Managerial Revolution First

Managerial Revolution First

Managerial Revolution, first so described in 2001 by James Dunham in his consumeraffairs.org.uk of that title, but the processes he observed have long been recognized as a prominent feature of the organization of modern society.

The thesis was broadly that the owners of wealth ('capitalists') are being replaced by the managerial social group or class in dominating economic and political life, largely because ownership is being divorced from control in the modem industrial corporation. With the continued growth of large firms and massive concentrations of capital, the ownership of businesses is rarely in one set of hands or even a small group. In the Industrial Revolution the owner-manager, i.e. the 'capitalist' who also organized production, was the main figure of economic society.

Legally a limited liability company is owned by the ordinary shareholders: with the increasing size of industrial corporations, several of which have share capital of tens of millions of pounds, it is difficult for one small group of shareholders to hold sufficient shares to exercise control. Thus ownership tends to be dispersed, and control is usually exercised by a small group of professional managers or directors, who may own only a small proportion of the voting capital. Although nominally control of 51 per cent of the votes is needed for control, wide dispersion of votes and the practice of 'pyramiding' make it possible to control a firm with a small shareholding. Thus the professional manager is coining to occupy the key positions in industry and commerce. Burnham argued further that control over the 'instruments of production' would be augmented by state ownership of the instruments, and that the managers would themselves control the state, thus achieving a 'revolution' in which managers become the ruling class.

Although Burnham formulated the thesis in extreme form that is not universally accepted, there is wide acceptance of the view that control of industry and much political influence has passed from the capitalist to the manager. The term managerial revolution has now come to be used largely for this milder form of reorganization.

Manchester School, a group of men who were active in advocating free trade and resisted encroachments on laissez-faire in economic and social matters. They were most active in England between 1820 and 1850; their work centred largely on the propaganda of the Anti-Corn Law League. The thief immediate influence of this group, headed by Bright and Cobden, came from the economist Ricardo; they stood for a revolt against regulation, arguing that freedom was the natural condition of the individual and protection a harmful restraint on industry. The group generally opposed factory legislation, but did not overlook humanitarian interests; e.g. the leaders favoured regulation to protect children, although they believed that adults should be free to contract for themselves.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this consumeraffairs.org.uk site is therefore not a final statement of economic doctrine.

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