Reports from the Economic Front

a blog by Marty Hart-Landsberg

The Logic of Capitalist Production

Those who support capitalism often do so by arguing that it is the most efficient system for promoting material and human progress.  Market competition, they claim, forces firms to produce the goods and services that people want and at the lowest possible cost.  Moreover, by making goods available to people at ever lower cost, competition works to expand the size of the market, enabling firms to take advantage of economies of scale and drive down prices even more.  The result is a virtuous spiral of progress.

Sounds good, but there are problems with this argument.  Among them, a false identity of profit maximization with efficiency as well as a one-sided understanding of the logic shaping the organization of production and its end product.

It is true that capitalists seek to maximize profits and those less successful will eventually be forced out of business.  However it is not true that the most profitable firms are necessarily the most efficient (at least in terms of how efficiency is commonly understood).  In other words success under capitalism does not guarantee efficiency.  In fact, it is likely that the most profitable firms are not the most efficient. 

In the sciences a process is said to be efficient if it produces the greatest output with the fewest inputs.  But that is not what capitalism promotes.  Capitalists seek to produce the most for the least cost, and the process of lowering cost normally involves use of labor regimes that increase the intensity of work.  In other words, capitalists will select the work process that ensures that workers have no choice but to work as hard as possible (thereby producing as much as possible) and normally, thanks to an associated deskilling, for the lowest possible wages.  The result is certainly favorable as far as profits are concerned (assuming sufficient demand).    

However, because the increase in output is achieved by increasing the input—in this case human labor—there is no basis to conclude that the work process is the most efficient even thought it will be the most profitable.  Regardless, it will be the work process chosen by capitalists.  This point highlights the class nature of capitalism.  Capitalists view labor as just another factor of production.  To them it makes perfect sense to maximize the intensity of its use.  But to those of us who work, there is a very real cost to the growing intensity and insecurity of labor that underlies and shapes the capitalist pursuit of profit. 

This discussion leads directly to the second problem.  All activity produces a joint product—a good or service as well as the human capacities, vision, and values of the producer.  As noted above, the pursuit of profit, which drives capitalism, generally leads capitalists to select a production process that truncates the potential of the worker; lower labor costs are achieved through the intensification and deskilling of work.   Thus, capitalism tends to promote a highly inefficient system of production if we take full account of its logic.   

This critique is not limited to some backward, declining sector of capitalist activity; it is applicable to the processes used to produce our most technologically advanced goods.  One example is the globalized production process used to make the popular Apple iPAD.  The following six minute video highlights working and living conditions for those who assemble the iPAD at the new Foxconn facilities in Chengdu, China.  The video was made by Students & Scholars Against Corporate Misbehaviour (SACOM), a Hong Kong-based labour organization, in March and April 2011, during a SACOM investigation of conditions at Foxconn (a Taiwanese transnational corporation).  

I want to make two important additions to the video.  The first is that while SACOM appropriately calls for consumers to take action to force Apple and Foxconn to improve worker conditions, corporate social responsibility initiatives have generally proven to be ineffective.  The second is that the workers employed by Foxconn as well as other transnational corporations operating in China are far from passive.  They have engaged, in ever growing numbers, in increasingly militant workplace actions.  In our press their efforts are reported as threats to our price stability.  In reality we should celebrate, learn from, and support their organizing and actions.  More generally, their actions should encourage us to think carefully and critically about the kind of society we value and how best to build it.

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