Written in Hebrew in 1943 under name Y. Tsur
Place of publication not known
Translation by Moshé Machover
Hebrew original at Managerial Revolution, Tony Cliff Archive, Modern Records Centre, University of Warwick, MSS.459/box 10.
Transcribed by Ian H. Birchall
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Monopoly, or finance capitalism is the highest stage in the development of capitalism – in it the contradictions of the present system reach their apex, and, on the other hand, it reveals the ripening of the objective conditions for the establishment of socialism. The bourgeoisie therefore makes many attempts to freeze this transitional period without returning to the capitalism of free competition, and to prevent the advent of a new system. The means proposed for this are ‘planning’, albeit contradictory; regulation of the economy; various kinds of state capitalism.
How is this transitional period reflected in the minds of the proletariat and the bourgeoisie?
To the hidden ‘golden chains’ that bind the proletariat (namely being ‘free’ of means of production) are added overt iron chains: the banning of free movement and organisation and smashing of workers’ organisations. The proletariat, therefore, regards state capitalism – especially in its perfect form, fascism – as a class oppression system directed against it.
Despite its internal contradictions, despite being far from homogeneous, despite its historical short-sightedness, despite all the factors that impel it to internal conflicts and to clashes with its own state – the bourgeoisie regards state capitalism as a necessary stage in the development of capitalism and the protection of profit. Objective reality is reflected in a most distorted form in the minds of the managers of industry, engineers, scientists, etc. On the one hand, they clearly see the potentialities hidden within the forces of production, and the extent to which the capitalist system retards their development. On the other hand, they have an attitude of distrust, of scorn, towards the ‘dumb’ proletariat. They seek an escape from this contradiction in a rationalisation which consciously liberates technology from the limits of social relations, in faith in the inevitable victory of technology and in an enormous enthusiasm for the god of technique, clinging to the theory of technocracy.
But the days of economic high tide following the first world war are over, and with them technocracy has declined. The ‘rule’ of technology cannot be realised solely through the powers of technique. It requires the help of political, social factors.
The engineers, scientists, etc. are faced with two options: to join the proletariat or to join state capitalism, in its perfect form, fascism, which promises a certain advance of military technology, and certain privileges to a social elite from among the intelligentsia, even though it condemns it to proletarianisation and pauperisation.
The attachment of part of the technical intelligentsia to the bourgeoisie has great social, political value. The petit bourgeoisie are dispersed in a multitude of small workshops, tiny shops, minuscule offices. They lack the capacity for cohesion, organisation and initiative; they lack self-confidence; their position is very insecure. Among these intermediate classes there is a ‘new’ stratum which is not amorphous, which does possess the capacity for organisation and initiative – engineers, technicians, etc. At the head of this stratum are the managers of the enterprises in large-scale industries belonging to limited companies which have great influence and an important economic position. Their incorporation in the camp of the bourgeoisie is of great help to the latter, because they can form the backbone, the officer corps of the fascist movement (as was the case to a large extent in Germany).
However, if the engineers, technicians, etc. were to attach themselves to the bourgeoisie, thus consciously defending the capitalist system, they would be incapable of stirring up a popular movement encompassing masses of non-capitalists who suffer from the existence of capitalism. And it is just now, when capitalism is revealed with its tangle of contradictions and its parasitic, anti-popular character, that the bourgeoisie needs a mass movement to support it and a suitable ideology.
Professor James Burnham has given this ideology perfect form in his book The Managerial Revolution. [1]
His theory deserves analysis because it enables some of the fundamental characteristics of the present-day developed capitalist economy to be disclosed.
Who are the managers? Burnham says explicitly that he does not mean engineers, scientists, etc. because these are ‘merely highly skilled workers’ (p.76). He has in mind only the co-ordinators, those who organise the enterprise in its entirety. It will not be the proletariat who will overthrow the bourgeoisie, and it will not be socialism that arises on the ruins of capitalism. Rather, it is the managers who will displace the bourgeoisie and replace it. In the system that they create property will be social, more correctly, the state will own all the means of production, but the lion’s share of the fruits of production will be taken not by the worker–producers, but by the managers.
In order to justify his view Burnham resorts to three arguments: first, the proletariat is incapable of winning power; second, a chasm of conflicting interests lies between the capitalists and the managers; and thirdly, we are currently witnessing the formation of the process whereby capitalism is displaced by ‘the managerial society’.
In support of his first argument, Burnham makes the following claims: a) the rate of increase of the proletariat and particularly its decisive part, the industrial proletariat, compared to the entire population, has been declining since the first world war. b) The majority of unemployed leave the ranks of the proletariat. c) If in Marx’s time it could appear credible that workers could manage enterprises on their own, today technology is too complicated, and managing an economy will require ‘managers’. d) Changes in military technology have given a decisive role to experts (pilots, generals, etc.) and reduced the value of the infantry. Barricades stand no chance at all.
Let us first turn to the third and fourth arguments.
Since Marx’s time there have been great changes in production and military technology, but these have increased rather than decreased the capacity of the proletariat to win a civil war and manage production. While Marx foresaw the disappearance of the fundamental conflict between physical and mental labour, this process is already beginning to come about within the present system. The mechanisation of office work, calculating machines, etc., have brought about the ‘proletarianisation’ of mental labour. Tremendous specialisation has occurred which makes it easier for anyone to acquire skilled knowledge to raise physical labour to the level of work that requires thinking. Due to the introduction of robots, mechanical automata whose supervision requires dealing with dials, labour is released from its monotony and its mental component enhanced. The mass ‘production’ of an intelligentsia, the ‘output’ of a myriad of engineers, scientists, agronomists, etc. every year brings mental labour and the mental labourer closer to physical labour. If ‘in Marx’s time one could think without too much strain of the workers’ taking over the factories and mines and railroads and shipyards, and running them for themselves’ (Burnham, p.49), it is ridiculous to claim that now the difficulties are greater. Was the distance between a worker’s education and that of the factory owner who managed the enterprises smaller in Marx’s time than the present distance between the engineer and the ‘manager’?
Burnham’s claim that military technology has handed decision-making to a handful of commanders and top experts and has reduced the value of ordinary soldiers is by no means new but not at all well founded. Recall how the words of Engels in the introduction to The Civil War in France were distorted by the Rolanists [1*] who claimed that due to the weakness of barricades in confronting a modern army, the social revolution has become an impossibility. Lenin formulated the revolutionary conclusion to this fact: it is necessary to attract the army, or at least part of it, to the people’s side. The function of the barricade is to arouse the army to support the people. Barricades will not disappear, even if they do not serve as the decisive military factor. But to the hackneyed revisionist argument Burnham adds a new one: within the army itself the ordinary soldiers are no longer important; a handful of experts are all-important. However, are not all military experts forced to admit that the expertise, alertness, enthusiasm of the individual soldier, the section leader’s capacity to command, of utmost military importance? Is it still necessary to prove that initiative is not the exclusive prerogative of the general commander – as it was in Frederick the Great’s army – or that of divisional commanders, but belongs to every section of soldiers? Is it any longer necessary to prove that a handful of pilots without the support of a mass land army, and in opposition to such an army, cannot win a victory?
Now let us turn to Burnham’s first two arguments.
Many scholars have preceded Burnham to show Marx’s mistake of forecasting that the intermediate classes would disappear. But whoever peruses Marx’s writings will find that this ‘accusation’ is quite unfounded.
Thus, for example, Marx writes in Theories of Surplus Value:
‘Malthus, “the profound thinker”, has different views. His supreme hope, which he himself describes as more or less utopian, is that the mass of the middle class should grow and that the proletariat (those who work) should constitute a constantly declining proportion (even though it increases absolutely) of the total population. This in fact is the course taken by bourgeois society.’ [2]
The decline in the weight of the intermediate strata does not in any way imply their disappearance, or even a decrease in the number of persons belonging to them. Instead of using simple arithmetic, one should deal in quantities of a more complex kind. The weight of a thousand owners of barber shops, shopkeepers or agents of petty commerce is much smaller than the weight of a thousand industrial workers concentrated in one modern enterprise. Moreover, these intermediate strata do not constitute a class in the full sense of the word; they are in a constant process of proletarianisation. The law of the reserve army of industry applies not only to the worker and clerk, but also to the entire intermediate strata, including petty traders, artisans and peasants.
However, is there no truth in his claim that unemployment weakens the class power of the proletariat? Of course it does. The law of dialectics applies to the proletariat too. If the conflict and contradictions within capitalism have reached a turning point and the critical revolutionary deed is not performed by the proletariat, then the proletariat is doomed to be torn apart by the tangle of contradictions in the system, and the decay begins to spread not only within the system, but even to the class hostile to it. The would-be gravedigger of the system will be buried under its ruins. This dialectical view prevents us from taking a fatalistic attitude to social reality and impels us to undertake ‘revolutionary practical critical activity’.
Having ‘proved’ that the working class is incapable of winning power and managing the economy, Prof. Burnham goes on to show how deep are the conflicts between the managers and the capitalist class.
Marx, who according to Burnham had become out of date even in the nineteenth century, wrote as follows:
‘Compared to the money-capitalist, the industrial capitalist is a labourer, but a labouring capitalist, an exploiter of the labour of others ... The wages of superintendence ... appear completely separated from the profit of the enterprise in the co-operative factories of the labourers as well as in capitalist stock companies ... Stock companies in general ... have a tendency to separate this labour of management as a function more and more from the ownership of capital ... [O]nly the functionary remains and the capitalist disappears from the process of production as a superfluous person.’ [3]
And in the same third volume he writes that formation of stock companies implies:
‘1) An enormous expansion of the scale of production and enterprises, which were impossible for individual capitals ...
‘2) Capital, which rests on a socialised mode of production and presupposes a social concentration of means of production and labour powers, is here directly endowed with the form of social capital ... as distinguished from private capital and its enterprises assume the form of social enterprises as distinguished from individual enterprises. It is the abolition of capital as private property within the boundaries of capitalist production itself.
‘3) Transformation of the actually functioning capitalist into a mere manager, an administrator of other people's capital, and of the owners of capital into mere owners, mere money-capitalists ... [P]rofit is henceforth received only in the form of interest, that is, in the form of a mere compensation of the ownership of capital, which is now separated from its function in the actual process of reproduction, in the same way in which this function, in the person of the manager, is separated from the ownership of capital. The profit now presents itself ... as a mere appropriation of the surplus-labour of others, arising from the transformation of means of production into capital, that is, from its alienation from its actual producer, from its antagonism as another's property opposed to the individuals actually at work in production, from the manager down to the last day-labourer….
‘[T]he function [of management] is separated from the ownership of capital, and labour, of course, is entirely separated from the ownership of means of production and of surplus labour. This result of the highest development of capitalist production is a necessary transition to the reconversion of capital into the property of the producer, no longer as the private property of individual producers, but as the common property of associates, as social property outright.’ [4]
And Marx adds:
‘This is the abolition of the capitalist mode of production within capitalist production itself, a self-destructive contradiction, which presents on its face a mere phase of transition to a new form of production ... It reproduces a new aristocracy of finance, a new sort of parasite in the shape of promoters, speculators and merely nominal directors; a whole system of swindling and cheating by means of corporation juggling, stock jobbing, and stock speculation. It is private production without the control of private property.’ [5]
Thus Marx describes the separation between ownership by tens of thousands of share owners, management by officials and control of corporations by a handful of financial oligarchs. Thus a handful of leviathans subjugates the whole of social production, the socialisation of management and of the forms of ownership, to its own predatory aims.
Due to his formalistic way of viewing these matters, it seems to Prof. Burnham as though the financial oligarch no longer exists, and we are faced only with managers on the one hand, and passive capitalists on the other.
This view too is not very new. Thus, for instance, Gardiner Means, on whom Burnham often relies, has written: ‘Ownership of wealth without real control and control of wealth without real ownership are a logical consequence of the development of corporations. This separation of functions compels us to recognise “control” as something separate from both ownership and management.’ Means cites material about control of the largest non-financial corporations in America. According to him 44 per cent of these are controlled by the managers, and if we also include indirect means possessed by managers – it is more than one half.
However, Lewis Corey has torn off the mask of normality and revealed in his excellent book The Decline of American Capitalism, that control by managers is but a juridical name for the rule of financial oligarchs. Since the publication of Means’s book, new statistical material has been published, which proves how erroneous and superficial his analysis was. I refer here to Monograph 29 of the Provisional National Economics Commission: Distribution of Ownership in the 200 Largest Non-Financial Corporations. According to this research, in only 60 of the 200 corporations was there no clear centre of control, whereas the remaining 140 were under owners. Of course, if this report asserts that in 60 corporations there was no clear centre of owners controlling their fate, this does not mean that control was free from the financial oligarchs. In many cases this is subject to jostling among various financial groups.
The labour of the unskilled labourer, the skilled labourer, the [qualified] engineer, the foreman, the manager of an enterprise, contrasts with the parasitism of the financial oligarch who is active in one field only: the field of financial manipulation, speculation, swindling.
Having seen the relationship between managers and financial oligarchs in the right perspective, let us pose the question: is it possible for the servants of the oligarchy – namely the managers – to free themselves from its rule and become the workers’ exploiters?
Before answering this question, let us deal with Burnham’s third argument, namely, that the process of displacement of capitalism by the ‘managerial society’ is taking place already. He describes what is happening in three countries: Germany, Russia and the United States.
Let us take, for example, the description of the regime of Nazi Germany in Burnham’s book:
‘They [German capitalists] do not decide what to make or not to make. They do not establish prices or bargain about wages ... The regulation of production in Germany is no longer left to the market. What is to be produced, and how much, is decided, deliberately, by groups of men, by the state boards and bureaus and commissions ... There is no requirement that these decisions of the bureaus must be based on any profit aim in the capitalist sense ... It is literally true to say that the Nazi economy, already, is not a “profit economy”. The workers, on their side, are no longer the “free proletarians” of capitalism. Under Nazism the workers are, indeed, free from unemployment. At the same time they cannot ... bargain for wages or change jobs at will.’ (pp.223-4).
And above all this appears Burnham’s main argument:
‘There is a steady reduction, in all senses, of the area of private enterprise, and a correlative increase of state intervention.’ (p.223).
Here too Burnham’s formal approach prevents him from seeing the real economic relations. He does not pose to himself the questions: What determines the decisions of the state institutions, the bureaux, the committees etc. on the distribution of orders, on the allocation of raw materials etc., is it not the relative strength of each enterprise? If we say that profit is the motive of capitalist production, we do not thereby mean that the capitalist needs to increase his profit in order to increase his consumption, but in order to increase the accumulation of capital. An enterprise that does not accumulate capital is doomed to failure in competition, to decline and bankruptcy. If the distribution of orders, raw materials, etc. among the enterprises is made according to their relative strength, does it not require each one of them to maximise its profits and thereby accelerate the accumulation of capital? And the crushing of workers’ organisation, the liquidation of Jewish enterprises, the plunder of the occupied countries of Europe, the liquidation of the small and middle-sized enterprises in Germany, etc., – do not all these signify the apogee of the rule of profit as the fundamental motive of the whole of economic and social life?
But Burnham’s main argument for proving his claim regarding the displacement of capitalism by the ‘managerial economy’ is the following: the share of state expenditure in the national income is increasing at the expense of the private capitalist economy. However, it is incumbent upon him to prove that the increase of state expenditure is at the expense of, or is accompanied by, a decline in the capitalists’ profits, or even by a decline in the general national income other than that used by the state. This he has not done and cannot do. Apart from this, Burnham forgets that capitalists make profits not only from supplying tanks, rifles, provisions, etc., to the state, but also from financing these purchases, from lending to the state. The increase in the state’s share of the total national income does not prove that the economy is freed from the shackles of capitalism.
Instead of regarding state capitalism as the summit of its monopolistic development, Burnham regards the former as the negation of the latter.
Let us return to the second problem posed by Burnham: even if we assume that the German economy is not a ‘managerial economy’, an anti-capitalist economy, but a capitalist economy at the height of its development, is it not possible that in future the managers will be victorious and will impose their own regime?
In order to reach that goal the managers must, according to Burnham, solve a triple problem:
‘(1) To reduce the capitalists (both at home and finally throughout the world) to impotence; (2) to curb the masses in such a way as to lead them to accept managerial rule and to eliminate any threat of a classless society; (3) to compete among themselves for first prizes in the world as a whole.’ (p.97)
According to Burnham there are two main ways of solving this triple problem. One is the way of the Russian revolution: solution of the three aspects of the problem in the order enumerated above. The second is the German way: first to rein back the workers, then to totally exhaust the capitalists, and finally to fight over the division of the global loot.
Burnham drawn an analogy between the bourgeois revolution in France and the ‘managerial revolutions’ of the present. Just as the French revolution was made by the sans culottes but its main fruits fell into the hands of the bourgeoisie, so the managerial revolution will be made by the proletariat, but its fruits will be taken over by the ‘managerial class’. Just as the bourgeoisie in its struggle against feudalism represented progress and the overthrow of feudalism signified a rise in the welfare, the culture, the political influence of the bourgeoisie, so the ‘managerial revolution’ constitutes a turn that will bring about a rise in the standard of living of the masses, and after a certain development will reinforce political democracy.
However, Prof. Burnham’s analogies fail any kind of scrutiny. First, the relation between the bourgeoisie and feudalism is quite unlike the relation between the ‘managers’ and contemporary capitalists. The French revolution was not a manifestation of the conflict between the feudal lord and the lender of capital, but between the feudal lord and the capitalist who owned his own enterprise, an owner in an economy outside the bounds of the feudal economy. Those bourgeois who lent money to the nobility and the monarchy not only did not rise with the victory of the revolution but rather were totally crushed. Therefore, if one can use the same analogy, we will be compelled to infer that if the manager is a ‘servant’ of the capitalist, as Burnham claims, then his position will decline as a partner of the exploiting ruling class with the ending of capitalist ownership of the means of production. Second, if indeed the sans culottes did not succeed in taking over the power which slipped from the grasp of the feudal class, this was because large industry had not yet been established, nor had there come into being a proletariat concentrated and disciplined by the process of production. Therefore, one cannot draw from the sans culottes of Paris conclusions regarding the modern proletariat. And third, in order for the ‘managers’ to be able to totally rein back the masses and to eliminate the threat of a classless society, one must assume that the proletariat is incapable of managing the process of production, in other words, to view the proletariat through the spectacles of an ‘intellectual’ who considers himself to be at a higher level in the ‘spiritual hierarchy’.
Gorky writes:
‘The semi-pauperised peasant despises the worker because the proletarian has, indeed, apart from hands, a head as well; and he found this out since the hands of the worker started acting in an intelligent way. This applies also to the modern “nephews of Rameau”.’ [6]
Before becoming a believer in the ‘managerial revolution’, James Burnham belonged to the Socialist left in the USA. It may be that a psychological basis for this change of mind was the fact that the huge proletariat of America (at present there are 50 million wage workers in the USA) has not yet crystallised into an independent class with its own social consciousness But undoubtedly a large role in this change of mind was played by the reality in the Soviet Union. Disappointment in the face of the shape assumed by the proletarian dictatorship in Russia also led him to his theory. Burnham repeatedly emphasises that the regime in Soviet Russia exemplifies the ‘rule of the managers’.
Because this subject requires separate treatment, Y.Ts. has refrained, at the request of the Editorial Board, from dealing with the problem of the Russian regime in the present article. He will be given the opportunity to deal with this in future..
1. James Burnham, The Managerial Revolution, Second Edition, 1943. [Page references here to edition published London 1942.]
2. Theories of Surplus Value, Part II, chapter XIX, section 14.
3. Capital, Volume III, Part V, Chapter 23. [The quotations from Capital are given from the edition published by Charles H Kerr, Chicago, 1909, as this is probably the edition Cliff would have used. Chapter references are given to enable readers to locate the passages in other versions.]
4. Capital, Volume III, Part V, Chapter 27.
5. Capital, Volume III, Part V, Chapter 27.
6. Diderot’s book Rameau’s Nephew, written before the French revolution; i.e. intellectual snobs. [Tsur’s note]
1*. We have been unable to trace a political current called the Rolanists or perhaps Rolandistes during the period referred to. This is probably due to problems with the transliteration of names into Hebrew and back into English. It is, however, the case that towards the end of Engels’ life he was involved in a dispute with the SPD leadership about censorship of the said Introduction to The Civil War in France. Engels felt that the unauthorised censorship of his views would lead to a misinterpretation of his intentions in pointing out that fighting on barricades was an outmoded tactic. And indeed that is what happened after his death, when this text was used to justify the retreat from militant mass actions and a concentration on increasingly reformist parliamentary activity on the part of most social-democratic parties.
Last updated on 18.10.2007