On Joint-Stock Organization and Limited Liability

J. On Joint-Stock Organization and Limited Liability

A three-part article by Marx for the New York Daily Tribune dated 24 June 1856 − the first part was published in The People’s Paper on 6 June – on the Cr´edit Mobilier,

49 According to an editorial note by Engels the “public accounts” relating to cooperation date no later than 1864 since “the above was written in 1865.”

Is There a Marxian “Entrepreneur”?

the French bank founded in 1852 by the P´ereire brothers, spells out that the com- pany was “a joint-stock company with limited liability of the shareholders” (MECW

15: 11). 50 Marx noted further that the Cr´edit Mobilier was legally required to limit its financing to joint-stock, limited-liability, industrial companies so that “there must arise a tendency to start as many such societies as possible, and, further, to bring all industrial undertakings under the form of these societies” (21); and he opined “that the application of joint-stock companies to industry marks a new epoch in the economical life of modern nations. . . . [I]t has revealed the productive powers of association, not suspected before, and called into life industrial creations, on

a scale unattainable by the efforts of individual capitalists.” It was the “immortal merit” of Charles Fourier (1841) that – “under the name of Industrial Feudalism” –

he had predicted the novel arrangement whereby “[t]he concentration of capital has been accelerated, and, as its natural corollary, the downfall of the small middle class. A sort of industrial kings have been created, whose power stands in inverse ratio to their responsibility – they being responsible only to the amount of their shares, while disposing of the whole capital of the society – forming a more or less permanent body, while the mass of shareholders is undergoing a constant process of decomposition and renewal, and enabled, by the very disposal of the joint influence and wealth of the society, to bribe its single rebellious members.” Marx observed further that “in joint-stock companies it is not the individuals that are associated” – as in partnerships of various sorts – “but the capitals,” whereby “proprietors have been converted into shareholders, i.e., speculators.”

This same contrast appears in Capital 3, where the joint-stock form of organi- zation is described as entailing “the abolition of capital as private property within the framework of the capitalist mode of production itself ” (MECW 37: 434). The irrelevance of the capitalist is elaborated thus:

Stock companies in general – developed with the credit system – have an increasing tendency to separate [the] work of management as a function from the ownership of capital, be it self-owned or borrowed. . . . 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 by its direct 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 (386).

Marx reinforced the lack of effective control by the mass of shareholders, taking up

a theme already present in his 1856 paper: “Titles of ownership to public works, 50 The stock company is also alluded to by Marx while working on the Grundrisse: “Capital falls

into 4 sections. A) Capital en g´en´eral. . . . B) Competition, or the interaction of many capitals. C) Credit, where capital, as against individual capitals, is shown to be a universal element. D) Share capital as the most perfected form (turning into communism) together with all its

contradictions” (to Engels, 2 April 1858; MECW 40: 298).

437 railways, mines, etc., are . . . titles to real capital. But they do not place this capital

J. On Joint-Stock Organization and Limited Liability

at one’s disposal. It is not subject to withdrawal. They merely convey legal claims to a portion of the surplus value to be obtained by it. But these titles likewise become paper duplicates of the real capital. . . . They come to nominally represent non-existent capital. For the real capital exists side by side with them and does not change hands as a result of the transfer of these duplicates from one person to another” (476).

In the account of stock companies – and on a par with cooperatives in this respect – “profit of enterprise” is unambiguously represented as a net return after managerial costs have been met: “The wages of management both for the commercial and industrial manager are completely isolated from the profits of enterprise in the cooperative factories of labourers, as well as in capitalist stock companies” (386). Again, the net return presumably reflects a pure exploitation income (though how this is explained in the case of cooperatives raises a new issue). And the account also confirms the absence of any particular function undertaken in production attributable to a “functioning” capitalist – for he can disappear from the scene with no untoward consequences. That there is no act of “enterprise” for which profit is paid confirms that the suggestive Unternehmergewinn carries with it no substantive implications.

All this is nicely summarized in a statement relating to the evolution of doctrine and the implications of the falling wages paid hired managers:

Profit of enterprise and wages of supervision, or management, were confused orig- inally . . . by the apologetic aim of representing profit not as a surplus value derived from unpaid labour, but as the capitalist’s wages for work performed by him. This was met on the part of socialists by a demand to reduce profit actually to what it pretended to be theoretically, namely, mere wages of superintendence [see MECW

32: 497]. And this demand was all the more obnoxious to theoretical embellish- ment, the more these wages of superintendence, like any other wage, found their definite level and definite market price, on the one hand, with the development of

a numerous class of industrial and commercial managers [Hodgskin 1825: 27, 30], and the more they fell, on the other, like all wages for skilled labour, with the general development which reduces the cost of production of specially trained labour power (387). 51

Marx again points out that “[w]ith the development of cooperation on the part of the labourers, and of stock enterprises on the part of the bourgeoisie, even the last pretext for the confusion of profit of enterprise and wages of management was removed, and profit appeared also in practice as it undeniably appeared in theory,

51 Marx paraphrased a passage in Mill’s Principles thus: “The general relaxation of conventional barriers, the increased facilities of education tend to bring down the wages of skilled labour

instead of raising those of the unskilled” (MECW 37: 387). For the full passage, see Mill 1963–91 [1848]: 388.

Is There a Marxian “Entrepreneur”?

as mere surplus value, a value for which no equivalent was paid, as realised unpaid labour” (387–8).

An important elaboration of the foregoing theme emphasizes the absolute divorce within joint-stock organization (l) of “profits of enterprise” from the repro- duction process as such; and (2) of the management function from ownership of capital:

Even if the dividends which [money capitalists] receive include the interest and the profit of enterprise, i.e., the total profit (for the salary of the manager is, or should be, simply the wage of a specific type of skilled labour, whose price is regulated in the labour market like that of any other labour), this total profit is henceforth received only in the form of interest, i.e., as mere compensation for owning capital that now is entirely divorced from the function in the actual process of reproduction, just as this function in the person of the manager is divorced from ownership of capital. Profit thus appears (no longer only that portion of it, the interest, which derives its justification from the profit of the borrower) as a mere appropriation of the surplus labour of others . . . (434).

Here the grey area regarding “profits of enterprise” entirely disappears – there is a net return (paid out as dividends) after management and interest has been paid which (like interest) is unmistakably a “mere appropriation of the surplus labour of others”; and so does the grey area regarding management – the manager is a wage laborer like all others whose labor power yields surplus value.