THE FUTURE OF SOCIALISM PART TWO

One of the inevitable consequences of this move from calculation to planning is a corresponding loss of simple clarity of goal. When an entrepreneur is locked in cutthroat competition with other small producers, he has very little choice of feasible entrepreneurial goals. Short-term profitability is the condition of survival. Growth – for economies of scale, for technological innovation, and as a means of liberation from market forces – virtually is thrust upon him. At this stage, there is no room for what eventually comes to be celebrated as “industrial statesmanship”. A firm may flourish one season, and be driven to the wall the next. Once the firm has reached a certain level of size and control over its input and output prices, however, the managers of the firm [for at this stage, it is likely that the individual entrepreneur has been replaced by salaried managers] must choose among a variety of corporate goals: short-term profit maximization, longer-term profit-maximization, enhancement of the firm’s stock market performance [which is, of course, not necessarily identical with profit maximization], managerial stability, attractiveness to potential take–over financiers, resistance to a financial take-over, and so forth.

There is no calculus that dictates how managers are to decide among these goals. They are genuine alternatives, corresponding to different and incompatible managerial ambitions. In a fundamental sense, which I shall dwell on shortly, these choices are political rather than economic in character. What distinguishes them from what are ordinarily considered political alternatives is not their logical structure, but simply the identity of the constituencies to whom the decision-makers are accountable in the making of the choices.

The second means available to entrepreneurs for overcoming the tyranny of the market – incorporation into their enterprise of stages in the production process that were previously carried out by independent supplier firms – constitutes an even more important theoretical departure from the logic of capitalism and a corresponding movement toward a precursor of socialist planning. This time, let us use a simple hypothetical example.

Imagine a firm that has been producing cardboard cartons in a factory with 80,000 square feet of usable floor space. We may suppose that the firm buys the cardboard in large sheets from a cardboard producer, and then stamps, folds, and staples the cardboard into cartons. Cardboard cartons are the sole product of the firm, and abstracting from a number of issues to which we shall return, the accounting procedures used to keep track of costs and determine profit margins are quite elementary and straightforward. The firm’s accountants have made a few standard assumptions about the depreciation rates of the machinery, and we may simplify things by assuming that there are no tax considerations [accelerated depreciation, etc.] to complicate or warp the bookkeeping. Profit is then the difference between costs and revenues, and the profit rate is calculated on the value of invested capital, the profit margin on the difference between cost and sale price of each unit of cartons.

The market for cardboard sheets, we may suppose, is fluctuating and uncertain, and the carton manufacturing company’s manager believes that he can stabilize his costs and increase his profits by producing his own cardboard, rather than buying it on the market. Since there are 25,000 square feet of unused space on the factory floor, he allocates that space to cardboard production and puts a young, ambitions supervisor in charge of the new branch of the firm. The question arises: how shall the profitability of this cardboard manufacturing activity be computed?

There are two reasons why this question needs answering from the firm manager’s point of view. First, of course, he must decide whether it is better to produce the cardboard in-house or continue to buy it in the market. That question, we may suppose, is relatively easy to answer. Second, as the manager of a firm with two divisions, each headed by an ambitious divisional chief, he must evaluate the relative profitability of the two divisions in order to decide which division chief will be tapped for promotion when and if a new, higher-level job in the corporation comes open. In large, modern capitalist firms, this bureaucratic question of internal advancement is of much greater importance to everyone in management than the older question of profitability of the firm as a whole. Profitability becomes a key to managerial advancement, not merely to owner-satisfaction.

The new division manager, eager to make as good a record for herself as possible, argues as follows to the accountant, whose job it is to come up with profitability estimates at the monthly meeting of officers of the firm: “The depreciation on the factory building is exactly the same whether we run the cardboard-producing activity or not, as are the general overhead costs for utilities, telephone and so forth. Save for some small increase in operating overhead, the cardboard-production experiment imposes no new fixed costs on the firm at all. What is more, the bookkeeping, ordering, and shipping departments can absorb the relatively small flow of work generated by the new division without any increase in personnel or overtime costs. Hence, in figuring the input costs as against revenues for cardboard production, the only items that ought to be charged off against the new division are such direct costs as the new machinery required, the wages of the extra workers taken on to make the cardboard, and the cost of the raw materials.”

The manager of the old carton division, who knows a serious threat to his job when he sees one, flatly refuses to agree to this self-serving bit of accounting sleight of hand. What the cardboard-production manager has proposed will, if accepted, result in a dramatically higher rate of return to her division’s investment than can possibly be earned in his. How long will it be before the president of the firm gets it into his head to have them switch places with an appropriate readjustment of their salaries! He proposes that all of the fixed costs of the enterprise be allocated to the two divisions in proportion to the percentage of the floor space they occupy [a method of allocation that happens to favor him a bit more than the equally plausible proposal to allocate in proportion to the revenues generated by the two divisions].

The president of the firm, confronted with this disagreement between his two division managers, turns to the accountant, whom he asks for an objective, impartial, scientific ruling. And he now gets a distinct shock, for his accountant, who is as honest as she is competent, informs him that as a matter of fact [or, more precisely, as a matter of accounting theory] there is no objective, impartial scientific answer to the question: How shall the fixed costs of a joint-production enterprise be allocated among the several distinct productive activities of the enterprise?

This is a rather startling proposition, on which the entire argument of these remarks rests. I need therefore to spend some time explaining it clearly and indicating the grounds on which it rests. My guide here is a pair of monographs written by a Canadian Professor of Accounting, Arthur L. Thomas, and published by the American Accounting Association. The first monograph, “The Allocation Problem in Financial Accounting Theory,” appeared in 1969; the second, “The Allocation Problem, Part II,” was published five years later. Thomas seems to be something of an iconoclastic radical masquerading as a nerdy bean-counting number-cruncher. In the driest language imaginable, he argues ploddingly, painstakingly, but devastatingly that a central activity of financial accountants – the allocation of costs to the outputs of a firm – has no objective rational whatsoever, being based rather an arbitrary choice of one from among a number of alternative incompatible patterns of allocation. What this means, in plain language, is that an accountant, speaking professionally, cannot tell the management of a firm just what a unit of output costs and hence how much of the profit of the firm can be attributed to its sale.

Thomas himself draws no larger lesson from this extraordinary conclusion, but in what follows, I will try to show that it has the most profound implications for our understanding of the manner in which something very like socialism evolves in the womb of the capitalist firm. Incidentally, in his correspondence with me, Thomas seemed to evince a good deal of pleasure at the radical conclusions I drew from his work, but it goes without saying that when I venture beyond the confines of financial accounting theory I am entirely on my own.

The accountant is presented by the firm with the raw data concerning the costs of the firm’s activities – invoices for materials, bills for rent, electricity, and insurance, hourly wages and managerial salaries, inventories, and so forth. His job [if we imagine this to be Thomas himself as the accountant] is then to figure out how much of each of these factor costs to allocate or impute to each unit of salable output, and thereby to calculate the contribution to profits being made by each division of the firm. He is to do this as objectively and accurately as the data permit, not allowing his assessments to be influenced either by the hopes and ambitions of the company management or by the particular aspirations of one division of the firm rather than another. His conclusions can then be presented to the investing public as a neutral evaluation of the performance of the firm, and to the management as a sound basis on which to make corporate decisions.

There are three different features of the activities of large capitalist firms that defeat the accountant’s effort to find neutral, objective methods for allocating costs to individual outputs, or to the subdivisions of the firm responsible for their production. These are the phenomena of fixed capital, inventories, and joint production. Let us look at each of them briefly in turn.

Fixed capital is capital that lasts longer than one cycle of production, which is to say, longer than it takes to produce one unit of output. The examples are endless – a robotic riveting machine on an automobile assembly line that can be used in the assembly of three thousand vehicles before it must be replaced, a power loom that wears out after being used to make ten thousand yards of cloth, an office copying machine that must be replaced on average every twenty thousand copies, an office building good for fifty years. Some of these items will have a resale value when it is time to replace them; others will simply have to be scrapped. Each of these factors of production costs the firm something, and that cost must in some way be apportioned to the units of output to whose production it contributes. To put the same point in other words, the accountant must select a schedule of depreciation for the productive factor. [I am entirely abstracting from the enormous complications introduced by the depreciation schedules stipulated by the Internal Revenue Service, which of course have nothing whatever to do with the actual wear and tear on the item being depreciated. These words are being written at my desk in the tiny pied-a-terre that my wife and I bought in Paris several years ago, which we rent out to readers of the New York Review of Books. Our apartment is in a seventeenth century building whose value has been appreciating steadily for the past four hundred years or so but when it comes time for me to fill out IRS Schedule E – Rents and Royalties – I am permitted to adopt the fiction that in twenty two and a half years, its value will have disappeared.]

Without going into the details of Thomas’ monographs, let me indicate some of the incompatible alternatives available to the accountant. He may assume that the fixed capital yields up equal parts of its purchase price to each unit if output produced with its aid. This was in fact the assumption Marx made in Capital. Alternatively, he may assume that the machine loses equal shares of its value in equal time periods – one tenth during each year of a ten year life, for example. This is not at all equivalent to the first alternative, because the machine may be used in the production of differing numbers of units in different years, either because of speed-ups and slow-downs in the production process, or because the machine has a breaking-in period before it reaches maximum efficiency, followed by a period of optimum functioning, after which as it wears out it is less and less capable of spewing forth product at the same rate. Each of these assumptions will yield a different depreciation schedule, and hence a different quantum of cost imputed to units of the output.

Alternatively, the accountant may adopt an entirely different approach, and by appealing to an existing market for second hand capital goods, impute to each year’s output the difference between what the machine would have sold for in that market at the beginning of the year, and what it would have sold for at the end of the year. Or – and this will yield a totally different set of numbers – he may compare what the company would have to pay for a second hand machine at the beginning of the year with what it would have to pay at the end of the year for a second hand machine one year older. But we have not even begun to ring the changes on this apparently elementary accounting problem, for the accountant may impute to a year’s output what it would cost the company to rent a machine for one year, even though the company has already purchased the machine, which is thus, from its point of view, a sunk cost. Indeed, Thomas actually considers the suggestion [which has been treated respectfully in accounting circles, to my surprise] that the company write off the entire cost of the machine in the year it is purchased, and treat it in all the subsequent years of its use as a free good, like the air that is required for the burning of fuel. The accountant may even, in any given year, choose whichever of these methods of allocation yields the lowest number, on the theory that he is thereby telling the management what its most efficient choice would be at any moment.

This litany of options available to the accountant does not begin to exhaust the logical possibilities. The problem faced by the firm, as Thomas makes clear, is that accounting theory offers no way of deciding which of them is objectively right – which accurately reveals to the management of the firm the true structure of its costs. Indeed, although the data with which the accountant works are, or can be made to be, factually accurate, there seems simply to be no answer to the question, “Just how much does each unit of output cost the firm to produce?” Thus, returning for a moment to our cardboard and box factory, the accountant cannot resolve the dispute between the division managers in a neutral and unbiased manner befitting a chartered accountant. Some of the many options are likely to favor the head of the box division, others will make the head of the cardboard division look better.

Similar problems arise when the accountant turns to the task of deciding how to carry on the books of the firm the cost of the stocks of material in its inventory. A firm acquires a stock of some input that it requires for its productive activities – coal for its furnaces, thread for its power loom, gravel for its cement mixers, diesel fuel for its trucks. Stocks characteristically are composed of units acquired at different times and at different prices. For the most part, stocks consist of homogeneous units – one gallon of diesel fuel is much like another, one bag of cement indistinguishable from another. [The homogenization of inputs, and the corresponding outputs, is , as Marx points out in Capital, one of the signal features of capitalism, and distinguishes it from the craft production that it replaces. It is accompanied by a like homogenization of the labor performed by the workers employed by a capitalist firm.]

How shall our accountant proceed in allocating the cost of inputs drawn from stock and thrown into production [as Marx liked to put it]? He may assume that the first unit withdrawn is the first unit that was added to the inventory, and he will then impute to the output whatever price was paid for it. This is the rule of allocation known in accounting circles as FIFO – First In, First Out. He will still have to adjust this price for the opportunity cost incurred by tying up that amount of capital in inventory, which in turn will require some choice from among the many alternative ways of computing the relevant rate of interest.

Alternatively, our accountant may opt for LIFO rather than FIFO – which is to say, Last In, First Out – or some average of the two ways of computing costs, and so forth. Since the price of stocks typically varies over the life of an inventory, it can make a very considerable difference to the profit or loss imputed to a unit of output which of these accounting conventions is selected. If I may echo the late unlamented Richard Nixon, it would be easy, but it would be wrong, to suppose that choosing one accounting rule and sticking to it will sanitize the accounting process and obviate these problems. It only takes a little mathematical imagination and some patience to construct examples in which, as a consequence of the pattern of variation of factor prices, the choice of FIFO over LIFO, or any of the other alternatives, can over time systematically advantage one division of a corporation over another.

For example, if a factor input has been falling steadily in price for some years, FIFO will make the division using that factor look unusually profitable, for the accounting convention will make its costs appear to fall. LIFO will make it appear that its profitability is in decline. If two divisions are in competition within the corporation, one using inputs whose price is falling and the other using inputs whose price is rising, the choice between FIFO and LIFO can have an inverse effect on their apparent relative profitability.

Adverting once again to our cardboard example, when the manager of the box division draws cardboard from the inventory being accumulated by the cardboard division, he must for purposes of keeping track of his profitability choose one convention for imputing the internal cost of the cardboard to his box output. Just as he lobbied for an allocation of the cost of space to his division that most advantaged him vis-à-vis his fellow division manager, so now he will try to persuade the accountant to select an inventory convention that has the same beneficial impact on his bottom line.

Which brings us to the third and most problematic of the sources of accounting ambiguity, joint production, for that is precisely what is at stake when it comes time to allocate the cost of the space in which the two divisions carry out their productive activities. Speaking generally, joint production is the use of a factor input to produce two distinct salable outputs. In this case, the input is the company’s building and the outputs are cardboard and boxes. An oil refinery usually generates an entire array of products from its processing of crude, as does a slaughterhouse from its transformation of beef on the hoof into an assortment of meat products, hides, and other outputs. It is not too much to say that in a modern corporation, joint production is the rule rather than the exception.

The accountant, in preparing an annual report of a firm, is called upon to allocate the cost of the inputs that are used jointly in the production process. As Thomas demonstrates, there is no neutral pattern of allocations that can determine how much of the cost of such a factor is to be allocated or imputed to each unit of the several outputs in whose production process it is employed. The problems are manifold, as should by now be obvious. Thomas cites as one example an attempt to distinguish the cost of a building in which are carried out production processes having multiple outputs from the cost of the land on which it is built. The problem is that tearing down the building would so significantly alter the land values in the neighborhood in which the factory is located that the sale price of the cleared land would in no way reflect the cost to be allocated among the several outputs.

Well, enough is enough. Even these remarks, which might be characterized as accounting lite, are more than any sensible layman would want to read. Why does all this matter to someone like myself who is trying to assess Marx’s analysis of the transition from capitalism to socialism?

THE FUTURE OF SOCIALISM PART ONE

I have several times on this blog referred to a paper I wrote some time ago and have delivered two or three places, called "The Future of Socialism." Since it is my attempt to say what future there may be for Marx's central insights, it occurs to me that it might serve nicely as a coda to my recently completed tutorial on The Thought of Karl Marx. I should be able to post it in five lengthy parts. Here is the first.

An unpromising title, this, in the eleventh year of the third millennium of the Common Era; rather like “Recent Developments in Ptolemaic Astronomy” or “Betamax – a Technology Whose Time Has Come.” My grandfather’s dream, the faith of my younger days, has turned to ashes. And yet, I remain persuaded that Karl Marx has something important to teach us about the world in which we live today.

In what follows, I propose to take as my text a famous statement from Marx’s Contribution to the Critique of Political Economy – a sort of preliminary sketch of Das Kapital – and see what it can tell us about the capitalism of our day. I shall try to show you that Marx was fundamentally right about the direction in which capitalism would develop, but that because of his failure to anticipate three important features of the mature capitalist world, his optimism concerning the outcome of that development was misplaced. Along the way, I shall take a fruitful detour through the arid desert of financial accounting theory.

Here is the famous passage, from the Preface of the Contribution, published in 1859:

No social order disappears before all of the productive forces for which there is room in it have been developed, and new, higher relations of production never appear before the material components of their existence have matured in the womb of the old society.

Although Marx spoke generally about all social orders – by which he meant ancient slavery, medieval feudalism, modern capitalism, and the socialism he anticipated, it was principally the transition from feudalism to capitalism on which he focused his attention. The development of latifundia in late Roman times, he thought, was a preparation for feudalism within the womb of the slave economy of the empire. But when it came to the transition from feudalism to capitalism, his historiographical research, which was quite extensive for his day, persuaded him that all of the structural elements of a full-blown capitalist economy and society could be found in rudimentary form in the latter decades and centuries of the old feudal order: exchange based on money rather than barter; wage labor; production for sale rather than consumption; the transformation of money into investment capital; the appearance of commodity production; the dissolution of legal and customary constraints on production and exchange; and so on. In Marx’s view, the great political upheavals of seventeenth and eighteenth century Europe and the Americas were caused by the growing and eventually unsustainable contradiction between the economic power being acquired by the new entrepreneurial classes and the formal legal and political power still exercised by the landed aristocracy and its allies in the clergy.

But Marx also believed that he was witnessing, in his own time, a new contradiction between the legal and political power of bourgeois capitalism, which by the mid-nineteenth century had taken a secure hold of both the marketplace and the state, and the emerging but still subordinate industrial working class. It was, as Marx made clear in his 1848 tract, The Communist Manifesto, a world historical irony that every effort by capitalists to expand the scope and efficiency of their productive forces had the unintended consequence of promoting the unification and self-conscious awareness of their mortal enemy, the working class. As later European Marxists would say, Capital was unintentionally but inexorably transforming labor from a class in itself into a class for itself. The end result of this dynamic process, Marx believed, would be a clash as momentous as that which replaced feudalism with capitalism. This time, it would be capitalism’s fate to be consigned to the dustbin of history and to be replaced by socialism.

It followed immediately from the logic of Marx’s analysis that revolutionary change would be brought about, if at all, in the most advanced capitalist countries through the actions of the most advanced sector of the working class -- the skilled industrial workers in those industries that had achieved the most efficient, sophisticated forms of capitalist production. Marx was not sentimental about the unskilled toiling masses, to whom he referred rather contemptuously as lumpenproletariat.

Marx never presented us with the same sort of detailed analysis of the transition from capitalism to socialism that he so brilliantly laid out in his historical account of the development of capitalism. It is up to us, therefore, to try to imagine what such a transition might look like, taking as our guiding clue his remark about “the material conditions” maturing in “the womb” of the old order. Since the capitalist firm is the central institution through which production and distribution is managed in capitalism, it is there, if anywhere, that he believed we should expect the “new, higher relations of production” to appear. What can this possibly mean?

1. In the Womb of the Old

In the early stage of capitalist development, the characteristic capitalist firm is a small, single-product manufacturing operation presided over rather closely by an entrepreneur who is both owner and principal manager. Present day observers accustomed to the almost complete separation of legal ownership from effective control characteristic of the modern corporation may find this difficult to remember. [For the implications of the transformation of the owner-operated firm into a limited liability joint stock corporation, one may still usefully consult the classic 1932 work by Adolph Berle and Gardiner Means, The Modern Corporation and Private Property.]

A firm of the original sort, in the language of modern economic theory, is a price-taker at both ends. The entrepreneur purchases raw materials, labor, and other inputs in a competitive market at a price over which he [and it is, almost always, he] has no control. The size of his purchases is vanishingly small in comparison with the market as a whole and consequently he must simply shop around for the best price, and pay what the market dictates. The entrepreneur stands in a like relation to the price of his output, for when he returns to the market to sell what has been produced in his factory, he finds that his sales are negligible in relation to the market as a whole. Thus, though he makes a profit sufficient to support a comfortable existence and also to permit further expansion of his enterprise, he is, and experiences himself to be, at the mercy of market forces beyond his control, and even, in the early stages of capitalist development, beyond his ken.

Characteristically, the process by which inputs are transformed into output in our entrepreneur’s factory is simple and relatively direct, although there may be temporary intermediate products as the result of a first process of transformation, serving as the inputs into a subsequent process. Flax is spun into thread and woven into linen; iron ore and coke are transformed into steel; flour is baked into bread.

The accounting procedures required to keep track of the production process, in value terms, although revolutionary in relation to the procedures of the pre-capitalist era, are by modern standards elementary and transparent. Profits are simply the difference between the cost of inputs – wages and rent included – and the price at which the output is sold. The rate of profit can be computed directly as the ratio of annual profit to the value of the capital invested in buildings, machinery, raw materials, and so forth.

There is, to be sure, the first suggestion of a theoretical complexity in the necessity of assigning some fraction of the cost of the buildings and machinery – the “fixed capital” – to the cost of inputs of an annual period, but Marx, in common with all other classical economists, simply assumes that a machine yields up, each year, a portion of its purchase price equal to the fraction of its expected lifetime represented by one year. A power loom that can be expected to last five years, costing one thousand dollars new, can be thought of equally well as having cost the capitalist two hundred dollars in each year. Very shortly, we shall see that this elementary calculation is in fact quite problematical.

At this earliest stage of capitalist development, nothing remotely resembling economic planning can be said to take place on any level but that of the individual firm. Prices, wage levels, aggregate demand and supply, the economy-wide movement of capital, all are completely beyond control and are experienced by all as though they were forces of nature. Within the firm, of course, there is increasingly careful calculation, as individual entrepreneurs, pressed by their competitors, examine every element of their operation in the effort to reduce costs and thus increase profits. It is hardly surprising, under these circumstances, that owners resort to such petty subterfuges as tampering with the clocks in their factories so as to extract an extra few minutes of labor from their miserably paid workers.

The state of affairs we have been describing may strike economic theorists as ideal – indeed, as Pareto-optimal! But it can hardly be said to strike the entrepreneurs as in the least satisfactory. To them, it is a condition of perpetual uncertainty and anxiety. Even the most careful and rationally calculating of entrepreneurs is utterly at the mercy of market forces which he cannot control and can scarcely predict. Though he may be in the grip of one or another of the self-serving rationalizations that celebrate the productivity and progressive thrust of the system as a whole, he will, as a prudent business man, be eternally on the alert for some way to diminish the degree of his servitude to the market.

There are essentially two things our entrepreneur can do to achieve a more secure relationship to the market forces, and whether by foresight or accident, he and his fellows pretty soon attempt both of them. First, he can increase the scale of his operations, so as to cease to be a negligible factor either in the market in which he buys his inputs or in the market in which he sells his output. Second, he can partially overcome his dependence upon markets by engaging in a bit of what economists call “vertical integration” – he can start to produce some of the inputs that previously he was forced to buy in the market.

The first tactic is easily enough illustrated from the history of American capitalism. When the Great Atlantic and Pacific Tea Company [or A&P] decided to expand beyond its original role as a supermarket grocery chain, and go into the business of making jelly under its Ann Page label, it turned to the grape-growing valleys of California for its principal input. The growers were relatively small producers who had, until then, sold their crop in a competitive market to large numbers of small producers. A&P launched its Ann Page line on so large a scale that it needed to buy up the crop yields of entire valleys for its jelly-making operation. As a consequence, it became virtually the sole buyer for the output of large numbers of small growers. It was able to guarantee purchase of a grower’s entire crop even before the growing season had begun, in return for which it acquired the power to dictate the price at which it would buy the crop. In this way, it gained a significant measure of control over its input market, and this in turn allowed A&P to institute production and marketing plans based on an assured input at an assured price.

A further extension of the entrepreneur’s conquest of market forces is exemplified by a practice of Sears & Roebuck. Sears would not merely buy the entire output of its suppliers, thereby making them subservient to it s dictates in a manner analogous to that of A&P. Sears buyers would meet with representatives of the supplying companies and dictate the specifications of the goods it wished to purchase, along with the quantity it wanted. The suppliers then produced to order, secure in their ability to sell their entire output. Sears also dictated the price it would pay, thereby completely undermining the play of market forces. Under these circumstances, Sears executives could truly plan their seasonal line, not in the sense of merely predicting accurately the character, price, and availability of the goods they wished to sell, but in the full sense of deciding what they wanted and then commanding that it be produced.

At this point, it should be noted, a new form of calculation enters into corporate planning. Previously, a corporation like Sears would bargain as hard as it could to lower the price of its inputs. Now, however, when it decided what price to specify for the total output it proposed to buy from a supplier, it had to balance its desire to obtain its input at the lowest possible price against its interest in keeping a reliable supplier in business.

Analogous maneuvers can be undertaken by the firm at the other end of its interaction with the market. As a firm grows larger, it less and less confronts a market for its output that is opaque and independent of its will. Increasingly, it becomes a price-maker rather than a price-taker in its output as well as its input market. Instead of short-term sales tactics, focused almost entirely on price competition, it begins to think strategically about total market share, adding product differentiation to price as a means of increasing, or merely securing, a stable market share on which it can predicate corporate planning.

As the firm grows larger, it progressively diminishes its level of uncertainty, and reduces its dependence on the impersonal workings of the market. It is driven to achieve this independence by the same self-interest that motivates it in the more fully competitive market environment at an earlier stage of capitalism. To whatever extent they are able, entrepreneurs or managers seek to substitute planning in the full sense indicated above for mere calculation of profitability.

Rachel Maddow

Immediately after posting the previous blog entry, I watched last night's Rachel Maddow show on MSNBC, on my computer. It is the best commentary yet on what is happening in Wisconsin. Go to www.msnbc.com, click on msnbc news, and go to Maddow. It is really worth watching.

BLOWIN' IN THE WIND

Herbert Marcuse published ONE-DIMENSIONAL MAN in 1964. In the Preface, he apologized for the forbiddingly abstract nature of the discussion. "In the absence of demonstrable agents and agencies of social change, the critique is thrown back to a high level of abstraction. There is no ground on which theory and practice, thought and action meet. Even the most empirical analysis of historical alternatives appears to be unrealistic speculation, and commitment to them a matter of personal (or group) preference." No sooner had these words made their way into print than Europe and America exploded with student protests. Rudi Dutschke in Germany, Daniel Cohn-Bendit in France, Mario Savio and Bettina Aptheker in Berkeley, and countless other left wing students became "demonstrable agents ... of social change." The deaths of Martin and Malcolm transformed the Civil Rights Movement, the movement for Women's Liberation expanded dramatically, and what we now recall fondly and nostalgically as "the Sixties" was off and running. Once ONE-DIMENSIONAL MAN had been translated into a number of languages, Marcuse became an icon of the European rebellions, a fact that both bemused and delighted him.

I have for some time been writing rather pessimistically on this blog and elsewhere about the prospects for major social change. Am I making the same mistake Marcuse made? Certainly, the events first in Iran, then in Tunisia, then in Egypt, and now in Bahrein and elsewhere, give us hope that rapid and radical transformation is finally coming to the hundreds of millions of Muslims who live in North Africa and the Middle East. I care less about America's complicity in a half-century of their repression than I do about the signs of an explosion from below. For better or worse, this is how genuine revolutions happen.

At the same time, we see the totally unanticipated events in Wisconsin. Who would have thought there was this much life left in the seemingly moribund union movement! It is one of history's little ironies that the Tea Party Movement, an authentic rightwing populist rebellion, should by its success electoral have triggered such energy on the left. All across America, appalling Mayors, Governors, Representatives, and Senators are trying to satisfy the lust for reaction and repression that their right-wing base demands, and it would seem that their overreaching, the threat they pose to long established principles of relatively humane capitalism, is prodding into action the vast majority of Americans who have been taking those principles, and the associated programs, for granted.

Marcuse was wise enough to understand that the job of the philosopher is to understand what the people are doing, not to lead them or tell them which direction in which to go. I shall try to play that relatively minor role on this blog in the months ahead. Only in retrospect will we know whether Wisconsin was merely a momentary flare-up or the first spark of a conflagration. But if the opportunity presents itself, I certainly shall not hesitate to pour a little rhetorical gasoline on the flames.

UNIONS

Mark Povich suggests that I say something about unions, in light of the events now taking place in Madison, Wisconsin. Topographical sidebar: I spent much of my career at the University of Massachusetts in Amherst, which flourished in the asparagus fields of the Pioneer valley, eighty miles and more from the Statehouse in Boston. For a long time, there was only one member of the State Legislature, Jim Collins, who had actually graduated from the State University, and since most people in Boston do not know that there is anyone living West of Worcester, we were pretty much left entirely to our own devices. This was a bad thing, when we wanted the legislature to allocate some money for the perpetually underfunded university, but it was a very good thing when we became one of the most politically left-wing campuses in America. Even when a Dean [with the Catch 22-like name Dean Alfange] peremptorily hired five tenured radicals into the Economics Department in one fell swoop, no one in Boston so much as raised an eyebrow, let alone an outcry. But as I discovered, in 1969, when I delivered Matchette Lectures at the University of Wisconsin that then became my book, THE IDEAL OF THE UNIVERSITY, the Madison campus sits in the state capital on one hill, and the state legislature sits in its building on another hill, the two looking at each other suspiciously. Anything that happens on either hill is immediately taken note of on the other. Hence the instantaneous response on the university campus to the Governor's assault on unionized state employees.



What can I say about unions that will not simply be a matter of preaching to the choir? Americans as a whole have developed a rather bilious negative view of organized labor, but the handful of people who visit this site regularly are, I am reasonably sure, predominantly supporters of the idea of workers joining forces to fight for decent wages and working conditions. All of you know that virtually everything people generally like about their jobs is owed to the often violent struggles of previous generations of organized workers: the eight hour day, the five day week, overtime pay, health insurance, paid vacations, pensions, some measure of job security, safety measures to protect workers in physically dangerous jobs -- none of this was introduced by benevolent employers whose love for their workers led them to forgo profits so that those "less fortunate" [as we used to say] could have a decent life.



The full-scale assault on unions by the Republican Party began in earnest with Reagan, whose first, and signature, act was to break the Air Traffic Controllers' union. It has been downhill ever since. Unionized primary and secondary school teachers, unionized fire fighters, unionized police officers, unionized automobile workers, unionized health care providers -- all have been demonized, scorned, and slandered.



Rather than rehearse these familiar facts, I thought I would tell a personal story that brought home to me how far supposedly progressive intellectuals have strayed from the left. Many years ago, I was invited to participate in a symposium at the University of Kentucky in Lexington, on the subject of the political responsibilities of intellectuals. This was part of a series of symposia open to the public, and we are asked to present talks that would be accessible and interesting to a non-academic audience. The other two participants were Martin Jay, a sociologist who had written a very valuable book on the Frankfurt School for Social Research, the famous pre-war gathering of left intellectuals that included Horkeimer, Adorno, Fromm, Benjamin, and Marcuse, and a very well-known UMass Comparative Literature scholar [whose name I am crushed to discover I cannot recall -- a real senior moment], and myself.

I took the assignment seriously, and wrote a rather pedestrian, but earnest, talk on the responsibilities of progressive intellectuals. It was moderately well received, I guess, but at least it was entirely comprehensible. Martin Jay chose to speak on images of the mirror in nineteenth century French literature, a subject obscure even in the most recherche of circles, in impenetrable to the good citizens of Lexington who had gathered for the event. The third chap, not to be outdone, delivered a talk on Heidegger's essay on technology that I found completely incomprehensible, to put it as delicately as I can.

I was, I must confess, genuinely offended by the performance of my colleagues, so
when it came time for those of us on the dais to engage in edifying intellectual intercourse, before throwing things open to the audience for questions, I asked each of them where he stood on the subject of the unionization of professors. I should explain that the UMass faculty had recently been unionized, in an effort that I had very strongly supported. The two of them stumbled over one another fleeing from the question. It had obviously never occurred to either of them that the political obligations of ostensibly left-wing intellectuals had anything at all to do with unions, and most certainly not with the unionization of professors, which they clearly considered infra dignitate.

It is this complete divorce of the gilded literati from the raw facts of worker exploitation and the need for strong unions that makes me pessimistic about the prospects for the left in this country. Marx has been transformed into a Comparative Literature eunuch. He lives in the pages of literary journals as the ostensible source for silly clever "interventions" in a discourse unconnected with the world of working men and women.

VAMPING 'TIL READY

This, for those who are unfamilar with it, is what musicians in a band call playing a few chords or figures over and over again while waiting for the lead singer to start his or her number. Now that I have brought my Marx tutorial to a close, I am trying to catch up on a few things while waiting for the Muse to inspire me with my next blog riff.

I have spent the past few days teaching my two courses and doing my taxes. The latter effort is tedious, time-consuming, and depressing, needless to say, but I like not to leave it to the last moment. Now that I am retired, I seem not to be able to get my withholding right, so I fear I shall owe the federal government some money. I freely confess that I pay my taxes not because I believe the State has the de jure authority to require it, but simply because I fear the punishment it will inflict if I do not. It seems that being an anarchist does not save me any money, in the end. [It does make me a bit of money, though, since IN DEFENSE OF ANARCHISM continues to sell some copies each year.]

Meanwhile, I have started reading the copyedited chapters of the eleventh edition of ABOUT PHILOSOPHY, a college textbook I wrote thirty-six years ago. Happily for me, Philosophy, unlike Biology or Physics, changes at glacial speed, so a textbook a third of a century old can still be used in college classrooms with relatively minor revisions. Over the years, the book has changed a good deal, although its core passages remain unaltered. I wrote it in eight weeks to fulfill a contract, and because I did not actually expect anyone to read it, I felt free to say what I really think about the various branches or fields of philosophy.

Several people have indicated an interest in some posts on Kant's ethical theories. That would be a daunting undertaking indeed, and I am still turning it over in my mind. Each time I bring one of my multi-part blog series to a close, I think I shall never have anything to say again, but somehow after a few days, the words start pouring out again. We shall see.

LITERARY CRITICAL EXERCISE

Wandering aimlessly about the internet, I came on the following story in THE ONION, the wonderful satirical on-line magazine about which I have written before. It strikes me as a pitch-perfect piece of satire, but then I thought, "Just exactly what is it satirizing, and what is the moral/satirical point of view from which it is written?" I pose that to my readers as an exercise in literary criticism. I am not entirely sure how I would answer the question, but I am certain, nonetheless, that it is spot on as a piece of satire. Here it is for your amusement and possible response:

STAMFORD, CT—On his weekly trip to restock the vending machine at the Stamford Office Park cafeteria Friday, 56-year-old attendant Bob Ingersoll reminisced about how much the B3 slot selection has changed in the 20 years since he began servicing the popular snack dispenser.

"A lot of history in this row," said Ingersoll, twisting a key to open the large display door and refill B3's coil mechanism with Kit Kats. "Back when I was getting started, you wouldn't even think about putting Kit Kats in B3. In those days, it was always more of nougat slot. But then again times have changed."

"Yes, sir," he added, "B3's seen it all."

Ingersoll, whose resumé includes restocking machines at the Darien bowling alley, the Shell station on Post Road, and the New Lebanon Elementary School, first added the Stamford dispenser to his regular route in 1991, when the previous attendant retired. Upon taking an initial inventory, he quickly discovered that he had inherited a B3 in disarray.

With a backlog of unsold Cheetos and two lone packs of Razzles trapped behind them, Ingersoll opted to start the spindle from scratch rather than drop its price, a move that led him to fill the row with Milky Ways.

"It was a safe choice, but it was what I had to do to rebuild B3," he said. "Sure, Razzles are fine for a flex spot like F8 or G2, but not B3. B3 is an anchor row. It's at eye level and it needs a solid product in there to draw your attention to the C's, which is where you put the big guns like your Twix or your M&Ms. I didn't even consider Snickers, though. You can put Snickers anywhere and people will find it."

When things began to turn around, Ingersoll spent the next year cycling new items through B3, experimenting with Doritos, Twizzlers, and even the unconventional 100 Grand Bar. For a brief time, he stocked B3 with Rolos—a candy he said had been performing strong in D2 and deserved a shot at the big time.

The gambit, however, only achieved a short-lived success.

"Certain things work and certain things don't work," Ingersoll said. "But you can't be afraid to try something new. In 1994, I put Sour Patch Kids in there, which is something you just don't do. It's kind of an unwritten rule that they stay near your Combos and Famous Amos Chocolate Chip Cookies. But I had a feeling Sour Patch Kids would be a solid B3."

According to Ingersoll, the decision paid off. He couldn't refill B3 fast enough, and the overnight success, he said, spilled over into unusually brisk sales for neighbors B2 and B4, and even gave Premium Nut Mix a bump.

For a time, he said, B3 was the new C6. Ingersoll acknowledged, however, that nothing can stay the "it" selection forever, and in early 1996, after six months of dismal sales, he made the difficult decision to move his remaining supply of Sour Patch Kids into G5.

"It tore me up to have to bury them like that," said Ingersoll, calling anything at knee level "the Graveyard." "But in the end, I think I did the right thing for B3. You couldn't deny how popular Twizzlers were at the time, and they needed a chance to shine."

Since then, the row has coasted at a respectable level, at turns seeing prosperity with SweeTarts, 3 Musketeers, Bugles, Gummi Worms, Fun Dip, and Hot Tamales. And for the past seven months, Kit Kats have settled into a comfortable groove.

When asked what the future holds for the slot, Ingersoll grew contemplative, saying that he was considering moving Ring Dings to B3 from A4, which he called a solid row that "nobody really talks about." In addition, Ingersoll said he could imagine a future where Clark Bars or even Nerds occupy the spot. He also admitted that the notion of "going classic" and putting plain Hershey bars there had crossed his mind.

"After two decades, I've built up enough confidence in B3 to try just about anything," he added. "Except breath mints. Those are always a J. Everyone knows that.