Way to Miss the Point

Brian Doherty, in reviewing Michael Moore’s “Capitalism:  A Love Story,” makes this telling comment:

“He loses the whole game when he asks a woman from the factory why the workers don’t form a co-op and run it themselves. They don’t have the money, she explains; they aren’t capitalists. That’s a benefit the wealthy provide to the working man that Moore won’t acknowledge.”

I wouldn’t be surprised if Doherty thinks Moore is stupid.  But surely even he doesn’t think Moore is so  stupid as to be unaware that some people have money and others don’t, or that people engaged in wage labor most likely do so because they don’t have as much money as the people employing them.  As Basil Fawlty would say, I’ll take the bleeding obvious for $500, Alec.

A major part of Moore’s critique of corporate capitalism hinges on the reasons that some people have so much money, and others have to work for them.  I’m incredulous that Doherty could have sat through the movie without noticing that the concentration of wealth and polarization of income was an issue in its own right.  Moore’s critique is muddled, sure enough.  But the question itself is entirely legitimate, and for Doherty to treat it as if it doesn’t exist is just dumb.

Doherty regurgitates, as if he’d only just thought of it himself for the first time today, one of the most complacent, one of the most unreflective—one of the dumbest—knee-jerk apologetics out there:  “Without rich capitalists, who would employ people?”

An analogue of Doherty eight hundred years ago might have asked, smugly:  “But without feudal landlords providing land to work on, how would the peasants be able to feed themselves?”

A parallel Doherty in the old Soviet system, the same sort of Hegelian enthusiast for the rationality of the real in the context of a state planned economy, might have similarly taunted disgruntled Soviet workers on their dependence on state industrial ministries to “provide” them with the “benefit” of employment.

I can imagine a parallel Doherty crowing, similarly, in response to antebellum slaves’ admission that they lacked the capital to buy out the plantation and run it themselves.  This is not to say, by any means, that the cases are parallel, or that modern workers are under the same constraints as slaves.  The point is that to take labor’s dependence on capital as a legitimization of capital’s position, without first examining the brute facts of the background power relationship, is just plain stupid.

In all these cases, the obvious question—never addressed by any of the class systems’ analogues of Doherty—is why.  Why is the feudal landlord, the state manager, the corporation, in a position to provide the only available jobs?  Why do those working for such employers lack the capital to employ themselves?

Doherty’s argument—if you can call it that—presumes three things as just given, part of the natural state of affairs:  1) the concentration of capital in the hands of a few absentee investors, 2) the lack of same on the workers’ part, and 3) a production model that requires massive capital investment in product-specific assets.

That the working classes might have been systematically robbed by Enclosures and other land expropriations, that the state might have barred access to vacant and unimproved land, that the state might have raised entry barriers to the aggregation of capital outside the existing finance system—that the state has systematically impeded the bargaining power of labor and shifted income upward—never occurs to Doherty.  That the state has systematically promoted a particular industrial model at the expense of others, and thus artificially raised the capital outlays needed to enter the market, likewise never occurs  to him.

Aside from all the rest that’s wrong with Doherty’s “argument,” it assumes an archaic finance model that really applies only to startups:  a manufacturing corporation gets its “capital” from sales of stock and loans.  In fact, of course, the overwhelming majority of most large corporations’ investments are funded by retained earnings.  And the “capitalists” who actually make the decisions are managers pretending to represent the shareholders when they’re really just a self-perpetuating oligarchy in control of a mass of capital with (de facto) no real outside owner.

The parallel with the Oskar Lange model of market socialism back in the ’20s (endorsed both by Frederick Taylor and Joseph Schumpeter, by the way) is interesting.  Mises argued that it would be simply playing with markets, because the manager of a market socialist firm wouldn’t be risking money he contributed himself.  But that is, in fact, pretty much the position of corporate management in the West.  They didn’t contribute the capital stock of the corporation; they’re gambling money accumulated at no cost to themselves.  So if they get a multimillion bonus this quarter and then run the company into the ground, they’re not only out nothing themselves, but ahead several million dollars.  Hence the perverse incentives to go for big wins, with no regard to the possible downside.  Hence the perverse incentives to game the quarterly numbers, even at the expense of gutting long-term productivity.   Exactly the kind of irrational allocation of capital that Mises said Lange’s market socialism would lead to, in other words.

Doherty, in praising the corporation for giving the workers crutches for their broken legs, shouldn’t forget the extent to which the system depends on—and profits from—the systematic breaking of legs.

Anarchy and Democracy
Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory