Schumpeter/Gilder, pt II

Doug Henwood dhenwood at panix.com
Wed Nov 29 08:56:15 MST 1995


At 2:43 PM 11/29/95, rakesh bhandari wrote:

>For this he blames the feminist decomposition of the
>bourgeois family, the radical defection of intellectuals and, in a more
>correct and Marxist manner, the loss of attachment of the bourgeoisie to
>its property as it is ousted from control of production and converted into
>psychologically passive income receivers.    So I would argue that his
>concern here is more political than economic. And it is easy to see the
>importance of such themes to the lunatic right today.

Rakesh, as usual, is first rate in this posting. I can only add to it the
fairly obsession in financial and management circles with issues of
corporate governance as an approach to curing this alienation from
ownership. For years, the high bourgeoisie accepted with little protest the
classic Berle/Means line on the separation of ownership and control, and
even Galbraith's pronouncement of the effective death of the stockholder in
a manager-dominated corporate scene.

That changed in practice in the early 1980s, though the theoretical
groundwork was laid as early as 1965 with Harry Manne's classic article on
the market for corporate control, and then Jensen and Meckling's 1976
article on agency theory. Jensen - to whom, as a Harvard faculty member,
it's difficult to apply the label lunatic right - went on to develop a
theory of the death of the public corporation and the mending of the split
between ownership and control. This was the intellectual/political
rationale for leveraged buyouts and the other corporate restructuring
attempts on the 1980s. (Of course, there was lots of money made on this
movement, so I'd want to put the intellectual/political rational in its
proper context: M-M'-M"-....) Though Jensen continues to defend the
strategy, it came to a bad end, practically everyone agrees; it was
operationally disruptive and financially untenable. Restructuring's heir is
the present movment by institutional shareholders to assert greater control
over management. This strategy, too, seems doomed; ownership in
Anglo-American economies is too dispersed for the owners to speak with one
voice - and, if anything, other capitalist economies seem to be moving in
the A-A direction, rather than in the German one. So the bourgeoisie really
has a hard time on its hands, managing the complexities of social
ownership; for now it seems stumped.

Doug

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