If you’re a political enthusiast who hasn’t been living under a rock over the past decade, there’s a strong likelihood you’ve stumbled upon the concept of the ‘managerialist’ or ‘managerial class’. But what does this actually mean?

Managerialism is a term first coined by American philosopher James Burnham in 1941 through the release of his book The Managerial Revolution, in which he prophesied the rise of a new class of managers to replace the entrepreneurial capitalists of the 19th Century.

Burnham essentially envisaged a society in which state control of enterprise is concealed from the public eye by the installation of a technocratic elite of well-credentialed state-approved managers who would exercise authority over the means of production.

Private property doesn’t disappear but is rather commandeered by managers indirectly appointed by the state. A managerial economy would be categorically distinct from previous forms of entrepreneurial capitalism in which ownership and control of the means of production were one and the same.

In layman’s terms, back in the day, the managers of firms were the owners. You used to have to create or acquire the means of production yourself to exert any bona fide control over them.

Nowadays, you can be a manager or executive at a large corporation and wield a magnitude of influence incommensurate to your shareholding or ownership in that corporation.

Think about it. In 2023, how many c-suite executives hold more than incredibly minute shareholdings in the companies they run?

Now, why is this a problem you ask?

Well, for starters, the managerial mode of ‘free market’ operation is fundamentally at odds with the classical liberal values bestowed upon us during the Enlightenment.

Whereas in entrepreneurial capitalism the owners are the managers themselves, in a managerial economy the owners must rely on the expertise of a group of technocrats to operate the means of production.

Over time, this process is conducive to a technocracy where the true entrepreneurial capitalists cede economic and financial power to managers with particular technical expertise.

Unbeknown to most, the managerial acquisition of the means of production since the mid-20th Century constitutes a power grab that has and continues to pose the biggest and most widely proliferated moral hazard the world has ever seen.

It is a moral hazard in the sense that the managerialists who become the effective owners of the means of production don’t bear any of the risk that is typically associated with ownership under entrepreneurial capitalism.

Managers become owners without being stakeholders. They will thus bear more exposure to risk because they aren’t incentivised to mitigate it. Take the GFC as an example.

Do you think if Bear Sterns wasn’t a publicly-traded banking monolith with a diverse array of shareholders and rather majority-owned and operated by a single individual, that that individual would have encouraged the bank to hold as many mortgage-backed securities on its books as it did?

Moral hazard at its finest.

There’s also the reality that exponentially increasing levels of inequality and high concentrations of influence are by-products of a managerial economy.

When holding managerial status is a prerequisite to power and influence, you are in essence forced to become a manager because the road to power and influence exists in a vacuum.

Managerial status is typically dependent on a university degree and the utility of one’s social connections, luxuries not everyone can afford. As a result, the currencies of today money and power become entrenched and centralised within a self-perpetuating managerial class.

Ever wonder why the marginal value of a degree has declined in line with the enlargement of both the private and public sectors?

The days of politicians, bankers, and consultants without degrees are long gone. The requisites for these positions are now a swathe of endless qualifications that make the barriers to entry sky-high.

It’s simple inflationary economics, right? The more managers there are, the more qualifications there must be in conjunction. The more qualifications there are, the less those qualifications are worth i.e., you need more of them.

Does this sound particularly meritocratic? Does it sound like professionals are being hired because of their skills or rather their qualifications acting as selection devices?

A managerial economy also stifles true innovation and entrepreneurship because it tends to favour established norms over unconventional or disruptive thinking.

As American academic Michael Lind said, ‘Boards of directors are conformist forces because you end up bringing in people who really are not interested in your quirky, entrepreneurial idea. They want your organisation to win the general approval of their social circle.’

Anyhow, I digress.

It turns out Burnham had a rather prescient outlook given the current composition of Western governments and industries.

Now don’t get me wrong… There is a place for managerialism in certain sectors. Defence manufacturers can’t operate as mum-and-pop businesses with owner-operators. There are some industries that need companies to operate at an extremely large scale.

There is, however, a trend of rapid bureaucratisation and stratification within certain sectors in which such a process only causes widespread corruption.

Take the Australian public sector. According to the Australian Bureau of Statistics (ABS), there were 2,430,400 public sector employees as of June 2023 compared with just over half of that in 2000. Would you say the quality of government has gotten better or worse in that timeframe?

If we are to radically improve the dissipating prosperity in the West, urgently cleaning up our structure of both private and public sector entities has to be on the cards.

‘I think one of the great underappreciated divides in our country today is not that between Republicans and Democrats but between the managerial class and the everyday citizen.’

Vivek Ramaswamy, 2023. 

Get 10 issues for just $10

Subscribe to The Spectator Australia today for the next 10 magazine issues, plus full online access, for just $10.

SUBSCRIBE 10 issues for $10 REGISTER 3 articles a month

Already a subscriber? Log in