Marx explains that surplus value is extracted through the cooperation of labor- power, when “a greater number of laborers work together, at the same time, in one place, in order to produce the same sort of commodity under the mastership of one capitalist’ (223). Only when full cooperation is achieved, will we see “the creation of a new power, namely, the collective power of masses” (225). Those who have studied Marx will recall that this power of the masses is whom Marx strongly advocates for. Proposal: Why do modern organizations exist?
It is evident that Mar’s works and theories have largely shaped the structure and economy of our modern world. However, his assumptions were formed in the agriculturally based sass’s, and thus needs to be adjusted for the technological advancements in today’s economy. Progression in technology has changed our modes of production (from labor intensive, to automated), and brought rise to a new type of firm whose goods are intangible or idea based. This paper addresses the validity of Mar’s theory of ‘why organizations exist in the modern context.
In doing so, it was found that while it is impressive that some Marxian assumptions hold, a few have become outdated. Marx argues that firms exist to generate surplus value through physical operation. We see that as ‘production’ becomes increasingly intangible and technology based, this idea of mechanical labor-power is losing its significance. The value of modern firms lay in their intellectual property, technology and ability to continually innovate to generate future profits. Thus as a general theme, we see that modern firms exist to generate, capture and capitalize on their intellectual property with the goal Of increasing future value.
THE MODERN ECONOMY Marx vs.. Real World Phenomena: In supporting our thesis, it is essential to evaluate Mar’s key assumptions against current real world phenomena. We propose that the modern firm exists to increase and capitalize on its intellectual property. This is quite noticeable when we look at the evolution of production in modern firms. While a firm in Mar’s era produced simple tangible goods, such as harvesting crop, the modern firms manufactures goods that are dependent on high technology and intellectual property.
This shift in technology is what brings shift in the role of the firm. One of Mar’s most basic assumptions is that firms exist because “it costs less labor to build one workshop for twenty persons than to build ten to accommodate two weavers” (224). Thus, surplus value is created simply because of the costs saved when workers are under one roof. However, how do we explain the rise of modern firms who hold no physical location at all? With the rise of E-Commerce, many firms find their competitive advantage, or their ‘surplus value’ by saving rent through holding virtual storefronts.
For instance, in 201 1 the Alabama Group began the Chinese company Taboo Mall, or “Tamale. Com”, a BBC platform for E-stores. On November 11, 2012, the total sales volume of Taboo reached 19. 1 billion Yuan, which amounted to advent times the daily volume of retail sales of Hong Kong. Furthermore 2000 companies on Tamale passed annual sales exceeding 10 million Yuan (CLC Team staff, 2013). With this advancement in technology in mind, we take a look at another assumption. Marx states, “As a general rule, laborers cannot co-operate without being brought together (226).
In the modern context, it is very evident that this is an outdated idea. Through email, video conferencing, and other modes of digital telecommunication we see cooperation taking place without ‘laborers being brought together’. In fact, CNN Moneys “100 Best Companies to Work for” lists Telecommuting as the criteria best workplace benefit. 5% of the “Best Companies” including Cisco, Intel, and PWS, allow employees to telecommute at least of the time (“Best benefits: Telecommuting,” 2012).
Furthermore, the recently released Workshops Canada report states that part-time telecommuting could save Canadian companies, employees and the community more than $53 billion a year. $44 billion of this being value saved by Canadian companies (Hernias & Leister, 201 1). This mode of production via telecommunication is only possible due to the shift towards intangible goods. Consequently, we see modern firms gaining surplus value from this; something a firm in Mar’s era would never e able to. Laborers in Mar’s age needed to be in physical contact with each other to produce their tangible goods.
However, laborers in 201 3 produce documents, spreadsheets, and other intangible intellectual property. The value of the modern firm is intangible, and therefore firms exist to generate and capitalize on intellectual property. Perhaps one of the downfalls of production becoming intangible is the development of social loafing. Marx assumes that ” a dozen persons working together will, in their collective working-day of 144 hours, produce far more than twelve isolated men each working 12 hours, or than one man who works helve days in succession” (225).
In the context of the production of simple, tangible goods, each worker’s productivity is easily traceable and tracked. However, when production becomes more automated or intangible, it is difficult to track an employee’s productivity. In 1 986, Gravity and Martin observed that a collective group performance required less effort by individuals com pared to the sum of their individual efforts (Gravity & Martin, 1986). Gravity and Martin are describing ‘Social Loafing, a phenomenon in which individuals exert less work when working in a group rather than alone.
This is, exactly opposite of Mar’s assumption that cooperation produces surplus value. As modern firms hold their value in intangible intellectual property, rather than produce simple tangible products, the potential for social loafing arises. Thus, we see another assumption of Marx not holding in the modern context due to the increasing intangibility of a company’s value. Rather than finding value in increased number of laborers, firms need to manage their talent by forming specialized task groups, and teams as to generate the most value. As a final point, we look at one last assumption of Marx.
He states that “It is not because he is a leader of industry that a man is a capitalist; on the contrary, he is a leader of industry because he is a capitalist” (228). Simply put, Marx is arguing that capital holders are the industry leaders. Again, any person living in current ages will tell you this is not so. Capital is needed to become an industry leader, however it is not the defining trait. The modern economy places the highest value on intellectual property. Those that are able to generate intellectual property, such as a patent or a new technology, can become industry leaders even if they do not initially hold capital.
This is much due to the development of our financial system, in which those that have expertise or ideas can finance their ventures through debt (angel investor, venture capitalists, banks) or equity financing (sale of shares). Thus, the modern firm’s value is held in its intellectual property. Ultimately, firms exist to generate lasting value by generating and capitalizing on intellectual property. CONCLUSION As we see technology contain ally revolutionize the way we do business, many of Mar’s assumptions are predated and no longer hold. The modern economy has seen changes in what is produced.
Marx made his assumptions in the context of an economy that produced simple tangible goods. Our current modern economy is highly dependent on technology and has brought rise to a new type of firm whose true value is intangible or idea based. Thus, Mar’s theory stating that companies exist to generate surplus value through exploiting labor needs to be updated to the modern context. Through evaluating key Marxian assumptions, and looking at modern case studies, we see that the modern firm exists to generate, capture, and capitalize on intellectual property.