Capitalism and the Social Relationship

An Organizational Perspective

H. Kazeroony, A. Stachowicz-Stanusch, H. Kazeroony, A. Stachowicz-Stanusch

• Publisher: Palgrave Macmillan
• Year: 2015
• ISBN:
  9781137325709
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

The book examines the changing external environment of organizations. This book explores the contradictions within the global capitalist system and their consequences to assess and find ways in creating new knowledge for managers/leaders to reorient themselves in appropriate restructuring of organizations to better serve their stakeholders.

Part I

Capitalism: The Dialectical Contradictions Paving the Way

1

Capitalism and the Social Relationship: A Contextual Overview

Hamid Kazeroony

Introduction

Chapter 1 sets the stage for the way this book examines capitalism and its exploration of the social, political, and economic context of individuals’ and firms’ place within the societal setting. In this chapter, we provide the methodological orientation of our compilation and examination of the research addressing the theme Capitalism and the Social Relationship: An Organizational Perspective. We will also examine the nature of capitalism’s emergence as a global system and its current state, which impacts on the way organizations operate. Additionally, we will explore the inherent contradictions in the global capitalist system, created by outsourcing and offshoring, which have led to domestic imbalances for some countries, displacing individuals, and changing organizations. Finally, we will examine how the global capitalist system, as viewed by different political perspectives, addresses and resolves its inadequacies and how organizations are influenced by changes resulting from interactions within the capitalist system.

Methodological lens and framework

We have an objective interest in making sense of the written text in addition to appreciating and understanding (Tyson, 1999) the current state of capitalism and its impact on organizational relationships. We moved from immersing ourselves in the process of understanding events in our surroundings to understanding the phenomenon of capitalism, arriving at new tacit knowledge (Moustakas, 1990). We began our inquiry knowing that ‘values – axioms, theories, perspectives, social/cultural norms, and individual norms – are in continuous interaction’ (Lincoln & Guba, 1985, p. 161) and no inquiry can be value-free, since such an approach would mean dogmatic adherence to methods and approaches that ultimately rely on individual moral decision making, rendering such a claim meaningless (Lincoln & Guba, 1985). To delineate social relationships in capitalism and examine its impact on organizations, where ‘standards of objectivity and subjectivity need[ed] to be reconceived’ (Van Manen, 1990), and to discover the unique human connectivity to the prevailing social political-economic system, a phenomenological approach was necessary. Operating beyond the postmodern and deconstructionist era of Fromm and Derrida, the research is faced with constructing ‘the world anew, not just in random ways but in a manner that undermines what opens to question what appears obvious’ (Kincheloe & McLaren, 2005, p. 321). Although capitalism in itself is not new, to the extent that it functions as a living organism, moving dialectically, we approach the inquiry using a phenomenological lens.

Capitalism is an inclusive topic, which may be addressed from different perspectives in unfolding different social, political, and economic issues. In this chapter, we focus on capitalism as a phenomenon that functions as a part of systems (Bertalanffy, 1973; Checkland, 1999) impacting organizational behavior, structure, and dynamics. Therefore, by examining changes in the nature of capitalism we attempt to understand its function in changing organizations.

Capitalism: changes over time

Capitalism, unlike normal sciences as defined by Kuhn (1996, p. 10), has evolved dialectically, creating new dilemmas in social relationships. The new capitalism has created a new thesis and antithesis between the laborer and the owners of capital and has fundamentally transformed the middle class (bourgeoisie) into a new class of intellectual laborers standing in direct opposition to the capitalists, which has given rise to a new antagonism between them. No longer does the capitalist’s profit come from skimming the unpaid wages of laborers but rather, in large part, from draining the intellectual labor of the middle class through technological innovation. This fundamental shift has led to new stage of capitalism, creating a new social relationship which through system interconnectedness (Bertalanffy, 1973) has impacted the way organizations operate. To unpack this assertion, let us take a step back, explain our terms to clarify our points, provide a brief history of views on capitalism and some major ideas associated with it, and examine its current state. Before we define our terms, the reader should keep in mind that the intent of this chapter is not to support or challenge Marx’s perspective or his writings but rather to draw on his work to explain the terms insofar as they elucidate the shared meaning between reader and writer.

What do we mean by what we say?

To make our points with sufficient clarity and to make sure the reader understands the meanings we intend to convey, we should first explain what we mean by the terms used. We will explain what we mean by capital, capitalism, value, surplus value, exchange value, imaginary value, profit, laborer, intellectual laborer, consumption (and productive consumption), dependency, system, dialectics, alienation, and organization.

Capital ‘is money, capital is commodities’ (Marx, 1976, p. 255), where money, the independent form of value, represents the other side of the produced article (the commodities). Capitalist ‘command in the field of production is now as indispensable as that [which] a general should command in the field of battle’ (Marx, 1976, p. 448). Therefore, to carry out his/her commands as a general would and to make sure each objective is met, a capitalist must organizationally rely on a hierarchy of staff and a structure to recruit, train, develop, and position them. In addition, as a general would, a capitalist must possess social support, externally to his/her operation, which can be earned through coercion or an appeal to tie the internal organizational dynamics of production to external conditions and environmental factors such as attitudes, needs, political views, and demand.

Capitalism or the capitalist mode of production ‘is the self-valorization of capital to the greatest extent possible’ (Marx, 1976, p. 449). Capitalism functions as an open system which, through lobbying power, persuasion, coercion, or legal means, sets and maintains at artificially high prices the commodities produced, adding to the surplus value earned. As a military general invades new territories, subjects the invaded territories to taxes, and usurps their assets in the name of war, capitalists retain the surplus value to expand their organizations through competition, purchasing of rival or smaller businesses, and/or positioning themselves financially to influence social and political outcomes, which impacts on their organization externally.

Value is created by two elements, which are the amount of labor input (based on the inverse relationship between the quantity of labor time required to produce an article) and the price paid for the raw material to produce it. However, it is possible, and has been argued, that social goods, including natural and environment resources, used to produce an article also create value in addition to the labor and the raw material (Marx, 1976, p. 131). The challenge in stating the value as such leads to ignoring the law of supply and demand, which can diminish or add to the value of an article produced independently of the inputs stated above (Marx, 1976, p. 133). In this chapter, we define value as the total price of labor, raw material, and the price paid for machinery or capital advances to buy the necessary tools and inventory for the purpose of producing the articles/commodities. When the Commodity-Money-Commodity (C-M-C) circle is completed, the money obtained by the capitalist represents the value of the commodity (Marx, 1976, p. 448) in addition to the value of the unpaid social goods (input to production and delivery of the articles) and the unpaid value of labor. The unearned value attained from the C to M is the surplus value, which in turn can be retained as cash or returned to commodity form. The exchange value is the ‘definite, independent, form, distinct ... independent of its use value, as the pure form of materialized social labor-time, i.e. its price’ (Marx, 1976, p. 955). In The process of circulation of capital: Capital: A critique of political economy (Vol. II), Marx (1907) continues to expound on the notion of value, surplus value, and exchange value within the context of capital circulation as the circle of C-M-C widens and its velocity changes, yet the basic definitions of each term remain the same.

Profit is produced as follows: P = M – (L + R), where P is the profit, M represents the net proceeds from a transaction where the capitalist has converted the exchange value of a commodity into money, L signifies the quantity of labor input and R presents the amount and price of raw material used to make the article. In this equation, always, M > (L + R), because when s/he accounts for M, the capitalist does not pay for the surplus value which may have been generated by the unpaid portion of labor effort, unpaid social goods when delivering the products, using public roads, etc., and taking advantage of the speculation. Imaginary value (IM) can be calculated as IM = P – [(L + R) + T + DE + C] where taxes (T) account for the social goods as an input into the commodity sold and where distribution expenses (DE) account for all the intellectual labor, administrative processes, related expenses, and cost of capital (C) in production of the commodity.

Laborer or worker (used interchangeably) means the individual who uses his/her force in addition to the required skills to perform a task in producing an article with minimal educational requirements as a precondition for the skills or force used in the activity. For example, a worker who operates on an assembly line, moving an object forward or realigning an object on the line as it moves forward, can accomplish the task with sixth grade learning and minimal intellectual activity (in providing the rationale) for carrying out the task or acquiring the skills and/or reading the instructions. The laborer/worker, by inputting his/her skills and force, helps to convert the raw material into finished articles ready for sale. The laborer offers his/her labor for sale to the capitalist in exchange for payment based on the quantity and quality of work produced.

Consumption is the productive use of commodities by the final individual/commercial venture purchasing the commodity and is not analogous to the sale of commodities (Marx, 1907, pp. 66 & 68). As Marx (1907) examined the nature of accounting for wages to laborers, arguing Adam Smith’s points, one fact remains undisputable: the mutual dependency of laborers and capitalists. Dependency can be defined as the extent to which laborers need capitalists to offer commodities that they must purchase for productive consumption and the extent to which capitalists rely on the supply of laborers to produce the commodities.

A ‘system can be defined as a set of elements standing in inter-relations’ (Bertalanffy, 1973, p. 55). Checkland (1999) classified the use of systems in the social sciences, as is the case in this book, as a soft system, where the interrelations between elements are somewhat vague and the degree of their influence is less determined, yet the system is a coherent whole, functioning organically.

Dialectics ‘maintains that the world is an endless process of movement, regeneration, the demise of the old and the birth of the new ... the internal contradictions inherent in the objects and phenomena as the source of motion and development’ (Afanasyev, 1987, p. 11). Dialectical materialism, as explained by Afanasyev (1987):

... studies general laws regulating all spheres of reality ... inorganic and organic objects, the phenomena of social life and consciousness develop on the basis of the law of unity and conflict of opposites, the law of the passage of quantitative into qualitative changes, and the law of negation of negation. (p. 13)

Dialectical materialism is embedded in Hegelian dialectical idealism, where being comes from ‘nothing’ and manifests itself as something, as was elaborated further by Heidegger. Where Hegel saw the conversion of nothing into something or the reflection of the former in the latter, Marx saw the reflection in existential translation of reflection of labor input into the production of commodity (Gadamer, 1976).

As workers engage in the production of commodities and services, they are connected to them insofar as their labor (physical or intellectual) has been input into them. Once the product/service is produced, they are removed from it and its value is determined by the exchange of money independent from the workers, transferring the rights to the owners of capital who retain the right for disposition and determination of the value and/or the surplus value as they deem appropriate. Let us consider two cases to illustrate the point. A worker in car manufacturing may input $100 worth of his/her labor into making a car, and collectively a total of $1000 is input into the production of the car. Let us further assume that the car used $500 worth of raw material. In this case, once the car’s production is complete, none of the workers own any part of or have any claim to the car produced. Therefore, their labor is disassociated from the car and their efforts are alienated from the commodity produced; and if workers intend to buy the car collectively, they must pay a sum surpassing the total amount of raw material and labor input ($500+$1000). Let us now consider a worker in the production of intellectual work. Let us suppose the worker provides his/her input in the production of a marketing campaign for the amount of $1000. Once the production of the campaign is complete, the worker is removed from the service and has no right to it and the owners of the capital/agency take possession and sell the campaign at the price determined by them, above the amount of intellectual labor input. Therefore, again, the worker is alienated from the production of his/her own work without any rights to it. The point where the worker becomes disassociated from the product/service is where the alienation takes place.

Organization ‘designates the way in which various types of services are continuously combined with each other and non-human means of production’ (Weber, 1964, p. 221).

Changes in the nature of capitalism and organizations

While the nature of alienation remains the same, its propensity and velocity in changing its form, and the extent to which the middle class is subjected to it have changed. As Tucker (1972) explained,

Marx’s alienated man is a man who produces ‘under the domination of egoistic need.’ This is the needs ‘outside’ the labor process to which the process is subordinated. The compulsion that transforms free creative self-activity into alienated labor is the compulsion to amass wealth. (pp. 137–138)

Marx and Engels (1981) viewed the bourgeoisie (middle class) as responsible for improving the means of production in order to channel some of the surplus created to itself rather than allowing it to pass to the capitalists. Marx (1993, pp. 163–165) further observed that while the bourgeoisie depended on the status quo to skim from the surplus value produced by the laborer, it became in its turn the subject of exploitation by the capitalist becoming subject of new developments where its own intellectual labor was exploited by the capitalist as it saw the degradation of its social relationships both ...

Table of contents

• Cover
• Title
• Part I Capitalism: The Dialectical Contradictions Paving the Way
• Part II Capitalism and Organizational Inner-working
• Part III Capitalism Triad: The Organization, Its External Stakeholders, and the Capitalist System
• Part IV Capitalism: Its Future and the Consequences for Organizations and Social Relationship
• Index