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Monday, April 5, 2021

ANOTHER INTERMISSION, THIS TIME TO REPLY TO SOME COMMENTS

Several of you, most notably David Palmeter, have raised questions to which I need to respond. The questions all concern matters that Marx discusses at length in Capital and which I have discussed in my books and articles, but I am afraid that in an effort to limit the length of this multipart essay I skipped over issues that I mistakenly assumed would be clear to the readers of this blog.

 

David Palmeter raises two different questions which require different answers. First of all, he asks what Marx has to say about labor that is not manual labor of the hammer – on – nail sort. Second, he asks about the labor of management performed by the owner of the company. Let me discuss each of these in turn.

 

Of course it is the case, as Marx and every other political economist was aware, that some of the labor required for the production of commodities was labor of design, planning, organization, of record-keeping, and so forth. Marx’s analysis applies exactly as directly to the office of an insurance company managing claims and keeping records, to a high-tech digital firm designing state-of-the-art iPhones, to for-profit hospitals, and to trucking companies as it does to companies that produce commodities on production lines dominated by relentlessly moving conveyor belts (think Lucille Ball making candies). The examples Marx gives in Capital are drawn from the Parliamentary Factory Inspectors Reports, which deal mostly with the factory production that dominated the English economy in the first three or four decades of the 19th century, but everything in what he says can be more broadly applied.

 

There is one major shortcoming in Marx's discussion of capitalism that is in fact quite important, but I have chosen not to go into it here in the interest of brevity. Writing in 1860s England, Marx was convinced that he was seeing the progressive deskilling of the traditional crafts in the transformation of the working class into a mass of semiskilled factory workers. Marx failed to foresee that capitalism would develop a steeply pyramidal working class structure in which the employees of companies would be making anywhere from starvation wages to salaries that supported a lavish lifestyle. I have talked about this and other problems with Marx’s analysis in my essay “The Future of Socialism,” which you can find that box.net by following the link at the top of this blog.

 

The second question David asks concerns the compensation to the owners of the companies for the extremely valuable labor of oversight or management that they provide. This too is a question that Marx considers with some deliciously mocking remarks in the early chapters of Capital. This is a much more important issue because it touches on one of the most important ways in which modern capitalism successfully mystifies itself and misrepresents itself to even sophisticated onlookers.

 

The answer requires distinguishing two cases. The first case is the more traditional case in which an entrepreneur launches a company, hires labor, buys inputs, sets them all to work making commodities, sells the output in the marketplace and pockets a profit. Since the labor of management performed by the entrepreneur is essential to the enterprise, a part of what the entrepreneur takes home at the end of the year must be written up as his managerial salary, and in any well-run enterprise it will appear therefore on the books as one of the costs of production. But a little thought makes it obvious that in any well-run company that managerial salary will not be all that the owner takes home. When I taught a course on Marx at UNC Chapel Hill in the spring of 2020, I tried to illustrate this point by telling a story about the time that I lived in Northampton Massachusetts. Driving west out of Northampton and up into the hill towns of the Berkshires, I drove along the Mill River. At one point I came to an old mill on my left which in the 19th century had been powered by the water rushing down the river but which was now converted to a number of little shops of the countercultural sort. On my right, across the street, were two large homes, virtually identical, each of which featured large garish white pillars. (I even managed to grab a screenshot of them from Google maps which I showed to the students.) The story was that one of the two homes was built by the owner of the mill and the other was built for his daughter when she got married. I made up a story that went something like this: the mill owner married his daughter off to an impecunious but wellborn young Boston man from an old Boston family. When he died, his daughter and her husband inherited the mill but the young man had no intention of actually working as the manager of the mill so he hired a paid manager at what was then the going market rate for middle managers, and then took his new wife off on a European tour. When he returned, he asked how much profit the manager had to turn over to him, and the manager said “why, sir, there is nothing at all.” Outraged, the young man asked how his hired manager had contrived to run the mill so badly and the manager replied, “I ran it exactly as efficiently and profitably as did your late father-in-law, but his profit was his salary which he earned for the labor of management and since you chose not to run the mill yourself you have paid all of that money to me.” Well, we all know, as did Marx, that the manager was just pulling his leg. Of course there is a profit left over after the salary of management has been added to all the other costs of running the mill.

 

Everyone is mesmerized by the extraordinary wealth of Jeff Bezos, who not only owns Amazon.com but started it and at least until recently ran it, but richer yet than Bezos is the Walton family whose collective wealth outstrips even his. These are the heirs to the fortune of Walmart, created by their father, Sam Walton. Unlike their late father, they provide little or no direction for this great company, but no defender of capitalism would suggest for a moment that therefore they have no right to the shares that they inherited.

 

In the balance sheet of a corporation, costs appear on the left-hand page and income appears on the right-hand page and when the two columns are added up, profit is what results from the first subtracted from the second.

 

But the modern corporation is not a business run by its owner. It is a joint stock corporation run by hired managers whose compensation is determined by a Board of Directors. What confuses things is that in a regular, systematic, unquestioned process of theft, a portion of the profits is directed away from the shareholders who are the owners of the corporation and into the pockets of the managers, who are paid vastly more than the going rate for managerial labor. To be sure, through the device of stock options, these managers often become the owners of very large stakes in the corporation, but they are not chosen as managers because they own large numbers of shares of stock – they own large numbers of shares of stock because they are employed as managers. Rex Tillerson is said to own $600 million in Exxon shares but he was not made CEO of Exxon because of that huge ownership share. Rather, his holding was the consequence of his rise to senior executive positions in the corporation.

 

The simple fact remains that capitalism is a system of economic organization that regularly, quietly, unremarkably transfers a portion of the annual collective social product into the hands of a small segment of the society who have come to own the means of production. As each year goes by, the owners of capital expand their ownership and thereby reinforce their control of the workers whose labor creates what they take as profit.

 

It is for this reason, Marx teaches us, that the essence of capitalism can be captured in a sentence of just nine words: capitalism rests on the exploitation of the working class.

 

Now, back to my exposition. Tomorrow things get genuinely complex and difficult.

15 comments:

Samuel Chase said...

This past Sunday, 60 Minutes had two segments which bear on this discussion, one directly, the second somewhat tangentially. The first segment involved an interview with Darren Walker, the current President of the Ford Foundation, a position which he has held since 2013. Mr. Walker is African-American. He grew up dirt poor in Louisiana, by a single mother who emphasized education. Mr. Walker attended the University of Texas at Austin, graduating with a bachelor of arts degree and a bachelor of science degree. He went on to obtain his law degree from the University of Texas. As an attorney, he worked for the Union Bank of Switzerland in its capital markets division and became quite wealthy. Thereafter, he became a teacher in Harlem, and thereafter he became a community development organizer for the Abyssinian Development Corporation, located in Harlem and devoted his life to philanthropic causes. As the President of the Ford Foundation, he has redefined the Foundation’s mission by issuing grants to individuals and entities which promote education in poor socio-economic sectors and in the arts.

During his interview, he maintained that capitalism was the best economic system ever developed for the generation of wealth. He insisted that it was not inherently evil, and that there was nothing in the nature of capitalism which was inconsistent with using that wealth for philanthropic causes. The nay-sayers who comment on this blog will undoubtedly criticize Mr. Walker’s opinion as being an aberration in capitalist society, but this misses the point he was making - that the wealth which capitalism generates can be used for either good or evil; which choice is made, however, is not defined by capitalism itself, but by human nature and the individuals who benefit from capitalism, not by the nature of capitalism per se.

The second segment raised questions about the character of human nature itself. The segment told the little known story of an incident which occurred in the 1960s involving five teenagers growing up in Tonga. Bored with their high school assignments, they stole a fishing boat and set out into the Pacific Ocean, wherein they eventually got lost. A violent storm destroyed the vessel’s sails and rudder and they drifted for days, until another storm drove the vessel onto the shore of a tiny volcanic island in the middle of nowhere. Stranded on the island, contrary to what William Golding envisioned would happen in his novel “Lord of the Flies,” the five teenagers cooperated together in building shelter, acquiring food and eventually being able to generate a fire, which they monitored day and night to keep alight in order to signal their presence on the atoll to passing vessels. They lived on that atoll for 15 months, with no declination into the kind of barbarism depicted in “Lord of the Flies.” They were finally rescued by an Australian fisherman who happened to sailing by the island and saw them using his telescope. The incident achieved some notoriety in Australia, but was lost to history until the story was uncovered by a Dutch historian and writer, Bregman Rutger, who saw in the story a refutation of the assumption of the basic selfishness of humanity as depicted by Golding. He authored the book “Humankind,” proselytizing this unconventional viewpoint, which became a best-seller.

Critics of this viewpoint might note that a single instance of cooperation among five stranded teenagers says little about the nature of humanity in general. A cynic, such as myself, might note that such cooperation, achievable among a small group of five individuals, becomes less sustainable as the number increases and competition over limited resources becomes more demanding, encouraging the formation of tribes and clans, as depicted in “Lord of the Flies.” While it is impossible to resolve this question one way or the other, I suppose that Mr. Walker would maintain that neither outcome is the inevitable product of human nature, but that both are equally possible, depending on the individuals involved.

Jordan said...

Samuel, I think you'll find that the response from a committed Marxist is not what you imagine. For Marx, the ethical motivations of particular capitalists is wholly irrelevant to the judgment that capitalism is exploitative. Capitalism would be exploitative even if every capitalist was as committed to philanthropic causes as Mr. Walker. No matter how much money he gives back, it remains the case that the wealth was made by exploiting workers. And so the point about the selfishness (or lack thereof) in human nature is really beside the point. Of course, it's only beside the economic point -- the motivations of individual human beings are crucially important for us in almost all areas of our lives, as hardly needs to be said. But they do not, if Marx is right, affect the basic exploitative structure of the capitalist mode of production, which only works if the capitalist profits by underpaying for the value of the labor he/she employs.

DDA said...

That capitalism makes philanthropy both necessary and inadequate is a critique of capitalism.

Samuel Chase said...

Jordan,

I have been engaging in this back-and-forth regarding Marxism and its ethical implications for several months now. The use of the term “exploitation” is itself a pejorative term with ethical implications. If Mr. Walker is correct that capitalism, whether it is exploitative or not, is the greatest generator of wealth which can be used for good or evil, depending on the ethics of the recipients of that wealth, the claim that capitalism is inherently exploitative, and therefore inherently unethical, raises the question, “Which form of economic organization best serves the needs of humankind, capitalism or Marxism?” This depends, I submit, on which system can better allocate the use of the wealth that system generates. As some commenters on this blog have pointed out, Marxism fails to take into account the promotion of innovation which capitalism rewards, which in turn, while it is exploiting the workers who produce the products that such innovation generates, results in generating greater wealth than would be created if the means of production were solely in the possession of the workers, who lack the ingenuity to use those means of production to the greatest advantage. This statement may smack of elitism, but it happens to be true – for if it were otherwise, there would not be wealthy capitalists who became wealthy via their ingenuity, industriousness, etc. The workers would be able to generate this wealth by co-opting the ingenuity of the capitalists. The bottom line, then, is, which is more ethical – a capitalist system that, according to Mr. Walker, is best suited for generating wealth, which in turn can be used for philanthropic purposes to aid the workers and their families, or Marxism, in which the means of production are owned by the workers, but which ultimately generates less wealth because such a system inhibits rewarding innovation.

Jordan said...

Hi Samuel,

I think the question -- "Which form of economic organization best serves the needs of humankind, capitalism or Marxism?" -- is ill-formed, at least from a Marxist perspective. Marxism is not a form of economic organization (a "mode of production," in Marx's terms) but an analysis and critique of capitalism. (A critique that admits, by the way, that capitalism is the greatest generator of wealth that the world has ever seen.)

Now, maybe that's just a terminological point, since after all Marx was a committed socialist, and socialism IS a mode of production, the one that Marx thought inevitably would result from the collapse of capitalism. But it is important that he didn't develop serious plans for what the socialist mode of production would look like in practice.

You may be right, for example, that the socialist mode of production would struggle to be as innovative as the capitalist. I think that's an open question, for a number of reasons. I do think that what you say may well be a bit elitist, and that workers are not as innovative as they might be in part because they have been trained from a young age to be no more than cogs in a big machine that exploits them. And I think as well that "innovation" is at best a highly dangerous good -- it helps to create new vaccines, for example, but also helps to create endless types of unnecessary luxury goods, feeds into anthropogenic climate change, etc.

But I think the most appropriate Marxist thing to say is that it would be a standing problem with the new mode of production of how it might approximate at least some of the goods of prior modes. Perhaps in some cases it would fail. It would very likely generate less wealth, for example. But the reason the socialist mode of production would be developed in the first place would not be because there was some independent standard according to which the socialist mode scores higher than the capitalist, but because the capitalist system becomes, in itself, intolerable. And that is because the way it creates wealth is to exploit the worker, in ever more explicit and disastrous ways.

Samuel Chase said...

Jordon,

Your exposition, and the practical justification for a continued analysis of Marxism, depends on the validity of his prophecy that capitalism will eventually collapse of its own weight. As crude, anti-intellectual and grating as what I am about to write may seem to the devout adherents of Marxism, including Prof. Wolff, I highly doubt that this prophecy is going to come to pass in the near future, in the distant future, or ever, and I have several reasons for believing this:

1. The prophecy depends on the mass of workers becoming so fed up with capitalism that they will revolt, probably violently, and overturn it. But most of the workers that this prophecy depends on actually support capitalism and aspire to join the ranks of wealthy capitalists. This is true of the millions of Americans who, unfortunately, supported Trump, as well as the millions of Americans who despise Trump.

2. Most humans aspire to obtain three things in their lives: wealth, power and/or sexual gratification. They do not aspire to obtain these things in virtuous ways, but simply to obtain them, whatever it takes. Even if once exploited, they do not wish to share their acquisition of any of these objectives, once attained, with others. Such a mentality does not bode well for the collapse of capitalism. The exceptions to this mentality throughout human history have been few and far between, i.e., Jesus Christ, Mahatma Gandhi, Immanuel Kant (who led a humble and solitary existence), etc. But the vast number of humans – even intellectuals, artists and academics, when push comes to shove - do not share in this world view.

3. The examples of societies which have purported to adopt Marxism have been utter failures and have degenerated into autocratic governments, i.e., the Soviet Union, China, Cuba and Angola, where, as Orwell noted, all pigs may have been equal , but some pigs were more equal than others. The fact that there has not been any successful implementation of Marxism, in which the means of production are controlled by the workers who then proceed to share equally in the wealth the system produces, is not a propitious sign that the future holds greater promise for the instantiation of a genuine Marxist society.

4. Examples of more hopeful instances of cooperative societies, such as Robert Owen’s social experiment in New Harmony, Indiana, have met with failure as well. The only examples of the promotion of worker rights in the U.S., i.e., the union movement, with which I have some personal experience as an attorney, have had mixed results. My experience has been that as many times as a union fought for an employee’s rights, there have been as many, if not more, instances where the union has abdicated its responsibility to its members, and the member(s) have had to sue the union for breach of the duty of fair representation. My experience has been that the adage that power corrupts, and absolute power corrupts absolutely, applies just as much in the union movement as it does in politics.

5. The example of communal living which was once the pride of Israel, the kibbutz, has, for all intents and purposes, disappeared, to be replaced by aggressive capitalism.

So, I do not hold out much hope for Marx’s prediction that capitalism will eventually collapse of its own weight. Analyzing Marxism as an academic subject may be intellectually gratifying, but unless it has any real hope of seeing fruition, as rude as my saying this on this blog may be regarded, what is the point if its is done at the expense of analyzing the more propitious ways in which capitalism may be formulated in order to enhance its philanthropic potential, as Mr. Walker advocates? It may be stimulating to contemplate Marxist ideology as an academic exercise, and hope for its ultimate success over capitalism, but, to quote Jake Barnes’ response to Brett Ashley, fantasizing about the happy life they might have had together had not reality intruded, “Yes, isn’t it pretty to think so.”

s. wallerstein said...

Sam,

Even if your reflections on human nature are true (and I don't entirely disagree with them),
that doesn't make Marxism (which isn't an ideology, but a school of philosophy) merely an
"academic exercise".

Insofar as Marx's analisis of the capitalist economy exposes its real nature, even if his hopes of capitalism leading to socialism do not prove true, it seems more than an academic exercise to understand the economic system we are living under as Marx helps us to do.

Samuel Chase said...

s. wallerstein,

You have in past comments ridiculed organized religion as a form of fiction believed by silly, easily manipulated people.

If an economic theory – I repeat, theory – has as one of its central tenets that capitalism will by its own weight collapse, to be replaced by the next historical stage – Marxism - but history, empirical exemplars of Marxism, anthropology, human psychology, all point to this central tenetas being erroneous, then does not the fact that a central tenet of a philosophy is erroneous – since, as you have pointed out, the central tenet of monotheistic religions is a silly fiction, rendering devotion to such religions a fatuous exercise – indicate that a similar devotion to an economic theory whose central tenet is false also devotion to a fatuous exercise?

s. wallerstein said...

I'm not a Marx scholar, so I'm not in no position to opine on which of Marx's central tenets are true and which are false. What Professor Wolff has explained so far about how capitalism exploits workers seems plausible to me and has nothing to do with whether capitalism will collapse of its own weight or not (in the foreseeable future).

I don't see why we can't take those elements of Marxism which are true and use them as tools of analysis.

I don't see that as analogous to faith in a religion at all, although I will not deny that for some people Marxism can become a religion of sorts.

If Marxism, as presented by Professor Wolff so far, is a model of economic reality worth considering, then we may use it to understand our social and economic reality, even if we don't expect Revolutionary change. First of all, the examined life is worth living and second of all, if we understand our economic reality, we can reform it more lucidly.

s. wallerstein said...

Professor Wolff has called Marx "the greatest social scientist".

Let's say he's not the greatest, only in the top ten.

That's no reason not to read him and learn from him, as we might read Weber, Durkheim, or Bourdieu.

That doesn't make finding some of his thought worthwhile a religion any more than finding some of Weber's ideas worthwhile is a religion.

Let's read what Professor Wolff has to say and then opine after reading all his posts on the subject.

Samuel Chase said...

s. wallerstein,

In my earlier comment, I stated: "Analyzing Marxism as an academic subject may be intellectually gratifying, but unless it has any real hope of seeing fruition, as rude as my saying this on this blog may be regarded, what is the point if its is done at the expense of analyzing the more propitious ways in which capitalism may be formulated in order to enhance its philanthropic potential, as Mr. Walker advocates?"

I did not advocate foregoing the study of Marxism altogether as an intellectual exercise. I was decrying doing so at the expense of a condemnation of capitalism, resulting in a disregard of methodologies to improve capitalism, especially since it looks like it is going to be around for quite a while.

LFC said...

Marx had some very sharp insights into the capitalism of his time. That would be reason enough to read him. (How far and in what ways those insights apply to later varieties or instantiations of capitalism is a matter, I think, on which reasonable people can differ.)

To some extent Marx's thought transcends its time, and to some extent it is a product of its time and historical context. That's a banal but nonetheless accurate statement that can be made about any thinker of consequence (and about any thinker, period).

As s. wallerstein says or implies, Marx and other social theorists (and I'm using that label very broadly) should not be viewed as purveyors of The Truth (capital T) but as sources of insight and frames of reference and analysis whose tools may or may not be useful depending on the situation or object of study. Sometimes you need to saw a piece of wood in two and you need a saw, but other times you need to drive a nail into a wall and then you need a hammer. (Trick is knowing which you need when.) This is all very obvious and non-profound, and it's why you don't have to (and shouldn't) believe that any single thinker has possessed the Master Key to the Secret of the Universe, and is one reason why the canon (so to speak) of social theory has been broadened over the years to include not only the usual white males but also non-white males (e.g., F. Douglass, DuBois, Fanon, etc.) and women (e.g., feminist theorists like DeBeauvoir whose names everyone knows by now). That's not a matter of wokeness or political correctness but mostly just an application of the belief that no single person has possessed the entirety of The Truth (capital T), and that everyone, from the most colossal geniuses and polymaths who've ever trod the earth to their polar opposites, is necessarily shaped (and also therefore necessarily limited) by their particular experiences.

Samuel Chase said...

s. wallerstein and and LF Cooper,

It is all well and good to speak of Marx as no more than a social theorist, and to extol him for his literary charm, without expecting him to be an expounder of truth with a capital T. But that is not all that he is portrayed as by those who worship him. He is, in fact, also portrayed as offering a theory of economics which is true, with a capital T, and for which the proletariat should throw over the traces of capitalism in order to end their exploitation and attain the workers’ paradise his worshippers maintain can be found in such a rebellion. So, to seek to minimize his effect by simply saying, well, after all, this is just an academic exercise in social theory and we should only view him as a social theorist and not as a purveyor of some kind of truth with a capital T, is, in my opinions, rather disingenuous and not at all what those who claim to be Marxists are about. They do want his economic theory to be regarded as truth with a capital T, to treat capitalism with scorn and as the irredeemable abuser of the working man, which must be cast aside if a legitimate egalitarian society is ever to be achieved. Your efforts at a didactic apologia and minimization of his economic theory as just so much interesting theory is not what he intended, and not what his supporters intend.

LFC said...

There are plenty of people who call themselves Marxists who don't view every single word Marx ever wrote as correct and inerrant. Similarly, there are Freudians who don't think every single word Freud ever wrote was correct, ditto for Weberians, ditto for Foucauldians, ditto for Kantians, etc. etc. etc. That's basically all I was trying to say. I was not trying to minimize anything. So you mistook my comment. (But what else is new?)

Jason said...

That last sentence is why I've begun my deep study of Marx. As someone who just got a whopping $2500 "loyalty bonus" check after the company I work for got bought out for $7 billion, I feel just a little exploited myself.