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Saturday, June 20, 2015


Sigh.  Let's try again.

Before responding to Wallace Stevens’ comments, I am going to continue to explore the ways in which capitalism has changed, and the questions raised by those changes for the project of a transition to socialism.  I apologize for the rather crude and elementary character of these remarks.   This is a subject about which I know very little, and sitting here in Paris, I am limited to what I can glean from the Internet.  As always, I will try to anchor my remarks in some concrete facts, thereby encouraging my readers, I hope, to do the same.

Exxon Mobil is the second largest American company by net receipts, after Walmart.  It is also, after Apple, the publicly traded company with the largest market capitalization [which is to say, the total value placed on its shares by the stock market price of those shares each day.]  Its current market capitalization is about 357 billion dollars.  [Apple’s is about 650 billion!]  The President, Chairman of the Board, and Chief Executive Officer [or CEO] of Exxon is a character named Rex W. Tillerson.  Tillerson, who is 63, has worked for Exxon for forty years.  As you might expect, he is a very rich man.  At last count, he owned 2,288,874 shares of Exxon stock, which, at about $85 a share, means that he personally owns a bit less than two hundred million dollars of Exxon Mobil.  He makes thirty or forty million dollars a year, depending on what sort of year Exxon is having [not so good lately, what with the fall in the price of crude oil.]

Tillerson did not become CEO of Exxon because he owns so much Exxon stock.  He owns so much Exxon stock because he is CEO [and has held various other executive positions along the way.]  One of the principal devices modern corporations have of circumventing the tax laws is to give their executives options to buy stock in the company at a set price, regardless of whether the shares appreciate before the option is used.  The gains generated by these options, when exercised, are taxed at capital gains rates [I think I have this right], which are much lower than personal income rates.  Top executives over the years acquire enormous holdings in the companies they run.  The rationale for this boondoggle is that it makes them care about how the company is doing.

But rich as Tillerson is, his holdings in Exxon Mobil amount to only .05 of one percent of the market capitalization.  He is, as it happens, the individual with the most Exxon stock, but his holdings are dwarfed by those of a number of investment companies, such as Vanguard, which own vastly larger amounts of Exxon.  Even these investment companies, however, own fractional portions of Exxon that do not come close to giving them the voting power [one share, one vote] to take control of the company.  Recently, it should be noted, the Rockefeller family tried to get Exxon to separate the Chairman of the Board position from the President position.  Despite the fabled wealth of the Rockefellers, they failed, and Tillerson prevailed.

Most corporations these days resemble Exxon Mobil, in separating ownership from effective control of the capital assets of the corporation.  Walmart, by the way, is an exception.  The four principal heirs of Sam Walton, each of whom is one of the ten richest persons in America, collectively own about half of Walmart’s shares, although I think I am correct that none of them has ever occupied a management position in the company.

This observation about the divorce of ownership from control is hardly news, needless to say.  The classic statement of it can be found in the 1932 book by Gardner Means and Adolf Berle, The Modern Corporation and Private Property.  But although this book has been around for eighty-three years, the development it reports occurred well after Marx wrote Capital.  In Marx’s day, corporations by and large were run by the men who owned them.  That ownership conferred on them the power to control the businesses, to make decisions about what to produce, whom to employ, what wages to pay, what working conditions to impose on their workers, and so forth.  The profits of the businesses belonged by law to the men who owned them.  Hence, it made perfectly good sense to suppose that transferring ownership of the means of production to the workers, either by force or by law, would also transfer effective control of those productive resources to the workers as well.

Today, things have changed, and the old understandings must also be changed.  Now I do not really care whether you label this change “a change in appearance/content, or a change in form/essence/laws of motion,” to quote Chris.  Frankly, I do not really understand that language.  It has the sound of bad nineteenth century metaphysics, not good twenty-first century radical critique.  But I am quite sure that if workers want to take control of the economy away from those who now effectively run it and use that control to change their lives, they had damn well better stop long enough to notice the change I have been describing.

Please don’t quote Marx to me again.  Don’t find a passage in which Marx said something prescient or perceptive about the new arrangement of joint stock companies in 19th century England.  Since he was a genius, I have no doubt we can find such passages.  But they are not a substitute for an analysis of what is going on in capitalism right now.


Wallace Stevens said...

In your discussion of Exxon’s Tillerson you highlight one of the respects in which classical Marxism is no longer “carving nature at its joints.”

Let us consider Tillerson in Marxist terms: rich as he is, he is just a working stiff who happens to have been compensated, in part, with shares in the company he works for. (He would still be a very rich man if we only counted his money salary.) He makes about $115,000 per day during the part of the working day for which he is compensated—this amount ultimately reflecting both the cost of producing Tillerson, and the cost of reproducing more little Tillersons just like him. The rest of the day’s effort goes to the shareholders in the form of surplus value. Tillerson is exploited, while the owner-manager of the independent pizza place on the corner who hires delivery boys is a capitalist exploiter…and so on…and so on. But somehow, from a schoolyard fairness perspective, never mind any more sophisticated ethical reckoning, none of this rings true. This is because, in Marx, ‘exploitation’ is a technical, economic category and not a moral or ethical category. That would be merely a problem of confusing terminology (‘exploitation’ is morally laden in most contexts) if, somewhere else in Marx, there was a theory of social and economic justice. But there is no such thing, that I am aware of at least. And so the problem is much greater. We are left with the conclusion that the $115,000 per day that Exxon begrudges Tillerson is HIS to enjoy. And, come the revolution, Tillerson will get to keep the surplus value that he generates as well!

James Camien McGuiggan said...

Robert, at the risk of being cynical (or patronising!), I suspect that Amanda Quinn is a robot, and I recommend deleting the comment.

Robert Paul Wolff said...

done. Thanks.

Anonymous Coward said...

Dear Professor Wolff:

To realize a better world, I think it is important to not only imagine how presently existing structures may form the basis for a new social order but also to examine previous utopian projects, successful or unsuccessful. China, Russia, and Cuba - among other examples - offer important lessons for egalitarian projects. If someone can point me to some literature on this, I would appreciate it.

As Professor Wolff reminds us, if a patient assiduously avoids discussing some topic in the course of psychoanalysis, soon the entire conversation comes to be about that very topic. I have noticed that many Marxists - but, of course, not all - conveniently pass over opportunities to analyze and learn from the tragic history of really existing state-bureaucratic socialism. Professor Wolff makes a passing reference to Hayek's critique of command economies in his essay, and I would be interested in hearing more of what he has to say about this.

One objection might be that the Bolsheviks and the Red Army jumped the dialectical gun by seizing control of economies that had not yet undergone significant capitalist development. However, many Marxists rightly accuse bourgeois economists of dealing in ideological abstractions rather than really existing capitalism. It is only fair that Marxists confront really existing socialism - in its social democratic and state-bureaucratic varieties - instead of indulging in the sectarian faith that the materialist dialectic will progress towards a realm of limitless spontaneity. This sort of hagiography, when pursued as a political program, is incredibly irresponsible and obviously ideological. Obviously, Professor Wolff opposes religious readings of Marx and Engels, but certain others are very committed to their cult.

My experience of various branches of the communist party has been confined to a few coastal US cities, and it is not a random sample. In general, the card-carrying members I have met are committed to Leninist politics - charismatic leaders and vanguard revolutionary parties - and lack any sense of the actual history of communist revolutions. This is not a coincidence; in fact, there is a deep connection here. Underlying their egalitarian rhetoric is a commitment to seizing power for themselves. Among other factors, this explains why communist revolutions consistently produce dictatorships that then exterminate all "enemies", real or imagined. Ignorance of the past is a defense mechanism against the unconscious truth of revolutionary desire.

All the more important to confront history, if we are to make a better world.

Matt said...

(Somehow I posted this comment in the wrong post - to the one about Picasso, where it obviously had no relevance. I hope it's okay to re-post it here.)

For an interesting view of how things have changed for working people from Marx's time (when shortening the working day was a serious problem) see this story:

The whole thing is very interesting, but especially scroll about 3/4 of the way down, to the story of the man suffering, greatly, under the reign of "dynamic scheduling" at a warehouse. He only wishes he could work as much as he wanted to. But, while perhaps impossible in current American, because of political considerations, the solution to this problem are not in principle hard, and don't require radical changes, just rules about when schedules must be set, about who counts as being "on call", and how such people must be compensated, and so on. People wishing to help the working class are really better off working towards such goals.

More generally, I think it's worth it for people to look at Eduard Bernstein's mostly forgotten _The Preconditions of Socialism_. Not because Bernstein, who had been one of Marx's literary executors, has the magic formula for today, but because it's useful to see the ways that he had noted, as early as the 1910's that many of the economic predictions of Marx had not happened, and that the world had changed in ways Marx had not predicted, and that therefore people wishing to be loyal to the spirit, and not the text, of Marx needed to change, too. Unfortunately, he was more or less run out of the "mainstream" Marxist/socialist movement for this heresy, but a significant part of European social democracy was built along the lines he suggested. For the general moral it is still worth reading.

Magpie said...

Prof. Wolff,

Your understanding of the way CEOs are paid is only part of the story.

CEOs are paid with options on stock for other reasons, besides taxation laws. One of them is the so-called principal-agent problem [1]: as an agent for the firm, the CEO's interests are not necessarily coincident with the shareholders'. A way to align those interests is by making the CEO a shareholder. Tim Worstall, from Bloomberg, comments on that in relation to Apple. [2]

A consequence of that is the rise in inequality. Discussing the British case, Jacques Peretti, from BBC, in his documentary The Super-Rich and Us[3], explained that in the UK during the 1990s, the Greenbury Commission was tasked with studying reforms on the way CEOs were paid. The committee was formed by 8 chairmen or CEOs, out of 11 members, and proposed that CEOs' pay should be based on performance, including options.

An obvious way to boost profit, is by cutting wage costs. Deborah Hargreaves, Director, High Pay Centre (interviewed by Peretti):
"If you're a chief executive of a big company, your remuneration will be tied to the share price of your company, so you would have a very strong interest in getting that share price up. And one of the ways to do that, of course, is to cut costs, and one of the biggest costs is wage costs.
"So, you know, you could have a direct interest in holding wages down."

In Marx's terms: increasing the rate of exploitation.


In relation to Wallace Stevens' question (and without pre-empting Prof. Wolff's own ideas) Prof. David Ruccio[4] offers some ideas about whether "markets determine the unequal distribution of income under capitalism" which may interest you.

Ruccio writes:

"All of the preceding analysis [Marx's] is carried out under the assumption that all markets are perfect. Then, of course, at an even more concrete level, it is possible to introduce and explore the implications of all kinds of market imperfections, such as 'political or economic power, rent-seeking, cronyism, imperfect information, monopolies,' which no doubt characterize contemporary capitalism.
"The point is, the Marxian theory of the distribution of income identifies an unequal distribution of income that is endemic to capitalism—and thus a fundamental violation of the idea of 'just deserts'—even if all markets operate according to the unrealistic assumptions of mainstream economists. And that intrinsically unequal distribution of income within capitalism (as determined both within and beyond markets) becomes even more unequal once we consider all the ways the mainstream assumptions about markets are violated on a daily basis within the kinds of capitalism we witness today."

[1] Principal–agent problem

[2] Solving The Principal Agent Problem: Apple Insists That Executives Must Hold Company Stock

[3] The Super-Rich and Us

[4] Markets and exploitation

Magpie said...

Incidentally, I replied to Matt's comment on the previous post, too. Hopefully, it will be all right to repeat it here:


"Unfortunately, he [Bernstein] was more or less run out of the "mainstream" Marxist/socialist movement for this heresy, but a significant part of European social democracy was built along the lines he suggested. For the general moral it is still worth reading."

Without discussing the merits (or lack thereof) of Bernstein, your interpretation of what happened is rather odd, to put it mildly. Parties like the SPD gradually tended towards reformism and actively expelled communists.

If someone was ran out, it was the communists.

Not only that. The SPD ordered the bloody repression of German communists, anarchists, and even the more radical social democrats in 1919. It was the SPD, under Friedrich Ebert, with the support of the proto-Nazi Freikorps, who saved the day for the German bourgeoisie.

Frankly, I'm lost for words.