In the aftermath of a financial crisis marked by bank-friendly bailouts and loosening campaign finance restrictions, a chorus of critics warns that business leaders have too much influence over American politics. Mark Mizruchi worries about the ways they exert too little. The Fracturing of the American Corporate Elite advances the surprising argument that American CEOs, seemingly more powerful today than ever, have abrogated the key leadership role they once played in addressing national challenges, with grave consequences for American society.
Following World War II, American business leaders observed an ethic of civic responsibility and enlightened self-interest. Steering a course of moderation and pragmatism, they accepted the legitimacy of organized labor and federal regulation of the economy and offered support, sometimes actively, as Congress passed legislation to build the interstate highway system, reduce discrimination in hiring, and provide a safety net for the elderly and needy. In the 1970s, however, faced with inflation, foreign competition, and growing public criticism, corporate leaders became increasingly confrontational with labor and government. As they succeeded in taming their opponents, business leaders paradoxically undermined their ability to act collectively. The acquisition wave of the 1980s created further pressures to focus on shareholder value and short-term gain rather than long-term problems facing their country.
Today’s corporate elite is a fragmented, ineffectual group that is unwilling to tackle the big issues, despite unprecedented wealth and political clout. Mizruchi’s sobering assessment of the dissolution of America’s business class helps explain the polarization and gridlock that stifle U.S. politics.
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About the Author
Mark S. Mizruchi is Robert Cooley Angell Collegiate Professor of Sociology, Barger Family Professor of Organizational Studies, and Professor of Business Administration at the University of Michigan.
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Chapter 7: Winning the War, but Losing the Battle: The Fragmentation of the American Corporate Elite
The American business community as a whole was not unified in the postwar period. A major disjuncture existed between the interests of large and small companies, and even among the larger firms differences existed over issues such as trade and, to a lesser extent, labor policy. Yet there was a relatively small group at the top of the corporate world that managed to achieve a basic unity around a moderate, pragmatic approach to politics. As the American economy, and the social order underlying it, experienced a severe set of exogenous shocks during the 1970s, American business developed a perhaps unprecedented degree of political unity. Corporations both small and large, both capital and labor intensive, and both globally and domestically focused, came together in an effort to redirect the efforts of the government and to reduce the power of organized labor. Even then differences remained, especially on questions of international trade, but the overall unity of American business far exceeded the divisions, a point agreed upon by both pluralist political scientists and their critics.
This high level of business unity corresponded with a period of great political success. By the late 1970s, business had significantly turned the tide of state action, stopping labor reform, quelling the consumer movement, and reducing both the statutes and, especially, the enforcement associated with government regulation. As Ronald Reagan consolidated his presidency, the victory of business became even more complete. Corporations saw significant declines in their tax burden. The Administration severely curtailed the nation’s regulatory apparatus. The President increased defense spending to a level that, according to his budget director David Stockman, led to “squealing with delight throughout the military-industrial complex” (Stockman 1986, 109). And through the Federal Reserve’s tight money policy, the Administration’s cuts in the social safety net, the increasingly pro-management National Relations Labor Board, and the President’s response to the air traffic controllers’ strike, the business community was now facing a significantly weakened labor movement. Business had won the war begun in the 1970s. With the shift in government priorities, the retreat of organized labor, and the corresponding decline of commercial banks, the corporate community, even its most enlightened elements, was no longer constrained to act in a moderate and accommodating fashion toward its adversaries.
Yet an interesting consequence resulted from this victory. Having won the war, there was nothing left over which to fight. As a result, the corporate community began to fragment. This fragmentation involved not only a return to the old divisions between large and small business and between foreign- and domestically-oriented firms. It also occurred even at the top. Although vestiges of the old, moderate corporate elite remained well into the 1980s, the group of enlightened, pragmatic corporate leaders began to dissolve. Increasingly, the decade saw each firm go its own way, pursuing its individual interests without the group of leaders at the top to forge a broader, longer-term consensus. Just as Michael Useem was publishing his book about the “inner circle” in 1984, the inner circle was starting to disappear. The group’s death knell came as a result of the acquisition wave that engulfed corporate America later in the decade. But even prior to that assault on management, the corporate elite was already in significant decline as an organized entity.
Table of Contents
1 Introduction 1
2 The Rise of the American Corporate Elite 22
3 The State and the Economy 46
4 Labor as Uneasy Partner 81
5 The Banks as Mediators 111
6 The Breakdown of the Postwar Consensus 139
7 Winning the War but Losing the Battle: The Fragmentation of the American Corporate Elite 180
8 The Aftermath 225
9 The Ineffectual Elite 266