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The Management of Specific Demand

The industrial system relies on its control of prices in the markets in which it operates to make long-term planning possible, by guaranteeing an acceptable level of revenue. But clearly, the volume of products each corporation is able to sell at its fixed price is equally important to the security of this revenue. It would be inconsistent of corporations to invest effort in securing stable prices and do nothing to manage consumer demand.

In fact, demand is very actively managed. This function of the firm covers not only advertising functions – itself accounting for $20 billion[17] a year – but also for many other general functions of management and production: devising a sales strategy, devising a product or features of a product around which a sales strategy can be built, product design, and model change in order to provide strong selling points.

The purpose of demand management is to ensure that a sufficient quantity of product is bought at the controlled price. Not all advertising is devoted to this end, which is of importance to avoid overstatement. There are forms of advertising such as classified adverts whose purpose are merely to inform an otherwise ignorant consumer of the existence and price of a product for sale. This does not, of course, imply that the role of all advertising is merely to provide information about products. ”[A]s I have noted on earlier occasions, only a gravely retarded citizen can need to be told that the American Tobacco Company has cigarettes for sale.”[18]

Economic theory associates advertising with oligopoly – here it is a wasteful zero-sum game in which firms compete with one another for market share because of their inability to compete on price. “These large advertising budgets, like heavy armaments, largely cancel each other out. Not even the oligopolists benefit from them.”[19] This is nonsense. This advertising effort shifts demand to the industry from other industries, it shifts the overall pattern of demand such that more goods of this class are demanded than would otherwise be so. In doing so, it shifts a part of the ultimate decision – the 'sovereignty' – as to what is to be purchased and therefore produced in the economy from the consumer to the corporation. It also serves to stabilise the demand faced by each individual firm – advertising effort will be redoubled in the firm with stagnating or falling sales, whilst in the successful firm efforts to create new campaigns or redesign their products will be more lax. In this way, the share of demand between different firms will be, to some extent at least, self-rectifying, making planning easier. Again, in order to avoid overstatement there will be exceptions – occasional products which the consumer will not accept not matter how large the marketing effort. The novelty of these cases serves to illustrate the point – this process is imperfect but nevertheless strong and reasonably reliable and is not disproved by its exceptions.

In recent times, those with lower levels of literacy have joined the class of individuals with excess money available to spend on satisfying psychic rather than physical wants. Thus it has been necessary to extend advertising methods from print advertisements which were previously sufficient to manage the demand of the minority of society who had a malleable demand to the remainder of the population – radio and television advertising has filled this gap. It is now of great importance. “The industrial system is profoundly dependent on commercial television and could not exist in its present form without it.”[20]

The management of demand is a mass phenomenon rather than an individual one, and is relatively subtle. It is perfectly possible for an individual to contract out of its influence, and this is often used as proof that it cannot possibly exist: “I know it is not true of me, and I do not fancy myself cleverer than the next man in this regard.”[21] Whilst it is true that some people do not watch television, and that nobody is forced to watch, the fact remains that the majority do.

Much of the conventional wisdom lives or dies on this point. If demand does not arise autonomously from consumers' inner desires, but rather is created through a complex sociological process in which both consumers and producers have a measure of influence, then the free operation of the industrial system comes under question. It cannot be defended on the basis that it is serving the 'higher purpose' of society's true needs. It cannot be protected from government interference or regulation on the basis that this will distort the discipline of the market. And indirectly the aggregate effect of advertising is to constantly reaffirm the value of goods, the value of production, the value of the industrial system and the value of the technostructure – to place material production at the top of society's goals.

When viewed not in the context of absolute virtue but in the narrower context of industrial planning, it will be evident that advertising and its related arts have a large social function. This extends on from the management of demand, the necessary counterpart of the control of prices, to the shaping of attitudes necessary for the performance and prestige of the industrial system. For advertising men it has long been a sore point that economists dismissed them as so much social waste. They have not quite known how to answer. Some have doubtless sensed that, in a society where wants are psychologically grounded, the instruments of access to the mind cannot be unimportant. They were right. The functions here identified may well be less exalted than the more demanding philosophers of the advertising industry might wish. But none can doubt their importance for the industrial system, given always the standards by which that system measures achievement and success. –p215

The Revised Sequence

In the traditional view, market conditions (demand) are determined by the inherent desires of the consumer; the firm is forced to respond helplessly to those conditions. The consumer is sovereign, the firm subservient. Let this be known as the Accepted Sequence.

The accepted sequence persists in the competitive markets outside of the industrial system. Within the industrial system, it provides only a partial explanation. There is a separate mechanism, by which corporate functionaries create and distort consumer preferences, as well as market prices, so that market demand is managed by corporations.[22] Let this latter be known as the Revised Sequence.

I do not suggest that the revised sequence has replaced the accepted sequence…Within the industrial system the consumer can still reject persuasion. And, in consequence, through the market he and his fellows can force accommodation by the producer. But consumers, and the prices at which they buy, can also be managed. And they are. The accepted and revised sequences exist side by side in the manner of a reversible chemical reaction. –p217

There are enormous consequences of challenging the accepted sequence. The defence of the free market from interference or regulation is no longer justified by the higher authority of the individual's right to buy what he wants – instead only the seller's right to manage the individual remains as a means of defending corporate autonomy, which seems to lack a some of the rhetorical charm of the former.

The accepted sequence, with its emphasis on the assumed power of the individual, serves in other ways to sanction organisation. Men accept the disciplines of the great industrial enterprise in order to serve the ultimate interests of the individual consumer. By bowing to rules, subordinating their personality to organisation, being good members of the team, they help to enlarge the range of choice of individual consumers. It is proper that they subordinate their lesser liberty to that greater one. Or such is the justification from conventional economics.

Much more is so justified. Industrial squalor, air and stream pollution, sacrifice of aesthetic values – even the rhymed commercials and billboards which are part of the process of consumer management – expand the quantity and variety of product. So they increase the scope for exercise of the sovereign power of the consumer. Again, it is held, lesser values are subordinated to the greater liberty that is allied with the ultimate and controlling power of the individual in an economic system with a maximum range of choice. Again economics renders service to industrial purpose.

None of these contentions survives the revised sequence. There is no case for subordinating the lesser liberty of the organisation man to the greater liberty of the consumer unless that latter liberty exists. If that has already been subordinated to the organisation, the argument lapses. Industrial squalor serves not the larger liberty of the consumer. It serves industrial convenience. –p221-222

Consumer sovereignty is often explained with analogy to political democracy – that by casting his ballot in the market-place, the consumer makes the ultimate decision as to what is produced. The analogy rather loses its appeal when it is understood that the corporation, through consumer management, is able to cast a number of the votes – indeed, it begins to serve better as a condemnation of the logic of the economic system than a justification for it.

The Regulation of Aggregate Demand

The problem of regulating aggregate demand is of much greater scale than the problem of managing demand for an individual corporation's product – it is of commensurate significance to the industrial system.

The problem is specific to the industrial state. In a more primitive state of development, savings are insufficient and urgently needed. What is saved is invested, thus Say's law holds – all income is either spent in consumption or via saving in investment and the market clears. In the industrial state, the majority of saving (in 1969 $99 billion compared to $38 billion) is done by corporations, only a minority by high-income individuals. The relation between retained earnings and industrial investment is therefore a planning decision in the hands of the technostructure – there is no mechanism by which it is stabilised. Indeed, it is frequently the case that a failure in aggregate demand leads to a more than proportionate reduction in investment to protect the technostructure from the dangers of insufficient revenue. In such circumstances, the system is not self-stabilising but chaotic – a downward impulse in aggregate demand begins a spiral. Under Say's mechanism, a failure of aggregate demand leads to a reduction in prices and the market clears. In the industrial system prices are a variable of planning and are not reduced. Instead output and employment falls.

Aggregate demand can only be managed by the state. By increasing spending and/or reducing taxation, aggregate demand can be boosted when it lags, the opposite operation can reduce aggregate demand when it is excessive. This requires a large state sector to make such changes practical. Swings in government demand are often of the order of $10 billion in a single year – the state infrastructure needs to be far larger than this in order to make such changes practical. In practice, increases in public expenditure are practical whilst reductions are not – to be politically viable spending must be seen as useful, and useful spending is taken for granted as soon as it is established. Instead taxation is the primary mechanism by which this is achieved in the post-war world, through progressive personal income tax and a corporate tax that, whilst not progressive, acts as such, since corporate profits are amongst the most volatile indicators of aggregate demand.

There is a perception that this increase in the role of the state has been opposed by business. It has largely been opposed by entrepreneurial businessmen, on whom the increased tax burden disproportionately falls and who are far less vulnerable to the failure of aggregate demand (they are able to respond by laying off production workers and are not reliant on long-term planning). It has not been opposed by the industrial system, who are highly dependent on it. Business generally opposes social spending, but never military spending which is understood to be vitally important to the technostructure and accounts for between 55 and 60 per cent of government expenditure in the 1960s. The role of military spending in assisting the advance of crucial technology is indispensable – this expenditure could not simply be replaced by civilian government or private expenditure.

In much social comment, including that of numerous economists, there has been a tendency to minimise or ignore the role of military expenditures in the regulation of demand. There is much that is unsettling about dependence on such outlays. That weaponry in the higher megaton ranges of destructive power has an organic relation to the performance of the economic system leads to unpleasant introspection. It seems also a poor advertisement for the system and lends comfort to a frequent allegation of Marxists. –p234

The Nature of Employment and Unemployment

There is a firm trend within the industrial system to reduce the requirement for blue-collar workers whilst expanding the technostructure. This is not simply a matter of cost minimisation, although that is a component in some cases. The technostructure also values technical virtuosity for its own sake when circumstances allow, and the continual growth of the technostructure protects them from unemployment and increases their importance within the firm and within society. It is natural for those who have decision-making power to approach problems with solutions borne of their own specialisations and talents – a highly educated engineer seeks a solution involving complex and ingenious top-down automated processes, rather than improvements in working practice that might occur to the assembly-line operative, were he responsible for improving production. There are also important implications for planning. A large blue-collar labour force, especially when under the influence of a powerful union, is an unpredictable factor of production. The planner's ability to deal with the uncertainty of capricious labour relations is limited. It is therefore attractive to reduce the power of unions and the influence of labour by replacing unpredictable workers with highly predictable automated processes – even if automation is more expensive, the elimination of risk is worth the extra cost.

It is important to distinguish here between education and skill. Skilled and unskilled blue-collar workers alike are becoming redundant; the technostructure is composed of highly educated individuals. For those in the educational elite, skills may be reacquired relatively easily – with a college education retraining for a new job is comparatively easy. But even the most skilled blue-collar worker is in a very poor position to retrain for a different function. Formal education is flexible as a base for any of a number of roles in the technostructure – the skills of the uneducated are often vulnerable to technological advance.

The nature of unemployment in the industrial state has changed. No longer is it attributable to a failure of aggregate demand and no longer are the unemployed composed of those willing and able to work if work were available. There is now a structural component of unemployment – jobs are available that require highly educated personnel, whilst the unemployed consist primarily of those who have not completed high school. Superposed on this, a cycle of unemployment related to aggregate demand persists, but it is no longer the only feature. One consequence is that simple unemployment statistics are no longer sufficient to describe the important features of current unemployment.

The requirements of the economic system of the educational system have changed, and there is a lag in the response. An increase in investment in education and changes which encourage a greater quantity to complete higher levels of education is resisted. Partly it is resisted by business outside of the industrial system, whose need for highly educated personnel has not significantly changed, and who will nevertheless be forced to pay for the increased government expenditure. Partly it is in the nature of social response that there is a lag whilst culture and attitudes adjust. Unemployment in Western Europe has been significantly lower than in the US partly because aggregate demand has remained higher, partly because the industrial system is of less importance, but also because this adaptation of the education system has been swifter and more effective. Countries such as Germany, France and Switzerland have been successfully importing unskilled migrant workers, so successful has their ability been to educate their own populations for higher-skilled positions.

This rise in the importance of education is so important that it is possible to say that it has changed the nature of class conflict in the United States. The significant division is now no longer between the affluent and the poor but between the educated and the uneducated.

In recent times education has become the difference that divides. All who have educational advantage, as with the moneyed of an earlier day, are reminded of their noblesse oblige and also of the advantage of reticence. They should help those who are less fortunate; they must avoid reflecting aloud on their advantage in knowledge. But this doesn't serve to paper over the conflict. It is visible in almost every community…

Politics also reflects the new division. In the United States suspicion or resentment is no longer directed to the capitalists or the merely rich. It is the intellectuals – the effete snobs – who are eyed with misgiving and alarm. This should surprise no one. Nor should it be a matter for surprise when semi-literate millionaires turn up leading or financing the ignorant in struggle against the intellectually privileged and content. This reflects the relevant class distinctions in our time. –p248-9

The Control of the Wage-Price Spiral

There are two influential conceptual bases for the mechanism by which persistent inflation becomes established. The only important one for the industrial system, and therefore the most important one for the industrial state, is 'cost-push inflation', or the 'wage-price spiral'. When the economy is near full employment and aggregate demand is strong, trade unions find themselves in a strong bargaining position. There are likely to be a few unfilled positions amongst blue-collar positions. Recruitment is difficult. In the event of a strike, the workforce cannot be replaced en masse. The unions therefore press for wage increases. The technostructure fear the unpredictable consequences of a strike. They recognise that wage increases will make recruitment for unfilled positions easier, and improve employee retention. Further, because the corporation is not profit maximising – and as is accepted by all economists – the technostructure knows that it can pass on increased wage costs to its customers through higher prices. Union arrangements are usually to some extent industry-wide – all firms are likely to accept similar rises in wages and prices will rise uniformly across the industry, so no firm will lose out. “And, finally, the technostructure with which the decision resides, does not itself have to pay.”[23] So, when aggregate demand is adequate, the technostructure will readily accept wage demands, passing on costs to consumers. The price index rises as a result, leading to a further round of wage claims in the course of time. Inflation persists.

Outside of the industrial system the situation is different: here the concept of 'demand-pull inflation' is more appropriate. The entrepreneurial firm already maximises profits – wage demands cannot be passed on to the consumer and must be paid for out of the entrepreneur's earnings: “Again there is the special poignancy in paying when the individual has himself to pay.”[24] Wage claims will be fiercely resisted. Prices will only rise when aggregate demand outstrips the industry's ability to supply, when profit maximisation leads the entrepreneur to increase prices. This will not happen until aggregate demand is excessive rather than sufficient, although the definition of these points is somewhat hazy.

The point is that the wage-price spiral begins before the economy reaches capacity – it can only be avoided by reducing demand so much that an unacceptable level of unemployment results. Persistent inflation and significant unemployment are both unacceptable. The only solution to this problem is state control of wages and prices within the industrial system. This has been highly effective whenever it has been tried – in the US to a greater or lesser extent since the Second World War (rigid controls from 1941 through to the end of the war, then again during Korea, followed by informal but significant pressure under Kennedy and a sudden and rather embarrassing return to formal controls previously denounced as little short of un-American under Nixon[25]) – but has somehow never convinced economists of its effectiveness.

For economists, as will be sufficiently evident, a massive intellectual vested interest was involved. As noted, nearly all teaching and technical discourse assumed markets win which producers sought to maximise their return. To admit of the need for price or wage control was to admit of the inadequacy o this system and the associated theoretical apparatus…Instead of revealing to students by precise and rational diagrams the prices that would maximise profits for a producer, it would be necessary to consider what price a bureaucrat might believe consistent with wage and price stability. Economist would be reduced to the level of political science. Truth has its obligations to dignity. –p254

Wage and price controls are traditionally opposed by the entrepreneurial firm and unions. For the entrepreneurial firm, the only purpose of price and wage controls could be to reduce profits – resistance is rational. Within the context of the entrepreneurial firm, unions feared that wage controls meant wage restraint at the behest of the bosses:

[The entrepreneurial firm] had a strong interest in resisting union demands. It had privileged access to newspapers, public opinion and the state. Any wage regulation, other than that establishing minimum wages, would be, it was felt, for the purpose of keeping wages down. –p254

However, there is no serious reason why those in the industrial system – both the technostructure and the unions – should resist wage and price control. In principle, the government would ensure that corporations kept prices within the industrial system remained stable, and in return the unions would agree to press for wage increases no larger than the trend rate of productivity increases within their firm or industry. For the technostructure, this makes planning easier by reducing uncertainty (albeit an uncertainty that is relatively easy to deal with). For unions, this removes the need for a sustained organising effort merely in order to win gains sufficient to keep real wages constant.

With minimum prices established by the firms, demand that is managed by them for specific products, demand that is managed in the aggregate by the state and maximum levels established by the state for wages and prices, the planning structure of the industrial system is effectively complete. All that remains is to ensure that everyone, at all times, refers to it as an unplanned or market system. –p261

Outside the industrial system wage and price controls are not wanted or needed. This sector is not responsible for the wage-price spiral and will only lead to inflation if aggregate demand extends beyond the economy's capacity. Since controls in the industrial system are effectively supported by everyone in the industrial system, the power which the state needs to implement them are not particularly large. They have enjoyed success in the past with inadequate infrastructure or even through informal arrangements such as those introduced by Kennedy.

The Industrial System and the Union

The union is of much less importance in the industrial system than it is in the context of the entrepreneurial firm. Most of the broad changes that have lead to the importance of the industrial system have also contributed to the loss of power and influence of the union:

  1. The shift in power from the entrepreneur to the technostructure, as previously mentioned, means that those deciding whether to accept wage demands are no longer those who will pay the bill. The urgency of undermining or destroying the union felt by the entrepreneur is not felt by the technostructure – the union poses a threat to planning through the risk of striking rather than a threat to pecuniary reward through seizing their profits. Thus it is in the interests of the technostructure to pursue more docile relations and assent to more generous wage agreements. Moreover, increased costs can be passed on to consumers, especially when wage agreements are industry-wide, signalling equal price increases for all firms simultaneously.
  2. Technological advance reduces the number of workers within reach of the union, shifting employees in large number into white collar positions who tend to identify more with management than with unions.[26]
  3. The regulation of markets and aggregate demand as well as comparative affluence have reduced the dependence of the worker on the union. Where previously the worker had been unable to find another job because of high level of unemployment, management of aggregate demand has made this much easier. Consequently, where the union was previously the only mechanism by which he could solicit for better working conditions, and the only organisation that could protect him from the extreme privation of unemployment, now he is less dependent. He is much more able to find another job if he is dissatisfied and thus the problem of recruitment motivates firms to voluntarily improve conditions.[27]
  4. The imperatives of price and wage regulation place wage negotiation firmly within the remit of the state, and are ultimately likely to demand that wage increases progress in line with industry average improvements in productivity.

Although the original role of the union is waning in the industrial system and the numbers of unionised employees is clearly in decline, new and useful roles for the union have emerged in this context. In some ways, unions in the industrial system are becoming more similar to those in the Soviet system – in which unions must be allowed to persist as a symbol of worker power but cannot be allowed to interfere with workers' identification with the goals of the firm. The union has emerged as an infrastructure through which grievances about the fairness of an increasingly complex pay structure are aired and settled. In some cases unions have supported the adoption of new technology, and have constructively negotiated settlements for reducing employment as part of these adjustments. They now provide a convenient voice to proclaim the needs of the technostructure: whereas it is uncomfortable for the technostructure to demand increased defence spending for its own enrichment and security, it is more acceptable for unions to advocate such spending to protect jobs and the wellbeing of the community in which most workers are employed. “On support for the Vietnam war and on spending for highly technical weapons some union leaders, in recent years, have been far less inhibited than management.”[28]

Finally, the union is capable of delivering industry-wide wage agreements, and is a viable mechanism by which its members can be induced to accept such agreements – in other words, by which wages can be reliably controlled. This reduces the threat of one firm within an industry managing to reduce wages beneath those of its competitors and thereby underselling the industry. It also makes the state's problem of agreeing wage controls to prevent inflation far more manageable.

The Educational and Scientific Estate[29]

The educational estate has grown fortyfold over the past 80 years.[30] This growth has responded to the importance of trained talent as the most scarce vital resource in the industrial society.

Prior to the significance of the industrial system, the educational establishment was largely under the influence of the entrepreneur. Much of the money which sustained the few schools and colleges that existed came directly from rich benefactors, who believed in “the doctrine of financial paramountcy – of the ultimate power of those who paid the bills”, although this was never fully accepted in the academic community. Indeed, a significant tension always existed between the private sector who felt financial measures the uncontroversial measure of success and academics who, failing dismally by such measures, tried to assert goals that were “intellectually more demanding or aesthetically more refined”.[31] This tension was complicated by academia's tendency to be the dominant source of social innovation – a realm in which corporations have always been notably sterile. Whilst inconvenient views were often voluntarily muted or suppressed, nevertheless legislation and policy antithetical to the entrepreneurial enterprise originated in the universities:

Laws against monopoly, regulating access to the capital markets, n support of a wide range of welfare measures, in support of progressive taxation and on behalf of unions, owed much to such origins. –p288

During these years the academic community has been regarded as having been bullied and dominated by business. Much of this view reflects the fact that the history has been written by academia. Moreover, the influence of money is usually rather brutal and unsubtle.

Proposals for reform, by contrast, begin as seemingly eccentric and implausible suggestions. Gradually they gain adherents; in time they emerge as grave needs; and then they become fundamental human rights. It is not so easy to attribute power to those who set this process in motion. –p288

The needs of the technostructure and the modern educational estate are much more closely aligned. The technostructure is dependent on the educational estate not only for a constant supply of talent, but for information about current technological innovation. There are more acute risks associated with direct criticism of academics. Moreover, academic ideas are not as threatening to the technostructure as they were to the entrepreneur. The costs of “improvements in medical care, guaranteed incomes for the poor, protection or salvaging of the environment, regeneration of slums” can be passed on to either consumers or shareholders, and the burden of coping with regulation can be passed on to professional lawyers, accountants and industrial relations specialists where once these burdens fell squarely on the entrepreneur. “The burden of regulation like that of taxation is appreciably lessened by having it fall on someone else.”[32] Some recent developments that have come from academia have proved invaluable to the needs of the technostructure – particularly the regulation of aggregate demand and the more nascent attempts to control prices and wages.[33]

The question remains to what extent the educational estate has reconciled its goals to those of the industrial system. There is no single answer as the educational estate is importantly heterogeneous, but there is a trend for the degree of reconciliation to vary across subjects. ”[E]conomics, as a discipline, has extensively and rather subtly accommodated itself to the needs of the industrial system.”[34] So, to a significant but lesser extent, have the hard sciences and engineering – who often work closely with the technostructure and often receives money from them. Much less so the classics, humanities and some social sciences and a natural tension has grown up between the two cultures.

Despite this reconciliation, there remain three main points of conflict between the educational estate and technostructure:

  • The educational estate generally disapproves of the management of individual behaviour, usually focusing on the use of the media for commercial ends.
The market for soap can only be managed if the attention of consumers is captured for what, otherwise, is a rather incidental artefact. Accordingly, the smell of soap, the texture of its suds, the whiteness of textiles treated thereby and the resulting esteem and prestige in the neighbourhood are held to be of highest moment. Housewives are imagined to discuss such matters with an intensity otherwise reserved for unwanted pregnancy and nuclear war. Similarly with cigarettes, laxatives, painkillers, beer, automobiles, dentifrices, packaged foods and all other significant consumer products. –p293-4
The educational and scientific estate views the effort with distain, even though, as the technostructure responds, these efforts are necessary for the effective management of the economic system.

Thus the paradox. The economy for its success requires organised public bamboozlement. At the same time it nurtures a growing class which feels itself superior to such bamboozlement and deplores it as intellectually corrupt. The subculture which requires such obfuscation for its existence can only be regarded with disdain. That culture responds with a sense of hurt and guilt and the indignation which comes from the knowledge that its needs sustain and nourish its academic critics. –p294
  • The educational estate retains a highly individualistic ethic, and encourages individualistic development in those it trains. In contrast, they find themselves in a world in which they, as citizens, consumers, soldiers and organisational men are expected to be subordinate to the needs of organisation and planning.
  • There is further conflict in the developing relations with the state. Members of the educational estate are in a privileged position in that their involvement in political matters is less inhibited by decency. They are also growing rapidly in numbers. The idea that the academic community was becoming a decisive instrument of political power was firmly denounced in criticism of the first edition of NIS, but since its influence in retiring Johnson and changing policy in Vietnam, this suggestion has not seemed so radical.

The Industrial System and the State

The relationship between the entrepreneurial firm and the state, like all relationships of the entrepreneurial firm, primarily pecuniary and generally zero-sum. By purchasing influence the entrepreneur could gain various profitable concessions: protection from foreign competition, railway and public utility franchises, licenses to export mineral rights and other natural resources, exception or mitigation of taxes and armed support against some of the excesses of workers' ambitions. Equally, the entrepreneur had every reason to fear state power, particularly in the form of taxation and regulation. Entrepreneurial influence over government was direct, pecuniary and very great – to the extent that business was perceived to have bought government. Influence came in the form of purchased votes and legislators. Large corporations dominated the states in which they were based: “California of the Southern Pacific, Montana of Anaconda, Pennsylvania or the steel and coal companies, Michigan of the automobile companies”.[35]

During the 1930s, there was a wide perception that this relationship – of business dominating the state – was being reversed. It was largely blamed on the unions who, with the support of the intellectual elite, were enlarging the power of the state by encouraging it to adopt roles in the management of aggregate demand and greater support for working people. In fact the enlargement of the state that was occurring very much met the needs of the emerging industrial system.

The relationship between the state and the industrial system is far from antagonistic. As already discussed, the state meets the industrial system's need for educated talent, stable aggregate demand, controlled wages and prices and support for the most costly and risky areas of long-term development of technology. Moreover these policies are not paid for with money extracted from the technostructure – as was the case with the entrepreneur – but by taxes which can be passed on to the shareholder and consumer. These policies are of minimal value to the entrepreneurial firm.

Government has clearly adapted itself extensively to the needs of the industrial system, and yet the industrial system is much less capable than the entrepreneurial class to directly purchase the allegiance of the legislature. Corporations cannot donate funds directly, but entrepreneurs can pay themselves dividends and then offer that money as a private donation. Such arrangements are most easily made between individuals, but the technostructure operates through group structures. And the entrepreneur had enough to gain financially to risk being caught in immoral dealings, whereas salaried technocrats seem less likely to relish the risk.

Power has passed to the industrial system in a very different way – in much the same way that power has passed from upper management into the bowels of the technostructure. In defence, for example, which accounts for more than half of government activity, it is barely possible to distinguish between public and private organisation. The extent of planning and the requirements of technology ensure that services and the corporations that supply them work together in effectively permanent relationships in which real decision-making emanates from specialist committees as likely who are as likely to be composed of members of the private sector, and are as likely to perceive importance in the goals of the private sector, as they are to be public servants with purely public interests at heart. Identification and adaptation dominate the motivational systems of everybody involved – but those working, strictly speaking, in the private sector identify just as closely with the public service they are supplying as they do with their own firm, and vice versa. The result is that the needs of the corporation are embedded just as surely in the real decision-making of defence services as the needs of the defence service itself (and in fact, the two will share many goals: not least the need to increase the budget and scale of their operation). The industrial system comes to influence government by integrating itself so seamlessly with the outer functions of government that it becomes artificial to draw a line between the public and private sectors. Rather than the influence government decisions, the technostructure makes government decisions. In defence above all, decisions made by committees composed of members of the armed services alongside scientists, engineers and managers from private firms are passed up to legislative houses that are in no position to adequately appraise them and are forced merely to ratify.

One consequence of this is that the industrial system cannot be concerned with party politics in the way that entrepreneurs were and still are. The industrial system is more akin to the civil service – it must get along seamlessly with whoever is in power and can rarely afford even to criticise government.

[The corporation] can help shape the highly technical choices which, in turn, govern the demand for its own military and other products. It will have access to the decisions on military strategy which establish the need for such products. And it will help to shape the current beliefs or assumptions on foreign policy. These, obviously, are a far more important power. It is the difference between the formal grandeur of the legislative hearing and the shirt-sleeved rooms with blackboards and tables heavy with data, drawings and tapes where the important decisions, bit by bit, are actually made. The technostructure selects its theatre of influence with discrimination and intelligence. –p316

A Further Summary

Poverty remains in the US as in other industrialised countries, but not within the industrial system, which has also greatly reduced the burden of human toil. “Only those who have never experienced hard and tedious labour, long continued, can be wholly indifferent to its elimination.”[36] The economic system no longer serves man's “original and sovereign desires” – the industrial system not only accommodates to men's needs, but also accommodates men to its needs. This is not peripheral, but a fundamental requirement of the industrial system. This control ensures that men do not work less as more of their wants are satisfied. Increased production remains the primary goal of society, and thus the industrial system remains of paramount importance.

The management to which we are subject is not onerous. It works not on the body but on the mind. I first wins acquiescence or belief; action is in response to this mental conditioning and thus devoid f any sense of compulsion. It is not that we are required to have a newly configured automobile or a novel reverse-action laxative; it is because we believe that we must have them. It is open to anyone who can resist belief to contract out of this control. But we are no less managed because we are not physically compelled. On the contrary, though this is poorly understood, physical compulsion would have a far lower order of efficiency. –p318

The industrial system has near total control of its capital supply, significant control of its labour supply and considerable influence within the state. State functions necessary to the industrial system – regulation of aggregate demand, state underwriting of advanced technology, provision of educated manpower – are considered the highest social goals. Along side these changes, there has been a dramatic shift in the centre of political and economic power from the financier and union to the technostructure, who exert their influence by very different means – by having direct decision-making power over the component planning decisions which ultimately superpose to determine policy. A large and powerful scientific and educational estate has been brought into existence to serve the needs of the industrial system, but remains to some extent independent of it.

the_new_industrial_state_part_ib.txt · Last modified: 2008/03/17 12:00 (external edit)