Managers rule, not capitalists?

The capitalist mode of production is coming to an end.  But it is not being replaced by socialism. Instead, there is a new mode of production, based on a managerial class that has been forming in the last hundred years.  This managerial class does not exploit the working class for surplus value and its accumulation as capital.  The managers instead use power and control which they exercise through the management of transnationals and finance.  The working class will not be the ‘gravediggers’ of capitalism, as Marx expected.  The ‘popular classes’ instead must press the managerial class to be progressive and modern; and eliminate the vestiges of the capitalist class in order to develop a new meritocratic society. Such is the thesis of a new book, Managerial Capitalism, by Gerard Dumenil and Dominique Levy (D-L), two longstanding and eminent French Marxist economists.

I participated in the launch of the book in London this week.  At the launch, Gerard Dumenil argued that capitalist class (i.e those who own the means of production) have been replaced by managers who control the big companies and take all the decisions that matter.  The capitalist class now is like the fading old feudal class in the early 19th century when Marx came on the scene.  The capitalist class took over then and the feudal class converted themselves into capitalists eventually as well.  Now the managerial class has taken over and the traditional capitalists are increasingly converting themselves into the new managerial class.

Marx was well aware to the separation of functions in capitalism between the owner of capital and the managers of corporate capital.  As he put it in Capital Vol 3: “Joint-stock companies in general (developed with the credit system) have the tendency to separate this function of managerial work more and more from the possession of capital, whether it is owned or borrowed … But since on the one hand the functioning capitalist confronts the mere owner of capital, the money capitalist, and with the development of credit this money capital itself assumes a social character, being concentrated in banks and loaned out by these, no longer by its direct proprietors; and since on the other hand the mere manager, who does not possess capital under any title, neither by loan nor in any other way, takes care of all real functions that fall to the functioning capitalist as such, there remains only the functionary, and the capitalist vanishes from the production process as someone superfluous.”(ibid. p. 512).

D-L spend some time in their book reminding us that Marx was aware of this division.  But Marx did not see this as leading to a new managerial class. The division was merely of appearance. The system had not altered: “producing surplus-value, i.e. unpaid labour, and in the most economical conditions at that, is completely forgotten in the face of the antithesis that interest accrues to the capitalist even if he does not perform any function as capitalist, but is simply the owner of capital; while profit of enterprise, on the other hand, accrues to the functioning capitalist even if he is not the owner of the capital with which he functions. In the face of the antithetical form of the two parts into which pro.t and thus surplus-value divides, it is forgotten that both are simply parts of surplus-value and that such a division can in no way change its nature, its origin and its conditions of existence” (p. 504).

D-L reckon that this view of the relation between outright capitalist families and their managers is out of date.  Managers, not capitalist families, now rule. In the book, D-L back up their thesis with empirical evidence on rising income inequality in the US and other major economies.  The top 1% of income earners in the US, who would usually be regarded as part of the capitalist class, now get 80% of their income as salaries from working as managers and top executives, not from capital income (dividends, interest and profit).  So these top people are managers, not capitalists.  This is why, D-L argue, we must revise the traditional Marxist view that top managers are merely functionaries of the capitalist class.

But the data could be interpreted in another way.  Simon Mohun has done similar empirical work (ClassStructure1918to2011wmf) on where the income of the top layers comes from.  He found that the working class – those who depend on wages alone for their living – still constitute 84% of the working population.  Managers constitute the rest, but only 2% (Qc in graph below) can actually live off rent, interest, capital gains and dividends alone.  They are the real capitalist class.  And that ratio has little changed in 100 years, even if their direct source of income has.

Moreover, this is the group that has gained most during the last 30 years of rising inequality.  The income of this capitalist class (Qc) has risen from about 9 times the average income of the working class to 22 times while managers’ incomes (Lpd in graphs) have risen from 2.5 times to 3.5 times workers income.  So rising inequality is primarily the result of increased exploitation (a rising rate of surplus value) in Marxist terms.

Yes, for the top 1%, since 1980, their ‘labour’ source of income has fluctuated around 60% of total average income (around double what it was in the 1920s). But this top 1% of managers includes investment bankers, corporate lawyers, hedge fund and private equity managers and corporate executives. Moreover, two-thirds of the top 1% are managers only in name, as an increasing proportion of these executive occupations are in so-called ‘closely held businesses’. That means they own their own businesses but pay wages to themselves as the main source of income.  This blurs the distinction between labour and non-labour income.  So the top 1-3%, according to Mohun, are still capitalists as Marx understood it, even if they pay themselves huge salaries and bonuses.

Moreover, as one study shows“The incomes of executives, managers, financial professionals, and technology professionals who are in the top 0.1% of the income distribution are found to be very sensitive to stock market fluctuations. Most of our evidence points towards a particularly important role for financial market asset prices, shifting of income between the corporate and personal tax bases, and possibly corporate governance and entrepreneurship, in explaining the dramatic rise in top income shares.”  So their labour income depends on capitalist stock markets and financial assets.

As for managers in general, by most definitions, they constitute about 17-20% of the workforce, but it seems a jump to suggest that these constitute a new managerial class, when they can vary from Jeff Bezos at Amazon to a supervisor in Walmarts. “While managers supervise, most of them are also supervised, and splitting the distribution into working class and non-working class does not address the question of who has to sell their labour-power and who does not. That is, in no way can managers be considered a homogeneous group, because they are fundamentally divided into those who might sell their labour-power but do not have to do so, and those who do sell their labour-power because they have to do so.” Mohun.

Erik Olin Wright looked the class structure of six advanced capitalist economies and showed that ‘managers’ are a curate’s egg of a group in modern capitalism.  By breaking down the skill factors of managers, he reckoned that most managers are really workers with skills.  The working class proper was still over 70% of the labour force.  Mohun’s tax calculation method finds that the working class is more like 80-85%.

Surely, the real question is: in whose class interest do managers carry out their managerial labour? The very nature of the capitalist economy obliges the managers to manage in the interest of the 1%.  Their jobs depend on the decisions of the shareholders, the company share price and its earnings performance, however highly paid they are.

Moreover, as Marx predicted, the main feature of modern capitalism is a growing concentration and centralisation of wealth (not income).  And that means wealth held in the means of production and not just household wealth.  In 2016, the top 1% of the US population held 40% of total net wealth, while the bottom 80% held just 10%. On the basis of Wright’s class structure analysis, this suggests that the top 1% is a combination of capitalists and expert managers. The next 20% by wealth consists of the remaining capitalists and the top two thirds of the managers. The bottom 80% by wealth consists of the bottom third of the managers and the entire working class (wage workers and supervisors).

Modern capitalism has developed into a huge network of interlocking companies with cross-shareholdings.  Three systems theorists at the Swiss Federal Institute of Technology in Zurich developed a database listing 37 million companies and investors worldwide and analysed all 43,060 transnational corporations and share ownerships linking them.  They discovered that a dominant core of 147 firms through interlocking stakes in others together control 40% of the wealth in the network.  A total of 737 companies control 80% of it all.   This is the concentrated power of capital.  147 control)

At the launch, Gerard Dumenil argued that this concentration of ownership among a small number of global companies, particularly banks, actually proved D-L’s thesis.  It was managers and finance directors who ran these companies and made decisions on mergers etc while the shareholders followed like sheep.  This was proof of ‘managerial capitalism’.  Instead, I would argue that it was proof that, since Marx wrote about joint stock companies 150 years ago,the capitalist mode of production has dominated even more over investment, employment and production globally.

One of the inherent features of the capitalist mode of production is that it generates crises of production, investment and employment at regular and recurring intervals.  This is the consequence of production for profit by individual private owners on a market which runs in contradiction to the needs of society.  This is a unique feature of capitalism. Has this disappeared?  Was Marx not proved right in expecting crises to become more global and damaging?

Dumenil seemed to be suggesting that Marx was wrong about growing crises.  At the launch he claimed that the recent Great Recession had avoided a major depression because of ‘managerialism’.  The crisis had been managed.  Well, the evidence is surely to the contrary –as I have argued at length on this blog and in my book, The Long Depression.

Dumenil, however, was insistent that those of us who stick to Marx’s old analysis and predictions needed to break with dogma and recognise the new mode of production that was upon us.  The political strategy that flowed from this was for the ‘popular classes’ (working classes) to reinvigorate the class struggle – but not for the replacement of capitalism with socialism.  That was not going to happen.  But instead the aim must be to push the ruling (progressive?) managerial class to the left to introduce pro-labour reforms and isolate the small and fading capitalist class.  Well, if the working class is still 80% of the adult population in most advanced economies (let alone elsewhere) and capital is even more concentrated and centralised than ever before, why not overthrow ‘managerial capitalism’ too?

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31 Responses to “Managers rule, not capitalists?”

  1. Kieron Says:

    Sounds the same as the 1941 thesis promoted by James Burnham’s book ‘The Managerial Revolution’.

    “The control of the world is passing into the hands of the managers. Capitalism has virtually lost its power and will be replaced not by socialism but by the rules of the administrators in business and government.”

  2. SimonH Says:

    This is old hat. Ernest Mandel dealt with this argument about half a century ago, responding in particular to one James Burnham. I sure hope Dumenil avoids the ultimate political trajectory of Burnham.
    Of course back in the day it was argued that the Soviet Union was a managerial society, since capitalist restoration that seems a strange argument. It’s like capitalists restoring feudalism!

  3. ucanbpolitical Says:

    What no comment on share buy-backs! What if corporations buy back all their shares? This is said tongue in cheek of course. All it raises is the perspective of a change in the legal expression of capital which leaves capital as a social relation intact. More to the point the unfolding crash will prove where real power lies. In the 1970s the wages of the top 1% was equal to $6 in every $100 dollars of post tax corporate profits. By 2015 this had increased to $25 or 25%. This large increase means that the income of the top 1% of wage earners has to be included in the category “counter-vailing” factors in determining the rate of profit. Simply put, the drive to restore the rate of profit will include a savage attack on the flamboyant income of the top 1% of wage earners. If on the other hand, and in the unlikely event that the preservation of these wages takes precedence over the interest of profit, then and only then would we need to re-examine our assumptions.

  4. jlowrie Says:

    Japan is/was clearly also something of a planned economy developed by managers and bureaucrats. J.K. Galbraith had argued that Soviet planning aimed to abolish the market whereas Japanese planning aimed to meet it. But this seems to me to be epistemologically unconvincing, as it posited the market as antecedent to the economic exchanges that constituted the social nexus of which ‘the market’ is the conceptual expression. For example, in the dominant heights of the Japanese economy could there be said to exist anything resembling a labour market? In Japan joining the major companies was for life, and it was morally and financially difficult to change companies. Moreover in Japan there was central control of prices for key inputs such as labour, land and capital equipment. Nor was there any real financial market, and the export of capital practically illegal( In South Korea at one stage I have read it could bring the death penalty). So the Japanese model seemed more geared to thwarting free markets. A good example of this was about 1982 or so when Osaka gas paid out big bonuses to ALL their employees. Now this company was neither a state nor a municipal nor a private company, in the sense that it had no shareholders, and was also a monopoly. Employees joined after school or college for life and would only be dismissed under exceptional circumstances. Anyway, it came under severe criticism from other companies, who argued that Osaka Gas should lower its prices so other companies could produce more cheaply; and this duly happened. In fact it was not at all clear to me that profit maximisation was the driving force of the Japanese economy at all. Perhaps Japan represented what Marx, with the rise of joint stock companies, called ‘the abolition of capitalism within the capitalist mode of production itself.’

    But the recent trajectory of Japan has been towards ‘freeing’ labour and capital markets, which is not what one would expect were D and L’s thesis accurate.

    We must remember that Marx distinguishes between an economic relationship and its juridical status. The capitalists are, according to Marx, the ‘bearers’ of the capitalist relationship. What is that relationship but that of dominance and servitude in which surplus value is pumped out of the producing class? The juridical status of a property might as much obfuscate as express an economic relationship. This is more readily grasped with an analysis of slavery. All slaves would be of the same class, were this determined on the basis of their legal status, but an examination of ancient slavery demonstrates that some slaves became wealthy by exploiting other slaves i.e. the had the economic power so to do.

    Such ‘managers’ are going to need an awful lot of ‘pressing’; I should rather suggest squeezing them to death and replacing them with altogether much more democratically minded people!

  5. Charles Post Says:

    Actually the geneology of the argument goes back to Berle and Mean’s 1932 book, THE MODERN CORPORATION AND PRIVATE PROPERTY. Even more importantly, this sort of argument abstracts from REAL COMPETITION. It matters little who “runs” the corporation– stockholders, managers-executives or even workers (under employee stock ownership plans)– competition will compel them to all act in the same manner.

    • Steve Diamond Says:

      I think Bellamy is the real source…even for Berle who met Bellamy as a child. See Art Lipow’s Authoritarian Socialism. Berle then influenced Burnham who carried the germ into the SWP/WP where it turned into bureaucratic collectivism and then out again and into The Managerial Revolution which to this day resonates among the reactionary right in the US, at least. Inside the WP, meanwhile, the Johnson Forest Tendency fought a losing battle against the idea’s influence, particularly when it was reinforced with the retrogressionists thesis.

  6. Boffy Says:

    When Marx, talked about “functioning capitalists” as the professional managers who took over the social function of the old private capitalists, he meant those who were the actual day to day managers and organisers of the production process – including the day to day purchasing managers, sales managers, accountants and so on. This was an increasing group, which as he points out is drawn increasingly from a more educated working-class, paid wages the same as other workers, and so on. It is the group that Engels talks about as being necessary for the Workers Party to draw in, to provide the technical expertise required for organising production in the transition to socialism.

    These are the groups of worker/magers/technicians/administrators who were the members of the more militant and radical trades unions such as ASTMS. or AUEW-TASS in the 1960’s, and 70’s. They were the groups that were able to provide the expertise for the ideas of industrial democracy, and for things such as the Lucas Plan of alternative production, and workers control.

    What Marx and Engels were not talking about were the tiers of managers placed above these day to day managers, to keep them in check. They were not talking about the Boards of Directors whose job is to represent the interests of shareholders, rather than the interests of the company. And, Marx says so, quite explicitly in describing the hostility and contradictory interests of the shareholders (to obtain as much in dividends or capital gain as possible),as against the interests of the industrial capital (to minimise dividends and other interest payments, so as to maximise profit of enterprise and potential for accumulation).

    Marx notes,

    “On the basis of capitalist production a new swindle develops in stock enterprises with respect to wages of management, in that boards of numerous managers or directors are placed above the actual director, for whom supervision and management serve only as a pretext to plunder the stockholders and amass wealth. Very curious details concerning this are to be found in The City or the Physiology of London Business; with Sketches on Change, and the Coffee Houses, London, 1845.

    “What bankers and merchants gain by the direction of eight or nine different companies, may be seen from the following illustration: The private balance sheet of Mr. Timothy Abraham Curtis, presented to the Court of Bankruptcy when that gentleman failed, exhibited a sample of the income netted from directorship … between £800 and £900 a year. Mr. Curtis having been associated with the Courts of the Bank of England, and the East India House, it was considered quite a plum for a public company to acquire his services in the boardroom” (pp. 81, 82).

    The remuneration of the directors of such companies for each weekly meeting is at least one guinea. The proceedings of the Court of Bankruptcy show that these wages of supervision were, as a rule, inversely proportional to the actual supervision performed by these nominal directors.”

    (Capital III, Chapter 22)

    • Steve Diamond Says:

      I think this vastly overstates what Marx wrote about (quite early in the historical process which led to the rise of the managerial strata). He spoke of the industrial/functioning capitalist as the one who insures that surplus value is, indeed, extracted. I think Michael is quite right to point to Mohun’s differentiation between managers who genuinely look to survive on surplus value as opposed to those dependent on market wages as part of the managerial layers you describe as ASTMS level members, etc.

      • Boffy Says:

        The functioning capitalist whether in a joint stock company, a co-operative or in some other form of transitional form of property after capitalism is indeed to pump surplus value out of production in the most efficient manner. That as Marx points out is their historic and progressive function.

        Its why Lenin, Trotsky, Gramsci etc. were in favour of the scientific management techniques of Taylorism! In fact, as Marx sets out in the Critique of the Gotha Programme, and as Lenin, Trotsky, Gramsci et al set out, this function of pumping surplus value from the workers becomes even more important in a post-capitalist society, because it becomes all the more important to maximise the extraction of surplus value so as to speed up capital accumulation, and create the conditions for the development of society.

        The question becomes not one of maximising the production of surplus value by the old inefficient methods of absolute surplus value, or reducing wages below the value of labour-power, but by raising efficiency, and relative surplus value.

        The functioning capitalists, as Marx sets out are paid wages from variable-capital. The Directors set above them are an excesence no different to the landlords, and their lackeys amongst the clergy and other unproductive layers. They detract from the surplus value/profit of enterprise available for accumulation.

  7. Farans Kalosar Says:

    In the United States generally economists attribute the notion of “managerial capitalism” to the late Alfred D. Chandler, very much as if Burnham, thirteen years Chandler’s senior, had never existed–never mind Galbraith. This is perhaps partly because Burnham was a philosopher and political theorist and not, as economists understand it, an economist.

    Perhaps Thomas Piketty got the ball rolling by asserting that financialization and other woes of late capitalism are a result of rent seeking by the corporate managerial classes.

    Before Piketty & Co.,reactionary economists like Arthur Samuelson (http://economistsview.typepad.com/economistsview/2006/10/the_rise_and_fa.html) were discussing “the end of managerial capitalism” with reference to Chandler, asking the question, what could come next?

    As I am a poor scholar and certainly no economist, I am grateful for what I see as your deft and thorough scuttling of this perennial fallacy, one consequence of which is that there can be no revolution because the revolution has already taken place.

    Whatever the technical economic and detailed historical case may be, the ideological implications of this are all too tediously familiar–IMHO, it all boils down politically to TINA with a little fringe area reserved for “humane” reform, most likely confined within the world’s ‘advanced’ economies.

    It’s mighty thin gruel.

  8. mandm Says:

    How do D and L deal with Marx’s fundamental definition of capital as a “social relation”? –The richer and nicer the managers the vaguer the social relation…until it just fades away…though leaving “capital” itself behind?

    Wouldn’t it take a bit more to end capitalism than cajoling top manager/capitalists to change their clothes? Wouldn’t it entail some deodorant and also shaving off their wolfish butts (the capitalist state)?

    How do these “eminent” French marxists deal with the capitalist problematic of the apparent super-exploitation (by whom?) of the impoverished, overwhelmingly majority of the world’s “popular” (working) class, that are neither French nor Western European? What do they think of US managers? these wars of regime change? endless (colonial?) wars in general? –“Ce la vie”?

    Required reading for au courant “eminent” marxists” should be Saramago’s “Blind”.

  9. ucanbpolitical Says:

    Good point Boffy. However, for Marx the functioning rate of profit was the enterprise rate of profit, that is the profit that remained once all expenses were paid which included the expenses of the directors, top managers and so on. Top of page 512, Penguin Edition, chapter 23. “The wages of management. both commercial and industrial, appear as completely separate from profit of enterprise…in capitalist joint stock companies. The separation of managerial wages from profit of enterprise…is here a constant factor.” Further down the page he describes these wages as forming a component of variable capital because it is paid out of capital.

    The two French “Marxists” miss the essential point when they address the problem sociologically. What is decisive about the growth in the proportion of management wages relative to the mass of profits, is not the growing independence of management, but its affect on the rate of enterprise profit itself. The extraction of rents by managers is tolerated only in a period of rising profitability and is taken away in a period of falling profitability. This was already clear in the aftermath of 2008 when senior management experienced actual wage cuts, and will be amplified by the forthcoming crash which will have greater repercussions, because of the deteriorating finances of the majority of corporations.

    • Boffy Says:

      Ucan,

      Depends on what context you are meaning “functioning rate of profit”. In terms of the law of falling profits, Marx makes clear that he means s/(c+v), i.e. before rent, interests and taxes are deducted from surplus value. If you mean the relevant rate in relation to accumulation, then quite right it is the rate of profit of enterprise.

      My point is that when Marx talks about “functioning capitalists” he means those professional managers paid wages out of variable capital, not those directors placed above them whose high stipends are a deduction from surplus value, and who form an excrescence on society like the landlords, and their appropriation of rent.

      The functioning capitalists are a necessary element of production, as with the conductor of an orchestra, to use Marx’s example. Their wages come out of the variable-capital as with any other worker. The Directors placed above them are not necessary elements of production. They are there to represent the interests of shareholders, as money lenders, and to keep the actual functioning capitalists in check.

      But, as Marx sets out those Directors themselves, as with any other bureaucracy, appropriate to themselves privileges wherever they can, recent examples being TYCO, Enron and so on, where the shareholders themselves fail to keep such bureaucrats in check. The shareholders permit these bureaucrats to rob them to an extent, because they need them to represent their interests as against the interests of the company. They need their appointed Directors to push up dividend payments was above what a market rate of interest on their lending would have been, to provide them with capital gains, by buying back shares, and to rob the company by making other forms of capital transfers to shareholders, and so on.

      In all these ways, they represent a drain on surplus value, and potential for capital accumulation. They are a reactionary weight holding back the development of capitalism, as much as were the landlords in the 19th century, as outlined by Smith, Ricardo and others, in relation to that parasitism. Its important as Engels set out to make the distinction between functioning capitalists, as workers, part of the production process, who we need for the transition to socialism, and those parasites placed above them, who form a “sybaritic excrescence”, as Marx puts it.

      • ucanbpolitical Says:

        In my article on China I crunched the numbers: https://theplanningmotivedotcom.files.wordpress.com/2017/03/corruption-in-china-or-back-door-privatisation-pdf.pdf

        Using Harvard Business School Data covering the boards of the Russell 3000, total remuneration for both CEO and other directors amounted to $45.9 billion versus $190 billion for the top 1% of wage earners, which includes the smaller figure (the $190 billion is obtained from the same source as Saez, which is the Actuary of the United States which hosts a very useful website breaking down compensation into very small earning slots). So instead of being abstract these are the figures we should be talking about. Having read Chapter 23 repeatedly I do not believe Marx would have drawn a distinction between these two figures. What concerned him and Engels was the enterprise rate of profit, that is the profit returning to the owners of the firm after paying all expenses including director remuneration. This is the rate of profit investors use when determining whether to invest or not in a firm. It is the same headline profit after tax used everywhere.

        Of course, the remuneration of the board of directors is not the only cost to capital. This does not include the administration expenses attached to the board, their expense accounts and so on. When all these costs are set against net investment it is likely that it costs $4 for every $10 dollars invested, which I am sure you would agree, is highly efficient.

      • Boffy Says:

        But, Marx does make the distinction I have set out. He does distinguish between the functioning capitalist who takes on the role equivalent to a conductor in an orchestra, whose wages are a part of the variable-capital of the firm, as opposed to the profit of enterprise that is a portion of the surplus value.

        Marx, in fact, sets out that this distinction is quite obvious in the case of the worker-owned co-operatives, where the workers themselves employed the managers/functioning capitalist. He and Engels give the examples of Lancashire textile co-operatives where former owners had gone bust, and the workers had taken over the firm as a co-operative, and then employed the former owner as a manager. In every case, the manager was then paid a much smaller wage than they had paid themselves previously when they owned the business.

        That demonstrates Marx says that where they owned the business, these managers had paid themselves not only wages, out of the variable capital, but had also appropriated a part of the surplus value, as profit of enterprise. But, economically, these are two separate funds. Its no different than a landlord who actually appropriates what is really a portion of profit or even wages, rather than surplus profit, whilst still describing it as rent. (the economic sense of rent as Marx analyses it being surplus profit).

        In the case of the worker owned co-operative, the distinction is clear. The manager/functioning capitalist is paid wages. The surplus value produced divides into rent, interest on money-capital borrowed, and profit of enterprise. The profit of enterprise here is again clearly delineated, as the property of the co-operative, and wholly available for accumulation.

        None of these relations are changed economically in other forms of socialised capital. There is no reason, economically, why a manager employed by such a co-operative, should be paid any differently if they are employed by a joint stock company, or a consumer co-operative. That they might be so is down to power and politics not to economic relations.

        In a privately owned capital, which is grown in size, and the private capitalist owner has stepped aside to allow their function to be taken over by a professional manager, such a manager, like the actual owner of the capital before them, may use their position to appropriate to themselves a portion of the profit of enterprise, if the actual owner allows them to do so. However, as Marx sets out, in Capital III, Chapter 17, looking at the employment of commercial workers, as public education expands, so that the supply of potential workers, now drawn from a more educated working-class, is capable of taking on these social functions of administration and management, so the supply of such labour, and the competition for jobs, reduces their wages not just down to the average skilled worker, but even below it. As an ASTMS shop steward in the 1970’s that was a common theme and complaint from our members, who were frequently paid less than the manual workers whose production they had to organise and supervise.

        That is particularly notable not in a private capital, but in a socialised capital, such as a large limited liability company. The actual production managers, and so on that I worked with were often the most militant sections of the workforce. Several were members of the CP, or had been members of the CP, and had moved into the left of the LP, as it moved leftwards in the 1970’s. My Branch Secretary, a production manager himself on a big Council estate, and so on.

        Its to keep such actual functioning-capitalists in check, and the potential for their day to day alliance with the other workers in the plant, that in these large joint stock companies the shareholders appoint Boards of Directors above them, and it is then these directors and higher executives, with no real function in production, that appropriate a portion of the profit of enterprise, as opposed to a portion of the variable-capital.

        Workers, including those workers who actually undertake the task of organisation, planning, supervision and co-ordination of the labour process, in the same way that a conductor organises the various instruments and musicians in an orchestra stand in opposition to those executives placed above the actual functioning capitalists, and to the shareholders whose representatives they are.

        The interests of the workers, and of the professional managers is to maximise the production of surplus value, and its allocation as profit of enterprise, available for accumulation, and thereby to minimise that paid out as interest/dividends to shareholders, and in lucrative stipends to their representatives. Its why progressive social democracy should seek to build upon that alliance of these productive workers against the shareholders control over capital they do not own. Its why we need a reform of corporate governance laws to remove the right of shareholders to vote, and to appoint Boards of Directors.

        The socialised capital of joint stock companies/nationalised industries, should be under the control of the company itself, which can only mean the associated producers within it, as with a worker owned co-operative. It means extending the co-determination laws that exist in Germany, taking forward and extending the EU’s Draft Fifth Company Law Directive, and the proposals of the Bullock Report on Industrial Democracy, to enshrine in company law, the democratic requirement for all boards of directors to be 100% elected by the workers and managers employed by the company.

  10. Farans Kalosar Says:

    Oops–wrong Samuelson. i should have named Robert Samuelson above, “Arthur” was a figurative slip of the pen.. My apologies,

  11. Jo Morton Says:

    Top earners and managers use their inflated salaries and bonuses, not to eat lavish amounts of caviar for breakfast every day, but to add to the mass of accumulated capital

  12. Publicstat (@Publicstat) Says:

    They will leave the capitalist boat only when they’ll no other option and they will land in the socialist boat afterwards, as experts.
    The main task if possible remains on the shoulders of the working class and also of excluded, no job working class, I’m afraid.

  13. Virgens VK Says:

    “D-L reckon that this view of the relation between outright capitalist families and their managers is out of date. Managers, not capitalist families, now rule. In the book, D-L back up their thesis with empirical evidence on rising income inequality in the US and other major economies. The top 1% of income earners in the US, who would usually be regarded as part of the capitalist class, now get 80% of their income as salaries from working as managers and top executives, not from capital income (dividends, interest and profit). So these top people are managers, not capitalists. This is why, D-L argue, we must revise the traditional Marxist view that top managers are merely functionaries of the capitalist class.”

    It doesn’t matter how much you unfold the process of the reproduction of capital, the general movement D – M – D’ still applies. That happens because, in the capitalist mode of production, wealth is in abstract form, value. The managerial class substitutes only the administration role of the capitalist; as a function by itself, it could be e.g. automated (AI); socially, the managerial function is still profit oriented, i.e. the manager remuneration still depends – whatever the accountancy form (if it’s salaries, bonuses, stock etc.) – on the profit rate of the individual capital he/she works for.

    Yes, fraud episodes – where the CEO get out with a big bonus when his/her company registers a loss – happen. But they are treated, socially, through the mainstream media, as frauds, not the normal, definitely not the socially acceptable. And they are punished in the justice system when possible. So, it’s not like managers are holding the shareholders ransom.

  14. Boffy Says:

    The requirement to produce the greatest possible surplus is not just one that imposes itself on capitalist society, however. It is the basis of accumulation in all societies, and thereby of enabling society to develop by the most rapid and effective means to the stage where at least relative abundance exists, which is the precondition for establishing a society able to focus on production that meets needs for all.

    The historic role of capitalism, as Marx sets out is precisely that it shows how to do this effectively, for all humanity.

    “It is the constant aim of capitalist production to produce a maximum of surplus-value or surplus-product with the minimum capital outlay; and to the extent that this result is not achieved by overworking the workers, it is a tendency of capital to seek to produce a given product with the least possible expenditure—economy of power and expense. It is therefore the economic tendency of capital which teaches humanity to husband its strength and to achieve its productive aim with the least possible expenditure of means.” (TOSV, Chapter 18, p 548)

    It was the fact that Ricardo recognised this importance, and the need to maximise the surplus product/value – Net Product, as opposed to Gross Product – which meant, Marx says that he stood out as against Smith, who continually emphasised the Gross Product. It was the fact that Ricardo did so that earned him the disdain of the liberal moralistic whiners.

    “Provided this surplus grows the aim of capitalist production has been achieved even if the value decreases or, if along with the value, the total quantity of the product also decreases.
    Ricardo expressed these tendencies consistently and ruthlessly. Hence much howling against him on the part of the philanthropic philistines.” (ibid, p 548)

    That is why Marx praised the scientific honesty of Ricardo for recognising this historic role of capitalism. But, Marx certainly did not believe that Socialism could somehow come about overnight, even if workers took control as well as ownership of the means of production, precisely because of the need to continue this process of developing the forces of production to a condition way above those that capitalism made possible.

    As he says, in The Critique of the Gotha Programme,

    “But these defects are inevitable in the first phase of communist society as it is when it has just emerged after prolonged birth pangs from capitalist society. Right can never be higher than the economic structure of society and its cultural development conditioned thereby.”

  15. Magpie Says:

    @Michael Roberts

    Managerial capitalism appears to be a zombie, that every now again rises from the dead. But professors Dumenil and Levy chose a really very bad time to resurrest it.

    You wrote:
    Surely, the real question is: in whose class interest do managers carry out their managerial labour? The very nature of the capitalist economy obliges the managers to manage in the interest of the 1%. Their jobs depend on the decisions of the shareholders, the company share price and its earnings performance, however highly paid they are.

    That’s a very astute question and indeed in 2016 two mainstream economists won the so-called Nobel Prize for offering a good answer to it. You should read that year’s Nobel Committee press release (the link is below).

    The inventors of so-called “contract theory”, the ideas of professors Hart and Holmström (the two prize winners) are behind the performance pay of top executives.

    The idea is that in principle, qua employees, top executives’ interests are not aligned to shareholders’ interests (I am sure professors Dumenil and Levy count on that). But their interests can be aligned to those of shareholders (and this is what D-L may not be counting on).

    Performance pay is the way to align those diverging interests: CEOs get paid in options (contracts entitling its owner to buy the company’s shares in a future date at a set price) and exercise the options when the future price exceeds the set price. Their gains are taxed at capital gains rates, lower than personal income rates (saving the firm money).

    CEOs gain money to become shareholders. Makes sense?

    https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2016/press.html

    Incidentally, that concern about executives gaining too much power is old, really old. Adam Smith wrote about it. So did Milton Friedman, much more recently.

  16. mandm Says:

    “It is the constant aim of capitalist production to produce a maximum of surplus value…and that this result is not achieved by overworking the workers…”

    This quote (like many others throughout Capital) represents Marx as seemingly blind to the actual conditions of the working class under 19th century English capitalism–as well as your own seeming blindness to the actual condition of working people under capitalist conditions today (worsening crises, ecological desolation, endless wars [including threat of nuclear war], increasing exploitation/super-exploitation and immiseration of the global working class [including even workers at the imperial centers], the expanding army of precarious labor, etc., etc.).

    For all your impressive and often useful learning, however, here (similar to the eminent French marxists) you expose yourself as blind to Marx’s (clear enough) intent in appearing to accept the idealistic, epistemological assumptions of economic liberalism: which was to appraise and at the same time subject political economy’s ideal, abstract representation of the capitalist mode of production (abstracted from its social relation) to an historical materialist critique. This dialectic, in fact, reveals exactly the opposite of what your (neoliberal?) use of the quote seems to imply, not the human-liberating force of private production for private accumulation, but its increasingly socially destructive nature.

    • Boffy Says:

      No matter how many times you keep using any pretext, of any subject, to accuse me of “neo-liberalism” without any substantiation of that accusation, it will not make it true.

      I thought Michael was trying to cut out such trolling behaviour.

      • SimonH Says:

        That’s funny coming from a text book troll like yourself Boffy.

      • mandm Says:

        Well, my intent was not to make an accusation, but an observation about the political implications of the way you present certain passages from Marx’s works–a-historically. I suppose I’ve done this one too many times, and it’s become tiresome. Time to desist.

  17. jlowrie Says:

    Readings of Capital
    A political economy blog by Jim Kincaid
    A Debate on Value Theory Guest Post by Pete Green

    On the recent (2018) debate over value theory between David Harvey and his critics

    Further comments by Pete Green on the above debate.

  18. jlowrie Says:

    Paul Cockshott has an interesting analysis his blog in an article entitled “”Class and The LGTB Lobby”:

    ”It is important to realise that whether someone benefits from exploitation is not down to the legal form of their income. A person may formally be an employee and still benefit from exploitation. Obviously this applies to a manager on £250,000 a year. It is not always so evident where the cut-off comes. To work it out precisely you have to know what the monetary equivalent of an hour of labour is. I have not worked this out recently for the UK but before the recession I reckoned that it was about £20 an hour. As a first estimate anyone earning more than this in say 2008 would have been, at least partially, benefiting from the exploitation of others.

    Just taking wage income into account is obviously too simple. People may have property income as well, and on the negative side they may be exploited by banks to whom they pay interest, or landlords to whom they pay rent. But simple income figures give you a first cut.

    An alternative approach is to look at the share of wages in national income, then look at the mean wage. Someone on the mean wage will be exploited by the average amount. In 2009 for example the UK wage share was 53%1 and the average salary was £26,4502 which implies that the average employee generated a surplus value of £23,450 giving a total value created per employee of just under £50,000, so anyone earning above this was not exploited.

    Because the distribution of income is uneven, the mean wage in 2009 was well above the median adult income which was only £16,400, and 67% of adults had an income of less than the average wage. About the top 10% of Britons, that year, had an income above the exploitation threshold of £50,000.”

  19. sartesian Says:

    First, what difference does it make? It’s the laws of capital accumulation that operate independently of the will of its “agents” whether the agents are owners, or agents of owners. The bourgeoisie are like the Dr. Frankenstein character in Mary Shelley’s great novel who when confronted by the monster of his own making is told by the monster the awful truth of the doctor’s existence: “You are may creator, but I am your master. You must obey!”

    Secondly, this by Boffy: “The requirement to produce the greatest possible surplus is not just one that imposes itself on capitalist society, however. It is the basis of accumulation in all societies, and thereby of enabling society to develop by the most rapid and effective means to the stage where at least relative abundance exists, which is the precondition for establishing a society able to focus on production that meets needs for all.” is so deliberately superficial analysis that amounts to distortion. Boffy, as usual, leaves out the fact that the “accumulation” of surplus has been the expropriation and appropriation of surplus by RULING CLASSES with zippo concern for anything other than the reproduction of the class relations preserving their ability to expropriate surplus. For someone who quotes so extensive from ToSV, the careful reader might wonder why Boffy ignores what Marx says in Chapter 21 of ToSV (“Opposition to the Economists”) where Marx quotes, approves of, and then adopts as his own the ideas of an “anonymous” pamphleteer who writes: “A nation is really rich…when only six hours instead of twelve hours are worked….’Wealth…is disposable time, and nothing more…”

    The point being that the accumulation of surplus is performed under conditions of class exploitation, and the “surplus” the accumulation appears not only as alien to the activity of the laborers, but as an enemy, an opposition, a conflict with the needs of the laborers. One doesn’t find that recognition in Boffy’s rendering of Marx. On the contrary, we get the following nonsense:

    “Its[sic] to keep such actual functioning-capitalists in check, and the potential for their day to day alliance with the other workers in the plant, that in these large joint stock companies the shareholders appoint Boards of Directors above them, and it is then these directors and higher executives, with no real function in production, that appropriate a portion of the profit of enterprise, as opposed to a portion of the variable-capital.

    Workers, including those workers who actually undertake the task of organisation, planning, supervision and co-ordination of the labour process, in the same way that a conductor organises the various instruments and musicians in an orchestra stand in opposition to those executives placed above the actual functioning capitalists, and to the shareholders whose representatives they are.

    The interests of the workers, and of the professional managers is to maximise the production of surplus value, and its allocation as profit of enterprise, available for accumulation, and thereby to minimise that paid out as interest/dividends to shareholders, and in lucrative stipends to their representatives. Its why progressive social democracy should seek to build upon that alliance of these productive workers against the shareholders control over capital they do not own. Its why we need a reform of corporate governance laws to remove the right of shareholders to vote, and to appoint Boards of Directors.”

    What rot. As if all the attacks on workers living standards, pensions, work rules, wages; as if after all the buybacks, leveraged buy outs, special dividends declared, as board of directors exists to keep the capitalists in check.

    Oh yeah and the interests of the workers and the professional managers are not the same. The interest of the workers is NOT to maximize the production of surplus value, and its allocation as profit. Boffy, who flogs the wage-push theory as the reason profit, and the rate of profit falls, would know that if he ever bothered to work through the contradictions in his oxymoronic “progressive social democracy, which like the Holy Roman Empire is thrice wrong.

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