“The upshot of these changes, which I would summarize as the decomposition of capitalism, is a situation in which the extraction of surplus value from labor by capital has lost its investment function, and the production of value by labor has lost its income function. In short, capitalism has stopped making moral sense because it has stopped making economic sense. It’s not a technical issue. Capitalists and their political functionaries continue to extract surplus value from labor however they can?–?these days by fierce assertion of their prerogatives, as if they’re Charles i defending the divine right of kings against a dubious Parliament, as if the rights of property as such are at stake?–?but the profits that result have no purpose, no outlet, no investment function. Growth will happen with or without them, whether they’re invested in goods production or not, and so they pile up, waiting for another bubble to inflate.”
A through-provoking interpretation, excerpted from James Livingston:
“Marx suggested, however, that the separation of ownership and control required by corporate enterprise is a revolution in itself, because when the mere manager performs all real functions, “the capitalist disappears from the process of production as a superfluous person.”
Let me stretch this insight to fit the economic history of the twentieth century, as a way of claiming that social relations of production have changed so fundamentally in the last hundred years that we can plausibly equate the coming of a postindustrial society with the emergence of a postcapitalist society?–?in other words, that we’re living through an evident yet unrecognized transition from capitalism to socialism which, if we’re lucky, will never ?be complete.
The corporations didn’t just put functionaries in charge, thus setting them loose, as nominal capitalists, to speculate at will. The economies of scale and the technological innovations enabled by corporations in the early twentieth century extricated capital and labor from the “process of production,” making both factors superfluous.
On the one hand, net private investment from profits became less and less important as a determinant of growth?–?after 1919, simple replacement and maintenance of existing assets improved output and productivity. To the same extent, capitalists and their criteria of investment became less and less important: growth happened in their absence, and so the customary rewards, prerogatives, and incentives accruing to capital began to look like archaic rents paid to absentee landlords, like income without work, just another inherited entitlement. The profit motive began to look like a “somewhat disgusting morbidity,” as Keynes put it in 1930.
On the other hand, those same corporate economies and innovations expelled labor from goods production, to the point where the industrial working class stopped growing except when and where war (“defense spending”) sustained demand for labor. Since the 1920s, all growth in the labor force has been driven either by state, local, and federal public spending or consumer spending for services, not goods, apart from the component of the National Income and Product Accounts labeled “residential investment” (that is, home-building).
The upshot of these changes, which I would summarize as the decomposition of capitalism, is a situation in which the extraction of surplus value from labor by capital has lost its investment function, and the production of value by labor has lost its income function. In short, capitalism has stopped making moral sense because it has stopped making economic sense. It’s not a technical issue. Capitalists and their political functionaries continue to extract surplus value from labor however they can?–?these days by fierce assertion of their prerogatives, as if they’re Charles i defending the divine right of kings against a dubious Parliament, as if the rights of property as such are at stake?–?but the profits that result have no purpose, no outlet, no investment function. Growth will happen with or without them, whether they’re invested in goods production or not, and so they pile up, waiting for another bubble ?to inflate.
Meanwhile, proletarians of all kinds continue to go to work because they know that if they don’t their incomes will disappear. But as they buy the right not to die on a daily basis, they also know that the hours they spend on the job are a waste of their time and talents: unlike the “aristocracy of finance,” they know that their incomes have no relation to the value they create while at work, because they know that their increased productivity has gone, literally, to waste. They know that what the functionaries of capital call “entitlements” and “transfer payments” are justifiable supplements to or substitutes for income that can’t be earned by working for it, either because there aren’t enough good jobs or because there aren’t enough labor unions. These supplements or substitutes have been the fastest-growing components of labor income since 1959; according to the Bureau of Labor Statistics and the New York Times, they now account for one of every five dollars of all household income.
The bourgeois criterion of productivity?–?from each according to his abilities, to each according to the value he creates through productive labor?–?has in this limited sense given way to the ancient Christian and the modern socialist criterion of need?–?from each according to her abilities, to each according to her needs.”