The Power Elite and the State

1. The power elite is rooted in a socially and economically cohesive ruling class

The power elite is the set of people who are the individual actors within the associational and institutional roles that comprise the "power structure."

Social and economic cohesion. The American ruling class is not a fragmented collection of competing interests, but a highly integrated social upper class. This cohesion is forged through shared experiences in private schools, exclusive social clubs, and corporate boardrooms, which translate into shared policy preferences.

Institutional overlap. Power is exercised through a network of institutions that connect the corporate community directly to the federal government. This network includes:

• Giant corporations and financial institutions
• Private foundations and elite universities
• Policy-planning groups and think tanks

Indicators of dominance. Rather than viewing elite participation in government as a mere coincidence, we must see it as a primary indicator of class power. The overrepresentation of corporate leaders in key cabinet positions and advisory boards demonstrates that the ruling class actively governs.

2. The American state is structurally fragmented and permeable, preventing true autonomy

A state has to be unified to be autonomous, because the various branches and bureaucracies of a fragmented state are "vulnerable to the demands of the already privileged."

The myth of autonomy. State autonomy theorists argue that government officials act as independent state managers with their own distinct interests. However, the American state is structurally fragmented by federalism, checks and balances, and a highly accessible legislature, making it exceptionally vulnerable to outside influence.

Permeability of institutions. Because the state lacks a unified, insulated bureaucracy, private interest groups can easily penetrate its decision-making apparatus. This structural weakness allows corporate elites to:

• Lobby congressional committees directly
• Place their own experts in key administrative roles
• Shape regulatory agencies to serve corporate interests

The legislative veto. The existence of a powerful, decentralized legislature like Congress ensures that state elites cannot act in a unified, autocratic manner. Private class segments, particularly the southern rich, have historically used Congress to block any state initiatives that threatened their economic dominance.

3. The policy-planning network acts as the corporate community's political arm

The policy-planning network is indeed the political arm of the multinational corporations and international financiers...

Agenda-setting power. The corporate community does not rely on crude lobbying or bribery to get its way; instead, it shapes the political agenda through a sophisticated policy-planning network. This network of foundations, think tanks, and discussion groups develops long-range policy solutions before they ever reach the halls of Congress.

Consensus-building mechanisms. These organizations serve as elite forums where corporate leaders, academic experts, and government officials can debate and resolve their differences. Key organizations in this network include:

• The Council on Foreign Relations (CFR)
• The Committee for Economic Development (CED)
• The Business Advisory Council (BAC)

Legitimating expert knowledge. By funding academic research and university institutes, the ruling class ensures that the "experts" called upon by the state share their basic capitalist assumptions. This relationship transforms private class interests into objective, scientific recommendations for the national interest.

4. Sophisticated corporate moderates actively designed the Social Security Act of 1935

The old-age insurance program, despite its unprecedented grant of federal power, represented the acceptance of approaches to social welfare that private businessmen, not government bureaucrats, had created.

Welfare capitalism's triumph. Contrary to the pluralist view that the Social Security Act of 1935 was forced upon a hostile business community, sophisticated corporate moderates were central to its design. These "corporate liberals" saw social insurance as a necessary mechanism to stabilize the economy and defuse radical labor unrest.

Direct elite involvement. Key provisions of the act, particularly old-age pensions and unemployment insurance, were drafted by experts directly employed by elite-backed organizations. These connections included:

• The American Association for Labor Legislation (AALL)
• Industrial Relations Counselors, Inc. (IRC), funded by John D. Rockefeller, Jr.
• The Business Advisory Council (BAC) of the Department of Commerce

A restabilizing compromise. While the act was modified by conservative forces in Congress to eliminate minimum federal standards, its core principles remained aligned with corporate interests. It successfully put a floor under consumer demand and channeled radical political energy back into conventional, safe avenues.

5. The Wagner Act passed due to a strategic compromise with southern elites

First, and most critically, the Wagner Act passed because it was acceptable to the southern segment of the ruling class, as it manifested itself in Congress, due to the exclusion of agricultural workers and of labor from food processing.

An exceptional defeat. The National Labor Relations Act of 1935 (the Wagner Act) was the only major legislative defeat suffered by the corporate community in the mid-twentieth century. State autonomy theorists use this case to argue that the state can override capitalist opposition, but a closer look reveals a complex story of class-segment conflict.

The southern compromise. The act passed only because its authors, Senator Robert Wagner and his staff, made a critical concession to the powerful southern segment of the ruling class. By excluding agricultural and domestic workers, the act:

• Protected the low-wage, racially oppressive labor system of the South
• Secured the votes of southern Democrats who controlled Congress
• Left the northern industrial capitalists isolated in their opposition

The coalition's collapse. This unusual alignment of forces did not last long. Once the newly formed industrial unions of the CIO began organizing in the South and launching sit-down strikes in the North, southern elites quickly reunited with northern capitalists to gut the act through the Taft-Hartley Act of 1947.

6. Postwar foreign policy and the "national interest" were defined by private planners

The definition of the national interest that animated postwar foreign policy was created in good part by leaders and planners within the private and elite-based Council on Foreign Relations in the years 1940 and 1941.

The Grand Area strategy. Long before the United States entered World War II, corporate planners at the Council on Foreign Relations (CFR) were mapping out the postwar world. They defined the "national interest" not in terms of abstract state survival, but as the minimum geographical area necessary for the American capitalist economy to function without state control.

Securing global markets. This "Grand Area" planning sought to integrate the Western Hemisphere, the British Empire, and the Far East into a single economic bloc. The strategy required:

• Unrestricted access to raw materials in Southeast Asia
• The opening of the British Empire to American trade and investment
• The economic integration of Japan and Western Europe into the American orbit

The roots of interventionism. This economically driven definition of the national interest laid the groundwork for postwar American imperialism, including the containment policy and the Vietnam War. Anticommunism was not a disembodied ideological crusade, but a practical necessity to defend the Grand Area from hostile closure.

7. The International Monetary Fund reflects corporate planning

Through the Council on Foreign Relations, there was a large ruling-class involvement in the postwar planning that lead to the creation of the IMF, White's important role in writing the specific plan and seeing it through lengthy negotiations notwithstanding.

Collaborative monetary design. State autonomy theorists claim that the International Monetary Fund (IMF) was designed by independent "national capitalist" state managers in the Treasury Department who opposed open-world capitalism. In reality, the IMF was the product of intense collaboration between Treasury official Harry Dexter White and elite-backed experts.

The role of elite experts. Key economists from the Council on Foreign Relations' war-peace study groups actively shaped the American proposals. These experts included:

• Jacob Viner, who brought White into the Treasury and co-drafted the original fund plan
• Alvin Hansen, who mediated between British negotiator John Maynard Keynes and American officials
• Marriner Eccles, the millionaire banker who chaired the Federal Reserve Board

Resolving elite conflicts. While conservative New York commercial bankers initially opposed the IMF in favor of a bilateral agreement with Britain, a compromise was brokered by the Committee for Economic Development (CED). This corporate-led solution satisfied the bankers and paved the way for overwhelming congressional approval.

8. The Employment Act of 1946 was gutted to protect corporate privilege

The compromise supported by the sophisticated conservatives had the effect of formally linking policy-planning groups to the state apparatus.

Challenging private investment. The original "Full Employment Bill" of 1945 was a radical attempt by liberal state employees and politicians to guarantee the right to a job. It authorized the federal government to engage in compensatory spending and direct investment whenever private capital failed to maintain full employment, directly threatening the "privileged position of business."

The corporate counterattack. Terrified by the prospect of state-directed investment, the corporate community and the conservative coalition in Congress mobilized to gut the bill. Sophisticated conservatives from the Committee for Economic Development (CED) successfully substituted a compromise that:

• Stripped the government of its spending and investment mandates
• Replaced the "right to a job" with the vague goal of "maximum employment"
• Created the Council of Economic Advisers (CEA) as a purely advisory body

Institutionalizing elite advice. The final act formally mandated that the CEA utilize the research of private agencies. This provision effectively institutionalized the policy-planning network, ensuring that postwar economic advice would be dominated by business-funded think tanks and corporate-friendly economists.

9. The Democratic Party is financed and constrained by specific elite segments

The Democrats were still hemorrhaging in the South and the traditional fat cats of the North were sitting on their wallets while they waited for acceptable presidential candidates to emerge.

The myth of the populist party. While the Democratic Party is often portrayed as the champion of the working class, its national policy choices have always been constrained by its financial backers. The party's historical trajectory cannot be understood without analyzing the specific elite segments that fund its campaigns.

The Democratic funding coalition. Historically, the party's financial backbone has relied on three distinct elite groups:

• The southern segment of the ruling class, rooted in low-wage agriculture and land ownership
• Urban real estate developers and "growth machines" dependent on municipal spending
• Jewish financiers and entrepreneurs, who remain loyal Democrats due to social exclusion and cultural liberalism

The limits of party reform. Because these "fat cats" provide the essential resources for electoral success, Democratic politicians are highly sensitive to their policy preferences. When the party's voting base pushes for radical economic redistribution, these elite funders quickly pull back, forcing the party to retreat to the safe center.

10. The conservative turn of the 1980s was driven by the decline of popular social disruption

The conservatism of the Reagan years, then, represented what business had been waiting to do for a long time, but couldn't because of social activism and the Vietnam War.

The power of disruption. The liberal reforms of the late 1960s and early 1970s—such as the creation of the EPA and OSHA—were not defeats for a disorganized business community. Instead, they were temporary concessions forced upon a highly organized power elite by massive, non-economic social disruptions, including the civil rights and antiwar movements.

The return to normalcy. Once these social movements subsided and their leaders were integrated into mainstream institutions, the threat of disruption vanished. This decline in popular militancy allowed the corporate community to:

• Launch a coordinated counteroffensive against labor unions
• Reassert the dominance of the conservative coalition in Congress
• Roll back the social wage through deep cuts in welfare and social spending

The class war renewed. The rightward shift of the late 1970s and 1980s was not a triumph of new right-wing think tanks or a sudden "revitalization" of business lobbying. It was simply the reassertion of class power by a united ruling elite, taking advantage of a quieted, demobilized working class to restore corporate profitability.