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5 A THEOLOGICAL CRISIS

      The capitalist process, by substituting a mere parcel of shares for the walls of and the machines in a factory, takes the life out of the idea of property. […] Dematerialized […] ownership does not impress and call forth moral allegiance as the vital form of property did. Eventually there will be nobody left who really cares to stand for it – nobody within and nobody without the precincts of the big concerns.

      Joseph A. Schumpeter¹

      ‘It may not be saying too much to assert that the new thinking about collective enterprise, or managerialism, is about to be recognized as constituting a great theological crisis, on the order of the one that accompanied the introduction of Darwin’s work, or even the social and political thought that followed the Reformation. For we are experiencing the collapse of the economic and political pillars of the ideology which has dominated Western thought for the past several hundred years’.² The decisive intellectual event in this respect, as the author of these lines said in 1962, had been the publication, three decades earlier, of a book co-authored by the lawyer Adolf Berle and the economist Gardiner Means, The Modern Corporation and Private Property.³ This work, which John Kenneth Galbraith considered to be one of the two most important books of the 1930s, with the General Theory of Keynes,⁴ did in fact polarize debates on the theory of firms for nearly half a century.

A few weeks after its release, however, its publisher, a small house specializing in tax issues, suddenly had second thoughts and withdrew it from sale. A General Motors executive, horrified by what he had read, had expressed his disapproval to the officials of the Corporation Trust Company, a business consulting agency whose publishing wing was one of the subsidiaries, and of which General Motors just happened to be one of the big customers – the kind of customers that it is always a pity to lose. As Berle comments, looking back on the affair: ‘Discovering the viper they had nourished in their corporate bosom, publication was promptly suspended after a few copies had been sold. (Copies under that rubric are – modestly – collectors’ items now.) […] Books questioning power systems – as did The Modern Corporation – often do have initial rough handling by the power system whose rationale and bases are analyzed’.⁵ This attempt at censorship in fact produced the opposite effect. Reprinted by Macmillan Publishing, the book was able to benefit from a much wider circulation. ‘Ironically, General Motors, […] was responsible for launching Berle and Means’s book’, as a conservative intellectual lamented some years later.⁶

      What was so disturbing about the work? Its authors highlighted an unnoticed transformation in property rights, a revolution that led to the undermining of the principles of the capitalist economy as it had been justified for almost three centuries by its defenders.

      Imagine a horse and its master. ‘The owner of a horse is responsible for it. If the horse lives he must feed it. If the horse dies he must bury it’.⁷ What about another relationship, that between a shareholder and the company of which he owns shares? ‘No such responsibility attaches to a share of stock’. The shareholder is not responsible for the company. Often, he has not even set foot on its premises. He has become, in the words of Thorstein Veblen, an ‘absentee owner’.⁸ He no longer has the physical possession of a property, only that of a ‘title deed’ – a dematerialized, abstract property, a paper property.

      The old property-possession was solid. It immobilized the owner, who lived in the landscape of his ‘thing’. The shareholder, however, is without ties. If his property no longer suits him, he liquidates it. This represents a dematerialization, a fluidification and also a splitting of shareholder ownership, with the shares of a corporation being scattered between thousands of shareholders.

But something else also happens: ‘there has resulted in the dissolution of the old atom of ownership into its component parts’.⁹ The functions that private property had traditionally brought into a whole were split into two: ‘the power, the responsibility and the substance which have been an integral part of ownership in the past are being transferred to a separate group in whose hands lies control’.¹⁰ The shareholder now has only a passive property, and it is salaried managers, non-proprietors, who are now responsible for the active control of the company, its concrete management. So we have, on the one hand. ‘owners without real control’ and, on the other, ‘control without real ownership’.¹¹ This is the main idea put forward by Berle and Means, that of the separation of ownership and control.

      At the same time, the nature of business has been transformed. The big corporation with shares no longer has much in common with the business of the manager-owner. By freeing itself from the boundaries of individual and family ownership, by concentrating and socializing capital from a large ‘investing public’,¹² the shareholder form allowed the development of giant firms, ‘quasi-public’ institutions where thousands of workers were under the leadership of a unified management.

      Here, Berle and Means agree with the industrialist and German politician Walter Rathenau: ‘The de-individualisation of ownership, the objectification of enterprise, the detachment of property from the possessor, leads to a point where the enterprise becomes transformed […] into an institution resembling the state’.¹³ Detached from any substantial economic anchoring in the ownership of capital, ‘control by management’ appears as a power of a governmental kind. Hence the way that, in describing it, political metaphors are used: managers are ‘new princes’ at the head of great ‘industrial empires’.

      The way this phenomenon was viewed was, from the start, highly ambivalent. While some celebrated the arrival of a disinterested managerial power, others feared the rise of a new managerial despotism. In the most pessimistic view, popularized in 1941 by James Burnham, in The Managerial Revolution,¹⁴ the managers would, as Orwell summarized it in an account of these ideas, ‘eliminate the old capitalist class, crush the working class, and so organize society that all power and economic privilege remain in their own hands’.¹⁵

      The discovery of Berle and Means had many implications, one of which was particularly radical on the theoretical level: ‘This dissolution of the atom of property destroys the very foundation on which the economic order of the past three centuries has rested’.¹⁶

In their crosshairs was Adam Smith and his famous ‘invisible hand’. The rich, explained the author of The Wealth of Nations, may have nothing to worry about but their ‘vain and insatiable desires’, but paradoxically they are working unintentionally, by their private greed, for the public good. Their selfish interest lies in getting the most profit from their property, so they are driven to manage it in an efficient way that will contribute to the growth of general wealth, and, in turn, to the wealth of everyone.¹⁷ But, note Berle and Means, the economist was arguing in a context where ‘the system of private enterprise has rested upon the self-interest of the property owner’.¹⁸ ‘To Adam Smith and to his followers, private property was a unity involving possession. He assumed that ownership and control were combined’.¹⁹ But ‘today, in the modern corporation, this unity has been broken’.²⁰ Shareholders may still be motivated by profit, but this does not mean that they do in fact make ‘a more efficient use of the property, since they have surrendered all disposition of it to those in control of the enterprise’.²¹ As for managers, as they are no longer owners, it is difficult to see what would impel them to sweat blood so as to maximize the profits of others.

      Smith, they point out, noted that company managers – a form still rare in the eighteenth century – did not show the same eagerness to make the business entrusted to them flourish

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