Managerial Revolution, Theory of the

The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.

Managerial Revolution, Theory of the


one of the technocratic theories of contemporary bourgeois socioeconomic thought.

The theory of the managerial revolution asserts that control of corporations and banks has shifted from capitalists to managerial specialists, technocrats, and bureaucrats. The theory is based on the transition from ownership by individual capitalists to joint-stock ownership of enterprises and on the new role of the managerial and organizational sciences in capitalist production. It is a component of the theory of people’s capitalism.

A number of the tenets of the theory of the managerial revolution were formulated in the 1930’s by G. Means and A. Berle of the USA as theories on the corporative revolution and control by managers. The theory of the managerial revolution took shape in the 1940’s. Important contributions were made by the American economists J. Burnham, who formulated theories on the new form of property and new ruling class, and P. Drucker, who advanced theories on the new society and on the functions of management. In the late 1960’s and the 1970’s J. Galbraith popularized the theory of the managerial revolution with his theories on technostructure and the modern corporation. Such figures as L. Blum in France, J. Strachey in Great Britain, K. Renner in Austria, and the revisionist M. Djilas in Yugoslavia have used the theory of the managerial revolution to obscure the fundamental differences between capitalism and socialism.

In the third volume of Das Kapital, K. Marx showed that in joint-stock companies a distinction arises not only between the “functional capitalist” (who runs the company but owns only part of the capital) and the other capitalist owners (who loan their capital) but also between the functional capitalist and the hired employees, who manage production but have no title to the capital (K. Marx and F. Engels, Soch., 2nd ed., vol. 25, part 1, p. 427). Marx also noted the dual character of this “large class of industrial and commercial managers.” On the one hand, they exploit workers by acting as supervisors; on the other hand, they are workers themselves, since they receive salaries for selling their “special skills,” which involve the integration and cooperation of engineering and technical work (ibid., pp. 425–26, 428). These circumstances gave rise to certain processes that are cited in the modern theory of the managerial revolutions. For example, in the 19th century managers acquired the power within certain well-defined limits to dispose of the capital and property of others and to direct private production without controlling the property itself; capital came to be abolished as private property within the framework of the capitalist mode of production (ibid., pp. 479,482).

The increase observed by Marx in the importance of management and of joint-stock ownership has been particularly evident in the 20th century. However, the proponents of the theory of the managerial revolution dwell on these developments, which they claim have fundamentally changed the economic, social, and political structure of capitalist society. The theory of the managerial revolution obscures the fact that the emergence of a large and influential stratum of senior managerial personnel in the 20th century was a logical result of (1) the development of capitalist monopolies and (2) the extension in the early 20th century of control by means of finance capital over hundreds of thousands of enterprises, banks, and other business establishments, whose former owners were thereby reduced to the status of ordinary stockholders lacking any say in management. The administrative power of the top-level managers within these enterprises and banks became not an obstacle but the organizational basis for control over the entire economy by the owners of the largest blocks of capital. In the process, the “managerial elite” emerged as an important component of the financial oligarchy and came to earn unprecedentedly high incomes.

Mass production using production lines and conveyors was introduced in the USA between 1914 and 1950 and in Western Europe and Japan between 1950 and 1970. This advance was largely due to the development of a number of managerial and engineering-organizational sciences—such as operations analysis, decision-making theory, quality control, supplies management, biotechnology, and human engineering—and their conversion into a direct productive force. The development of mass production strengthened even further the position of the managers, who subsequently implemented the system of exploitation of a complex labor force.

The theory of the managerial revolution also obscures class polarization among the engineering and management personnel, whose numbers have increased as a result of the scientific and technological revolution. While the upper and middle strata of this group have become members of the bourgeoisie, the majority of the engineering personnel—who chiefly perform such tasks as the coordination and maintenance of production processes, the management of equipment, and the on-the-job training and retraining of workers—have become closer to the proletariat. This large stratum of hired labor has become an object of exploitation by capital and is being drawn to proletarian forms of class struggle, thus refuting the claims about the new ruling class that are advanced by the proponents of the theory of the managerial revolution.

The big owners of joint-stock capital have regained their dominant position relative to the highest-level corporate managers. Moreover, the relative success of managerial policies in the 1950’s and 1960’s discouraged participation by ordinary stockholders in management; this success was reflected by the steady growth in the scale of production, in efficiency, in profits, and in the accumulation of capital property (as measured by the increased value of shares of stock). In the 1970’s the increase in production took place in a declining stockmarket. Shareholders, who are increasingly represented by various banks, firms, and funds, have been using these institutions to express their dissatisfaction with managers’ policies, to change senior management personnel, and to dictate decisions on many central management problems.

Capitalist ownership has not disappeared, nor has the capitalists’ power, as the proponents of the theory of the managerial revolution maintain. In huge joint-stock companies it has taken the form of collective and anonymous capitalist ownership and has adapted to new production conditions.


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The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.