Cooperation and the Modern Organization

Image source:  http://europamedia.files.wordpress.com/2011/05/cooperation-international2.jpg

This post is a brief analysis of Modern Organizations- the molecules of Economic Production. It aims at bringing out the inherent co-operative nature of traditional[orthodox]{1} organizations of Modern Economies. It thus attempts to bring to people's conscience that Cooperation and Cooperative Management are highly relevant concepts, not only to understand cooperative Organizations but also to enrich one's knowledge of modern Organization realities.

Cooperation: 

To undertake production in a modern Capitalist Organization{2}, medium or large sized, strict cooperation{3} is at the heart of harmonious economic activity, the smooth running of the economy. It is not that people had not cooperated to produce Commodities{4} in previous forms of societies- eg. under ancient communism, slave, feudal, and others. There too, cooperation was the ultimate necessity facilitating production. But, it is only under the modern mode of production[called Capitalist mode] where a comparatively large number of labourers are required to cooperate and produce.

A modern form of organization pre-supposes: 1). A highly specialized and complex division of labour within the Organization itself, 2). A complex division of labour in society, and 3). Cooperation of the labourers involved in the process of production.

It is this third aspect that is very essential to understand the concept of Cooperative method of Organizing and its inherent existence in every form of Production organization. We thus see, that Cooperation of labour is evident in every modern 'firms'{5}- be it Microsoft, Google, a Textile unit or any other production site{6}. Harmonious acceptance of each other and of the method of production along with the acceptance of the way it is organized, the political-legal back up it has in terms of property relations, the structure and content of labour-process, is what helps in daily reproduction of the given society in its current form.

Cooperation: Heart of the economic molecules

Every firm{7} that exists today, exists only because the labour force employed under it obeys the larger social-economic categories that create and sustain the modern forms of production. For eg. Suppose a strike occurs{8}. News of workers' strikes are common. At these moments do we realize how important the mutual cooperation of labour-force is. Whenever there is a disequilibrium in this set-up, in the uninterrupted flow of cooperative work within a traditional organization; the importance of this element is seen, naked in front of our eyes. 

It is very important to protect this mutual harmonious work-flow in order to sustain healthy economic activity, failing on which the economic system in dominance can come to a stand-still{9}. Many different processes have to be undertaken, outside the firms in order to sustain the given form of mode{10}.

Cooperative Organizations: A different class-structure

Hence, we see that any form of firm needs cooperation at its heart in order to reproduce itself profitably, daily. Still, we do have a completely separate discipline of study that confines itself only to Cooperative forms of Organizations. Such organizations, though rest on the same fundamental element{11}, still differs from traditional organizations in one very important way- the difference of internal class structure{12}.

In private or public organizations, the produce of the firm is a property of a particular individual or a group of individuals, but not of the direct producers. While in a Cooperative organization the produce of the firm is under ownership of the direct producers- the decisions regarding which are taken by the direct producers themselves. Hence, the need to undertake a separate study of this concept.

Conclusion:

Cooperation is at the heart and profit-chart of modern market-based profit-oriented firms. Lack of mutual harmony among themselves and with the larger social-economic variables around them, results only in disruption and crisis in the Economy- given a relatively labour-dominated industry/economy. The belief that Cooperation and Cooperative Organizations are alien and different than traditional Organizational set-ups is incorrect. As we saw, every firm, be it under any social-economic system, is a cooperative firm, where labourers work under complete harmony. Any disequilibrium to this fact results in interruption in the production process and hence in the entire economy. 

In modern times, we have separate disciplines such as Motivation, Leadership, Human Resource Management and a plethora of others whose ultimate aim, it seems, is the sustaining of Cooperation of the labour-force, both within the firm and within the Society at large. 

Notes:

1). Here referred in reference to modern private/public enterprises.

2). Medium or Large scaled, employing many labourers.

3). Cooperation that is a must, for working in a given firm, to which every employee must obey. This is based on Company's rules/regulations/etc.

4). Here referred to as simply any Good or Service produce for selling to others.

5). Used in the sense as in microeconomics

6). Irrespective of its produce- Goods or Services.

7). As in point 5

8). Any event or issue that stops the production process can be equally used here

9). Not to suggest that only this particular reason can cause crisis

10). For eg. Ideological, political, intellectual propaganda

11). i.e. Cooperation of labourers

12). More on this concept- refer Richard Wolff's website and Books

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Reflections on Fine and Filho's "Marx's Capital"

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[Source and Courtesy: Marx's Capital, Ben Fine and Saad Filho, Pg. 62, Figure 5.1] 

This post is a specific reflection on the above Diagram- Economic Reproduction in Capitalism[1], as depicted in the worth-studying book- Marx's Capital by Ben Fine and Alfredo Saad-Filho. This book is one of the most reliable introductions to all the four volumes of Marx's Capital. The above diagram shows, in essence, how economic activities- specific to capitalist mode of production[2], are reproduced, in simple[3] as well as expanded[4] commodity production. More such commentaries on other concepts dealt in the book, shall be put in future.

Preliminary Observations:

Some important preliminary observations may be noted here-

1. The circuit above correctly brings out the geo-spatial motion of 'capital'. It necessarily presents a dynamic[5] view of the economy, which is constantly in motion.

2. The process of reproduction may be divided into two parts:

[A] Department 1(D1)- 'Means of Production' department: Thus, the lower half part of the circuit is D1.

[D1- Department 1, of means of production]

[B] Department 2(D2)- 'Means of Consumption' department: Thus, the upper half part of the circuit is D2. 

[D2- Department 2, of means of consumption]

3. The areas of circuit representing P1 and P2 depict the Production part of the entire process.

4. Consequently, the area representing 'Exchange' depicts that part of circuit wherein the sales and realization of commodities produced is done in the economy. In other words, it represents the market exchanges.

Some reflections:

'M' represents the total pool of money in the given economy. Looking at this model from a macro level will give a better understanding of how Marx's system analyzes the capitalist economy, giving an alternative view to other approaches. As we are analyzing two departments, D1 and D2, 

M = m1 + m2 

and also

M = m'1 + m'2

where, m1 = total money with the producers of D1, and m2 = total money with the producers of D2. At the end of the numerous transactions, entire amount, assuming zero savings, returns to the money pool M. This movement of money, to the extent it is capital advanced and then sales realized, is constant, disrupting frequently thought, and causing crisis[more on this in future posts].

The capitals advanced are:

for D1: c1+v1

for D2: c2+v2; 

where, c1 and c2 are "constant capitals", and v1 and v2 are variable capitals[6].

The capitals- raw materials, etc.,[represented by C1 and C2 ] of respective departments flow within the economic unit of production- firm, pass through Production[P1 and P2], then get converted into commodities ready for sale[C'1 and C'2]. These are then sold, i.e. exchanged for money through market exchange. 

The point of production is Profit. What if the same amount of Money M returns back in the hands of the owner? This would negate the entire purpose of production of commodities. Hence, it is very much essential for an excess amount to be received, which surpasses the original capital advanced. This, we call as per the model- m'1 and m'2 respectively for Departments 1 and 2.

m'1 in the model above is c1+v1+s1, m'2 is c2+v2+s2 respectively for their concerned departments. The mystery then is this 's'- surplus value. The orthodox belief will suggest that this surplus value- the amount excess to the original capital advanced[M1 and M2] has come through the market exchange. But as the model suggests, that's not the case. As soon as the production process is over- P1 and P2, we find the  emergence of surplus values- s1 and s2. Hence, we have a mystery.

This mystery, we shall keep unsolved till future posts. 

Notes and References:

1. Economic Reproduction means the constant generation/production of given social-economic conditions of production, and the production of commodities in a particular given manner, that reinforces the particular mode of production.

2. Capitalist mode of production may also be called, for the sake of simplicity- Capitalism.

3. Simple economic reproduction is wherein the surplus value produced- 's', is not ploughed back into production, but utilized for personal consumption. 

4.Expanded reproduction is where this surplus value 's' is put into production of commodities[Goods or Services], which thus increases the pool of money 'M', every time this happens.

5. By dynamic, we mean an economy constantly in motion rather than a static version of it. This constant movement is seen in the national and global economy as a whole.

6. Variable capital here means the amount of money advanced as 'wages' to the workers[in any enterprise producing any commodity(goods or services)]. Constant capital means the amount of money put into raw materials, machines, tools , equipments, other expenditures, etc. These definitions are different than mainstream definitions.

Consumer is the King, And King never bargains! Part I

This is the philosophy of modern day service/goods providers, at least in many developing cities of India. Bargaining is opposed even before it can begin. This post attempts to trace this emerging[or maybe inherent] concept of anti-bargaining culture, mostly in the 'booming' middle class. It also explains how the notions of consumer freedom, sovereignty, liberty, etc. are merely theoretical deductions to showcase a merrier image of modern society as it is. Finally, it proposes an alternative view to look at consumers and pricing, criticizing the traditional beliefs that price is determined by demand and supply and that profit arises in market exchanges.

Note: This issue will be dealt with, in a series of articles, Part I is presented below.

Bargaining: A crucial feature of market

Bargaining is what brings demand and supply in equilibrium[1]. Demand and Supply aren't some living phenomenons that act and react on their own will. Humans, living and organic, do so. Demand and Supply, just like other economic categories[Capital, Labour, Rent, Profit, Value, Price, etc] is a bearer of 'social production relationships'. In other words, Demand represents 'consumers' and supply- 'producers/sellers'. Hence the popular way of talking about Demand and Supply as some human-independent phenomenon that functions through some magical 'invisible hand'[2] is purely a sophistry.

When Demand exceeds supply, humans, in form of consumers and sellers bargain, take decisions and react, hence resulting in a given price prevailing- where Demand and Supply intersect. This means that bargaining, especially on the side of buyers is an essential element for an equilibrium to occur.

Markets, Perfect competition and Consumer choice:

With the emergence of organized[3] sellers[modern day goods/service providers], bargaining has begun to loose its importance as a crucial characteristic of markets. Indeed, in local markets where many unorganized sellers are present[4], bargaining is prevalent and normal. But in more organized markets and selling centres{cafes, cybers, jewelry stores, large hotels, etc.}, bargaining is of least necessity. Also, with the emergence of the 'booming' middle class whose ultimate goal of life, it appears, is maximizing its marginal utilities, bargaining is deployed carefully, only where one's economic/social status isn't put at stake if she is found bargaining.

This raises an important question:

Is Consumer really the King?

The philosophy 'Consumer is King, and King never bargains' implies that consumers must quitely accept whatever price prevails, and if they do not want to, then may find another place to buy. It clearly is a violation of the so-asserted consumer sovereignty. It merely shows the hollowness of those who proclaim that markets provide freedom through choices, while these choices being decided and established by non-individual factors, or maybe by the sellers themselves. More on this issue later.

We thus understand that when bargaining is made to loose its prevalence and when buyers are forced to accept the prices as given, except of course their right to find some another seller[5], it reduces consumers' decision making ability, her freedom to ask for a change in price which doesn't suit her. 

An industrial phenomenon:

Bargaining being made to look as 'low standard', 'poor' and 'non-king' behaviour is not a special but an industry-wide phenomenon. Many industries such as cyber cafe, precious metals, garments, luxury items, and some more have such a culture creeping in. This means bargaining is made to look as a shameful phenomenon which a consumer must avoid so as to preserve her standard in society. Of course, social and cultural variables too are responsible for this, but when such phenomenons are asserted in stores, malls and shops, it reinforces and multiplies such a culture.

Hence, the options for choosing another seller looses its significance once it is understood that this is not limited to a single firm, but spread throughout an industry. If Consumers cannot bargain, then the notions of consumer freedom are utterly foolish and useless. The worst part is, the consumers themselves accept and reinforce such a culture, which at the end harms their own 'marginal utility'.

References and Notes:

1. It means that when buyers and sellers actively negotiate with each other, only then and then can an equilibrium occur. If, one party were to be completely mum, the price reached would have been dictated by another side, which is against the so-cherished consumer freedom, consumer choice, etc.

2. This obviously is not a reference to Adam Smith. He didn't use the term in the manner that modern day Economists have made it out to be. For more information on this issue/controversy, refer here. Of course this blog of Mr. Gavin Kennedy is plagued with all sorts of fallacious thinking about Karl Marx and his economics, it still defends Smith well, and is a worth looking at apologetic of Smith.

3. The term "Organized" here is meant to signify far more institutionalized, coordinated and centralized sellers. For eg. cyber cafes, branded garments sellers, etc. 

4. Such as mandis, local vegetable markets, grocery stores, local bazaars{eg. of electronics} and so on. 

5. This option is superficial as explained in the next part, because it is an industry-wide phenomenon. Some exceptions might exist, but only rarely.

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The fallacy of balanced approach

Interesting News article today: Left out: Marx, Engels to play minor roles in Bengal school books

It is surprising to see that Politicians/Academicians in West Bengal are striving to reduce/remove Marx and Engels from History. We can ignore the Economics part as hardly anywhere in world is Marxian economics taught. A News channel debate today explained that the 34 years rule of Communists in West Bengal resulted in a lot of Marxism being taught. It didn't explain than that why didn't a Communist revolution occured in WB in last 34 years? Why was Social democracy so closely knit into the political fabric of Bengal for these many years and not pure Communism? Why was there 'State Capitalism' in WB and not Communism as envisaged by Marxist ideas?{1} Many more questions remain unanswered though.

This is yet another instance why Marx is being suppressed and neglected as much as possible. These bourgeois personas of West Bengal's ruling party think they can suppress Karl Marx. Even if that's done, it makes no difference to Marxist methodology at all! As such, who needs mainstream syllabus to teach anything relevant today?

Today's case of Bengal clarifies how much afraid the dominant politicians and their bourgeois compatriots are of Marx{2}. Schools, Colleges and Universities are centers of brainwashing young population so that they can obey the dominant ideology and safely skip what they must actually know.

No doubt then, that most of the syllabus in India is filled with ideological biases of the ruling class. If they feel threatened by Marx's ideas, they can indeed reduce/remove him. Still, these ideas will return, with far more strength and endurance. Sad that History is being politicized. And sad that hardly anyone understand's Marx's ideas except that he was a Communist{3}.

Can there be a balanced approach?

The fallacy of balanced approach is very clearly visible in mainstream History and Economics curricula. Every new political party in power wishes to introduce its own ideological standpoint so as to bring changes it wants. That's not bad per se{4}. What is bad is that Marx's ideas are hardly taught in their correct, real form. What is presented in the name of Marxism is a critical analysis of his ideas by some other ideologues who have completely different ideological standpoints. This is dangerous. Such a trend will destroy the very future of our young generations. If we wish to have a better India, we need to allow "bias-free" flow of ideas. 

Balanced approach in Economics and History is a fallacy, and a dangerous one. It is to fool people that the committees framing curriculum is a bias-free, neutral set of humans. That's not possible. Every human has an ideology, whether she knows it or not. In the name of balanced approach, a different ideology is presented. The brainwashing still continues.

Agreed. Marxist ideas may have been overdosed in Bengal due to the Communist party's rule there for many years. But that is not a good reason to say that the now-ruling party is a balanced party. Far from it. A newer ideology will be put. Pro-Capitalism, Pro-markets and Pro-capitalist ideas will be fostered, maybe to create a well-obeying, pro-capitalism youth that turns out to be a 'productive' labour force{5}.

Is Marx really understood today?

Talking in terms of India, Marx is hardly even known to majority of the people. A nation where a large chunk of population resides in poverty/sub-poverty/near-poverty levels, its hard to expect them to read Marx and forget about their stomachs. That's not possible for now. But even the well-off sections of society do not understand Marx except the experts in various related subjects. Common populace must understand Marx's ideas in its originality rather than learning it in schools and colleges from ideological tutors- who nevertheless will promote their own ideologies. 

Today, we have a growing number of Austrians in Government colleges. They're able to help people understand their ideas well by engaging in productive teaching which is a healthy sign. Same must be done by Marxians. Just like Marx's ideas, even Austrian Economics is hardly taught or even understood in India. Dare you find a book by Ludwig von Mises or Murray Rothbard in school, college libraries{6}. You might find Marx though- but that's the only good thing. 

This boils down to one simple point: There's nothing like a balanced approach in History and Economics. Both are the pillars of Politic's justification in its present form. Common people must disapprove such a move. The brouhaha about introducing Indian point of view of History is equally fallacious. It is being talked as if only Marx was taught in Bengal's curricula till now, and Indian history was kept aside. There too, comfortable ideas will be put, challenging ones reduced/removed. People must resist such political manoeuvres. Let us focus more on solving nations's immediate problems 

rather than politicizing academic subjects which can be best left 

to academicians to sort out.

In the end, we can say that there's not too much of Marx in Bengal's schools, but a lot of politics to justify the society in its 
current form and skip the ideas people now really need to understand.

Notes:

1. State undertaking decisions that private competing firms must be taking is merely capitalism replaced by political executives taking those decisions. That's far more harmful.

2. This might be the case in face of the recent crisis in Capitalism that has engulfed most of the capitalist countries- E.U., U.S., etc. Justification for the American model of Capitalism is possible when it is justified and taught as if it were the best way to achieve human freedom.

3. The common people in India hardly understand Marx other than the mainstream ramblings against his ideas. Former USSR, Eastern countries,  &c. are publicized as failure of Marxism- as if they had anything to do with Marx.

4. Healthy spreading of one's ideology is always good. World needs different ideologies. But replacing something to introduce another while calling it a balanced approach is very mediocre.

5. Indeed, if wage-labour system is justified in the minds of young people, they'll end up accepting it as the sine qua non of modernity. That's dangerous too. It keeps radically different viewpoints about History, Economics and Future deliberately away from them. We can't afford that.

6. There is a lack of awareness about Austrian Economics in India. Moreover, one will hardly find the literature by this school of thought in Economics- except a few. At least this blog's author has experienced so. That's unfair. Such radically different ideas, diverging from mainstream perspective must be fostered and promoted. Combustion of ideas is the key to prevalence of truth.

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The Greatest Parliamentarian in Indian History

Today, i.e. on 26th March, in 1902, Gopal Krishna Gokhale, carefully trained in Indian Economics, made his first seminal speech on the Budget of the then British India. The British authorities took pride in the budgetary surplus that they had saved. Just then a man stood up and took lock, stock and barrel the entire British administration for their shameful deeds. 

He pointed out that having a budgetary surplus while majority was either starving or dying, wasn't a thing to be proud of. He then took up the annual budget, clause by clause and brought out the negligence and apathy of the Colonial administration, concluding that India was poor because its Economy was subservient to British interests.

Since that day, he's known as the Greatest Parliamentarian in the history of India. His views are very much true even today! While today's authorities and the "booming" middle class are busy in 'maximizing their marginal utilities', about 80% of Indian population resides and struggles at $1,25/day. There seems to be a need for another Gopal Krishna Gokhale.

The blind pursuit of consumption-maximization, the idea that a nation can be happier with more material wealth to consume, the old trickle down theory of Economics and the lack of interest in the larger field called Society, are some of the reasons for the contradictory state of world we live in. On one hand we have Consumers who want to maximize their marginal utilities and feel 'free to choose' in the market; on the other hand its this very class of consumers who has to produce in order to be able to consume. The lack of interest of people in Production while understanding the society isn't a healthy sign and must be reformed.

We don't need Economists to help us make our lives better. We need Social scientists who can rather help us understand the larger phenomenon called Society. And you know what- there's someone who can help us here; Karl Marx!

Following are some links that will help readers know more about Gopal Krishna Gokhale:

AICC's website: Click here.

Wikipedia's article: Click here.