Push them to the left

According to a new book, today it is the managers, not the capitalists, who rule. Michael Roberts begs to differ

The capitalist mode of production is coming to an end. But it is not being replaced by socialism. Instead, there is a new mode of production, based on a managerial class that has been forming in the last hundred years.

This managerial class does not exploit the working class for surplus value and its accumulation as capital. Instead it uses power and control, which is exercised through the management of transnationals and finance. The working class will not be the “gravediggers” of capitalism, as Marx expected. The ‘popular classes’ instead must press the managerial class to be progressive and modern; and eliminate the vestiges of the capitalist class in order to develop a new meritocratic society.

Well, that is the thesis of a new book - Managerial capitalism,1 by Gérard Duménil and Dominique Lévy, two longstanding and eminent French Marxist economists.

I participated in the launch of the book in London last week. At the launch, Duménil argued that the capitalist class (ie, those who own the means of production) has been replaced by managers who control the big companies and take all the decisions that matter. The capitalist class now is like the fading old feudal class in the early 19th century when Marx came onto the scene - the capitalist class took over and the feudal lords eventually converted themselves into capitalists as well. Similarly, argues Duménil, the managerial class has taken over and the traditional capitalists are increasingly converting themselves into that class.

Marx was well aware of the separation of functions in capitalism between the owner of capital and the managers of corporate capital. As he put it in Capital volume 3,

Joint-stock companies in general (developed with the credit system) have the tendency to separate this function of managerial work more and more from the possession of capital, whether it is owned or borrowed ... But, since, on the one hand, the functioning capitalist confronts the mere owner of capital, the money capitalist, and with the development of credit this money capital itself assumes a social character, being concentrated in banks and loaned out by these, no longer by its direct proprietors; and, since, on the other hand, the mere manager, who does not possess capital under any title, neither by loan nor in any other way, takes care of all real functions that fall to the functioning capitalist as such, there remains only the functionary, and the capitalist vanishes from the production process as someone superfluous.2

The authors spend some time in their book reminding us that Marx was aware of this division. But Marx did not see this as leading to a new managerial class. The division was merely of appearance. The system had not altered:

producing surplus value - ie, unpaid labour - and in the most economical conditions at that, is completely forgotten in the face of the antithesis that interest accrues to the capitalist even if he does not perform any function as capitalist, but is simply the owner of capital; while profit of enterprise, on the other hand, accrues to the functioning capitalist even if he is not the owner of the capital with which he functions. In the face of the antithetical form of the two parts into which profit and thus surplus value divides, it is forgotten that both are simply parts of surplus value and that such a division can in no way change its nature, its origin and its conditions of existence.3

Out of date

Duménil and Lévy reckon that this view of the relation between outright capitalist families and their managers is out of date. Managers, not capitalist families, now rule. In the book, they back up their thesis with empirical evidence on rising income inequality in the US and other major economies. The top 1% of income earners in the US, who would usually be regarded as part of the capitalist class, now get 80% of their income as salaries from working as managers and top executives, not from capital income (dividends, interest and profit). So these top people are managers, not capitalists. This is why, they argue, we must revise the traditional Marxist view that top managers are merely functionaries of the capitalist class.

But the data could be interpreted in another way. Simon Mohun has done similar empirical work on where the income of the top layers comes from.4 He found that the working class - those who depend on wages alone for their living - still constitute 84% of the working population. Managers constitute the rest, but only 2% can actually live off rent, interest, capital gains and dividends alone - they are the real capitalist class. And that ratio has changed little in 100 years, even if their direct source of income has.

Moreover, this is the group that has gained most during the last 30 years of rising inequality. The income of this capitalist class has risen from about nine times the average income of the working class to 22 times, while managers’ incomes have risen from 2.5 times to 3.5 times workers’ income. So rising inequality is primarily the result of increased exploitation (a rising rate of surplus value) in Marxist terms.

Yes, for the top 1%, since 1980, their ‘labour’ source of income has fluctuated around 60% of total average income (around double what it was in the 1920s). But this top 1% of managers includes investment bankers, corporate lawyers, hedge fund and private equity managers and corporate executives. Moreover, two-thirds of the top 1% are managers only in name, as an increasing proportion of these executive occupations are in so-called ‘closely held businesses’. That means they own their own businesses, but pay wages to themselves as the main source of income. This blurs the distinction between ‘labour’ and non-‘labour’ income. So the top 1%-3%, according to Mohun, are still capitalists, as Marx understood it, even if they pay themselves huge salaries and bonuses.

Moreover, as one study shows,

The incomes of executives, managers, financial professionals and technology professionals who are in the top 0.1% of the income distribution are found to be very sensitive to stock market fluctuations. Most of our evidence points towards a particularly important role for financial market asset prices, shifting of income between the corporate and personal tax bases, and possibly corporate governance and entrepreneurship, in explaining the dramatic rise in top income shares.5

So their labour income depends on capitalist stock markets and financial assets.

As for managers in general, by most definitions, they constitute about 17%-20% of the workforce, but it seems a jump to suggest that these constitute a new managerial class, when they can vary from Jeff Bezos at Amazon to a supervisor in Walmarts:

While managers supervise, most of them are also supervised, and splitting the distribution into working class and non-working class does not address the question of who has to sell their labour-power and who does not. That is, in no way can managers be considered a homogeneous group, because they are fundamentally divided into those who might sell their labour-power but do not have to do so, and those who do sell their labour-power because they have to do so.6

Marxist sociologist Erik Olin Wright looked at the class structure of six advanced capitalist economies and showed that ‘managers’ are a curate’s egg of a group in modern capitalism. By breaking down the skill factors of managers, he reckoned that most are really workers with skills. The working class proper was still over 70% of the labour force. Mohun’s tax calculation method finds that the working class is more like 80%-85%.

In whose interest?

Surely, the real question is: in whose class interest do managers carry out their managerial labour? The very nature of the capitalist economy obliges the managers to manage in the interest of the 1%. Their jobs depend on the decisions of the shareholders, the company share price and its earnings performance, however highly paid they are.

Moreover, as Marx predicted, the main feature of modern capitalism is a growing concentration and centralisation of wealth (not income). And that means wealth held in the means of production and not just household wealth. In 2016, the top 1% of the US population held 40% of total net wealth, while the bottom 80% held just 10%. On the basis of Wright’s class structure analysis, this suggests that the top 1% is a combination of capitalists and expert managers.7 The next 20% by wealth consists of the remaining capitalists and the top two-thirds of the managers. The bottom 80% by wealth consists of the bottom third of the managers and the entire working class (wage workers and supervisors).

Modern capitalism has developed into a huge network of interlocking companies with cross-shareholdings. Three systems theorists at the Swiss Federal Institute of Technology in Zurich developed a database listing 37 million companies and investors worldwide and analysed all 43,060 transnational corporations and share ownerships linking them. They discovered that a dominant core of 147 firms through interlocking stakes in others together control 40% of the wealth in the network. A total of 737 companies control 80% of it all. This is the concentrated power of capital.8

At the book launch, Gérard Duménil argued that this concentration of ownership among a small number of global companies, particularly banks, actually proved his thesis. It was managers and finance directors who ran these companies and made decisions on mergers, etc, while the shareholders followed like sheep. This was proof of ‘managerial capitalism’. Instead, I would argue that it was proof that, since Marx wrote about joint stock companies 150 years ago, the capitalist mode of production has dominated even more over investment, employment and production globally.

One of the inherent features of the capitalist mode of production is that it generates crises of production, investment and employment at regular and recurring intervals. This is the consequence of production for profit by individual private owners on a market which runs in contradiction to the needs of society. This is a unique feature of capitalism. Has this disappeared? Was Marx not proved right in expecting crises to become more global and damaging?

Duménil seemed to be suggesting that Marx was wrong about growing crises. At the launch he claimed that the recent great recession had avoided a major depression because of ‘managerialism’. The crisis had been managed. Well, the evidence is surely to the contrary - as I have argued at length on this blog and in my book, The long depression.

Duménil, however, was insistent that those of us who stick to Marx’s old analysis and predictions needed to break with dogma and recognise the new mode of production that was upon us. The political strategy that flowed from this was for the ‘popular classes’ (working classes) to reinvigorate the class struggle - but not for the replacement of capitalism with socialism. That was not going to happen. Instead the aim must be to push the ruling (progressive?) managerial class to the left to introduce pro-labour reforms and isolate the small and fading capitalist class.

Well, if the working class is still 80% of the adult population in most advanced economies (let alone elsewhere) and capital is even more concentrated and centralised than ever before, why not overthrow ‘managerial capitalism’ too? l



1. www.plutobooks.com/9780745337531/managerial-capitalism.

2. K Marx Capital Vol 3, Moscow 1967, p512.

3. Ibid p504.

4. See https://thenextrecession.files.wordpress.com/2018/04/classstructure1918to2011wmf.pdf.

5. https://web.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf.

6. Mohun - https://thenextrecession.files.wordpress.com/2018/04/classstructure1918to2011wmf.pdf.

7. See http://isj.org.uk/gravedigger-thesis.

8. https://thenextrecession.files.wordpress.com/2013/07/147-control.pdf.