Community Power Structures

excerpted from the book

Who Rules America Now?

by G. William Domhoff

Touchstone Books, 1983



... leaders within a local area join together as a community power structure because they share a mutual interest in increasing the value of their land, buildings, and other real estate through intensifying land use and creating population growth.

Community power structures attempt to achieve their growth aims by attracting the capital investments of corporations, state and federal agencies, and universities and research institutes. This need for outside investors creates a basis for cooperation between local landed elites and the corporate community.


A theoretical framework for encompassing the diverse and seemingly contradictory findings on power at the local level has been suggested by urban sociologist Harvey Molotch. Surveying the separate literatures on city development and community power structures, Molotch concludes that a community power structure is at bottom an aggregate of land-based interests that profit from increasingly intensive use of land. It is a set of property owners who see their futures as linked because of a common desire to increase the value of their individual parcels. Wishing to avoid any land uses on adjacent parcels that might decrease the value of their properties, they come to believe that working together is to the benefit of each of them: "One sees that one's future is bound to the future of the larger area, that the future enjoyment of financial benefit flowing from a given parcel will derive from the general future of the proximate aggregate of parcels," Molotch writes. "When this occurs," he continues, "there is that 'we feeling' which bespeaks of community."

The most typical way of intensifying land use is growth, and this growth usually expresses itself in a constantly rising population. A successful local elite is one that is able to attract the corporate plants and offices, the defense contracts, the federal and state agencies, or the educational and research establishments that lead to an expanded work force, and then in turn to an expansion of retail and other commercial activity, extensive land and housing development, and increased financial activity. It is because this chain of events is at the core of any developed locality that Molotch calls the city and its local elite a "growth machine."

The most important activity of a community power structure in this view is to provide the right conditions for outside investment-in Molotch's phrase, to prepare the ground for capital. However, this preparation involves far more than providing level and plentiful acreage with a stream running through it. It also involves all those factors that make up what is called a "good business climate," such as low business taxes, a good infrastructure of municipal services, vigorous law enforcement, an eager and docile labor force, and a minimum of business regulations. Molotch stresses that the local "rentiers" expend considerable effort in keeping up with the changing place needs of corporate capital:

To better understand the needs of capital, and hence to better prepare the ground for them, sophisticated rentiers may take business school courses, read relevant trade journals, make use of their social ties with local capitalists, foster studies at the local university, governmental, or planning agency, or, as is most common, use their own "good business sense." The point is that they maintain an attitude of constant alert to the needs of this dominant class.

Although the growth machine is based in land ownership, it includes all those interests that profit from the intensification of land use. Thus, executives from the local bank, the savings and loan, the telephone company, the gas and electric company, and the local department store are often quite prominent as well. As in the case of the corporate community, the underlying unity within the growth machine is most visibly expressed in the intertwining boards of directors among local companies. And, once again, the central meeting points are most often the banks, where executives from the utilities companies and the department stores meet with the largest landlords and developers.

There is one other important component of the local growth machine, and that is the newspaper. The newspaper is deeply committed to local growth so that its circulation and, even more important, its pages of advertising, will continue to rise. No better expression of this commitment can be found than a statement by the publisher of the San Jose Mercury News in the 1950s. When asked why he had consistently favored development on beautiful orchard lands that turned San Jose into one of the largest cities in California within a period of two decades, he replied, "Trees do not read newspapers."

However, the unique feature of the newspaper is that it is not committed to growth on any particular piece of land or in any one area of the city, so it often attains the role of "growth statesman" among any competing interests within the growth machine. Its publisher or editor is deferred to as a voice of reason.

Competing interests often regard the publisher or editor as a general community leader, as an ombudsman and arbiter of internal bickering, and at times, as an enlightened third party who can restrain the short-term profiteers in the interest of a more stable, long-term, and properly planned growth. The paper becomes the reformist influence, the "voice of the community," restraining the competing subunits, especially the small-scale arriviste "fast-buck artists" among them.

The local growth machine sometimes includes a useful junior partner-the building trade unions. These unions see their fate tied to growth in the belief that growth creates jobs. They often are highly visible on the side of the growth machine in battles against environmentalists and neighborhood groups. Although Molotch shows that local growth does not create new jobs in the economy as a whole, which is a function of corporate and governmental decisions beyond the province of any single community, it does determine where the new jobs will be located. For that reason it is in the interest of unions to help their local growth machine in its competition with other localities.

Those who make up the local growth machine are able to have it both ways. At the state and national levels they support those politicians who oppose, in the name of fiscal and monetary responsibility, the kinds of government policies that might create more jobs, whereas at the local level they talk in terms of their attempts to create more jobs. Their goal is never profits, but only jobs:

Perhaps the key ideological prop for the growth machine, especially in terms of sustaining support from the working-class majority, is the claim that growth "makes jobs." This claim is aggressively promulgated by developers, builders, and chambers of commerce; it becomes part of the statesman talk of editorialists and political officials. Such people do not speak of growth as useful to profits-rather, they speak of it as necessary for making jobs.

The growth machine hypothesis leads to certain expectations about the relationship between power structures and local government. Rather obviously, the primary role of government is to promote growth according to this view. "It is not the only function of government," writes Molotch, "but it is the key one and ironically the one most ignored."


The most significant policy undertaken by a wide range of cities since World War II was that of urban renewal. Since 1954 urban renewal programs have changed the face of many downtown areas and displaced millions of low-income citizens. The programs have led to lawsuits, demonstrations, and sit-ins by liberals, university students, blacks, and senior citizens. If there is anything to the growth machine hypothesis, the origins of this program at the national level, and the implementation of it in different cities, should reveal the guiding influence of the growth machine, for what these programs do is to clear downtown land of low-income housing and small buildings so that central business districts and such major institutions as universities and hospitals can be expanded and enhanced.

The urban renewal program had its shaky origins in the Housing Act of 1949, but it did not get under way in a serious fashion until 1954, when the Eisenhower administration made several changes in the law. Our analysis of the events leading up to this legislation and the subsequent amendments reveals a conflict between two contending forces, one of which was rooted in local growth machines. The other was the liberal-labor coalition.

The liberal-labor coalition was concerned with creating more housing for the poor. This concern manifested itself in terms of programs for public housing, subsidized housing, and the rehabilitation of slums. The coalition was opposed by downtown business interests, who were concerned with protecting real estate values and creating more space for the expansion of businesses and other large institutions. There was some overlap in the two camps, created by the many liberal planners who also shared some of the business perspective and the few farsighted businesspeople who were willing to grant the need for some housing programs within an overall urban renewal program. But at their cores the two groups were fundamentally opposed. The prohousing group saw the business interests as "the reactionary real estate lobby," which was embodied in the U.S. Savings and Loan League, the Mortgage Bankers Association, the National Association of Real Estate Boards, and the real estate committees of the Chamber of Commerce of the United States. Those in the real estate lobby called the public housing advocates "the housers" and often claimed their programs were socialistic or communistic.

The first federal legislation related to this conflict, the Housing Act of 1937, was a redevelopment program for low-income housing that provided federal aid to municipal housing authorities. While modest in size, there were 200,000 people living in these federally aided projects by 1941, and there was vigorous opposition to this liberal initiative from the real estate interests. Not only did it ignore their interest in downtown expansion, but it posed a mild threat to real estate values because the administrator of the housing authority preferred to build public housing on vacant land. By building outside of slum areas, the liberal director of the United States Housing Authority, a wealthy real estate owner from New York who knew the business well, was trying to deflate land values. As he later wrote:

It would indeed have been a betrayal of a public trust to allow the USHA program to become a means of bailing out owners of slums at "values" of three, five, or ten dollars a square foot when such fictitious values arose out of use of property in a manner which was dangerous to the health of tenants and detrimental to the well-being of the community. The USHA program accordingly was planned to enable local authorities to build some of their projects on low-cost land outside of slum areas.

It was about this time that downtown business interests and real estate developers, with the aid of economists and planners, began to develop their own plans for the inner city, partly to counteract the liberal housing program but also to find a way to clear expensive land for their own growth plans. As urban analyst Jeanne Lowe writes in her colorful history of urban renewal, which sometimes becomes an encomium to the pioneers in urban renewal:

Business interests, particularly downtown property owners and realtors, wanted a clearance and rebuilding program that would be on a more "economic" basis-that would allow private entrepreneurs to participate as developers; permit reuses other than public housing especially in centrally located slum areas; and let cities reap the higher tax returns which private developers promised. Equally important, these interests had come to accept the fact that in order to assemble land for feasible rebuilding, local government's power of eminent domain would be required to eliminate hold-out prices.

Even with the power of eminent domain, however, it was likely that the high cost of slum land would make it too expensive for those who wanted to renew and expand downtown areas. The answer to this financial problem was provided in the early 1940s by two economists, Alvin Hansen and Guy Greer. Their work was part of the large-scale postwar planning already under way in 1940-1942 under the auspices of three national-level policy-planning organizations, the Council on Foreign Relations, the Committee for Economic Development, and the smaller and more liberal National Planning Association. From the point of view of these organizations, urban renewal was one of several spending programs that might be utilized if economic depression returned after the war.

The general Greer-Hansen proposal for redeveloping the cities was very similar to one developed at the national level by planners at the Urban Land Institute, the national-level policy-planning organization of the real estates interests, but with one major difference. Hansen and Greer suggested that the federal government might have to pay much of the cost for buying and clearing the land instead of merely granting long-term loans, as in the Urban Land Institute plan. Local government was to pay the remainder of the cost, which was set at one-third when the act was passed several years later. The land would then be leased (under the Hansen-Greer plan) or either leased or sold (under the Urban Land Institute plan) to private developers at a lower price than the government had paid, a lower price that supposedly reflected the true earning power of the land when redeveloped. In other words, small property holders, mortgage holders, and slumlords would be bought out at a handsome price by the government, and the bigger real estate interests would be able to obtain the land at a reduced price that supposedly was necessary if they were to make a reasonable profit with non-slum structures. The difference was to be absorbed by the ordinary taxpayer.

Greer and Hansen realized that the new plan might be viewed by some as "a bail-out of the owners of slum properties and the lending institutions that held the mortgages." They therefore argued that "the social and economic mess" that had been left by "past generations" was something for which "society as a whole can be held mainly to blame." This rather general argument was not appreciated by such liberals as the U.S. Housing Authority administrator already quoted:

The high profits obtained from slum properties, the dogged insistence of slum-owners on their right to maintain housing which flagrantly violates human decencies, the high returns derived from this method of operation, and the high capitalized value placed on the properties- these are typical conditions throughout the country. In view of the facts the thesis that society is to blame for slum conditions and that there is moral justification for using the taxpayer's funds to bail out owners of the slums is hardly tenable.

The conservative real estate interests had different reservations about the program, but they were tempted by it. They were opposed in principle to federal interference, and they feared the guidelines that might be tied to any federal handouts, but they decided they could live with the basic proposal if certain changes could be made and the emphasis on housing kept to a minimum.

The Hansen-Greer proposal was included in new legislation introduced into the Senate in 1943, and a slightly different bill was introduced later in the same year by the Urban Land Institute. Hearings on the ideas contained in the two bills were first held in 1944-1945 before the Special Subcommittee on Post-War Economic Policy and Planning. In the legislative struggle that ensued, the prohousing interests were able to place a great emphasis on housing construction by introducing the requirement that residential areas that were cleared had to be returned to predominantly residential uses, with predominantly being eventually defined as over 50 percent. This requirement was vehemently opposed by the real estate lobby, but it was unable to have it removed. The lobby thus worked to block passage of the bill and was successful in doing so until 1949.

The bill as finally passed contained two important concessions to the real estate interests. They were introduced as amendments early in 1948 by a moderate Republican, Senator Ralph Flanders of Vermont, a major industrialist who was also one of the top leaders in the Committee for Economic Development. The first change mandated that federal money be given to the local community in one lump sum, which made it more difficult for federal agencies to monitor the local program in any detail. The second change allowed city-cleared land to be sold as well as leased to private developers. This concession, which had been part of the original Urban Land Institute proposal, was essential to leaders of the growth machine because it made it possible for private entrepreneurs, rather than the city, to realize the gains from long-term increases in land values. Liberals and moderates, fearing fiscal crisis for the cities, wanted to give them a more secure financial basis by letting them share in the profits of ownership, but the conservatives wanted no part of such a plan. They wanted all the profits, and they wanted city officials dependent on them.

Because the final bill still contained the strong emphasis on housing, the defeated real estate lobby moved to block its implementation through its strong influence with the Appropriations Committee in the House. It also suggested to local leaders that they lobby for passage of state legislation that would allow them to set up local redevelopment agencies that could compete with local housing authorities for federal grants. This plan by the Urban Land Institute, created in the mid-1940s, had been developed in anticipation of a possible defeat at the hands of the liberals at the national level.

The outbreak of the Korean War also contributed to the delay in starting the program, diverting money and attention away from the program. Then, too, developers were very leery that protests might flare up over programs that were going to tear down people's houses with no guarantee of where and when new ones would be completed. The result, as Lowe recounts, is that very few urban renewal programs of any consequences were in process by 1954. Put in this national context, Dahl's emphasis on local leadership in explaining delays in the New Haven program up to that point is muted considerably. "Redevelopment proved doggedly slow in getting started," Lowe writes, "in spite of the apparently attractive opportunity that Title I [of the Housing Act] presented to private enterprise and the cities themselves.... The pertinent fact here is that by 1954, few municipalities had been able to take a redevelopment project beyond its initial planning stage."

The advent of the Eisenhower administration in 1952 raised the possibility that the real estate interests could change the law to their liking, and their opposition to the program began to soften. The first step in this process was the creation of a presidential commission in 1953 that was dominated by bankers, savings and loan officials, and real estate and development leaders. When their suggestions, in the form of a commission report, were brought to Congress, there was little or no protest from any business groups, although conservative southern congressmen continued to register their disagreement.

The key change suggested by the commission was to create an exception to the rule that residential areas had to be restored to predominantly residential usages. The new provision allowed another 10 percent of urban renewal grant monies for a given project to be used for nonresidential uses. The commission also proposed that the program should encompass slum prevention as well as slum clearance. In practical terms, this made it possible for a plan to encompass areas that were not run down by claiming they would become slums if they were not part of the redevelopment program.

The combination of these two provisions freed local growth machines to move ahead with their plans. Requests for money burgeoned, and numerous programs got under way. The gradual enlargement of the exception rule made the program even more attractive. It was increased to 20 percent in 1959, to 30 percent in 1961, and to 35 percent in 1967. The real estate lobby had won a complete victory over the housers even though it took them a long time to do so. As urban sociologist Scott Greer succinctly summarized the legislative struggle between 1937 and the early 1960s, "the slum clearance provisions of the Housing Act of 1937 have been l ~ slowly transformed into a large-scale program to redevelop the central city."

The differentiation between a national corporate community based in production and local growth machines based in land use, provides a more subtle, less monolithic picture of power in America. At the same time, it shows once again that the politics of America, at whatever level, is mostly business in one form or another.

... dominant power in the United States is exercised by a power elite that is the leadership group of a property-based ruling class. Despite all the turmoil of the 1960s and 1970s, and the constant chatter about economic crisis that is ever with us, there continues to be a small upper class whose members own 20 to 25 percent of all privately held wealth and 45 to 50 percent of all privately held corporate stock. They sit in seats of formal power from the corporate community to the federal government, and they win much more often that they lose on issues ranging from the nature of the tax structure to the stifling of reform in such vital areas as consumer protection, environmental protection, and labor law.

Who Rules America Now?

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