decomposition of capital

The process by which, in advanced Western capitalist societies, ownership of the means of production has come historically to be dispersed throughout a greater proportion of the population. In the classic statement of this thesis ('s Class and Class Conflict in Industrial Society, 1959), there is an increasing separation of ownership and control. Subsequent sociological studies investigated, and debated, the empirical relationship between the two.

A number of interpretations have been offered. At one extreme, John Kenneth Galbraith (The New Industrial State, 1967) argues that, as a consequence of growth in the scale of production, corporations become increasingly capitalized, to the point at which only the wealthiest of individuals can own anything other than a minimal stake in the ownership of the large corporation. The number of individuals holding shares therefore increases such that no individual, or even group of individuals, can have a controlling interest. This long-term process of dispersal creates a power vacuum which can only be filled by a professional salaried management . At the other extreme, Sam Aaronovitch (The Ruling Class, 1961) maintains that the characteristic form of advanced capitalism is a fusion of monopoly capital in banking and manufacturing into ‘finance capital’, or capital not restricted to one sphere of industry. Banks, insurance companies, pension funds, investment trusts, manufacturing, and other commercial corporations all own shares in each other. These cross-shareholdings are reinforced by a complex web of interlocking directorships-and sometimes by kinship and friendship ties-which restricts ‘effective ownership’ to a financial oligarchy , comprising only a few hundred or few thousand individuals, organized into financial groups or knots of financial power.

Considerable research effort has been expended in the attempt to specify the size and shape of these knots. How much, and which parts, of a corporation need to be organized into a co-ordinated financial grouping before strategic control of a particular corporation can be secured? The most convincing answer to these questions will be found in the works of John Scott (see especially Corporations, Classes and Capitalism, 2nd edn., 1985, and Capitalist Property and Financial Power, 1986). These studies identify empirically the varied modes of corporate control, including that of the ‘constellation of interests’. This is found in enterprises where financial intermediaries are the dominant shareholders, but none is able, individually, to exercise minority control. Where the largest twenty voting shareholders collectively hold sufficient shares for minority control, these comprise a diverse ‘constellation of capitalist interests’, and no stable coalition can exercise full powers of minority control. In this situation, the members of the Board of Directors can ‘achieve some degree of autonomy from any particular interest’. Scott's work demonstrates that the dynamics of this situation alone reveal the relationship between ownership and control to be much more complex than either of the earlier interpretations would suggest. See also bourgeoisie ; interlocking directorate.