In this posting, I am concerned about the role of capitalists in human progress, and the ‘goddam’ libertarian view that the social order dominated by the bourgeoisie (capitalists) and their virtues or ‘middle class values’ was good, is good and will be good for humankind.
Today’s academies of business and economics have publications on the rise about uplifting the humankind. Business intellectuals have got emerging stories of humanistic business. Parallelly, economists have got or want stories of humanistic economics. Are these stories ushering in a new development in business and economics that is empowering and beneficial to all people in the world? Or, are they a strategic production on the part of the academics to make their own careers flourish from publications about uplifting (Weissberg, 1999)? This is my modest concern here.
Take the business academy.
Colin Mayer (2018) of the Said Business School, hailed as the John Maynard Keynes of the business world, has made the case for business as a steward of society. Rebecca Henderson (2020) of the Harvard Business School too has made the case for reformed capitalism in order to avoid rampant inequality and climate catastrophe. Similarly, the Business of Humanity Project of Camillus et al. (2017) at the Joseph M. Katz Graduate School of Business of the University of Pittsburgh has taken up the task of documenting what capitalists are doing in relation to three questions—What is the humaneness in managerial decision making?; How is the dysfunctionality of accounting profits overcome as a guide for managerial decision making when facing crises, innovating strategy and confronting wicked problems?; and How is humankind at the bottom of the pyramid with low per capita incomes recognised in innovative strategies?
These stories have emerged in the backdrop of overwhelming documentation about dirty businesses and corporate misconduct all around since long.
Also, take the ‘brahminical’ economics academy.
In the dominant context of neoclassical or mainstream economics as an ethically bankrupt subject (Radford, 2011) and studying it as a sheer waste of time (Radford, 2017), Vernon Smith and Bart Wilson (2019) have made the case for “Humanomics”–as a science and rhetoric of human beings for economic betterment–by marrying Adam Smith’s Wealth of Nations with his Theory of Moral Sentiments. They have nicely argued that Adam Smith’s sight of the full range of human feeling, thinking and knowing in everyday life can re-humanize twenty-first century economics by undergirding it with sentiments, fellow feeling, and a sense of propriety—the stuff of which human relationships are built. Adam Smith, the pioneer of political economy and a key figure during the Scottish Enlightenment, had indeed argued that “…to feel much for others and little for ourselves, that to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature.” So, what is required is the union of the ethically persuasive consequence of Humanities and the nefarious positivism of Modern Economics based on data or mathematical precision and infatuation.
This view is put forward against the question as to whether capitalism can ever be ethical in the dominant backdrop of sympathetic moral sentiments of the capitalists towards the labouring people as also natural environment conspicuous by their absence throughout the history of capitalism up to the present times.
Dierdre McCloskey, who has ably dealt with economics as social history, has also professed, but since long and much before the above two economists, that the bourgeoisie have changed the world in a good way (Allemang, 2010). In so doing, she has made the case for ‘rhetorical economics’ as equivalent to humanomics by combining humanities with economics. She has argued that the ideas of liberalism—liberty and dignity–were the real backbone of the subsequent institutional changes, technological discoveries and capital accumulation possible for the “Great Enrichment” of the globe over the last 250 years. Modern economic growth could materialise due to the unhindered efforts of the virtuous bourgeoisie (capitalists) that began in the Netherlands and England in the 18th century. McCloskey believes that capitalism has ethically improved its participants as well as its bystanders while materially enriching its participants and even its critics. She has celebrated the bourgeois virtues in terms of faith, hope, charity, justice, temperance, fortitude, prudence, solidarity and altruistic hedonism. These are the classical and Christian virtues which apply to all humanity. Without the virtuous bourgeoisie, humanity could not have arrived at modernity and modernization, and consequently prosperity with equality and dignity. Modernity is a condition of social existence that is significantly different to all past forms of human experience while modernization is the transitional process of moving from traditional or primitive communities to modern societies. Economists, therefore, as McCloskey emphasizes, should look beyond strictly material factors like infrastructure, investment, laws and regulations when accounting for economic growth and particularly when discussing modernity as the great turning point in human history.
However, there are two grave problems with McCloskey’s rabid libertarian discourse. First, she cannot frankly make us understand why anti-capitalist intellectuals have emerged, especially ever since 1845 when the most influential book in the entire socialist tradition came out, authored by the bourgeois Friedrich Engels—The Condition of the Working Class in England. Secondly, she is silent about how neoliberalism as the pervasive rationality of our recent times has ravaged the society by acute polarisation and cannibalisation of labour and nature, perhaps like never before. How is it that the long-standing and strongly entrenched bourgeois virtues have suddenly disappeared so as to result in savage capitalism?
Neoliberalism (Seybold and Chihara eds. 2019) applies to a range of referents—as the transformations capital underwent at the turning point of the 1970s and 1980s; as an economic dogma concerned with the cultivation of capitalist markets and competition; as a philosophy of radical self-interest that emerges out of classical liberalism; as protocols for governmental policy including deregulation and privatisation of industry and the weakening of organised labour; as the proliferation of contingent and insecure labour conditions via the subcontracting and outsourcing of labour contracts, freelancing and zero-hour arrangements, and as the current stage in the history of capitalist accumulation.
Neoliberalism, taken on all these lines, has seen the evanescence of any sympathetic and empathetic moral sentiments of the power elite towards ordinary people and natural environment.
My own labour relations research (Bose, 2012) has revealed the capitalists as opaque, secretive and outright hostile towards research on their internal arrangements and external affairs. I had addressed the following question.
Faced with competition, what do capitalists do?
This contemporary question of mine is very much like the questions posed for historical enquiry by the economist Stephen Marglin–what do bosses do?—and the historian David Landes—what do bosses really do?—respectively, with differences of opinion between the two scholars. Marglin (1974, 1975) had focussed on the politics of production via capitalist hierarchy controlling production, and Landes (1986), on achievement of cost efficiency by division of labour and technological momentum of machinery and the factory system.
According to the dichotomous competitive strategy literature, capitalists have a choice to adopt either adaptive strategy or innovative strategy to cope with competition or even beat it.
Adaptive strategy is the defensive strategy. It aims to cut costs, especially labour costs using existing techniques. On the other hand, the innovative strategy seeks to reduce costs or improve quality or both by increasing efficiency via technological and organisational innovations.
The adaptive strategy is a zero-sum game. It can imply not only straight forward cost cutting (wage and non-wage labour costs) but also rationalization of production in various ways. The various measures to do these could be, for example, (1) concession bargaining, i.e. the temporary or permanent reduction of wages, fringe benefits or other items of worker remuneration, on the understanding that this could save a firm or plant in difficulties; (2) extending operational hours or arranging for flexible working hours more in line with production needs; (3) increasing workloads (i.e. making workers work harder, unaccompanied by effort-saving technologies); (4) changes to labour legislation in terms of legal exemption from labour protection regulation; (5) relocating production to areas of lower labour costs or finding cheaper outsourcing of more expensive in-house production; (6) using and increasing different kinds of non-standard/atypical/precarious forms of employment. These measures downgrade labour standards: “poor wages and worsening terms of employment hinder the firm from acquiring and keeping the staff required for efficiency and flexibility; they rarely induce the firm to ‘invest’ in its labour force to make it more productive. So, in the absence of better performance and alternative possibilities, further cost-cutting may become inevitable, resulting in a vicious downward spiral.” In this approach which consists of seeking competitiveness through low labour cost and a deregulated labour market environment, institutions and rules aimed at regulating competition are seen as mere straightjackets, and should be kept to a minimum!
By contrast, the innovative strategy is a win-win or positive sum game. It is constructive competition, leading to economic gains due to efficiency enhancement. Technological or organisational innovation can make possible workforce requalification, ‘worker empowerment’, broadening of job content, etc. along with improvement of wages and other rewards, safeguarding of workers’ rights, providing adequate standards of social protection, etc.
Note that the perception of labour as a factor of industrial development and restructuring varies sharply between the two above said competitive strategies. There are two kinds of labour flexibility. The labour flexibility associated with the innovative strategy is “active versatility” or “offensive flexibility” which refers to deriving competitive advantage on the basis of a skilled and polyvalent labour force. By contrast, “passive pliability” or “defensive flexibility” of the adaptive strategy refers to passing the flexibility requirements of the market to the workforce in a coercive manner through expanding and retrenching production volume, forcing wage concessions, making flexible use of garbage labour contracts in terms of short-time and casual employment, etc. Scholars of innovative strategy have further clarified that labour flexibility associated with technological and organisational innovations “does not mean a job for life, but it does mean freedom from fear of arbitrary dismissal, some shelter against short-term market forces, some minimum level of justified trust between workers and employers even where there are also conflicts: a new moral economy.” That is, the flexibility of innovation has some kind of job security (not in the sense of job for life or even a job beyond the grave if the job could be passed onto one’s child) in exchange for multi-tasking and/or multi-skilling. To put it differently, there will definitely be functionally flexible open-ended employment contracts, which signify decency.
In light of this theoretical knowledge, I had set out to investigate, like a few other labour researchers, how the capitalists have actually dealt with competition and their employees in the ‘commodity chains’ of real world of capitalism. The dominant trend or the only trend in India as also abroad, especially since the 1990s, has been documented to be definitively towards the adaptive strategy or in a few cases the organisational and/or technological innovative strategy wedded to the degrading labour flexibility of the adaptive strategy. Neoliberalism has only more than amply demonstrated this finding about ‘industrial terrorism’ against labour in tandem with pro-capitalist public policy on the part of the governments, which are devoid of ethical sensitivity for broad-based prosperity. Life remains unfair for most working people.
In light of this predominant reality, capitalists need to frankly answer the following questions:
1. Why have you not adopted the win-win, ideal, equality and dignity enhancing innovation strategy to beat competition?
2. If you have adopted technological or organisational innovation, how have you made it compatible with the numerical and precarious labour flexibility of adaptive strategy?
If they do not candidly answer these questions, which is most likely the case, then the case for business and economics by bourgeois goodness will implode. The view that under capitalism, wealthy elites pursue or want to pursue unmitigated or unregulated self-interest in order to prey like vampires upon those in lower socioeconomic positions, will have to be indisputably upheld. The experiential observation of the harsh ground-realities by the numerous labour researchers will be vindicated. This is not all. All the trending fashionable talk now about “the ethical capitalist subjects” who are personally responsible for making their society, workplace and even their lives ‘more ethical’ in the face of an immoral but seemingly permanent free market and the despotic pressures of a frenetic or savage global business environment, will amount to be nothing but hogwash (Seybold and Chihara eds. 2019).
Let capitalists, and their managers, historians, and economists, therefore, contest this solid conclusion against them. After all, they must not back out from showing the earnest and intelligent attempt to contribute to the conversations of the ‘business of humanity’ or human-centred capitalism, just like the way Dierdre McCloskey rightly wants conversations of ‘humanomics’ to replace the lifeless, robotic, moronic, apolitical, philistine, positivistic economics.
Annavajhula J.C. Bose, PhD
Department of Economics, SRCC
References
Annavajhula J.C. Bose. 2012. https://gurgaonworkersnews.files.wordpress.com/2012/09/full-thesis-in-pdf.pdf
Colin Mayer. 2018. Prosperity: Better Business Makes the Greater Good. Oxford University Press.
David Landes. 1986. What Do Bosses Really Do?, in The Journal of Economic History. 46 (3).
John Allemang. 2010. How the Bourgeoisie Changed the World–in a Good Way. The Globe and Mail. November 26.
John C. Camillus et al. 2017. The Business of Humanity: Strategic Management in the Era of Globalization, Innovation and Shared Value. Routledge.
Matt Seybold and Michelle Chihara. 2019. Edited. The Routledge Companion to Literature and Economics. Routledge.
Peter Radford. 2011. Ethics in Economics: Where is It?, in Real World Economics Review. Issue 58. December.
Peter Radford. 2017. Economics is a Waste of Time. Real World Economics Review Blog. February 15.
Rebecca Henderson. 2020. Reimagining Capitalism in a World on Fire. Penguin.
Robert Weissberg. 1999. The Politics of Empowerment. Praeger Publishing Inc.
Stephen Marglin. 1974 and 1975. What Do Bosses Do? The Origins and Functions of Hierarchy in Capitalist Production: Part 1 and Part 2. The Review of Radical Political Economics. 6 (2) and 7 (1)
Vernon Smith and Bart Wilson. 2019. Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century. Chapman University Digital Commons.
