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Charu: your point is like Marx's point



Charu's view:

> >I don't dispute that corporations represent huge foci of power and that
> >much material development has resulted from the application of this
> >power, I'm saying that we need to take a closer look at
> >1. the social cost of the corporation becoming the seat of most
> >monetary and consequently political power, and
> >2. alternatives we can devise [isn't that what this group about,
> >alternatives?]

Manoj, you have very aptly defined the key foundations: Individual
autonomy and freedom of contract (non-coercion). I think virtually
everything can be fruitfully tested on these criteria as a starting point. 

Reverting to Charu's points: Let me cite from the Communist Manifesto
again (this is what you sent me a long time ago, remember?)

"Modern industry has established the world market, for which the discovery
of America paved the way. This market has given an immense development to
commerce, to navigation, to communication by land. This development has,
in its turn, reacted on the extension of industry; and in proportion as
industry, commerce, navigation, railways extended, in the same proportion
the capitalist class developed, increased its capital, and pushed into the
background every class handed down from the Middle Ages.

"We see, therefore, how the modern capitalist class is itself the product
of a long course of development, of a series of revolutions in the modes
of production and of exchange. 

"Each step in the development of the capitalist class was accompanied by a
corresponding political advance of that class. An oppressed class under
the sway of the feudal nobility, an armed and self-governing association
in the medieval commune; here independent urban republic (as in Italy and
Germany), there taxable "third estate" of the monarchy (as in France),
afterwards, in the period of manufacture proper, serving either the
semi-feudal or the absolute monarchy as a counterpoise against the
nobility, and, in fact, cornerstone of the great monarchies in general,
the capitalist class has at last, since the establishment of Modern
Industry and of the world market, conquered for itself, in the modern
representative State, exclusive political sway. The executive of the
modern State is but a committee for managing the common affairs of the
whole capitalist class. 

"The capitalist class, historically, has played a most revolutionary
part." 

What you are doing, Charu, is very similar to Marx's analysis. At first,
you admit that modern technology has much to do with the growth of
corporate law and organization. Much like Marx singing high praise for the
virtues of capitalism in getting rid of Feudalism. 

Then you claim that the corporate managers have gained virtually
totalitarian power and therefore, in your analysis, have become a "class"
by themselves (Marx included the smaller fish too. You are restraining
yourself to the Bill Gates of the world.). You are concerned about the
"social cost" of this "power," and recommend an alternative structure,
which you do not define. By the way, that is also very similar to what
Marx did. He did not explicitly define what socialism was, and therefore
there have been endless interpretations of socialism including the
interpretations by Fabians, Nazis, Indians, and North Koreans, among
others. 

Marx's concern was also with creating alternative structures. And, without
analyzing the human being, he proceeded to try to do so. Not much though,
was defined (I have read most of Das Capital, and of course, the
Manifesto), very little of empirical analysis was carried out. Much of it
was a "proof" that value arises from labor that is put into the production
of a commodity, a theorem that is so immensely peurile that it has no
place anywhere in economic theory since the 1870s, when Marshall wrote his
book describing basic principles of supply and demand. The other part of
Capital is a railing against the "excesses" of the capitalist system. 

I fully agree with Marx that many workers including children had to put in
very hard labor during the early part of the Industrial Revolution which
he personally witnessed, but remember, the capitalist process led to
higher education, and as I mentioned earlier, Ford could succeed only by
paying his labor MUCH higher than the market wage. This is known as
efficiency wage. Capitalism has a way of paying people HIGHER wages than
they "deserve," in order to reduce turnover, ensure loyalty, and prevent
leakage of trade secrets. 

I do appreciate your concern with inequality, and at first I was very
concerned that CEOs should earn thousands of times more than you or I.
But the truth is that 

	(a) you and I can both become CEOs (if we stop wasting time on IP,
		of course!), i.e., it is not a hereditary right.
	(b) markets punish companies where CEOs "eat" too much profit,
		at the expense of growth of value of the company.
	(c) the market forces have begun to pay CEOs mostly in stocks	
		and stock options. This means that the CEO can get 
		nothing if he does not work hard. Many CEOs draw
		a wage of $0 and get paid entirely in stock options.
		That is a perfect incentive contract. The market
		has automatically designed it. 

So, I'm much less concerned with this great wealth owned by some CEOs and
more concerned with the tremendous wealth generated for workers and for
the economy by efficient corporations. And concerned that these guys have
made America so rich that we are virtually defenceless if America gets
angry with us. My response is - let us counterattack by making India very
rich, and by making our multinational corporations rule the world. 

	[PS: You and I can team up and start a MNC, if you like]

I would suggest that you and I get busy trying to become CEOs and let the
poor Indian socialists rant about inequality. The truth is that it is in
India where there is terrible inequality: honest folk earn peanuts, and
the corrupt earn in crores. And of course, nobody produces anything of
quality since competition is forbidden, and we are scared of Singapore
airlines. The simple thing like an electrical socket that is produced in
India is so dangerous that many poor socialist suckers die each year out
of electric shock. Serve them right for trying to violate the laws of
economics and trying to run an "alternate economy." Let us not make things
worse for these poor suffering folks of our nation by now saying that we
don't want corporate structures, but want something vague instead (not
collective industries, I hope, on the lines of collective farms!). 

Look at the statistics on social mobility in USA and nations like India. 
Virtually every CEO/ rich industralist is a first-generation guy in this
country. In India, mobility is very limited. The rich manage to remain
rich. In the USA, competition forces the rich to become poorer, and many
of the poor become horribly rich. That is the nature of competition.

Reverting to your points. While well taken in terms of the concern for the
'totalitarian' power of the CEOs, I assure you that nobody has so far been
able to determine a better system of organizing capital, men, technology,
and raw materials, to produce the kind of things you and I use on a daily
basis (computers, for instance). Please do start reading some basic
economic textbooks, and some essential material, such as Ronald Coase's
paper I referred to once earlier. You must start seeing things from the
point of view of 'standard' economists. I often notice that what you say,
though always sounding very scholarly (plenty of citations you bring in!),
appears that you have ready very selectively, particularly neo-Marxist
literature. 

Unfortunately, this is like studying the material on biology and physics
that was produced before the Renaissance. Now, that might not be such a
good idea at all given that in the meanwhile a huge body of modern biology
and physics have been discovered. I would recommend,"The Economics of
Life," by Gary Becker, and of course I have mentioned many books on the
way. Read widely, debate with an open mind and clear vision for India, and
then let us decide on how to make India rich and powerful. That is my only
goal at this stage, and I trust, and know, is yours, too.

Let us revert to political campign finance in the next 2 weeks.

Regards!

Sanjeev 

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