by Daniel Bell
The second change was the revolution wrought by the corporation, the effect of which was to separate ownership from management and bring a new category of occupation—if not a new class—which Marx calls “the labor of superintendence” into society.
That not the industrial capitalists, but the industrial managers are “the soul of our industrial system,” has already been remarked by Mr. Ure. ... The capitalist mode of production itself has brought matters to such a point, that the labor of superintendence, entirely separated from the ownership of capital, walks the streets.
And finally, the expansion of the banking and credit system and the growth of the corporation would necessarily mean the expansion of office personnel and white-collar work.
... it is clear that commercial operations increase to the extent that the scale of production is enlarged. ... The more developed the scale of production is, the greater, if not in proportion, will be the commercial operations of industrial capital. ... The calculation of prices, bookkeeping, managing funds (accounting), all these belong under this head. ... This necessitates the employment of commercial wage workers who form the office staff (vol. III, p. 352).20
And yet, while these three structural changes would seem to modify considerably or challenge drastically the theory of polarization of classes which is so strong in the Manifesto and at the end of volume I of Capital—and which was the dominant idea of classical Marxism —Marx felt that the basic sociological tendency, the deepening of economic crises and the spread of a socialized character to property, would force acute conflict in society.
Of the banking system, rather than seeing the institutionalization of credit as a source of stability in the system, he thought it would hasten crises.
By means of the banking system the distribution of capital as a special business, as a social function, is taken out of the hands of the private capitalists and usurers. But at the same time banking and credit thus become the most effective means of driving capitalist production beyond its own boundaries, and one of the most potent instruments of crises and swindle (vol. III, p. 713).
As for the managerial function, he saw this as much, if not more, an aspect of socialism as it is of capitalism. The managerial function, said Marx, “arises from the social form of the labor process” and “to say that this labor is a capitalistic one ... amounts merely to saying that the vulgar economists cannot conceive of the forms developed in the womb of capitalist production separated and freed from their antagonistic capitalist character” (vol. III, p. 455). “A director of an orchestra need not be the owner of the instruments.” “The cooperative factories furnish the proof that the capitalist has become just as superfluous as a functionary.”
In fact, writes Marx shortly afterwards, in a startling analysis, the rise of the manager is one of the key elements in transforming profits into “social property,” for with the introduction of the manager (“skilled labor the price of which is regulated in the labor market, like that of any other labor”), the capitalist becomes removed from the process of production, the manager is alienated from his own labor, and profits assume a social character. Marx writes:
... this total profit is henceforth received only in the form of interest, that is, in the form of mere compensation of the ownership of capital, which is now separated from its function in the actual process of reproduction in the same way in which this function, in the person of the manager, is separated from the ownership of capital. The profit now presents itself ... as a mere appropriation of the surplus labor of others, arising from the transformation of means of production into capital, that is, from its alienation from its actual producer, from its antagonism as another’s property opposed to the individuals actually at work in production, from the manager down to the last day laborer.
In the stock companies the function (of production) is separated from the ownership of capital, and labor, of course, is entirely separated from the ownership of the means of production and of surplus labor. This result of the highest development of capitalist production is a necessary transition to the reconversion of capital into the property of the producers, no longer as the private property of individual producers, but as the common property of associates, as social property outright (vol. III, p. 517).
As for the white-collar worker, Marx foresaw that the number of such employees would spread, but he felt that the extension of capitalism would lead to the proletarianization of the white-collar worker because the division of labor in the office and the growth of public education would depreciate their value. As he put it:
The commercial laborer, in the strict meaning of the term, belongs to the better paid class of wage workers: he belongs to the class of skilled laborers, which is above the average. However, wages have a tendency to fall, even in proportion to the average labor, with the advance of the capitalist mode of production. This is due to the fact that in the first place, division of labor in the office is introduced; this means that only a one-sided development of the laboring capacity is required. ... In the second place, the necessary preparation, such as the learning of commercial details, languages, etc., is more and more rapidly, easily, generally, cheaply reproduced with the progress of science and popular education, to the extent that the capitalist mode of production organizes the methods of teaching, etc. in a practical manner. The generalization of public education makes it possible to recruit this line of laborers from classes that had formerly no access to such an education and that were accustomed to a lower standard of living. At the same time this generalization of education increases the supply and thus competition. With few exceptions, the labor-power of this line of laborers is therefore depreciated with the progress of capitalist development. Their wages fall, while their ability increases (vol. III, p. 354).
These new structural tendencies, therefore, were discounted because Marx believed, implicitly, that schema one would be decisive. Yet why the “integument” would have to burst is not clear. As Paul Sweezey writes: “In a real sense it can be said that Marx’s entire theoretical system constitutes a denial of the possibility of indefinite capitalist expansion and an affirmation of the inevitability of the socialist revolution. But nowhere in his work is there to be found a doctrine of the specifically economic breakdown of capitalist production.” 21 And as Sweezey comments further, efforts by later Marxist writers, including Rosa Luxemburg and Henryk Grossmann, to posit such a necessary breakdown are unconvincing.
On the historical evidence, the tendency Marx laid out in schema one has been modified, if not falsified, by the showing that there is no intrinsic tendency of the rate of profit to fall; that the state has been able to intervene and soften, if not prevent, economic crises; and that technology has been an open frontier for the reinvestment of capital. There is no evidence—in theory or empirical reality—that capitalism must collapse from economic contradictions within the system.
What, then, of the structure of the “new society” within the “womb” of the old—the changing character of the labor force, the role of the manager? What of the social developments which I have called schema two? What role have these elements played in social theory and the conceptions of social evolution since Marx? If one reads the sociological theories on the future of capitalism which were enunciated in the first half of the twentieth century, one sees that almost all were, in effect, a dialogue with schema two of Marx.
Post-Marxism: The Dialogue in the West
Few writers on capitalism have seen it as a “permanent” system of society. The very self-consciousness that attended the coinage of the term in the nineteenth century—the fact that it was associated principally with socialist theoreticians 22—from the start led to the belief that capitalism was only a “stage” in the evolution of economic society and to the expectation that it would be replaced— shortly—by some successor economic system of some collectivist kind. (In fact, given all the predictions of an early demise, what is to be explained, if anything, is the relative longevity of the
system.)
The writer who first sought to chart the transformation of capitalism in some set of qualitatively different sociological periods—the first, actually, to make capitalism the centerpiece of economic history and analysis—was the German economic historian Werner Som-bart. In Der Moderne Kapitalismus (the final revisions of which were published from 1921 to 1927 in three volumes) Sombart sought to write a full-scale history of the transition of economic society from a pre-capitalist phase of a sustenance economy to the rise of modern capitalism and its deliquescence. While he dealt fully with the influence of technology and the creation of the capitalist enterprise as a distinctive social form, his emphasis was principally on the capitalist spirit (or mentality) as its most unique characteristic, and on the entrepreneur as the key figure in capitalist development.23
For Sombart, economic epochs could be understood only within the framework of other historical systems. Thus the early period of any system overlaps with the late period of a retreating or previous economic system; the period of full development reveals a system in its singular purity; and the last period is identified when one can show the onset of a new, oncoming system. Applying this division of epochs to capitalism Sombart distinguished between early capitalism, the period from the middle of the thirteenth century to the middle of the eighteenth; full capitalism (Hochkapitalismus) from about 1750 to 1914; and “late capitalism,” the period after the First World War.
Early capitalism still bore the marks of the handicraft period. Traditionalism was still strong, economic life had a personal cast, buyer and seller allowed personal likes and dislikes to affect their relationships, and employers and workers were held together by patriarchal bonds.
In the period of full capitalism the principles of profit and economic rationalism permeated all economic relationships. Markets expanded, the size of business increased, scientific mechanistic technology was utilized, relationships became impersonal and institutionalized. “The capitalistic spirit at its prime,” writes Sombart, “was characterized by psychological strains of peculiar intensity born of the contradictions between irrationality and rationality, between the spirit of speculation and that of calculation, between the mentality of the daring entrepreneur and the hard-working, sedate bourgeois.” 24
In the period of late capitalism two major changes are central. Within the society, “the strength of specifically capitalistic elements of economic life” declines, while “mixed” public-private undertakings, state and communal public works and non-capitalistic economic endeavors “increase in number, size and importance.” Within the firm, “there is a gradual decay of the entrepreneurial mentality.” In place of the entrepreneur comes the bureaucratic mentality, and the firm itself becomes bureaucratized.
In late capitalism, says Sombart—his model was the cartelization of German industry in the 1920s—the major desire is for stabilization. The striving for profit grows less intense (“witness such symptoms as the fixed dividend rate, the reinvestment of surplus—in the United States, for example, some concerns provide 30 to 35 percent of their new capital in this way”), the market mechanism is superseded by the price regulation by combinations or even by the government, the cyclical oscillations of the economic system become attenuated, and the interventions of government become more and more decisive. The features that had given capitalism its distinctive-ness have begun to atrophy. If capitalism, as Sombart put it, could be characterized by three constituent elements, spirit, form, and technology, the spirit was now gone and only form and technology remain.
All these themes of Sombart, with subtle shifts of emphasis, are present in Schumpeter who, in his Capitalism, Socialism and Democracy (1942), predicted the end of capitalist civilization. The transformation is both on the level of mentality and social structure. For Schumpeter, three elements are at work to change the capitalist mentality. One is the fact that capitalism is too rationalistic. “I have no hesitation in saying,” writes Schumpeter, “that all logic is derived from the pattern of economic decision or, to use a pet phrase of mine, that the economic pattern is the matrix of logic.” The capitalist process, he continues, “rationalizes behavior and ideas and by so doing chases from our minds, along with metaphysical beliefs, mystic and romantic ideas of all sorts.” But such rationality, says Schumpeter, is too stringent for society. “The stock exchange is a poor substitute for the Holy Grail.” Second is the “obsolescence of the entrepreneurial function.” The entrepreneur was the man who unsettled things, who innovated and got things done. But today, “personality and will power” count for less in economic environments that have become routinized, where “bureau and committee work tends to replace individual action” and economic progress becomes “depersonalized and automatized.” Third is the corrosion of all established beliefs. Rationalism and empiricism foster a critical attitude which begins to question everything. Traditions begin to crumble. The desire for change and novelty become built into the system. The intellectual—the man “who wields the power of the spoken and the written word”—becomes increasingly hostile to capitalism. (“Only a socialist or a fascist government is strong enough to discipline them.”) Inevitably, thus, the social antagonism to capitalism grows.
On the level of social structure, what sustained capitalism, said Schumpeter, was an institutional framework built on twin pillars, the institution of property and the freedom of contract. The political support for this framework is maintained by a “host of small and medium-sized firms of owner-managers” who, “together with their dependants, henchmen and connections, count quantitatively at the polls.” Yet for Schumpeter, this institutional framework has become brittle. Freedom of contract is hemmed in by various forms of regulation, from the powers of trade unions to that of government. The institution of property is undermined in two ways. One, the process of monopolization and the growth of the large corporation tend to eliminate the intermediate-sized firms. (“Economically ... the case against concentration of economic control ... misses the salient point [i.e.] the political consequences of concentration.”) Second, the transformation of the owner-proprietor into the salaried executive diminishes the strength of property and the managerial group begins to adopt a set of social attitudes which are at variance with the stockholders’ interests in the firm. Thus, for reasons parallel to Marx, Schumpeter, too, sees the walls of capitalism as crumbling and—in a century!—the “civilization that slowly works deep down below” may then emerge.25
But what is the “civilization that slowly works deep down below”? Marx had thought it was socialism. But Marx’s great antagonist, Max Weber, had a far different vision. For Weber, the master key of Western society was rationalization, the spread through law, economy, accounting, technology, and the entire conduct of life of a spirit of functional efficiency and measurement, of an “economizing” attitude (maximization, optimization, least cost) towards not only material resources but all life.26 With the inevitability of rationalization, administration takes over, and the complete bureaucratization of all social institutions is inescapable: “The future belongs to bureaucratization. ... Where once the modern trained official rules, his power is virtually indestructible, because the whole organization of the most basic provisions of life is fashioned to suit his performance.” 27
But while bureaucratization was a feature of capitalism, it would be, necessarily, a feature of socialism as well. In Wirtschaft und Ge-selhchaft Weber writes:
The primary source of bureaucratic administration lies in the role of technical knowledge which, through the development of modern technology and business methods in the production of goods, has become completely indispensable. In this respect, it makes no difference whether the economic system is organized on a capitalistic or a socialistic basis. Indeed, if in the latter case a comparable level of technical efficiency were to be achieved, it would mean a tremendous increase in the importance of professional bureaucrats. ... capitalism in its modern stages of development requires the bureaucracy, though both
have arisen from different historical sources ... a socialistic form of organization would not alter this fact. It would be a question [Weber refers here to the rational calculation of the use of capital] whether in a socialistic system it would be possible to provide conditions for carrying out as stringent a bureaucratic organization as has been possible in a capitalistic order. For socialism would, infact, require a still higher degree of formal bureaucratization than capitalism. If this should prove not to be possible, it would demonstrate the existence of another of those fundamental elements of irrationality—a conflict between formal and substantive rationality of the sort which sociology so often encounters.28
As Richard Pipes points out:
Weber repeatedly criticized the Marxists for ignoring what to him seemed the central problem facing socialism: who will operate the nationalized enterprises? As for himself he felt certain that this function would be assumed by the groups technically best prepared for the task, that is, the bureaucracy “from which nothing is further removed than [a sense of] solidarity with the proletariat.”29
The spread of technical knowledge, the rise of the manager in industry and the bureaucrat in government, rather than exemplifying for the new directors (in the St. Simonian image which Marx had taken over) a role analogous to the “director of the orchestra,” meant for Weber a new form of domination:
