The Phoney Revolution (1957)

From the October 1957 issue of the Socialist Standard

Part One: The Burnham Thesis

The roots of James Burnham’s Managerial Revolution go back to the early 19th century Utopian Socialist, St. Simon, who first systematised the notion of the managerial society. Burnham’s second edition of this concept was neither analytical nor in the strict sense statistical, only crudely and melodramatically descriptive. Nevertheless, it met a need in that it gave food for thought to a theory hungry intelligentsia and presented them with a plausible view of what was supposedly happening in contemporary society.

Burnham and the Reformists

Not that the motley crowd of reformists who acclaimed the managerial revolution were prepared to swallow Burnham whole. They eschewed his cynicism as to the effectiveness of any kind of political action; his blatant totalitarianism and bizarre fatalism based on “iron historic laws.” Nor did they share his brutal frankness that this managerial revolution would only be for the working class a change of masters—managers instead of capitalists, and, vide Burnham, a change in some respects for the worse. Rather they diluted the doctrine with democratic and quasi idealistic assumptions. They agreed that a hierarchic social structure was inevitable, even desirable, with an administrative and technical elite at the apex. Political expediency, however, compelled them to a tender regard for the broad based “masses,” who would be comfortably supported in that station of life to which it pleased “management” to call them. Indeed, leftists in their quest for novelty renamed the managerial revolution 20th century Socialism, and in their incorrigible fashion turned Burnham’s nightmare into a Fabian day dream.

Burnham’s proposition

Burnham’s book was tricked out in the pseudo Marxist terminology favoured by Trotskyists and Communists alike. Perhaps many mistook his heavy style for weight of argument, and his metaphysical determinism for scientific exposition. Again, the fact that Burnham as an ex-Trotskyist had been subject to the political paranoia peculiar to the creed, made it easy for him to pass over to the grandiose assumptions of the managerial revolution.

These assumptions can be briefly summarised. It is a fallacy, said Burnham, to believe that Socialism is the only alternative to capitalism. In fact, he contended that the abolition of capitalist property relations holds no implications for the realisation of Socialism. Nevertheless, the present system was doomed. It had lost its power due to the impact of economic crises, modern wars and changing industrial techniques on an already enfeebled system. The New Deal in U.S.A., large scale State organisation carried out by the Soviet and Nazi dictatorships, even the effects of the war economy on Britain, had compelled the major Powers along a path which so far as the old methods of capitalist production were concerned there could be no return. So argued Burnham.

Burnham’s Managerial Class

According to Burnham, capitalism in any significant sense was virtually finished, and the phase we are entering, contrary to Marxist predictions, is not Socialism, but the managerial society, a social set up where control is vested in the administration of business and government by an elite of highly trained and educated men. In short, a society dominated by the manager and technician. Economic evolution, he argued, compels the State to exercise ever greater control and even direction over the means of production. But he concluded, whether managers are representatives of private or public concerns, their power will grow with the growth of economic and technical development. Thus, the managers will emerge as a distinct class, with their own class consciousness, class interests and privileges.

Managerial Society Universal but not Indivisible

Paralleled with this internal development of managerial society, there will externally be a struggle between the three major states or super-states for world supremacy. These super-states will consist of Europe, pivoted on Germany; Asia, whose focal point will be Japan; and America, based on the U.S.A. Each of these states will be autonomous managerial societies based on state ownership of the means of production and political control by the managerial class. We may mention that Burnham wrote his book in 1940 and at the time deemed a Nazi victory possible.

The Three Phases of the Revolution

The managerial revolution, vide Burnham, will be divided into three phases, although the phases may overlap. First, the managers will seize political power from the capitalist class and reduce them, to impotence. Secondly, the curbing of the masses and their indoctrination with managerial ideologies. Thirdly, the struggle between the world Powers for economic supremacy. In Burnham’s view the process took the classic course in Russia. In Germany the working class was curbed first and the capitalists later. Leaving aside the fact that all of Burnham’s major prophecies regarding the outcome of the war were false, what he had to prove was that Russia, via the Bolsheviks, and Germany, via the Nazis, had eliminated capitalism. Further, that the New Deal had been a mortal blow to U.S.A. capitalism and that in the major capitalist countries control of the means of production were passing under the control of the managers. It can be said that Burnham’s premises have no more foundation now than when he first put them forward.

Burnham’s Fallacies

When Burnham argued that the managerial revolution occurred first in Russia, this would seem inconsistent with his own logic. According to him the managerial revolution can only take place as the result of an economic and technical development which renders the capitalist organisation of production superfluous along with the capitalist class. No such process, however, had taken place in Russia. The task of the Bolsheviks was not to supersede capitalism in Russia, but to develop it. Burnham strove to show that Soviet Russia was neither capitalist nor Socialist, but he evaded the basic proposition  that the relations between wage workers and a state employer enchain the working class in Russia to the laws of wage labour as elsewhere in capitalism.

Nor was he on any stronger ground when he argued that the Nazi Germany had begun a new social order. He offered as a proof of this the fact that mass unemployment had been wiped out in Germany. Remembering the vast armament programme of the Nazis and the placing of the economy on a virtual war footing, it would have been strange if the Nazis had not done so.

Burnham tried to clinch his point by saying that capitalist countries like England could not even in total war abolish mass unemployment. Once, however, the war effort was under way mass unemployment was abolished here. He also contrasted what he believed to be the overall efficiency of the alleged managerial set up in Germany with what he termed backward nations like England. Yet, according to official English sources, war production efficiency was superior to that which obtained in Nazi Germany.

Nor did his picture of a virtually non-capitalist economy correspond with the facts. German capitalism all through the Nazi regime and right up to now exhibits the monopolistic and interlocking character which it had in pre-Nazi times. One has only to think of the iron and steel industry dominated by men like Wolf and Flick, Transport, the building, chemical and electrical trades, largely controlled by the Quandt family, or the monopolistic concentration of potash, oil, textiles, glass and cement. While names like Krupp and Klockner were still in Nazi Germany household words. Not only were these monopolists powerful capitalists, but also active participants in their businesses. As such they do not fall into the category of mere coupon clippers or managers in Burnham’s sense of the term. Moreover, these powerful capitalists or groups of capitalists were able, by the familiar devices of inter-connected directorships, plural and proxy voting, share exchanges, profit pooling, etc., to exercise a closer control over the German economy than their counterparts here.

State Regulation and Capitalism

But, argued Burnham, was there not a great deal of regulation and direction of the state, including curtailment of investment, carried out in Nazi Germany. But if this is the characteristic mark of the managerial set up, then English capitalism was equally qualified to be accounted a managerial society. A qualification which in England’s case Burnham would not grant. Burnham contrived to show that market laws and the profit motive were no longer crucial to the German economy. While it was true that the outcome of imperialist rivalries and the needs of German rearmament had blocked certain economic avenues, this had only led to a more intense search for new outlets by means of an aggressive policy of expansion. Thus, extension of markets, export of capital and expansion of capital accumulation were the dominant features of Nazi Germany, just as they were the dominant features of pre-Nazi Germany, and just as they are dominant features today. (Here, of course, we specify West Germany.)

Again, vide Burnham, the index to the advance of managerial society lies in the extent to which state capital replaces private capital. But here once again the evidence which Burnham offered is unconvincing and even paradoxical. In Germany in 1937 the capital invested in state enterprise was only about 7 per cent, of the nominal capital of joint stock undertakings. But if, according to Burnham’s logic, the maturity of the managerial society is an ever-increasing ratio in favour of public financing of industry as against the private industrial sector, then Germany was, under Hitler, still overwhelmingly a capitalist nation.

We might also remember that in 1938 and, taking account of the different price levels, profits distributed in Germany were 1,200 million marks, and undistributed profits were over 2,000 million marks. According to the Oxford Institute of Statistics (The Economics of Full Employment), “Profit margins were extraordinarily high in Germany in 1938 as compared with other countries or with conditions prevailing in Germany in the ’20s.” Also the same source states that between 1933-1938 there was a decline in Germany in real wages. Nor did German capitalism remain a static economy. Some concerns expanded, others declined. Some made huge profits, others made small profits. Some even went out of existence. In short, under the Nazis the economic set up had all the basic features associated with the economic behaviour of capitalism. As such it hardly corresponded with Burnham’s picture of a non-capitalist, non-profit economy.

State Intervention and Capitalism

Burnham also advanced as a crucial proposition in support of his managerial thesis that state intervention, he instanced the New Deal, undermines the basis of capitalist society. In principle Burnham had to argue that state intervention is a move away from capitalism to the managerial society. But state intervention is a typical feature of capitalism, and its purpose is to, and does in fact, strengthen the structure of the capitalist economy. While groups of capitalists in America opposed state intervention via the New Deal, the undoubted intention of Roosevelt was to strengthen and stabilise capitalist property relations, and in this he succeeded. The fact that state intervention of some sort has been a consistent and permanent feature of capitalism, including the state regulation and interference of its mercantilist period, exposes the poverty of Burnham’s argument.

Burnham and U.S.A. Capitalism

It was American capitalism which Burnham made the touchstone of his contentions. For this he leaned heavily on Berle and Means study, The Modern Corporation and Private Property. They stated that “The dominant institutional feature extant in America is the large corporation. Typically they said this is controlled by its management, who have no substantial ownership interest in it and consequently receive no benefit from it apart from their salaries.” They add that in 1929 65 per cent. of the 200 largest corporations, totalling 80 per cent. of their assets, were management controlled. Burnham, however, went far beyond the findings of Berle and Mean. Indeed, only a total misreading of their work could lead one to conclude that they were advancing a theory of the managerial revolution. Apart from what they termed pure management; i.e., Burnham’s definition of the managerial class, they included in management those whose interest was financial and profit making.

Since the publication of Berle and Mean’s book, The Securities and Exchange Commission of the Temporary Economic Committee (T.N.E.C.) carried out an exhaustive analysis on the same lines, which emphasised an aspect of corporation control ignored by Burnham. The report stated that “In about 140 of the 200 largest corporations the blocks of shares in the hands of one interest group were large enough to justify with other indications, such as representation on management, the classification of these concerns as more or less ownership controlled.” This, of course, is even truer for the vast number of smaller companies. The same report stated that the 2,500 officers and directors of the 200 companies own more than two billion dollars’ worth of stock, which amount is heavily concentrated in the hands of about 250 men. Again, it can be noted that the dominant group need hold as little as 20 per cent. of the total stock providing sufficient proxy votes can be arranged, and the rest of the stock can be sufficiently dispersed. It is true that the salaried employers of big corporations—managers in Burnham’s sense—may by investing their savings or even judiciously speculating with the funds of the corporation in which they are employed, strengthen their financial position and reach the status of capitalists. But it was no part of Burnham’s case to prove that there can be and are changes in the personnel of the capitalist class.

What Burnham failed to prove

But even apart from the decisive controlling interests of the powerful capitalist groups who are outside Burn-ham’s managerial classification, he failed to answer the crucial question, and that was in what way do the most important managers employed by capitalists have interests and aims different from their employers? Further, if the mode of production of the managerial society is to be neither capitalist or Socialist, in what way will it be different from both? Burnham himself was aware of the basic weakness of this part of his case, and although he strove to get round it, he left the whole matter up in the air. Thus we find in the end that Burnham’s managerial society, with its integration of state with capitalist industry, is merely a new name for an old process, the development of monopoly capitalism.

We might conclude by saying that Burnham typifies the arrogant, peevish intellectual. He qualified to become a leading Trotskyist by making all the political errors it is possible to make. Some might have been dangerous— if anybody had taken any notice of him. Thus, in 1936, he was not only still asserting that the Soviet set up had a Socialist basis but further, that in the event of a war between Russia and other capitalist powers, the workers should turn their arms against their nationals in support of Russia. Now he has stopped being a Trotskyist, he has not, however, stopped being foolishly dangerous. He is now advocating American world domination—and at this point we leave him.

Ted Wilmott

Part Two