THE NEW FOLKLORE OF CAPITALISM

...What is new is the pervasiveness of these polyglots...

...They show that wealth is again flowing to the top in increasing measure...

...This is not the familiar case of vertical integration, the steel producer who reaches back in the production process to own an iron ore mine and forward to operate a fabricating plant...

...Over the next twenty years, however, it shrank to a little under twenty per cent...

...The economists' principle of the propensity to consume tells us that as income rises, a larger and larger proportion goes into savings, and a shrinking share goes for spending...

...In calculations made for Business Week magazine, Lampman concluded that this trend continued through 1961...

...just nine years later, the number had more than doubled to 27,502...

...The all-purpose or many-purpose firm is not a new actor on the economic stage...

...For all of the nation's much vaunted richness and diversity, it appears that a comparative handful, the managers and boards of a hundred or so corporations, are in control...

...The largest fifty firms in 1958 included thirty-four from the same elite group in 1947...

...It was produced by Robert Lamp-man, recently of the University of Wisconsin economics department and now a staff member of Mr...

...The latest one,, published in April, supports the main lines of Kolko's argument...

...It merely means that they will harmonize their individual price, investment, and output plans one with the other under the aegis of a friendly government...

...A President must come to terms with this handful of powerful managers, that is, if he intends to fulfill his mandate to reduce unemployment to tolerable levels, sustain the purchasing power of the dollar, and guide the world's leading capitalist nation into a more commanding position in the economic competition with the Communist bloc...

...But the post-war return to normalcy increased it steadily to twenty-five per cent by 1956...

...Blandly titled "Concentration Ratios in Manufacturing Industry, 1958," this document discloses a striking increase in control at the top...

...Kolko's central concern is with income...

...aluminum, plastics, and pre-stressed concrete...

...This enables the corporations to finance expansion from their own funds, saves their shareholders the progressively higher taxes on dividend income and swells the asset value underlying stockholders' shares...

...Moreover, these figures seriously understate the disparity because they omit not only expense account income but also that all-important source of income to the top brackets, capital gains...

...But their gains have been much slower than those at the top...

...Between 1929 and 1959, the second and third richest tenths increased their share of all income from twenty-two per cent to nearly twenty-eight per cent...

...He has no intention of reshaping the power structure...

...To be sure, this is considerably less than the thirty-nine per cent that the top tenth received in 1929...

...If the increases and decreases in concentration in each industry are about equal, how could there be such a striking gain in the control of the largest 200...

...Kennedy's difficulties with businessmen...

...Even after allowing for the shrinkage in the dollar's purchasing power, the millionaires' club expanded to 17,611...

...But he has insisted on a government voice in vital price, employment, and investment decisions...

...The modern corporation, it is said, is run by professional managers...

...In reality, their incomes and volume of wealth have been rising...

...In a society with incomes unequally distributed, more of any generalized tax cut will be stored away in savings than in a society with more equal distribution of incomes...

...and that industrial power is becoming increasingly concentrated in the hands of the largest corporations...

...Between the census of manufacturers taken in 1947 and 1958, the Census Bureau finds that the 200 largest corporations increased their share of the dollar value of industrial output more than twenty-five per cent...

...There is, for example, a quaint notion that no one can become a millionaire any more under the weight of oppressively high-bracket income taxes...

...Their decisions on investment, output, pricing, and employment will largely determine the course of the economy...

...It is known that Nixon was planning, once in the White House, to drop his principal economic adviser, who hails from the Chicago free market school, and would have taken more pragmatic, interventionist types into his inner council...

...The smallest breakdown it is permitted to make is the share of the four largest combined...

...The answer is the conglomerate enterprise...

...Now its share has dropped to less than thirty per cent, and it suffers additional competition from BERNARD NOSSITER interprets economic developments for the Washington Post...

...Finally, regressive state and local levies like sales taxes offset much of the apparent progressiveness of the Federal structure...

...At any rate, so the contemporary apologia runs, economic power in American life is broadly diffused today...

...The second study is Wealth and Power in America by Gabriel Kolko...

...The jeremiads of a C. Wright Mills about a power elite are scorned by no less a disseminator of received doctrine than Arthur Schlesinger, Jr., currently an assistant to the President...

...This comfortable state of mind is nourished by several fables...

...Progressive income taxes, death duties, trade unions, and the minimum wage are all instruments of the new dispensation...

...The excuse for this rule is the alleged need to prevent competitors from learning such well known trade secrets as the fact that General Motors accounts for something over half of all auto production...

...that shares of the income pie change very little and in perverse directions...

...Thus, the report shows only that the four biggest auto manufacturers accounted for ninety-nine per cent of auto assemblies in 1958...

...Look at U. S. Steel, we are told...

...Divorced from the control of owners, these managers engage in the delicate task of balancing the interests of stockholders, workers, and the general public...

...For example, persons comprising the wealthiest one-half of one per cent—one two-hundredth of the population—owned thirty per cent of all wealth in 1922...

...government) confronted a difficult problem: taming the freewheeling industrial-military complex...

...This does not mean that the poor are getting absolutely poorer...

...In the course of his elaborate statistical outpouring, Lampman deals some nasty blows to a few other cherished constructs of the image-mold-ers...

...Another fable tells of the complexity and dynamism of the economy, with new products, firms, and industries appearing and disappearing so rapidly that industrial power is widely diffused...

...Their share rose to nearly a third in 1929...

...the remaining sixteen were all among the 200 largest in 1947...

...Among other things, he helps explain Lampman's findings, observing that corporations distribute a much smaller share of their profits today than they did a generation ago...

...the large electrical machinery producer acquires electronics firms...

...What counts, of course, is the value of the share-holdings...

...A former Harvard historian now at the University of Melbourne in Australia, Kolko ranges over a wider terrain than Lampman and his work is more suggestive than definitive...

...It is quite likely that a President Richard Nixon would, at some point in his Administration, have run into the same difficulties experienced by President Kennedy...

...The seemingly curious business hostility to the Administration's proposal of an investment credit reflects in part business understanding that this is a conscious effort to stimulate investment in some sectors and repress it in others...

...These phenomena shed some light on the hidden roots of the power struggle that President Kennedy has been reluctantly and intermittently waging with the captains of industry...

...They see little popular challenge to their power in a society that is, after all, generally increasing total material output, even if slowly...

...The bottom forty per cent, however, has slowly lost ground...

...This is the nub of Mr...

...But most of them resist with all of their considerable strength any sharing of their power, even with the friendliest of governments...

...But his suggestions are provocative...

...For those who are squeamish about Kolko's statistical technique, the impeccable Commerce Department's income distribution studies should be reassuring...

...In contrast, the poorest three-tenths have steadily lost ground, from fourteen per cent in 1910 to ten per cent in 1929 to nine per cent in 1959...

...In practice, neither prospect holds much promise under the kinds of conservative regimes that have been in power for a quarter of a century—since midway in the F.D.R...

...Kolko finds that measuring income shares after taxes does hot change his picture much...

...Given their easy access to, and constant penetration of, the highest levels of government, these captains will likely be disposed to follow the example of Europe...

...Another vision of the ad men is embodied in the slogan "People's Capitalism" and supported by such irrelevant (and probably inaccurate) claims that seventeen million Americans own shares of stock...

...nor is it the familiar horizontal integration in which the large auto company gobbles up smaller, identical competitors...

...Such industrial barons as Roger Blough want the President to sign a magna charta, swearing that he will not attempt again to introduce a guide broader than short-run industrial self-interest into economic decision-making...

...European capitalists, with a longer tradition of combination and market-sharing behind them, have willingly ceded some of their power to a conservative state in the interests of long-run stability...

...At one time, it accounted for more than half of the industry's capacity...

...Covering the years 1955 through 1960, it shows that the after-tax income of the wealthiest fifth has remained constant...

...He is currently on leave as a Nieman Fellow at Harvard...

...Among industries with sales of a billion dollars or more, concentration actually decreased as frequently' as it increased...

...The pre-tax share of national personal income received by the richest tenth was thirty-four per cent in 1910 and twenty-nine per cent in 1959...

...In the latest year cited by Lampman, 1953, he found that one per cent of the nation's adults owned seventy-six per cent of the value of all corporate stock...

...There are so many deductions, exemptions, and other special devices available to the rich that this is hardly surprising...

...Ritual obeisance to the free market notwithstanding, any Administration grasps this fact very quickly...

...In 1947, the top 200 accounted for thirty per cent of the total value added by all manufacturers...

...The third study to affront conventional wisdom consists of 452 pages of tables compiled by the Census Bureau, a Commerce Department organ, hitherto unknown for any revolutionary propensities...

...But since then, the top segment has been helping itself to a bigger share of the growing pie...

...regime—and are likely to continue in power in the forsee-able future...

...The captains have a strong vested interest, at least in the short run, in the status quo...

...Economists infatuated with this calculus have largely turned their backs on the problems of power that engrossed Thorstein Veblen...

...Market power, imperfect competition, administered prices are all established features of the language...

...they were losing ground in oil refining, meat packing, and rubber...

...Perhaps the most interesting feature of the Census Bureau's report was the variation from industry to industry...

...The big auto company moves into diesel locomotives and refrigerators...

...But it is no different from their 1945 share, and all during the postwar period the top tenth's slice barely changed...

...Instead of Adam Smith's invisible hand, a President must come to terms with the very visible hands of several score boards of directors...

...Moreover, as several government surveys have shown, tax evasion, like wealth and income, is concentrated in the upper brackets...

...Kennedy's Council of Economic Advisers...

...in 1958, their share had leaped to thirty-eight per cent...

...For several months, Washington debated the wisdom of tax cuts to spur a sluggish economy, a debate that is likely to recur every time the business cycle appears headed for a downward swing...

...Unhappily, three studies published this year by respectable authors puncture some of the more comforting current economic illusions...

...The conglomerate extends its arms into partly related or even wholly unrelated industries, operating under a logic known neither to conventional economic, nor to traditional legal, theory...

...Lamp-man wanted to know who owns wealth—stocks, bonds, cash, mortgages, insurance, and such miscellaneous property as patent rights, pensions, royalties, and consumer durables...

...Lampman counted 13,297 persons who owned $1 million or more in wealth in 1944...

...The Bureau is forbidden to report the share of the single largest or top two or three companies...

...It won't cost them much power...

...If income and wealth were more equally distributed, tax policy to counter slumps would be considerably more effective...

...Studying estate tax returns, he found that wealth was indeed becoming more equally distributed from the Great Crash of 1929 until shortly after World War II...

...A substantial portion of income flowing to the upper brackets is income in kind— lavish expense accounts, corporate yachts, country club memberships, hunting lodges, and the other tax-free emoluments of the executive life...

...Just as the concentration of power can further or frustrate achievement of a wide range of economic goals, the concentration of wealth and income poses some major obstacles for economic policy...

...Thus stock prices rise faster than other forms of wealth (notwithstanding bear markets) and, since share ownership is concentrated, wealth follows suit...

...Moreover, according to Kolko, the share that the top tenth "lost" between 1929 and the present did not go to the bottom groups...

...His articles have appeared in Harper's, The Reporter, and The New Republic...

...The full extent of concentration within one industry cannot be measured because industrial lobbyists have succeeded in tying the Census Bureau's hands...

...The conglomerate firm is no longer a rarity but has become typical of big business organization...

...Thus, inequality in income distribution defeats the goals of a tax reduction designed to bolster a sagging economy...

...It is possible, however, that the more sophisticated captains, aware of the national dilemma, will lead the way among industrialists to closer collaboration with these safe Administrations...

...By splicing together some figures that may not be entirely comparable, he concludes that there has been precious little equalizing of income over the past fifty years...

...Faced with this dilemma, what does a basically conservative Administration do...

...One fable holds that President Franklin D. Roosevelt effected a peaceful revolution of such vast dimensions that the gap between rich and poor has been steadily diminishing...

...the oil refining giant takes over petrochemicals...

...In any event, measurements based on the customary definitions of income understate the degree of concentration at the top...

...it was picked up by the second and third richest tenths—the smaller businessmen, lower echelon managers, and professionals who tend to write books with titles like "The Plush Society...

...The three studies are variations on a single theme—the concentration of wealth, power, and economic decision-making in American life...

...Nevertheless, the belief persists that competition and product substitution are intense, that each, single industry is a small and unrelated fraction of the whole, that economic decisionmaking is essentially decentralized...

...One study, The Share of Top Wealth-Holders in National Wealth 1922-1956, appears under the unimpeachable imprimatur of the National Bureau of Economic Research...

...Its reach gives it a cosmopolitan outlook and a contact with power at many points...

...Recall that President Eisenhower, a figure not otherwise noted for acute insights into the dynamics of American society, concluded in his curious farewell address that the nalion (i.e...

...Individually, as the wealth and income figures show, they are constantly bettering their own position...

...Their opposite numbers here are not yet ready for such a step...

...To be sure, apart from the economics faculty at the University of Chicago and paid business apologists, few knowledgeable men still assert that the principal industrial markets meet the requirements of classical competition, that they are governed by Adam Smith's invisible hand...

...In theory, the concentration of power could be attacked by policies designed to redistribute wealth and income and through the use of antitrust legislation for something besides a punitive instrument against crude price collusion...

...Again, contrary to popular belief, there is not much room at the top...

...Thus, the largest concerns were widening their grip in autos, steel, and beer, among others...

...If some managers hold a distorted view of this balance, the countervailing power of unions and other interest groups will set matters right...

...Indeed, the decisive number may be far fewer because of interlocking directorates, with one man sitting on several boards and his colleagues doing the same...

...The less primitive industrial captains know that no American President wants to reorder the system...