Featured Title

After Capitalism
After Capitalism


About the Author Excerpt
Picture of Author Author Name


The Shape of Production Under State Capitalism

Quietly--without fanfare, manifestos or plans--workers around the world have been inventing an economy that succeeds capitalism and communism as we have known them. In many different countries, workers are developing new rules for deciding about production--their own work--and for allocating the product, basing their decisions on standards that are quite different from those of capitalism and communism. These new rules offer an exit route from the militarized forms of state capitalism and state communism that dominated political economy during the latter part of the twentieth century.

What are some of the indicators of the economy after capitalism? Decision-making and producing functions are combined, as the people whose jobs lie primarily in production take an increasing part in decisions on their own work, on enterprise and on community. In turn, administrators are bound by agreements with workers that represent the bulk of employees, other than managers.2 Long-term economic viability, as against short-term profit, becomes an increasing point of emphasis for workers in the operation of enterprise. The idea of stable employment, in contrast to arbitrary downsizing, is introduced as an explicit objective for the operation of companies. Cooperation between groups of workers becomes a continuing part of working life.

All of these initiatives demonstrate a shared desire to move beyond predatory competition in the workplace. Such competition among workers is displaced, for example, when they choose seniority as a primary criterion for changes in job assignment, work time and compensation. The adoption of seemingly straightforward seniority criteria--first by workers, then concurrently by managers--alters management's sole control. In its place, unionized workers and managers install and operate a joint process of decision-making. Within the framework of competence for job performance, seniority limits the possibilities for arbitrary personnel decisions by managers, and limits favor-seeking by workers vis-a-vis managers.*

In order to live, a community must produce. A set of necessary production decisions must be made in every economy, whether feudal, tribal, merchant-capitalist, industrial-capitalist or state-capitalist. Carrying out production requires that certain key decisions be made. What and how much should be produced? How is the production to be accomplished? What is the value of the product? How should the products be shared? And finally, how should products be exchanged or distributed, bought and sold in markets?

While these decisions are necessary for production, they do not suffice. Key questions must be asked. What are the requirements that production serves in our society? What are the societal objectives that are to be served by production?

If production is organized primarily for acquiring profit and power, then prospective production activity not serving such a purpose will be either ignored or given very low priority. If, on the other hand, production is made to serve long-term economic viability, or stable employment, priority may instead be given to workplace democracy.

When there exist alternative ways of carrying out production, a selection must be made--and is made--following the requirements of the leading decision-maker. Thus, in industrial capitalism, those means of production that serve management's requirements for the enlargement of profit and power are given first priority, as against, for example, those means that would conduce to the convenience and safety of the people who will actually perform the work or use the product.

What are the rules that dominate in decision-making in industrial capitalism? They can be summarized as follows:

1.Occupations tend to be specialized into those dealing with production as against those dealing primarily with decision-making.

2.The decision-making occupations are organized in a hierarchy, with money and power concentrated at the top of the pyramid.

3.The rule among the decision-making occupations is that they must strive for more profit and for more control. In what follows we shall call these, together, accumulation.

*For a detailed discussion on seniority, see "Creating Workplace Democracy," in Chapter 9.

4.Striving for accumulation in profits or power, or both, is measured by a common rule of success: your gain is real only when it is accompanied by someone else's relative loss. That is what makes this predatory competition.

These rules governing relations among individuals--both deciding about work and working--go to the heart of an industrial capitalist economy. By exploring these interactions, we can uncover the changes with the most far-reaching economic effects. So, this book focuses not on political governance but rather on the rules that govern our work, how we organize and conduct our working lives, our occupations.

In capitalism, these rules, as between employer and employee, often contain an autonomous dynamic. Thus, while managers try to restrict workers to their specified production tasks,* employees either directly or through unions seek constantly to affect the conditions of their working lives. Such striving challenges the managerialist "ideal" of the total separation between production and decision-making occupations that deprives many workers of real control over their lives.

These rules about production and allocation change as employers and workers engage in a continuous process of problem-solving, albeit with fits and starts and changes of pace. This continuous problem-solving modifies the nature of successive problems. As a consequence of the drastic mechanization of work, for example, both the criteria and the array of possible solutions to the employer's problems are altered. Changes in production methods, when put in place by the employer for solving his problems, lead in turn to responses by workers that entail further negotiations about production.

By paying close attention to such changes in the rules that govern work relations, and to the struggle between managers and workers that

*Union-management agreements typically include a "management rights" clause that defines the sole rights and responsibilities of the management for governing every major aspect of production. The Agreement Between the UAW [United Auto Workers] and the General Motors Corporation, September 17, 1990, p. 13, specifies that

The right to hire; promote; discharge or discipline for cause; and to maintain discipline and efficiency of employees, is the sole responsibility of the Corporation except that Union members shall not be discriminated against as such. In addition, the products to be manufactured, the location of the plants, the schedules of production, the methods, processes and means of understanding are solely and exclusively the responsibility of the Corporation.

The full, qualified meaning of "solely and exclusively" thus requires 619 pages of text in the agreement. The context of the management-workers interaction that produced such an elaboration of worker and management procedures is a central aspect of developing worker decision-making on production. these changes reflect, we can chart the elements of an economy after capitalism. This is not the so-called "new economy" of alienated globalization. It is a new, disalienated way of organizing work that offers workers control over their work and their lives.

New problems in work relations arose throughout the twentieth century because of the continual tendency of decision-makers in both "capitalism" and "communism" to extend their power. Indeed, one of the important features of the present study is the attempt to diagnose capitalism and communism in terms of their common features. That is why a discussion of the actual as against the theoretically ideal meaning of these economies is a good place to start.

The Realities of Capitalism

From the time of Adam Smith to the latter part of the twentieth century, a common set of ideal characteristics has been used to define capitalism.

1.Property is privately owned, especially the means of production.

2.The prices of all goods and services are said to be the outcome of interaction among many buyers and many sellers--hence the product of an "unseen hand."

3.Profit from the investment of capital and the employment of labor is the purpose of management.

4.Government is restricted to political matters and laissez-faire is a thoroughgoing condition of business enterprise.

5.The share of incomes to labor and capital is proportionate to the value they contribute to production (of either goods or services).

During the twentieth century, neoliberal economists refined these elemental features and focused on market behavior as the core economic relation of capitalism, basing their theories on the rational behavior of entrepreneurs. They assume that entrepreneurs act with full knowledge of calculable consequences of their actions. So equipped, they can respond swiftly to competitive challenges.

But the actual conditions of capitalism are far removed from the ideal. Let us consider each of these ideal characteristics in turn.

Private control, or ownership, of consumer goods is common. But in the realm of capital goods, ownership is highly concentrated in government--and in the larger corporations, whose privacy consists mainly in the legal fiction by which a corporation is recognized as a person.

During the 1930s, the most important enterprise in the United States in terms of assets was the American Telephone and Telegraph Company (AT&T). By the end of the Second World War, the assets of the Atomic Energy Commission alone, wholly owned by the U.S. government, far exceeded those of AT&T.

Even in the earliest period of the Republic, government was never fully separated from the economy in the United States. During the late eighteenth and the nineteenth century, the government took a very active part in planning roads and waterways and in the regulation of shipping to promote general economic development. By the mid-twentieth century, the federal government had become the largest employer in America, and the most important regulator.

Consider the matter of subsidy, which Congress defines as "a government program designed to aid a particular industry group or type of enterprise." In 1960, the Joint Economic Committee of the Congress needed 17 pages to list the various subsidies from the federal government. By 1994, the list had mushroomed to the 1,400-page Federal Domestic Assistance Catalogue, published annually by the Office of Management and Budget and the General Services Administration.

In American capitalism, then, the central government is deeply involved in the economy. This has great influence, of course, on the determination of prices and market positions, which in the ideal world of capitalism would be governed by the independent actions of separate buyers and sellers.

Ideally, profit is supposed to stem from the private investment of finance capital and the employment of labor. But government subsidies have a controlling influence on affected firms. Consider that the Department of Defense, even ten years after the Cold War, had contractual, and therefore regulatory, relationships with about 30,000 enterprises. Rather than investing privately and employing labor to keep costs down and thereby enlarge profit, the military micro-economy routinely maximizes cost. As we will see in Chapter 4, under the "cost-plus" system, introduced during World War II and fine-tuned in the 1960s by Secretary of Defense Robert MacNamara, firms bill the government based on the cost of a product plus a percentage of this cost. The greater the cost of fashioning the product, the greater the profit. Cost-plus managing and accounting, also known as "historical costing," has produced a full range of choice items, from the infamous $400 "hammer with bent nail extractor" to the B-2 stealth bomber, tagged at over $2 billion each, each plane thus worth more than its weight in gold.

Economic action by individuals and enterprises is further limited by government controls. Thus banking, like the securities business and exchanges, has been subject to regulations that were installed for the purpose of restricting fraud, and as a safeguard against mixing ordinary banking with securities brokering and underwriting. These regulations, introduced during the Great Depression, have been opposed by industry lobbyists and by market-economy enthusiasts.

This brief reminder of some conditions of economic life suffices to show that real capitalism is far removed from the ideal.

Such contrasts between ideal and reality have not escaped the attention of economists. They have explained these contradictions by designating the system a market economy. This catch-all description serves several purposes at once. After all, they point out, there are markets and a lot of buying and selling. The concept of the market economy also suggests that pervasive buying and selling determines the rest of the system, including production. But once again reality challenges the ideal. As the experts well know, in the course of making decisions about production and implementing them, the chiefs of enterprises are not simply responding to external market forces. In practice, managers have developed various ways of affecting their markets within workable limits.

But none of this takes away from the political-ideological usefulness of the market economy to the advocates of state capitalism. Where the division of labor is found, they argue, the exchange of products and services is necessary for production, and thus requires a market. Since division of labor must be sensibly assumed a continuing feature, so too, the ideologues argue, must we accept the market--and market forces--as the necessary price of material progress. By identifying capitalism with "market," and by assuming, despite all the evidence to the contrary, that buying and selling control the relations of production, the advocates of the market economy justify the status quo. To be sure, that leaves many blanks in our understanding about further development of the economy. But that is not a central problem for the ideologues of capitalism; for them, market forces, and hence capitalism, are forever.

Economists have customarily understood the purpose of business in industrial capitalism to be profit. Accordingly, during the Cold War, Soviet enterprise seemed to function without accumulation in the capitalist sense. But once again there is a big difference between real and ideal. Actually, the role of profit-maximizing as an ordinary business goal in American capitalism, especially in the larger firms, needs major qualification on at least two counts.

Excerpted from After Capitalism by Seymour Melman Copyright 2001 by Seymour Melman. Excerpted by permission of Knopf, a division of Random House LLC. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.