Like many Americans, Mark Mizruchi had grown increasingly distressed by the state of our politics. He was unhappy with the gridlock in Washington, the inability to accomplish even the most routine tasks of government, and the intransigence of those who have managed to hold the nation hostage to their extreme views. In trying to understand the problem’s roots, Mizruchi came to see the issue as a lack of national leadership from a group that had previously played a major and constructive role in developing solutions to new problems and keeping American politics mostly centric: the leaders of large American corporations. His goal in The Fracturing of the American Corporate Elite, new this month, is to explain how this relatively cohesive group emerged, what sustained it, how it declined, and the consequences of its demise. In the book excerpt and video below, he outlines his argument.
I argue that the leaders of the largest American corporations, to whom I refer as the American corporate elite, once played an important role in addressing, if not resolving, the needs of the larger society. Since the 1970s, the members of this group have largely abandoned their concern with issues beyond those of their individual firms. This abandonment, I suggest, is one of the primary causes of the economic, political, and social disarray that American society has experienced in the twenty-first century. In earlier decades, the United States had a corporate elite that, however imperfect, was willing to see beyond the short-term interests of the firms that its members directed. Today this is no longer the case. The corporate elite that exists today is a disorganized, largely ineffectual group. Paradoxically, I argue, individual American corporations have more political power in the early twenty-first century than at any time since the 1920s. As a group, they are fragmented, however. Unlike their predecessors in earlier decades, they are either unwilling or unable to mount any systematic approach to addressing even the problems of their own community, let alone those of the larger society.
In this book I examine the rise and fall of the American corporate elite, from its pinnacle in the 1945–1973 period, through its period of turmoil and transition in the 1970s and 1980s, to its present state, in which the group is only a shadow of its former self. I argue that the decline of this elite is a significant source of the current crisis of American democracy and a major cause of the predicament in which the twenty-first-century United States finds itself.
In making this claim, I do not want to imply that the corporate elite of the postwar period was uniformly altruistic or public spirited. On the contrary, business leaders during that age were strongly protective of their interests, as they have been in every historical era. Nor am I suggesting that postwar America was a society that we should attempt to emulate in every respect. Social and cultural norms have become far less oppressive since that time. Our society today is far more tolerant and accepting of difference than it was half a century ago. Innovation, especially in the area of information technology, has improved peoples’ lives in many, albeit not all, respects. Consumer products in general are more plentiful and less expensive than in earlier years. There is no returning to the past, nor should this be an ideal to pursue. Yet for all its problems, the postwar United States had a number of qualities that are lacking today: an expanding economy with a high level of upward mobility, declining inequality, a relatively high level of security, a well-functioning political system, and a widespread belief that problems were solvable. And underpinning these forces was a corporate elite that provided a degree of leadership and vision that are not in evidence today.
In the postwar period, a small segment of leaders emerged in the American business community. This was not the first time that American business leaders had organized. In the early 1900s, a group of business leaders formed the National Civic Federation, in which they developed a series of suggestions for dealing with some of the deleterious consequences of the rise of corporate capitalism at the turn of the twentieth century. The postwar effort to address major national concerns was equally serious. The leaders of this group sat atop the largest firms and held positions in multiple organizations, which allowed them to see the world from a relatively cosmopolitan perspective. This breadth led these elites to exhibit a moderate approach to politics that included limited acceptance of both labor unions and government regulation. They participated actively in policy-making organizations, such as the CED [Committee for Economic Development], and they played a significant role in formulating ideas that were later adopted as national policy, in both Republican and Democratic administrations. These people were not liberals. Like the heads of smaller firms, they too were largely opposed to organized labor and had major reservations about government intervention in the economy. The heads of the leading firms tended to hold a more pragmatic approach toward strategy, however. They also believed that it was in their long-term interest to have a well-functioning society.
Three forces, I argue, contributed to the moderate, pragmatic approach adopted by the postwar corporate elite: a relatively active and highly legitimate state, a well-organized and relatively powerful labor movement, and the financial community, which served as a source of interfirm consensus. The state provided regulation of the economy through its taxing and spending policies, its provision of welfare expenditures (which helped it create effective demand for the products of American industry), and its regulation of business with agencies such as the Federal Trade Commission and the Securities and Exchange Commission. Because of the enormous success that the American economy experienced during the postwar period, a Keynesian consensus emerged among national political leaders and economic policy makers. The corporate elite largely accepted this consensus. The labor movement provided a series of constraints on firms’ actions as well as benefits for the firms. The unions’ industry-wide presence in core sectors of the economy helped maintain a relatively stable price structure, which prevented destructive competition. Union leaders also worked with corporations to ensure that more radical elements within their ranks were kept at bay. Management assisted in this effort by agreeing to provide relatively high wages and benefits in exchange for labor peace, an agreement that has been referred to as the postwar “capital-labor accord.” The banks, meanwhile, because of their concern with the economy as a whole, played a role in mediating disputes across sectors. Bank boards of directors became meeting places for the chief executives of leading nonfinancial corporations, which helped to generate and maintain a broad consensus on issues of business-wide concern. The banks also occasionally played a role in disciplining individual capitalists who engaged in erratic or deviant behavior.
This situation prevailed from the mid-1940s until the early 1970s. Although this period was characterized by significant social turmoil, it was also a time of sustained economic growth, the expansion of the middle class, and an increasing level of economic equality. The relative strength and legitimacy of both organized labor and the state was not only a consequence of the moderate orientation of the corporate elite. These institutions, along with the financial community, also acted as constraints on business, compelling them to maintain their accommodationist perspective. Corporate leaders fought with unions and government during this period, sometimes fiercely, but they accepted the existence and permanence of these institutions, deciding it was better to work with them than to mount a full-scale assault. This approach was reflected in the attitudes of the corporate elite. By 1971, a majority of top corporate executives expressed support for both Keynesian deficit spending and the idea that the government should step in to provide full employment if the private economy was incapable of doing so.
This system began to unravel during the 1970s. High government spending levels, the emergence of foreign competition, and the energy crisis of 1973 created an unprecedented combination of high inflation and unemployment, which called into question the Keynesian economic orthodoxy of the time. The aftermath of Vietnam and Watergate created a legitimacy crisis among major American institutions, including business. The emergence of new regulatory agencies, most notably the Environmental Protection Agency and the Occupational Safety and Health Administration, which were instituted over the opposition of many corporations, turned many businesses against regulation.
As a result of these crises, corporate elites saw business as embattled, and vulnerable. In response, they mounted a counteroffensive, a full-scale mobilization in which corporations, large and small, found an increasingly unified voice. Business organizations, including the newly formed Business Roundtable, began to attack government regulation. They also became increasingly aggressive in fighting unions. By the time of Ronald Reagan’s election as president, labor was already in significant retreat, and after Reagan’s inauguration in 1981, regulations were more loosely enforced.
As we moved into the 1980s, however, a paradox became evident. Corporate interests had been extremely successful in weakening the labor movement and thwarting government regulation. In winning this war, however, it became apparent that organized collective action within the business community was no longer necessary. As a result, the corporate elite began to fragment. This fragmentation was hastened by the decline of commercial banks, a group whose boards of directors had served as meeting places for the heads of the leading nonfinancial corporations. As the banks dropped from the center of the corporate network, the cohesiveness of the elite began to decline as well. Companies began to go their own way, increasingly pursuing relatively minor firm and industry-specific issues, as exemplified by the Tax Reform Act of 1986, in which a plethora of individual and small groups of firms lobbied separately for specific provisions to the law. By the late 1980s, the relatively cohesive, relatively pragmatic character of the American corporate elite had begun to disappear. The corporate elite had, ironically, been “killed” by its own success.