C Wright Mills, America's Elite, and the Wisdom of Third Parties

I finished reading C. Wright Mills's Power Elite over the past couple of weeks.  Published in 1956, the book offers more insight into current events than most contemporary commentary.  Mills says that there are three levels of power--lower, middle, and upper--and that the pluralism upon which most political science focuses is characteristic of the local (lower) and Congressional (middle) levels. Although interest groups function on the lower and middle levels, there is little diversity at the upper level.  The upper elite does, of course, contain advocates of different social orientations and degrees of socialism, but the underlying viewpoint is stable.  The upper elite that runs America is comprised of presidential appointees selected from the broader power elite, which Mills depicts as coming from multiple sources: the Metropolitan 400 or social register types, the corporate rich, and the senior officers in the military.

When Mills wrote the book, the military and the military budget were more important than now.  Mills was unaware of the Fed's role (hence the centrality of banking interests) in the subsidization of the power elite and the US governmental system. As a result, he understates the importance of banking interests, which Murray Rothbard and Ronald Radosh tease out in their New History of Leviathan and that James Perloff illustrates in his Shadows of Power.

Mills  briefly describes the central role of the white-shoe law firms and investment banks, but these were more central in the 1950s than Mills describes them; they have become  more so since Nixon's ending of the gold standard in 1971.

According to Mills, the president and his advisers select the highest-level elite from the various groups within the power elite.  During the Kennedy years social and intellectual elites, represented by the Bundys, Dean Rusk, and Robert McNamara (recommended by fellow Skull-and-Bonesman and partner of Prescott Bush at Brown Brothers Harriman, Robert Lovett ) were dominant.  More recently, much as in the days of George Washington, bankers like Henry Paulson (who parallels but is not the intellectual equivalent of Hamilton) have been dominant.

The upper elite interacts within itself, and typically there are one or two degrees of separation between any two members.  Mills  does not claim that there is any sort of conspiracy, for that would be foolish.  Rather, each takes cues from the other.  Conformity derived from educational-and-university experiences obviates the need for overt conspiracy.

The last few chapters move from analysis to broadside as Mills criticizes what he calls the crackpot realism of America's narrow-minded upper elite.

Mills's depiction of America as having moved from a public liberal to a mass society is on point.  His emphasis on the mass media as transforming Americans from a free, imaginative people to a nation of cowed serfs (my word, not his) is also on point.  Mills is not that far from writers like James Perloff, who writes about the Council on Foreign Relations.  No president since Hoover has been independent of  the CFR.   That does not imply conspiracy any more than the leadership of a modern corporation's interacting with each other is a conspiracy.  The elite interacts and forms opinions. Its mindset, like that of leading university professors, is conformist, lockstep, cowardly, and lacking in vision.

Mills offers little hope for those who care about America or hope to see a change from the current trend. It occurred to me that his book was the inspiration for Eisenhower's 1961 speech about the military-industrial complex.   If Mills is right, then a useful long-term strategy in politics is to support third parties.  Another is simply to jump ship and move to a smaller country in which a mass culture and an elite bred to narrow-minded arrogance and the subjugation of a foolish mass of TV-news-viewing idiots won't exist because of the smaller scale.

In the Federalist 10 Madison argued that America's large scale was an impediment to the formation of faction.  As transportation and communication modernized, universities began to serve as the proving ground for elite conformity and groupthink.  The power of America's elite is made possible by large scale combined with modern communication methods.  The Internet and other postmodern developments, such as community activism, pose a challenge to America's mass culture.  Nevertheless, as long as Americans continue to support the two mass parties and as long as at least a plurality of Americans derive their news from mass-market newspapers and television,  the trends that Mills observed will continue to escalate.

Social Mythology and Public Dismay

In his 1972 article "Myth of the New Deal"* "New Left" historian Ronald Radosh writes:

"The New Deal reforms were not mere 'incremental gestures'. They were solidly based, carefully worked out pieces of legislation. They were of such a character that they would be able to create a long-lasting mythology about the existence of a pluralistic American democracy, in which big labor supposedly exerts its countering influence to the domination that would be otherwise undertaken by big industry.

"One cannot explain the success of the New Deal by pointing to its rhetoric. The populace responded to FDR's radical rhetoric only because it mirrored their own deeply held illusions. They could not comprehend how the reforms that changed their lives only worked to bolster the existing political economy, and they did not realize that many sponsors of the reforms came from the corporation community themselves. The integration of seemingly disparate elements into the system was successful. Labor did not get its share and it did benefit from the development of a permanent war economy and the military-industrial complex. Many of those who lived through and benefited from the New Deal most likely view its accomplishments in much the same way as Schlesinger or Carl Degler. One can never be sure whether they reflect the explanations offered by the 'vital center' historians or whether these historians merely reflect the false consciousness of their own epoch."

Radosh wrote this in the early 1970s, just as Richard Nixon changed the monetary regime by abolishing the international gold standard and just as employers were about to shift their supportive stance toward labor unions, which Radosh documents in his article, to a more anti-labor stance. I have previously blogged that there was a major shift in the pattern of stock returns as related to real wages around 1971. Between 1932 and 1971, net of cumulative inflation, stock returns were about 5.9% compounded, and between 1971 and 2008 they were also around 5.9% compounded. However, from 1932 to 1971 real wages increased 2.6% compounded, while from 1971 to 2008 real wages declined -1.1% compounded. The 1971-2008 period was characterized by high inflation (the highest 40-year period of inflation in America's history) but real stock returns were held constant at 5.9% net of inflation. As well, the post-1971 period was characterized by manufacturing's exiting the country, a decline in the quality of education, and declining unionization. The one variable that the Progressive and New Deal policies have ultimately held constant is corporate stock returns net of inflation. Real wages, unemployment, inflation rates and public welfare gyrate, but in the end real stock returns find their way back to the baseline real 5.9% level.

At the time Ronald Radosh wrote his article in New History of Leviathan it could still be argued that the statist Progressive and New Deal ideologies integrated social justice concerns. This is no longer the case. Rather, it is apparent from my earlier blog that Radosh's argument is actually understated. The New Deal labor union edifice was easily overturned because of declining manufacturing presence, globalization, declining scale in post-modern American industry and employer resistance to unions. Hence, unions' ability to represent workers has diminished just as inflation escalated. Unions lack the resources to organize small shops, and it is more profitable for them to concentrate on government workers who enjoy monopolistic privileges and can impose costs on taxpayers. The one variable that has been fairly steady since Franklin D. Roosevelt's election in 1932 has been returns on the Dow Jones Industrial Average, net of inflation. Since 1971 workers' real wages have declined, but returns on the Dow have remained strong even in spite the past eight years' stagnation, a period characterized by relentlessly increasing inflation as the mismanagement and incompetence characterized by the Progressive and New Deal regimes has become evident in corporate scandals, inept real estate investment and taxpayer-financed subsidies to millionaire investment bankers through the Fed's low interest rate regime and through direct subsidies to incompetently run firms like Bear Stearns.


*Ronald Radosh, "Myth of the New Deal" in Ronald Radosh and Murray N. Rothbard, editors, A New History of Leviathan: Essays on the Rise of the American Corporate State, New York: EP Dutton, 1972, p. 186