In Part 1 of this article, John Hughes depicts the contemporary landscape of power with its commanding heights. He attacks the popular myth that ownership is no longer relevant, and pinpoints the particular forms of social irresponsibility taken by private bureaucratic power in the economy.
One might call it, their commanding heights. We are looking at a network of power relations, and we want to understand what their main characteristics are, what policies (typically) they give rise to, and how these are implemented (through what institutions). This is not something that can be confined to economic analysis, since political strategy is vitally important to these power groups. It is not something that occurs simply in the “private” or “company” sector either, for these policies dominate the operation of the public sector too —and particularly the nationalised industries.
Most of the economy, and particularly the industries characteristic of modern industrial technique, are dominated by giant firms. The National Institute has recently published a study, Concentration in British Industry, analysing material from the 1951 Census of Production. All the evidence of profit data, and takeovers and mergers, shows that concentration has gone further since. Nor does their method of measurement even touch on the ramifications of control stemming from large minority blocks of shareholding by one firm in another, or collusion and agreement explicit and implicit between firms. Still, their material shows that, of the trade groups they surveyed (219 of them), only trades accounting for slightly over one-fifth of total employment did not show an appreciable concentration of market power in the hands of a very few firms. In all the rest, the three largest firms accounted for at least one-third of employment in their trade group, and/or were at least sixteen times as big as the average sized firm among “the rest”. The power such concentration gives, reinforced as it is by agreements between firms and general acceptance of price leadership by the largest firms, gives them a considerable control over prices and profit margins. The larger of these giant firms straddle more than one trade group, are large and secure enough to raise capital easily from the stock exchange, and inter-connect with the big banks and insurance companies. (Of the growing body of literature on this, see particularly, The Insiders, the series on The Controllers in ULR by M. Barratt Brown, Peter Shore’s Chapter in Conviction, Tribune pamphlet Socialism For The Sixties and Professor Titmuss’s Fabian pamphlet, The Irresponsible Society).
However, we are told that these giant companies are in fact strongholds of “managerialism”. The Labour Party’s policy document Industry and Society strove hard to convince us of this: “the world of the managers is not the world of the shareholders” . . . “apart from providing small sums of additional capital the traditional functions of share-holders have virtually disappeared in the case of the large firms”. The fact that companies can function effectively and grow in the absence of private shareholders is taken as a general demonstration that ownership has become “irrelevant” (Industry and Society, p. 38).
Even if this were so at present (which it is not), to justify the domination of the economy by the boards of the giant firms would require something more than a general whitewash of their performance. For if the giants are not accountable to their shareholders, why should they not be made accountable to the community? Why tolerate irresponsible concentrations of power? Industry and Society gave us platitudes (“these companies should conduct their affairs in a manner which coincides with the interests of the community” . . . this involves “a sense of responsibility to the nation”, p. 49) instead of proposals for control. “The Labour Party recognises that, under increasingly professional managements, large firms are as a whole serving the nation well” (Industry and Society, p. 48). After this, all the British Iron and Steel Federation had to do in its antinationalisation propaganda was to echo the phrase, “Steel is serving the nation well”.
The truth of the matter is (a) there are very close links between ownership and control in the very largest firms, but this has important new characteristics; (b) the power wielded by the boards of the industrial giants, whether or not it is irresponsible in relation to control by large shareholders, certainly is irresponsible in relation to the community although dominating the community’s life and future; this power has been used in ways extremely damaging to the community economically, and when used politically, in ways extremely damaging to what democracy we retain; (c) the selfish interests of the industrial and finance oligarchy dominate the operation also of the nationalised industries.
On ownership, we are indebted to the new material collected by Professor Sargant Florence (The Times, August 11, 12, 1959). He points out that “take-over bids have given a rude shock” to the view that “no shareholders have now any power”. Highly concentrated shareholdings are well in evidence in the largest companies, but between 1936 and 1951, the percentage of shares concentrated in the hands of the