In 1968, a tumultuous year in American politics, Paramount Studios made a deal with cinematographer Haskell Wexler to buy what would become his first film as a director. Wexler was already one of the most influential cinematographers in movies, with an Oscar for Who's Afraid of Virginia Woolf. He was also one of the more prominent leftists in the business, and his first film was boldly radical.

Medium Cool (1969) broke ground in the way it used scripted action within a documentary framework – the story of a news cameraman, played by Robert Forster, covering the 1968 Democratic Convention in Chicago. Wexler chose the setting because he guessed there would be trouble. The movie was partly a treatise on violence, media and the Vietnam War. There were violent clashes between the hippies and Yippies on one side and the Chicago Police Department on the other. It became a huge embarrassment for Chicago's strongarm mayor, Richard M. Daley, who called in the National Guard. Wexler's camera was in the middle of the action.

A few months later, Paramount had a problem. Daley and elements in the Democratic Party were leaning on Gulf and Western, owner of Paramount since 1966, to block its release.

Wexler, now 92, tells me the story from his home in Los Angeles. "First, the movie censors said, 'You can't release this picture because you don't have release forms from all the people in the demonstrations'. So I took it to an ex-Supreme Court justice in New York, and he looked at it and said, 'It's a very interesting film, and the people in the demonstrations don't have to sign a release. They are doing a public thing in a public place'. "

The Hollywood censors then tried to make him cut a lot of the slogans used by the demonstrators, such as "The pigs are shit". They also objected to the nudity. "They didn't object to Marianna Hill going balls-ass naked, but Robert Forster without his shorts on, they said, 'We just don't like it with his yosh bouncing up and down like that, so we are going to have to give it an X'. So it was released with an X, and it was a perfunctory release." (And yes, a yosh is what you think it is.)

Wexler found out much later that senior Democrats had threatened Gulf and Western with the loss of certain tax benefits if it didn't curtail the release. The tactics worked, in the short term. The picture was not a financial success, but it got great reviews. Its reputation has only increased since then. In 2003, the Library of Congress selected it for inclusion on the National Film Registry, for works that are "culturally, historically or aesthetically significant".

In one sense, Wexler was a victim of changing times. By the late 1960s, the old Hollywood of Louis B. Mayer and the other tycoons was gone. Large corporations had bought up all the studios. Most of the backlots were sold for real estate and the way movies were made changed. Studios stopped making the films themselves. They arranged finance for outside production houses and took distribution rights, spreading the risks. Head offices could be anywhere.

Over the next decades, the old Hollywood disappeared, and movies became just one part of much larger enterprises. Time Inc and Warner Bros joined forces to become Time Warner. NBC and Universal became a wing of Comcast, the largest broadcasting and cable company in the world, based in Philadelphia. Rupert Murdoch bought Twentieth Century Fox and started to build his Fox TV network. Sony acquired Columbia Pictures from Coca-Cola.

Once-famous names, such as RKO and MGM and Orion, all but disappeared. The new owners came from unrelated industries, such as Kinney National, a provider of parking stations and timber flooring, which bought Warners. Revenue models changed completely. Home video became more important than theatrical, and was supplanted by DVD. Foreign box office overtook United States domestic returns. Modern studio heads had to learn how to say hello in Chinese.

The rise of corporatism allowed the Democrats of 1968 to bully Wexler, but that kind of behaviour was hardly new. In 1947, the studios caved in very quickly to the House un-American Activities Committee. The moguls routinely cut their cloth and their pictures to suit the political winds. It's impossible to know whether corporatism has made that worse. Radical movies have always had a hard time from the rich and powerful, or they wouldn't be radical.

The Republican Party organised armies of internet flamers when Michael Moore's anti-Bush documentary Fahrenheit 9/11 came out in 2004. When I reviewed the film positively, I received about 50 emails overnight from strangers in the US, many accusing me of treason (which just goes to show that some Americans think Australia is not just a close ally, but actually part of the US).

The bigger influence in Hollywood today might well be Washington, rather than any modern version of Engulf and Devour, as Mel Brooks called the studio conglomerate in Silent Movie. US President George W. Bush's deputy chief of staff, Karl Rove, made straight for Hollywood in the wake of the September 11, 2001, attacks to talk to studio heads about how they could help in the war on terror. The CIA, the Pentagon, the FBI and the Secret Service all make strenuous efforts to influence how Hollywood depicts their activities. The studios tend to welcome them with open arms: anyone who can lend them an aircraft carrier is their buddy.

Money still talks, but the Pentagon is mightier than the board.

Twitter: @ptbyrnes