In capitalism's early days, during the eighteenth and early nineteenth centuries, the social relations of production, as Marx called them, were quite primitive. It took a long time for markets to develop sufficiently to support a theory of the determination of prices and profit rates. The techniques of production were also undeveloped. But as time passed, the institutional arrangements -- laws, accounting procedures, market clearing mechanisms, futures markets, and the like -- evolved, and so did the theoretical understanding of them. Improved communications and accounting procedures were needed by capitalists seeking to gain an advantage in the marketplace, and so were the actual techniques of production. The development of joint stock limited liability firms -- corporations, as they came to be called -- dramatically altered both the scope and the flexibility of accumulations of capital. Eventually the law recognized the existence of corporations as, in effect, immortal institutional persons, whose managers were no more than the jockeys riding the thoroughbred horses in an endless race around the free market track.
With the relentless horizontal and vertical integration of productive activities, corporations grew to enormous size, eventually rivaling small countries both in the value of their annual output and in the complexity of their internal organization. [Horizontal integration, for those unfamiliar with the jargon, is the merging of many firms producing a certain commodity into one -- many shoe manufacturers becoming one, many cloth manufacturers uniting. Vertical integration is the merging into one firm of the several stages of intermediate production leading to final output -- fabric manufacturers making their own spindles and looms, growing their own flax or cotton, tailoring themselves the clothing made from their cloth.]
For reasons too complex to explain here [but set forth in my earlier paper], a time comes when it is no longer possible for the managers of large integrated firms to guide their economic decisions solely by the prices dictated by the market. Although they continue to pursue the goals of expanded production and profit, they are forced internally to make personnel and allocation decisions that are, in their logical structure, essentially political rather than economic in nature. A new social order is growing within the womb of the old.
Marx predicted, on the basis of what he was observing in England in the middle of the nineteenth century, that this process of expansion and integration of capital would be paralleled by a corresponding expansion and integration of workers' organizations, leading eventually to labor unions that would organize the entire working class. For a while, his expectations seemed to be fulfilled, but in the past half century we have seen a decline in the scope and power of unions, with a consequent increase in the imbalance between the power of capital and that of labor.
I wrote my earlier paper at a time when it seemed that capital had solved the problem of managing the booms and busts on which Marx counted as the causes of an eventual collapse of capitalism. For that reason, among others, I was deeply pessimistic about the ever greater internal integration of the great corporations leading to anything remotely resembling socialism. In effect, I concluded that Marx was right to expect the new to grow in the womb of the old, but I expected the new social order to be as inimical to the genuine human needs and interests of the great mass of the popualtion as the old order manifestly had been.
However, we radicals are as hopeful of a world-wide economic collapse as the Born Agains are of Armageddon, so a faint flutter of optimism has been engendered by the recent disasters that have smitten the financial world.
Tomorrow, I will attempt some amateur analysis of those disasters and some predictions as to where they will lead.