Why should the so-called Communist Hypothesis, briefly outlined in my last post, if implemented, more likely to succeed than the Socialist Hypothesis? Let me try to answer this question in this post today.
Forces of Production vs Relations of Production
One key aspect of social change is that new types of atomic social organisations (ASOs) for carrying out the task of social production, namely, Firms, must be economically more efficient and successful in carrying out the task of social production in some rigorously definable way than older type Firms so that they are able to establish their dominance and eventually replace the older type Firms. In short, new type of Firms should somehow represent an advance of over older type of Firms.
This thought is captured somewhat partially and vaguely in the following Marxian formulation and I may as well quote Marx himself to avoid any misinterpretation:
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.
– Karl Marx, Preface to A Contribution to the Critique of Political Economy, 1859
Unfortunately, this was no more than an observation about social change from the history of social change and failed to provide any detailed analysis or explanation as to why this should be so. Why should old relations of production (ROP), or as Marx claims they are the same as “property relations”, come into conflict with and become a fetter on further development of the productive forces or Forces of Production (FOP), and why older forms of “property relations” must give way to new “property relations” for the continued development of the FOP?
ROP is more complex than oversimplified “property relations”
With Marx and his subsequent followers failing to recognise that ROP manifest themselves at the micro-economic level of individual Firms in any discretely definable society, Marxists have, for the last 153 years since the publication of this formulation, or more correctly general observation, unquestioningly accepted the validity of this observation simply because in a very general and oversimplified way, this observation has appeared to be empirically valid.
The dogmatic acceptance of this oversimplified observation led to the misconception that if private property is replaced by state property on a macroeconomic scale one could create a new social order that would mark an advance over capitalism.
But once we make the theoretical advance that ROP manifest themselves at the micro-economic scale at the level of the individual Firms, it becomes easy to see that instead of the vague and oversimplified category “property relations”, the two key determining aspects of any ROP is (a) how the production carried out by production ASOs, namely Firms, is shared between the property owning class providing the means of production and the labour owning class providing the labour power within those Firms – these being the two factors of production necessary to carry out any kind of production (and there are none remaining that can contribute to production despite the gobbledygook produced by mainstream capitalist economists), and (b) whether these two factors of production are owned by the same class or different classes within any given Firm.
Different types of ROP and whether they are class-less or not must, therefore, be differentiated on the basis of these two determinants and not by a vague, oversimplified, general term “property relations”.
Once this clarity is achieved, it then also becomes easy to see that in Collectively Owned Firms or simply Collective Firms (COFs or CFs) it is the same class that owns both the means of production as well as the labour power that must be brought together to carry out any kind of social production and consequently, there is automatically some sort of equity in the distribution of social production. Thus, COFs are class-less and therefore, more equitable in character.
[A footnote here:
This also means that the necessary condition of primitive communism or modern communism is the existence of COFs as ASOs in such “communist” societies.
In this context, for purposes of easier understanding and greater clarity, let me mention right away that the necessary and sufficient condition for both Primitive Communism and Modern Communism is that such COFs must also be owned by Collective Households to ensure equitable distribution of social production and we shall try to show why this is so a while later.]
On the other hand, all types of Privately Owned Firms or simply Private Firms (POFs or PFs) are class-riven and the distribution of social production is iniquitous. In such Firms, means of production is owned by one class while labour power is provided by another class and the distribution of the social production is unequal between the two classes through different sharing or distribution formulas in different types of Private Firms with the class owning the means of production, or, in other words, the property-owning class, keeping a much larger share of the production while the class providing labour power getting a much smaller share of the social production.
This results in exploitation defined as grabbing of surplus value by the class providing means of production by dint of property ownership where surplus value is defined as total production less share of production given to the class providing labour. All types of Private Firms are, therefore, exploitative.
This notion of exploitation is based on the simple idea that ultimately any production can take place only when means of production – non-human animate or inanimate objects – things-in-themselves – such as land, machinery, raw materials, domesticated plants and animals or as in the past, if we consider hunting-gathering societies, Nature in general – can be converted into things-for-us, that is, things that humans can consume in order to exist, only when human labour power is exerted on the things-in-themselves to bring about this conversion.
If there is no human labour power coming into the picture, things-in-themselves remain things-in-themselves and do not get converted into things-for-us – no production takes place. So, all human social production is the result of human labour power and since production is always carried out in atomic social organisations, if such production is not equitably distributed between the people comprising the ASO, exploitation takes place – some people benefit more from the production than other people involved in bringing about this production although all the people are equally required to bring about the production.
Why there is no difference between socialism and capitalism?
Once we acquire this conceptual clarity it is easy to see that since ROP manifests itself at the micro-economic scale within the confines of individual Firms, and since state ownership leaves the ROP at the micro-economic scale of Firms entirely the same as in privately owned Firms, state owned Firms are no different from so-called privately owned Firms of any capitalist market economy. Let us see why.
State-owned Firms even in a fully centralised command economy operate on the basis of exchange value and although prices are determined administratively and not by market forces, the generation of profits of such Firms require that administrative prices of labour and output – i.e. wages and commodity output prices – be set in such a fine-tuned way that surplus value is generated. If such surplus value is not generated and in turn profits are not generated even State-owned Firms become unsustainable and have to be closed down sooner than later. So State-owned Firms also have to make profits in order to exist and continue to exist.
In such State-owned Firms production is inequitably distributed between workers on the one hand and the State bureaucracy and party functionaries on the other, the latter being the people who exercise control over these Firms and therefore, are nothing but a new class of property-owners – the workers remaining what they always were – mere providers of human labour power.
In other words, there is absolutely no difference between privately-owned Firms and State-owned Firms from an ROP point of view – both are class-riven – both have to make profits from exploitation of the labour-providing class by generation of surplus value. And it is the class owning or controlling means of production who reap the benefits of such exploitation – in the case of privately-owned Firms it is the private capitalists who reap these benefits and are the exploiters, in the case of State-owned Firms it is the State bureaucrats and party functionaries who wield all the power and are effectively the people who “own” or control State-owned Firms and are the exploiters. The class owning or controlling the means of production take the lion’s share of the production carried out by these Firms and the class providing human labour power get little more than what is absolutely necessary for subsistence or in any case substantially less than what the class owning means of production get.
That State ownership is nothing but state capitalism in terms of the empirical evidence with regard to the behaviour of state-owned Firms and the outcomes for workers in so-called “communist”/socialist countries such as Soviet Russia and China is already quite well documented and commented upon and there is a fairly substantial literature on the subject.
Here I am trying to provide the theoretical explanation as to why State-owned Firms are no different from Privately-owned Firms – they have the same ROP at the ASO level – the micro-level of Firms. The view that State-owned Firms in particular and socialism in general represents any structural change from pure unadulterated capitalism and they also represent an advance over capitalism is, therefore, nothing but a complete myth. They are not because they are one and the same thing as far as ROP are concerned and workers are often much more exploited in socialist countries than in their capitalist counterparts because of such factors as lack of trade union rights, the right to strike work, etc. and plain and simple state terror.
The reader is invited to take a look at the substantial literature on the empirical evidence as to why socialist states are nothing but state capitalist states and how state-owned firms in these societies are almost exactly similar to capitalist firms in capitalist countries in terms of their economic behaviour and the actual outcomes for workers – workers remain wage slaves and exploited through same or similar mechanisms in both types of Firms and societies and for this simple reason socialism or socialist Firms represent absolutely no advance over capitalism or capitalist Firms.
This also explains why all socialist states have ultimately reverted back or are reverting back to capitalism and market-based private ownership. Let us see why?
As the production of such primarily state-owned socialist economies grow, within a few years or at the most few decades, the number of goods and services and the number of Firms for which prices and wages have to be set administratively goes well beyond what humans or even computers can keep track of and gradually distortions in the demand and supply of goods and services needed by society also go beyond sustainable levels with administrators – the people setting output prices and wages – having absolutely no clue as to how to correct these demand-supply imbalances.
Then a period of reforms set in and such command economies invariably go back to an economic system where output prices and wages have to be allowed to be determined by the market forces of demand and supply.
With the essential character of the ROP obtaining in State Owned Firms remaining the same as in Private Firms of a capitalist market economy, privatising State Owned Firms in such economies is just a matter of administrative action and even if some Firms remain State Owned, their ROP remain essentially the same as those obtaining in Private Firms and there is absolutely no structural change in the ASOs of such societies. This explains in brief the history of the rise and fall of societies based on the Socialist Hypothesis.
How Forces of Production impact ROP and change ROP?
With this to serve as the basic conceptual framework, we can now proceed to the question of how the development of the productive forces impact ROP and bring about new types of Firms.
Let us begin with how primitive communist Firm (CFs) gave way to Slave Firms. Primitive communist Firms were basically hunting-gathering Firms and used simple tools to carry out production. Primitive communism was a stable form of society for many thousands of years and although tool making and other productive technology developed within the CFs of primitive communism such development of productive forces did not bring about any change in the ROP. Meanwhile, change was taking place in the other basic type of ASO – the Household. RORP was changing as I have said before under the impact of evolutionary forces and genetics – the reproductive relations between adult males and females were moving from complete promiscuity to less and less consanguine relations so that increasingly the Household was becoming less and less collective in nature until the appearance of the pairing family based on Private RORP – private marriage or marriage between individuals rather than any form of group marriage, i.e marriage between groups of individuals. All previous forms of marriage were based on collective RORPs, i.e. forms of group marriage.
While the primordial condition was one big ASO – the natural biological group, to use the terminology of zoologists, comprising several adult males and females and their offspring – which was at the same time one Collective Firm “owned” by one Collective Household, as RORP became less and less collective in character several Households appeared within the one primordial natural biological group.
It is a certainty that as the new genus Homo evolved as distinct from Pan (chimpanzees – genetically closest to humans), initially there must have been several natural biological groups and several competing hominid species and over time only one of these species have evolved into modern man – Homo Sapiens Sapiens.
For the purposes of our discussion, we need not go into the details of such evolutionary anthropological processes except to point out that each such primordial ASO – each primordial natural biological group of hominids irrespective of the particular species they may have belonged to – evolved into a single more or less homogenous tribe or clan living together as the early communities of hominids.
Each such tribe or clan was at that time a discretely definable society and more complex societies comprising several tribes or clans must have emerged much later and certainly not earlier than the emergence of private property and the state.
As is seen from the history of the indigenous tribes of North America – the so-called Red Indians – or other tribal societies elsewhere in the world – different tribes lived in relative peace and clashes broke out only when economic pressures or reproductive pressures – population growth combined with less abundance of what could be hunted or gathered either due to human or non-human natural causes and less abundance of women (one of the two factors of reproduction, the other being men) – forced tribes to seek to expand and grab the territory and women of other tribes.
Also, since there was no economic logic for maintaining male slaves such tribal clashes resulted in the killing of males of other tribes but not conversion of them into slaves. As a result, slavery did not appear within such ASOs and both Households and Firms remained collective and primitive communist in character although within the society – one single collective Firm – many households had appeared and finally the pairing household appeared but still there was no change in the hunting-gathering technologies used for production and there was no change in the ROP within the collective Firm that each such society was.
[Here as an aside, I should point out that ASOs are teleological organisations or goal-oriented organisations and they have existed since the beginning of time as far as human social history is concerned to carry out the tasks of production in the case of Firms and reproduction in the case of Households. Consequently, the behaviour of these ASOs is entirely explained by whatever it takes to carry out these two tasks respectively and changes in the behaviour of these ASOs are determined entirely by the requirements of carrying out these tasks. I shall try to take this up in more detail in a later post when I discuss the relationship between structure and superstructure in human social formations.]
The transition from primitive communism to slavery
The development of animal husbandry and agriculture changed all that. The emergence of Households based on the pairing family had already created the social base for the emergence of private property which had already begun to appear in a rudimentary form in the shape of what things each Household “owned” within the tribe that still operated as a single collective Firm.
The domestication of animals on the one hand and the existence of private households on the other – private households based on the pairing family – meant that some households began to own more domesticated animals than other households.
Similarly, the development of agriculture also meant that some households began to cultivate more land than other households.
Within the womb of the Collective hunting-gathering primitive communist Collective Firms new relations of production were appearing – initially without much tension within the overall collective framework because different households must have simply shared their individual outputs within the Collective Firm of the tribe but soon new tensions and contradictions began to appear.
The men, the warriors, who naturally contributed more to capturing land that could be brought under cultivation as well as taming and domesticating wild animals such as horses and other bovines as well as smaller canines for helping them in hunting, were naturally at the forefront of putting up fences around the land they owned and declaring that the land and animals belonged to them.
The pairing family had already created a situation where mother right could be dispensed with – if the pairing was made strict – that is, if the wife could be forced to have sexual relations only with the paired husband and no other man, it would become possible for the father to know that the wife was giving birth only to his children and not the children of other men.
This was not possible in all previous forms of group marriage where only the mother had any idea, and often even the mother would have no idea who the father of any child was. Children could be identified only on the basis of their mother and not father and so automatically all previous Households were matrilineal in character where mother right prevailed.
Now differences in land ownership and in the ownership of domestic animals came into conflict with the Collective character of primitive communist Firms – people who owned more naturally were reluctant to share with people who owned less and the collective character of the primitive communist Collective Firm began to increasingly come under pressure. This was further aggravated by the ownership of slaves because by this time it had become economically viable to employ slaves for cultivation of land and for upkeep of domesticated animals.
I am here merely repeating much of what has already been discussed by Engels in Origin of the Family, Private & State just to reinterpret all of that material in terms of Firms and Households rather than in the oversimplified, vague and general terms that Engels had used as he had not succeeded in going beyond broad empirical observation to realising in a theoretical and conceptual sense that both relations of production and relations of reproduction manifest themselves at the micro level within Firms and Households respectively.
All these developments meant that Firms based on the ROP of Slavery emerged within the womb of primitive communist society based on Collective Firms. Soon a time came when societies hitherto based on the old collective relations of production sharing and distribution, the crux of the term relations of production, found themselves being dominated by Private Firms having private relations of production based on Slavery. The men-folk now demanded their pound of flesh – they demanded private property and they demanded inheritance laws so that they could leave behind their property to their children on their death – this required the transformation of the simple pairing family into the monogamic family where women were at last enslaved by men and the sexual freedoms of women got restricted even as men continued to enjoy multiple sexual relationships with other women through their harems of slave women and prostitutes. Prostitution too was born at around this time.
Private monogamic marriage and the Private Household was born and with it came private property and the Private Firm. Civilisation was born with the emergence of Private Firms and Private Households – with the antagonistic contradictions between men and women in Households and between property-owning and non-property-owning classes in Firms.With these antagonisms in place the state as the primary superstructural element in society had to come into being.
Private Households and Firms could be sustained only by the imposition of so-called law and order imposed by the State as these Private Firms and Households were based on ROP and RORP – the absolutely basic human social relationships obtaining at the micro level, atomic social organisation level – that were essentially exploitative in nature and violated all principles of natural justice and of the basic principles that guide the rest of life in Nature – the rest of the living species on planet earth other than Homo Sapiens Sapiens.
Man-made laws, rules and regulations became imperative to maintain human society because unlike other living species who have Firms and Households based on natural laws, rules and regulations arrived at through evolutionary processes, humans needed to create a State machinery to maintain by force the unnatural and man-made categories of private property and monogamic marriage.
[Again as an aside let me mention that the concept of property definitely exists in the world of higher animals and probably also in plants and other smaller microscopic forms of life. All living species need an eco-niche – a space within Nature from where it draws its sustenance. Readers more competent in biology and zoology can expand on this concept but for the purposes of this discussion it is suffice to discuss the concept of territorial property in some of the higher animals – say, for example, lions and tigers.
I am not going into too much details as I lack the biological and zoological competence to do so but very generally it is widely known that both lions and tigers fiercely protect their territories or their private properties.
The key difference between such naturally arrived at property through evolutionary processes and the man-made private property of human beings is that the private property of lions and tigers are based on natural needs while human private property though originally emerging through evolutionary processes (human social evolution is part of the overall evolutionary process) got converted into an unnatural and in fact an anti-Nature category because of human greed.
Lions and tigers and I suppose all other living species on planet Earth acquire whatever “property” is needed to survive and maintain their existence but humans, especially property-owners, ever since human society became “unnatural or anti-Nature” with the emergence of Private Firms and Households, want more and more property to satisfy their greed for more and more even after their basic wants and what is needed for their basic sustenance has been obtained.
Instead of venturing into what will surely turn out to be an unending moral and philosophical discussion, I should close this discussion by merely pointing out that lions, tigers and other living species acquire only so much property, only so much eco-niche, as they need to survive, but Man as the most evolved living species does not.
Why that is so maybe a philosophical question that will ever remain unanswered but the scientific situation is that this is the undoing of human beings as a living species.
It is because of this greed, because of this desire to acquire more of an eco-niche than what is required for survival, the morbid desire of individual humans to own the whole world if possible, that we are now facing a situation of mass extinction not only of other living species on this planet but humans themselves and the writing on the wall is so obvious that it is a waste of time and intellectual energy to argue in detail as to why this is so. The concept of eco-footprint brings this out very well – how our eco-footprint, especially that of so-called developed societies, is much more than what we need to survive.
Already whole hordes of scientists have amassed enough evidence on why we are as a species heading for extinction and here I will restrict myself to merely say that today Private Households and Private Firms have simply become unsustainable.
As statistics-minded readers can easily check out, in the case of the ASO for reproduction, the Household, the more developed a capitalist society, the higher is the share of state spending on family welfare and on maintaining the nuclear family and so-called family values and there is a direct correlation between capitalist development and state spending on maintaining the family or the Household. But to no avail as the more developed a capitalist society, the higher is the rate of breakdown of the family or Households and the higher is the incidence of single-parent families.
Similarly, in the case of ASOs for production, the Firms, the more developed a capitalist society, the more is the share of the state spending on maintaining and baling out the largest Firms by invoking the Too Big to Fail hypothesis or the “Economic Stimulus or Quantitative Easing” hypothesis. The other major area of state spending is on security and maintaining law and order and on defence – all aimed at maintaining the existing structure of class-riven ASOs – Private Firms and Households.
As a combined effect of the need to maintain Private Households and Firms, state spending on a global scale by capitalist states throughout the world has been growing at an asymptotic rate over the last few decades and has now reached unsustainable levels as reflected in huge fiscal deficits and sovereign debt combined with high levels of inflation brought about by too much printing of money.
The point is: it is because Private Firms and Private Households are based on unnatural human relationships that violate the principles of natural justice, that the State was needed. The rest of the living species on planet Earth do not need a State as they do not have to maintain Firms and Households that are based on unnatural principles that violate the principle of natural justice. But humans do because only by using the State machinery and the State gendarmie can a few individuals (read 1% in terms of the OWS movement ) lord over the rest of the people (read 99% in terms of the OWS movement).
In the natural world any such grabbing of eco-niche by a minority would have been dealt with simply – the majority would have killed and removed the minority and life would have gone on smoothly in a natural way and which is exactly what happens in the rest of Nature.
In the case of human beings, the State and its gendarmie makes sure that a minority can continue to rule over a majority in the most unnatural and anti-Nature way violating all principles of natural justice as well as the basic laws of nature.
This is the single most important reason why in a society based on Collective Firms owned by Collective Households the state will “wither away “and will not be required – humans will be able to go back to a natural and pro-Nature way of living based on principles that do not violate the principles of natural justice and therefore, do not require a State to enforce unnatural and anti-Nature laws, rules or regulations.]
Coming back to the main thread of our argument, all this meant that throughout society there was a need to rework past values of community living, sharing and group marriage and replace them by new ones that were compatible with private property and monogamic marriage.
Nature worship gave way to organised religion which said theft was sin, adultery was sin – the two basic tenets on which all modern post-civilasation religions compatible with Private Households and Private Firms are based on. Apart from the State, religion became another superstructural pillar for maintaining class-riven ASOs.
Small quantitative changes taking over a long period of time suddenly turned into qualitative change with almost all of society dominated by Private Firms having new relations of production – that is, new ways of sharing and distribution of production – as opposed to the Collective Firms of the past having collective relations of production.
The key point here is that the further development of agriculture and animal husbandry could not have taken place anymore within Collective Firms and Households simply because Private Firms and Private Households had already appeared within the old society because of the development of the productive forces and it is only within such new type of Firms and Households that further development of agriculture and animal husbandry could take place.
The oversimplified Marxian formulation that with the development of the forces of production there comes a time when they come into conflict with old “property relations” and these old “property relations’ become a fetter on the further development of the forces of production and therefore, they give way to new “property relations” now turns out to be a much more complex process where it is clear that the development of the productive forces as such does not unleash any direct conflict with “property relations”. Instead, what happens is that when a new revolutionary technology for production appears on the historical proscenium it brings about changes in the structure of both Firms and Households – in other words it brings into play new relations of production and reproduction – it alters the very nature of Firms and Households that had hitherto dominated as ASOs and new types of ASOs emerge.
What are the determinants of ROP change?
The question that now arises is exactly what type of revolutionary productive forces can bring about revolutionary changes in Firms and Households?
In the absence of a quantitative approach that remains to be developed, the only way to answer this question is by using a general conceptual framework. I will try to gradually introduce new concepts to build this framework and the reader will have to bear with me.
Clearly, any kind of technological advance brings about an improvement in labour productivity that may be conceptually defined as output per unit of labour power used or, what is but the same thing, man hours used.
Such changes in the forces of production also bring about a change in the cost curve of existence, that is to say the cost of living also changes and goes up. For humans to provide labour power, they have to first subsist and exist before they can provide labour power and as the forces of production develop so do the cost of such existence as the basic consumption basket needed to maintain existence grows and gets diversified.
The more economically developed a society is, the higher is the basic generally accepted consumption basket for survival and this is an unending process – new products as they appear in society go through a life cycle from being elitist to becoming essential – this is all the more observable in capitalist society where new products have been appearing almost every day and are gradually becoming a part of the consumption basket of all in society – electric bulbs, toothpaste, soap, mobile phones, refrigerators, motor cars, to name just a few products that started as elitist and became a part of every day consumption of the majority. This is true for all previous socio-economic formations based on older types of ASOs. We may thus think of this rising consumption basket as the cost of existence at the individual human being level.
In primitive communism, there were Collective Firms because the labour productivity was low and the cost of existence too was low – collective living – sharing the total production of the collective Firm among all the people who brought about this total production made sense – even the minimum production needed for subsistence and existence required the collective activity of many low productive individuals and the total product of the Collective Firm had to be shared to meet the cost of existence of the humans that carried out the production – there was no excess productivity anywhere that could be usurped and still meet the cost of existence.
As long as incremental technological improvements only brought about equally incremental increases in labour productivity and cost of existence, the old ROP of sharing and one class providing both labour and means of production remained intact and there was no need for new types of Firms with new ROP.
But with the discovery of agriculture and animal husbandry there was a disruptive increase in labour productivity but not such a disruptive increase in the cost of existence. This meant that if a class of people could be kept at the subsistence level in terms of cost of existence while being forced to provide labour power then a substantial surplus could be generated because labour productivity was much higher than the cost of existence. This made slavery economically meaningful and the economic reason for maintaining the old ROP of equitable production sharing formula could be replaced by inequitable production sharing.
Moreover, with the emergence of private property there also emerged two classes – a class that owned property or means of production and a class that owned nothing but the ability to provide human labour power because they had been enslaved and a State had emerged to make sure that the enslaved, though in the majority, could not arm themselves so that the armed state could keep them enslaved although the slave owning class was in a minority.
Thus, when the objective condition or hardware of a new type of ASO emerged with emergence of two classes of humans in a discretely definable society where one class owned the means of production and the other class owned nothing but the ability to provide labour power, the subjective condition, the software, compatible with this hardware, the ROP of exploitation, also emerged at the same time and new ASOs based on the ROP of class division and exploitation replaced the older ASOs based on the ROP of classlessness and production sharing.
To sum up all this verbosity when trying to explain conceptually what can be expressed much more crisply in mathematical terms, when the productivity of labour increased in a disruptive way in comparison to the cost of existence, the economic conditions for exploiting this sudden increase in labour productivity were created and this provided the economic logic for the emergence of new ROP that was exploitative in nature and the older non-exploitative class-less ROP was replaced by this new ROP.
ASOs for production (or Firms) based on this new exploitative ROP could enable exploitation of this much higher labour productivity as compared to the cost of existence and thereby allowed for rapid growth in production.
The cost of existence, however, has an individual manifestation at the level of the individual human being, a micro manifestation at the individual Firm level and a macro manifestation at the social level comprising many Firms. At the individual level, the cost of existence is the minimum consumption basket required by individuals to exist or subsist. At the micro level, the cost of existence is the share of total production of the individual private Firm that needs to be given to the class providing labour power. At the macro level, it is the share of total social production that has to be given to the class providing labour power plus the cost of maintaining the State.
So, while the cost of existence at the individual human being level and at the micro level of the individual Firm can remain more or less stagnant even as the Private Firms in society go on increasing production, over time the cost of existence at the macro level tends to escalate in a disruptive way because Private Firms have to continuously spend more and more on maintaining the State which in turn maintains the class-riven antagonistic contradiction within Private Firms under control or in other words on keeping the class struggle within society (because of class struggle within individual Private Firms) under control.
In mathematical terms, the cost of existence at the micro level – we can give a generic term for this as the “Wage Bill” to cover all types of Firms although except in capitalism in all previous socio-economic formations based on previous types of private ASOs based on previous types of ROP, the share given to the labour providing class was not called wages – is equal to the share of total production of the Private Firm given to the class providing labour.
At the macro level, the cost of existence is equal to the sum of the share of the total production of each Firm given to the class providing labour plus the cost of maintaining the State expressed as a share of the total social production or the sum of the total production of all private Firms in any discretely defined society.
For both micro and macro level, I am, however, using the generic term cost of existence to keep the discussion less complex and easier to understand.
The concept of social surplus value
As the productive forces continued to grow within these new ASOs of slavery, the incremental increases in labour productivity lagged behind the incremental increases in the social cost of existence of the providers of labour because the costs of the State spent on keeping a growing population of slaves raced ahead. In other words, the macro level cost of existence now included not only the cost of consumption of the human beings that provided labour power but also the costs of maintaining the State needed to ensure that enslaved humans remained enslaved and remained forced to provide labour power in return for mere subsistence in any discretely definable society .
Now let me introduce another new concept – the concept of private surplus value – which is equivalent to total production of any Private Firm less the wage bill or the share of production that has to be given to the class providing labour power for its sustenance. Social surplus value is the sum of private surplus values of all the private firms in any discretely definable society.
Private and Social surplus value has a key role to play in bringing about changes in the ROP. At the time of the transition from primitive communism to slavery, the private and social surplus value saw a disruptive increase due to the disruptive increase in human labour productivity as compared to the cost of existence (the wage bill in the case of individual private Firms, i.e. micro level cost of existence and total social wage bill plus cost of State for macro level social cost of existence) and provided the economic logic for the emergence of two classes and the usurpation of a much larger share of the total social production by the property owning class as compared to the labour providing class.
In a class-riven society where there is a ruling class reaping the benefits of any extant exploitative ROP, the ruling class is constantly trying to maximise the private surplus value at the level of the individual Firm. In slavery, therefore, Firms based on slavery ROP continued to expand , grow their production and maximise their private surplus value. But as private surplus value grew, the cost of maintaining the State too grew with the result that over time the rate of growth of Social surplus value gradually lagged behind the rate of growth of private surplus value. Moreover, even with the new technology of agriculture and animal husbandry and the growth of productive forces, the continuous working of the law of diminishing returns meant that the growth of incremental labour productivity also began to fall off after a period of initial growth. In other words, mathematically, the normal curve or some variant of the normal curve can be used to describe the growth and fall of private surplus value, social surplus value and labour productivity. In this context, we have to also remember that the cost of existence at the level of the individual Firm is a function of the cost of existence at the individual human being level. This is a new complexity that I am now introducing into the discussion.
As we have mentioned before, the cost of existence at the individual human being level rises with the growth of the forces of production. The individual basket of consumption increases but when expressed as a share of the total production of any Firm it begins to reach a peak and fall off – again a normal curve or some variant of that. The wage bill also follows a similar curve and the social cost of existence also follows a similar curve.
First Law of Social Change
Now it is possible to state the first law of social change – when the development in the forces of production or technological development reaches a stage that it brings about a huge increase in private surplus value then new private Firms with new private class-riven ROP emerge in class-less collective society to convert it into a class-riven private society that can enable the new technology to be used for generating this private surplus value.
These new private Firms emerge and begin to dominate and break down the dominance of the old collective Firms. This law worked in the transition from primitive communism to slavery. Technology played the decisive role.
Second Law of Social Change
But once private Firms came into existence there appeared a contradiction between the reproduction and sustainability of private Firms and that of society as a whole. I have to now remind readers of the teleological nature of ASOs – Firms and Households. As we have seen the social surplus value is equal to total social production less cost of existence at the macro level. Total social production is a function of labour productivity which in turn is a function of technological advance. Cost of existence at the macro level is equal to the cost of existence at the micro individual Firm level (which is a function of the cost of existence at the human being level) plus the cost of maintaining the State for maintaining status quo in class riven society. From this it is clear that social surplus value is directly proportional to human labour productivity which is a function of the forces of production or technology in general while being inversely proportional to the social cost of existence. As ASOs are teleological organisations whose task is to maintain the production and reproduction of human existence – that means social reproduction from a systems point of view – whenever a society reaches a point where the social surplus value that is being generated reaches zero or near zero levels the State gets weakened to a point where it begins to fail to hold together the structural ASOs in society and old ASOs give way to new ASOs. The change in the structure of new ASOS is driven by (a) cost pull – when the increase in the social cost of existence reaches a point that tends to erode the social surplus value and bring it down to zero or (b) a productivity push from technology change that brings about a disruptive increase in human labour productivity or (c) by both factors working in tandem.
In the case of the transition from slavery to feudalism, the cost pull factor made slave society unviable from a social reproduction point of view. The cost being borne by society as a whole (the cost being borne at the micro level of slave firms by slave masters to maintain slaves plus the cost being borne by the State as a whole to help slave masters maintain slaves in the condition of slavery) became so high over time that the social surplus value being generated – that is the total social production produced by slaves less the cost of maintaining the slaves in their condition of slavery – tended towards zero making slave society unviable as a whole. The way out was to free the slaves and convert them into serfs – they were free but they still did not have any control over the means of production. The slave masters who had by then acquired large tracts of land and were local warlords became feudal landlords who used the now freed slaves converted into serfs to carry out production and gave a small percentage of the total production to the serfs for tilling the land and took the rest themselves. A part of the production was also taken by the King or the Church (in the general sense of the dominant religious organisation that combined with the State in pre-capitalist societies to maintain social status quo of class-rivenness). The exact way the production was shared between the ruling combination of landlords, the King or government and the dominant religious organisation (the Church to use a generic term in the sense used by Arnold Toynbee for example) on the one hand and the serfs on the other hand differed from one feudal society to the next but the basic characteristics of the feudal Firm was that the real producers, the serfs only got a small share of the total production, typically about 30-40% while the local landlord, the King and the Church took the rest. This new system ensured the production of social surplus value once again and feudalism became a very stable social system till technological change again brought about a major change in the structure of Firms.
The transition from Fedualism to Capitalism was primarily driven by productivity push due to technological change and the higher productivity in turn led to the need to bring about a rapid expansion of the market for both output and inputs.
In the meantime, the increase in social production first under slavery and then feudalism had also expanded the need for distribution of the social production through exchange based more on money as the medium of exchange replacing the earlier barter system.
Population growth also meant more and more serfs being being driven to urban centres as they had no land to till – the arable land area was more or less fixed growing at a rate far slower than the rate of growth of population. This meant the availability of a class of people in urban areas who had nothing but their labour power to sell.
The simultaneous growth of manufacturing – using labour power to produce non-agricultural goods – also led to increasing use of labour power with money or a wage as compensation and the wage system emerged. With the stage set, the technological breakthrough achieved by the industrial revolution then brought about a rapid proliferation of Firms based on wage labour and in a more or less short time such Firms became dominant from the economic point of view. The new class of owners of such Firms – the capitalists – soon began to be economically more powerful than the earlier dominant class – the landed aristocracy. The democratic revolution was ushered in.
The key change was that in the earlier feudal Firms, production was physically shared – the ruling class took over the major part of the production leaving a small part for the real producers – the serfs. In the new type of capitalist Firms that emerged, the exploitation of human labour power took place in a much more subtle and well-hidden way. By paying a wage that was less than the actual value addition done by a worker, the capitalist earned a surplus value that showed up as his profit. Whatever gobbledygook the bourgeoisie economists may produce, the simple fact that even the smallest capitalist knows – even the owner of a micro-enterprise who hires labour – is that profits happen only when the hired workers, the real producers of value are paid a wage that is less than the value that they add to the raw materials and machinery while producing the final output. As long as the final output cannot be sold at a price that ensures value addition that is more than what is paid as wage there is no profit in a capitalist Firm.
Finally, to bring this discussion to a close, let us look at the transition from capitalist Firms to any post-capitalist Firms – what would be the nature of structural change?
This transition is being driven all the third factor mentioned in the Second Law of Social Change mentioned above – that is both technological change and cost pull is working. First, technological change towards more automation and less use of labour power has reached a stage where almost all productive activity now being done by humans can be automated but this technological change cannot take place within the existing structure of capitalist Firms because if this happens then except for a miniscule portion of the population – metaphorically the 1% of the global population who are the owners of 90% of global means of production, the rest of the people would become unemployed and the market for capitalists would tend to collapse while social reproduction will come to a halt so that there would be massive social unrest and the system will not be able to go on any longer.
On the other hand, the social cost of maintaining capitalism is increasingly leading to a situation where the social surplus value that is total social production less the cost of existence is increasingly tending towards zero. This is because the cost borne by the state to maintain the system has now reached unsustainable levels – and these costs are of mainly two types.
The first is the cost of state spending on security – the cost of policing the people and of maintaining increasingly larger armies and the second is the cost of propping up aggregate demand through state spending – that is by fiscal deficits and sovereign borrowing.
The total fiscal deficits and sovereign borrowing run by all the capitalist states in the world has been growing asymptotically in the last few decades and has now led to an unsustainable level.
The inequality in incomes has meant a chronic slump in aggregate demand – essential for capitalist Firms to be able to sell their output at a price where the value addition is more than the wages paid to generate the value addition so that profitability at the micro level – at the level of the individual Firm is tending towards zero while at the society-wide level the difference between total social production and the cost of existence which is equal to the wages paid to the working class plus the profits taken out by the capitalist class plus the spending by the state to maintain the class-riven status quo is tending towards zero.
Here we need to understand the significance of what may be called the wealth economy. The growth of global capitalism has brought about a situation where social production usurped by the capitalists over time and converted into monetary wealth is sought to be invested and reinvested in primarily financial instruments or in speculative manipulation of stock, commodity and money markets in a bid to generate more wealth.
Unfortunately, however, real wealth can be generated in the capitalist economy only when capitalist firms employ wage labour to produce goods and services that people need to consume to produce their existence. When wealth is entirely financial and monetised this wealth is only notional – paper wealth that is not backed by real material goods and services.
Moreover, capitalists manage to spend only a small portion of this notional wealth in buying real goods and services and this is despite the massive growth of the luxury market where luxury goods and services are very high priced due to branding but are actually consuming very little real goods or services.
For example, an Armani suit may cost $1 million dollars but the suit length material that is used to produce the suit actually costs a fraction of the final output price so that the value addition due to branding, the so-called premium earned from branding is actually only notional or virtual.
This massive growth of the virtual economy based on exchange value is what it is – virtual and notional so in real terms the system is increasingly tending towards a stagnation in the actual production of goods and services in use values although there seems to be an illusion of growth in exchange values but due to population growth the need for real goods and services that people need to consume to produce their existence is growing continuously. It is this dichotomy between actual use values being produced in the economy and the exchange value of these goods and services that is masking the gradual erosion of actual social surplus value – the difference between actual production and the share that is needed and being used up to meet the cost of existence of the people in the society. On paper, capitalist Firms are making profits but in reality real social production is not matching the real needs of an asymptotically growing population and on a society-wide scale this manifests itself as large scale poverty and deprivation on the global scale.
In short, from the point of view of a production system that can ensure the production of existence of the population in the global community of human beings, capitalism has reached its death throes – it is not being able to ensure the production of human social existence and as such capitalist Firms are failing to do what they are supposed to do as an atomic social organisation whose task is to produce such goods and services that people need to consume to produce their existence. This is leading to rapidly increasing social tensions reflected in various social conflicts across the globe in myriad ways – the struggle for existence reflected in people’s struggles expressed in various ways.
The Occupy Wall Street movement and similar movements in the developed world and the various people struggles – such as Left wing extremism in developing countries or even democratic struggles in such countries such as the movements by the unorganised sector in India for example, islamic terrorism which sustains itself because of poverty among the people are all manifestations of this generic inability of capitalist atomic social organisations, the capitalist Firms to serve the teleological purpose for their existence – producing the goods and services that the population needs to consume to produce their existence.
This systemic failure is further exacerbated by the need for capitalist Firms to increasingly destroy the environment in their pursuit of profits – by producing goods and services that people don’t need for existence – arms, automobiles, many kinds of products such as refrigerators or air-conditioning systems, plethora of electronic products, all kinds of machines for industrial and domestic use – but which uses up enormous amounts of energy produced out of fossil fuels and the concomitant pollution.
The enormous amounts of industrial waste is also adding to that pollution and environmental degradation. Similarly, in order to sustain this military-industrial complex and alrge scale urbanisation that is typical of capitalist growth there is large-scale destruction of forest cover, degradation of life-sustaining top soil and massive extraction of groundwater resources all of which are destroying the very basis of life on Planet Earth. Capitalism as a system of producing the existence of human society has as a whole turned into its opposite – it is now a system that is destroying the existence of human society and therefore, capitalist Firms as atomic social organisations have become completely unviable from their teleological purpose of existence.
Ongoing structural change
But structural change is already taking place and more and more capitalist Firms around the globe are becoming worker owned Firms. This process is now too slow and too sporadic to become noticeable on a global scale but the process is on. When workers around the world begin to realise that collective ownership of means of production must also be combined with creation of collective households – that is the association of producers of any particular collectively owned Firm must also live in a collectively organised household with a single kitchen and that each such collectively owned Firm-Household combine must try to gradually own enough land so as to become self-sufficient from the point of view of meeting the basic needs of the people engaged in that Firm and that individual collectively-owned Firms can begin to cooperate with others in the vicinity in such a way that they share resources for inputs for production and share outputs for consumption, a bottom-up process of eliminating exchange value will begin and in this way a market-less system of production, distribution and consumption can begin to emerge. This can be done by making increased use of information technology to match production requirements with consumption patterns – a kind of consumer relationship management system being implemented across the increasingly growing network of worker-owned enterprises.
Why collectively owned firms (COFs) will be more competitive than capitalist Firms?
In the meantime, while individual collective Firm-Household combines walk on the path of linking up with each other on the basis of sharing of uses values in terms of both inputs and outputs, they will continue to operate in the existing capitalist market system and initially they will be producing items that have a market in the capitalist market place. Firms such as Mondragon in Spain as well as others elsewhere are doing at the moment.
Such worker-owned Firms will be intrinsically more competitive than existing capitalist Firms because they will be free to automate their production processes fully without bothering about sacking anybody – the workers are themselves the owners so the only change that automation will bring about will be to free them from hard manual labour and allow them to quickly become skilled and educated in running and developing automated systems of production. Increased level of automation and increased innovation of new products and processes that will be unleashed with each and every individual worker now having a stake in such innovation, being owners themselves, will make such Firms far more competitive than capitalist Firms in the same lines of business apart from other business benefits arising from eliminating the owner-worker antagonistic contradiction (as can be seen already in Firms such as Mondragon).
Such Firms should then seek to utilise their profits – the difference between what the workers earn from their output and what they consume to maintain their existence – to increasingly buy land and create eco-firms that focus on need-based production and consumption rather than capitalist market-driven production and consumption. Such eco-firms would also enable such collectives to adopt a collective way of living – for example, by creating environment-friendly and low energy consuming apartment buildings with each worker family being assigned one apartment. Such buildings will operate like hotels with a common kitchen serving multi-ethnic cuisine to meet all individual culinary needs and combining a school, a hospital and all leisure facilities. With the focus on need-based consumption rather than getting fooled by capitalist branding and running after so-called “luxury” consumption, all workers can live a life of “luxury” at a much lower cost than what is possible in the existing capitalist system. Here I am merely trying to indicate a vision of how all workers can maintain a fairly luxurious life-style but at a much less cost than that would be possible in the existing capitalist system and without the existing disparities. Exactly how these basic principles will be implemented would necessarily be a matter of social experimentation and how concrete conditions unfold at each concrete worker-owned enterprise. It is likely that as the full innovative capacity of workers are unleashed there will be many different paths by which worker-owned enterprises will move towards more environment-friendly ways of living while ensuring decent life-styles, protecting individual freedom and choice and unleashing the innovative capacities of each individual.
Such worker-owned Firm-Household combines will be States in themselves – self-administered and as the network of such self-administered communities grow a time will come when they will begin to dominate the landscape instead of capitalist Firms and Households. It is only to be expected that in this process of growth of worker-owned enterprises (collective Firm-Household combines) a truly communist (people who are at the same time workers as well as owners) political force will emerge and will begin to challenge the political parties of capitalism albeit through the existing democratic processes. This challenge will lead to political clashes and need for change in other superstructural aspects – primarily laws that govern property ownership and maintain capitalist ASOs. The new collectively owned ASOs will need new laws.
Thus, while initially worker-owned Firm-Household combines may grow within the womb of the existing socio-economic-political-legal framework of existing Capitalist societies in a peaceful and democratic way, a time will come when the worker-owned Firm-Households will begin to dominate the landscape and a revolutionary transformation of the superstructure – the political, legal, religious, philosophical, ideological, ethical superstructure of society will become inevitable.
It is not possible to predict at this stage whether this transformation will be possible entirely through peaceful, democratic processes or whether the gradually dying capitalist Firms and their political parties and state machinery will try to reverse the relentlessly grinding wheels of history by resorting to violence in various forms. It is, however, only to be expected that vested interests will not give up their positions without a last ditch attempt to hold on to their power and privileges and violent resistance to change cannot be ruled out in any way. But the onus of resorting to violence will be on the Capitalist Firms and their States and not those seeking change.
The key question now is whether this structural change will take place rapidly enough to save the Planet from the destructive path that it has been put onto by capitalism? It appears that once more and more people become aware of the theoretical aspects of how structural change has come about in ASOs hitherto – rudiments of which have been sought to be documented here – then this process of real structural change within the atomic social organisations to create collective Firms and Households to resolve existing antagonistic class contradictions – will get speeded up enough to reverse the process of capitalist destruction – initially slowly and then rapidly to bring about a revolutionary transformation to a post -capitalist collective but a more sustainable, equitable, just and rational society.