Control of Work: Control Over the Means of Production Under Capitalism and Communism

1. In criticizing capitalism and calling for communism Marx's fundamental concern was not inequality in income and wealth, but inequality in the control of the means of production. Productive activity, we have seen, is central to human life in that it is necessary to live and, if it is unalienated activity, can and should be the central aim of a good life. Productive activity is impossible without having some means of production. Thus control over the means of production gives people control over their own lives. And without such control, alienation is inevitable.
1. Private ownership of the means of production, then, gives some people greater authority over the lives of other people. For, the only way people without control of the means production can engage in productive activity is to cede control of where, when and how they work to those who do control the means of production.
1. Thus Marx’s critique of capitalism as not primarily economic in nature but political..
2. Indeed, Marx continually emphasizes the political character of social class and class struggle. For Marx, the dominant class is a ruling class. The members of the ruling class tell the members of the subordinate class how to live their lives.
2. The socialization of the means of production is central to Marx’s notion of the first stage of communism. By socialization, we mean that control of the means of production is turned over, in one way or another, to the democratic control of workers. Socialization of the means of production can take place in two fundamental ways.
1. Nationalization. Marx argues in The Communist Manifesto and The Critique of the Gotha Program, that a communist government would nationalize or the largest business enterprises.
1. Thus they would come under control of the government or state.
2. Nationalization of business enterprises can be carried out in two fundamentally different ways, depending upon how coordination of economic activity is carried out. (See II C for some details on these different ways to run an economy.)
1. Nationalized business enterprises can operate in a market economy.
2. Nationalized business enterprises can operate in a command or authoritative planning economy.
2. Worker's Control. Socialists—and, in some work we have not read, Marx himself—suggest that another alternative is for control over the means of production to be turned over to the workers who have previously used these means of production.
1. On this view, the workers in a particular workplace or corporation—and any workers who later join in working at these places—will democratically elect those who exercise managerial responsibility.
2. To understand these different proposals, it helps to have a brief overview of how different politico-economic systems solve the problem of economic coordination. The problem of economic coordination arises in all economies once there is a division of labor. (This is some new material we did not discuss in class, but might be of interest to some of you.)
3. Division of labor:
1. Different people do different work, produce different goods
2. Not only do people produce different goods, but many people produce goods that are only used in the production and consumption of still other goods.
1. Goods used in the production of other goods are called capital goods. They include such things as steel, rubber, glass, plastics used to create other products, computer chips and so forth.
4. The problem of economic coordination: An efficient economy is one in which enough, but too much of each good and service is provided.
1. This is important for all goods, including consumer goods.
1. We don’t want to waste time and effort producing consumption goods that people don’t want to buy.
2. Or want to buy less than other goods at the price at which they will be sold
2. But the problem of coordination is particularly important with regard to capital goods
1. If we produce more iron than we need, we will have wasted our efforts and the iron will sit on the ground and rust.
2. If produce less iron than we need, we won't have enough to make the products we seek to buy that use iron, such as cars and building.
5. Politico-economic coordination can be carried out in two different ways.
1. Command economy or authoritative planning systems: in all such systems authoritative direction by the government replaces market relationships between business enterprises
1. Thus control over the means of production (natural resources, equipment and capital) is in the hands of the government
2. In most authoritative planning system, goods and services and labor are allocated by the market but allocation of the means of production is carried out by the government;
1. Capital goods are not bought and sold from one company to another. Instead, the government directs companies to deliver such goods to each other.
2. This is the system that was in effect in the Soviet Union and other communist countries until fairly recently.

Market systems: the means of production, goods and services and labor are allocated by market relationships, that is, by buying and selling in the marketplace. Different market systems vary with regard has ownership and control over business enterprises (and thus the means of production). In formal terms, the key question is who elects the board of directors that is ultimately responsible for governing a business enterprise. There are three possibilities:

3. Private ownership and control (capitalism). Individual stockholders elect the board of directors
4. Social ownership and control
1. Worker’s control: worker’s elect the board of directors.
2. Consumer cooperatives: consumers elect the board of directors.
5. Government ownership and control: nationalized business enterprises
1. Government ownership of business in a market system differs from government ownership in authoritative planning system: communism
1. In communist system: no or limited use of markets in the allocation of capital goods.
2. The government assigns means of production from one business to another
3. For example, if the government owns a dam and want to produce electricity: it tells the enterprise which controls the dam to build an electric generator; tells the electric company to take any electricity generated at the dam and to then provide that electricity it to other business enterprises or consumers.
2. Government ownership of business in market system: government businesses buy and sell capital in the market.
1. For example, if the government owns dam and wants to produce electricity: it buys generator from business enterprise which builds generators and sells the electricity it generates to an electric company.
3. Two important questions can be raised about Marxist proposals for socialization of the means of production.
1. Do these proposals undermine the legitimate rights of private property?
2. Which form of socialization best realizes Marx's aims?
3. Socialization of the means of production and property rights.
1. The key complaint capitalists raise against the socialization of the means of production is that it would violate the legitimate rights of property owners.
1. Recall that capitalist property gives an owner three rights:
1. To buy and sell.
2. To get revenue
3. To exclude others from the means of production.
2. Control over work rests on the third right, to exclude others from the means of production. It is only because workers can be excluded from the means of production that they must agree to work under the direction of the owners of the means of production. Socialization of the means of production transfers this right, either to the government or an association of workers.
3. To understand the Marxist argument in favor of socialization, let us focus the third property right and not worry about the first two rights, to buy and sell and to get revenue.
1. So we will assume that when socialization takes place, the previous owner of the means of production do not lose their first two rights. Whether their property is nationalized or brought under worker’s control, the previous owners continue to have a right to revenue and to buy and sell that right to revenue.
1. Suppose that the government passed a law that required business enterprises that had reached a certain size—in the number of workers or in sales or both—to gradually give the power to elect the board of directions to either government appointees (nationalization) or an association of workers (worker’s control). The stockholders who currently have this power would gradually lose it, without losing their financial stake in the company.
2. We might imagine that their stock would gradually be converted from what today is called common stock to what today is called preferred stock. Common stock gives the owners a right to buy and sell the stock, a right to revenue in the form of dividends and a right to vote for the board of directors. Preferred stock gives owners only the first two rights but not the third right.
3. To make this idea more palatable, let us also suppose that this law only goes into effect when the entrepreneur who originally started the business retires or dies. Bill Gates could run Microsoft as long as he lived or cared to. Once he died, however, his the common stock passed to his descendants would, over a period of time, be converted into preferred stock and the workers at Microsoft would be given the right to elect the members of the board of directors.
2. The Marxist case for socialization of the means of production is that it is part and parcel of a fully democratic way of life, in which we collectively exercise control over the conditions under which we live.

Private ownership of the means of production gives some people greater authority over the lives of other people than they deserve. The members of the ruling class tell the members of the subordinate class how to live their lives. We live under a democratic political regime—however compromised by the political power of capitalists. But the workplace is oligarchical in nature. In it, we are ruled by the rich, that is, the capitalists and their hired help.

1. A frequent response to this argument is that we can choose where and for whom we work. There is a free labor market. One can ask, however, whether this really gives us the same power over our work lives that we would have if, say, businesses were democratically run.
2. A good way to think about this issue is to compare a business enterprise or company to a town. (I borrow this important analogy form Michael Walzer, who developed it in his book Spheres of Justice.
1. Suppose that we let individual entrepreneurs own towns and cities. Imagine that a rich capitalist starts a town. (This has actually happened a few times in American history, when corporations began company towns. Johnstown, PA started this way. And, in recent years, there have been many new sub-divisions, and even cities, that are similar to these older company towns.) The capitalist owns most of the land and residential and commercial buildings in the town. He rents space to people. Or he sells land, with the proviso that anyone buying land must agree to his continued rule of the town.
2. The capitalist provides all of the goods and services usually provided by city governments.
1. The money for this comes out of the rents he collects or from a special assessment he makes on landowners. To buy land, one must agree to allow the owner of the town to make these assessments.
3. The owner of the town:
1. Provides police and fire protection.
2. Sets up zoning rules and sign ordinances.
3. Builds and controls the schools.
4. Builds and controls recreation facilities and parks.
5. Appoints the local arbitrators who settle property disputes between those who live in the town. (Suppose that a condition of leasing an apartment or buying a house in this town is that all such disputes must be submitted to arbitration.)
4. The owner of the town can, in effect, do everything a local government can do except jail someone.
3. Is a person justified in owning a town in this way? Can he continue to own town when it gets large enough or must he give up political power? Suppose that all towns were privately owned. We could choose to live in one town or another. This would give us some control over the conditions under which we lived. But would it give us enough control or as much as we would have if the fundamental decisions about the life of the town were made democratically? Would we have the same degree of control over the kinds of common goods we receive from the town, including not just services such as police protection, but also the goods that come from shaping the development of the town in one way or another through planning and zoning decisions?
4. A privately owned town would, in some ways, take us back to feudalism. Recall that the feudal lord had political as well as economic authority over his manor. The owner of a town would have the same political rights as well. Isn’t this contrary to our assumption that political power should be democratically controlled?
5. When a case of this sort came before the Supreme Court many years ago, it ruled that the entrepreneurs who starts towns must ultimately give up power. The Court held that towns must governed democratically.
6. If you agree that towns should not be privately owned, then, in order to justify private ownership of business enterprises—in the sense of private control over them—you would have to explain the difference between rule over a town and rule over a corporation. But it is not clear that the differences are all that great. Corporations have enormous control over the lives of their employees. They control not only the immediate work process but, also, the workplace, including the physical and social environment in which people work. They often provide a wide range of common goods and services to their employees in the work place, from cafeterias to recreation facilities to day care centers to medical clinics to pictures on the walls. Indeed, our boss often makes more important decisions about our lives then does the mayor of the town in which we live. If we believe in democratic control over common goods, why shouldn’t these decisions be democratically made? That is, why shouldn’t the right to revenue and the right to buy and sell be separated from the right to control the use of the means of production?
7. What kind of democratic control over business enterprises does this argument justify?
1. The analogy of town and company would seem to justify worker’s control over the means of production. If we believe that towns should be democratically controlled by the people who live in them, then companies should be democratically controlled by those who work in them.
2. A similar—though perhaps less compelling—case can be made for the nationalization of the means of production.
1. Again, the argument is based upon the right to democratic control over the work, the work process and the workplace. Nationalization would give this power to the central (and presumably democratic) government.
2. If one believes that power should, in so far as possible, be decentralized, then nationalization might be a less satisfactory result than socialization.
1. Most democrats do not believe that central governments should make decisions about what happens in a particular region or locality except in so far as those decisions have a large effect on the lives of people beyond those living in that place.
1. And that aim can be met by central governments regulating what cities and towns (or business enterprises) can do, as they do today.
2. If we take the analogy between town and company seriously, nationalization would of a company would be similar to national rule over local cities and towns.
3. Still, the objection of capitalists to nationalization—that their property rights are violated—would fall to the same arguments about the political character of the governance of work. Or at least, they would fall to the same arguments, provided that the previous owners are financially compensated for their property.
4. Questions about and Criticisms of Worker’s Control
1. Criticisms of Worker’s Control
1. Worker’s control is a strange and uncommon idea.
1. So was individual rights and democratic government during feudal times.
2. Perhaps there is some good grounds to reject the analogy between towns and companies. I must admit I do not see them, however.
3. The analogy between towns and companies shows that both should be governed in the same way. One could argue, however, that oligarchic rule is justified in both towns and companies.
1. On the Lockean principles, democracy certainly would be required in a town that taxes people.
2. If markets are a satisfactory replacement for democracy in towns, why not for democracy in countries? Can dictators deny the claims of democrats if they let citizens enter leave their country and go to another country run by another dictator?
4. Worker’s control might not create enough space for the creativity and individuality of ambitious people.
1. In order to carry out their ambitions, such people might need to have some control over the lives of other people. They get this control in the business world, without having the dangerous power to limit our liberty to leave their control by changing jobs.
1. Space for such control can be found under a systems of workers control, however.
1. If we exclude founders of companies from the requirement to institute worker’s control.
1. Hired managers typically do not have the same degree of ambition as those who found new companies
2. In small business which are not subject to the rules instituting worker’s control
3. In seeking managerial positions in worker’s controlled companies. Just as ambitious people seek control over others in political life.
2. Questions can be raised about whether there are enough such spaces, however.
2. Lack of such space for ambitious people has two potential disadvantages.
1. We all lose the benefits of their innovative and creative ideas.
2. The Lockean diversion of the ambitious from politics to economics is undermined.
2. Questions about worker’s control
1. How would democratic control of the workplace be carried out?
1. Workers’ control can have many forms. There will undoubtedly might be different implementations of worker’s control, that fit the different desires, goals and working conditions in different companies.
2. Worker’s control can be implemented at different levels of a company.
1. Some forms of what I call work process democracy can be found in many capitalist businesses, which grant teams of workers the right to reorganize the work process to make it both more enjoyable or more efficient.
2. What I call workplace democracy involves workers in planning both the spatial and aesthetic qualities of work places and the various services that often go along with work. Workplace democracy gives workers the right to democratically decide about what kinds of benefits they would like at work (e.g. health benefits, day care benefits, recreation facilities and so forth).
3. Corporate democracy gives workers a say in the basic business strategy of a corporation from decisions about growth and finances to decisions about sales and marketing.
4. Each of these three types of worker’s control can be instituted independently of the others. There is some tendency for them to go together, however. Corporate democracy is not necessary for workprocess and workplace democracy. But, given the reluctance of many managers to allow workers independence, some element of corporate democracy is sometimes necessary to support workplace and workprocess democracy. On the other hand, workers seem to need some direct experience in lower level decisionmaking about the workprocess or in the workplace before they become interested and knowledgeable about the corporation as a whole.
3. Managers can elected in a different ways
1. Under workprocess democracy, workers may elect their foreman or other local bosses. Or they may elect a board that sets policy for the workprocess and chooses the foreman.
2. Under workplace democracy, worker’s elect a board that governs a particular factory or office and that chooses the director of that workplace.
3. Under corporate democracy, workers elect the board of directors for a whole corporation, which chooses the top managers.
4. Worker’s control can give more or less independence to individual managers.
1. Managers might be hired (that is, elected) for long terms and given considerable authority to make decisions.
2. Or they might be tightly constrained by the elected board.
2. How would worker’s control alleviate alienation?
1. Workers would have the means to change the nature of jobs or rotate particularly awful jobs.
2. Workers could adopt new technologies that change the nature of work while reducing alimentation.
1. They would not be motivated to de-skill workers, as private owners are.
3. Workers would find that taking part in the decision-making in their companies would be stimulating and challenging.
3. What would motivate workers to work hard under a system of worker’s control?
1. The same thing that motivates them today, since some hierarchy would continue to exist that evaluated the performance of individual workers. (Remember that democracy is not anarchy.)
1. Higher wages and bonuses if they are good workers
2. Fear of unemployment.
2. Under a system of worker’s control, workers might also be motivated by their sense of shared ownership of the company. This might dramatically increase morale at work.
1. There is a great deal of evidence that shows that workers’ controlled corporations are, on average, more productive and efficient than privately owned businesses. Greater morale might be one reason for this.
4. Why would workers be concerned about the long term prospects of their company?
1. Even when all three types of workers’ control is found, the worker’s controlled business enterprise still operates in the marketplace. It must raise capital by selling bonds and preferred stock or by getting loans from banks. It buys and sells both capital goods and its own products. Thus the workers’ controlled business is both independent of the government and constrained by the market, like any privately owned business. It must remain profitable in order to pay dividends and pay back bonds and thus in order to borrow more money for expansion.
2. Why wouldn’t workers just look to their short term interest, raise their wages and then find new work when the company went bankrupt.
1. Workers typically stay at one place of work for a long time, in part because job skills are not easily transferred from one position to another. (At many companies, lower level workers stay longer than top managers.)
1. Thus they have a long term interest in the health of their business.
2. The are more likely to recognize this interest if they can trust that the management of the company does not have interests that conflicts with their own.
2. Bonus systems can be structured to give workers an interest in the long term financial well being of their company.
3. Pride.
5. Can we trust workers to elect good members of the board of directors and good managers? Will these people make good decisions?
1. We trust workers to vote for President and members of Congress. If democracy is a satisfactory way of making decisions about nuclear weapons and taxes, why would it be an ineffective way of making decisions about making cars?
5. Questions about Criticisms of Nationalization. Nationalization of business enterprises is no long a very attractive ideal, even among leftists. It might be useful to review some of the reasons for the decline of this ideal. (Since we only briefly discussed this material in class, I do not expect anyone to draw upon it in your examination answers. I include it here for those students who are interested in pursuing these issues. Much of the following material is drawn from my book manuscript, Reason, The Good and Rights.
1. There is very little reason to think well of nationalization when it is combined with command or authoritative planning as a means of economic coordination.
1. It seems overwhelmingly clear that command economies cannot effectively manage the problem of economic coordination in an advanced, high technology economy.
1. There is simply too many businesses that need and produce too many kinds of capital goods for any government agency to be effective in economic planning.
2. So nationalization, if it takes place at all, will only be useful when is combined with a market economy. Nationalized business enterprises, in other words, will have to compete with other businesses in the market place.
2. One possible advantage of nationalization is that it reduces the structural political inequality in a capitalist political community.
1. Nationalization gives politicians a means to directly raise investment, without offering inducements to businesses.
2. But there are problems with this solution.
1. Government directed business investment may not be economically efficient business investment.
2. Governments cannot direct all business investment without nationalizing most large corporations. But, as I mention below (D), there are reasons to be dubious about the advisability of such widespread nationalization.
3. And alternative solutions to structural inequality exist.
1. Governments can stimulate investment without subsidizing the wealth by lowering interest rates.
1. To do this in times of prosperity, governments should running budget surpluses
2. They can do this, and create more equality, by instituting progressive taxation of the rich.
3. One problem with nationalization, from a Marxist point of view, is that it does not seem to be a useful solution to the problem of alienation.
1. Nationalized business enterprises are, to some extent, likely to be more open to the concerns of workers than privately owned business enterprises.
1. Publicly owned companies may be willing to forgo some profits in order to improve the quality of work.
2. Workers have the opportunity to vote for the politicians who can ultimately exercise some control over the heads of these companies.
1. Workers can presumably enlist politicians to serve as ombudsmen when the companies do things that are contrary to their interests, just as citizens do when their services.
2. But,
1. Nationalization seems to be a very indirect way of giving workers a say in the governance of their productive activity.
2. Publicly owned business enterprises, like all other public bureaucracies, will undoubtedly have some, and perhaps a great deal, of independnece from top political officials, who have other things to be concerned about.
1. And when they are concerned about these enterprises, public officials are likely to be more worried about how well these companies serve consumers than about they serve their workers.
4. There are many other problems with the nationalization of business enterprises that are plausible to all shades of political opinions, leftists, centrists and rightists. Even among many leftists today, good reasons for preserving the independence of business enterprises are widely accepted. Click here for an overview of these problems.