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T.N. Vance

A.A. Berle’s Capitalist Revolution

Qualitative Changes in American Capitalism

(Spring 1955)

T.N. Vance, A.A. Berle’s Capitalist Revolution, The New International, Vol. XXI No. 1, Spring 1955, pp. 34–41. (book review)
Transcribed by Ted Crawford.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

While Berle’s 20th Century Capitalist Revolution [1] has been loudly criticized by all types of critics as a very shallow and superficial study – one which fundamentally repudiates his basic work on the modern corporation which he wrote together with Means in 1939 – it would be a mistake to dismiss his series of lectures as merely a panegyric in favor of the large corporation and state monopoly capitalism. That, of course, it is, but Berle does succeed in raising some very interesting questions even if he cannot provide the answers.

Moreover, in passing and in developing his general thesis, Berle provides some very interesting and useful information. For example, he quotes fairly extensively from a study on concentration of economic power by Professor M.A. Adelman of Massachusetts Institute of Technology, in which it is stated that “135 corporations own 45 per cent of the industrial assets of the United States – or nearly one-fourth of the manufacturing volume of the entire world. This represents a concentration of economic, ownership greater perhaps than any yet recorded in history.” Adelman seems to be of the opinion that this is a relatively static situation with little change from year to year. Berle indicates at the end that he is not entirely in agreement. It is clear, of course from the current merger movement that the situation is far from static.

Berle is concerned with the fact that in most industries:

“Two or three, or at most, five corporations will have more than half the business, the remainder being divided among a greater or lesser number of smaller concerns who must necessarily live within the conditions made for then by the ‘big two’ or ‘big three’ or ‘big five’ as the case may be.”

In other words, no matter what figures are cited, as Berle says,

“There will be little dispute however, with the main conclusion: considerably more than half of all American industry – and that the most important half – is operated by ‘concentrates.’ Slightly more than half is owned outright by not more than 200 corporations. This is calculated on the coldest basis – the amount of actual assets owned by the corporations involved.”

There is, of course, nothing new in this brief description of concentrated capital accumulation in the United States. What is new is Berle’s assertion that progress in the interests of the entire population, not only of the United States but of the world at large, rests upon these 200 private corporations, who are performing a constructive role in helping to organize the entire process of industrial production and distribution. At one point, Berle puts it this way:

“Mid-twentieth-century capitalism has been given the power and the means of more or less planned economy, in which decisions are or at least can be taken in the light of their probable effect on the whole community.”

In other words, Berle has discovered state monopoly capitalism and has declared that the assumptions of multiple competing units that were the foundation of Adam Smith and classical bourgeois economics no longer hold true. Consequently, the “judgment of the market place” is no longer – in Berle’s opinion the motive power of the economy.

Berle also perform a useful function in calling attention to the study by the National City Bank on sources of capital accumulation. This study covering the eight years from 1946 through 1953, estimates that a total of $150 billion was spent for what might termed capital expenditures, namely, modernizing and enlarging plant and equipment. Sixty-four per cent of the total of $150 billion came from “internal sources” – that is to say from – surplus and depreciation reserves. Of the total of $99 billion financed through such “internal sources,”retained earnings were by far the largest proportion. Of the remaining $51 billion, or 36 per cent of the total, according to Berle, one-half was raised by current borrowing, chiefly bank credit. This accounts for about $25½ billion.

Of the remainder, $18 billion or 12 per cent of the grand total was raised by issue of bonds or notes. Although half of this amount was probably privately placed, Berle is willing to admit that a large portion of this capital was forced to run the gauntlet of so-called “market-place judgment” The astonishing fact is that “6 per cent or $9 billion out of a total of $150 billion was raised by issue of stock, Here, and here only, do we begin to approach the ‘risk capital’ investment so much relied on by classic economic theory. Even here a considerable amount was as far removed from ‘risk’ as the situation permitted: without exact figures, apparently a majority of the $9 billion was represented by preferred stock. Probably not more than $5 billion of the total amount was represented by common stock – the one situation in which an investor considers an enterprise, decides on its probable usefulness and profitability, and puts down his savings, aware of a degree of risk but hoping for large profit.

“There is substantial evidence, which need not be reviewed here, that this is representative of the real pattern of the twentieth-century capitalism. The capital is there; and so is capitalism. The waning factor is the capitalist. He has somehow vanished in great measure from the picture, and with him has vanished much of the controlling force of his market-place judgment. He is not extinct: roughly a billion dollars a year (say five per cent of total savings) is invested by him; but he is no longer a decisive force. In his place stand the boards of directors of corporations, chiefly large ones, who retain profits and risk them in expansion of the business along lines indicated by the circumstances of their particular operation. Not the public opinion of the market place with all the economic world from which to choose, but the directorial opinion of corporate managers as to the line of greatest opportunity within their own concern, now chiefly determines the application of risk capital. Major corporations in most in-stances do not seek capital. They form it themselves.” (Italics mine – T.N.V.)

The existence of what is sometimes termed monopolistic competition or oligopoly or any of the other choice phrases used, does not of course mean that capitalists no longer exist. But Berle is correct in pointing out that capitalism has changed its form considerably during the twentieth century, and capitalism has introduced an aspect of planning which was surely not envisaged by Marx or early Marxists.

There is, above all, the role of the state which makes present-day capitalism differ qualitatively from nineteenth or even very early twentieth-century capitalism. Berle correctly points out, for example, that “the development of atomic energy, perhaps the crest of the next great wave in modern development, was not socialist by theory or by design. It was twentieth-century capitalism in respect of which the government played a major part, as it will continue to do.”

The role of the state in modern state monopoly capitalism in the United States is not confined to Democratic administrations. There has been no significant change under the present Republican administration either in fact or in theory.

As a matter of fact, even in Eisenhower’s Economic Report to Congress of January 20, 1955, which is devoted mainly to assuring the bourgeoisie that everything is fine and there is really very little to worry about, there is a type of recognition of the role of the state which certainly could not have been present in any official document of the last Republican administration. The economic report, after raising various questions concerning the shortness and mildness of the recent economic decline, implies that the government, i.e., the state, is really the factor that is different in the situation today and basically responsible for preventing a severe depression along classical lines. The report states:

“Clearly, many people had a part in stemming the economic decline and easing the readjustment from war to peace. The Federal government also contributed significantly to the process of recovery. It influenced the economy in two principal ways, first, through the automatic workings of the fiscal system, second, by deliberately pursuing monetary, tax, and expenditure policies that inspired widespread confidence on the part of the people and thus helped them to act in ways that were economically constructive.”

There can be little doubt that so-called fiscal policy, especially with reference to tax structure, and monetary and credit policy, did enable the state to play a constructive role in so far as helping to maintain general economic, equilibrium is concerned. The important word, however, in the passage quoted above is the word “expenditure” for it relates to government expenditures and here we find ourselves face to face with reality. What type of recovery from the so-called recession 1958-54 would have taken place had Federal government not been spending $50 billion or more per year on war outlays? It suffices to raise the question to realize that none of the platitudes of the theoreticians of the bourgeoisie can begin to cope with the recent situation. The economy is maintaining itself and giving an outward appearance of health – although inwardly extremely sick – only because capitalism has entered what we have previously described as the stage of Permanent War Economy.

That is why it is somewhat pathetic to find an outstanding bourgeois economist like Sumner Slichter of Harvard state in the current issue of the Harvard Business Review that the old-fashioned business cycle has in effect disappeared. The implication would seem to be that American capitalists have become super-intelligent and can now eliminate depressions. Slichter refers to many points in reaching this rather remarkable conclusion, such as developments in the financing of construction, and the so-called development of individual cycles of different industries. He also refers to the fact that durable goods industries “will at all times have a far higher ratio of unfilled orders to sales and inventories than prevailed in pre-Korean days.” One reason for this, according to the New York Times of January 23, 1955, is “the defense program ... [but] .. . even if diplomacy in the next few years succeeds in substantially mitigating the vigor of the cold war, I suspect that the volume of unfilled orders in the durable goods industry will be kept high simply as a matter of national policy.”

Slichter continues, according to the New York Times, by stating:

“In the unlikely event that a large additional drop in defense spending becomes possible, the country will probably offset the drop in defense spending by a long-term development program.”

What Slichter is saying, of course, is that the state will continue to support the Permanent War Economy – and if, in the unlikely event that international economic conditions change so as to render socially unnecessary the large-scale expenditures in the means of destruction, then the state will find other types of investments which will help to maintain the economy. Here he is reverting to a theory which he promulgated about 1930-31 which, had he been right then, would have meant that it would have been impossible for mass unemployment to have developed. Slichter is no more right today than he was in the 1930’s. The only socially acceptable large-scale state expenditures are those which do not compete with private capital and those which are absolutely and unmistakably essential to the preservation of the capitalist class. Such expenditures, so far, have only been found in the new third category of economic investment, namely, means of destruction. Yet, we should not lose sight of the fact that one of the essentials of state monopoly capitalism is that there is an unusual degree of state intervention in the economy which permits achieving stability, or relative stability, in many cases that could not have previously been attained. Of course, to do this the capitalists must have the support of other sections of the population, particularly of the labor movement. So far this has not been difficult for them to achieve.

What will happen during the year 1955 and into 1956 as the pressure of mass unemployment constantly grows remains to be seen. Already, there are signs that the leadership is being forced to take cognizance of the fact that there are several million unemployed and that these are not people who are superfluous to the normal functionings of capitalism – but who have been rendered superfluous by the very rapid accumulation of capital which, as Marx pointed out, necessarily brings about a certain increase in the industrial reserve army.

Or, as we have demonstrated previously, under the Permanent War Economy the basic Marxism law of accumulation of capital becomes transformed into a relative decline in the standard of living rather than an absolute increase in unemployment but as we have had occasion more recently to point out, this holds only when there is a steady increase in the ratio of war outlays. At the present time the ratio of war outlays has been declining, if only slightly, so that whereas a year ago it ran around 17 per cent, today it is down to around 15 per cent. The pressures that develop, particularly in basic industries, are apparent in such cities and industrial centers as Detroit, Pittsburgh, etc.

A process of attrition has developed. To revert to our analogy used in our original presentation of the nature and structure of the Permanent War Economy (see Part III, Increasing State Intervention, New International, May–June 1951):

“The restoration of the rate of profit could not be followed by an abandonment of state intervention. On the contrary, like a patient who has recovered from an almost fatal illness solely by taking medicine containing habit-forming drugs, the enduring ‘health’ of capitalism demands the continuation of the ‘habit-forming drug’ of state intervention. This becomes obvious as the economy of depression is followed by the Permanent War Economy. There are differences, however. Not only is state intervention more expensive, but it is no longer confined to restoring the profitability of ‘sick’ industries: The most decisive sections of capital are subjected to state control and direction, but the reward is the virtual guarantee of the profits of the bourgeoisie as a class.”

To maintain the precarious equilibrium that exists, constantly increasing state intervention is necessary. This is a fundamental law of the present epoch of capitalism – the Permanent War Economy. Not even Old Guard Republicans can defy this law and escape its consequences. Thus, we have the Eisenhower Administration talking about a 100 billion program for road building, and similar measures – most of which will naturally remain confined to paper and which will be trotted out every year around November when elections take place. There will, however, be state intervention in the economy so long as it is within the power of the bourgeoisie to use this new weapon to preserve its own historically outmoded system.

Not all bourgeois economists are optimistic about the outlook for economy as a whole as the official prognosticators in Washington. For example, an article in the New York Times under date of January 27, 1955 is headlined, Economists Wary of Business in ’55. The sub-headline is even more to the point: Their Testimony Casts Doubt on Eisenhower Optimism. There were eight private economists who testified before the Joint Congressional Committee on the Economic Report and not all of them represented the trade-union movement. They all appeared to be worried by what in some quarters is loosely referred to as automation which is simply a high-sounding public relations word for a process which has been going on for many years – even if it is accelerating now in certain industries and results in an increasingly high organic composition of capital. This is inherent in the nature of capitalism and should not cause surprise to those who presumably understand, more or less, how the capitalist system operates. It means that in a situation where business as a whole is good, where the bourgeoisie is making very high profits, there could be mass unemployment amounting very easily to a figure of 5,000,000 at the end of 1955. This gives rise not only to much uneasiness within the labor movement and pressures on the labor bureaucracy to do something about it, so that they in turn begin to exert pressure on Washington, but it also gives rise to such phenomena which are appropriate for this period in the form of renewed promises to investigate the “new trend toward monopoly and the concentration of economic power.” There will be, without question, many types of Congressional investigations this field. Whether any of them will add materially to the work of the temporary National Economic Committee remains to be seen, but the New York Times of January 24 reports that the sub-committee of the Committee of the Judiciary, in a report submitted by its majority, Senators Langer, Kefauver and Kilgore, stated that their hearings had lead them to two conclusions:

“(1) That there is a two-pronged drive by private monopoly to destroy public competition in the power business, and that the Dixon-Yates contract is a part of that drive. (2) The Wall Street domination of the power industry has revived many of the monopolistic holding company evils which Congress sought by legislation to suppress, particularly the extension of monopoly control over very wide regions.”

Here we have the makings of a great debate which may very well play an important role in the elections of 1956.

Mr. Berle, however, would answer to all of this that while the large corporation must adopt a conscience comparable to that of the king in feudal days, it is the engine of progress not only in domestic affairs but in international affairs. It is at this point that Mr. Berle, trying to pursue a pre-conceived thesis, becomes a simple apologist for state monopoly capitalism in its most rapacious form, with its justification of the oil cartels and similar international agreements.

He still, however, manages to flirt with important thoughts when he virtually concludes his essay by stating:

“Corporations still have, perhaps, some range of choice: they can either take an extended view of their responsibility, or a limited one. Yet the choice is probably less free than would appear. Power has laws of its own. One of them is that when one group having power declines or abdicates it, some other directing group immediately picks it up; and this appears constant throughout history. The choice of corporate management is not whether so great a power shall cease to exist; they can merely determine whether they will serve as the nuclei of its organization or pass it over to someone else, probably the modern state.”

Since the power of the state should be kept to a minimum, according to Berle and the traditional liberal philosophy, it is obvious that corporate power must be built up and maintained, but the corporate managers should please have a social conscience to that it would really be true for the former president of General Motors to say that “What is good for General Motors is good for the country.”

Sermons are interesting to those who like them but only in their proper place, and an essay on the twentieth-century capitalist revolution is hardly the place for Berle’s type of propagandistic sermon. His critics, however, have sufficiently well disposed of him so that we can merely state that there has been a type of revolution in the twentieth century but Berle doesn’t understand its nature, its causes or its probable results.

The constant decline in factory employment focuses attention on one of the major problems of American capitalism – and one for which there is no solution in sight. PWE (permanent war economy) or WPA (work relief projects) have actually been the only two solutions that capitalism has had to offer for the last 25 years. An entire generation has grown up and come to maturity which can only know from reading, but never from experience, what the old capitalism was like. This does not make the new capitalism less capitalist, but it does mean that some of its laws of motion and methods of operation are different and require analysis and understanding – especially by socialists.

Symptomatic of danger ahead for the economy, is a most interesting article that was published in the New York Times of September 20, 1954. The heading was Per Capita Output Only 1 per cent Above ’47. This is an article by one of the New York Times’ economic reporters, Burton Crane, and one which is highly recommended to Mr. Berle and to all students of the economy. It is worth quoting from fairly extensively:

Per capita industrial production in this country has dropped so sharply in the last year that it is only 1 per cent above the average rate for 1947 ...

The question facing the economy is whether industrial production and gross national product can be allowed to fall farther below the normal trend. Our economy, as observers of all shades of political thought have pointed out, works best when it is expanding. Signs that the dynamism had disappeared might discourage investors from risking their capital and dissuade industrialists from expanding their enterprises.

There are warnings that such attitudes may be in prospect. Expenditures for new plant and equipment, expressed in constant dollars and weighted for population changes, in the first half of 1954 were at 113 per cent of the 1947 level. In the two preceding years they had been at 116 and 123 per cent.

What is the normal upward trend in our economy due to growing mechanization and efficiency? Some economists have set it as high as 3.5 per cent for manufacturing production. At that annual improvement factor, per capita industrial production in 1954 should be at 127.2 per cent of 1947 output. It is at 101 per cent. (Italics mine – T.N.V.)

The twentieth-century capitalist revolution is thus not so earth-shaking as would appear from Mr. Berle’s panegyric. It has not solved the problem of unemployment. Here is one of the essential contradictions of capitalism under the Permanent War Economy only where, with attrition setting in, some of the basic laws of capitalism begin to reassert themselves. The economy must constantly grow and expand, at least to the point where it can support the 600,000 to 700,000 new entrants into the labor force each year. This it is obviously failing to do. Moreover, the two prime sources of economic infection, the agricultural crisis and the crisis in consumer durable goods (centering in the automobile industry), clearly remain – with no alleviation in sight. Many factors have been responsible for the rapid increase in population, and it is clear that the Permanent War Economy is intimately connected with this sociological phenomenon. The increase in population in turn, however, gives rise to the very correct analysis of Mr. Crane, quoted above, that only a per capita approach becomes meaningful in appraising the economy, its performance and its outlook. The American economy is simply not suited, nor large enough (on a capitalist basis) to provide the constantly expanding market that is required to sustain an expanding capitalism.

We are, therefore, back where we started and Mr. Berle is at least partially aware of this central problem when he speaks of “A modern corporation thus has become an international as well as a national instrument.” And when he observes that, “The present political framework of foreign affairs is nationalist. The present economic base is not. The classic nation-state is no longer capable, by itself alone, either to feed and clothe its people, or to defend its own borders.” (Italics mine – T.N.V.)

Here, then, is the central fact of the modern capitalist “revolution.” Capitalism has visibly, before our very eyes, outgrown its national framework and must burst this integument asunder in one form or another. The only question that history must still answer is the form in which the capitalist national state will be destroyed and the nature of the political organization that will succeed it.

T.N. Vance



1. The 20th Century Capitalist Revolution, by A.A. Berle, Jr., Harcourt, Brace and Company, New York City, 1951, 192 pp. $3.00.

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