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Walter E. Grinder and John Hagel, “Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure” (1974)

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Abstract

Class membership is defined by relationships with the market and the state. Elite groups are renewed as new members are drawn from the talented. The ruling class comprises both “narrow” and “broad” elements, with the former, rooted in the financial sector, setting the broad terms of political behavior. Politicians, the bureaucracy, the military, organized labor, and the executives of state-allied firms serve to effect and generate support for ruling-class policies, while academics and journalists help to develop and legitimate them. The ruling class is not homogenous, and conflicts persist within it related both to economic interest and to philosophy.

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Notes

  1. 1.

    Ludwig von Mises, Socialism: An Economic and Sociological Analysis, trans. J. Kahane (New Haven: Yale UP 1951 [1922]).

  2. 2.

    Murray N. Rothbard, “Freedom, Inequality, Primitivism and the Division of Labor,” Modern Age 15.3 (Summer, 1971); Murray N. Rothbard, “Egalitarianism as a Revolt Against Nature,” Egalitarianism as a Revolt against Nature and Other Essays (Washington, DC: Libertarian Review 1974 [1965]); Frank H. Knight, Risk, Uncertainty and Profit (Chicago: U of Chicago P 1921); Ludwig M. Lachmann, “The Role of Expectations in Economics as a Social Science,” Economica 14 (Feb. 1943) 108–19; Ludwig. M. Lachmann. “Professor Shackle on the Significance of Time,” Metroeconomica 11 (Sep. 1959) 64–71.

  3. 3.

    H. A. Hodges, The Philosophy of Wilhelm Dilthey (London: Routledge 1952); R. G. Collingwood, The Idea of History (London: OUP 1946); Ludwig von Mises, Theory and History (New Haven: Yale UP 1957).

  4. 4.

    Joseph A. Schumpeter , The Theory of Economic Development (Cambridge: Harvard UP 1961); Joseph A. Schumpeter , Capitalism, Socialism and Democracy (New York: Harper 1942); Israel Kirzner, Competition and Entrepreneurship (Chicago: U of Chicago P 1973).

  5. 5.

    S. E. Finer, “Pareto and Pluto-Democracy: The Retreat to Galapagos,” American Political Science Review 62:2 (June 1968); S. E. Finer, Pareto: Sociological Writings (New York: Praeger 1966); Ferdinand Kolegar, “The Elite and the Ruling Class: Pareto and Mosca Re-Examined,” Review of Politics 29.3 (Jul. 1967): 354–369; J. H. Meisel, Pareto and Mosca (Englewood Cliffs, NJ: Prentice-Hall 1965); J. H. Meisel, The Myth of the Ruling Class: Gaetano Mosca and the Elite (Ann Arbor, MI: U of Michigan P 1962); Robert Michels, Political Parties (New York: Collier 1962); Gaetano Mosca, The Ruling Class (New York: McGraw-Hill 1939).

  6. 6.

    Ludwig von Mises, Human Action, (Chicago: Henry Regnery 1966).

  7. 7.

    Schumpeter , Development.

  8. 8.

    The circulation of elites over time is illustrated by the popular maxim: “from shirtsleeves to shirtsleeves in three generations.”

  9. 9.

    Herbert Spencer, Social Statics (New York: Kelley 1969); Isabel Paterson, The God of the Machine (Caldwell, ID: Caxton 1943); Gabriel Kolko, The Triumph of Conservatism (New York: Free 1963).

  10. 10.

    Albert Jay Nock, Our Enemy the State (New York: Free Life 1973); Franz Oppenheimer , The State (New York: Free Life 1975); Murray N. Rothbard, “The Anatomy of the State,” Egalitarianism as a Revolt Against Nature and Other Essays (Washington: Libertarian Review 1974); For a New Liberty: The Libertarian Manifesto; rev. ed. (San Francisco: Fox and Wilkes 1994).

  11. 11.

    Oppenheimer.

  12. 12.

    Kolko, Triumph.

  13. 13.

    Carl Menger, Principles of Economics (Glencoe, IL: Free 1950) and Murray N. Rothbard. “Toward a Reconstruction of Utility and Welfare Economics,” Freedom and Free Enterprise, ed. Hans M. Sennholz (Princeton: Van Nostand 1956) 224–62.

  14. 14.

    Rothbard, “Reconstruction”; Lionel Robbins, The Economic Basis of Class Conflict (London: Macmillan 1939).

  15. 15.

    Robbins.

  16. 16.

    Hilaire Belloc, The Servile State (London: Foulis 1912).

  17. 17.

    It should be stressed that the elements of this analytical model are rarely encountered in their pristine purity in the “real world.” Instead, historical class formations usually represent varying mixtures of the political means and the economic means . The historian and social researcher must resolve the empirical question of the extent to which a particular class in any given historical period relies on either of these two methods for the acquisition of wealth . It is useful, however, to isolate the distinct elements of this analytical model in their purest form in order to describe their unique characteristics and thereby achieve a deeper understanding of their interaction in various historical epochs.

  18. 18.

    The interventionist dynamic is occasionally disrupted, and even temporarily reversed, by certain crisis periods in which the contradictions inherent in earlier interventionist measures confront the ruling class with the necessity of repealing these earlier measures, e.g., the acute housing shortage resulting from New York’s rent control legislation confronted policy makers with the option either of repealing this legislation or authorizing massive state intervention in the housing market in the form of public housing projects. The fundamental social transformations that would have resulted in the latter option made it unacceptable. Usually, however, policy makers will be reluctant to admit the mistake of their earlier intervention (mainly for political reasons) and instead will adopt further interventionist measures to “cure” the previously caused distortions.

  19. 19.

    For a more detailed investigation of the nature and effects of interventionism, see Walter Grinder and John Hagel , “From Laissez-Faire to Zwangswirtschaft: The Dynamics of Interventionism,” delivered to the Austrian Economics Symposium, University of Hartford, June 1975. See also Ludwig von Mises. “The Middle of the Road Leads to Socialism,” Planning for Freedom (South Holland, IL.: Libertarian 1962) and F. A. Hayek , The Road to Serfdom (Chicago: U of Chicago P 1934).

  20. 20.

    Of course, any system which interferes with the market process embodies inherent contradictions which progressively hamper the functioning of the social system over the long run. Hence reality is a strong teacher and market oriented reforms will probably accompany each cumulative crisis but, in the absence of a continuing libertarian ideology , even the harsh lessons of reality will soon be forgotten and the interventionist dynamic will resume its relentless course. F. A. Hayek , Individualism and Economic Order (Chicago: U of Chicago P 1948); Ludwig von Mises, “Economic Calculation in the Socialist Commonwealth,” Collectivist Economic Planning, ed. F. A. Hayek (London: Routledge 1935) 87–130; Murray N. Rothbard, “Lange, Mises and Praxeology: The Retreat from Marxism,” Toward Liberty: Essays in Honor of Ludwig von Mises on the Occasion of his 90th Birthday, September 29, 1971, 2 vols., ed. F.A. Hayek , Henry Hazlitt, Leonrad R. Read, Gustavo Velasco, and F.A. Harper (Menlo Park, CA: IHS 1971) 307–21.

  21. 21.

    Mises, Action; Ludwig M. Lachmann, “On the Method of Interpretation,” The Legacy of Max Weber (Berkeley: Glendessary 1971); Murray N. Rothbard, “Praxeology as the Method of Economics” Phenomenology and the Social Sciences, ed. Maurice Natanson, 2 vols. (Evanston, IL: Northwestern UP 1973) 2: 311–39.

  22. 22.

    Albert Jay Nock, Memoirs of a Superfluous Man (Chicago: Regnery 1964).

  23. 23.

    E. Digby Baltzell, Philadelphia Gentlemen: The Making of a National Upper Class (Glencoe, IL: Free 1958); G. William Domhoff , Who Rules America? (Englewood Cliffs, NJ: Prentice-Hall 1968); G. William Domhoff, The Higher Circles (New York: Vintage 1971); Ferdinand Lundberg, America’s Sixty Families (New York: Vanguard 1937).

  24. 24.

    Gabriel Kolko, “The Men of Power,” Roots of American Foreign Policy (Boston: Beacon 1968); Domhoff, Circles.

  25. 25.

    David Eakins, “Policy Planning for the Establishment,” A New History of Leviathan, ed. Ronald Radosh and Murray N. Rothbard (New York: Dutton 1972); David Eakins. “Business Planners and America’s Postwar Expansion,” Corporations and the Cold War, ed. William A. Williams (New York: Monthly Review 1968); David Eakins, “The Development of Corporate Liberal Policy Research in the United States 1885–1965” (PhD diss., U of Wisconsin-Madison 1966).

  26. 26.

    Domhoff , America; Domhoff, Circles.

  27. 27.

    Baltzell; Stephen Birmingham, The Right People (Boston: Little 1968): Domhoff, Circles; Lundberg; Stanislav Menshikov, Millionnaires and Managers (Moscow: Progress 1969); Victor Perle, The Empire of High Finance (New York: International 1957).

  28. 28.

    Cleveland Amory, The Last Resorts (New York: Harper 1952); Baltzell; Birmingham; G. William Domhoff , The Bohemian Grove (New York: Harper 1974); Domhoff. Circles; C. Wright Mills, The Power Elite (New York: OUP 1956).

  29. 29.

    Raymond Arm, “Max Weber,” Main Currents in Sociological Thought (New York: Basic 1965); Schumpeter , Capitalism; Max Weber, The Theory of Social and Economic Organization (New York: OUP 1947); Ludwig von Mises, Bureaucracy (New Haven: Yale UP 1944).

  30. 30.

    Meisel, Myth; Domhoff, Circles (esp. ch. 9).

  31. 31.

    Seymour Melman, Pentagon Capitalism (New York: McGraw-Hill 1969); Seymour Melman, The Permanent War Economy (New York: Simon 1974); Murray Weidenbaum, The Modern Public Sector (New York: Basic 1970); and H. L. Nieburg, In the Name of Science (Chicago: Quadrangle 1966).

  32. 32.

    John C. Calhoun , A Disquisition on Government (New York: Smith 1943); Murray N. Rothbard, Power and Market (Menlo Park, CA: IHS 1970).

  33. 33.

    These broadened criteria are essential to isolate and define the precise relationship existing between the state and an ostensibly “private” corporation such as Dow Chemical Company which emphasized that its Contracts for the manufacture of napalm account for less than 3% of its total revenue.

  34. 34.

    Sylvester Petro, Labor Policy of the Free Society (New York: Ronald 1957); Rothbard, Power.

  35. 35.

    Yale Brozen, “Is Government the Source of Monopoly?,” Intercollegiate Review 5.2 (Winter 1968–9); Milton Friedman , Capitalism and Freedom (Chicago: U of Chicago P 1961); John M. Peterson and Charles T. Stewart, Jr., Employment Effects of Minimum Wage Rates (Washington: American Enterprise Institute 1969); Rothbard, Power.

  36. 36.

    Other prominent examples of government contracts include the interstate highway network, the Albany Mall, the World Trade Center Towers, etc., etc., ad infinitum.

  37. 37.

    Ronald Radosh, “The Corporate Ideology of American Labor Leaders from Gompers to Hillman,” For a New America, ed. James Weinstein and David Eakins (New York: Random 1970) 125–52; Ronald Radosh, American Labor and United States Foreign Policy (New York: Vintage 1970); Rothbard, Power.

  38. 38.

    Finer, Writings; Vilfredo Pareto, Mind and Society (New York: Harcourt 1935).

  39. 39.

    Frances Fox Piven and Richard Cloward, Regulating the Poor (New York: Pantheon 1971); Joseph Pechman, “The Rich, the Poor and the Taxes They Pay,” Public Interest 17 (Fall 1969): 21–43. Preliminary studies by an Institute of Policy Studies research group in low income areas in Washington, D.C. also indicate that these areas pay out more in taxes than they receive in welfare benefits. Of course, purely quantitative studies of transfers in this field suffer from the same limitations characteristic of such studies in other areas of the economy.

  40. 40.

    Antonio Gramsci. The Modern Prince and Other Essays (New York: International 1957); Bertrand de Jouvenel, On Power (Boston: Beacon 1969); Schumpeter.

  41. 41.

    F. A. Hayek , “The Intellectuals and Socialism,” University of Chicago Law Review 16 (Spring 1949): 417–33.

  42. 42.

    De Jouvenel.

  43. 43.

    Rothbard, “Anatomy”; and a brilliant but, as yet, unpublished manuscript by Rothbard, “A Parable for Our Time.”

  44. 44.

    James Gilbert, Designing the Industrial State (Chicago: Quadrangle 1972); Domhoff , Circles.

  45. 45.

    Joel Spring, Education and the Rise of the Corporate State (Boston: Beacon 1971).

  46. 46.

    Spring; Edgar Z. Friedenberg, Coming of Age In America (New York: Random 1963).

  47. 47.

    Ludwig M. Lachmann, “On Institutions,” The Legacy of Max Weber (Berkeley: Glendessary 1971).

  48. 48.

    This defensive role of political interventionism is best identified and explained by the “Brozen-Friedman-Kolko Thesis,” a unified thesis which may be developed from the following works: Brozen; Friedman; Gabriel Kolko. See also Pareto and Mosca.

  49. 49.

    Spencer.

  50. 50.

    A retrogressive social phenomenon is defined through a comparison between existing conditions and the conditions which probably would have prevailed had the intervention not taken place . It would be misleading to compare the present conditions with earlier conditions since, for other reasons, there in fact may have been an improvement on this level.

  51. 51.

    Mosca.

  52. 52.

    Raymond Aron, “Pareto,” Main Currents in Sociological Thought: Durkheim, Pareto, Weber (Atlantic Highlands, NJ: Transaction 1998); Finer, Writings.

  53. 53.

    Hayek , Road.

  54. 54.

    Karl Marx, “Theses on Feuerbach,” The Marx-Engels Reader, ed. Robert Norton, 2d ed. (New York: International Norton 1978 [1845]) 145.

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Hart, D.M., Chartier, G., Kenyon, R.M., Long, R.T. (2018). Walter E. Grinder and John Hagel, “Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure” (1974). In: Hart, D., Chartier, G., Kenyon, R., Long, R. (eds) Social Class and State Power. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-64894-1_33

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