How the Ruling Class Became Vulgar

Old-money WASPs once ruled America with an air of clannish exclusivity. Then the economic crises of the 1970s upended their world, opening the corporate floodgates to new-money barbarians — and replacing elite social norms with wanton money lust.

By Doug Henwood, Daniel Denvir 

February 14, 2024
Source: Jacobin


LONG READ

Who governs? For socialists, the answer is often an obvious one: the capitalist class governs, of course. But upon closer inspection, the composition of the ruling class is no more obvious than that of the working class — a class whose disorganization and neoliberal reorganization has been the subject of much analysis, study, and debate.

The changing composition of the ruling class ought to be similarly analyzed, but it rarely is. One exception is Doug Henwood’s article “Take Me to Your Leader,” published in Jacobin.

Henwood is a journalist and broadcaster based in Brooklyn, New York. He published the Left Business Observer from 1986 to 2013 and hosts Behind the News, a weekly show originating on KPFA in Berkeley that enjoys a vigorous afterlife as a podcast. Henwood’s books include Wall Street: How It Works and for Whom and My Turn: Hillary Clinton Targets the Presidency. He’s working on turning “Take Me to Your Leader” into his fifth book.

The following interview was recorded for the Jacobin podcast the Dig.

DANIEL DENVIR

In “Take Me to Your Leader,” you write:

You could say the ruling class is the capitalist class, of course, but what does that mean? CEOs of Fortune 500 companies? Their shareholders, to whom they allegedly answer? What about the owner of a chain of franchised auto parts stores in the Midwest?

The instant one tries to define the ruling class, all these disparate forces and power blocs appear all over the place. So to start off, how do you define it? Who or what is the ruling class?

DOUG HENWOOD

It’s kind of hard, but I would say that it’s the upper reaches of the capitalist class: CEOs, top people on Wall Street, but also in conjunction with the senior officers of the political class — that is, elected officials, appointed officials. Some of those people are repeatedly appointed to things and then go back to the private sector, but there’s also this permanent government, of which somebody like Henry Kissinger would be an example. So it’s this combination of money with political power, which often work together.

There’s this kind of simple belief in some quarters that the capitalists just pull the politicians’ strings. And I think that’s way not up to the task. I think there’s an awful lot of organization going from the political class to the capitalist class — because the capitalists just know how to make money, and they don’t necessarily really think about politics very much.
DANIEL DENVIR

You write,


The present configuration of the American ruling class is having a hard time performing the tasks it’s supposed to in order to keep the capitalist machine running. It’s not investing, and it’s allowing the basic institutions of society — notably the state but also instruments of cultural reproduction like universities — to decay.


What is a ruling class supposed to do? And what sort of ruling class are we governed by today?
DOUG HENWOOD

Well, they do need to keep these institutions going. They’re just not, it seems. There’s a hostility to reason, science, and culture — which, when the bourgeoisie was on the rise in the nineteenth century, used to be very important to its mission of establishing its legitimacy and domination of society. Now they just seem to be dominated by moneymaking and the accumulation of the maximum amount of money in the shortest period of time.

Now, I would think the most urgent problem facing humanity today is of course the climate crisis. And I would think that a ruling class that was really up to the task would be addressing it. It might not be addressing it in ways that you or I or any of the contributors to the Jacobin Green New Deal series would like, but it would be addressing it in some way that was compatible with the sustainability of life on Earth, while also upholding capitalist principles. I don’t necessarily believe that capitalism is, by definition, incapable of dealing with the climate crisis, as some people believe. I think there’s probably imaginable capitalist solutions to the problem, but they just don’t even seem to be very interested in it.

There’s a small wing of particularly the financial elite that is interested in the problem, like Brian Deese, who went from BlackRock’s sustainability portfolio over to the Biden administration. But it’s a minority, and they’re overwhelmed by the more conventional sorts. And we’re even seeing it in the government. Certainly the Biden administration is showing more interest in climate than many of its predecessors have, and to some degree, I was surprised by the seriousness with which they seem to be taking the climate crisis, but it’s just half measures. And there are many obstacles within the opinion-making elite of the Democratic Party itself. It’s easy to blame Joe Manchin for all our problems, but there are a lot of Democrats who are very happy to have Manchin taking the heat for their indifference to this existential crisis.

So yeah, I think they’re so shortsighted and driven by the accumulation of money that they can’t think of what’s going to happen five years from now. I read an article in Bloomberg the other day about what billionaires are doing to address the threat of climate change in Florida. And the answer is building bigger mansions. That seems to be the extent of their interest. There’s just too much money to be made developing more.
DANIEL DENVIR

It’s not surprising that they’re not solving the climate crisis via a Green New Deal, but their lack of interest and imagination in even solving it on capitalist terms is what’s remarkable.

You write, “A core concept of Marxism is class struggle, but the tradition exhibits a strange dearth of investigation of the ruling class.” [Karl] Marx’s [The Eighteenth Brumaire of Louis Bonaparte] is one notable exception, but you’re of course entirely right.

In your essay, you draw on Italian elite theory. And the US does have its own tradition of non-Marxist but left sociologists who study the elite — notably C. Wright Mills and then after him G. William Domhoff. But today there’s so little, maybe like almost none. Mike Davis definitely attended to this in Prisoners of the American Dream and other works, but there’s so little Marxist or any sort of left work on the American ruling class. Why is that?
DOUG HENWOOD

It’s funny, when I started in this project I asked Bertell Ollman, the Marxist political scientist, what he liked on the topic, and he thought for a moment and said, “Well, there’s really not much — Marxists just don’t write about the ruling class.” And I asked him why, and he said they think it’s obvious. Like the answer is just, “Oh, it’s the bourgeoisie.” What’s the bourgeoisie? “It’s rich people. It’s capitalists.”

Articulation of economic power and political power is generally an important part of Marxist thought, but there’s really not a whole lot of examination of how elite power works in American society. I don’t know what it is. I guess there’s been a bias in a lot of radical scholarship toward studying from below and not that much interest in elite studies, possibly for some psychological reasons.

My obsession is a love-hate relationship with the American elite. I’ve become much more interested in the topic. I spent thirty-five years looking at and writing about Wall Street and financial power, which is one angle of the ruling class. But even that, there’s not a whole lot of Marxist interest in finance, aside from perhaps some I’d say shallow commentary about the financialization of everything. There’s not much attention to the institutional detail and the configurations of power that finance represents, or even calls into existence.

Within the capitalist class, particularly in the ’80s and ’90s, there’s a whole lot of interest in how large corporations should be run, what their relations to their shareholders should be, what their responsibilities are. But even that has receded, and it didn’t really draw much attention from Marxists or other kinds of radicals.

There’s kind of an anti-corporate tendency in populist literature in the US, but not much serious attention to looking at how these institutions are run and what the form of the corporation might mean for any kind of future evolution of a socialist economy. There’s an awful lot of “Let’s break up the big banks, break up the corporations” — is that really what we want? Do we really believe “small is beautiful”? Not a lot of thinking about these kinds of topics either.

And you’ve seen a growth in recent years of greater interest in antitrust among liberals. There’s a tendency along those lines in the Biden administration now, and you have people like Matt Stoller holding forth about the need to break things up and have more competition. Do we really want more competition? I don’t think so. In any case, it seems like there’s a lot of invocation of formulas, but not much thought behind them.
DANIEL DENVIR

The left analysis of the ruling class tends to be a little bit flat and static when one needs a sophisticated, subtle analysis of the constantly changing composition and recomposition of all sorts of classes — very much including the ruling class, the class that we want to overthrow.
DOUG HENWOOD

Yeah, I mean, we’ve seen a lot of attention paid to what’s happened to the working class — the increasing diversity of the working class, fissures within the working class, the decline of unions, the relative loss of power of labor versus capital — but not much attention paid to the upper reaches of society. And maybe it’s because they’re distasteful people and we don’t like them.
DANIEL DENVIR

I think that makes them all the more fascinating.
DOUG HENWOOD

I know. Well, yes, and they have better parties.
DANIEL DENVIR

Better hors d’oeuvres, at least.

You reject a popular American piece of conventional wisdom known in political science literature as pluralism that “there is no ruling class — that there are voters in a democracy who may be divided into interest groups but none are dominant.”

Obviously, you’re right to reject that framework. I also think, though, that pluralism was not just popular in scholarly literature but was a popular understanding of how this country works. And reading your piece, it occurred to me that I think that conventional wisdom is mostly dead.

Many — particularly, but not exclusively — on the Left think that rich people run the country, which I think is closer to the correct answer, and the Right thinks that we are governed by some narrow subset of cultural elites or else woke capitalists, which is just reframing economic elites as cultural elites in a way that’s convenient for the Right. And then, of course, many more apocalyptically on the Right think that Hollywood pedophiles are in charge.

Do you agree that these days most Americans seem to believe that some group or another governs, that we do indeed have a ruling class and the debate is now over who it is?
DOUG HENWOOD

Yeah, there’s a tendency to descend into conspiracy theorizing, where it’s just a small group of people in a room who plan everything, and that’s not true. It’s a much larger group than that. They can’t always get together in a room, and they really can’t plan everything.

But there’s an insight to that attraction of conspiracy theorizing, which is, I don’t think anybody believes that this is a democracy anymore. Probably since the mid-’80s, it’s become ever more discredited, to the point where now nobody can believe that. It’s just such transparent nonsense driven by the interest of the money. And that sounds like vulgar Marxism, but as my late friend [Robert] Fitch used to say, “Vulgar Marxism explains 90 percent of what goes on in the world.”
DANIEL DENVIR

You write,


Nor am I taking seriously conceptions of a ruling class that center on PC-obsessed, organic-food-eating urban elites. That set has some influence, especially among the liberal wing of the consciousness industry, but it doesn’t shape the political economy.

It’s an important comment to make. There are obviously leftists who fall into this line of thinking sometimes in rather politically dangerous ways. But on the Right, more consequentially, I think this perceived and also real domination of culture by liberal elites has been really key to keeping the right-wing base mobilized. It’s the way to nurture the basic sense that they’re victims — even as, of course, they exploit our antidemocratic system to exercise political power far out of proportion to their numbers.

So what role do liberal cultural elites play in American power? You don’t talk a lot about them in the essay. And then what role, by comparison, does the perceived power of liberal elites play in the broader contest for power?
DOUG HENWOOD

Well they obviously have a role in shaping media coverage and shaping education. One of the things I really don’t quite understand now, and I really want to get into, is what is going on with — I’m putting this in multiple scare quotes — “woke culture.” I’m curious what the influence of that at elite secondary schools and colleges is now. I mean the curriculum at a place like Dalton or Harvard-Westlake, it’s all about race and gender. It’s an influence.

In any case, I can understand why the masses might resent liberal power, because liberals kind of look down their noses at the masses. There’s no question about it. They think they’re all deplorables, as Hillary Clinton famously said. But these are not the people who run the state. They’re not the people who run finance. They’re not the people who make decisions in the Fortune 500, which are the ones that are the most consequential for people.

Now, I can understand why the Right would want to draw attention to that, because it draws attention away from the real nature of power, which they’re extremely complicit in or puppets of. But I find it distressing when people on the Left adopt some of this argument. Some of that stuff we dismiss is woke — and I will do that in the privacy of my own home sometimes — but these are real things. I think race and gender and sexuality are really important material political concerns. And I really don’t like this tendency of a lot of people to dismiss that as secondary or diversionary or even wrong. These are important things.

Even if Dalton and Harvard-Westlake, where you have to pay $55,000 a year to go to school — yes, it’s kind of ridiculous that they’re concerned with some of these things. Because it makes it look like they’re not really interested in the roots of their material power and instead want to appear righteous and above it all and not like all those dirty working-class people who are just bigots and all. That I would be critical of. But on the other hand, these are very serious concerns. I really wouldn’t want to be part of a movement to dismiss them.

Catherine Liu’s book on elites, for example — I read that and I was never really clear on who she was talking about. I don’t know who these elites are that people like that are really up in arms about. They may be working out some guilt about not being out there doing political work or organizing a union or whatever, and instead they’re in the seminar room. But I think seminar rooms are important. I think academia is important, and it’s a point I make in the article. The Right takes these things very seriously. I mean, Charles Koch and his buddies have been trying to reshape academia in the Right’s image.
DANIEL DENVIR

Yeah. The Mercatus Center at George Mason University is not a sideshow.
DOUG HENWOOD

No, no. They’ve created all these think tanks, and it’s part of the model of the propagation of neoliberal thought and right-wing thought. It’s been very hierarchical. But you need these elite institutions and thinkers to develop the ideas, which then get disseminated through think tanks and then through journalism and then through politics.
DANIEL DENVIR

And through powerful policy political networks like ALEC [the American Legislative Exchange Council] and the State Policy Network.
DOUG HENWOOD

There’s something like a little over fifty of these state think tanks funded by the Koch and similar networks, and they write bills. State legislatures don’t have to do the work themselves, they just have this fill-in-the-blanks legislation. But also, they’re endowing chairs, endowing institutes, essentially trying to create universities in their image. A good bit of [George Mason University] is like that. So I think we need to be serious about intellectual life if we want to fight them, and we’re not going to fight the Right by just thinking it’s all a distraction.



Let’s turn to the history so we can get into what sort of ruling class we used to have and how we ended up with what we have today. You write, “We once had a coherent ruling class, the White Anglo-Saxon Protestants (WASPs), who more or less owned and ran the United States from its founding through the 1970s.”

DANIEL DENVIR

How did a self-conscious WASP elite arise? And then what sort of economic, social, and political institutions guaranteed the reproduction of their power?
DOUG HENWOOD

The European settlers of the US were primarily originally from Britain and, to a lesser extent, Germany. The Germans were kind of honorary WASPs, but they’re the ones who really were your initial governing class.

But it wasn’t until we saw mass immigration from Southern and Eastern Europe that the WASPs really came to consciousness as a formation. So in the 1870s and 1880s, as these immigrants are coming in, you saw the WASP class really developing a whole set of institutions and a consciousness around them.
DANIEL DENVIR

And it was also in the WASP home base of New England and the Northeast where elites most actively mobilized against this new immigration through groups like the Immigration Restriction League.
DOUG HENWOOD

One doesn’t want to romanticize these characters. They’re often racists of the worst sort and very consciously allied with British imperialism. They thought that we were the partners and eventually the heirs to this white man civilizing mission around the world. They founded prep schools, most importantly Groton in the 1880s. Endicott Peabody, the headmaster of Groton for many decades, really shaped a whole generation.
DANIEL DENVIR

What a name!
DOUG HENWOOD

I know, yes. Franklin Roosevelt named Endicott Peabody as the second most important influence in his life, after his parents. In the 1880s they developed the WASP summer town — you know, Boothbay Harbor, Maine, and places like that — the prep school, the urban men’s club. All these things really came into prominence in that decade, along with a lot of race theory justifying why they were the superior form of humanity.

All this was inspired by a mass immigration from southern Eastern Europe. There was an interesting relation with Jews at this point because there were some Jewish members of the upper classes — the Guggenheim family, for example. But as there came Eastern European Jewish immigration, the WASPs turned on the Jews and kind of expelled them from the elite. The old German Jewish elite were very uncomfortable about having these disreputable Eastern Europeans, often with bad politics, socialist politics, and certainly a working-class outlook on life.

That’s when WASP consciousness really came to the fore. And it had this ethic of discipline and austerity. It was not the luxury that we associate with our contemporary ruling class. These were people who lived in very disciplined, modest ways.
DANIEL DENVIR

Sort of Teddy Roosevelt, strenuous life stuff.
DOUG HENWOOD

Yeah. There was this concern that everyone was going soft as industrial civilization was taking us away from the fields and manly labors. So somebody like Teddy Roosevelt would engage in cartoon-like performances of masculinity to counter that creeping softness. Endicott Peabody and the Groton ethic was very much like that as well: getting up early, working hard, going to bed, and no sex, no fun, no art, just discipline.
DANIEL DENVIR

It’s not easy to be on top.
DOUG HENWOOD

At that point also there were a lot of robber barons who had made a lot of money in the late nineteenth century who thought that they weren’t really civilized enough. So they wanted to send their kids off to Groton to learn how to be civilized, which is an interesting thing. Our current rich don’t feel any need to be civilized. They’re so confident in themselves and their right to rule the world. They feel no social anxiety about not having the proper manners or the proper education, the proper understanding of their civilization. They just know everything because they’re so rich.
DANIEL DENVIR

The 1970s upended this entire order. How did the economic crises of the ’70s — and then settlement of those crises — drive the recomposition of the ruling class?
DOUG HENWOOD

Several things happened. One, the growth of Japanese and European competition really undermined a lot of the material base of WASP power, rooted in old line industrial terms. Also their power was very much tied up with the financial markets. All WASPdom was you would graduate from Yale with maybe a C average, go to work at an investment bank as a bond salesman, and you would have a comfortable life. But that neat clubby world of the financial markets broke up starting in the mid-1970s.

There’s what in Wall Street is known as “May Day” — May 1, 1975 — when they deregulated commissions. They made financial markets and investment banking much more competitive. There used to be very fixed price controls on financial products that got thrown out. That began the turn of finance from a world that was rooted in the relationship — you might be a business partner of whoever your roommate at St Paul’s was — to, starting in the ’80s, just whoever could make the most money in the shortest amount of time.

And a lot of that moneymaking in the early 1980s was centered around takeover artists, leveraged buyouts of sagging old industrial companies. These buyout engineers, often financed by Drexel Burnham Lambert under Michael Milken, just ravaged old-line corporate America. There was a very famous attack on Gulf Oil by T. Boone Pickens in ’83. One of T. Boone Pickens’s advisors on that takeover attempt, turned out he was a long-time banker for Gulf. So that relationship was turned on its head.

That became the ethic of the new Wall Street. For decades after the 1929 crash, Wall Street was seen as kind of vestigial and sleepy. The shareholders would collect their dividends but didn’t really interfere much with the management of companies. That all changed starting in the late ’70s, early ’80s, as money managers became much more insistent on jacking up profit rates, breaking labor, outsourcing, offshoring. That really helped undermine the old WASP order.

There are also some internal changes within the WASP order. George Gilder, who comes out of that world, has a very funny passage about how the first generation makes money and then by the third generation they become artists and hippies. They’re not really interested in the established order and even turn on it in a lot of cases. They also screwed up the Vietnam War, and the Vietnam War was very much a product of that WASP foreign policy elite. The Bay of Pigs invasion was their disaster, but then the Vietnam War was what really did them in. It was so discrediting and so disastrous that that whole crowd was just finished as the dominant force in US foreign policymaking.
DANIEL DENVIR

The shareholder revolution is a key part of the story you’re telling. It really shook up these large publicly owned corporations. You write,


​​For the first few postwar decades, the New Deal model was standard liberal doctrine. In The New Industrial State, John Kenneth Galbraith argued that rapacious profit maximization had been replaced by a secure mediocrity, and greedy capitalists by a “technostructure.” Top managers, who were well paid but on nothing like today’s scale, saw little point in risk-taking; they wanted sales growth and prestige, not the paychecks that would later populate the Forbes 400. Today’s paychecks are driven by stock prices; in the 1950s, top executives were paid mostly straight salaries. Shareholders had become vestigial; if they didn’t like the performance of firms they held stock in, they’d just sell the shares. No one ever troubled management.

Why was corporate America content with this New Deal order settlement? And then how did the crises of the ’70s and the shareholder revolution upend it all?
DOUG HENWOOD

The 1929 crash and the subsequent depression really discredited Wall Street for a generation. There was a pretty tight regulatory structure imposed on them during the New Deal. It’s interesting to read through some of that history; Roosevelt explicitly said he wanted to have some kind of private socialism to avoid real socialism.

So they’re going to create this kind of comfortable world of very tightly regulated shareholding where the financiers were kept on a short leash, so that they didn’t really interfere much with production. And the early post–World War II decades were very prosperous. There was really nothing to worry about. Stock prices would go up — not like they’ve been going up in the recent decades, but they were going up and the dividends would keep coming. There was no serious competition. Everything was fairly stable.

But then in the ’70s, economic performance started to deteriorate. We saw the rise of semipermanent inflation, a deepening bad attitude among the working class. There’s that old saying that for the working class, the ’60s happened in the ’70s. That’s when the working class started sabotaging assembly lines, organizing wildcat strikes, all that stuff. So there is this sense that things were really falling apart, that they’re just not working. Financial markets were doing very badly, reflecting this underlying deterioration in economic performance but also the changing nature of class relations. The bosses felt like they were losing control. And so the shareholder revolution, which got going by the second half of the 1970s but didn’t really take off until the ’80s, was a way to address all these problems as a form of social and labor discipline that was going to shake up that kind of complacent mediocrity that Galbraith was, to some degree, celebrating.

And to be honest it was a better deal for labor in a lot of ways. That was the era of cost-plus contracts and cost-of-living adjustments. The corporate elite was not really militantly anti-labor. They’d come to some sort of understanding. They may not have loved having unions, but they didn’t want to destroy them. Then the shareholder revolution, the Volcker tight money regime from 1979 to 1982, and the Reagan revolution — notably the breaking of the PATCO union — all these things together really transformed that old comfortable world into the one that we live in today. And we’re still living pretty much in the world that was shaped by the 1980s, where now it’s a sacred principle that stock prices are the preeminent guide for what a corporation is all about, at least for a public corporation.
DANIEL DENVIR

And what did the shareholder revolution mean concretely for the composition or recomposition of the ruling class? You write that the transaction replaced the relationship, but did it also just remake who the elite were and how rich they were?
DOUG HENWOOD

For one, that old world where the guy who graduated from Yale with a C average could get a job as a bond salesman, that disappeared. Regional brokerage firms where mediocre people could go make a comfortable living still existed. But there was a change in the geographic picture of capital. Oil and metals, inflationary assets, commodities, all that sort of thing became really dominant in the economic picture. And that meant the shift of geographic power to the South and to the West, the decline of all those old-line industries that depended upon cheap energy in the past, and the decline of New England and New York as the focus of corporate and financial power.

There’s this whole new class of people who were formed by this, including many people who came out of Drexel Burnham Lambert. There was that famous book by Bryan Burrough [and John Helyar], The Barbarians of the Gate, about all the takeover artists of the ’80s: cigar chompin’, vulgar guys who were proud of the vulgarity and upsetting the apple cart.

The cultural politics at that moment were interesting. There was a way in which you could have divided loyalties. You could understand how the old corporate class might want to retain a stable world. It’d be better for most people if capitalism were not in constant turmoil and restructuring. On the other hand, there’s a resentment of established power. There’s a kind of celebration of the populist revolt by these takeover artists, financed with borrowed money and being really reckless.

T. Boone Pickens in his memoir tells a story of a club in Pittsburgh where the CEOs would go out hunting. The handlers would feed the birds salt pills, then release them. The birds would get very thirsty and head straight down to the pond where the CEOs could shoot them easily. To Pickens, that was the image that captured the nature of corporate life in those days. It was just too easy. They were lazy and complacent and flabby, and they needed to be shaken up by the likes of him.
DANIEL DENVIR

Elon Musk isn’t a Wall Street guy, but it’s impossible to imagine someone like him existing had the shareholder revolution not overturned the preexisting order. The preexisting order did not have space for someone like him.
DOUG HENWOOD

No, there were no celebrity businessmen to speak of. There were no people like Jeff Bezos or Elon Musk or Richard Branson or any of these characters who want to shoot themselves into space.

There was a rehabilitation of the word entrepreneur too. Weirdly, [John Maynard] Keynes used that term a lot in the general theory; I guess he didn’t want to say capitalist because he didn’t want to sound anti-capitalist. But that word went out of fashion until the early ’80s when you started hearing about entrepreneurship all over again. The lone wolf hero of accumulation was lionized by the broader society in ways that we hadn’t seen since the 1920s, and before that the 1890s. It was a remarkable transition.
DANIEL DENVIR

The shareholder revolution of the 1980s was supposed to make the passive investor a thing of the past. No longer would management run companies as private fiefdoms with little outside supervision. They’d be disciplined by activist investors in real-time report cards provided by stock prices.

That was the case for quite a while. But the intraclass peace treaty after the shareholder revolution has brought back several aspects of that old world. Two are especially important: the growth of index funds and the explosion in stock buybacks through which corporations have shoveled trillions of dollars into their shareholders’ pockets.

What are index funds and stock buybacks? And then what does it mean that the shareholder revolution ironically created a system that is as insulated from shareholder pressure as ever.
DOUG HENWOOD

Almost no one can beat the stock market averages unless you’re George Soros or Stanley Druckenmiller or somebody like that. What that means is it makes the most sense just to try to mimic those averages. So as a result of this financial theory, it became really hard to justify paying a lot of money to money managers to try to beat the averages when it was virtually certain that they wouldn’t be able to do it.

There were some exceptions. The manager of the Yale Endowment, David Swensen, was one of the pioneers of getting institutional money into private equity and things like that. He did very well, made a lot of money for Yale and for himself. But most other entities that tried to match this couldn’t do it. And grossly, an awful lot of public pension funds have been heavily invested in private equity, which generally operates against the interests of labor — money managed in the name and interest of the working class, used to finance a very anti–working class agenda.

At most of these private equity funds, because the managers take out so much in the way of fees — their general fee structure is 2 percent of assets under management, plus 20 percent of the profits. If you’re skimming that much off the top, it’s really hard to beat the averages. Why pay all that money for inferior results? So over the last couple of decades a lot of people have been putting more and more money into funds that are meant to match, say, the S&P 500 index. That’s the most popular one.

Why spend any time or effort or money on lobbying corporate management when you’re not going to get any gain yourself? It’s going to go to everyone. It raises your fees. And the whole point of an index fund is to keep the fees down. So we had this evolution of corporate governance from this very activist phase in the ’80s and ’90s, when first you had these takeover artists in the ’80s, and pension funds like CalPERS in the ’90s drawing up hit lists of underperforming companies and demanding they clean up their act. All that kind of disappeared as we entered the 2000s.

One of the very dramatic things that changed the nature of corporate life was that in 1982, the SEC [Securities and Exchange Commission] legalized the practice of corporations buying their own stock. It used to be dismissed and banned as something manipulative and self-dealing. But that changed with the SEC under John Shad, who was a former Wall Street guy that Reagan appointed to run the SEC. It was said that Shad would bet on anything. He would bet on two cockroaches crossing the room. He had this purely speculative mind.

Under Shad, they legalize this practice of corporations buying their own stock to boost its price. Corporate managers who are paid in stock go, “Let’s use this corporate treasury money to buy the stock and boost its price, it’ll keep outside shareholders happy and will make me richer.” So if you look at the flow of corporate money over the last forty years, trillions of stock dollars of stock have disappeared. There are times when the buybacks exceed the level of corporate investment going into the pandemic crisis. Boeing and some of the major airlines were so cash depleted because of all their buybacks that they needed a federal bailout. A lot of companies were even borrowing money to buy their own stock — not borrowing money to expand or do something.

So we have index funds, which means the stock marketplace has almost no role in corporate governance or a declining role in corporate governance, and this growth in buybacks, which is just an enormous amount of money that goes from corporate treasury into shareholders’ pockets. It’s a giant racket of a different sort. In the ’50s and ’60s, it was a little more egalitarian because some of the bounty was shared with the working class. Now, of course, it’s just all for the big guys. We can squeeze the working class as much as possible and just pamper the shareholders.
DANIEL DENVIR

You identify another major shift underway to various forms of private ownership, something that’s more in sync with the Gilded Age than with the ethos of the shareholder revolution. One of them is private equity, and another is privately held corporations. You write,


Recent decades have seen another throwback to nineteenth-century models: an increasing prominence for the owners of very profitable private firms. A study of US tax records, “Capitalists in the Twenty-First Century,” by economist Matthew Smith and colleagues, finds that a large portion of the upper ranks — just over half of the proverbial 1 percent — is populated by the owners of closely held firms, rather than the public company CEOs who get so much of the press. Under American tax law, these are structured as pass-through entities, meaning their profits are untaxed at the firm level and distributed directly to their owners, either a single individual or a small partnership. The form has grown sharply over the decades. Its share of total business income rose from 10 percent in the mid-1980s to 35 percent in recent years.

You quote Smith and company as writing,


Typical firms owned by the top one to 0.1% are single establishment firms and professional services. EG consultants, lawyers, specialty tradespeople or health services, eg. Physicians, dentists, a typical firm owned by the top 0.1% is a regional business with $20 million in sales and 100 employees such as an auto dealer, beverage distributor, or a large law firm.

What accounts for such firms occupying such a massive and growing share of the economy in recent decades? And what does that ascendance of privately derived wealth mean for the composition of the ruling class?
DOUG HENWOOD

I really don’t quite understand why they’ve grown to be so profitable, because that form has always been around. We’ve had car dealers around for a long time, and we’ve had law firms around for a long time. But just like everyone else at the top end, they make much more money than they used to. You go back in the 1950s, you look at Rick Percy’s book about the emergence of the Right. That kind of provincial petty bourgeoisie was really the funders and base for a lot of right-wing politics, but they just weren’t that numerous or that rich compared to where they are now.

I quote in the piece a story about a guy the Washington Post described as a “quartz-countertop mogul” in suburban Minneapolis who held a fundraising party for [Donald] Trump. Minneapolis is not a backwater by any means, but he’s certainly a backwater as a capitalist. He’s not something that anybody’s ever heard of. That formation was a very important part of the Trump business coalition.

That formation is important, but also there’s the growth of a whole bunch of larger private companies, a lot of them in the Koch network, that don’t even want to have to deal with outside shareholders, much less governments telling them what to do. And a very important part of the right-wing business constituency is this kind of either very large private corporation or this kind of regional petty bourgeoisie.

Patrick Wyman wrote a piece about what he called the elite of his hometown of Yakima, Washington. Yakima is a backwater — I hope nobody in Yakima takes offense at that, but it’s not exactly the heart of the cosmopolitan elite. Wyman says they run local businesses, car dealerships, or law firms. It’s the part of Washington where they grow a lot of fruit. Not the snazzy part around Seattle, but the fruit part of Western Washington where some of these rich folks service the fruit industry, as accountants or lawyers or whatever. And they amount to this local elite that is very Republican. I looked at the political contributions of Yakima compared to Seattle. Seattle, even though it’s a pretty rich town, gave to Democrats — mostly overwhelmingly corporate Democrats, of course. Whereas a lot of the elites of Yakima are right-wing Republicans.

I think it’s important to look at the class composition of these political tendencies. We see a lot of the base of the Right is in these kinds of privately owned businesses, and a lot of the Koch network consists of these sorts. It also includes the hedge fund guys who made a lot of money either in hedge funding or private equity; they give a lot of money to the Right. And it’s not like Goldman Sachs or JP Morgan — the established banks, which tend to be much more centrist. There are certainly a lot of Democrats around Goldman Sachs. But the hedge fund world is not much like that. These guys think of themselves as lone gunslingers upsetting the established order.

That quote from Ralph Waldo Emerson: “I unsettle all things. No facts are to me sacred; none are profane; I simply experiment, an endless seeker” — that’s the ethic of these characters. But if you’re a large public corporation, you have to some degree to engage with the public. You have a lot of shareholders you have to deal with. You’re a much more political figure or social figure than a lot of these gunslingers are.
DANIEL DENVIR

Is there a material basis to the ideological divergence, aside from the shareholder discipline? Because in terms of the past political divergence between commanding heights versus provincial capitalists, you write that the problem wasn’t merely ideological. You write,


The business branch of that “splinter group” had a material problem with the Eisenhower-era settlement: General Motors may have preferred life without the UAW, but it could afford to pay union rates, especially in exchange for labor peace. Smaller fries couldn’t. They were caught in the petite bourgeoisie’s classic position, squeezed by big labor and big capital. Their freedom was under siege, and they reacted by funding a right-wing insurgency. The John Birch Society was founded in 1958 by the retired CEO of a Massachusetts-based candy company, Robert Welch, who’d made a fortune off lollipops and Junior Mints. Welch was rich, but he was no Rockefeller or Mellon.

Are there similar sorts of dynamics driving political differences between different sorts of capitalists today?
DOUG HENWOOD

There’s a big material fissure based on the nature of the industry. For example, Koch and a lot of his associates are in the carbon business. They just create enormous amounts of pollution. Whereas somebody like BlackRock or Jamie Dimon can afford to be a little more high-minded because they’re not out there like directly pumping carbon at the atmosphere.
DANIEL DENVIR

They’re diversified across the entire economy.
DOUG HENWOOD

Yeah, and obviously JP Morgan et al. have a lot of money invested in carbon assets, but they can take the long view and say we understand that carbon’s not going to be around forever and we have to start making plans for a post-carbon world, even to some degree. Even though a lot of that is just PR, the larger oil companies can do that. But somebody like Koch Industries has nothing else. Dirt is their most important product. That’s an important fissure, and a very important part of the Republican constituency or those dirty industries.

It used to be low-wage industries as well. There was a big split between high-wage and low-wage. Thomas Ferguson has written about this, that a lot of the high-wage capital intensive industries more or less supported the New Deal in 1930s and had some longer views of things than the low-wage retail sector. Now the retail sector is still very Republican, and you’re likely to find more Democrats in some of the higher-wage sectors, even finance.

Interestingly some of the historically Jewish firms on Wall Street like Goldman have been a very important Democratic constituency because they didn’t feel welcome in the Republican Party historically. But for all sorts of reasons, there is a little more openness to some degree of infrastructure spending, social spending, that sort of thing. When Mario Cuomo was thinking of running for president in 1988, he put together a commission to advise him on the state of the economy. For the chapter on urban poverty, the lead author was credited to be Robert Rubin, formerly of Goldman Sachs and of the Clinton administration. The former cochair of Goldman Sachs was deeply concerned about urban poverty, whereas some hedge fund guy wouldn’t give a shit about urban poverty.

You have a lot of big capitalists who only care about their own sectoral interests, for example tax breaks for their particular industry. That’s the dearest thing to their hearts, but they don’t have a broader political agenda the way somebody like Charles Koch does or the ALEC crowd or any of these characters. And it was very interesting to watch during the early Trump years, because big capitalists really were not very high on Trump. They favored Hillary. They thought that Trump is an irresponsible and dangerous character. But as soon as he came into office and he cut their taxes and deregulated everything and the stock market took off, they were happy. So they didn’t care about all the other insane stuff he was doing, as long as the stock price was going up and their taxes were going down and regulations were disappearing. That’s all they cared about.
DANIEL DENVIR

One big part of the changes you’re describing is that there just didn’t used to be so many people rich enough to individually have such a huge impact. The growing number of extremely rich people created a novel situation whereby a relatively small number of individuals with perhaps idiosyncratic reactionary ideologies, like the Kochs, can just exercise a ton of power as they see fit. Is that independent from the more diffusely institutional logics that historically governed much of American capitalism?
DOUG HENWOOD

It’s true not only at the national or even the international level, but at the local level. A lot of local billionaires really dominate their state’s politics. So a character like Art Pope in North Carolina, who made billions off a chain of discount stores for poor people, has a material interest in creating more poor people because they patronize his stores. And he has been financing a lot of the reactionary agenda in North Carolina. And North Carolina is not a blue state by any means, but it is not a reactionary state. It’s not South Carolina, which is one of the most reactionary states in the country. It has very distinguished universities and cultural life. But somebody like Art Pope, with all his money, can fund gerrymandering and laws designed to promote the right-wing agenda. There were no Art Popes forty or fifty years ago, or at least on the scale of somebody like him.

They just have so much to spend, and they’re willing to spend it. And they feel so persecuted — funny since these folks have never had it so good. Maybe there’s a little more hostility now than there was toward them some years ago. But politically, they’re really safe. They don’t have to pay any taxes, and yet they still feel so besieged. I guess it’s a guilty conscience, the sense that they’re getting away with murder and that any time now that the angry masses are going to come slit their throats. But it’s a weird sense of aggrievement that leads them to fund all these crazy politicians to push this agenda even further.

Despite their wealth, they seem to feel bad, like they’re not taken seriously enough or they’re not cultured and the cultured look down on them — which is of course correct to some degree; I look down on them. This combination of being materially secure and politically secure, and at the same time culturally insecure, produces a very volatile mix of reactionary politics. And it’s a way of course of manipulating the masses into supporting their agenda. This is one of the things that Trump was so brilliant at — Trump was able to take the fact that the Manhattan elite never accepted him and he resented them for it, because he was a vulgarian from Queens, and he was able to transfer his personal resentment into something that a whole bunch of marginalized people across the country could identify with.

Like I said earlier, I think people exaggerate the degree of working classness of that base. It’s a much more regional petty bourgeoisie, not displaced machinists on the banks of the Great Lakes. This is something that the Right is just hammering away at. Now they understand that the rest of their agenda is not popular — they can’t sell tax cuts or rich people — so they have to work all these cultural resentments.
DANIEL DENVIR

Isn’t this ascendant class of private firm–derived wealthy people also where much of the high-end liberal elite today come from? Not so much the countertop moguls, but more extremely highly compensated lawyers and other professionals?
DOUG HENWOOD

Oh yeah, that’s absolutely the case. If you go back into the progressive era too, a lot of the base for the progressive era of politicians were the professional class that resented all the new capitalists. They felt they were vulgarian and what we needed were nice civilized experts to run things. The early twentieth century Nation magazine very much reflected that. It editorialized in favor of chain stores. There was this big movement, especially in the rural South, against chain stores, and the Nation in those times was contemptuous of the rejection of what they considered economic evolution.

But as I was saying earlier, the Right is so organizationally and ideologically disciplined compared with the liberal side. The Democracy Alliance, which is supposed to be a liberal answer to the Koch network, they all are encouraged to give to whomever they want to. There’s no focus on personnel or institutions or agenda or anything. It’s all like, do your own thing, man.
DANIEL DENVIR

You write,


In the 1980s, the Democratic Leadership Council (DLC), led by the likes of Bill Clinton, aimed to reinvent the Democratic Party for the neoliberal era by purging it of progressive forces left over from the 1960s and 1970s. The goal was to make it friendly to Wall Street and the Pentagon while dropping the civil rights and tree-hugger talk, and it was largely successful, as the party found popular support among professionals in the nicer suburbs.

I think that’s a really important insight, especially when people on the Left sort of mistakenly blame any sort of emphasis on racial or gender justice or anything like that on the woke liberal PMC [professional managerial class]. Because this is the actual sordid history of the “in this house we believe” liberalism. What do we learn when we understand that the origins of the Democratic turn toward these affluent professionals was thoroughly and explicitly reactionary, specifically on social issues?
DOUG HENWOOD

There’s a really good book on this topic by Lily Geismer, Don’t Blame Us, in which she studied five towns north of Boston. It’s this story of how these kinds of elite suburbs and the people who populated them thought of themselves as very different from the boring gray flannel suit types of the Levittown suburbs of the ’50s and ’60s. It was like, “As MIT [Massachusetts Institute of Technology] professors, we really know best.” They became the root of a lot of this transformation. As the Democratic Party was dropping the old urban working class and replacing it with these sorts of professionals, it took on a very different cast.

Geismer tells the story of, I think it was in Lexington, where they were very aggressive about passing fair housing legislation. They wouldn’t discriminate, so they wanted to make sure that black people were just as welcome in Lexington as white people were. Problem was that very few black people had the money to buy a house in Lexington. So it was just all purely symbolic. That’s emblematic of so-called woke liberalism: materially, money did the work of making sure that just the right kind of people would enter their suburbs and they wouldn’t have to worry about vulgarians from the city coming in and taking over.
DANIEL DENVIR

The problem isn’t that these people focus on things like race and gender. It’s that they do so in a revealingly idealized and always dematerialized way.
DOUG HENWOOD

Yeah. I mean, they don’t wanna like think about why they live in Lexington and other people don’t. That would make them uncomfortable. Or if they do think about that, it’s because they worked so hard and did all the right things and went to the right schools and their social status is a reward for all their virtue and labor. They don’t really want to think about the social structures that reproduce their privilege.

Places like Yale made a conscious effort starting in the 1970s to bring in people who are not third-generation legacies and try to recruit people from public high schools. But if you look at the makeup of the Yale student body today, it’s overwhelmingly people from households with six-figure incomes. I think [Thomas] Piketty says in Capital in the Twenty-First Century that the average Harvard undergraduate’s family has a household income of $300,000. So you can certainly bring in a different set of personnel, different from the old-legacy George Bush–type WASPs, but you’re still relying mostly on money. The old alumni magazine had a cover several years ago of someone picking a fruit tree and the headline was something like “Beyond the Low-Hanging Fruit,” and they’re complaining that they could only find a certain limited number of kids from poor backgrounds to recruit to Yale and they just couldn’t get beyond that low-hanging fruit.

So there’s this effort consciously to diversify, but it’s of limited success. The corporate establishment is still overwhelmingly white, pretty much male. We’ve seen a certain degree of diversification of the professions. The political class is certainly more diverse than it used to be. That’s probably the most diverse subset of the higher reaches of society. But they’ve got a way to go for sure. And it’s partly because the reproduction of privileges is across generations. Brookings [Institution] had a study out the other day that almost all of the families that are under the poverty line for three generations in a row are black. There are almost no white people whose families are under the poverty line for three generations in a row. That kind of thing is really hard to do much about without a major social reconstruction, which is impossible to imagine in the current political environment.
DANIEL DENVIR

“Take Me to Your Leader” is a very long essay, and yet it will represent just a small part of your next book project. What are some of the big questions about our ruling class that you haven’t yet answered?
DOUG HENWOOD

I want to talk more about the tech people. I want to talk more about diversity and how much diversification of the elites there has been. I want to look more into the role of women, which is a very interesting story. Upper-class women in the WASP days were very much the social managers. They handled the social reproduction of the class. They helped create a national ruling class through inviting people to parties. What’s happened now that women are more likely to be working than they are to be handling these tasks of social reproduction? It’s changed the nature of philanthropy, and that’s another thing I want to look at more closely. What are the roles of the old philanthropies versus a lot of the new philanthropies?

The WASPy ruling class really shaped the modern world. And there was a cross-Atlantic relation with the British ruling class. Where are they now? What are their ties? How do they think about their role globally? How do they think about their role nationally, even? So those are some of the things I really wanna look at. It’s a big task.



Doug Henwood
Doug Henwood, editor and publisher of Left Business Observer, got his B.A. in English from Yale in 1975. At Yale, Henwood was briefly a conservative and a member of the Party of the Right, which maneuvered his election as Secretary of the Political Union, but he quickly came to his senses. From 1976-79, Henwood did graduate work in English at the University of Virginia, concentrating on British and American poetry and critical theory, fulfilling all requirements for a PhD except for that great stumbling block, a dissertation. After two years working as a copywriter and under-assistant promotion man for a medical publisher in New York, Henwood revived the idea of writing his dissertation, which was to be an examination of the varieties of narcissism in American poetry from Emerson through Whitman to Stevens. To examine the evolution of this psycho-esthetic, Henwood planned to examine the evolution of the U.S. political economy as well, from the entrepreneurial-yeoman capitalism of Emerson`s day to the finance-bureaucratic capitalism of Stevens` - which would have taken seriously Stevens` employment as a bond lawyer for The Hartford insurance group. The dissertation was never written. But in the course of boning up on the theory and history of the U.S. political economy, Henwood got more deeply interested in economic matters and less so in literary ones, supplementing a decent base of undergraduate training with extensive self-teaching. After 5 years of contemplation, convinced that the 1980s experiment with free-market economics was a financial and social disaster and that much "left" writing on economics was usually dry and dated, Henwood decided that there was room for a newsletter addressing both these deficiencies. He founded Left Business Observer in September 1986. Almost from the first issue, the newsletter was a critical success, and, though the publication more than pays its bills, a vast cascade of subscriptions would always be welcome. LBO covers economics and politics in the broadest sense. Recent and persisting obsessions include income distribution and poverty in the U.S. and elsewhere in the First World; the evolving Western hemisphere free trade zone and the Mexican crisis; the globalization of finance and production; the worldwide attack on pensions; Third World debt and development; the transformation of the former "socialist" world; the IMF and World Bank; the media business; the influence of foundations on politics and culture; the meanings of Clintonism. Every issue includes a report on the world`s financial markets and central banks. Besides editing LBO, Henwood is a contributing editor of The Nation and hosts a radio weekly program on WBAI (New York). He has written for numerous magazines and newspapers around the world, and has contributed chapters to a number of scholarly and popular anthologies. His social atlas of the U.S. (in the Pluto atlas series), The State of the USA, was published by Simon & Schuster in the fall of 1994, and his book Wall Street was published by Verso in June 1997, to great critical acclaim. It was also a smashing best-seller, as these things go; an updated paperback version was published in June 1998.