What accounts for the increasing extremism of the Republican Party, and the polarization that has resulted from it? It at least partly stems from what many may view as an unlikely source: a decline in leadership by large American corporations, a group Mark Mizruchi refers to as the American corporate elite. Here, Mizruchi joins Geoff Kabaservice to provide a detailed history of the role of the corporate elite in stabilizing American politics, and how elites have gradually abdicated that role.


Mark Mizruchi: But I think the single biggest problem in contemporary American politics is the absence of a significant element in the center-right. This is the place that the Republican Party used to occupy, a position that has historically been occupied by big business, and right now it’s empty.

Geoff Kabaservice: Hello! I’m Geoff Kabaservice for the Niskanen Center. Welcome to the Vital Center Podcast, where we try to sort through the problems of the muddled, moderate majority of Americans, drawing upon history, biography, and current events. My guest today is Mark Mizruchi from the University of Michigan, where he is the Robert Cooley Angell Collegiate Professor of Sociology, the Barger Family Professor of Organizational Studies, and professor of Management and Organizations. That’s quite a mouthful, but welcome Mark.

Mark Mizruchi: Glad to be here, Geoff.

Geoff Kabaservice: I’m glad to have you with us. You’ve written a number of books dealing with the economic and political behavior of large American corporations, but I’m particularly interested in your marvelous 2013 book, The Fracturing of the American Corporate Elite. The continuing relevance of that book has been very evident to those of us at the Niskanen Center. As some listeners may know, last year we published a kind of restatement of Mark’s thesis on our website under the title “Large Corporations Contributed to Our Political Polarization: Here’s How They Can Fix It.” And you, Mark, also were so kind as to be one of the panelists in our webinar series this summer called “Divided We Fall: How Business Can Depolarize the United States,” which we co-hosted with Business for America. Thanks again for doing that. That was a lot of fun, actually.

Mark Mizruchi: It was, yeah, and I’m glad it came off. You know, it was hard to tell how it was going and we didn’t get big audience reaction, so we weren’t fully aware of the audience. But I really enjoyed the discussion and it seemed very productive.

Geoff Kabaservice: That was a lot of fun. Before we get into a discussion of your work on the corporate elite, I just wanted to ask you how you came to do work on this subject. Where did you grow up? What did you study? What kind of work led up to that 2013 book?

Mark Mizruchi: Well, it’s a long story, but I grew up in upstate New York. I went to college at Washington University in St. Louis. And my sophomore year was the 1972 presidential election, and I was 18. I was a big McGovernite and I signed up to canvass for George. And they sent me to these Democratic neighborhoods on the South Side of the city of St. Louis: all white, largely ethnic. And they had me go door-to-door, only to the houses of registered Democrats, to try to convince them to vote for McGovern. And it was quite an eye-opening experience. There were very few McGovern supporters among those people. Some were flat out for Nixon, others were neutral, others didn’t want to talk to me at all. When I’d actually find a McGovern supporter, it was so exciting — it would make my day! That’s how rare it was.

And I found the entire experience very perplexing. I couldn’t figure out… These people were not particularly well off and I didn’t understand why they were not receptive to McGovern’s appeals to tax the large corporations, redistribute wealth, and make things better for working people. It just didn’t make sense to me. I started asking myself… You know, I had started college as a math major, I was taking math and physics, and here was a social issue that I really didn’t understand. And I started asking myself, well, why would these people think this way? And one thing led to another and I came to this conclusion: It must be that these powerful, large corporations have somehow exercised control of our ideological system and convinced these people that it’s poor people and Black people who are to blame and not big business. So I switched my major to sociology and I went off to graduate school a few years later.

And at the time, I ran into a professor in grad school who was studying connections among boards of directors of large companies, what are called interlocking directorates: people who sit on the board of one company sit on the board of others. And he was using this brand new approach nobody had ever heard of it at the time called network analysis. Now everyone talks about larger networks, but back then — this was the late 1970s — this was a relatively new idea. And he was using mathematical models to study this process. I had abandoned my math major but never really my love of numbers, and here was an opportunity to study this problem about the powerful and the wealthy using math. And so I joined this project.

And at that time, there were a bunch of us both in my department and a handful of people in the rest of the country who were relying on the old book by C. Wright Mills, The Power Elite, and newer work by G. William Domhoff, who had written a book called Who Rules America? And they were trying to understand how the wealthy and powerful control the country and basically made our nation undemocratic.

And so I plunged into this research. And in my view at the time, and in others’ view, the elites were the bad guys. These were the people who had gotten the United States into the Vietnam War, and had exploited Latin America and other parts of the world, and they had been responsible for many of our big social problems and environmental pollution. And so that’s how I got into studying this topic. It was really through a process of radicalization, actually. I’ve moved, I’ve changed my position somewhat since that time, but that’s how I got into it.

Geoff Kabaservice: Yeah, that is interesting, particularly since you do mention in your book on The Fracturing of the American Corporate Elite that you came to your study of corporations with the view that they were the villains. And you came away with a much different conclusion by the time you had finished that book. How did your perspective shift?

Mark Mizruchi: Okay. Well, I had already come to the new perspective by the time I wrote The Fracturing of the American Corporate Elite. But I think what happened over time — and I mentioned this in the preface to the book — is things may look one way at a certain point in history, and then 40 or 50 years later the same events may look very different, the same people may look very different. You don’t necessarily interpret things the same way.

And I think what happened over time was these people whom I had considered “the bad guys” back in the late seventies and early eighties — in retrospect, comparing them with contemporary elites, they looked pretty good. They did lots of good things. We complained about them at the time. We called them “corporate liberals,” as if that was some kind of pejorative and as if these were terrible people doing terrible things. But 40 years later, you look back at what they did — well, actually a lot of what they did was pretty darn good, particularly in comparison to what many of the elites are doing today.

And so I think it was a very slow process over time. I just observed changes… And the political scene in the United States shifted so starkly between the ‘70s and the present that it was hard not to reinterpret things and see things differently from the way I had seen them earlier.

Geoff Kabaservice: Before we get into your thesis, it seems to me that The Fracturing of the American Corporate Elite is essentially a business history of the sort that university history departments no longer seem to support. Am I wrong in thinking that business history has been marginalized in academia in recent decades?

Mark Mizruchi: Well, I’m not sure it’s more marginalized now than it was in earlier years. I know there’s a journal called the Business History Review, which I have reviewed for. I attended one of their conferences many years ago as a graduate. My understanding… If anything, there are others right now working on this topic. There was a guy at, a historian, I think it’s Waterhouse. Do you know the book, it’s called Lobbying America, I think it’s called?

Geoff Kabaservice: There has been a lot of good work on lobbying. You’re right about that, yes.

Mark Mizruchi: But anyway, I’m… Yeah, Benjamin. I think it’s Benjamin Waterhouse.

Geoff Kabaservice: Ben Waterhouse, that’s right.

Mark Mizruchi: Yeah. So I’m not sure there’s less interest in this topic than there was an earlier years, but I would agree it’s never been a major area, at least in my understanding of this. I don’t know of many people in my history department at Michigan who work on this stuff.

Geoff Kabaservice: Some of the history has come in through the back door in the form of the New History of Capitalism school — which is much in the news, frankly, because Matthew Desmond in the 1619 Project channeled several historians from that school to conclude that American capitalism and global markets broadly stem from slavery. But that’s not the work that you do.

Mark Mizruchi: No, but you know that Matt’s a sociologist, right? He’s not a historian.

Geoff Kabaservice: Of course, of course. Yeah. So let’s talk about that book then. Essentially, you’re saying that there was a different kind of business elite who represented the largest corporations in the postwar period. And although they weren’t liberals, they believed it was in their long-term interest to have a well-functioning society. And that meant that they took a moderate approach to politics that included at least limited acceptance of government regulation, of taxation, and labor unions, and that this group had a significant role in formulating policy ideas. Is that basically the thesis?

Mark Mizruchi: Yeah, that’s pretty accurate. Now, there’s a lot more to it than that. But that, in thumbnail sketch, is basically what I’m arguing.

Geoff Kabaservice: So if you could adumbrate then, why was there such an elite and what shaped it?

Mark Mizruchi: I think the origins of this were at the turn of the 20th century when we had… This was the period of the so-called second industrial revolution, the rise of the large corporation in the United States, the enormous growth of manufacturing, and we had this huge wave of immigration. And we also, partly because of the immigration and partly because of the expansion of manufacturing, we have large numbers of workers laboring under very difficult conditions, and that led to radicalization. And it created significant fears among some of the leading businesspeople that we might end up with socialism in the United States.

And so there was a group that formed right around 1900 called the National Civic Federation. And their idea was, “Well, look, if we don’t improve conditions, we might in fact have a socialist revolution. And so, we have to find a way to make life more tolerable for average Americans.” And so they developed a series of relatively moderate ideas, including the possible acceptance of independent labor unions. They tried to sell that to the larger corporate community. They weren’t fully successful, but they did have a significant amount of influence. And you started to see in the early 1900s many companies developing their own welfare programs for their employees, giving them health insurance and pensions. And so that was the origin. And it all kind of disappeared in the 1930s because of the Depression.

But then in the 1940s, during the war, we had the re-emergence of this mentality and this approach. And in particular it was the formation of a group called the Committee for Economic Development in 1942 that really characterized, best characterized, this approach. The basis for the CED was, “Well, we know that the war got us out of the Great Depression, but what’s going to happen when the war ends? Are we going to fall back into a depression? “And so the idea was that we needed to plan for the post-war economy. And it was a group of leading businesspeople but also a handful of academics, and their mission was to try to develop ideas for how the United States would handle the postwar economic situation.

But along with this, there were a whole series of things that were central and critical at that time. First of all, most Americans believed that the federal government was a good guy, it was on their side. And this was a result of Franklin D. Roosevelt, the New Deal, and this new approach by the federal government to try to ameliorate social problems. And so by the ‘40s… And then of course we have the war. And so the American public in general was very supportive of not just the federal government, but the idea that the government was on their side. So that was one key constraint that businesspeople faced.

The second thing was that labor unions had become increasingly powerful. And so even if the big companies would have preferred to not have to deal with unions, the reality was they were there. And so the feeling was, “Well, we can’t get rid of them. Let’s make the best of a bad situation.” And so they accommodated the situation. They decided, “Well, we’ll work with these people and we’ll try to reach some kind of mutual understanding.” It didn’t mean that they weren’t at each other’s throats all the time. They were, but they worked out agreements, the most famous of which was the 1950 so-called Treaty of Detroit, which the UAW agreed to a five-year plan where they would not strike.

Geoff Kabaservice: That’s the United Auto Workers?

Mark Mizruchi: Yeah. And then the other piece of it was that the elite at that time, it was a smaller group than it is today. We had a big, highly powerful, manufacturing-based economy and a number of major financial institutions. They were very tightly connected. They knew each other. Many of them had grown up together. They were friends. They belonged to the same clubs. And they also had a sense of noblesse oblige. They believed that… They saw themselves as elites, but they had this ethic that suggested, “We have a certain responsibility to the larger society.”

Now, exactly where that came from, I don’t know. I think some of it had to do with probably going through the Great Depression. I think that World War II had really united the country in a way that maybe we’re not in a similar situation today. But whatever the source of that was, the elite at that time had this sense that “We have a responsibility to the larger society.”

I think another piece of it was that they believed in Keynesian economics. They believed that one reason for the Great Depression was that there was insufficient purchasing power in the larger population: “Well, if we’re going to have a well-functioning economy, people have to have money in their pockets so they can spend and buy the things that we produced.” And so, there was a general feeling that we needed to take care of the larger population. We needed to make sure they had decent jobs that paid reasonable wages, that allowed them to live what became a middle-class lifestyle, and that this would not only benefit them but it would benefit us.

Geoff Kabaservice:

I feel a need to point out that someone like Paul Hoffman, who was instrumental in the creation of the Committee for Economic Development in the early forties, was not a liberal as we think of the term now. He in fact was pretty conservative. I think he was the chief executive of the Studebaker Automobile company, and he went on to become sort of important in the Eisenhower administration, which again was the first Republican administration after FDR and Truman.

But if you go all the way back to the progressive movement of the early 20th century, the phrase that shows up there as well as in a lot of what Hoffman was saying was “enlightened self-interest.” It was in the enlightened self-interest of the leaders of the large corporations to keep the system basically as it was, because they enjoyed their lifestyle, they enjoyed the way the American capitalist economy worked, and they were worried that immiseration of the population had the potential to overthrow that system.

There’s a passage in Jacob Riis’ book How the Other Half Lives, which I wonder if some of those corporate leaders read with sort of a worried eye. There’s this poor man on Fifth Avenue. He’s thinking of his children starving at home, his wife in their unheated apartment. And he sees all of these rich parading past him, enjoying all of the good things that the world has to offer. And he gets so enraged that he starts lashing out with a knife. And at basis, a lot of the desire of the progressives was just not to be on the receiving end of that knife, to make sure that there wasn’t that kind of immiseration in the society. And I think I’m correct in feeling that the CED also stood for that kind of enlightened self-interest where these kinds of reforms were seen as being necessary to preserve the American system. And the belief was that untrammeled individualism, rugged individualism, laissez-faire economics, no longer could really apply in the economy. Is that more or less correct?

Mark Mizruchi: Yeah, I think that’s very well put, Geoff. It’s interesting, I came across that phrase “enlightened self-interest” reading the CED’s 1971 manifesto about the importance of corporate social responsibility to the larger society. And I wasn’t aware that the phrase itself went back as far as you described. But what you’re describing is exactly the orientation they had. Yes, these people were not liberals in the sense that we think of liberals today. But they understood in some ways, in a way that I’m not sure a lot of contemporary elites do, that it ultimately is in their self-interest for the larger society to rest on a strong middle class. Some of it probably was defensive or at least preemptive: “Yes, If we don’t take care of people now they will overthrow us at some later point.”

I think this is one of the reasons that back in my younger days in the ‘70s we hated these people. We thought they didn’t really care about people, they were just trying to protect their own interests. But the thing is, though, if you compare that approach to the approach that, “Well, we’re just going to take everything for ourselves and who cares about anybody else?” — that former approach looks pretty darn good by comparison. Let’s forget about the morality of it for a minute and look at the consequences of the policies that flow from those two different orientations. And I think it’s pretty clear that if one is a liberal or happens to be, that one would certainly prefer enlightened self-interest to what we might call naked self-interest.

Geoff Kabaservice: My feeling also was that business collectively took a real hit in the Depression; its prestige plummeted with the American population. And there was a real felt need, particularly on the part of larger corporate leaders, to rehabilitate the image of business. And World War II helped with that to some extent. A lot of executives took jobs as “dollar-a-year” men in Washington. And I came across an essay by Philip Zelikow, where he felt that both the military and the business cultures of the U.S. in this period were intensely oriented toward practical problem-solving. And certainly the output of these industries that had been converted to defense production was a large part of what enabled the United States to win the war. So that was a step toward the rehabilitation of the image of business, and it continued through the ‘50s and ‘60s, it seems to me.

Mark Mizruchi: Yes. But the other aspect of that was that if you look at the big companies of that era… Yes, they were these large, heavy bureaucracies. But on the other hand, they employed a lot of people. They had very steep internal labor markets, which at the time a lot of critics felt were purveyors of sharp inequality — but in retrospect, you look back and one can see that what they did is they provided opportunities for upward mobility. And in fact a colleague of mine, Jerry Davis, did a study in which they’ve argued that the hollowing-out of middle management in more recent years is one of the major sources of the growing economic inequality you see in the United States.

And the other aspect of these big companies is people could have a career in them. So you’d go to work for one of these, for General Electric or General Motors, and you’d spend 40 years with them. There was at the time a relatively high level of job mobility. You could make a decent wage, people could live a middle-class existence on a single income and have a family. And a part of that was just a function of a great wealth the United States experienced at the time, but it was being purveyed through these big organizations. And so now we look back and we see them as these bureaucratic dinosaurs that eventually became very stagnant and led to many of the economic problems we experienced later on. But they certainly had their moment. And I think that that was probably one of the reasons that the public was not strongly anti-business in the post-World War II period.

Geoff Kabaservice: There was also an element of paternalism, I think, that carried on in that culture as well. And the idea was that you were giving people jobs for life, you were supporting communities, you were part of the stabilizing factors in American society.

Mark Mizruchi: Right. And so what you see is the social critics of the 1950s, which is kind of the height of this era, their criticism had to do with the bureaucratization, the dehumanization, the conformity that was a consequence of these big organizations…

Geoff Kabaservice: The Man in the Gray Flannel Suit.

Mark Mizruchi: Yeah. But they weren’t criticizing them on moral grounds so much, it was more just that they were dehumanizing — not in a sinister kind of way, but just because of the pressures of conformity. Later on in the ‘60s we started to get more sharp criticism. But yeah, there was a kind of paternalism, and I think most Americans at the time were not bothered by it.

Geoff Kabaservice: You also pointed out that during the Cold War there was a real sense that if we were going to compete with the Soviet Union, we had to get our collective act together to some extent. A lot of corporate leaders in the CED were very troubled by the high rates of draft rejection for illiteracy, for example, and also sort worried that if Americans didn’t understand what citizenship was about, what their democratic responsibilities were, that they would be prey to ideological appeals.

Mark Mizruchi: Yes, the Cold War was definitely a big part of this story. And in fact some people argue that the end of the Cold War is part of what led to the polarization we now see in the United States. But I think that the key event that really triggered this was Sputnik in 1957, when the Soviet Union launched the first space capsule. Now, it turns out that the insiders in the American government were aware of this, they knew it was going to happen. President Eisenhower knew about it before it actually occurred. But the public in general was shocked by this: “Oh my God, we’re going to lose the space race to the Soviet Union! And that means they’re ahead of us technologically, which means maybe they’re going to be superior to us militarily and economically.” And this really mobilized the public in a way, but it also mobilized big business including the CED, which immediately turned around and issued statements, put pressure on the government. There was a tenfold increase in federal funding for higher education during the 1960s.

This was even part, I think, of what provided so much support for Lyndon Johnson’s Great Society. I think it contributed also to the… I won’t even say grudging… There was a certain degree of support for the civil rights movement among big business at the time. Because, again, the Soviet Union was competing throughout Africa and in Asia and other parts of the world for political prominence, and they were telling people (particularly in Africa): “Look at the way the United States treats Black people. Do you really want to align yourselves with them?” And I think the elites in the United States were very worried about that: “We have to do something about this. How are we going to justify this treatment of a significant segment of our population when we’re supposed to be a democracy?” For all these reasons, the Cold War was a very important element of this.

Geoff Kabaservice: I suppose we should distinguish here that when we talk about business, you and I are mostly talking about big business and large corporations — in that the attitude of smaller business people usually would have been more conservative, both socially, culturally, and economically, as well as politically.

Mark Mizruchi: Yeah. I think it’s really that you pointed that out, Geoff, and it’s something I should have mentioned earlier. First of all, there are a lot of businesses in the United States — I mean literally millions. But the vast majority of American businesspeople, even during this post-World War II era that we’re now discussing, were politically traditionally conservative. They believed in free markets, they believed in minimal government intervention, low taxes. They did not like labor unions, they didn’t like regulation. And they would have been pretty comfortable with most of the ideas of the Republican Party at that time or even possibly today.

But the group that I’m talking about is actually quite a small group of people at the top of the business world. It’s sometimes referred to as the “Fortune 500,” because… Actually the Fortune 500 didn’t appear initially until 1955. But the concept that you have these 500 leading companies — and they were manufacturers, but you add 50 leading banks and 50 leading utilities and retailers — but a relatively small group of major corporations. And this is the group that I argue in the book adopted this relatively moderate and pragmatic approach to politics and the kind of enlightened self-interest that the CED talked about. And they have to be separated… Again, they were still Republicans in those days, but they tended to be more moderate, they made their peace with Keynesian economics. And therefore they were more willing to accommodate certain kinds of positions in the political arena that maybe were seen as anathema to most businesspeople.

Geoff Kabaservice: When and how did all of this begin to change?

Mark Mizruchi: Most of the change occurred in the 1970s and also the 1980s to some extent. So what happened is as we moved into the 1970s, the United States experienced a whole series of crises. First of all, if you look at the economy from 1946 up to about 1970, we had very low unemployment, very low inflation, high economic growth. The median standard of living approximately doubled between 1946 and 1970. Poverty was cut in half in the 1960s alone. So the economy was extremely strong. This was partly a function of the United States’ dominance in the world after World War II. But for whatever reason, we really didn’t experience significant economic problems — an occasional recession here and there, but nothing major.

By the early 1970s, we started to get serious inflationary pressures. This was partly a result of heavy government social spending for the Great Society in the 1960s, but probably more important was spending on the Vietnam War. We also had very tight labor markets in the late ‘60s because the economy was booming and that created upward pressure on wages. And then in the early ‘70s, around 1973, we had the first of our two major energy crises when the Organization of the Petroleum Exporting Countries placed severe limits on exports of oil. And that led to a huge increase in gasoline prices and threw the American economy into a huge recession. That was number one.

The second thing was, because of the turmoil of the late 1960s and then the Watergate scandal in the early ‘70s, we started to get a breakdown in the legitimacy and support from the American public of American institutions. So we started to get a lot of cynicism about the government: “The government doesn’t tell us the truth anymore.” People became cynical about big business — just renewed attention to the issue of environmental pollution and, “Well, business must be responsible for this.”

The other problem was that economic difficulties were exacerbated by the fact that many of the companies were now experiencing an increased amount of regulation. This was partly due to the emergence of two major regulatory agencies, the Occupational Safety and Health Administration and the Environmental Protection Agency. And these were actually not opposed… Most of the big companies were okay with the formation of these agencies. They were signed into law by Richard Nixon. But once in action, some of the regulations, some of the individuals were highly zealots. You could see how some of the big businesses found them not just overly stringent but also ridiculous. They had no relation to… You try to administer policies for an entire society, it’s very difficult to do that bureaucratically without having some of them have no relevance to what they’re trying to regulate.

And so for a whole series of reasons, the economy was experiencing great difficulty. We started not only to have high inflation but also high unemployment. Economists referred to this as “stagflation.” Productivity increases were dropping. So all these things came to a head in the 1970s, and the leaders of American big business started to reassess their positions: “Maybe we have to rethink Keynesian economics. Maybe demand is too high now and the problem is supply. Maybe the reason we have so much inflation is because productivity isn’t growing and so we don’t have enough goods and that’s driving the prices up. And maybe some of the protest was legitimate and made sense, but maybe now it’s gotten out of control, and a lot of these movements are not just liberal but they’re anti-capitalist. They don’t support the free market or our reason for existence.” And so you start to get a reassessment of that kind.

Geoff Kabaservice: So of course one of the important documents of this period is the Powell memo. This is future Supreme Court justice Lewis Powell writing to, I think, a friend who was associated with the Chamber of Commerce saying that “Business needs to take a stand at all levels of society and combat this anti-business, quasi-socialist tendency.”

Mark Mizruchi: There’s actually a lot of debate about exactly how influential the Powell memo was. But there’s definitely some evidence that it influenced some people. So one prominent member of the Coors family, for example, a very conservative group, said that he was strongly influenced by the Powell memo. What was interesting about that memo was that Powell laid out in great detail a whole series of proposals for what the business community should do: “We need to get people writing op-eds in newspapers. We need to fund organizations for people to conduct studies and write books celebrating the virtues of the free market. We need to get our people on television.” It was a whole series of very explicit recommendations. And what’s most interesting about it is, whether it was due to the Powell memo or not, what he recommended is exactly what happened in the next few years. You got the growth of older organizations like the American Enterprise Institute, the formation of new ones like the Heritage Foundation, enormous amounts of money being poured into these very conservative think tanks. Books and pamphlets being introduced, op-ed articles being written, people going on the networks, documentaries being produced… It was an entire wave.

And part of what led to this was a willingness of these historically moderate and pragmatic big business people to align themselves with a group of people they had previously gone out of their way to avoid — and that was traditional far-right conservatives. That was one of the most interesting developments of that period.

Geoff Kabaservice: So a few other aspects to remember which come up in your book, one of which is that American businesses are coming under increased competition from abroad. Particularly Japan and Western Europe, at this point, were starting to produce high-quality goods at lower prices than American producers. Further, there’s a decline in autonomy for a lot of these corporate leaders you’re talking about, who are coming under increased financial pressures and the beginning of the kind of shareholder revolts and the desire for shareholder value to be the predominant value taken into consideration by these companies. Can you expand on that a bit?

Mark Mizruchi: Sure. The foreign competition was a critical part of this. So what happened is… At the end of World War II, the world economy was basically in shambles, except for the United States. And so, the question was how… And this was not necessarily a good thing for us, for Americans, because we needed the rest of the world as a market for our own goods. And so the US went about, partly through the Marshall Plan and partly through aid to countries in East Asia, of rebuilding the world economy. And one might say they succeeded beyond all expectations. But in some ways they succeeded too well, because Germany was rejuvenated, Japan became a major economic power. And meanwhile, the American companies were operating… If you looked at the major, heavy industries in the U.S. — auto, steel, chemicals — they were operating in highly concentrated conditions where they faced little competition. And they got soft. They didn’t really have to innovate at that point because they were doing so well.

And as companies in other parts of the world developed, and then their goods started coming into the U.S., American consumers looked at Japanese cars and European cars and they said, “Wait a minute, these are better than our cars. Our cars are built to fall apart every two or three years. These Toyotas and Saabs last for a decade.” And so the American companies were caught flat-footed in that situation. They were really not well-equipped to compete with these foreign producers. And so that was one of the key aspects that led to some of the economic problems of what was happening. So that was a big part of this, and I’m really glad you mentioned that.

The issue of managerial autonomy, that actually happened later in the 1980s. These other crises, the economic crises, including the growth of foreign competition, happened mostly in the 1970s. In the 1980s we saw something else. Now, this was a result of some of what occurred in the ’70s. So part of the difficulties that American companies were experiencing in the ’70s was these great bureaucracies that I was complimenting a few minutes ago were now becoming big and clumsy. And the companies were no longer innovating; they were saddled with inertia. You couldn’t get anything done because you had all these vested interests inside the company. And their stock prices were dropping, particularly after 1974. And there was around that time a movement in the economics profession that started to rethink the nature of the corporation. And in combination with the depressed stock prices — which really stayed low from around 1974 into the early ’80s — we started to get a rethinking of the nature of corporate control.

So in the period really from the 1920s up through the ’70s, we had a situation where the insiders of the company — the CEO, the top managers — were able to run things pretty much independently. They weren’t pressured by their stockholders. Companies had thousands of stockholders, very few of whom owned any kind of sizable percentage of the stock. And they didn’t really exercise their voting power even if they had it. So managers had a lot of autonomy at that point. But now here we are in the early ’80s. We have depressed stock prices and there’s just a wave waiting to happen. And then the Reagan administration comes in and you have people running the SEC and other government agencies who had adopted this new view in the economics profession that the importance of the corporation is to maximize shareholder value; That the critical thing is, “Look, if management is no longer providing good returns for shareholders, maybe there’s something wrong with management. Maybe it’s time to get rid of them.”

And so you started to see a loosening of some of the laws that protected management. And as we moved into the 1980s, we actually experienced an unprecedented wave of not just acquisitions but hostile takeovers. And so during the 1980s, one-third of the Fortune 500 disappeared, the vast majority of them through hostile takeovers. So all of a sudden, managers who had been CEOs of companies, who had been sitting atop these huge enterprises basically unencumbered by bankers or stockholders, all of a sudden they were in a situation where they could be out of a job next month if they don’t worry about their stock price and find a way to push it up. And so this had a huge impact by the late 1980s in the nature of corporate management. Because now being a corporate CEO, you no longer have the degree of autonomy and security that you had in earlier years. Now you’re being watched like a hawk by Wall Street investors. If there’s any sign of weakness, you could be subject to a hostile takeover.

And there, I think, is a key aspect of the change in the orientation of big business that I talk about in the book. Because in the earlier years, these people could afford to be statesmen. They had a long-term perspective, but they could afford to have a long-term perspective because they didn’t worry about their job security. We could think in terms of, “Where’s our company going to be in five, seven, eight years?” After this takeover wave in the 1980s, you no longer have that luxury. Now, “I can’t think about five, seven years in the future. I’ve got to worry about the next quarter and what the analysts are going to say about the prospects of my company, and should investors invest in it?” And so this created a very different orientation. I think that’s one of the reasons that we started to get a decline in this broad, socially conscious approach that had characterized so much of American big business.

Geoff Kabaservice: I hear what you’re saying about the rightward turn of the American corporate elite, but what do you mean by its fracturing?

Mark Mizruchi: Again, going back to the post-World War II period, I had mentioned… The corporate elite at that time was a relatively small world. Again, these were people who… They were virtually all white males. A very high proportion of them — not all, but a very high proportion — came from relatively privileged backgrounds. They had gone to elite prep schools, they’d gone to Harvard, Yale, and Princeton. They knew each other, they belonged to the same social clubs. And they had this noblesse oblige view of the world. And partly because of all of these forces, it was possible for them to come together politically even when there were obvious conflicts of interest between the industries. Auto and steel historically have had political conflicts. The auto companies want to buy cheap steel regardless of whether it’s Japanese-produced or American. The American steel producers want tariffs on Japanese steel so the American auto companies have to buy from them. And they fought each other for years over this. There have always been conflicts of interest in the American business community. But in those post-World War II days, organizations like the CED found ways to bring them together. And they were able to come to a unified position on various big policy issues.

And then in the 1970s, as big business aligned itself with these historically much more conservative elements, you’ve got an even increasing degree of unity, including between big and small business in the late ’70s. And this allowed them to get many gains: reductions in taxes, reductions of regulation. And so by the early 1980s, if you think about the forces that big business faced in the earlier years — a powerful and high degree of government regulation, relatively strong labor unions, relatively high taxation — they had basically solved all these problems by the early ’80s. The idea of government as a source for the amelioration of social problems, that had been delegitimated by the early ’80s, with Ronald Reagan. Labor unions had been decimated by that point and taxes had been significantly decreased.

And so in the early ’80s, big businesses are looking at each other and saying, “We did it! We got everything we wanted” — not literally, but I think this was probably part of their thinking. And there was really no need for them to be politically organized. And so what you start to see is individual big companies going at it alone, pursuing their own interests. And you see this in the 1986 Tax Reform Bill, where this was largely seen as actually a defeat for big business. One of the Reagan administration’s people said, “Big business could’ve won on this, but they were too busy looking out for their own specific concerns rather than lobbying collectively. And that’s why they lost.” Then I believe the takeover wave also made it much more difficult for the companies to organize politically, because they had too much else on their minds — like keeping their jobs.

And so I think what happened was… This is what I mean by the fracturing. There are several issues that are critically important to big business that require them to act collectively — for example healthcare, which by the late ’80s had become a huge problem. And what I argue in the book is that by the early ’90s, when this was a real issue… And, for example, when Bill Clinton proposed his healthcare plan, the big companies, even though they supported major healthcare reform, they were not able to get their act together collectively in order to push something through. And there were a whole series of issues since that time, over the last 30 years, in which big business has not been able to address issues. Consider something like immigration, for example, or infrastructure — which they may finally get, but it’s not clear that it’s because of big business pushing it; it may just be because Joe Biden is. So what I’m talking about with the fracturing is a decline in the ability of big companies to join together collectively to pursue common political goals.

Geoff Kabaservice: Mark, hearing you talk about this history reminds me of my own personal history with three of the corporate leaders in that postwar era. I’ve mentioned this to you before… One of them was J. Irwin Miller, who was the CEO of the Cummins Engine Company. He was born, I think, in 1909. Another was Bill Beinecke — his full name was William Sperry Beinecke — who was CEO of the Sperry & Hutchinson Company, which brought us all S&H Green Stamps. And the third was Amo Houghton Jr. of the Corning Glass Works, which is now Corning Incorporated — and they are the people who manufacture, for example, the glass on the smartphones. And a lot of what you said about the corporate elite would’ve applied to them. I mean, they all did come from elite backgrounds. They were educated at private schools and places like Yale and Harvard. They all had the kind of moderate ethos you described. I think they were all members of the CED, as a matter of fact.

They would’ve looked at the world in somewhat different terms. One of the things that mattered to them was whether you had a family connection to the business you ran or not. They all did. In fact, Amo was the fifth person in his line to be the CEO of Corning. And they definitely did look at sort of a new generation of people coming up who did not have a family connection to the businesses they ran, who just essentially got hired out of MBA programs and were brought in as part of a growing managerial class.

Something I think which is a little different from what you’re talking about is I don’t think any of these people actually changed their political opinions over time. It’s just that they were kind of generationally replaced by people who did have more conservative opinions on a lot of these issues. I mean, there were always people in this group who had more conservative attitudes. One of Bill Beinecke’s contemporaries was Roger Milliken, who moved his family’s textile industry down to South Carolina and became a real force in the conservative movement, and I think was the single largest donor to National Review.

But a lot of these other people kept their kind of somewhat paternalistic attitudes. And you could see that in things like, for example, Miller keeping Cummins in Columbus, Indiana, which is a pretty small town of 40-something thousand people, and Amo keeping Corning in the town of Corning in upstate New York, and that’s just a town of about 10,000 people. And they were all influenced by the forces you were talking about, be it the Depression, their own service in the military in World War II, their service on those bank and corporate boards you mentioned. But they also did a lot to serve on cultural institutions, beyond business, particularly universities.

Both Bill Beinecke and Irwin Miller served on the corporation, and I think Amo was on the Harvard Board of Overseers as well. And then J. Irwin Miller, of course, is a fairly well-known figure in American history, because he became the first lay president of the National Council of Churches of Christ, which represented 34 Protestant denominations. And he co-sponsored the March on Washington, and he worked with presidents Kennedy and Johnson to help pass the Civil Rights Act. And then Amo became, I think, still the only Fortune 500 CEO to serve in Congress. He served nine terms as a moderate Republican Congressman from upstate New York. So all that you’ve been saying does correspond to the experiences of these people that I knew, but there are some slight nuances of difference in their own experiences, although some of that may just be anecdata.

Mark Mizruchi: No, I think that those three are perfect representatives of exactly the kind of people I’m describing, who were prominent in the post-World War II period. And I think you’re absolutely right that they didn’t change, that the world changed, the politics changed. I actually discovered a letter that Amory Houghton wrote to a local newspaper in Olean, New York. Olean is a small city in the southwestern part of New York State, in really an Appalachian kind of area. And it was right before the 2016 election and he said, “I’m 90 years old, I’ve been a Republican my entire life. But this Donald Trump, I just can’t get with the guy. He’s no good.” And then he started raving about Hillary Clinton and, “She’s a good woman. She’s knowledgeable. She’d make a very good president.” It was really just fascinating.

Geoff Kabaservice: Yeah. Bill Beinecke lived to be 104, and just about the time that Donald Trump became the nominee, he resigned from the Republican Party after 80 years as a Republican, which I just found astonishing.

Mark Mizruchi: Well, Houghton, as far as we know, and I think he died very shortly after that, but as far as I know, he never resigned from the party. But what you’re describing… Okay, so here is my take on that process. And of course, by the way, for those of you who don’t know, Geoff is the author of the book on this topic called Rule and Ruin, about the decline of moderates in the Republican Party. I think the root of this… Look, there was always a right wing of the Republic Party. We had the Eisenhower Republicans and we had the Taft Republicans. And there always were far-right elements: the McCarthy wing of the party, the Hunts in Texas. So this was not new.

But what was interesting about the Post-World war II period was that along with the leaders of big business, the moderates in the Republican Party really held sway. I think the key turning point was in the 1970s. Now, there’s a lot of debate about… We had Barry Goldwater in 1964, but that could be seen as an aberration; he was swamped in the general election. And it is true that many of the elites wanted George Romney in 1968, but Nixon got the nomination. But if you look at what Nixon did as president, he would be considered a liberal Democrat by today’s criteria — if you look at what he actually did, at least in terms of domestic policy. But what happened in the ’70s… Prior to that, these relatively far-right elements in the American business community were marginalized by big business. The big business people felt these people were living in the past. They had an outmoded conception of the way the economy works: “No, we have to have a certain amount of government intervention. We have to take care of the population. These people are extremists.” Dwight Eisenhower even referred to them as “stupid” in a letter to his brother in 1954.

These people were around but they were relatively isolated and marginalized in the post-world war period. As we moved into the 1970s, they had been working and slowly emerging through the ‘50s and ‘60s. But in the 1970s, with the crises that we discussed earlier, this was where the big business people decided that instead of having nothing to do with these more conservative elements, “We’re in peril now. We’re under duress.” And they made what — I want to be careful about this — might be described as a pact with the devil. They decided to align themselves with this group.

Again, for the first 10 years or so it was a very effective alliance. It allowed big and small business alike to get a number of major gains politically. What started to happen in the 1980s — it happened very slowly and gradually — was that partly because big business fractured, these far right elements started to gain control of the Republican Party. By the early 1990s, I would argue, they had pretty much succeeded.

You can see this in the way big business dealt with Congress in the lead-in to the Clinton healthcare bill, where eventually the bill was shelved and never even made it to a vote. Big business was basically supportive but they were so fragmented they couldn’t get their act together. They were in effect intimidated by some of the Republicans in the House. You start to see articles — for example, a cover story in Fortune in 1995, with an elephant on the cover: “What Happened to the GOP and its Relation with Big Business?” The argument was, big business no longer controls the GOP.

We certainly see it today. There has been article after article (I’ve been quoted in some of them) in the Washington Post and other publications, talking about how big business lost the GOP. I think what happened is over time these far-right elements gained control of the Republican Party. I think Donald Trump is more the culmination of that process than he is the originator of it. I think you could see this already happening back in the 1990s.

Geoff Kabaservice: Is it fair to say, Mark, that you feel that business, by engaging in this Faustian pact with the political right, undermined itself and its own prospects as well as the country?

Mark Mizruchi: I don’t blame them for doing what they did. I think if you put yourself in the situation they were confronting at the time, I can understand why from a rational perspective they did what they had to do. They really were facing a very difficult situation. I’m sure they were completely unaware that things were going to turn out the way they did. I think they probably thought, “Maybe this is a temporary alliance. We’ll straighten things out, and then things will go back to the way they were.”

Because you see in the Business Roundtable in the early 80s and even the late 80s, there’s still a degree of this social responsibility, where they’re accepting tax increases even on themselves. They’re pushing George Bush Senior to raise taxes even after he said, “Read my lips, no new taxes.” There were still vestiges of this responsibility in the big business community. So I hesitate to say, “Well, they blew it. They screwed themselves. They dug their own grave.”

I think it was an unanticipated consequence of some actions they took that seemed reasonable at the time. But I think some of them, if they look back now, maybe they would have rethought things and done things differently. I think if you would have asked Amo Houghton in 2005, he might have said, “Well, I’m not sure we would have done what we did back then.” Now, not that his company was… His company was in the forefront of the Clean Air Act from the day it was passed. I can give you more detailed information about that if you want.

Geoff Kabaservice: Let me push back slightly on you here. We’re talking about the conservative influence on the corporate community. But you could also argue that there’s been influence from the left which has pushed back against some of the positive aspects of that corporate elite that you described. I mean, it was the left in the 1960s that was pushing for individual liberation and a release from the kind of conformist strictures of that community-minded elite, and they got their way.

No longer do you have actually a cohesive corporate elite with a sense of collective responsibility, a sense of continuity between past and present, a desire to look at the long-term. Now you have a meritocratic elite, educated at liberal universities, which believes totally in the short term and is not terribly concerned with the welfare of the broader society. In some sense, you could say it’s a coming together of both left and right that has brought us to where we are.

Mark Mizruchi: I think there’s a good saying for this: Be careful what you wish for. If you look at the movements of the 60s, and you can see this with a lot of movements in a lot of different historical periods… The earlier years of the student movement and the civil rights movement, they tended to be universalistic, inclusive. Really the general orientation was, “Yes, we have major problems in America, but we still love America. We just want America to be better.”

Well, things didn’t work out maybe the way they had hoped. And by the late ‘60s we started to see increasing radicalization: “No, America’s really bad. We don’t love America anymore.” In some ways, I think they really were successful — not in a revolutionary sense, none of that ever happened. But it did lead to backlash, and it did contribute to some of the problems that we have.

I think just culturally, although I have my issues with much of what’s going on on the cultural left these days… And I know that’s not part of our discussion, so I’ll just leave it at that. But I think overall, culturally American society is a much better place today than it was in the 1950s in terms of being open to and just more decent treatment of difference and things like civil rights and women’s rights and gay rights. There’s a lot more acceptance today of difference than there was back then, in a way that I think has been good.

But I think some of what occurred in the ‘60s… Individual liberation was great and, yes, social freedoms were great. But one might say that they threw out the baby with the bathwater. You’re right, there is part of it that when the dust settled we ended up with what we have today, where we do have a high level of cultural freedom, and we’re much more advanced (or at least open) culturally. On the other hand, we no longer have the strong unifying institutions.

Look at the news media. We used to complain, “Oh, look, there are three major news networks. They’re all giving us the same propaganda.” I think for many of us we’d be happy if everyone could watch Walter Cronkite today and at least agree on what’s happening in the world. Today everyone has the freedom to get their own personal newsfeed, and we can’t even agree on what happened yesterday. Like a lot of things, a lot of good came out of these movements, and then there were unanticipated negative consequences.

Geoff Kabaservice: There’s a piece in Axios this morning by Erica Pandey entitled “The C-Suite Job of the Future: Chief Purpose Officer.” This article begins, “To appease employees, customers, and shareholders alike, companies are spending time and money grappling with huge social problems like systemic racism, income inequality and climate change. More and more firms are dedicating entire departments to tackle societal issues, and even hiring a purpose-focused executive — chief purpose officer — to lead the efforts.”

This matters, she continues, because “In the past, firms generally just had to focus on their bottom lines. Now every political, social and environmental challenge is becoming a corporate concern as well.” I wonder if these recent developments that we’ve seen maybe affect your conclusion in The Fracturing of the Corporate Elite to some extent. We’ve seen obviously the Business Roundtable saying that shareholder value should no longer be the predominant and indeed sole concern of businesses. There’s been a lot of pushback against these ideas, because they do seem to be worsening society. Are you more optimistic at this point than you were back at the time you wrote the book, or do you think these changes are going to be largely ephemeral?

Mark Mizruchi: Rather than saying I’m more optimistic, I might say I’m less pessimistic than I was at the time of the book. Because I do think that many of the big companies are becoming more aware of their importance and their need to do things. You see this with what Niskanen is doing and groups like Business for America. Again, the jury is still out in terms of how many of the real heavy hitters will get involved.

But I do think there’s at least some help now, particularly with regard to climate change, in a way that I really didn’t see when I finished the book. The difficulty that companies are going to face — and I really sympathize with them right now — is that they’re in a bit of a catch-22 situation. They’re being pressured from both sides of the political spectrum to respond on various issues. And doing one thing to respond to one group is likely to alienate significant numbers of people on the other side. They have to figure out, “Well, we’ve got customers…” I don’t know if Michael Jordan ever really said that when they asked him why he wouldn’t throw his support to Harvey Gantt against Jesse Helms in 1990. But he’s alleged to have said, “Well, Republicans buy sneakers too.” It’s becoming increasingly difficult for companies to hold that position because of the pressures they’re facing.

Now, what some of them are doing is they’ve come to the conclusion, Nike comes to the conclusion, “Well, our market is primarily people more toward the left than the right, so we will support Colin Kaepernick taking a knee.” Some other companies, perhaps Chick-fil-A, might have a different view — although I happen to love Chick-fil-A, or at least I love the sandwiches. But they’re all facing difficulties because of this problem.

I think for most of them, they probably wish the issue would just go away. Most people would say, “Let us produce and sell our product and not have to worry about the politics.” I will say one thing about it though: some of the pressure is coming from their employees. If you’re a bank operating in North Carolina — I was asked this question by a reporter a few years ago —and the legislature there is proposing this bathroom bill that won’t allow transgender people to choose their bathroom, well, how are you going to get a Harvard Business School MBA to go down and live in that kind of environment if they find that abhorrent?

By the same token, companies look at the demographics of the society. The younger population is increasingly diverse, and these are their markets of the future. These are their employees of the future. We have to be conscious of racism and sexism and violation of rights in the workplace, as well as how we’re marketing to people.

And particularly on climate change, I do see a lot of companies starting to realize, “Well, this is going to affect all of us.” I’m still waiting for some of the big oil companies to come around, but on the other hand Exxon just hired a couple of environmentalists now on the board of Exxon based on the last election. So I actually am more optimistic, just because I do see some change occurring. I teach in a university, and some of the things I see happening in the university I’m not thrilled with. But I think overall things are moving in what I see as a positive direction. I think a lot of the big companies are responsible for this and are doing good things.

Geoff Kabaservice: As a last question, Mark… If the Powell memo of 1971 took the corporate elite in a bad direction, what would a Mizruchi memo of 2021 tell that corporate elite? What are a few points that they ought to keep in mind as we confront this new era?

Mark Mizruchi: I think that the most important thing that big businesses need to do today is they need to find a way to move the Republican Party back toward the center. I think the biggest problem in the United States today — this is my personal opinion, it’s based on my research, no one else needs to take responsibility for this — but I think the single biggest problem in contemporary American politics is the absence of a significant element in the center-right of the political spectrum.

This is a place that the Republican Party used to occupy and it was the position that has historically been occupied by big business. And right now it’s empty. The Republican Party has become a party of extremists who don’t even necessarily accept reality. And I don’t see how they are operating, for the most part, in the interest of big business. I think a lot of big companies are aware of this. They’re a little bit afraid to come out, and I don’t blame them for being afraid, because there’s a significant component of the electorate that they’re likely to alienate if they take too strong a position.

But I think they have to find some way to either bring the Republican Party back toward the center by running more moderate candidates in primaries, or they have to at least temporarily say, “Look, we’re not Democrats and we’re not liberals, but until these far-right Republicans are defeated and don’t see a benefit in what they’re currently doing, things are just going to get worse.” Or they have to do what some people have been discussing, which is form a third party. I think given the American political system, any kind of third party idea is usually doomed to defeat. But it seems like it could draw significant numbers of people, because I do believe there are still people with Amo Houghton’s mentality out there. There are a lot of them, and I think they have no political home. So that to me is the single issue that has to be addressed in American politics.

Geoff Kabaservice: Professor Mark Mizruchi, thank you so much for joining us today.

Mark Mizruchi: Thank you, Geoff. It was great to be here.

Geoff Kabaservice: And thank you all for listening to The Vital Center Podcast. Please subscribe and rate us on your preferred podcasting platform. If you have any questions, comments, or other responses, please include them along with your rating or send us an email at contact@niskanencenter.org. Thanks as always to our technical director, Kristie Eshelman, our sound engineer, Ray Ingegneri, and the Niskanen Center in Washington, DC.

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