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One
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.
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