An Essay On Historical Methodology
 
THE LOST DEMOCRACY
Gabiel Kolko
©1963

[First published as the conclusion of The Triumph of Conservatism, A Reinterpretation of American History, 1900-1916 (Quadrangle Books, 1963) pp.279-310]

 The American political experience during the Progressive Era was conservative, and this conservatism profoundly influenced Amer­ican society's response to the problems of industrialism. The nature of the economic process in the United States, and the peculiar cast within which industrialism was molded, can only be understood by examining the political structure. Progressive politics is as complex when studied in all of its aspects but its dominant tendency on the federal level was to functionally create, in a piecemeal and haphazard way that was later made more comprehensive, the synthesis of politics and economics I have labelled
“political capitalism.”
 
The varieties of rhetoric associated with progressivism were as diverse as its followers, and one form of this rhetoric involved at­tacks on businessmen-attacks that were often framed in a fashion that has been misunderstood by historians as being radical. But at no did any major political tendency dealing with the problem of big business in modem society ever try to go beyond the level of high generalization and translate theory into concrete economic pro­grams that would conflict in a fundamental way with business supremacy over the control of wealth. It was not a coincidence that the results of progressivism were precisely what many major business interests desired.
 
Ultimately businessmen defined the limits of political intervention, and specified its major form and thrust. They were able to do so not merely because they were among the major initiators of federal intervention in the economy, but primarily because no politically significant group during the Progressive Era really challenged their conception of political intervention. The basic fact of the Progressive Era was the large area of consensus and unity among key business leaders and most political factions on the role of the federal government in the economy. There were disagreements, of course, but not on fundamentals. The overwhelming majorities on votes for basic progressive legislation are testimony to the near unanimity in Congress on basic issues.
 
Indeed, an evaluation of the Progressive Era must concede a much larger importance to the role of Congress than has hitherto been granted by historians who have focused primarily on the more dramatic Presidents. Congress was the pivot of agitation for banking reform while Roosevelt tried to evade the issue, and it was considering trade commissions well before Wilson was elected. Meat and pure food agitation concentrated on Congress, and most of the various reform proposals originated there. More often than not, the various Presidents evaded a serious consideration of issues until Congressional initiatives forced them to articulate a position. And businessmen seeking reforms often found a sympathetic response among the members of the House and Senate long before Presidents would listen to them. This was particularly true of Roosevelt, who would have done much less than he did were it not for the prodding of           
Congress. Presidents are preoccupied with patronage to an extent unappreciated by anyone who has not read their letters. 
 
The Presidents, considered-as they must be-as actors rather than ideologists, hardly threatened to undermine the existing controllers of economic power. With the possible exception of Taft's Wickersham, none of the major appointees to key executive posts dealing with economic affairs were men likely to frustrate business in its desire to use the federal government to strengthen its economic position. Garfield, Root, Knox, Straus-these men were important and sympathetic pipelines to the President, and gave additional security to businessmen who did not misread what Roosevelt was trying to say in his public utterances. Taft, of course, broke the continuity between the Roosevelt and Wilson Administrations because of politi­­cal decisions that had nothing to do with his acceptance of the same economic theory that Roosevelt believed in. The elaborate relationship between business and the Executive created under Roosevelt was
unintentionally destroyed because of Taft's desire to control the Republican Party. Wilson's appointees were quite as satisfactory as Roosevelt's, so far as big business was concerned, and in his con­crete implementation of the fruits of their political agitation –the ­Federal Reserve Act and the Federal Trade Commission Act- Wilson proved himself to be perhaps the most responsive and desirable to business of the three Presidents. Certainly it must be concluded that historians have overemphasized the basic differences between the Presidents of the Progressive Era, and ignored their much more important similarities. In 1912 the specific utterances and programs of all three were identical on fundamentals, and party platforms re­flected this common agreement.
 
This essential unanimity extended to the area of ideologies and ­values, where differences between the Presidents were largely of the sort contrived by politicians in search of votes, or seeking to create ­useful images. None of the Presidents had a distinct consciousness of any fundamental conflict between their political goals and those of business. Roosevelt and Wilson especially appreciated the significant support business gave to their reforms, but it was left to Wilson to culminate the decade or more of agitation by providing precise direction to the administration of political capitalism's most impor­tant consequences in the Progressive Era. Wilson had a small but articulate band of followers who seriously desired to reverse the process of industrial centralization-Bryan and the Midwestern agrarians reflected this tradition more than any other group. Yet ultimately he relegated such dissidents to a secondary position -indeed, Wilson­ himself represented the triumph of Eastern Democracy over Bryan­ism- and they were able to influence only a clause or amendment, here and there, in the basic legislative structure of political capi­talism.
 
 
But even had they been more powerful, it is debatable how different Bryanism would have been. Bryan saw the incompatibility be­­tween giant corporate capitalism and political democracy, but he sought to save democracy by saving, or restoring, a sort of idealized competitive capitalist economy which was by this time incapable of realization or restoration, and was in any event not advocated by capitalists or political leaders with more power than the agrarians could marshal. Brandeis, for his part, was bound by enigmas in period. Big business, to him, was something to be ultimately re or justified on the basis of efficiency rather than power accumulation. He tried to apply such technical criteria where none was relevant, and he overlooked the fact that even where efficient competitive, business could still pose irreconcilable challenges to political and social fabric of a democratic community. Indeed1 failed to appreciate the extent to which it was competition that vi leading to business agitation for federal regulation, and finally was unable to do much more than sanction Wilson's actions as were defined and directed by others.
 
There was no conspiracy during the Progressive Era. It is, course, a fact that people and agencies acted out of public sight, that official statements frequently had little to do with operational realities. But the imputation of a conspiracy would sidetrack a serious consideration of progressivism. There was a basic consensus among political and business leaders as to what was the public good, and no one had to be cajoled in a sinister manner. If détentes, private understandings, and the like were not publicly proclaimed it ' merely because such agreements were exceptional and, generally known, could not have been denied to other business interests a desiring the security they provided. Such activities required a delicate sense of public relations, since there was always a public ready to oppose preferential treatment for special businesses, if not the basis assumptions behind such arrangements.
 
Certainly there was nothing surreptitious about the desire of cer­tain businessmen for reforms, a desire that was frequently and pub­licly proclaimed, although the motives behind it were not appreciated by historians and although most contemporaries were unaware of how reforms were implemented after they were enacted. The fact that federal regulation of the economy was conservative in preserving existing power and economic relations in society should not obscure the fact that federal intervention in the economy was conservative in purpose as well. This ambition was publicly proclaimed by the interested business forces, and was hardly conspira­torial.
 
It is the intent of crucial business groups, and the structural cir­cumstances within the economy that motivated them, that were the truly significant and unique aspects of the Progressive Era. The effects of the legislation were only the logical conclusion of the in-tendons behind it. The ideological consensus among key business and political leaders fed into a stream of common action, action that was sometimes stimulated by different specific goals but which neverthe­less achieved the same results. Political leaders, such as Roosevelt, Wilson, and their key appointees, held that it was proper for an industry to have a decisive voice or veto over the regulatory process within its sphere of interest, and such assumptions filled many key businessmen with confidence in the essential reliability of the federal political mechanism, especially when it was contrasted to the unpre­dictability of state legislatures.
 
Business opposition to various federal legislative proposals and measures did exist, of course, especially if one focuses on opposition to particular clauses in specific bills. Such opposition, as in the case of the Federal Reserve Bill, was frequently designed to obtain spe­cial concessions. It should not be allowed to obscure the more im­portant fact that the essential purpose and goal of any measure of importance in the Progressive Era was not merely endorsed by key representatives of businesses involved; rather such bills were first proposed by them.
 
One can always find some businessman, of course, who opposed federal regulation at any point, including within his own industry. Historians have relished in detailing such opposition, and, indeed, their larger analysis of the period has encouraged such revelations. But the finding of division in the ranks of business can be significant only if one makes the false assumption of a monolithic common in­terest among all capitalists, but, worse yet, assumes that there is no power center among capitalists, and that small-town bankers or hard­ware dealers can be equated with the leaders of the top industrial, financial, and railroad corporations. They can be equated, of course, if all one studies is the bulk of printed words. But in the political as well as in the economic competition between small and big busi­ness, the larger interests always managed to prevail in any specific contest. The rise of the National Association of Manufacturers in the Progressive Era is due to its anti-labor position, and not to its opposition to federal regulation, which it voiced only after the First World War. In fact, crucial big business support could be found for every major federal regulatory movement, and frequent small business support could be found for any variety of proposals to the benefit, such as price-fixing and legalized trade associations. Progressivism was not the triumph of small business over the trusts, as has often been suggested, but the victory of big business in achieving the rationalization of the economy that only the federal government could provide.
 
Still, the rise of the N.A.M. among businessmen in both pro- and anti-regulation camps only reinforces the fact that the relation of capitalists to the remainder of society was essentially unaltered by their divisions on federal intervention in the economy. In terms the basic class structure, and the conditions of interclass relationships, big and small business alike were hostile to a labor movement interested in something more than paternalism and inequality. In respect, and in their opposition or indifference to the very social welfare reforms of the Progressive Era (nearly all of which were enacted in the states), American capitalism in the Progressive Era acted in the conservative fashion traditionally ascribed to it. The result was federal regulation in the context of a class society. Indeed, because the national political leadership of the Progressive Period shared this noblesse oblige and conservatism toward workers farmers, it can be really said that there was federal regulation be cause there was a class society, and political leaders identified with  the values and supremacy of business.
 
This identification of political and key business leaders with same set of social value- ultimately class values- was hardly accidental, for had such a consensus not existed the creation of political capitalism would have been most unlikely. Political capitalism was based on the functional unity of major political and business leaders. The business and political elites knew each other, went to the schools, belonged to the same clubs, married into the same shared the same values-in reality, formed that phenomenon which has lately been dubbed The Establishment. Garfield and Stetson met at Williams alumni functions, Rockefeller, Jr. married Aldrich's daughter, the Harvard clubmen always found the White House door open to them when Roosevelt was there, and so on. Indeed, no one who reads Jonathan Daniels' remarkable autobiography, The End of Innocence, can fail to recognize the significance of an interlocking social, economic, and political elite in American history in this century.
 
The existence of an Establishment during the Progressive Era was convenient, even essential, to the functional attainment of politi­cal capitalism, but it certainly was not altogether new in American history, and certainly had antecedents in the 1890's. The basic causal factor behind national progressivism was the needs of business and financial elements. To some extent, however, the more benign char leading business leaders, especially those with safe fortunes, was due to the more secure, mellowed characteristics and paternalism frequently associated with the social elite. Any number of successful capitalists had long family traditions of social graces and refinement which they privately doubted were fully compatible with their role as capitalists. The desire for a stabilized, rationalized political capitalism was fed by this current in big business ideology, and gave many businessmen that air of responsibility and con­servatism so admired by Roosevelt and Wilson. And, from a prac­tical viewpoint, the cruder economic conditions could also lead to substantial losses. Men who were making fortunes with existing shares of the market preferred holding on to what they had rather than establishing control over an industry, or risking much of what they already possessed. Political stabilization seemed proper for this reason as well. It allowed men to relax, to hope that crises might be avoided, to enjoy the bountiful fortunes they had already made.
 
Not only were economic 1osses possible in unregulated capi­talism, but  political destruction also appeared quite possible. There were disturbing gropings ever since the end of the Civil War: agrar­ian discontent, violence and strikes a Populist movement, the rise of a Socialist Party that seemed, for a time, to have an unlimited growth potential. Above all, there was a labor movement seriously divided as to its proper course, and threatening to follow in the seemingly   radical footsteps of European labor. The politic capitalism of the Progressive Era was designed to meet these potential threats, as well as the immediate expressions of democratic discontent in the states. National progressivism was able to short-circuit state progres­sivism to hold nascent radicalism in check by feeding the illusions of its leaders -leaders who could not tell the difference between federal regulation of business and federal regulation for business.
 
Political capitalism in America redirected the radical potential of mass grievances and aspirations –of genuine progressivism- and to a limited extent colored much of the intellectual ferment of the period, even though the amorphous nature of mass frequently made the goals of business and the rest of the nearly synonymous. Many well-intentioned writers and academicians worked for the same legislative goals as businessmen, but their innocence did not alter the fact that such measures were frequently designed by businessmen to serve business ends, and that business ultimately reaped the harvest of positive results. Such innocence was possible because of a naive, axiomatic view that government economic regulation, per se, was desirable, and also because many ignored crucial business support for such measures by focusing on the less important business opposition that existed. The fetish of government regulation of the economy as a positive social goon was one that sidetracked a substantial portion of European socialism as well, and was not unique to the American experience. Such axiomatic and simplistic assumptions of what federal regulation would bring did not take into account problems of democratic control and par­ticipation, and in effect assumed that the power of government was neutral and socially beneficent. Yet many of the leading muckrakers and academics of the period were more than naive but ultimately conservative in their intentions as well. They sought the paternalism and stability which they expected political capitalism to bring, since only in this way could the basic virtues of capitalism be maintained. The betrayal of liberalism that has preoccupied some intellectual historians did not result from irrelevant utopianism  or philosophical pragmatism, but from the lack of a truly radical, articulated alternative economic and political program capable of synthesizing political democracy with industrial reality. Such a program was never formu­lated in this period either in America or Europe.
 
Historians have continually tried to explain the seemingly sudden collapse of progressivism. after the First World War, and have offered reasons that varied from moral exhaustion to the repression of non-conformity. On the whole, all explanations suffer because they really fail to examine progressivism beyond the favorable conventional interpretation. Progressive goals, on the concrete, legislative level, were articulated by various business interests. These goals were, for the most part, achieved, and no one formulated others that big busi­ness was also interested in attaining. Yet a synthesis of business and politics on the federal level was created during the war, in various administrative and emergency agencies, that continued throughout the following decade. Indeed, the war period represents the triumph of business in the most emphatic manner possible. With the exception of a brief interlude in the history of the Federal Trade Com­mission, big business gained total support from the various regulatory agencies and the Executive. It was during the war that effective, working oligopoly and price and market agreements became opera­tional in the dominant sectors of the American economy. The rapid diffusion of power in the economy and relatively easy entry virtually ceased. Despite the cessation of important new legislative enact­ments, the unity of business and the federal government continued throughout the 1920's and thereafter, using the foundations laid in the Progressive Era to stabilize and consolidate conditions within various industries. And. on the same progressive foundations and exploiting the experience with the war agencies, Herbert Hoover and Franklin Roosevelt later formulated programs for saving American capitalism. The principle of utilizing the federal  government to stabi­lize the economy, established in the context of modern industrialism during the Progressive Era, became the basis of political capitalism in its many later ramifications.
 
In this sense progressivism did not die in the 1920's, but became a part of the basic fabric of American society. The different shapes political capitalism has taken since 1916 deserve a separate treat­ment, but suffice it to say that even Calvin Coolidge did not mind evoking the heritage of Theodore Roosevelt, and Hoover was, if any­thing, deeply devoted to the Wilsonian tradition in which Franklin Roosevelt gained his first political experience.
 
 
Marx and Weber: Economics vs. Politics
 
What, then, can one say about the larger nature of the phenom­enon of political capitalism in America? Certainly, if one looks at the formal traditions of economic and political theory there is little to be found that takes the American experience into account. For better or worse, the relationship of politics and the state to economic and social theory is a vast, uncharted region in the arena of going theories. This is not to say that theory has failed to develop a concept of politics and the state, but that none of them apply to American situation. Classical economics, for example, offered guidance. Adam Smith had a much more permissive concept of state than is usually attributed to him, but his theory of accumulation was based on parsimony rather than state favors. The state was corrupt, to be conceded as little as possible, but necessary insofar the maintenance of social order and property relations was a concerned. The Wealth of Nations did not explain why the state was crucial to capitalism, and merely postulated a set of conditions hoped could be implemented rather than describing or predicting much more complicated historical reality. And insofar as Smith believe the state was crucial to preserve social relations in their kg form, his utilitarian followers developed the same tradition their advocacy of a centralized political administration capable of protecting the property of the rich against the poor. None of subsequent major capitalist economic theorists ever tried to develop a comprehensive operational view of the integration of economics and politics. Descriptively, Keynesian analysis is based on the same ration of economic law and political reality which dominates class Theory, and Keynes never really examined the extent and form state intervention into the economy. And the more technical specialized studies of imperfect competition and oligopoly have ignored the political consequences of this phenomenon on behalf of purely internal economic descriptions.
 
Yet there are several theoretical efforts dealing with economics, or social relations that are worth considering here, if or because their deficiencies allow one to point more precisely to areas where a theoretical synthesis of the American political economic experience is necessary and possible. Despite their inadequacies, Marx, Max Weber, and Thorstein Veblen were concerned with genuine problems, and in this age of inconspicuous specialization in the social sciences the scope of their interests alone mark them a exceptional thinkers. Their errors can be cited, but there is, after all is said and done, something of significance worth criticizing.
 
Marx formulated an economic theory that was to have implications to social relations and politics, but he relied on purely economic categories of explanation. Indeed, although Marx the revolutionist was interested in economics only insofar as it had political impli­cations, his economic theory is his only complete one and for this reason, American development cannot be understood within the Marxist mold. This is not to say that Marxian economics is not use­ful for understanding specific situations, but the American experience extends well beyond Marx’s economic categories, and his political theory is entirely inadequate. However much one can respect Marx' insights into the role of technology in economic history, or his in-tense commitment to a never clearly defined goal of social justice, the history of the past century does not readily allow one to share his mechanistic faith in tendencies in technology and economics that would develop those internal contradictions in capitalism that would lead to a better world for workers.
 
There is no point in an exposition of Marx's economics per se, given the excellent critical analysis that has been done by Paul Mat-tick and others. 1 Only several of his economic ideas need be men­tioned. Although Marx believed moderate adjustments were possible, he strongly felt that society "can neither clear by bold leaps, nor remove by legal enactments, the obstacles offered by the successive phases of its normal development.” 2 This position led to what must be considered the "original sin” pf Marxism-- the acceptance and justification of the boundaries imposed by capitalism on the indus­trialization process. It was not necessary for Marx to argue that tech­nology as such made centralization and monopoly inevitable, but merely that there were certain tendencies within capitalist economics which, combined with technology, stirnulated a movement in that direction. Worse yet, Marx made capitalism the prerequisite to industrialization, thereby becoming an unwilling apologist for the necessity of the system. Engels carried this argurnent the furthest in his attacks on utopian socialism.
 
Despite complications, Marx believed that the long-term tend­ency in capitalism was toward centralization and monopoly, a tend­ency stimulated by the utilization of new and better technology in the competitive economy. This centralization was crucial, and a part of a "progressive" development that was unavoidable and desirable, since "Modern Industry never looks upon and treats the existing form of a process as final." 3 It was the existence of such monopolies that would make capitalism ripe for expropriation. Marx did not anticipate any noneconomic intervention in the concentration process before it ended, and his analysis was based on the assumption  that there were tendencies within the economy about which one could do nothing. Marx could condemn the injustice and misery which reulted from the industrialization through which he was living only because he was personally sensitive to suffering. His theory, as such, made such developments, in one form or another, necessary. Moreover, Marx made all of the facile assumptions as to size and efficiency that later became central in the writings of capitalist apologists. Marx saw total centralization as the conclusion of the capitalist economic process, and he had no intermediate theory of the nature of prices and competition in what is now referred to as an oligopolistic market in which the total economic victory of one large competitor over another is extraordinarily difficult. In this context, both Marxian and classical theories were thoroughly irrelevant as an explanation of the nature of the economic process. Neither could explain collusion based on solidarity among capitalists and a rationalized pursual of mutual interests and profits. In the American context, Marx was wrong in predicting that an ever smaller number of capitalists would share the market, for the rapid growth of the market and continuous technological innovations kept the economy sufficiently fluid to require the intervention of something more decisive than long-term impersonal natural economic processes.
 
Marx and Engels never formulated a comprehensive political the­ory. But such a system would not have made much difference to them in an event, since the entire theory of dynamics in Marxism is defined in purely economic terms. It was their failure to discuss the potential role of the state and politics in preserving capitalism that is the really fundamental reason why Marxism is not too useful in comprehending recent American history.
 
Marx and Engels applied inconsistent definitions of the state. They usually referred to it as the instrument of the ruling class, but the interpretation of the state as an independent, classless entity was used in certain crucial spots, and at times they mixed both defini­tions. The political element in Marxist economic theory, as opposed to commentaries on current events, is much more clearly defined. Marxian economics is a theory of circulation, accumulation, crises, and, ultimately, social relations. It is political only in the implicit sense that Marx believed economic developments would ultimately have social and political repercussions. But his theory of economic development, save in one particular, is primarily nonpolitical in its dynamic elements. Marx' political writings were intended for practical agitational purposes; his economic theory was self-sufficient and the state was not regarded as a means of preserving or enlarging eco­nomic power.
 
Historically, prior to the development of the modern economy in which capital was taken primarily from surplus value created by labor, Marx regarded the earliest capital accumulation-the stage of "primitive accumulation"-as dependent on political and essentially noneconomic factors of force and power. In the breakup of feudal society the land of the agricultural producer was expropriated, and this "is the basis of the whole process" of accumulation. Naked force was used first of all, but the Enclosure Acts in the eighteenth century were the political legitimization of robbery. The result was a free proletariat for nascent capitalists to exploit, and with which to ini­tiate a process of accumulation based on surplus value. The political basis of primitive accumulation was also apparent in colonialism, as well as the public debt and mercantilist system. And although Marx cited numerous examples that should have caused him to modify this point --the English Banking Act of 1844, for example-- he neverthe­less maintained that "In Western Europe, the home of political econ­omy, the process of primitive accumulation is more or less accomplished."4   
 
Although Marxist theory relied on purely economic categories of explanation, Marx was confronted with any number of political incidents during his lifetime-the creation of maximum hour laws, child labor laws, and similar measures in England and France-that forced him to try to reconcile these events with his theory, and in the process of doing so he formulated several inconsistent theories of the state. When discussing the English Factory Acts "made by a state that is rued by capitalist and landlord," Marx was hard pressed to understand why the hours of labor should be limited. Rather than show that the. interests of various capitalist blocs could be very diverse, or that the state was independent of the capitalists, he tried to argue that these laws were to their self-interest insofar as they prevented the exhaustion of workers. Moreover the possible loss to the capitalists was minimized by the increasing intensity of labor output per hour during the shorter work day. Later in Capital, however, Marx used another interpretation of the state and its motives, referring frequently to a nonclass "society" that stands above and beyond the interests of capitalists. ". . . capital is reckless of the health or length of life of the labourer, unless under compulsion from society.” Not self-interest but charity was used as an explanation of state intervention. Child labor laws were "here and there... effected by the State to prevent the coining of children's blood into capital." When Louis Bonaparte tried to extend the legal work day in 1852, Marx wrote, "the French people cried out with one voice 'the law that limits the working day to twelve hours is the one good that has remained to us of the legislation of the Republic."' The concept of “one voice” or “society" was a classless one, and a reflection on the nature of the state. Marx showed how courts were utilized to circumvent the proper application of the laws, or how factory owners pres­sured Parliament to obtain concessions, and he pointed to the various loopholes in the existing laws. But Marx greatly respected "The thoroughly conscientious investigations of the Children’s Em­ployment Commission . . .,” and he exploited them to show the horrors capitalism was creating in the English manufacturing centers. Moreover, he extended this admiration to the Factory Act inspectors themselves, who applied the law ruthlessly and treated the objections of business "as a mere sham."5
 
The specific economic form . . . determines the relationship of rulers and ruled, as it grows directly out of production itself and, in turn, reacts upon it as a determining element. Upon this, however, is founded the entire formation of the economic community which grows up out of the production relations themselves, thereby simultaneously its specific politi­cal form. It is always the direct relationship of the owners of the condi­tions of production to the direct producer~a relation always naturally corresponding to a definite stage in the development of the methods of labour and thereby its social productivity-which reveals the innermost secret, the hidden basis of the entire social structure, and with it the political form of the relation of sovereignty and dependence, in short, the corresponding specific form of the state. 6
 
But even though the state reflected the social and productive rela­tions within society --the economy-- it was not to be used to enlarge the power of the capitalists, to aid the process of accumulation, or to regulate relations among them. All of this was taken care of in the market place, which was precisely where the capitalist system was to be destroyed. The capitalists controlled the state, according to Marx' formal theory but they were not going to use it in the economic sphere. They might use it to club down workers although Marx did not develop this realistic possibility in sufficient detail either. Where Marx actually saw  the state operating , as in factory and labor laws, he gave it an implicitly nonclass character. Marx' dynamic economic theory was neatly isolated from the political sphere, and he naively assumed that the capitalist state would sit idly by while its material basis was destroyed by free economic laws.
 
Of all the writings of Marx and Engels on politics and the state, Engels' Anti-Dühring was by far the most systematic. Dühring’s basic thesis was not entirely dissimilar to Marx' discussion of primi­tive accumulation. Early economic institutions were really "social-economic constitutional forms of a purely political nature," based on the force of the state. Even in modern civilization, Dühring argued, political conditions were the fundamental causes of the eco­nomic situation-direct political force was primary-proposing a theory quite the reverse of the Marxist concept Engels, in a polemic that virtually threw out Marx' theory of primitive accumulation as well, took the opposite view. Force and politics could not alter inexor­able economic developments, and politics either conformed to economics or was replaced by a political system capable of succumbing.  “. . . the progressive evolution of production and exchange brings us of necessity to the present capitalist mode of production. . . . The whole process can be explained by purely economic causes; at no point whatever are robbery, force, the state or political interference of any kind necess~.”7 Indeed, in Engels' case the state and politics became so passive that he, much more than Marx, adopted an inter­pretation which made the state a classless, abstract entity-the state of bourgeois political theory. His discussion of the transition to socialism represents a hopelessly naive mix of both definitions of the state: the state as the tool of the capitalists and the state as the non-class, independent agent.
 
Engels later went even further in advocating a theory of the neu­tral state. Bonapartism had been able to balance the proletariat and the bourgeoisie off against each other, and Bismarck was able to do the same, giving the state a character and interest separated from both classes, according to Engels. And, partly because it could be used through corruption, and also because the workers had yet to develop a politically dangerous class consciousness, the "democratic republic" was becoming the "inevitable necessity" of modern society, a condition with obvious implications to its class functions.8 The fact that there were deep divisions between capitalists and emperors in a number of the modem states did not lead Engels to an analysis of internal divisions among power blocs, and the political expression that conflict might take. The power base of the emperors was also slighted, since it could not be subsumed within economic theory.
 
Marxist political theory was formulated mainly in response to specific political events, and on the basis of brief and inconsistent evaluations of the role of the state it is intended to be predictive. The predictions were based not on political understanding or theory that was especially serious, but on the anticipated outcome of economic developments. By effectively ignoring the role of the state in modem capitalism, Marxism lost sight of the possible resilience in capitalism, a resilience made possible by political rather than economic power. But if the state could determine the direction of the economy, an entirely new situation might be created, and in fact was.
 
Rosa Luxemburg excepted, European socialists tended to disso­ciate the economic activity and reforms of the state from the desire of capitalism to strengthen itself, and actually to endorse the state's activity. More important, they formulated alternate programs based essentially on the capitalist premises found in Marx: the assumption that concentrated industry was the price of technological efficiency, and that centralization and bureaucracy in decision-making were un­avoidable. Luxemburg alone tried to think through an alternative theory, really breaking with the true Marxist tradition. She failed primarily because she did not go far enough in her consideration of the role of the state in internal economics, dealing with it rather merely as a sponsor of external imperialism; in the former respect her methodology was of more limited historical value. Marxist theorists, with a few uninfluential exceptions, have never seriously confronted the relationship of the modern state to the economy.
 
The term "political capitalism" was first coined by Max Weber, but the meaning I have given to it throughout this book has been one that Weber would have strongly opposed.9 And quite rightly, for Weber's entire system cannot be reconciled with the American ex­perience in any significant way. Although Weber, the titan of social theory in the twentieth century-a man who reflected and captured the intense disillusion with industrial capitalism that has shaped Eu­ropean social thought-frequently wrote about politics and economics on the basis of his German experience, he felt that no where in the world was his general theory more vindicated than in the United States. Ironically, it is in the United States that Weber is least ap­plicable. Yet his concerns, if not his ideas, are precisely those of this study: the character of bureaucracy in the political sphere, the thrust toward rationalization in economic and political life, the nature of the state and its relationship to business. Weber was conscious, in a way that only a man who had lived through the First World War could be, of those complexities in modern society to which Marx was necessarily oblivious. But for all his insight, Weber, like Marx, abandoned himself to an impersonal future --to Historical Inevita­bility. Marx' future was optimistic, while Weber saw nothing ahead but the deadening triumph of a clinical, mechanistic industrialism. At the turn of this century neither alternative was inevitable, and the economic and industrial future was still capable of being molded --an opportunity we probably no longer have.
 
Although the America of the 1960's is, unfortunately, much closer to Weber's image than to Marx's, it did not become that way in the manner Weber predicted. Modern Western capitalism, accord­ing to Weber, had removed the state from the economy save in an external, impersonal sense. "Political capitalism" to Weber meant the accumulation of private capital and fortunes via booty connected with politics, the exploitation of opportunities provided by political bodies, colonialism, or tax fanning. The basic argument of the entire Weberian system was to show how and why the Western economy had moved away from irregular forms of political capitalism --unpredictable to both the state and the economy-- toward a political and economic rationalization of a sort very different from the one I have described in this volume. For Weber neatly separated the economic and political structure from one another in a way, so far as the American experience is concerned, that was historically mean­ingless. This bifurcation, I believe, was Weber's fatal error.
 
To Weber, rationalization in the political sphere attained its high­est expression in the area of the law. The general trend in modern Western law was to make it classless in the sense that no group or faction was to have a favored position in the economic process once certain ground rules were defined. The basic thesis Weber tried to advance was that "To those who had interests in the commodity market, the rationalization and systematization of the law in general and, with certain reservations.. . the increasing calculability of the functioning of the legal process in particular, constituted one of the most important conditions for the existence of economic enterprise intended to function with stability and, especially, of capitalistic en­terprise, which cannot do without legal security."10 Once a rationally objective law was created the demands of concrete individuals or interests were ignored, a fact that would have been impossible in many nations under the favoritism prevalent during periods of politi­cal capitalism as Weber defined it. And while Weber acknowledged that the detached bureaucratic administration in charge of the imple­mentation of the law was also protecting capitalism from the "irregu­lar" demands of noncapitalists, which is to say the masses, he did not make much of the point. The significant fact to Weber was that capi­talists were being protected from each other, and that modem West­ern law and states were taken out of the economic arena, leaving only certain minimal, universally applicable ground rules for economic activity. In the United States, of course, Weber's legal theory was nullified by Roosevelt’s detente system and the application of the irregular "rule of reason" by both the executive and judicial branches of the national government.
 
Weber discussed the nature and origins of the modern Western state in detail, the basis of its legitimation, and especially the charac­ter of its administration. Politics and political parties interested him, but there is a disturbing impersonality about Weber's writings no matter how often one reads him. In part this is due to the sweeping numbered and lettered categories or ideal4ypologies that Weber per­sistently used to catalogue all phenomena in virtually all places at all times. Such a method resists concrete historical application, save where Weber chose to make it. But the heart of the matter is that ultimately Weber did not really believe that the political institutions and structures of modem society had very deep or extensive conse­quences. His belief in a now impersonal legal structure, the imper­sonally administered state dominated by uncommitted bureaucrats, led him to outline a state and political structure that is somehow above or beyond the economic sphere, and is now virtually separated from it. Yet even within his own writings can be found ample ran­dom, untheoretical observations which disprove or raise serious doubts concerning his own systematic theory.
 
To Weber, whether he was discussing politics or economics, "Bu­reaucratization offers above all the optimum possibility for carrying ~rough the principle of specialized administrative functions accord­ing to purely objective considerations."11 The structure and opera­tional rules of modem bureaucracies were essentially the same to Weber whether they functioned in industry or politics. Bureaucracies are crucial to the successful operation of large-scale organizations, and their efficiency is based ultimately on impersonal technical knowledge. Bureaucracy both reflected and accelerated the trend toward concentration and giantism in political and economic institu­tions. In politics, as in economics, according to Weber, no changes in the basic nature of the bureaucracy, or the dependence on it, could really be effected by a change in formal leadership. Both the state and the economy were based on organizational principles as well as formal economic relations. A change in a government or ownership might alter the specific leadership, but the essential organizational structure-the bureaucracy-would ultimately prevail. In effect, poli­tics could not overcome the basic institutional legacy of the modern state and the systematized capitalist economy. It is for this reason that I consider Weber a determinist and a pessimist.
 
Yet politics remained. Weber was fully aware of the social and class character of modem parties and government, and that political battles would be fought over economic issues; but he failed to relate the consequences of those battles, once resolved, to the impersonality of law and bureaucracy-because he really did not believe politics could have serious consequences. Class and status were ultimately based on economic power, and party rule was class rule. And while the details of these facts were known to him, and he discussed the rich political amateurs or the American city bosses paid by financial magnates, the larger picture was overlooked by Weber. His discus­sion of political bureaucracies ignored why new bureaucracies were created. In the United States, for example, the technical knowledge of new administrative agencies that were created was not the source of their power. Power was created by decisions made in the political sphere by political agents, which is to say by class-oriented elements. It was the politically based bureaucracy that sought to rationalize the large-scale economic organization, to make economic decisions and profits predictable and secure through political means.
 
In large part due to his reliance on overschematized ideal-types that did not necessarily have concrete historical relevance, Weber ignored the specific value of his system. He categorized various types of modern political leaders, but ignored why they were there, other than legitimation provided by rational legal rules or charismatic hero worship. He overlooked what modern parties do when in power, but was concerned with only how they do it. Weber granted that elections disturbed modern economic life, but he failed to consider how capi­talists responded to them.
 
If one looks at the detailed organizational structures of the ad­ministrative agencies created by the federal government from 1887 on, these agencies were seemingly neutral and Weber's argument may be vindicated. But if one regards their functions as a whole, and their genesis and original purposes, political bureaucracies are very much a part of the structure of political capitalism created in the United States during this period. Indeed, the formalization and independence from the legislative and executive branches imposed on many agen­cies was not due to a desire to find the technically best way of creating a bureaucracy, but to protect established economic interests from the buffeting theoretically possible in a political democracy with economic problems. Weber realized that monetary policy represented an important political intervention into the economy, but he ignored the implications of this fact to his conception of a modern capitalism that had "a horror" of political capitalism that relied on the govern­ment rather than "the harnessed rational energy of routine enter­prise.. . . .” 12 Capitalism, of course, was no longer able to fulfill its intense desire for rationalization, which Weber rightly ascribed to it, via private or personal methods. Even when discussing government regulation that patently contradicted his thesis he overlooked the pur­pose of such intervention-to attain stability, or profits, or even to preserve existing social relations.
 
Weber's discussion of economics, as opposed to the very distinct area of politics in modern society, was hardly more adequate. Weber did not really have an economic theory, although he discussed eco­nomics extensively. He dealt with the motives of capitalists and their personal qualities, and he discussed bureaucracy in a manner that frequently applied only to economic institutions. Yet he never came to grips with the crucial questions that preoccupied Marx: What were the laws of capitalist development, the working dynamics and tend­encies of the economy? Weber's references to economics, like vir­tually his entire system, dealt in categories that were timeless and more pretentious than Marx'. For this reason Weber was incapable of identifying economic weaknesses that might require the interven­tion of the state. The bureaucracy of the modern business, with its efficiency and expertise, created the conditions of rationalization re­quired by capitalism. So far as Weber was concerned, this self-regu­lation, along with intercorporate market agreements and monopolies, virtually exhausted the modem corporation's requirements. Market regulation by the state was largely assigned to past history, especially if it involved capital accumulation through political means. The state applied a limited set of laws uniformly, provided a suitable means of exchange by which rational economic accounting and calculation was possible, and left the rest to the capitalists themselves. Problems of crises, profit ratios, market insecurity, and those issues central to the general tradition of economic theory did not bother Weber very much, or at least he failed to relate them to his larger scheme. For this reason there is a certain lack of dynamics in Weber, an unneces­sary, too convenient simplicity that goes beyond even that inherent in his incessant use of typologies.
 
Weber was correct in suggesting that "North America has of­fered the freest space for the development of high capitalism," but very little in his grand system is of aid in providing insights into that development.13 He failed to take the role of ideas or interests in mod­ern politics seriously enough. He separated the process of rationaliza­tion in economics and technology from the role of the positive state, and failed to see their dependence on one another despite the fact that he recognized the political and economic elites were frequently interlocked. The economic sphere had its own imperatives, the politi­cal sphere its neutral justification of bureaucracy as an end in itself. Weber rejected the possibility that victorious political parties, ad­mittedly based on class interests, could determine the special form and direction economic, industrial, and political rationalization took. Instead, he imputed an internal, independent logic to developments in each of these areas that could ultimately be traced back to the theological origins of Western society. Weber ignored the genre of capitalists who, in addition to wanting a predictable political and industrial organization, also wanted one susceptible to aiding them in the process of profit-making via political means and favors, and to helping them attain industrial or financial rationalization. But such a group was crucial in shaping the American political experience in dcfining political issues.
 
Despite his many shortcomings, only Thorstein Veblen, of all tine American intellectuals of the Progressive Era, understood the main drift of American power relations in the period preceding the First World War. One can still read Absentee Ownership, published ix' 1923, with the utmost profit, for Veblen captured the indispensable reality of the domination of business over American politics, ethics, and the key institutions of society.
 
Veblen's concern with the material and industrial development of America focused on the vested legal and political institutions that were designed to preserve old social relations in new circumstances. He never ceased to reiterate the crucial fact that "the chief-virtually Sole-concern of the constituted authorities in any democratic nation is a concern about the profitable business of the nation's substantial citizens."14 Any administration had to represent the desires of big business, and Congress was little more  an a “Soviet of Business Men’s Delegates." Nowhere in the world did big businessman influence the entire fabric of society and culture as in America.
 
Yet, for all his perception, Veblen failed to grasp the structural realities of the economy which the businessman ruled, and instead offered a rather oversimplified view of the source of the business-man's domination. It was his contention that the commanding heights of American business had expanded to such an extent that they were controlled by absentee financial and credit interests who assigned managerial responsibilities in the corporations to bureaucratic types. Investment banking, and Morgan was its major practitioner, had managed to take over the economy. In discussing this development, however, Veblen ascribed a natural power to finance capital which it did not have in fact, and he was unable to do more than explain away the origins of federal regulation of the economy, and especially the Federal Reserve Board. In its genesis, Veblen suggested, the Fed­eral Reserve Board was an event that was somehow brought under control, to the profit of finance. This legislation, like all others, was rechannelized because the personnel of politics was ultimately safe, a perfectly valid point that nevertheless failed to explain why legis­lation was enacted in the first place. Veblen, in short, ascribed an
economic power to absentee ownership that ft in reality did not have, and his approach to federal legislation was to try to explain it away.
 
Despite his correct understanding of the nature of political leader-ship as it stood, Veblen did not appreciate the tensions that were nascent in any formally democratic politics, and the extent to which action was necessary to direct this tension into harmless channels. More significantly, he was unaware of insecurity in the economic sphere and the extent to which government intervention was designed to overcome it. This oversight was due to the fact that finance capi­talism had not developed to the degree he believed, and that the bask conditions in the economy were fluid to a larger extent than he appre­ciated. But for all this, Veblen was largely correct for the wrong reasons. The desire for security and predictability was real, and the efforts to attain it eventually produced~ the sort of centralization of decisions over the economy that Veblen ascribed to finance capital. The effects of federal regulation were conservative, even though Veblen slighted the intent. For all Veblen's deficiencies, his contribu­tion toward a theoretical comprehension of American history in this century has never been equalled.
 
 
 
Theory and the American Reality
 
The American experience justifies different theoretical conclu­sions than those reached by Marx, Weber, or Veblen. Any rea­sonable generalization on the phenomenon of progressivism must necessarily take into account the economic realities and problems of the period, and the responses that were set in motion. Yet the crucial factor in the American experience was the nature of economic power which required political tools to rationalize the economic process, and that resulted in a synthesis of politics and economics. This integra­tion is the dominant factor of American society in the twentieth cen­tury, although once political capitalism is created a dissection of causes and effects becomes extraordinarily difficult. The economy had its own problems, dictated by technological innovation, under­consumption, crises, and competition. But these difficulties were in­creasingly controlled by political means to the extent that the consideration of economic problems outside their political context is meaningless. The "laws of capitalist development" were not self-contained imperatives in the technological, economic, or political sphere, but an inseparable unification of all three elements.
 
The object of such a combination was not merely capital accumulation, although it was that as well, but a desire to defend and exercise power through new media more appropriate to the structural conditions of the new century: the destructive potential of growing competition and the dangerous possibilities of a formal political democracy that might lead to a radical alteration of the distribution of wealth or even its total expropriation. Politics and the state become the means of attaining order in the economic sphere and security in the political arena. And they were accessible tools because the major political parties and leaders of the period were also con­servative in the sense that they believed in the basic value of capitalist social relations-of some variation of the status quo. The resilience of capitalism, under these circumstances, becomes something that cannot be evaluated in isolated economic terms. Behind the economy, resting on new foundations in which effective collusion and price stability is now the rule, stands the organized power of the national government. The stability and future of the economy is grounded, in the last analysis, on the power of the state to act to preserve it. Such support does not end crises, nor does it eliminate antagonisms inherent in the very nature of the economy, but it does assure the ability of the existing social order to overcome, or survive, the consequences of its own deficiencies. The theory of the national government as a neutral intermediary in its intervention into the eco­nomic process is a convenient ideological myth, but such a contention will not survive a serious inquiry into the origins and consequences of such intervention. The rhetoric of reform is invariably different than its structural results. Such mythology is based on the assump­tion that those who control the state will not use it for their own welfare.
 
It is important to stress that under conditions of political capital­ism the form of the industrialization process, and of the political machinery of society, take on those characteristics necessary to nil-fill the peculiar values, attributes, and goals of the ascendant class of that society. The rationalized, dominated, and essentially totali­tarian decision-making process is not a consequence of forces inherent in industrialism, but in political capitalism in all its components. The organization of industry is based on the decisions of men whose motives have nothing whatsoever to do with inexorable destiny. Mergers, the scale of effective production, the nature of the produc­tion itself, and the direction given to the fruits of technology-all these were decisions made by men whose motives, interests, and weaknesses were peculiar to the basic capitalist assumptions upon which they operated. Their errors were many, as were the possibili­ties for their failure; but the national government stood behind them so that the consequences of their mistakes would not be calamitous. Perhaps industrialization would not have permitted democratic con­trol and direct participation in the work process under any circum­stances. All one can do is point to the large extent to which the concentration of industry in this period had nothing to do with con­siderations of efficient technology, and suggest that no effort whatso­ever was ever made to democratize the work situation and industrial control, much less consider the desirability of reducing technological efficiency, if necessary, in such a way as to make decentralization or workers' control possible.
 
Nor is there any evidence to suggest that the bureaucratization of the political machinery of society, to the extent it took place, was as inevitable as the concentration of industry. It was perfectly logical for men who had spent years solving their economic problems or making their fortunes through political means to also welcome the intervention of a centralized state power to meet problems they could not solve themselves. Social forces, dynamic institutional factors, were the cause of bureaucratic developments in the form of new political agencies and the strengthening of many of the older ones. American capitalism was not merely interested in having law that operated like a piece of machinery, as Weber suggested, but in uti­lizing the state on terms and conditions which made bureaucratic functions class functions. Bureaucracy, in itself, needed a power base in order to operate in a roughly continuous, systematic fashion. Since it had no economic power itself, it had to support, and hence be supported by, powerful economic groups. This was especially true in a situation where the conditions of political activity were defined by political parties which in turn reflected economic interests, or where the idea of the bureaucracy originated with those operating in the very &ea in which the bureaucracy was to function.
 
The skeptical reader may ask whether political capitalism changed after 1916, or perhaps whether capitalism was made more socially responsible by virtue of the stability and rationalization it attained through political means. The question is a moot one, and would take at least one more volume to answer properly. All one can do is point to the continuity in the nature of the political parties and their key leaders, but, more important, to the perpetuation of the same dis­tribution of wealth and the same social relations over the larger part of this century. The solution of economic problems has continued to take place in the political sphere, and the strength of the status quo is based ultimately on the synthesis of politics and economics. Crises have been overcome, or frozen, as much by the power of the state as by internal economic resources applied by business in isolation.
 
The question remains: Could the American political experience, and the nature of our economic institutions, have been radically dif­ferent than they are today? It is possible to answer affirmatively, although only in a hypothetical, unreal manner, for there was nothing inevitable or predetermined in the peculiar character given to indus­trialism in America. And, abstractly regarding all of the extraneous and artificial measures that provided shape and direction to American political and economic life, and their ultimate class function, it would be possible to make a case for a positive reply to the question. Yet ultimately the answer must be a reluctant "No."
 
There can be no alternatives so long as none are seriously proposed, and to propose a relevant measure of fundamental opposition one must understand what is going on in society, and the relationship of present actions to desired goals. To have been successful, a move­ment of fundamental change would have had to develop a specific diagnosis of existing social dynamics and, in particular, the variable nature and consequences of political intervention in the economy. It would have, in short, required  a set of operating premises radically different than any that were formulated in the Progressive Era or later. Populism rejected, on the whole, the values of business even as it Was unable to articulate a viable alternative. Intellectually it left a vacuum, and, more important, the movement was dead by 1900. The Socialist Party suffered from the fetishistic belief in the necessity of centralization that has characterized all socialist groups that interpreted Marx too literally, and it had a totally inaccurate estimate of the nature of progressivism, eventually losing most of its followers to the Democrats. The two major political parties, as always, differed on politically unimportant and frequently contrived details, but both were firmly wedded to the status quo, and the workers were generally their captives or accomplices. No socially or politically significant group tried to articulate an alternative means of organizing industrial technology in a fashion that permitted democratic control over cen­tralized power, or participation in routine, much less crucial, de­cisions in the industrial process. No party tried to develop a program that suggested democracy could be created only by continuous mass involvement in the decisions that affected their lives, if the concen­tration of actual power in the hands of an elite was to be avoided. In brief, the Progressive Era was characterized by a paucity of alternatives to the status quo, a vacuum that permitted political to direct the growth of industrialism in America, to shape its politics, to determine the ground rules for American civilization in the twen­tieth century, and to set the stage for what was to follow.

 
NOTES
  1. Paul Mattick, “Marx and Keynes,” Cahiers de L’Institut de Science Economique Appliquee: Etudes de Marxologie, No. 5 (Januiary, 1962), 113-212.
  2. Karl Marx, Capital (Chicago, 1906), I, 14-15.
  3. Ibid., 532.
  4. Ibid., 787, 838.
  5. Ibid., 263,296, 298, 304, 524-25.
  6. Karl Marx, Capital (Moscow, 1959), III, 772.
  7. Engels, Anti-Dühring, 211,226.
  8. F. Engles, The Origins of the Family, Private Property and the State (Moscow, 1954), 281-82.
  9. I have criticized Weber in greater detail in “A Critique of Max
    Weber on America: Theory and Evidence,” History and Theory, I (1961), 243-60.
  10. Max Weber, Law in Economy and Society (Cambridge, 1954), 304-05. Also see Max Weber, The Theory of Social and Economic Organization (New York, 1947), 278.
  11. H. H. Gerth and C. Wright Mills, eds., From Max Weber: Essays in Sociology (London, 1948), 215.
  12. Max Weber, The Religion of China (Glencoe, 1951), 247.
  13. Ibid., 249.
  14. Thorstein Veblen, Absentee Ownership (New York, 1923), 36-37.