It would seem, if this
argument is correct, that things are proceeding just as Marx anticipated. As capitalist social relations mature, the
elements of socialist planning begin to develop deep within the corporation,
which is truly the womb of capitalism.
Why then are the prospects for social and economic justice so bleak? Why has the term “late capitalism,” once used
by socialist theorists to describe what they confidently believed to be the
death throes of the established order, now become a wry joke shared, with sighs
and the rolling of eyes, by aging radicals like myself? Why have any signs of a true movement of the
masses died out, to be replaced by an identity politics that is fundamentally
assimilationist rather than revolutionary in its thrust? In short, if all is going as predicted, why
aren’t we having any fun?
The answer, I think, is that along with everything that
he got right, Marx got three big things wrong, with the result that the
liberatory potential he saw in the internal contradictions of capitalism is
nowhere in evidence today. Let me say
something about each of these failures of analysis or prediction.
First, Marx completely failed to anticipate that the
capitalist state would develop the ability to manage and, to some extent, to
control the increasingly wild booms and busts that threatened to destroy the
capitalist order. He quite presciently
foresaw that the ever more rational organization of production within the firm
would come into contradiction with the anarchic distribution of the market,
resulting in crises of over-production and under-consumption. The great crash of ’29 was just what the good
Doctor of Philosophy ordered, albeit too late to gladden his heart.
But Marx was convinced that capitalists, confronted with
disaster, would be unable to coordinate their actions in order to save their
skins. In an odd way, he was too much in
thrall to the classical economic theory he had subjected to such a penetrating
critique in Capital. It took imaginative theoretical and practical
defenders of capitalism like Keynes and Roosevelt to see that with far-sighted
fiscal and monetary policies, the state could sufficiently dampen the business
cycle to enable capitalism to survive.
To put the point differently, Marx, very much in common with the other
economists of his day, failed to see how powerful the state had become under
capitalism.
The pulse still quickens in the circles I frequent when
the tech stock market bubble bursts or Paul Krugman forecasts a calamitous reversal
in housing prices, the way old war horses flare their nostrils and stamp their
hooves at the sound of distant trumpets.
But the truth is that our corporate masters will never again allow a
serious threat to the foundations of the economic house they have built.
Our mature capitalist economy is no longer the unplanned,
unintended consequence of the playing out of market forces, for all the lip
service that its apologists pay to “free enterprise” on festive occasions. Rational planning is as pervasive at the
macro-economic level as it is within the firm.
But that planning – far more sophisticated and nuanced than either Marx
or the state planners of the Soviet Union
could have anticipated – is securely within the service of private interests,
not the public good.
The second obstacle to the development of a revolutionary
working class movement has been the persistence of pre-capitalist passions and
attachments that Marx was convinced capitalism’s invasive rationalization of
economic life would weaken and ultimately destroy – nationalist loyalties,
ethnic identifications, racial antagonisms, and religious faiths. The secularization of life seemed to be well
under way in Marx’s time. The Catholic
Church had lost its grip on public life in France , Germany , and Italy . The ancient antagonism of the urban and the
rural was dissolving, as Marx had indeed predicted. And the ever-increasing mobility of both
labor and capital bid fair to consign nationalist sentiment to public holidays
and political speeches.
The optimistic confidence that class interests would
defeat the irrationality of nationalism reached its height in 1914, as
socialists world-wide – my grandfather among them – refused to believe that
French and German workers would fight one another in the trenches at the behest
of their capitalist masters. With the
bloody refutation of that belief, something died in the heart of the socialist
movement. To be sure, the unanticipated
success of the Bolsheviks in Russia encouraged some to believe that despite
all, the proletarian movement was on the march [though not my grandfather, who
sided with Norman Thomas and the Mensheviks].
But the success first of the Soviet Union and then of Mao’s revolution
in China, important as they were to the unfolding of the twentieth century, had
nothing at all to do with the birth of socialism in the womb of capitalism.
In the United
States , race had already opened a chasm in
the worker’s movement that, in a revised form, persists to this day. When four million Black men and women walked
out of slavery, prepared for the free labor market with agricultural, craft,
and industrial skills that they had used as slaves to make the South rich, they
encountered implacable hostility from white workers, whether immigrant or
native-born. White workers until after
the Second World War struck devil’s bargains with their employers, conceding
labor peace and low wages in return for whites-only hiring practices. This fact, perhaps more than any other,
doomed the American working class movement to eventual failure.
At this nightmare moment in recent history, little need
be said about the persistence and intensification of ethnic and religious antagonisms
throughout the world. Try as we may, we
socialists can no longer cling to the hope that class interests will unite men
and women across national, ethnic, racial, and religious divides in a vibrant
revolutionary movement to replace capitalism with a humane, just, egalitarian
social order. Capitalists are doing
their part. Not only are they crafting
the elements of rational planning that a socialist economy would require. They are in the forefront of efforts to put
the divisiveness of race, ethnicity, nationality, and religion behind us, for
these divisions are not good for business.
It is the people who remain mired in self-destructive and self-defeating
irrationality.
Marx’s third and most serious mistake concerns the
direction in which the labor force evolved as feudalism gave way to early
capitalism, and then to the mature capitalism we see today. In the middle of the nineteenth century, when
Marx was doing the British Museum research on which his hauptwerk was based, one of the most striking changes taking place
in British society was the destruction of the old crafts – weaving, spinning,
woodworking, and the rest – and the incorporation into machinery of the skills
they once required. In late feudal and
early modern times, a working man was known by the trade he plied, learned in a
long apprenticeship and symbolized by the kitbag of tools he brought with him
to the job. The complex social structure
of crafts left indelible marks on the family names that so many Americans bear
today – Wheelwright, Carver, Chandler ,
Taylor, Cartwright, Schneider, Schreiber, Weaver, Shepherd, Farmer, Smith.
Capitalism ate away corrosively at the craft tradition,
deskilling artisans and turning them into a homogeneous pool of semi-skilled
workers who could master the skills of a factory job in a few weeks and were
thus available to be moved easily from job to job by the fluctuations in the
market demand for industrial labor. Marx
saw this progressive homogenization of the labor force as the correlate to the
process by which small independent entrepreneurs were being crushed by
competitive forces and absorbed into larger and larger firms driven to expand
by a need to achieve control over their input and output prices. He foresaw a world in which a united
industrial working class would confront concentrated capital, until finally,
when a major crash had fatally weakened capital, labor would seize control of
the means of production and substitute socialist planning for capitalist
anarchy.
It was not only an inspiring dream, at least for some of
us. It was also a quite plausible
projection of trends that were working themselves out powerfully in Marx’s
day. But it was not to be. On the side of capital, as Marx anticipated,
relentless concentration did take place, leading to the world of vast
multi-national conglomerates with which we are all familiar. To be sure, a subordinate domain of small
business flourished, rather like the flora that live under the soaring canopy
in an Amazon rain forest. Nevertheless,
Marx got that part of the future right.
It is on the side of labor that things have not
progressed as Marx imagined they would.
For a time, the growth of industrial capitalism did indeed produce a
vibrant labor movement that evolved very much as Marx expected. First individual factories, then entire
industries, finally entire national labor forces were organized, giving rise in
the United States
to the American Federation of Labor and the Congress of Industrial
Organizations, while in Europe the labor
movement was so successful that it was able to create and sustain major
political parties.
But as industrial
capitalism gave way to a complex mix of industrial and service firms with huge,
bureaucratically managed assemblages of employees, the leveling and
homogenization ceased. There came into
existence a pyramidal hierarchy of job categories with sharply unequal wage,
salary, and compensation schedules. Instead
of a world in which the propertyless masses sell their labor and are poor,
while the owners of capital hire labor and live on the profits from this
unequal exchange, we see today an economy in which even the very rich, by and
large, are salaried, and capital is owned by share holders who exercise little
or no control over what is nominally their property. Indeed, comfortably compensated and securely
tenured economists like Paul Samuelson, bemused by the reversibility of their
equations, have taken to saying that it makes little effective difference to
the economy whether capital hires labor or labor hires capital.
This highly unequal allocation of the rewards and burdens
of labor has undermined that solidarity on which Marx was counting. Steel workers, miners, and textile operatives
could forge some degree of unity, despite their geographic dispersion and the
many differences in the nature of their jobs.
Even hospital and hotel workers, secretaries and fast food workers,
could find some common ground on which to stand in their struggle against the
exploitation inflicted on them by capital.
But whatever theoretical connections there might be between them and
lawyers, middle managers, and tenured college professors, the gap in the
salaries and conditions of labor between the two groups, the utter disparity in
their life experiences and life chances, have made a fruitful solidarity out of
the question. Workers have grown
progressively less unified, until at long last, Organized Labor has come to be,
and to be seen, as nothing more than an interest group, on a par with, but
often less powerful than, gun owners, retirees, and fundamentalist Christians.
All of us are familiar with this world, for it is, after
all, our world, and we understand intuitively that our life chances are
determined not by whether we own the means of production, but rather by where
on the pyramid of jobs we end up. It is
worth taking a moment to look at a few facts and figures, simply to remind
ourselves just how steep that pyramid is.
I am referring not to the much-discussed explosion of compensation at
the highest executive levels, but to the deeply entrenched inequality all up
and down the pyramid. [These numbers
come from Bureau of Labor Department tables, and date from 2004, the latest
year for which the statistics are available on their website.]
In the town of Amherst ,
Massachusetts ,
where my university is located, a teacher at the Amherst Regional
High School with a
Master’s Degree will, after fourteen years, earn $61,353 a year. If her husband is a fireman in town who is
also trained as an EMT, his salary will go up to $45,000 a year. Their combined family income will then be larger
than that of ninety percent of the families in the United States . Stop and think about that for a moment: a high school teacher and a fireman. If the teacher had married a professor at the
University, by the time he had risen to the rank of full professor and served
in that rank for a while, he might well be earning about $140,000 a year. Their family income would then be larger than
that of roughly 97% of all American families.
By any reasonable classification, they should count as among the rich,
and yet all of us are so conditioned by the meretricious images of the mass
media that we would unthinkingly describe them as a “middle-income family.”
Not surprisingly, the numbers are much worse for
African-American families. Now that the
federally mandated minimum wage is on its way up to $7.25 an hour, a Black
husband and wife working fulltime minimum wage jobs can look forward to the
time when their annual household income of $29,000 puts them solidly in the
Black Middle Class, with more than forty percent of Black households doing less
well.
The shape of the income pyramid in America has
changed very little in the past century and more, save to become somewhat
steeper. This in itself is odd, when we
reflect that over that period of time America has been transformed from
primarily an agricultural economy into to an industrial economy, then to a
service economy, and now to an information age economy. One might plausibly have expected that so
radical a series of transformations would work some alteration in the pattern of compensation, but it has not.
Apologists for capitalism, who are now as common as houseflies,
like to offer two connected explanations for the inequality in wages and
salaries, which taken together are intended as a justification as well. The first rests on a misinterpretation of a
famous eighteenth century mathematical theorem, the second on a common logical
fallacy.
Mathematics first.
Leonhard Euler, the great Swiss mathematician, proved a
theorem about linear homogeneous functions that was, in the nineteenth century,
given an important economic interpretation.
The theorem was construed as saying
that under certain conditions, the wages paid to workers in a free and
competitive labor market exactly equal their marginal contribution to the
output of the firm for which they work, or, as it is sometimes called, their
marginal product. Thus, if a
vice-president in an executive suite makes more than a secretary in the steno
pool, that is because the vice-president contributes exactly that much more to
the productive activity of the firm. It
would be both unjust and inefficient to take away some of the executive’s pay
and give it to the secretary, even though they are both, no doubt, nice people
and hard workers.
The problem with this rationale for unequal pay is that
it turns out, upon closer inspection, not to apply to any known or even
possible capitalist system. In the first
place, the theorem holds only for economies whose production function is linear
homogeneous [assuming that it even makes sense to speak of the production function of an entire economy], and as is easy
enough to show, this is equivalent to saying that the economy is in long run
equilibrium. But as Marx pointed out,
and as every economist since has reaffirmed, capitalism is never in long-run equilibrium.
A capitalist economy is always engaged in what Joseph Schumpeter, in a
famous phrase, called creative destruction.
Furthermore, it follows directly from Euler’s equation that a firm with
a linear homogeneous production will, if it pays each of its employees his or
her marginal product, make a zero profit, and a firm regularly making zero
profit will of course cease to exist.
All of this is quite well known to all economists, but it
has not dissuaded them and their epigones from wrapping themselves in the
sanctity of mathematics whenever proposals for wage and salary equalization
surface.
So much for mathematics.
Now logic.
When economists are asked why some employees are so much
more productive than others, and hence deserving of such inflated compensation,
their standard answer is education,
or, as they sometimes say in an attempt to make the answer sound more
impressive, human capital. Actually, that last sentence inverts the real
order of explanation, and thus participates in the ideological rationalization
that I am attempting to debunk. Let me
restate the point: When asked to explain
the striking inequality in compensation schedules, economists begin by assuming
that the inequality must be justified, for to think otherwise would be to call
into question both the foundation of American society and their own comfortable
compensation. Those of us at the top of
the income pyramid must have a much greater marginal productivity, they
conclude. And how can that in turn be
accounted for? Education.
Now, it is demonstrably true that in America today,
your level of education [or, to be more precise, the number of years of
schooling you have completed – not at all the same thing] powerfully affects
where on the income pyramid you end up.
Indeed, it may be the single most significant determinant. There are very few MBA’s working on the
loading dock, and very few K through Twelvers in the executive suites.
But this fact does not imply that the shape of the income
pyramid itself is in any way determined by the levels of educational attainment
in the work force as a whole. If you
have a college degree, your chances of climbing up the pyramid at least to the
middle levels are quite good. But if
everyone gets a college degree, the pyramid will not flatten out, because there
are only so many jobs at the middle level.
To think otherwise is to commit what logicians call the
Fallacy of Composition, which is simply the mistake of thinking that because
something is true of each member of a group, it can be true of them all. Each of us, we may suppose, can with hard
work and determination, be above average, but only in Lake Woebegone can all
the children be above average.
Because the American economy is so large, it is easy to
lose sight of this simple truth. For
each individual, or for all immigrants, or for all African Americans, or even,
within limits, for all women, it is indeed true that greater educational
attainment will tend to lead to higher compensation, but that is only because
the individuals or the group will over time displace some of those in the
favored slots. If all the applicants for
jobs at a corporation present themselves to the Human Resources Office with
MBA’s, the Board of Directors will not terminate the positions of secretary,
mail room clerk, and claims adjuster and make everyone a senior manager!
There is one way in which a dramatic educational
upgrading of the entire workforce might conceivably trigger a flattening of the
entire income pyramid. With better
prepared workers available, corporations might shift to different and more
profitable production techniques, and those new techniques might result in an
array of job positions with more equal associated compensations. Economists would say that the positions
defined by the new production function had more equal marginal productivities,
which, as we have seen, is nonsense, but nevertheless, the end result might be
a flatter pyramid.
Is this likely to happen?
Well, for more than one hundred years, the average level of educational
attainment in America ,
as measured by number of years of schooling completed, has been rising. The level of education demanded by the
production techniques and job specialties in the American economy has risen
correspondingly. And the shape of the
pyramid has remained essentially unaltered.
Literacy, not to mention computer literacy, is today required even by
such poorly paid jobs as department store clerk. And yet, no flattening of the pyramid can be
discerned.
What then does explain the shape of the income
pyramid? A number of bright economists,
willing to challenge the received wisdom, have been puzzling over this question
for several generations. More than
thirty years ago, Lester Thurow, the MIT economist who served there for a while
as Dean of the Sloan
School , published a
little book called Generating Inequality
that took a fresh look at the question.
But although it is possible to give partial explanations, especially of
an historical sort, for the pattern of compensation in this or that capitalist
economy, the seeming permanence of the steep pyramid, its imperviousness to
even the most striking changes in the world economy, remains a mystery.
Thus, there is little prospect for the labor solidarity
on which a successful socialist transformation must be built. It is now the best of times and the worst of
times. Economic rationality marches
relentlessly on, while poverty and inequality harden into permanent injustice,
and racial, ethnic, national, and religious rivalries tear the world apart.
What can we anticipate for the future? What will my grandfather’s great, great
grandson, my grandson Samuel, inherit as he grows to maturity? The impetus within corporations to substitute
economic planning for subservience to market forces will strengthen, as the
managerial class responds to the imperatives of institutional rationality. Meanwhile, the obscene gap between the gilded
life chances of the fortunate and the life-threatening poverty at the bottom of
the world economy will persist and come to be seen as an inevitable concomitant
of the rational workings of the market.
There will always be class traitors like myself who rail
against the inequality from which they personally benefit. But though our excoriating tracts may bring
us tenure and advancement, the revolutionary transformation they celebrate will
seem as fanciful as the Chronicles of
Narnia.
What then is the future of socialism? If socialism is the substitution of rational
planning for the anarchy of the market, it is already upon us. If socialism is the achievement, at long
last, of justice and equality, it is a dream that has been aborted in the womb
of the old order.
15 comments:
Thank you for such a great exposition of the possibilities of socialism..
Isn't a 4th thing that Marx missed the mass and social media and their control over people's mentality?
Dear Professor Wolf, Thank you very nmuch for your Marx' elucidating comments and for posting this paper on the Future of Socialism. Pleasse accept my very best regards and wishes for the forthcoming holidays. Yours sincerely, Tomasz J. Popielicki, Warsaw, Poland
I will be lecturing on Marx in a couple weeks for our Philosophy, Politics and Economics 'keystone' course. I will tell them to read this post. It's excellent.
You say the racism of the white working class was the doom of a successful working class movement. Actually you are pretty harsh about placing the blame on the white working class and 'their' racism in your essay. And that is not all that consistent with the labor history that I have learned. That labor history teaches that the employers almost always try to divide the workforce by whatever means possible- and that meant in many cases intentionally 'importing' workers from a different ethnicity or race into town when they were trying to break a strike. The hostility that is the expected result of such actions is not due to prior ethnic or racist views of the workers on strike- but they certainly could add to them. I think you should place the blame a little more realistically.
So, if true socialism--collective ownership of the means of production--is a utopian idea that can never be realized, why waste time and effort yearning for it? Why not work instead to tame the capitalist beast as much as possible (e.g. with Pikettyan tax policies) while continuing to enjoy the benefits in creativity and efficiency that it provides?
David Palmeter remarked in a previous comment that the ambiguity of accounting methods and other factors that lead ineluctably to quasi-political decision in the boardroom would affect corporations under socialism as well as capitalism. This is correct as Prof Wolff notes (I of course agree). Here's a suggestion (with references to be provided later). Political scientists and game theorists have been working on alternative voting methods (such as approval voting) and on the use of democratic procedures to resolve suboptimal outcomes in difficult games. Such suboptimal outcomes are non-cooperation in prisoners' dilemma and free riding in commons games. Researchers on improved voting methods have had little success persuading politicians to adopt them. However, it is possible that some corporations would adopt the procedures proposed by Brams and others, if it could be shown that these improve on the "wild ass guess" and dictatorial methods customarily adopted to decide among incompatible managerial ambitions. It's possible that government would follow suit (or follow the suits, as they have in the past, when insurance was adopted by the public sector, after it was developed in the private sector, for example).
Maybe instead of being so creative in selling us junk, filling our minds with junk, feeding us junk, poisoning the environment with junk and leaving everyone in debt as capitalism does, socialism might be creative in dealing with climate change, in assuring decent healthcare for everyone, in making the masses less resentful and hence, less violent, etc.
S. Wallerstein,
But if socialism won't come about, what's the point? And where does individual responsibility come in? Is your mind filled with junk? Do you eat junk? Given human nature, what reason is their to believe that a socialist government--intent on keeping their jobs--won't try to feed us junk, mental junk as well as material junk?
David Palmeter,
It's important that there are people like Professor Wolff who speak in the name of an ideal, in this case of socialism, which may or may not come to pass one day, I know not.
Ideals are important, they guide us in his life, they keep us from falling into the worst kind of pragmatism, they make life more beautiful.
In the case of Professor Wolff the ideal does not prevent him from being politically very realistic and even pragmatic and thus working actively to elect candidates who are electable.
Such a brilliant essay, and so ahead of its time. I say that because there's a recent book that develops the planning argument you anticipated: Leigh Phillips and Michal Rozworski, The People’s Republic of Walmart. How the World’s Biggest Corporations are Laying the Foundation for Socialism (London, Verso, 2019). And there is also Herbert Simon's old observation that in any large corporation only a tiny part of the workforce is market-facing; most employees cooperate in a planned system. But I can't remember where he says that.
Prof. Wolff,
How refreshing it is to read clear exposition and analysis amid the dross that passes for commentary these days. Thank you for taking the time to present this material in such an organized and stimulating manner. It resonates with me all the more because nearly thirty years ago my colleague and I published an article with essentially the same argument, although our piece was a more formal analysis of Marx’s theory of history in the context of G.A. Cohen’ work. (G.E. Panichas and M.E. Hobart, “Marx’s Theory of Revolutionary Change,” Canadian Journal of Philosophy, Vol. XX, No. 3, 1990, pp. 383-402.)
As I see it, you have demonstrated the two main features of Marx’s materialist conception of history: (a) how the “existing relations of production” in corporate capitalism serve to advance the “material productive forces” by replacing market mechanisms with rational planning under private ownership; (b) why tensions (or “contradictions”) in the productive relations of corporate capitalism cannot forecast or lead to the next historical stage, because of the absence of labor solidarity, coherent political consciousness, and will. In short, Marx’s theory of history succeeds as an explanation of the advance of production within a historical epoch; it fails as a theory of revolutionary change from one epoch to its successor, including the claim that socialism with supersede capitalism.
There is much more of interest in your articles that calls for historical commentary—the political and biased nature of rational planning; ruling class strategies for ensuring labor impotency; the supplanting of class politics by identity politics; and what we might term the ‘commitments of consciousness’ (religious, ethnic, gender, etc.) that contribute to the absence of labor solidarity (preventing the “class in itself” from becoming the “class for itself”). One quick point on the last of these. In the late 19th century fundamentalist Christians provided the backbone of populism throughout the mid-west and south. They knew their enemies, “Government and Big Business,” strolled arm in arm in pursuit of mammon and in complete disregard of the Christian understanding of justice and equality. Now, of course, the rank and file of the Christian right generally supports those very corporate interests that behave contrarily to their own. (Gramsci dealt with much the same issue in the case of Italian peasants who largely supported the Catholic Church and its ties to the state and Mussolini – completely antithetical to their own material interests.)
This grows too long; thanks again.
My remarks above probably fell flat for at least this reason: whether corporations decide to adopt alternative voting methods (such as approval voting) and democratic procedures to resolve suboptimal outcomes in difficult games (which would arise in the modern corporation), the question whether the condition of the working class (among others) would improve was left open. Executives might get around to reading "How democracy resolves conflict in difficult games" by Steven J. Brams and D. Marc Kilgour--to name one paper in an area undergoing vigorous development--and decide to pay only themselves more for adopting more refined methods.
Here's one for the free-market ideologues: Prof Wolff notes that "... the sort of market based determination of economic decisions which von Mises argued would always be superior to socialist planning are now impossible, and have long been replaced by decision making that has an unavoidable quasi-political structure." Given that corporations are politically (I hesitate to say "rationally") planned command economies (at least internally), the question for free-market opponents of command economies, who insist that such economies must lead ineluctably to the Gulag, is why the unconscionable evils of command economies should not also afflict the corporate employee.
"Indeed, comfortably compensated and securely tenured economists like Paul Samuelson, bemused by the reversibility of their equations, have taken to saying that it makes little effective difference to the economy whether capital hires labor or labor hires capital."
Reversibility a defect of the mathematical models used. More recently developed mathematics can handle directional causal relations. The equations in these models aren't reversible (except in degenerate cases).
Sure, but the point is that this brilliant man was tone deaf to the most fundamental structural fact of capitalism.
Given that our gods have clay feet (they can be taken in by their models), better tools would help. Leibnizian naivete on my part perhaps. But haven't you noticed the extraordinary discipline it takes to get the fundamental structural facts right? Even I missed your point, and that should have been easy. The unaided mind is at a disadvantage. My interjection was intended to point out some recent developments though.
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