Alienation and the Self-Managed Firm System

1. Introduction

The idea that a system of producer cooperatives gives rise to a new production mode which is fully consistent with Marxian theory is far from widely accepted although it was first suggested in Jossa (2005) and further analysed in Jossa (2010a, 2010b) by reference to Vanek’s distinction between LMFs and WMFs. The author’s claim is closely linked to Marx and Engel’s theorization of the mismatch between social production and private distribution and the capital-labor opposition as the basic contradictions of capitalism and is backed up by the demonstration that a system of LMF-type producer cooperatives would solve both these contradictions.

As LMF cooperatives remunerate capital separately from labor, i.e. by issuing fixed-income securities (see Vanek 1971), they are firms which literally reverse the capitalistic capital-labor relation. Specifically, whereas in capitalistic systems it is capitalists (or their representatives) that hire workers, pay them a fixed income, run the firm, and appropriate the residual, in a system of LMF cooperatives it is workers (or their representatives) that “hire” capital, pay it a fixed income (interest), run the firm, and appropriate the residual. In other words, by reversing this relation they trigger a change in the mode of production and a revolution real and proper. ¹

The subject of alienation, a central notion in Marx, is introduced in order to argue that a) the establishment of a self-managed system would abate alienation in full keeping with Marx’s approach, and that b) this supports the claim that a system of LMF-type cooperatives would give rise to a new mode of production. For the purposes of this paper, it will always be assumed that self-managed firms are the LMF-type.

2. The Fortunes of Alienation Theory in Time

Before we come to the real point of this paper, it is convenient to say a few words on the mixed reception of alienation theory from the scientific community. The changing fortunes of the Economic-philosophical Manuscripts of 1844 and the elaborate approach to alienation they include can be traced to the varying attention that Hegelian fundamentals have received in academic debate over time. ² Marx’s notion of alienation had been ignored for years when Lukàcs (1923), as if by a wave of a magic wand, thrust it into the spotlight of academic attention by disentangling it from the mazes of Marx’s Capital (several years before the posthumous publication of the Manuscripts themselves). One explanation for the interest aroused by Lukàcs’s contribution is the widely shared assumption, in those years, that the defeat of the Social Democratic Party in Germany had in part been caused by the abandonment of Hegelian philosophy and the turn to a positivistic vision of Marxism instigated by Karl Kautsky (see Basso 1971: 18-32). Traditionally, each turn to reformism in socialist movements has been associated with a rediscovery of positivism; hence, it is possible to say that the ground for the enthusiastic reception of the Manuscripts of 1844 was prepared by the Hegelian approach to Marx that Lukàcs, Korsch, and Gramsci instigated within the growingly anti-reformist climate of the early post-WWI years.

Objecting to alienation as a notion, Althusser (1965) highlighted a sharp split between Marx’s maturity and his early years, when he had not accepted the labor theory of value or enunciated his theory of historical materialism and production relations. Moreover, in Althusser’s opinion a central notion of Capital such as fetishism was unrelated to the notion of alienation that Marx took over from Feuerbach in his early years.

In later years, instead, alienation and fetishism were often closely associated with each other and today they are looked upon as central themes of Marxian thought both by those who rate them as closely interlocked and those who sharply set them apart as two different notions. Holloway (1992: 152) has argued that “the three volumes of Capital ultimately revolve around the subject of fetishism,” while Sève (2004: 27-28) has observed that an analysis of Marx’s mature works highlights the use of hundreds of words associated with alienation which we rated as fallen in utter disuse (see also Sowell 1985: 27; Balibar 1993: 108; McGlone and Kliman 1996; Favilli 2000: 203; Carver 2008). The opposite idea, i.e. the existence of a clear watershed between Marx’s early and mature approaches to the issue of alienation, is endorsed by Catephores (1972) and others.

Although there is generalized agreement that Marx held on to alienation theory right to the end, this does not mean that his approach to the subject in the Manuscripts of 1844 overlaps with that of his maturer years. Sève (2009: chap. X) and others, for instance, have pointed out that the older Marx preferably concerned himself with capitalistic alienation, rather than alienation in general.

The necessary starting point for any correct analysis of alienation is Marx’s conception of man (Ollman 1976: 131 ff.). As is well known, from the observation that values and modes of being in capitalism differed sharply from those in non-capitalistic societies and that “man and society are no separate notions; rather, man is intrinsically connoted by his social essence,” Marx deduced that the essence of man could only be grasped by examining social production relations (see Luporini 1955: 4). ³ The idea conveyed by this quote is that man is basically one with human nature and that “just as society itself produces man as man, so is society produced by him” (op. cit.: 298).

The author’s attempt to establish if the alienation issue offers clues for defining the type of production mode that will arise upon the abolition of capitalism was suggested by a passage, in the Manuscripts of 1844, where communism is described as the social organization mode that roots out alienation. As Marx provided few, if any, indications concerning the “inn of the future,” the contours of this social order must be deduced from the bulk of his writings. Although the faults and contradictions of capitalism discussed by crisis theorists may offer a number of insights into Marx’s ideas of the social order that would arise out of the ashes of capitalism, there are reasons for assuming that alienation theory, specifically the analysis of individual forms of alienation, may help prefigure the organization mode of the transition from capitalism to communism. In a comment on the Manuscripts of 1844, Althusser (1965: 136) wrote: “Setting out from the key notion of estranged labour, Marx solves the inner contradictions of political economy by thinking about it and then rethinking the bulk of political economy through it”; and years before, Cornu (1949: chap. VI) had suggested that the concept of alienation was the core idea behind Marx’s new approach to the course of history and communism and that this major turn in the evolution of his thought was evidenced by the Manuscripts of 1844. ⁴

3. Different Levels of Alienation

In his maturity, Marx identified different forms and levels of alienation. Some of these were common to a variety of social organization modes, while some were specific to capitalism only. In general terms, he made it clear that the categories of work to be described as “alienated” were all the production activities not primarily aimed to meet human needs, those aimed to earn necessary means of subsistence, and, even more generally, those conditioned by external constraints. In all the societies of which we have knowledge, he argued, labor and productive life itself appeared to people not as means of satisfying an inner urge, but only as means of satisfying other people’s needs.

In this wide meaning, any work done in a system characterized by productive specialization – the division of labor – is alienated. In Marx’s opinion, those finding pleasure in their work tend to diversify their activities, switch between jobs, and eschew over-specialized occupations, ⁵ whereas the division of labor strips workmen of the intellectual potential inherent in any work process.

In a less wide and comprehensive sense, alienation comes in association with the working of markets, where its roots are impersonal mechanisms whose effects can hardly ever be planned or wilfully contrived. The main alienation-generating market mechanism is competition, which impels people to behave in manners they would probably shun if they were not obliged to vie with competitors. A capitalistic market necessitates higher degrees of specialization than would be needed in a competition-free environment. Overall, market-related alienation is the effect of scarcity and the resulting need to act under compulsion and renounce freedom of choice.

The quotes above show that any activities undertaken for income-earning purposes were described as “alienated” and that this characterization can be rated as a core assumption behind Marx’s entire theoretical approach. Speaking of the worker, Marx raised the query: “Is this 12 hours’ weaving, spinning, boring, turning, building, shovelling, stone-breaking, regarded by him as a manifestation of life, as life? Quite the contrary. Life for him begins where this activity ceases, at the table, at the tavern, in bed” (see Marx 1849: 34). And in Grundrisse, with reference to a tradesman or professional, he spelt it out in bold letters that the exchange relation confronts us like a power which is external to producers and independent of them. “The social character of the activity, as also the social form of the product and the share of the individual in production, appear here as something alien to and existing outside the individuals; not as their relationship to each other, but as their subordination to relationships existing independently of them and arising from the collision between indifferent individuals” (see Marx 1857-58: 94).

Fetishism is one aspect of market alienation or, in the opinion of some, an overlapping notion. Fetishism is the process whereby interpersonal relations within production and exchange processes take on the characteristics typical of relations between commodities. In a market economy, the private operators that control production by producing goods for their mutual requirements are only formally autonomous. Whenever one of them steps up the production volume of a given article, the resulting drop in prices will impel other producers of that article to reconsider their original decisions. And social relations that generate interdependencies of this sort end up by resembling relations between things, instead of interpersonal relations. As consumers, men are dependent on markets, where the very character of people is at the mercy of his products. ⁶

A less general, but even more compelling, definition of alienation is “work which is subject to the sway of capital.” In Marx’s Manuscripts of 1844 we read: “the more the worker exerts himself in his work, the more powerful the alien, objective world becomes which he brings into being over against himself, the poorer he and his inner world become, and the less they belong to him.” “The alienation of the worker in his product means not only that his labour becomes an object, an external existence, but that it exists outside him, independently, as something alien to him, and that it becomes a power on its own confronting him. It means that the life which he has conferred on the object confronts him as something hostile and alien” (Marx 1844: 211).

In Grundrisse, we also read: “No extraordinary intellectual power is needed to comprehend that, if the initial situation assumed is that of free labour arising from the dissolution of serfdom, or wage labour, the only way in which machines can originate is in opposition to living labour, as property alien to it and hostile power opposed to it, i.e., they must confront labour as capital” (Marx 1857-58: 577).

Dissenting from Althusser, Elster argued that the dominion of dead labor over living labor, the subjection of labor to capital, and the idea that production means are an alien power holding workers in their sway are the most important points with which Marx concerned himself in his maturer years (see Elster 1985: 102). The worker’s estrangement from the commodities he has created – Elster wrote – is closely related to his spiritual alienation. To produce commodities is to create a need for them, a need which is often frustrated in the capitalistic production context. The link here is a fairly transparent one. In contrast, the reason why the estrangement of workers from production means should cause alienation is much less easy to grasp, even if it has more far-reaching implications. It reflects the crucial structural fact that the worker is stripped of his claim on the entire value of his product and its effect is to further exacerbate the worker’s commodities-related alienation. Dispossessed of production means, workers have no control over the work process as a whole and are consequently unable to realize their work potentials to the full (see Elster 1985: 103). According to Elster, a major assumption of Marxism is the idea that life is rewarding when it is founded on self-realization, rather than passive consumption. Indeed, in Marx’s approach the severest form of alienation originates from the estrangement of people from his creative faculties and may either magnify or stifle a desire for self-realization; and this is the reason why the ideal of self-realization in work is an immensely valid guiding principle for industrial and political reform (see Elster 1989: 297). ⁷

From the analysis of different levels of alienation I proceed to the central point of this paper. From Marx’s contention that hired labor is the main determinant of capitalistic alienation it follows that the suppression of hired labor in a system of self-managed firms would sweep away the primary form of alienation. As mentioned above, a democratic firm system reverses the capitalistic capital-labor relation since workers become buyers of production means instead of being bought by the owners of them. As a result, democratic firms are an effective means of counteracting that form of alienation that stems from the subordination of labor to capital ⁸ : “the worker” – Marx wrote – “actually treats the social character of his work, its combination with the work of others for a common purpose, as a power which is alien to him; the conditions in which this combination is realized are for him property of another. It is quite different in factories that belong to the workers themselves, as at Rochdale” (Marx 1894: 179). ⁹

One further explanation for the lesser levels of alienation in a cooperative firm system is lower labor division levels which this system requires. An additional point on which these reflections shed light is the higher levels of alienation from which workers suffer compared to capitalists. “The propertied class and the class of the proletariat present the same human self-estrangement. But the former class feels at ease and strengthened in this estrangement, it recognises estrangement as its own power and has in it the semblance of a human existence” (see Marx and Engels 1845: 36).

4. Alienation and Revolution

If my line of reasoning so far has been correct, there is little doubt that the revolution sparked off by a move from capitalism to self-management would sweep away that form of alienation that stems from the dominion of capital over labor. As mentioned above, however, alienation comes in different forms and at different levels, and self-management would not root out those forms of alienation that are related to the working of markets and to shortage of commodities. These forms of alienation can only be cancelled by a second revolution intended to suppress markets straightaway. This claim is consistent with the Marxist idea that the introduction of socialism was to be the first step of the process and that the second step, the establishment of communism, was to be deferred until after the necessary assumptions were created by the resulting surge in production levels.

One problem that still needs to be addressed in greater depth is the reason why markets would keep generating alienation even in a system of democratic firms. As has been made clear, the alienation-generating factor is external compulsion on production activities. In capitalistic systems, a major form of compulsion stems first and foremost from competition, which determines that businessmen risk insolvency if they fail to shape organizational modes capable of cutting costs. In other words, insolvency is the penalty for all those who are unable to stand up to external competition in markets, and the ultimate implication of this is that production is far from free.

Compared to a system of capitalistic firms, a democratic firm system greatly reduces insolvency risks. Insolvency is the effect of the pincers in which firms are caught up when costs escalate and prices go down under the pressure of competition from more efficient rival firms. And as the labor costs of self-managed firms are nought by definition, in the absence of upward price spirals triggered by labor costs the strain caused by these “pincers” would be greatly reduced (see Jossa 2010b: 82-85). Hence it is possible to conclude that markets in democratic firms systems would be a near proxy for those theorized by neoclassical economics, in terms that they would actually afford scope for free choices. By way of example, in democratic firms workers may reduce their working week to three days and put up with lower incomes without incurring insolvency risks. However, the one form of alienation that democratic firm management is unable to cancel is commodity fetishism, which Marx held to affect every market economy. ¹⁰ As a result, irrespective of the degree of freedom assumed to reign in the markets of a self-managed system, there will be no means of eliminating market-related alienation altogether. ¹¹

Hence, the question to be answered is whether the suppression of the sway of capital over labor can be followed up by a dismantlement of markets at least by degrees, if not from morning to night. Clues on this point may come from the “debate of the 1930s” on price systems in planned economies. That debate made it clear that neither prices nor markets or the associated incentive systems could be abolished as long as commodities were available in limited amounts.

Concluding, from Marx’s approach and the conclusions of the debate in the 1930s it follows that two revolutions are necessary: 1) a first revolution to reverse the capital-labor relation and root out the sway of capital and the alienation it carries in its track; and 2) a second revolution to realize the Marxian ideal of a communistic society by solving the scarcity issue and abolishing markets straightaway.

5. A Critique of Bigo’s Approach

At this point I will try to establish if central planning entails the elimination of alienation by its very nature. The most significant contribution on this point is an analysis by Bigo.

According to Bigo (1953: 111), the attempt to separate the road to communism into two distinct steps was one of the thorniest issues Marx faced. His aim – Bigo argued – was to provide evidence that communism would sweep away alienation in man while retaining some forms of value at least at the first step. “The goal that Marx had set himself was actually a very difficult one” (1953: 111).

What kind of solution did Marx concoct, according to Bigo? Far from maintaining that communism was likely to be implemented within a short timeframe, he postulated a very slow process intended to dismantle inequalities and social constraints in successive steps. The solution worked out by Marx for the transition period was to retain private property and hired labor and to introduce centralized planning. As Bigo puts it, Marx had no option but to admit – and this is the crux of the issue – that over the span of the transition period the capitalistic factors to be retained – private property as an institution, wages and salaries as its necessary assumptions, and the resulting right to freely dispose of such incomes – would stop generating alienation because alienation was a condition connoting capitalistic production and trade exchanges only (see op. cit.: 111). In other worlds, from Bigo’s perspective the introduction of planning alongside persisting capitalistic remnants eliminates alienation because it eliminates exchanges between capitalists and workers and between private producers and consumers.

Bigo’s argument is that the cause of Marxian alienation was neither hired labor nor the valuation of commodities by reference to abstract value or the existence of money, but the fact that prices were determined by the interplay between consumers and competing manufacturers (instead of being fixed at the end of a decision-making process).

In Bigo’s opinion, this is the reason why a mature Marxian work such as the Critique of the Gotha Program postulates the creation of a centrally planned system allowing for joint ownership of production means, i.e. a social order where products would no longer be interchanged between manufacturers. Quoting Marx (1875: 85): “Within the collective society based on common ownership of the means of production, the producers do not exchange their products; just as little does the labour employed on the products appear here as the value of these products, as a material quality possessed by them, since now, in contrast to the capitalistic society, individual labour no longer exists in an indirect fashion, but directly as a component part of the total labour.”

At this point, it is worth asking ourselves if Bigo’s line of reasoning is correct. Would planning in the transition period actually do away with alienation, as he assumes? ¹²

The centrally planned system that Marx had in mind when he wrote the Critique of the Gotha Program is basically the system which ruinously collapsed wherever it was established, in the Soviet Union and in Eastern countries alike. All the same, for the purposes of this paper it is interesting to determine Bigo’s theoretical error.

As was made clear by the debate of the 1930s, Bigo is wrong when he assumes that markets can somehow be imitated or used without concomitantly introducing competition. An additional unconvincing argument is his claim that alienation would be cancelled under conditions where markets and money would continue to exist in the absence of competition. In point of fact, the one precondition for sweeping away alienation is putting an end to scarcity, as mentioned above. However, his main error is to have assumed that alienation could be cancelled despite retaining hired labor working at the commands of the planner. If the aim is to induce workers to generate the output levels expected of them, there are but two options: introducing competition or the commands of a planner. There is no third option. ¹³ And in either case labor would not be free, but alienated.

Moreover, Marx thought that the strongest form of fetishism was linked to money (Marx 1867: 187): “We have already seen, from the simplest expression of value, x commodity A = y commodity B, that the thing in which the magnitude of the value of another thing is represented appears to have the equivalent form independently of this relation, as a social property inherent in its nature. We followed the process by which this false semblance became firmly established, a process which was completed when the universal equivalent form became identified with the natural form of a particular commodity, and thus crystallized into the money-form.” Now then, a centrally planned economy that retains money will retain the strongest form of fetishism as a matter of course.

The conclusion is that Bigo’s approach is wrong for a number of reasons, including the undeniable fact that nowhere in the Critique of the Gotha Program did Marx claim that this centrally planned system was expected to cancel alienation within a few days of the end of capitalism. ¹⁴

6. Conclusion

The points I have tried to make in this paper are that a) democratic labor-managed firms reduce the main cause of alienation, and b) that Bigo’s claim that alienation is cancelled by central planning is unwarranted.

My reflections reinforce the idea that the establishment of a democratic firm system would amount to a consistently Marxian anti-capitalistic revolution and weaken the assumption that Marx equated revolution with the introduction of centralized planning.