[OPE-L:7448] Re: reposting John Milios on buyer up

From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Tue Jul 23 2002 - 16:58:19 EDT

John, thanks for this contribution to the putting-out discussion.  You write:

>  Following Rakesh and Gil, I would like to add some thoughts on the 
> putting-out system discussion and to stress the contribution of Lenin's 
> early economic writings to the subject.
>             So long as the artisan or the farmer could sell his 
> commodities to different merchants he/she could retain the economic 
> status of an independent commodity producer. However, the diversification 
> of demand and consequently of production, along with the need to produce 
> not for a local but for various distant markets, historically made the 
> producer increasingly dependent on one merchant in particular, who would 
> supply him with raw materials and become thus BUYER-UP of the producer's 
> total output. Since the buyer-up is now the economic agent who places the 
> product on the different markets, he determines the type of product, and 
> the quantity of products, that each artisan or farmer working for him is 
> to produce. He places advance orders for the wares he requires, and in 
> many cases begins to supply the direct producer with raw materials.
>             In this way the buyer-up in effect acquires control over the 
> production process of the individual producers, I.E. OF THEIR MEANS OF 
> PRODUCTION. It is he who decides the extent of output and its degree of 
> diversification as well as establishing the division of labor among the 
> separate producers who are under his control, according to productivity 
> criteria which he sets and changes in demand which he follows. The 
> buyer-up can now lower the prices of the commodities he purchases (buys 
> up) from direct producers to a level which yields for the producer an 
> income not higher than a worker's wage.

This representation of the evolving position of the buyer-up/putter-out 
capitalist corresponds nicely with Marx's passage on the same issue in 
Grundrisse (p. 510 in the Penguin or Vintage English-language 
edition).  Both arguments suggest that the capitalist's exertion of 
ever-greater control over the labor process was an expression of the 
*monopsony power* enjoyed by buyer-up merchant capitalists vis-a-vis the 
workers they employed.  Another version of this argument appears in Stephen 
Marglin's classic "What Do Bosses Do?"

The problem I have with this argument is that capitalist monopsony power 
and capitalist control of production activity belong to two separate 
spheres of political economic logic that have no necessary connection with 
each other.  Put more specifically, as a general thing neither the desire 
nor the ability to exert control over workers' production activities 
implies, or is implied by, the existence of monopsony power.

On one hand, if all desired production activities (or a sufficient range of 
them) can be induced via the enforcement of appropriately specified labor 
contracts, then even a monopsonist would not have any particular desire to 
exert direct control over the production process.  As Marx notes (KIII, p. 
503, Penguin or Vintage), exerting such control takes effort, and 
capitalists would presumably avoid it if there were more effortless ways to 
induce the desired levels and forms of surplus labor.    On the other hand, 
if such contracts cannot practically be written (for any number of possible 
reasons), then even capitalists operating in perfectly competitive markets 
would have potential incentives to exert direct control over the production 
process--a point borne out by the experience of modern capitalism, in which 
most production activities, be they connected to competitive or 
monopsonistic labor markets, are carried out under the rubric of capitalist 

In other words, capitalist desire to exert control over the form, 
direction, and level of workers' production activity has to do with the 
condition of imperfect contracting conditions (i.e., the inability to 
enforce all relevant terms of exchange via  fully specifiable and 
costlessly enforceable contracts) rather than imperfect competitive 

I note in this connection that, after the Grundrisse, Marx drops the 
suggestion that capitalist control of production is linked to capitalist 
monopsony power, and discusses this control, which he treats in the forms 
of formal and real subsumption, in terms of the *general* desire of 
capitalists to dictate the conditions of production.

>             There thus emerges what Rubin in his HISTORY OF ECONOMIC 
> THOUGHT (1989) calls "the cottage or domestic or decentralized system of 
> large-scale industry" which "paved the way for the complete 
> reorganization of industry on a capitalist basis" (p. 155).
>             It was Lenin who clearly comprehended and pointed out firstly 
> the capitalist character of an economy based on the buyer-up:
>  "Nothing could be more absurd than the opinion that working for 
> buyers-up is merely the result of  some abuse, of some accident, of some 
> 'capitalization of the process of exchange' and not of production. () In 
> the scientific classification of forms of industry in their successive 
> development, work for the buyers-up belongs to a considerable extent to 
> capitalist manufacture, since 1) it is based on hand production and on 
> the existence of many small establishments; 2) it introduces division of 
> labor between these establishments and develops it also within the 
> workshop; 3) it places the merchant at the head of production, as is 
> always the case in manufacture, which presupposes production on an 
> extensive scale, and the wholesale purchase of raw material and marketing 
> of the product; 4) it reduces those who work to the status of 
> wage-workers engaged either in a master's workshop or in their own homes 
> () This  form of industry,  then, already implies the deep-going rule of 
> capitalism, being the direct predecessor of its last and highest form - 
> large scale machine industry. Work for the buyer-up is consequently a 
> backward form of capitalism, and in contemporary society this 
> backwardness has the effect of seriously worsening the conditions of  the 
> working people, who are exploited by a host of middlemen 
> (the  sweating  system),  are disunited,  are  compelled  to 
> content  themselves with  the lowest  wages  and  to  work under the 
> most  insanitary  conditions and for  extremely long hours,  and -what is 
> most  important- under  conditions which render public control of 
> production extremely difficult" (LCW Vol. 2, pp. 434-35).
>      Lenin considers the social relations created when the merchant takes 
> control of the craftsmen's production to be already capitalist relations 
> of production, i.e. a preliminary form of piece-wage labor, a preliminary 
> form of surplus-value extraction. According to his approach, by taking 
> control over the craftsmen's production process, merchant capital takes 
> control over their means of production, albeit in an informal or indirect 
> way. Consequently, Lenin conceives industrialization as a transition from 
> one (the underdeveloped) capitalist form to another (the developed).
>     I believe that Marxist development economics has much to gain if it 
> takes seriously into consideration this theoretical interpretation of the 
> producer-merchant class relations: the enormous spread of cottage 
> industries and sub-contracting relations in most LDCs (but also the rise 
> in faon-production and sub-contracting in the developed capitalist 
> countries, as on the one hand "labor flexibility" rises, while on the 
> other an increasing number of enterprises engage primarily in marketing 
> commodities produced for them by sub-contractors) can in many cases 
> comprehended as alternative (to formal wage-labor relations) forms of 
> capitalist exploitation.

I agree with this fairly thoroughly, noting only that Lenin's argument does 
not depend on the monopsony explanation of increasing control over 
production exerted by merchant buyers-up.



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