Marx Laughs

Apparently suggesting that a tax increase of one or two percent on earnings above $50,000,000 now makes one a communist who hates America and is trying to destroy the capitalist system.   Interjecting the word socialist into a discussion now allows one to immediately talk about gulags and mass murder just as interjecting the word fascist allows one to talk about death camps.  In each case, capitalism as it is currently constituted emerges as the default preference immune from any criticism to be praised and venerated as the god it has become.

As part of capturing the Russian state, the Bolsheviks also had to capture Marx in the way that any major political party or religious group will try to represent itself as the true and only exponent of some political theory or theology.  The Bolsheviks did this very well, to a point where Bolshevism is now seen by most people as simply the inevitable outcome of Marxism.   But even in Marx’s life, there were several different strands of socialism (not all Marxist) and even several different strands of Marxism.  Marx himself was long in the grave before Lenin emerged as even a minor force.  The terrible Bolshevik strain looks like the inevitable product of Marxism to us (in part because the Bolsheviks worked so hard to make it that way), but they were unforeseen by Marx himself.

So, what did Marx foresee?

Simply put, Marx did not think that some socialist party (such as the Bolsheviks) would capture the capitalist state and impose socialism. He thought that the “logic” of capitalism would cause it to move to more and more towards monopoly and the consolidation of existing property until a very few capitalist entities were left.  At this point, there would so few of them, and property would be so consolidated, that the society would be more or less socialist by default.  Everything would have been commoditized.  Everyone would have been proletarianized.  There would be a need for a “socialist” party that would keep workers (now mostly everyone) focused on this, since the diminishing number of “capitalists” would continue to try to keep control.  But the main thing here is that Marx thought that all of this was inevitable.  In the end, nothing could stop it.  And in being inevitable, it would not need to be forced.

In our current mythology about capitalism, we seem to think that it is a system of entrepreneurs (rugged brave risk-takers, of course) who own a business and through their intelligence and innovation build something useful from nothing.  Since they are the animators of the process, they deserve the rewards for that which they own, in the form of profits.  Since they are rugged and brave enough to risk an unlimited downside, they should be able to reap an unlimited upside.  We believe this myth so strongly, that we have not noticed a major change that has happened to advanced capitalism that fits rather well into Marx’s prediction.

In the 20^th century, we saw the general separation of ownership from control for most large businesses.  Before this separation, we could say that entrepreneurs ruled the capitalist world.  But now, with the owners (called “stockholders”) separated from the controllers (called “management”) we have something radically different, although we still think of this system as capitalist in the old way.

When I used to be an executive, it struck me that the higher executives in my business liked to cast themselves as entrepreneurs when in fact they were employees.  Most high executives are.  In the beginning of the separation of ownership from control, they acted as simple agents for the owners.  But in the last four decades (especially) they have taken on the rights of the owners themselves.

The high executives in my company did what capitalists always did, which was to try to get as much output from their workers while keeping wages as low as possible.  However, while being (in theory) agents of the “owners” (stockholders) they did not keep their own wages down at all.  Their wages kept going up and up.  They would openly claim that they were entitled to do this, because they had kept or maintained the overall profitability of the organization.  They also claimed that the stockholders approved this (the stockholders in this case being called “the market”).  Of course, the stockholders didn’t actually make any sort of direct decision to reward the CEO with millions. Their proxies on the Board of Directors did, since a Board of Directors acts in the interest of the stockholders against the management.  The thing is, however, that the members of the Board are chosen by the management and most members of the Boards are managers themselves.  Another interesting thing is that unlike the capitalist companies of old, modern large corporations issues stock, which allows the managers to either dilute or expand the stockholder base at will.  Or to put this another way, we now have a situation where management can create its own owners.  Since so much of the “compensation” of the modern high executive is in the form of stock options, they also could make themselves owners (subject of course to the approval of the Board members they themselves selected).  In theory, high executives could award themselves stock options, do a stock buyback of the other stockholders, and award themselves private ownership of the company that employs them. 

Adam Smith wept.

There are lots of other things going on here, such as the fact that the successful high executive is no longer an entrepreneur in the old sense but is rather a business school trained bureaucrat (since entrepreneurship is too risky).  The successful executive is now someone who knows how to get along in an organization.  Individuality, being disruptive, is not encouraged or even tolerated.  But the main thing is that it no longer really matters who the stockholders are.  They have no role at all in any of this other than to be there as the fictitious bosses of the group of employees called “the C-Suite”.  When the Trump regime did its massive tax cut for rich corporations and the corporations mostly then just repurchased their own stock rather than investing in anything that could be called entrepreneurial, fueling yet another speculative stock bubble, it struck me that the government could have simply eliminated the intermediate step of giving a tax break and could have just purchased the stock directly.  It would have then reaped the major profits that the corporations reaped itself and the general public would not have noticed a thing.  While we still worship innovation, and the religious believers of capitalism refer to it as the miracle working angel who will solve all of our problems if only we feed more money to it, the system no longer relies on them at all.  The monopolization that Marx talked about hasn’t exactly taken the form of a small group of companies owning everything else (yet).  It has taken the form of all major companies becoming corporations where the owners are separated from the managers and the game is for a small group of employees to squeeze the other employees as hard as possible and keep much of the rewards of ownership for themselves.

Marx laughs.