Burnham was an outstanding teacher and some of his students arranged for him to meet Earl Browder. "Some of the leaders of the Young Communist League, who had read his articles and enrolled in his classes, were so impressed that they arranged a meeting between him and Earl Browder, who smooth-talked Burnham out of most of his doubts about the Communist Party. Burnham's conversion was a very near thing. Although I wrestled for his soul, I would have lost but for two things. Browder had managed to allay all of Burnham's fears about the inappropriateness of the Communist program in America except on one point-self-determination for the Black Belt, the call for a Black Republic in the South. That stuck in Burnham's craw."

Burnham then came under the influence of Gerry Allard. "During that period, he met Gerry Allard, whose colorful life as a militant working-class leader, embattled on many fronts, against the coal mineowners, against John Lewis, and against the Communist Party disrupters, fascinated Burnham. He saw in Allard the apotheosis of the class-conscious proletariat." Allard persuaded Burnham to join the American Workers Party (AWP). Established in December, 1933, Abraham Muste became the leader of the party and other members included Louis Budenz, James Rorty, V.F. Calverton, George Schuyler, and J. B. S. Hardman.

Sidney Hook, another member, later argued: "The American Workers Party (AWP) was organized as an authentic American party rooted in the American revolutionary tradition, prepared to meet the problems created by the breakdown of the capitalist economy, with a plan for a cooperative commonwealth expressed in a native idiom intelligible to blue collar and white collar workers, miners, sharecroppers, and farmers without the nationalist and chauvinist overtones that had accompanied local movements of protest in the past. It was a movement of intellectuals, most of whom had acquired an experience in the labor movement and an allegiance to the cause of labor long before the advent of the Depression."

Soon after Burnham joined the AWP, leaders of the Communist League of America (CLA), a group that supported the theories of Leon Trotsky, suggested a merger. Burnham, Hook and J. B. S. Hardman were on the negotiating committee for the AWP, Max Shachtman, Martin Abern and Arne Swabeck, for the CLA. Hook later recalled: "At our very first meeting, it became clear to us that the Trotskyists could not conceive a situation in which the workers' democratic councils could overrule the Party or indeed one in which there would be plural working class parties. The meeting dissolved in intense disagreement." However, despite this poor beginning, the two groups merged in December 1934.

The American Workers Party was dissolved in 1936 when it was decided that members should join the more successful Socialist Party of America (SPA). This caused a split within the SPA and in 1937 Norman Thomas, the leader of the party, decided to expel the Trotskyists. Burnham, James Cannon, Max Shachtman and Martin Abern now formed the Socialist Workers Party (SWP).

Burnham became disillusioned with the Soviet Union when it signed the Soviet-Nazi Pact. These feelings were intensified when the Red Army invaded Poland (September, 1939) and Finland (November 1939). James Cannon continued to support the foreign policy of Joseph Stalin. Cannon, like Leon Trotsky, believed that the Soviet Union was "degenerated workers' state", whereas Burnham argued that Stalin was developing an imperialist policy in Eastern Europe.

Burnham decided to leave the Socialist Workers Party (SWP) and decided to join with others to establish his own Workers Party. Other members included Max Shachtman, Martin Abern, C.L.R. James, Hal Draper, Joseph Carter, Julius Jacobson and Irving Howe. However, in May, 1940, Burnham decided to resign from the SWP. He wrote at the time: "Marxian economics seems to me for the most part either false or obsolete or meaningless in application to contemporary economic phenomena. Those aspects of Marxian economics which retain validity do not seem to me to justify the theoretical structure of the economics."

In 1941, Burnham published The Managerial Revolution: What is Happening in the World. In the book, Burnham argued that there were three possible futures for capitalism: (1) that capitalism was a permanent form of social and economic organization; (2) that capitalism was a temporary form of organization destined by its nature to collapse and be replaced by socialism; (3) that capitalism was a temporary form of organization currently being transformed into some non-socialist future form of society.

Burnham pointed out that the Great Depression with its large-scale unemployment suggested that capitalism was about to collapse. In the past he had believed that capitalism would be replaced by socialism. After reading the work of Adolf Berle, he suggested that it was possible that a new form of economic system would emerge. Burnham looked at the New Deal that had been introduced by President Franklin D. Roosevelt. He suggested that these reforms were similar to what had taken place in Nazi Germany and the Soviet Union.

George Orwell summarised Burnham's theories in an article published in May 1946: "Capitalism is disappearing, but Socialism is not replacing it. What is now arising is a new kind of planned, centralized society which will be neither capitalist nor, in any accepted sense of the word, democratic. The rulers of this new- society will be the people who effectively control the means of production: that is, business executives, technicians, bureaucrats and soldiers, lumped together by Burnham under the name of 'managers'. These people will eliminate the old capitalist class, crush the working class, and so organize society that all power and economic privilege remain in their own hands. Private property rights will be abolished, but common ownership will not be established. The new 'managerial' societies will not consist of a patchwork of small, independent states, but of great super-states grouped round the main industrial centres in Europe, Asia, and America. These super-states will fight among themselves for possession of the remaining uncaptured portions of the earth, but will probably he unable to conquer one another completely. Internally, each society will be hierarchical, with an aristocracy of talent at the top and a mass of semi-slaves at the bottom."

James Burnham died on 28th July, 1987.