Fiduciaries, Federalization, and Finance Capitalism: Berle’s Ambiguous Legacy and the Collapse of Countervailing Power

This Article engages problematic interpretations of Berle\u27s thinking, as well as their implications for understanding Berle’s legacy and its relevance to some of the most critically important contemporary dilemmas of American law, policy, and politics. . . . Characterizing the New Deal, let alone the political economic and regulatory regime that emerged as its lasting legacy, as corporatist is imprecise, prone to misunderstanding, and largely erroneous. The misuse of corporatism as a term not only misconceives neocorporatism as a theory of governance and political economic ordering, but also obscures its core institutional and juridical attributes along with the variety of its historical and existing forms across much of the industrialized world. Still worse, the increasingly common description of contemporary economic and regulatory policy as corporatist is polemical, rather than analytical. The imprecise use of the term corporatist does not merely distort our understanding of Berle and his times, it also, and more importantly, distracts our attention from the salient, enduring features of the American political economy and a regulatory and administrative state that appears increasingly inadequate for addressing the causes and consequences of our recent catastrophic financial crisis. . . . Berle’s thinking was not informed by corporatist theories, nor was it an adaptation of corporatist-type principles of institutional design and governance to the level of the corporation. Further, his advocacy of national economic planning through quasi-corporatist arrangements during the early New Deal reflected a contradictory and often vague conception of how such arrangements should be structured and function with respect to the role of the state, business interests, and formal rules. The ambiguities of Berle’s intellectual legacy can be clarified by viewing it in the context of the rise and fall of “countervailing power” in the American political economy. John Kenneth Galbraith identified countervailing power in 1952 as a pervasive structural feature of the postwar economic order that served as a crucial means of stabilization and legitimation. This concept referred to the largely spontaneous and market-driven emergence of increasingly organized opposing interests within the economy that were capable of bargaining with each other on roughly equal terms. The consequent balance of economic power effected by these countervailing organizational interests ameliorated threats to both the economic and political order posed by the massive concentration of unconstrained managerial power made possible by industrialization and the rise of the large publicly held corporation. Within the postwar economic regime of countervailing power, corporate management was situated within a comprehensive set of market relationships that limited managerial discretion and promoted the development of a form of corporate and sectoral organization, as well as an accompanying management style, that tamed the self-serving excesses of managerial and financial elites. . . . This Article also discusses the economic crisis of the 1970s and the takeover wave of the 1980s as pivotal in the collapse of countervailing power and the emergence of a new form of neoliberal finance capital. The Article concludes by showing how this political economic order has developed and imploded in ways that recapitulate many of Berle’s political and economic critiques of corporate power, unregulated markets, and the role of the state and law in ameliorating the excesses and crises of capitalism