The analogy that Marx gives is that of an orchestra and the conductor. The conductor plays no instrument, so in terms of the sound produced, they do not contribute to it, in this way. However, the conductor does contribute to the sound produced in another way. Their function is to take an overall view of the sound produced, and thereby to ensure that the individual musicians, and the different sections of the orchestra work together, so that they are all playing in a synchronised fashion, that one is not playing too loud, compared to another and so on.
If we were to take two orchestras, one with a conductor and one without, then the one without would produce a sound that was more discordant. In terms of its use value, it would be lower. Audiences may not be prepared to consume its product, or would only say a lower price to do so. The value added by the labour of the conductor is then apparent in the higher price that audiences are prepared to pay to hear the orchestra with a conductor.
This is not the same situation as with labour that is necessary but does not create value. The labour involved in selling a commodity, for example, is necessary but adds no value. It represents only a cost that is deducted from the realised value of the commodity. The labour involved in producing a grain silo adds no value to the grain stored in it, but it is necessary labour, because without it, the grain would rot or be eaten by vermin. It is a cost, rather than an addition to value.
But, the labour of supervision itself adds value to the product. As with all value producing labour, the aim is to maximise the value that the labour produces, whilst minimising the value of the labour-power consumed. It is the difference between the two which forms the surplus value. Its on that basis, as Marx describes, that in previous modes of production, this function of labour of supervision was undertaken by slaves.
“The villicus in Cato's time:
"At the head of the estate with slave economy (familia rustica) stands the manager (villicus, derived from villa), who receives and expends, buys and sells, takes instructions from the master, in whose absence he gives orders and metes out punishment.... The manager naturally had more freedom of action than the other slaves; the Magonian books advise that he be permitted to marry, raise children, and have his own funds, and Cato recommends that he be married to the female manager; he alone probably had the prospect of winning his freedom from the master in the event of good behaviour. As for the rest, all formed a common household.... Every slave, including the manager himself, was supplied his necessities at his master's expense at definite intervals and fixed rates, and had to get along on them... The quantity varied in accordance with labour, which is why the manager, for example, whose work was lighter than the other slaves', received a smaller ration than they."; (Mommsen, Römische Geschichte, 2nd ed., 1856, 1, pp. 809-10.)
(Capital III, Chapter 23)
Within a small private capitalist firm, such as a shop or an engineering works, the labour of supervision may be undertaken by the owner of the business, and/or their family. As with any other worker who performs this function of labour of supervision they are entitled to receive, in exchange, wages representing the value of their labour-power. But, in the case of such a small private capital, the different revenues – wages, profit of enterprise, rent and interest – can be all combined and confused.
The private owner of the business may have provided the money-capital, required to start the business. They are then entitled to the average rate of interest on the money-capital loaned. If they used some of this money-capital to buy the land and premises on which the business is situated, they are a landlord, entitled to the market rate of rent. As the owner of the productive-capital, they are entitled to the profit of enterprise, which is left over from the profit, after interest, rent and taxes have been paid.
These are all revenues deriving from the profit produced by the business, and in that respect are quite separate from the wages that the owner pays to themselves for their labour of supervision, and like all wages, forms part of the variable capital of the firm. Yet, in practice, all of these revenues will tend to be paid together to the owner of the business.
But, as Marx points out, the labour of supervision, undertaken by the owner, here is labour like any other. It is what distinguishes the “functioning-capitalist” from the merely money-capitalist, because in relation to the latter, the former is a worker.
“Since the specific social attribute of capital under capitalist production — that of being property commanding the labour-power of another — becomes fixed, so that interest appears as a part of surplus-value produced by capital in this interrelation, the other part of surplus-value — profit of enterprise — must necessarily appear as coming not from capital as such, but from the process of production, separated from its specific social attribute, whose distinct mode of existence is already expressed by the term interest on capital. But the process of production, separated from capital, is simply a labour-process. Therefore, the industrial capitalist, as distinct from the owner of capital, does not appear as operating capital, but rather as a functionary irrespective of capital, or, as a simple agent of the labour-process in general, as a labourer, and indeed as a wage-labourer.”
(ibid)
But, it is this fact, that the functioning-capitalist is a worker, in relation to the merely money-capitalist, which also enables the former to develop solely on the basis of this function, whereas the latter develops solely on the basis of their ownership of loanable money-capital. The former is a functioning-capitalist by definition of their function, as performing the labour of supervision, even though they own no capital. The latter is a capitalist, even though they play no part in the process of the self expansion of value, solely because they are the owner of loanable money-capital.
In a small private capital, the owner of the capital may effectively remove themselves from the role of functioning-capitalist, and hand over the labour of supervision to workers employed as professional managers, just as in the past, slave-owners used slaves to undertake that function.
Its frequently the case that the owner of the capital will retain an office, at the business, and spend some time there to ensure that the managers undertaking this labour of supervision, are themselves undertaking that function effectively. As Marx points out, with the progress of capitalism, and the expansion of public education, capital can increasingly recruit such labour from within the ranks of the working-class. Competition between those workers thereby acts to push down wages for this kind of managerial and administrative labour-power.
In the 1970's I worked in such a position, in a small privately owned textile company, for the phenomenal wages of £11 per week, which was less than I had previously been paid as a cost clerk employed by the local council.
In larger companies, the owners of the money-capital loaned to the company, in return for shares, even remove themselves from this role of monitoring the labour of the functioning-capitalists. They allocate that role to a few of their number prepared to devote a small amount of time to the purpose.
“But with this accumulation the number of rentiers, people who were fed up with the regular tension in business and therefore wanted merely to amuse themselves or to follow a mild pursuit as directors or governors of companies, also rose.”
(Engels Supplement To Capital III)
As Marx put it,
“On the basis of capitalist production a new swindle develops in stock enterprises with respect to wages of management, in that boards of numerous managers or directors are placed above the actual director, for whom supervision and management serve only as a pretext to plunder the stockholders and amass wealth...
The remuneration of the directors of such companies for each weekly meeting is at least one guinea. The proceedings of the Court of Bankruptcy show that these wages of supervision were, as a rule, inversely proportional to the actual supervision performed by these nominal directors.”
(loc.cit.)
In conditions where the capital is still in the form of private property, as above, then, where the functioning-capitalist is a professional manager, the division is again quite clear, as they are paid wages, whereas the owner of the business draws profit of enterprise, rent and interest accordingly. Again, all of these latter payments may be subsumed under one heading, and even though the owner no longer performs any labour of supervision, they may still pay themselves wages. But, in this case, these wages form no part of the firm's variable capital. No value creating labour has been undertaken, and the wages paid are really just a portion of the profit of enterprise wrongly labelled.
A further distinction has to be made between the value creating labour arising from the labour of supervision as described, and the other labour performed by the functioning-capitalist, which arises solely on the basis of the existence of antagonistic class relations. The labour employed simply to discipline and control labour in the factory, is no more productive of value, than is the labour of the police or soldiers used to discipline workers outside the factory when those antagonistic relations break out more openly.
As Marx points out, the situation is clearest in the case of socialised capital, in relation to a co-operative and a joint stock company. In both cases, its clear that the labour of supervision is undertaken by functioning capitalists who are themselves workers paid a wage. They are capitalists only in terms of their function within the labour process, or organising production on a rational and efficient basis, so as to maximise profit. They are the personification of industrial capital. But, they are not capitalists in terms of ownership of capital.
“But since, on the one hand, the mere owner of capital, the money-capitalist, has to face the functioning capitalist, while money-capital itself assumes a social character with the advance of credit, being concentrated in banks and loaned out by them instead of its original owners, and since, on the other hand, the mere manager who has no title whatever to the capital, whether through borrowing it or otherwise, performs all the real functions pertaining to the functioning capitalist as such, only the functionary remains and the capitalist disappears as superfluous from the production process.”
(ibid)
In the case of the co-operative and the stock company, the capital is itself owned by the company as an independent legal entity.
The distinguishing factor in each case is the question of control over this capital, which is different to the ownership of the capital. In the case of privately owned capital, the private capitalist owns and controls the capital. They may combine the role of owner of capital and functioning-capitalist in themselves. But, even where these roles are separated, as owner of the capital, they also exercise control over it, through their employment of professional managers.
In the case, of socialised capital, the capital is owned by the company itself. But, control may not be exercised over it by the company. In the case of a worker-owned co-operative, the workers themselves employ the managers, and the workers exercise control over the capital. The role of the functioning-capitalist here is to undertake the labour of supervision in order to most effectively achieve the goals that the company has set itself. This is why Marxists such as Lenin, Trotsky and Gramsci gave considerable importance to the ideas of scientific management developed by the Taylorists.
That ought to be the case in relation to other types of co-operative, but usually, this is not the case. In a consumer co-op, it is not the producers who combine to produce co-operatively, but consumers who combine in order to purchase goods co-operatively. Consequently, the workers employed by such a co-operative, to undertake the functions of purchase and sale, are excluded from control. It is the consumers who form the membership of such a co-op, who exercise control over its capital, and who employ the functioning-capitalists, to carry out the labour of supervision, to achieve its objectives. Yet, the members of such a co-op are no different, in their relation to the commercial capital, represented by the shops and so on, than are the shareholders of a joint stock company, or indeed the workers who are members of a productive co-operative. They are only providers of money-capital to the socialised capital – the firm – itself.
In a joint stock company, it is again the company which owns the capital, but it is rarely the company which exercises control over it. Instances where that may be the case are, for example, the John Lewis Partnership, and a similar case was with Tower Colliery. In most cases, however, control is exercised by a tiny number of shareholders who own the controlling portion (around 30%) of the company's shares.
This applies whether the joint stock company is a private company, where the shares are owned by a small number of private capitalists, or whether it is a large public limited liability company. In these cases, the controlling shareholders appoint boards of directors to act in their interests. They are the ones who set policy, and who employ the professional managers to act as the functioning capitalists, undertaking the labour of supervision.
A similar situation exists with a state capitalist enterprise, with the only distinction being that it is the state which is the only shareholder. It is then the state which appoints the board of directors of the company, and the corporate executives to represent its interests. It is then they who, in turn, employ the professional managers who act as the functioning capitalists, undertaking the labour of supervision.
In all these cases, the labour of supervision is undertaken by the functioning capitalist. As such they act as the personification of the productive-capital.
“He is its personification as long as it functions, and it functions as long as it is profitably invested in industry or commerce and such operations are undertaken with it through its employer as are prescribed by the branch of industry concerned.”
(ibid)
But it is only in the case of the private capital and the worker owned co-operative that the owner of the capital actually exercises control over it. In all other instances, control has been usurped by external forces – members of a consumer co-op, shareholders, or the state.
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