FW: The Corporate Mind]

Charles Brown CharlesB at CNCL.ci.detroit.mi.us
Wed Apr 5 14:06:18 PDT 2000



>>> Wojtek Sokolowski <sokol at jhu.edu> 04/05/00 04:22PM >>>
At 12:46 PM 4/5/00 -0400, Charles wrote, inter alia:
>The principle of profit-maximization does not determine all the conduct in
capitalism, but it is dominant logic. The test it puts on the other logics you are talking about is do they interfere with profit-

That is what I am inclined to believe, but let's test that proposition a bit. It implies that capitalist decision makers know what is to their best interests when they make their decisions (i.e. they are profit maximizers in the neoclassical lingo). No doubt that the profit maximization logic of organizational behavior is the official ideology of the ruling class - but I doubt that such claim is true. In other words, the captains of the industry may ex-post-facto rationalize their own decisions by evoking profit maximization logic, but they do not necessarily follow that logic while making their decisions.

________

CB: Do you think they accidently make profits ?

Marx's theory was based on the observations of British 19th century capitalism, which was dominated by owner-managed firms. It is thus conceivable that the concentration of ownership and decision making capability in one person can, on average, produce a drift toward profit maximization at the firm level. But in most other countries, including the US, firm ownership and fiorm management have been separated long ago. What's best for managemnt is not necessarily best for stock owners - so the proposition of profit maximization at the firm level is untenable under these conditions.

_______

CB: "Maximize" is perhaps too much like optimum. They do make big profits. The bottom line dominates their conduct. Otherwise , they get taken over, or fail eventually. Put it this way. Those who survive make more profits than those who don't . Seems unlikely that the success is an accident relative to the conduct of the corporate controllers. _______

That is to say, corporate managers pursue their own interests that may or may not coincide with the interests of the firm owners (stockholders) or the firm itself. Moreover, corporate managers do not necessarily have sufficient or accurate knowledge what course of action will lead to maximum profitability. Oftentimes, their 'satisfice" rather than maximize i.e. mainating the minimum performance to keep their jobs and fat salaries.

________

CB: Yea, not "maximize", but not go in the red and not make less than the competitors.

______

So the end effect is that the actual behavior of corporate decision-makers is guided by an odd mixture of self-interest, beliefs embedded in the corporate culture, mimicry, incompetence, ass-coverage, and more-or-less successful attempts at profit maximization. It is thus important to investigate those actual motives rather than assume them a priori as the economists (neo-classical and marxist alike) do.

_________

CB: Why ? We are interested in the bottom line.

________

Of course that does not contradict Marx's clam that the dominant culture is that of the ruling class, and that all competing ideas are systematically attacked by the ruling class hacks. But it it is one thing to say that all ruling class actions are *legitimated* by the ruling class ideology, but quite a different thing to say that the *actual motives* of the ruling class decision makers are those specified by that ideology. If that were ture, we would have to accept that the actual motives of the crusaders and conquistadores coul dbe find in christian religion (e.g. a desire to "save" those who had not had a chance to 'find jesus') - which of course is utter bullshit. Ditto for corporate managers. They want us to believe they are ruthless yet efficient profit maximizers - yet the truth is that they tend to be incompetent, unimaginative idiots, aping each other, blindly following the groupthink and covering their asses by wrapping themselves in the dominant ideology (the market in the US or dictatorship of the proletariat in the x-USSR).

_________

CB: No, they want us to think that what is good for General Motors is good for everybody, not that they are ruthless profit maximizers at our expense.

CB



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