicable to operating profits of corporations and personal incomes of individuals, the provisions covering tax- free exchanges of stock, and the provisions governing the carrying forward of past operating losses as credits against future earnings are also important factors. " 18
Said the Federal Trade Commission stiffly: ". . . the economic forces and motives discernible are not per se different from those upon which all business judgments are based respecting the ownership and exchange of property in a free economy. The operation of these forces on a large scale, however, carries with it such adverse
economic effects on third parties, and on the economy as a whole, as to bring their unrestrained operation into conflict with public policy and law. " 19
What is happening may perhaps be better depicted by showing it as a small fictitious model, as follows: One man, owning all of the highly profitable Super-Cosmos Corporation, is causing it to hold back most of its earnings, thus enabling him to bypass personal income taxes. With these withheld tax-free earnings he is gradually buying up all other companies, large and small, causing them also to hold back earnings in order to buy other companies which in turn generate profits to buy others, etc. , etc. If this Super- Cosmos Corporation paid its earnings to him in dividends he would be heavily taxed and not richer but poorer. As it is, he grows richer and richer, owns more and more property, expands and expands, so that finally he owns every shoe-shine stand and peanut stand. He finally owns every single enterprise there is,
It is not true, of course, that one man is doing this. But several clusters of men, capitalists, are doing something like it and are producing the strange multifarious sort of companies we have noted, which are becoming typical companies among the biggest ones. And concentration is being intensified.
What of the antitrust laws? Why don't they prevent the erection of these huge, expanding multifarious trusts or finpolities?
The average citizen is not aware that the antitrust laws are highly selective in their application at those relatively rare times when the pubpols decide to make them operative. Their application is permissive, not mandatory. The avowed purpose of the antitrust laws is to protect competition. Thus, if a company in one line of business tries to take over a company in the same line of business they may be called into play; also, if a company through ownership in a functionally unrelated company--such as Du Pont in General Motors--seems likely to divert subsidiary business from others to itself, they may also be put into play.
As it is said, the antitrust laws forbid only horizontal mergers or horizontal restraint of trade. Under those laws General Motors could not acquire Ford Motor or vice versa.
But other kinds of mergers are not forbidden.
There are possible, for example, vertical mergers. Here a manufacturing company may acquire suppliers, all the way back to the mine or field, or may acquire distributors to the retail market. This does not appear to be illegal unless competition is directly affected with someone in the same line of endeavor. Actually, the company that engages in vertical mergers, far from ending competition, is externally intensifying it, forcing others to do likewise or to fall behind in the blind race for dominion.
There are, too, circular mergers, in which a company acquires a good many companies, neither in exactly the same line of business, but the whole tending to come back into a closed circle so that all these companies only or largely do business with and for each other, excluding others from the magic circle. Such a combination might well come under fire of the antitrust laws, particularly if the White House occupant decided to parade his muscle.
There are, finally, these latter-day heterogeneous mergers and acquisitions we have discussed and in which the large companies now so largely figure. The antitrust laws do not apply against them because the various acquisitions are not in directly competing lines. A ship company that acquires chemical companies, an automobile company that acquires a household-appliance-maker or a telegraph company that acquires insurance companies does not appear to have acquired any of its competitors.
But in a very real sense basic competition is diminished. For large pools of liquid capital, retained profits, acquiring most of the economy for themselves, are gradually ending competitive endeavors in making money and in running enterprises. As far as economic creativity is concerned, competition has been stifled at its very roots. Most of the population is in the process reduced to the passive status of the Russian and Chinese populations but by different means.
The antitrust laws, as justice Oliver Wendell Holmes noted, are a joke. They have signally failed to preserve competition, their avowed intent. While the economists go about vainly seeking perfect monopoly, a single company in a single industry making a single item, and debate among themselves the semantic differences of oligopoly, monopoly and price leadership, we see around us a rising and all-embracing financial monopoly, quasimonopoly or semi-oligopoly. It isn't that there is monopoly in one industry--such as steel, oil or motors--but that industry in general totality is monopolized in ownership, control and direction by a very few people, the rich and super-rich. The moneybund is a concrete literal reality rather than a hyperbolic figure of speech.
The next step may be the merging, as it becomes profitably tax-saving, of the huge heterogeneous trusts. There is nothing in the antitrust laws as now written, seemingly, that would prevent the merger of U. S. Steel with Great Atlantic & Pacific Tea and the fusion of this combination with IT&T and W. R. Grace. Another possible combination among many is General Motors, Sears, Roebuck, Standard Oil of New Jersey and Heinz pickles. Why not? They don't offer competing products or services. They are simply competitive in making money, which is the mainspring of all the activity. Take away the money-making incentive in the form of extremely peculiar tax laws and such mergers would not occur.
What is happening is not only of economic and political concern but is of profound cultural concern. Under the system of many competing enterprises, each independent of the other, independent and candid voices were encouraged. The old-time merchant, for example, was often a man of forthright, informed opinions, which he forcibly expressed. The object of going into business for oneself in the American ethos was to become "independent," so that one needed nobody's permission to speak out, or anyone's aid or charity.
The institutional foundations of independent expression, however, are being as eroded under spreading corporate giantism as under Communist or Fascist totalitarianism. Neither finpols, their managers or employees dare speak out on anything for fear of compromising the corporate image before a heterogeneous public. What does the corporate crowd really think about birth control, religion in the schools, civil rights, conscription and the like? Nobody knows because they play it cool, say nothing. The mass media under their control are similarly noncommunicative, carrying water on both shoulders, reflecting the world as an entertaining circus of clowns, idiots, heroes, villains and random events. The growing corporate philistinism spreads slowly over the seats of learning.
To what extent can an employee of any one of the multiple parts of the corporate octopi commit himself on public questions? As a middle-range executive of the Super- Cosmos Corporation, to what extent can he express himself on, say, traditional versus progressive education? If he manages to make himself effectively heard on either side he is sure to make a large emotion-ridden crowd angry. Indeed, the more effectively he speaks on any aspect of a topic the angrier they get. They send letters to the management of the company, threatening to raise a boycott against its many branches, subsidiaries, affiliates and coordinates. But rarely do matters go this far; if they do, the
offending middle-range executive is told to "lay off, forget about different approaches to education, stick to business. "
As nearly everybody works for one or the other of these finpolities, nearly everybody is reduced to mouthing mild banalities if called upon to speak at all. Everybody toes the approved corporate line, designed to avoid making anybody angry about anything. "Don't be a trouble maker," is the operational motto. Meanwhile, the world itself poses more and more difficulties. As for politics, leave that to the pubpols and their minions. As General Motors goes, so goes the nation: I'd die for Standard Oil: I have but one Ford to give to my country: Fifty-four-forty or AT&T: Nylon ueber alles.
Independent merchants and lawyers, once noted for their forthright views on public affairs, spoke out as the occasion seemed to require. Now that they are gone down the corporate drain, theirs and other voices are frozen in corporate silence. In their place the finpols, if they feel anything of public concern requires attention, summon their public relations men, legislative representatives and lawyers and map out a quiet undercover campaign--but only as the interests of the finpolity itself dictate. Do the political parties themselves need an overhauling? That is something best left to the pubpols, "Mind your own business" becomes the prevailing rule. "Live and let live. "
The outcome is much the same as though a totalitarian regime had imposed its will. The organization man in the grey flannel suit becomes endemic, not only on the corporate circuit but in politics and the groves of academe. The independent, autonomous mind is more and more seen as an eccentric, a knocker, a trouble-maker, an agitator. "Don't rock the boat," he is admonished. "You are simply playing into the hands of our enemies abroad. Be patriotic and rally behind the four-square guesswork of Mr. Big. "
The uniformity is perfectly reflected in the glacial technical slicknesses of the watered-down mass media. The pay-off comes in one catastrophe or the other--Bay of Pigs, Vietnam, Watts. Catastrophe itself becomes endemic, built-in--as in the ghettos.
The source of it all surely is found in the need to preserve the well-being of the really huge investments of the finpolities. Any real or apparent deviation from a bland public- relations norm, in word or deed, can hurt profitability, and this is the new unforgivable sin. For as profits go down, unemployment rises, parents despair, children grow hungry. Then riots begin, suicides proliferate. It is easy to see that the general well-being depends wholly upon the well-being and good temper of the finpolities. The national maxim becomes, "Shut tip. "
Engineering Enterprises
A difficulty in writing about corporations is that the idea of a corporation brings different things to people's minds.
What people usually think of when they think of corporations is the engineering structure owned by the corporations. People sometimes visit corporations, as they say, by which they mean they visit their plants or offices.
Nevertheless, nobody, not even a corporation lawyer, has ever seen a corporation, which as a juridical concept is beyond sensory experience and almost as impalpable as a metaphysical abstraction. Yet one can sue or be sued by a corporation, injure or be injured by one. The corporation is actualized, concretized, only in a set of papers, the provisions of which the courts stand ready if necessary to implement. Whatever is tangible about the corporation is in these papers--its charter of incorporation, its by-laws and the titles to its properties. Even when a corporation owns a single plant and office combined, one cannot go and look at it; one can look only at its properties, which it can sell or otherwise dispose of and still remain intact in full corporativeness.
Public relations departments, in presuming to show the corporation to public view, in almost all cases show only some of its property, mostly consisting of engineering enterprises. All the leading 200 corporations listed in Appendix B are the legal representatives of such engineering enterprises. The corporation itself is a business--or finpolity; the business is an adjunct of an engineering process, which could be carried on by other legal means.
While there may be little difficulty in seeing U. S. Steel, General Motors, AT&T and their industrial counterparts as operators of engineering enterprises (a brief visit to their plants will convert doubters), there may be some difficulty in seeing certain other companies as conducting such operations. The electric, gas transmission and railroad companies, of course, all clearly stand out as operators of engineering enterprises. But there might be some opposition to the assertion that Sears, Roebuck, Great Atlantic & Pacific Tea and R. H. Macy and Company are also operators of engineering enterprises. It is nevertheless herewith asserted that they are.
Even if we eliminate all manufacturing--that is, machinefacturing--from their jurisdiction, they remain engineering enterprises, their engineering function being to gather, transport, store, display, deliver and offer to view a great variety of merchandise. Their engineering task is logistical. Of course, if anybody wishes to deny that R. H. Macy & Company is engaged in engineering we need not worry; one either sees the point or not. But it cannot be rationally denied that all the so-called industrial and public utility companies are engaged in pure engineering as well as in trade for profit.
Engineering is one form of applied science, and we find the industries, taken altogether, using the full range of mathematics, physics, chemistry, biology and even, more or less to suit the taste, the social proto-sciences. With more or less growing consciousness they apply pure science to their problems of production. The discovery of a new scientific principle, such as is involved in the transistor, is instantly incorporated into radios.
New self-directed machines (automation) are installed on production lines as soon as they are created.
Now, if anyone wishes to contend that all these corporate engineering plants are marvels of modern human ingenuity, he will not bear any demurrer from this observer. He may find, instead, that he has a rival in eloquent advocacy, for I would be the first to agree that all these big corporations in their engineering aspects are among the wonders of the modern world.
But we are not considering them in this aspect--we are taking this showy aspect wholly for granted. We are considering them only in their corporate aspect, their juridical and quasi-political as well as financial-economic aspects. One not only concedes but proclaims and insists upon the fact that E. I. du Pont de Nemours and all the others have marvelous plants and general offices, based upon the latest scientific principles.
Few of the finpols, however, are au courant with their enterprises in their scientific and engineering aspects. Like the man in the street, they couldn't tell one much about molecules, atoms and sub-atomic particles nor about the principles of mechanics. Their knowledge has to do largely with principles of accounting and finance, law, cost analysis, taxes, prices, political negotiation, marketing, general organization--and profitability. They are largely creatures of the executive suite and boardrooms and the higher political caucuses rather than of the plant. They know far more about tax structure than about atomic structure.
And it is just these societal aspects, their particular area of interest, that is our area of interest. We take for granted the work of the scientists in the laboratory and the
technicians and engineers in the plants. They have those, too, in Soviet Russia and Communist China where, however, they do not have finpols.
Portent of good or evil, depending upon one's point of view, it is nevertheless a differentiating descriptive fact.
What most basically confronts us is not only different legal systems but different types of legal systems. The finpols and finpolities have come into historic view, chiefly with the aid of modern technology which they neither invented nor developed, in our sort of political system They constitute our problem, if problem they are, and this problem is in the truest sense political rather than economic or technical.
We are, then, interested in the finpols and finpolities from a political point of view. We do not identify the corporations in their essence either with their plants, which are among the most praiseworthy structures in the land, or with their products. While nylon to the average citizen may connote Do Pont, to us it connotes only chemistry. What Do Pont connotes to us--and Ford, Rockefeller, Mellon and the rest--is finpolity.
Eight
UNDERSTRUCTURE OF THE FINPOLITAN ELITE
As the various finpols and finpolities are rivalrous at least in respect to making and retaining money, how and in what way do they act in concert, if they act in concert at all? Do they, in fact, act in concert in imposing faits accompli and policies on the nation?
To conclude that they more or less loosely act together as a moneybund is to proclaim oneself at once an adherent to what is pejoratively called the conspiracy theory, widely frowned upon by latter-day organizational academics in grey flannel suits (many of them briskly on the way up to the State, Defense or Treasury Departments or to the foundation refreshment troughs). In a broad sense, as it has been observed by unabashed exponents of the conspiracy theory, all history is a conspiracy. In this sense the word no more than broadly and perhaps privately and even unconsciously indicates coordinated action toward some mutually agreed upon end or ends at variance with public expectations; manifestly it does not have its specialized meaning in law.
In any event, overeager members of the financial elite have been caught and convicted in American courts of many literal subconspiracies, so that even in the narrow juristic sense many of them stand forth individually as certified, simon-pure conspirators. Consequently, even if there is not a single all-embracing conspiracy in juristic terms, it is a fact that there are and have been hundreds of adjudicated single conspiracies. The conspiracy theory, then, has a little more to it than honors-bouond academics concede.
Three Theories
There are in fact three major sociological theories, academically certified in all solemnity, to account for the phenomenon of socio-economic decision-making, the recondite problem being to determine: Who, if anybody in particular, really makes the basic decisions that govern society? Who calls the shots?
To a considerable extent this is a pseudo-problem, for virtually every person knows that he isn't calling the shots nor are any of his neighbors, co-workers or acquaintances. Everybody knows it is some distant and obscure "they. " But this fact (evident to any intelligent person) is not at all evident to many academics, who have made quite a scholastic mystery out of the whole business. Doubt is raised by some that any individual whatever makes any decisions; the theory is advanced that the entire process is occultly collective.
There is, first, the theory of an elite, which is employed by some masterful investigators.
Next, there is the theory of an inert, apathetic, partially alienated mass society, consisting largely of P. T. Barnum's myriad suckers and H. L. Mencken's swarming booboisie--the denizens of the grandstands and taverns. According to this theory, as most people are supine, unresponsive, childishly credulous and seeking no more than a job, diversion and comfortable mediocrity for themselves, the few who are seriously active emerge spontaneously at the decision-making level, more or less by default. As Tom, Dick and Harry won't bestir themselves and George the doer does, George finds himself willy-nilly among the decision-makers, a natural leader. But he got there more by chance than design, chosen if at all merely by fitting into the pattern of things and events. No conspirator he, no boob and no elitist.
There is, finally, the pluralist theory, according to which many diverse groups, individuals and forces confront each other in various ways, and under various cultural auspices arrive after debate by consensus or compromise at decisions, a notion that fits in neatly with democratic prescriptions. The process is presented as one of mutual accommodation.
There is something to be said for each of these theories, as each explains some of the data. Obviously a single synthesizing theory would be preferable. Lacking such, one can, and many sociologists do, attempt to blend them or to use them all. But as this is eclectic, theoretical purists are offended. The world, however--even the small world of society--is more complex than any all-embracing theory about it.
My own tacit use of these theories with respect to our subject is hierarchical and eclectic in the order stated. The facts strongly suggest to me, in other words, that the elitist theory best explains the facts. Whatever it fails to explain is then explained by the concept of the mass society. Finally, in many matters, less paramount in almost every single case, the pluralistic theory does come into play as it finds supporting data. But it is far less often significantly applicable than its sponsors suppose.
Actually. the elitist theory presupposes or implies the theory of the mass society. One could hardly have an elite without a mass. If everyone was alert and on his toes, how could an elite ever show itself? The mass itself paradoxically, would be an elite, and perfect high-level democracy would prevail. The mass-society theory, then, does not stand separately. If one has an elite, one must have a mass and, if society is to survive, vice versa. The uninspired mass team, in brief, must have a quarterback and, preferably, a coach or set of coaches. If the elite is truly aristocratic, selecting only the best, so much the better.
These theories and some of their prominent adherents are briefly dealt with by a voting sociologist in an interesting book; 1 there is, of course, a rather large literature about them. He himself found it necessary to apply them eclectically, although he believes in the greater inclusiveness of the pluralist view. As his attention was centered upon community decision-making in a small California town, the pluralist view is most serviceable; for its most fruitful application is on lower levels that are of little interest to
the financial elite. But it would plainly be useless if applied to a company or white- supremacy town.
He objects to the elitist theory because it allegedly imputes motivations to covert leadership groups. If they are covert by definition they cannot, he believes, be investigated by rational methods. Next, he holds, the elitist theory smooths over and obscures the many internal struggles over decisions within an elite. With such struggles in mind, it would seem that one must apply the pluralist theory to the operations of the elite itself, a logically well-taken point certainly germane to the paramountcy of theory. Thirdly, the theory of the elite must rely on the impact of events outside the elite system to explain changes within the system itself; for the elite, which does indeed change, does not change spontaneously. Most importantly, "elitist studies of community power typically do not present data to support their contentions that all major decision-making rests in the hands of single leadership groups. "
While I recoil from the operative "all," which I have emphasized, it is clearly incumbent upon anyone utilizing the elitist approach to show major decisions emanating from the elite group--decisions at variance with some established consensus. If such decisions are made, and are made to stick, then I think it may fairly be deduced that other decisions are similarly made. It isn't the general consuming public, we may say in a preliminary way, that decides to raise the prices. Nor is it, in view of the system of corporately administered prices, an automatic free market. It is clearly some distant and popularly distasteful "they" who decide this.
The elitist theory most broadly stated, holds that the United States, for example, is a society of many dominant elites. The elite levels of science, scholarship, the arts, entertainment and sports (but not politics or finance) are open to anyone of ability. These are, therefore "open" elites, and consonant with the democratic bias. But there is, it is asserted or implied by a variety of writers, a politico-economic elite of elites, which is a "closed" elite. It is closed because something other than personal ability is required to belong to it. The main although not exclusive qualification for membership, it is here contended, is money. This elite has been referred to as the moneybund-- the complex of finpolities. Its leading members, I suggest, are finpols. This moneybund is different from C. Wright Mills's "power elite," which is a somewhat fanciful and highly personal embroidery upon the old-established basic idea of a moneyed elite. Take the money crowd away and Mills' "power elite" crumbles into verbal dust.
Now, while the moneyed elite no doubt is pluralistically structured internally, toward the outside world it presents itself as a rather solid, small, coherent entity. Its decisions once having been taken or not taken (a decision in itself)--and we can obtain at least glimpses of some of its decision-making processes--it presents to the world pretty much of a united front even if it is not always unified internally in its views. Its members, at any rate, have various ways of knowing the difference between insiders and outsiders. *
(*The idea of an elite does not necessarily imply that it is homogeneous. Thus, Albert Mathiez, the French historian on the subject of the French nobility. says: "The nobility consisted, in fact, of distinct and rival castes, the most powerful of which were not those who could point to the longest pedigrees. Side by side with the old hereditary or military nobility, there had sprung tip in the course of the last two centuries a nobility 'of the long robe' (noblesse de robe); that is to say, an official nobility which monopolized administrative and judicial offices. This new caste, which was as proud as the old nobility, and perhaps richer, was headed by the members of the parlements, or courts of appeal," This new nobility, as Mathiez goes on to show. was in many ways more powerful than the old nobility, Albert Mathiez, The French Revolution, Alfred A. Knopf, Inc. , N. Y. , 1926; Universal Library, N. Y. , 1964, pp. 6-7. One could similarly
divide the American elite into the old and new money and the leading corporate officials and corporation lawyers. )
As for motivations, it is, first, surely possible to deduce certain over-riding motivations in the moneyed elite by the way its members conduct their worldly affairs. One doesn't need to tap their telephones or induce their psychoanalysts to break confidences to see that they are nearly all motivated (1) to retain their money and power; (2) to add to money and power if possible; (3) to make use of all the resources of modern science, technology and politics in the retention and expansion of their power; (4) to keep their share of the tax burden as low as possible; (5) to support whatever politico-economic policies support or improve their position and to struggle against those which seem likely to diminish it; and (6) to have themselves presented to the world as especially worthy people.
What they want more specifically is shown by. their legislative lobbyists, trade association spokesmen and newspapers. Fortune, the Wall Street Journal and similar publications consciously and unconsciously tell us much about what they want. Beyond this, public inquiries, the taking of testimonies, the massing of evidence in the courts and occasional books by insiders have done much to reveal motivations. There have been memoirs such as those of the late Clarence W. Barron, critical and friendly biographies and even letters (although collections of letters, as in the case of the elder J. P. Morgan, have often been ordered burned by testamentary prescription) This in itself seems a bit conspiratorial.
The major ends of the moneyed elite are clearer, it must be confessed, than the devious means often used to attain those ends.
In view of this elite (judging purely by their outward behavior) what's good for them is good for the United States. They see their personal pecuniary interests as identical with the complex interests of the nation. This elite is known to favor, among other things, a minimum of government regulation of their corporate instrumentalities; they openly talk to this end and work to achieve it. Society, they feel, should be subject to minimal direction. Would anyone wish to assert there is any doubt about this?
As far as motivations go, it is not a difficulty that inheres peculiarly in the theory of an elite; in this day of Freudian psychology the motivations of every individual are a mystery even to himself. What are the motivations of participants in a pluralist decision- making process? If it is said, "How can we know what the elite is up to and why? " one may reply with another question: "How can we know what pluralists are up to and why? " Not being able to look inside people's heads, one makes deductions from external behavior. If a man hoards money in a hole in the floor we conclude that he is a miser. Can we be wrong? Can it be that he is in fact a spendthrift? As to why he does it, we turn to the psychoanalyst and hear talk about feelings of insecurity, inadequacy, rejection, alienation. Hoarding, it seems, makes him feel less anxious. Yet, he remains a miser vis-a`-vis others, an objective phenomenon. He is not merely a psychiatric case.
The theoretical objections to the theory of the elite, at any rate, are not nearly so compelling as they may seem when viewed only dialectically on the purely theoretical level, before testing against the facts.
But there are stronger reasons, compelling to any rational mind, for rejecting the idea of the greater serviceability of the pluralist theory in explaining decision-making on the national level. For if the pluralist theory indeed held, if major decisions in the United States were in fact the product of countervailing and balanced groups, with each group element of society making itself fully heard, the outcome in terms of money, position and prestige would be a great deal more equitable than it is. Sociologists can indeed show many decisions arrived at by pluralist means. But we are talking now about the
humanly fundamental decisions--the decisions about who gets what, where, how and why. Those decisions, I assert, are elitely determined, sometimes against considerable opposition.
If the decision about the distribution of the basic economic means is arrived at pluralistically, why is the payoff so uneven? If one goes along with the. pluralist view we must conclude that people have acquiesced in their relatively low reward by the economic system. Yet millions of people protest all the time that they are being underpaid, They sound as though they had not consented to the decision-making about the distribution of money.
Most people in the United States, including very many outstandingly intelligent and highly trained, are much like the participants in a dice game in which the opponent throws a long series of 7's and 11's, losing seldom; but when the dice change hands it develops that they follow the laws of randomness and show no runs of 7's and 11's. In a real dice game, most such losers would quickly conclude that the dice were loaded and they were being rooked.
Now, if the social dice weren't subject to manipulation from behind the scenes, would so many people be so far below par in the matter of money and property? Such subparity elements, it is often said by way of explanation, are the no-goods, without ambition or energy. But, we may ask, is this also true of Nobel laureates, university professors in general, the trained professional classes, whose pay in comparison with that of corporation executives and big dividend recipients is absurdly meager? Are we to suppose that highly skilled professionals have acquiesced in their relatively niggardly compensation? Hearing them complain, reading their complaints in professional journals, one would not suppose so. They sound very much as though they are complaining futilely against loaded dice.
Again, to look at the bottom of the labor force, are we to suppose that the poverty- stricken itinerant agricultural worker or the ghetto denizen has acquiesced through some pluralistic decision-making process in his low estate?
In looking at the history of organized labor, the long record of anti-labor violence and counter-violence, one gets the strong impression that basic decisions were imposed upon unwilling and eventually maddened victims. Those who worked in Andrew Carnegie's steel mills at $10 for a seventy-two-hour (and longer) week of punishing effort under intense heat had never willingly, agreed to perform in this manner. Nobody had ever asked them or their representatives. They were driven by stark necessity to accept a one-sided bargain.
It is true that all the persons to whom I refer have their compensation determined by a market. The elite, however, do not have their revenues impersonally determined by a market, to the dictates of which they submit. They make market rules pretty much to suit their inclinations.
It does, then, look as though members of the labor force, high and low, have come up against a decree that says: So far and no further. They have not acquiesced in this decree; they have not been consulted about it. They are often opposed to it, but are as powerless to push it aside as Russian workers are powerless to push aside a state decree.
It looks very much as though this decree has been handed down from some esoteric group, for there is no general rule against having an expansive income in a booming economy.
In any play against the socio-economic elite of finpols with a view to, participating in its inner decisions, few--indeed, none--of the members of the various open elites find
they can make it. They don't have the hereditary tickets; and even if they had the tickets they might not possess other qualifications.
What, precisely, is the understructure of the top elite of finpolity? Intermarriage of the Elite
Largely headquartered in the East, this elite, first of all, is heavily intermarried . This fact has been shown in great detail and need not detain us. 2 Most of the world of finpolity and its environs is interlaced by complicated cousinages, as in the case of the longer established European nobility. Intermarriage among the big propertied elite--the bourgeosie, the finpols-- continues, as the "society" pages of newspapers show nearly every week.
As a fairly recent and uncomplicated example of upper-crust family structure let us take the Fords. Edsel, the only child of grass-roots Henry, had four children. Henry Ford II, one of Edsel's three sons, married Anne McDonnell, a Catholic socialite by whom he had three children. His daughter Charlotte, twenty-four, in 1965 married the off-the- beach Greek shipping magnate Stavros Spiros Niarchos, fifty-six, reputed to be worth a minimal $260 million. 3 Her coming accouchement was duly announced early in February, 1966; not long thereafter a prospective divorce. Her debut in 1959, according to the Times, took a year to plan, was attended by 1,200 guests and cost about $250,000, of which 860,000 went for flowers alone. Recalled the Times nostalgically (December 17, 1965): "Two million magnolia leaves were flown from Mississippi and were used to cover the walls of the corridors leading to the reception room in the Country Club of Detroit, which had been redecorated to look like an eighteenth-century French chateau. " Sister Anne Ford, twenty-two, was married with less fanfare a few days later to Giancario Uzielli, an international stockbroker of New York. Henry Ford II in his second marital venture, after a divorce that led to his excommunication from the Catholic Church, married the divorced, also excommunicant, Mrs. Maria Christina Vettore Austin, of Italy and England, who is more particularly one of the European Rothschilds of pecuniary repute. William Ford, another of Edsel's sons, married Martha Firestone of the rubber fortune, by whom he has three children.
Here, among the comparatively late-arriving Fords, one finds a rococo interlacing of diverse elements the common social denominator of which is property, and this is typical of the upper ownership strata.
As to inward and outward twining cousinages among the moneyed elite, the Du Ponts provide perhaps the most spectacular example, interlinking with a number of other established and unlikely cousinages such as the Peabodys and Roosevelts. It is not usually easy in the hereditary strata of wealth to find someone unjoined to one or more other wealthy families by cousinly ties, and many of them link with what in Europe is known as nobility. Consinage threads through many apparently disparate propertied families.
To avoid detention here by details readily available elsewhere, let it simply be said that much about the affairs of the finpolities is a family matter. These families, it is true, are often subject to strains within themselves and vis-a-vis other families (pluralism); but they together present pretty much of a unified front to the world (eliteness).
Pretensions to Aristocracy
The American wealthy, as Cleveland Amory shows in considerable diverting detail, have confused money, ostentatious partying, politico-economic position and far-ranging power with aristocracy, of which they very commonly think themselves representative. 4 By the hundreds they have dug up for themselves, or caused to be devised, European coats of arms, more than 500 of which have been suitably proved and registered with
the New England Historic and Genealogical Society "easily the country's outstanding authority on coats of arms. " 5
The stress on coats of arms, both among bearers and disappointed nonbearers suggests that the wealthy themselves, unlike some unaccountably obtuse outside investigators, regard themselves as part of family enterprises, not as isolated persons who have won in an individualistic rat race. These families, to be sure, are placed within a certain setting of historically developed institutions of which American children sing innocently in school.
As the redoubtable H. L. Mencken remarked in 1926, "the plutocracy, in a democratic state, tends to take the place of the missing aristocracy, and even to be mistaken for it. It is, of course, something quite different.
