Technostructure

Technostructure is a term coined by the economist John Kenneth Galbraith in The New Industrial State (1967) to describe the group of technicians within an enterprise (or an administrative body) with considerable influence and control on its economy. It usually refers to managerial capitalism where the managers and other company leading administrators, scientists, or lawyers retain more power and influence than the shareholders in the decisional and directional process.

The power struggle between the technostructure and the shareholders was first evoked by Thorstein Veblen in "The Theory of the Leisure Class" (1899), questioning who, among the managers and the shareholders, should control the enterprise. At the time and until the end of the 1980s, the shareholders, unable to effectively regroup and organise themselves, could not exert enough pressure to effectively counter the managerial decision-making process. After the Second World War, the rapid augmentation of shareholders further diluted their collective power. This was perceived, by Galbraith, as a divorce between the property of the capital and the direction of the enterprise.

Since the technostructure is composed of an hierarchical system of influential employees inside the enterprise, its primary goal is not to maximize their profits but rather survival, continuous growth and maximal size. While it must maintain acceptable relations with their shareholders, hegemonic growth is more beneficial to the technostructure.

The lack of control of the technostructure resulted in managerial abuse notably on its salaries during the economic crisis of the 1970s. It prompted support for new economic ideologies like the School of Chicago under Milton Friedman. Furthermore, the Employee Retirement Income Security Act of 1974 forced a much greater transparency from businesses and possible opposition to their decisions. In the 1980s, the rising and influential neoliberal ideology decried the divorce between the capital and the decisions. Based on the belief of a new emerging economy, neoliberal economic theories were introduced at the end of the 1980s forcing managerial capitalism to yield to the shareholders.

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