People's Capitalism, Theory of

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 It might be outdated or ideologically biased.

People’s Capitalism, Theory of


a bourgeois, reformist, apologetic theory that substantiates the idea that capitalism can be transformed into a new social system. The theory emerged in the 1940’s and became widespread among bourgeois ideologists and practitioners in the 1950’s. The founders of the theory of people’s capitalism were the American economist M. Nadler, the Italian economist M. Salvadori, and the West German economist and statesman L. Erhard. Among the American businessmen who have propagandized the theory are E. Johnston, president of the US Chamber of Commerce, and G. K. Funston, president of the New York Stock Exchange. Bourgeois ideologists use the theory of people’s capitalism to break down the class consciousness of the proletariat and fight scientific socialism.

The theory of people’s capitalism absorbed a number of concepts: “diffusion of ownership,” the “managerial revolution,” and the “revolution in incomes.” Although these concepts reflect certain important tendencies in the development of modern capitalism, they offer a distorted interpretation of them. Propagandizing the thesis of diffusion of ownership, A. Berle, J. K. Galbraith (USA), and other bourgeois economists assert that under modern capitalism there has been a steady increase in the number of small stockholders, who have begun to exert a decisive influence on the activities of the corporations. In recent decades the largest corporations have stepped up the sale of stocks to their most highly skilled workers and office employees. For example, between 1952 and 1970 the number of stockholders in the USA increased from 6.5 million to 30.9 million, or about 15 percent of the total population. However, the “diffusion of stocks” does not signify diffusion of ownership: the overwhelming share of joint-stock capital is still controlled by a numerically insignificant capitalist social clique. The percentage of stockholders among low-income groups is very small. According to the American economist R. Goldsmith, in 1929, 65.6 percent of the joint-stock capital controlled by individuals was owned by 1 percent of the US population, and in 1953, 76 percent was owned by 1 percent. In 1967 (according to incomplete data), 2,024 wealthy American families owned stocks with a total value of $111.2 billion (15 percent of the value of all stocks in circulation). By means of these stocks, a numerically insignificant ruling clique of the capitalist class directly controls 1,995 major corporations with total assets of $290 billion.

The distribution of a percentage of the total number of stocks among the broad masses of the population strengthens the rule of the monopolies, since it gives them an opportunity to accumulate additional capital from the savings of the working people and enables them to maintain control over joint-stock companies through ownership of fewer shares. Moreover, the attraction of additional capital contributes to the acceleration of monopolistic concentration in the interests of a narrow circle of financial magnates. The sale of stocks to the people and the creation of the illusion that the working people are included in capitalist ownership help attain the goal of splitting the working-class movement and muffling the class struggle of the proletariat. Increasing the number of small stockholders does not change the structure of capitalist production relations as a system of exploitation of hired labor by capital. V. I. Lenin wrote: “The ‘democratization’ of the ownership of shares, from which the bourgeois sophists and opportunist so-called ‘Social-Democrats’ expect (or say that they expect) the ‘democratization of capital,’ the strengthening of the role and significance of small-scale production, etc., is, in fact, one of the ways of increasing the power of the financial oligarchy” (Poln. sobr. soch., 5th ed., vol. 27, p. 345).

An important component of the theory of people’s capitalism is the doctrine of the managerial revolution, which was formulated by J. Burnham and further developed by A. Berle, G. C. Means, and other bourgeois economists and sociologists. The doctrine of the managerial revolution alleges that the capitalists have been transformed into nominal proprietors and the full complement of power has been transferred to hired managers, who provide leadership in the interests of the entire society. The increase in the number of hired managers and, specifically, the advancement of certain managers to top positions in the economy and in politics create the illusion that this managerial stratum is autonomous, or independent of the proprietors of capital. However, supreme control over the managers is exercised by the financial magnates, who own controlling blocks of shares.

The concept of the “revolution in incomes,” which is fostered, for example, by the American economist S. Kuznets, is based on calculations of the dynamics of personal income distribution among various population groups. According to these calculations, the share of the group with the highest incomes (the upper 5 percent of the population) has supposedly declined markedly. Because they fail to take into account a number of other forms of income enjoyed by this population group, which includes the elite circles of the bourgeoisie, these calculations distort the actual situation. Recalculations, especially those made by the progressive American economist V. Perlo, refute the myth of the revolution in incomes. Characteristic of capitalist society is a tendency toward the reduction of the working class’ share in the national income. Lenin observed: “The workers’ comparative share in capitalist society, which is fast growing rich, is dwindling because the millionaires are becoming ever richer” (Poln. sobr. soch., 5th ed., vol. 22, p. 222). For example, the wages of workers and the salaries of office employees in the Federal Republic of Germany represented 46.3 percent of the national income in 1950, but by the end of the 1960’s the figure had declined to 45.8 percent. During this period the number of wage laborers increased from 15.6 million to 21.8 million. In 1968 the per capita net income of entrepreneurs was 6.8 times greater than in 1950, but the workers’ wages, only 3.4 times greater. In practice, the distribution of incomes among classes in bourgeois society refutes the main propositions of the doctrine of the revolution in incomes and confirms the growing inequality between the working people and the capitalists.

Despite the attempts of the theoreticians and propagandists of people’s capitalism to ideologically disarm the working people and impose on them false concepts about a “classless” society, the “disappearance” of classes, “social harmony,” and “partnership,” contradictions between labor and capital continue to be exacerbated. The growth of the strike movement, the most massive form of class struggle by the proletariat, is evidence of this. Between 1958 and 1971, 490 million people participated in strikes in the developed capitalist countries. This figure is seven times the total for the 20 years preceding World War II (1919–39), when a total of 74 million workers participated in strikes in the developed capitalist countries.

On the whole, the theory of people’s capitalism in its various modifications strives to prettify capitalism and mask the existence of irreconcilable contradictions between the working people and the monopolists.


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