Corporate Capitalism and the Integral State

This chapter lays out the theory of the “integral state” and an “institutional Marxist” analytical framework. It advances a critique of the dominant “neo-pluralist” lens for understanding the relationship between state and corporate power, whereby the state is seen as fundamentally neutral, and only passively influenced by corporate lobbying. Rather than merely responding to interest group pressures, state agencies actively organize and work with business associations to bring corporate elites into the policymaking process, build consensus around specific initiatives, and coordinate Congressional lobbying efforts. Just as state regulation profoundly impacts corporate organization, so too is the structure of state power shaped by the ability for specific state agencies to mobilize business around policies and frameworks they develop. Finally, the chapter summarizes the historical argument that will follow throughout the book as to GE’s specific centrality to the integral state as it developed in the United States.

This chapter examines the formation of the modern capitalist state in the United States and its relationship to the development of corporate organization. As it shows, this process of state-corporate institutional formation took place especially through a series of large-scale, capital-intensive public projects: the construction of the railroads, electrification, and World War I. This chapter traces how bank power overtook the early capitalist entrepreneurs through an examination of the conflict, leading up to the establishment of the General Electric Company in 1892, between Thomas Edison and J. P. Morgan, as the system of finance capital was politically enhanced and legally codified with the enactment of the Sherman Antitrust Act of 1890. Then it develops a picture of how the era of managerialism emerged from the era of bank control, as the loosening of finance capital networks enhanced the role of internal managers in the structure of corporate control.

This chapter examines the crystallization of a “state-capital complex” from World War I through the Great Depression. The development of this institutional complex substantially expanded the capacities of large corporations and the state during the war, and further consolidated the bond between them. This helped increase the autonomy of industrial corporations from banks, as they were increasingly controlled by “insider” professional managers. Though the networks of bank control had already begun to loosen by World War I, it was New Deal regulations that brought the system of finance capital to a formal end. After the war, GE executives Gerard Swope and Owen Young led the new managerial caste in promulgating a “New Capitalism,” characterized by firm-level welfare programs. However, the Great Depression revealed the inadequacy of such measures, leading to the implementation of New Deal measures. Building support for the New Deal required the state to develop new integral state mechanisms to coordinate with the managerial elite, especially via the Business Advisory Council, on which GE executives played a primary role.

This chapter examines the consolidation of managerial hegemony over the postwar economic boom, key to which was the expansion of the state industrial policy system. As a result of its integration with this system, GE emerged from World War II as “The New GE,” no longer concerned just with electrical equipment and infrastructure, but highly diversified. As the head of the War Production Board and Office of Defense Mobilization, GE President Charles Wilson worked to coordinate industrial policy between corporations and the new Department of Defense. This was supported by the formation of the Committee for Economic Development. Subsequently, GE led the way in disseminating “new right” ideology, especially through the efforts of its spokesman, Ronald Reagan. This supported the construction of a national integral state network at the state level, oriented around the CED, which facilitated the movement of production to the non-union south.

This chapter examines how the American state organized a class consensus around building a global “informal empire.” This included actively to building corporate support for aid for European reconstruction, reductions in US tariffs, increased autonomy in negotiating trade agreements, and establishing a new transnational trade regime. The centrality of GE was particularly striking given that the company was then absorbing a litany of devastating antitrust suits, which completely broke down the network of international cartels it had built over the previous half-century. An enlarged conception of the “national interest,” which incorporated a responsibility for managing the international system, was articulated through a range of state practices that operated at a considerable remove from the economic interests of particular firms. While the State Department mobilized support for the Marshall Plan, the Treasury led similar efforts in relation to Bretton Woods. GE Chairman Phillip Reed was central to both efforts.

This chapter argues that the Kennedy years coincided with a crisis of the state-capital relationship, and shows how the financialization of GE took root as a response to the end of the postwar boom. The crisis manifested most dramatically in the Great Electrical Conspiracy, whereby the state prosecuted GE and others for colluding on bids for contracts with the Tennessee Valley Authority. The BAC, under the leadership of GE President Ralph Cordiner, split from the Department of Commerce and formally become an independent organization—though it remained just as closely linked to the state as ever. Then, as the postwar boom gave way to a profitability crisis by the end of the 1960s, corporate planning was restructured as an internal capital market, with individual business divisions competing for investment from top executives. This was reinforced by demands from increasingly powerful investors for reforms. At the same time, the decline of industrial profits led managers to allocate greater investment to faster-growing “services” markets.

This chapter shows how the emergence of the Business Roundtable was rooted in state efforts to address the 1970s crisis. As the crisis of the 1970s dragged on, Nixon, Ford, and Carter implemented a series of wage and price control regimes to restrain wage growth while devising a more permanent strategy for disciplining labor. Yet a plan to do so was forthcoming from neither the state nor business. In this context, new policy planning capacities were rapidly built within and around the state economic apparatus. Connected to these was the Business Roundtable, formed in 1972 with the support of the Treasury Department and the Federal Reserve. While the BR sought to defend non-financial managers from rising investor power, the state’s ability to organize an “unstable equilibrium of compromise” between these fractions was a key factor in enabling the empowerment of finance through the neoliberal restructuring that would follow.

This chapter focuses on the restructuring of world trade following the unraveling of the managerial order. With the collapse of Bretton Woods, state agencies, especially the Treasury Department and Office of the Special Trade Representative, took the lead in constructing a successor. Meanwhile, the Commerce Department worked to overcome distrust among business by organizing an advisory architecture of unprecedented scope, through which capitalists from every sector of the economy systematically offered input into the trade negotiations. Yet this advisory system also served another important function: winning business over to the “free trade” agenda. GE executives worked closely with Commerce officials to lay foundations for the advisory system, on which it subsequently played a leading role. In 1979, Carter appointed GE’s Reginald Jones chair of the President’s Export Council (PEC), ostensibly the top trade advisory body to the president. The PEC helped solidify the free trade consensus among big multinationals, as well as to extend this to smaller businesses.

This concluding chapter explores the implications of the analysis presented in the rest of the book for understanding the rise of neoliberalism. It argues that neoliberalism did not result from the imposition of Hayekian ideas, nor corporate lobbying. Rather, it emerged from the crucible of class struggle, and the efforts of the state to develop a program for, and hold together a business coalition of around, restructuring. It also reflects on some of the changes that occurred within GE and the integral state during the neoliberal period. While CEO Jack Welch attained fame in these years as a spokesman for “shareholder value,” GE’s role within the integral state appeared to fade. Shifts in industrial policy, and the new configuration of capitalist class power, saw GE become less central to the industrial policy system, as military spending continued its long decline as a proportion of GDP. It could hardly be counted among the cutting-edge high-tech firms that emerged from the new industrial policy structure. Subsequently, “shareholder value” itself was thrown into discredit in the wake of the 2008 financial crisis, as the company’s financialized business model left its future deeply uncertain.