Where the Importance of the Materialist Conception of History Lies

ABSTRACT

Historical materialist argues that the socio-political structure of society, the ideals and policies of a nation and the distinctive facets of a civilisation are mainly shaped by the structural conditions under which production is carried on. Put differently, a historical materialist thinks of the socio-political structure of society, the ideals and policies of a nation and the distinctive facets of a civilisation as mainly shaped by the conditions of production. This paper analyses this issue against the backdrop of the contractual origin of the firm as theorised in “Production, Information Costs and Economic Organization” (by A. A. Alchian and H. Demsetz, in American Economic Review, vol. 62, no. 4: 777–795, 1972). I argue, a system of employee-managed system is a new production mode with a distinctive potential for outperforming capitalism which, contrary to Alchian and Demsetz’s opinion, has failed to materialise because of the predominance of economics over politics—in full accord with the core assumption behind the materialist conception of history. An issue discussed is also the cultural roots of historical materialism.

KEYWORDS:

• Historical materialism
• cooperative firms
• method

Acknowledgements

I thank Dr. Shuoying Chen and Dr. Edoardo Raimondi for their editing, translation, and supplement of bibliographies.

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes on Contributor

Bruno Jossa is Professor Emeritus of the University of Naples, Italy. He held the Chair of Political Economy at the Faculty of Economics and Commerce of University of Naples from 1970 through 1979 and at the Faculty of Law from 1979 through 2007. He taught also at the University of Chieti-Pescara, Messina and Venezia. His works include The Economic Theory of Socialism and the Labour Managed Firm (1997), Inflation, Unemployment and Money (1989), La teoria economica delle cooperative di produzione e la possibile fine del capitalism (The Economic Theory of Production Cooperatives and the Possible End of Capitalism, 2005), L’impresa democratica (The Democratic Enterprise, 2008), Cooperativismo, capitalismo e socialismo (Cooperativism, Capitalism and Socialism, 2012).

Notes

1 Orfei (1970, 271) reports that Antonio Labriola described the materialist conception of history as “an effective means of splitting the huge and extremely complex working mechanism of society into its simplest constituent parts.” From the perspective of Kautsky, for instance, the key points of Marxism were the materialist conception of history and the idea of the proletariat as the driving force behind the socialist revolution (see Geary 1974, 85). Conversely, in the opinion of Croce historical materialism was “neither a philosophy of history nor a philosophical approach proper, but rather an empirical interpretative canon, a recommendation to historians for them to focus on economic activity and give it the attention its major place in human life entitles it to” (see Croce [1896] 1961, 1–19 and Labriola 1942, 92).

2 The idea that neither the employer nor the employee is obliged to protract their contractual relationship indefinitely in time induced AD to argue that long-term employment contracts are not an essential attribute of the firm (see Alchian and Demsetz 1972, 777). In point of fact, Williamson has provided evidence that in later years Alchian did reconsider this point (see Alchian 1984, 38–39; Williamson 1985, 53; 1986, 241–242).

3 This amounts to a criticism of Coase’s theory of the firm which is shared by Hart (see Hart 1989) but was dropped by Alchian at a later stage. In the words of Arienzo and Borrelli (2011, 58), over these past years “the employment contract has turned, from a relationship between unequals, into a relationship between individuals negotiating a commercial deal on equal terms.”

4 Some authors describe cooperatives as hybrids blending market attributes with hierarchical mechanisms (see ; Chaddad 2012; Menard 2004; Valentinov and Fritzsch 2007), but while this view is probably relevant to farming cooperatives, it does not extend to producer cooperatives operating in industry.

5 Models which vest monitoring functions in tendentially risk-neutral individuals were theorised by Kihlstrom and Laffont (1979) and Eswaran and Kotwal (1989).

6 Demsetz himself revealed that the greater part of his own and Alchian’s line of reasoning in the 1972 paper was based on suggestions drawn from Knight (Demsetz 1988, 163–164, note 6).

7 In Demsetz’s words, the main aim of the 1972 paper was to relate different firm organisation modes to different monitoring requirements (see Demsetz 1988, 153). In the minds of those thinking that the “who will monitor the monitor” issue is AD’s main contribution, the answer is appointing a residual claimant with a self-monitoring incentive, i.e., concerned with monitoring at a high level of efficiency (see Eswaran and Kotwal 1989, 162). Does this necessarily entail appointing a residual claimant? This issue will be addressed below.

8 On the scant efficiency of shareholder control or control by a large group of persons, see Hart (1995, 182–183).

9 Jensen and Meckling (1979)’s claim that a democratic firm structure may weigh on efficiency in terms of weakening the authority of the managers over the partners by whom they are appointed re-echoes Bernstein’s argument that upon the abolition of the capitalistic ownership structure without concomitant organisational changes the firm’s organs would dissolve through loss of their common convergence point (see Bernstein [1899] 1961, 159).

10 Rejecting the description of the firm as “a nexus of contracts,” Screpanti (2004) and Zamagni (2005) rightly argued that the capitalistic firm is first and foremost “a nexus of employment contracts” and that theoreticians of the “nexus of contracts” hypothesis unduly equate employment contracts with the myriad other agreements entered into by firms, as if they were the same. This argument is perfectly in keeping with the reflections I have been developing in this paper.

11 In this well-known essay Bowles argued that shirking is both congenital to human nature and greatly dependent on the way production is organised. To account for the greater efficiency of employee-managed firms, he claimed that workers who do not feel exploited have a lesser incentive to shirking than those of a capitalistic firm in which business is not carried on in the workers’ interests.

12 The correct approach is that those who have no option but to do what is crucial to their subsistence or welfare cannot be rated as free (see, inter alia, Cohen 1978).