Planning in capitalism Intra-firm and intra-industry planning Large corporations use planning to allocate resources internally among its divisions and subsidiaries. Many modern firms also utilize regression analysis to measure market demand in order to adjust prices and to decide upon the optimal quantities of output to be supplied. Planned obsolescence is often cited as a form of economic planning employed by large firms to increase demand for future products by deliberately limiting the operational lifespan of its products. The internal structures of corporations have been described as centralized command economies that employ both planning and hierarchical organization and management. According to J. Bradford DeLong, a significant portion of transactions in Western economies do not pass through anything resembling a market. Many transactions are actually movements of value among different branches and divisions within corporations, companies and agencies. Furthermore, a significant portion of economic activity is planned in a centralized manner by managers within firms in the form of production planning and marketing management where consumer demand is estimated, targeted and included in the firms overall plan; and in the form of production planning. In The New Industrial State, the American economist John Kenneth Galbraith posited that large firms manage both their prices and consumer demand for their products through sophisticated statistical methods. Galbraith also pointed out that, because of the increasingly complex nature of technology and specialization of knowledge, management had become increasingly specialized and bureaucratized. The internal structures of corporations and companies had been transformed into what he called a technostructure, where specialized groups and committees are the primary decision-makers, and specialized managers, directors and financial advisers operate under formal bureaucratic procedures, replacing the individual entrepreneurs role (see also: Intrapreneurship). He states that both the obsolete notion of entrepreneurial capitalism and democratic socialism (defined as democratic management) are impossible organizational forms for managing a modern industrial system. Joseph Schumpeter, an economist associated with the Austrian school and Institutional school of economics, argued that the changing nature of economic activity – specifically the increasing bureaucratization and specialization required in production and management – was the major reason for why capitalism would eventually evolve into socialism. The role of the businessman was increasingly bureaucratic, and specific functions within the firm required increasingly specialized knowledge which could just as easily be supplied by state functionaries in publicly owned enterprises. In the first volume of Capital, Karl Marx identified the process of capital accumulation as central to the law of motion of capitalism. Increased industrial capacity from increasing returns to scale further socializes production. Capitalism eventually socializes labor and production to a point where the traditional notions of private ownership and commodity production become increasingly insufficient for further expanding the productive capacities of society, necessitating the emergence of a socialist economy where the means of production are socially owned and the surplus value is controlled by the workforce. Many socialists viewed these tendencies, specifically the increasing trend toward economic planning in capitalist firms, as evidence of the increasing obsolescence of capitalism and inapplicability of ideals like perfect competition to the economy; with the next stage of evolution being the application of society-wide economic planning.
Posted on: Sun, 22 Jun 2014 14:15:25 +0000
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