This piece establishes an important thesis, to wit, that Max Weber's famous "iron cage" does not refer to the institutions of modern capitalism, as is almost universally believed, but rather to the "system of needs and wants" or “the inexorable power of material goods over the lives of men” that, Weber maintains, leads to irresoluble conflict between individuals and yet can be filtered and mediated most efficiently and democratically by "the market mechanism". This is a crucial plank in the entire negatives Denken that runs across reactionary thought from Hobbes through to Mandeville and even Adam Smith until its pivotal reformulation by Schopenhauer. Thereafter, the whole notion of an insatiable "Will to Life" is taken up and developed by Nietzsche first, and then by Weber in sociology, the Austrian School (Menger to Hayek) in economics, and Schmitt in political theory. On this blog we have touched again and again on the negatives Denken. Friends can search this site for all relevant articles simply by entering "negatives Denken" in the appropriate search slot top right of the home page.
The ‘Iron Cage’ as “System of Needs and Wants”
….In theory one could probably conceive of the progressive elimination of private
capitalism - although this is certainly not the trivial matter some literati, who are
unfamiliar with it, imagine it to be, and it will quite certainly not be a consequence
of this war. But assuming this were to be achieved at some point, what would it
mean in practice? Would it perhaps mean that the steel housing (stahlhartes Gehause)
of modern industrial work would break open? [Etwa ein Zerbrechen des stählernen Gehäuses der modernen gewerblichen Arbeit?] No! It would mean rather that the
management of businesses taken into state ownership or into some form of ‘communal
economy' would also become bureaucratised.
The juxtaposition – indeed, the seamless transition that Weber effects from bureaucracy to “private capitalism” seems at first blush to be surprising given that he had earlier taken pains to distinguish the bureaucracy from “the factory”. Yet here Weber seems to conjoin the two without the slightest hesitation. And, in all fairness, this was to be expected given that Weber had earlier stressed the dependence of “the entire organization of providing the most basic needs of social life”, which also becomes the function of capital as it turns into “social capital”, on the performance of bureaucratic duties. It follows that for Weber “bureaucracy”, whether it be in “the modern state apparatus” or in “modern private capitalism”, has ultimately to do with that “concentration” and “socialization” of “the means of production and operation” that serve the essential aim of “providing even the most basic needs” of society.
The quintessential question and “problem” of modern societies, therefore, is not so much whether they are “capitalistic” or “socialistic”, that is to say, under “state ownership or some form of ‘communal economy’”. No! The quintessential question of modern societies – the “problematic” that is common to both capitalist bourgeois and socialist worker parties is that of “the steel-hard housing [the iron cage] of modern industrial labor”! It is not then the nature of “modern industrial labor” that determines “the iron cage” of bureaucratic, machine-like, “rationally calculable” rule: the genitive here is “subjective”! Instead, it is the “iron cage” that is the content, the social force or drive or impetus that conditions and effects the “nature” or the “technically-given” and “rational and systematic” form of “modern industrial labor”. “The iron cage” does not in the least refer to “the machinery” of “modern industrial labor”, of modern industry or to its labor process. Nor does it refer to, as is most commonly believed, “the rational conduct of modern business [that] creates a rigid structure in which work is carried out in a mechanical fashion” (as the editors of Weber’s Collected Political Writings wrongly define it in fn12 at p.90). It is not “the mechanical fashion of work” that concerns Weber, nor is it “the rational conduct of modern business” that induces “modern industrial labor [Arbeit]”. Weber himself expressly denies any such “rigidity” or “mechanical fashion” to “modern industrial labor”. This “homogenization” or “equalization” of tasks in the “modern industrial” labor process is not only an essential pre-condition for “the rational conduct of modern business”, but also it represents for Weber the only way to understand human living activity, as we will see later in this piece. Weber resolutely and expressly dismisses and refutes the “socialist” fable of a capitalist labor process that, eo ipso, in and of itself (!), leads to the “socialization” of production and the inevitable “expropriation of the capitalist expropriators”! (Cf. his explicit remarks on this in Der Sozialismus discussed in this section.)
The iron cage refers instead to the “economic demands” or “needs and wants” of atomized individuals in capitalist mass society that “modern industrial labor” is meant to provide for and satisfy – a condition that “the Protestant ethic” with its Askesis (a-scension, climbing) turning to “acquisitive greed” unleashed initially in the guise of “the spirit of capitalism” until that “spirit” escaped, leaving behind only a “soul-less machine”. It is this Ent-seelung (out-soul-ing, reification, mortification), this “crystallization” of social life caused by “the care for external goods” that is “the iron cage” – certainly not the industrial machinery and the organization of free labor of modern capitalism! It is this “system of needs and wants” (Hegel and Marx seen through the “Eristic” filter of the negatives Denken and the Schematismus of Neo-Kantism) that leads inexorably and “inescapably” – “rationally” – to modern industrial capitalism and to the rise of bureaucracy: but the two are not identical! It is irrelevant for Weber whether the form of government in a modern nation-state is “capitalist” or “socialist”. Whether in bourgeois
Europe or in communist
Bolshevik Russia, the common “Problematik” will be that of “the organization of
labor”, of “modern industrial labor” as it is “created and maintained”
by the “steel-hard housing” or “iron cage”. Weber takes this “modern industrial
labor” as a “given”, as a technical
fact. And the inevitability of “modern industrial labor”, its “rationally
calculable” attributes in the sphere of production, is derived from the urgency
and massive scale of the “needs and wants” that individuals have in capitalist
Let us recall that Weber had already defined this “iron cage” explicitly in the closing paragraphs of his Protestantische Ethik published thirteen years earlier in 1904. But he had been unable or unwilling or not ready to define yet the precise nature of the process whereby “the Protestant work ethic” had led to “a specifically bourgeois economic ethic”, except to stress that it consisted entirely in the glorification of “labor as an end in itself” through the ascetic religious ideal – an ideal that, in any case, had now been “dissolved into utilitarianism” (Nietzsche had described in quasi-Hegelian terms the “self-dissolution” [Selbst-Aufhebung] of the ascetic ideal in the Genealogie).
The Puritan wanted to work in a calling; we are condemned to do so. For when
asceticism was carried out of monastic cells into everyday life, and began to
dominate worldly morality, it did its part in building the tremendous cosmos of
the modern economic order. This order is now bound to the technical and economic
conditions of machine production which to-day determine the lives of all the
individuals who are born into this mechanism, not only those directly concerned
with economic acquisition, with irresistible force. Perhaps it will so determine them
until the last ton of fossilized coal is burnt. In Baxter's view the care for external
goods should only lie on the shoulders of the saint like a light cloak, which can be
thrown aside at any moment. But fate decreed that the cloak should become an
Since asceticism undertook to remodel the world and to work out its ideals in the
world, material goods have gained an increasing and finally an inexorable power
over the lives of men as at no previous period in history.
To-day the spirit of religious asceticism—whether finally, who knows?—has
escaped from the cage. But victorious capitalism, since it rests on mechanical 
foundations, needs its support no longer.
Der Puritaner wollte Berufsmensch sein, – wir müssen es sein. Denn indem die Askese aus den Mönchszellen heraus in das Berufsleben übertragen wurde und die innerweltliche Sittlichkeit zu beherrschen begann, half sie an ihrem Teile mit daran, jenen mächtigen Kosmos der modernen, an die technischen und ökonomischen Voraussetzungen mechanisch-maschineller Produktion gebundenen, Wirtschaftsordnung erbauen, der heute den Lebensstil aller einzelnen, die in dies Triebwerk hineingeboren werden – nicht nur der direkt ökonomisch Erwerbstätigen –, mit überwältigendem Zwange bestimmt und vielleicht bestimmen wird, bis der letzte Zentner fossilen Brennstoffs verglüht ist. Nur wie »ein dünner Mantel, den man jederzeit abwerfen könnte«, sollte nach Baxters Ansicht die Sorge um die äußeren Güter um die Schultern seiner Heiligen liegen389. Aber aus dem Mantel ließ das Verhängnis ein stahlhartes Gehäuse werden. Indem die Askese die Welt umzubauen und in der Welt sich auszuwirken unternahm, gewannen die äußeren Güter  dieser Welt zunehmende und schließlich unentrinnbare Macht über den Menschen, wie niemals zuvor in der Geschichte. Heute ist ihr Geist – ob endgültig, wer weiß es? – aus diesem Gehäuse entwichen. Der siegreiche Kapitalismus jedenfalls bedarf, seit er auf mechanischer Grundlage ruht, dieser Stütze nicht mehr.
The present “system of needs and wants”, that is to say “the care for external goods” is the “iron cage” that has replaced “the light cloak” it once was, now that “the spirit of religious asceticism has escaped from the cage [the care for external goods]”, and has therefore become irrelevant to the now “mechanical foundations of capitalism” whose inspiring “spirit” or “soul” it had been earlier, at the very beginnings of this mode of production. It is this “care for external goods” diabolically transmuted into an “iron cage” that constitutes and effects (Weber might say “creates and maintains”, see below) “modern industrial labor and machinery” as well as “bureaucratic rule”: - it is certainly not modern industrial labor and machinery or indeed bureaucratic rule that constitute and effect “the iron cage”!
It is abundantly clear that in the Ethik Weber had understood “the iron cage” to mean the “increasing and finally… inexorable power over the lives of men” on the part of “material and external goods” – although as yet in 1904 there is no careful specification of what this “inexorable power” might be – except the transmutation of “the ascetic ideal” that treated “labor as an end in itself” into a “victorious capitalism” that has dug by now “mechanical foundations” and that has jettisoned thereby the erstwhile “religious asceticism” whose “support it needs no longer”.
Once we accept Weber’s proposition that the modern “system of wants and needs” has turned into an “iron cage” - how it has “congealed” or “crystallized” into “mechanical foundations” or a “lifeless machine” -, we can then see how and why Weber can argue without hesitation that there can be no difference between capitalism and socialism as political forms of the rational organization of “modern industrial work” except perhaps in the sense that the latter would be far more “bureaucratic” than the former, and therefore “less free”!
Is there any appreciable difference between the lives of the workers and clerks in
the Prussian state-run mines and railways and those of people
working in large private capitalist enterprises? They are less free,
because there is no hope of winning any battle against the state bureaucracy
and because no help can be summoned from any authority
with an interest in opposing that bureaucracy and its power whereas
this is possible in relation to private capitalism. That would be the
entire difference. If private capitalism were eliminated, state bureaucracy
would rule alone. Private and public bureaucracies would then
be merged into a single hierarchy, whereas they now operate alongside
and, at least potentially, against one another, thus keeping one
another in check. The situation would resemble that of ancient
but in an incomparably more rational and hence more inescapable form.
As further proof of Weber’s reasoning, and to put the matter of the meaning of “the iron cage” entirely beyond doubt, let us parse carefully an analogous passage on the ‘Gehause’ in an essay (“Suffrage and Democracy in Germany”) that covers much of the ground of Parlament und Regierung but was published a little earlier in 1917. Having discussed the harm done to the German economy by government policies that would encourage “rentier” investments based on “dividends” as against “entrepreneurial” ones based on “profits”, Weber lashes the reactionary ‘literati’ who cannot tell the difference between the two. In referring to the “casing” (Gehause), Weber this time uses the attribute “ehern” or “brazen” (rather than “stahlhartes”) – and this is an adjective that (as the editors here adroitly point out) is most often used in German with nouns such as “Gesetz” (Law), Schicksal (Fate) and Notwendigkeit (Necessity). Clear is the intention on the part of Weber to stress the “harsh necessity”, the “iron law”, the “inexorable fate” of the concept he is about to elucidate.
Much more significant is the fact that they [the ‘literati’] have not the faintest idea of the
gulf of difference separating the kind of capitalism which lives from
some momentary, purely political conjuncture - from government
contracts, financing wars, black-market profiteering, from all the
opportunities for profit and robbery, the gains and risks involved in
adventurism all of which increased enormously during the war - and
the calculation of profitability that is characteristic of the bourgeois
rational conduct of business (Betrieb) in peacetime. As far as the litterateurs
are concerned, what actually happens in the accounts office of
this type of business is a book with seven seals. They do not know
that the underlying ‘principles' - or 'ethics’ if this term is preferred - of
these two different types of capitalism are as mutually opposed as
it is possible for two mental and moral forces to be. They have not
the slightest inkling that one of them, the 'robber capitalism' tied
completely to politics, is as ancient as all the military states known to
us, while the other is a specific product of modern European man.
Weber: Political Writings
(90) If one wants to make ethical distinctions (and that is at least possible
here) the peculiar situation is as follows: the brazen casing
(eherne Gehause) which gives economic labor its present stamp and fate
and naturally will do so even more in future, was created and is maintained
precisely by the ethics of professional duty and professional honour,
[die Ethik der Berufspflicht und Berufsehre es ist, welche jenes eherne Gehäuse hergestellt hat und erhält, durch das die wirtschaftliche Arbeit ihr heutiges Gepräge und Schicksal empfängt und natürlich nur um so mehr und endgültiger empfangen wird,]
which, generally speaking, stand far above the average economic ethics which
have really existed in any historical age (as opposed to those which have merely
been preached by philosophers and litterateurs). Of course, the fate and
character of economic life will be determined increasingly and irrevocably
by this rigid casing if the opposition between state bureaucracy
and the bureaucracy of private capitalism is replaced by a system of
bringing firms under ‘communal control' by a unitary bureaucracy to
which the workers will be subordinated and which would no longer
be counterbalanced by anything outside itself. Let us consider this
opposition further. The bearer of the specifically modern form of
capitalism as an inescapable system ruling the economy and thereby
people's everyday fate was not profits made on the infamous principle
that, ‘you can’t make millions without your sleeve brushing against
the prison wall'; rather, it was precisely that type of profitability which
is achieved by adopting the maxim, 'honesty is the best policy'. (89-90, CPW)
On the face of it, Weber is referring to the fact that it is “this second type of capitalism”, the one based on “that type of profitability achieved through honesty”, rather than the one based on “opportunistic profit”, that “created and maintained” the “eherne Gehause”. Yet this does not mean that the “eherne Gehause” is identical with it. And of course this “honest capitalism”, unlike the first type, is based on “the ethics of professional duty and honour”. But the aspect that counts most here is definitely not “professional duty and honour” or “rational conduct of business”, but rather most certainly the aspect of “calculation of profitability” – in other words, profitability based on “sustainable and renewed business (Betrieb)”. It is this “sustainability and renewability” of “business”, this “profitability” that “created and maintained the brazen casing”. But neither of these properties of business would be possible if they did not respond to an autonomous market demand that sets the discipline for the efficient allocation of resources to the industrial production of consumer goods for which “economic work with its present stamp and fate” is required. It follows that what makes possible “the calculation of profitability”, its indispensable ingredient, is precisely this “autonomous market demand” based on “individual consumer choice” (“the care for external goods”) which, in turn, conditions the rational allocation (“its present stamp and fate”) of the available quantity of “economic work” for the production and “supply” of the various “external goods” that provide for and satisfy “market demand” - “the care”.
That the autonomous nature of this “demand for material goods” (or “the care for external goods” of the Ethik) is the kernel of the concept of “brazen casing” is made evident once more by Weber’s insistence that
the fate and character of economic life will be determined increasingly and
irrevocably by this rigid casing if the opposition between state bureaucracy
and the bureaucracy of private capitalism is replaced by a system of bringing
firms under ‘communal control' [socialism] by a unitary bureaucracy to which
the workers will be subordinated and which would no longer be counterbalanced
by anything outside itself.
Now, if Weber had meant that “the second type of capitalism and its ethics of honest and calculable profitability” or “the rational conduct of business” was identical with the iron cage, he would never have said instead, as he did just before this long sentence, that it was these “ethics” that “created and maintained” the iron cage! And he would also reason that the “replacement” of the private capitalist bureaucracy with the state bureaucracy would bring about the extinction of the iron cage as well as of those “ethics” and not, as he does here, the further “increasing and irrevocable rigidification” of this “rigid casing”!
Weber puts the issue beyond doubt when he equates “the fate and character of economic life” with the “subordination of the workers” to the “unitary bureaucracy” that will “no longer be counterbalanced by anything outside itself”! It is “the workers” – not the professional ethics of the private capitalists or “the rational conduct of business” or the capitalists – who “will be subordinated” to this proto-totalitarian “unitary bureaucracy”. And in the very next sentence, Weber explains how it is most emphatically not the “rationality” of the profitability of this “second capitalism” that is “the bearer of the specifically modern form of capitalism as an inescapable system ruling the economy and thereby people's everyday fate”, but rather its “profitability” – which, again, is based on the “autonomous market demand” flowing from the formal “freedom” of “the workers” who are still “not subordinated to a unitary bureaucracy”!
It follows that the “brazen casing” would be further “rigidified” if a unitary bureaucracy replaced private capitalist enterprise based on “sustainable and renewable” or “honest and calculable profitability” for the evident reason that then “workers would be wholly subordinated to the rule of a unitary bureaucracy no longer counterbalanced by (in “opposition” to) private enterprise that would determine more than ever before the inescapable system of their needs and wants [the brazen casing] ruling the economy and thereby “workers’ everyday fate” or, what amounts to the same thing, their “economic work” – which is the resultant of the necessarily political conflict over wants and provision.
Perfectly aligned with this interpretation of “the brazen casing” or “iron cage” is the detailed discussion that Weber undertakes immediately and seamlessly after this paragraph on the quintessential role of “autonomous”, “independent”, “voluntary” and “free” determination of “individual preferences and needs and wants” in both the political and the economic spheres for the efficient functioning of government and economy, and therefore for the health and power of the nation-state, in strident opposition to the “romantic fantasies” (p.100) of the proponents of various forms of “socio-economic corporatism”.
It is, however, sheer naivete on the part of our scribbling ideologues
to believe that this is the way
104 Suffrage and Democracy in
to weaken or eliminate the rule of the 'profit motive' and the interest
in producing goods 'for gain' which they so despise, and to replace
them with a 'natural’, ‘communal economic' interest in providing
good and as far as possible cheap commodities to the people who
desire and consume them! What abysmal nonsense! The interest of
the capitalist producers and profit-makers represented by these cartels
would itself then rule the state exclusively, unless that organisation of
producers' interests is confronted by a power strong enough to control
and steer them as the needs of the population require. But an
individual's needs are not determined by his position in the machinery
of goods-production. The worker has exactly the same needs for bread,
housing and clothing, regardless of the type of factory he works in.
Thus if that method of organising the economy is imminent, it is
absolutely imperative before it begins to function - which means
immediately - for us to have a parliament elected on the principle
that the needs of the masses must be represented, and not one which
represents the way an individual is employed in the production of
goods - in other words a parliament of equal suffrage, wholly sovereign
in its power, which can take an independent stand in relation to
this type of economic organisation. Parliament must be much more
sovereign in its powers than hitherto, for in the past its position of
power has not sufficed to break the power of vested commercial interests
nor the inevitable rule of fiscal interests in state-run industries.
This is a negative reason for equal suffrage. (pp.104-5, CWP)
One could wish for no better definition from Weber of his identification of the iron cage with “the system of needs and wants” based on “free labor”! But note that both here and in the quotation above in which Weber did not notice “any appreciable difference between the lives of the workers and clerks in the Prussian state-run mines and railways and those of people working in large private capitalist enterprises”, Weber vehemently emphasises the primacy of “consumption needs” on the part of workers rather than their demands over working conditions. For him,
an individual's needs are not determined by his position in the machinery
of goods-production. The worker has exactly the same needs for bread,
housing and clothing, regardless of the type of factory he works in. (Weber’s emphases.)
This skewed emphasis on the part of Weber on the “consumption” side of what we have called here “autonomous market demand” of workers, and the relative occultation of the conflict over “modern industrial work” is conclusive evidence of our thesis on the ‘iron cage’, but also an early portent of the insuperable problems that Weber’s formulation of the nature of capitalism will run into once he tries to give it a much more systematic and coherent definition in the Vorbermerkungen. More specifically, this inability to com-prehend the historical specificity of capitalist social relations of production will rigidify Weber’s sociological analysis into a “value-free positivistic” formalism of the Rationalisierung akin to the experimental science of Mach, the Neo-Kantian Forms and Norms, the Sollen of Cohen, Simmel, and Kelsen, and their equivalent in economics, the marginalism of Neoclassical Theory and the Austrian School,– all significantly removed from Nietzsche’s original and far more coherent critical exposition of this concept. Ultimately, this incomprehension will expose the intrinsic limitations of Weber’s plans for parliamentary democracy. We will return to these themes repeatedly in the remainder of this study.
(Now that we have cleared some initial theoretical hurdles, it may be appropriate to emphasize the dramatic departure of this study from the almost universally standard manner in which Max Weber’s political sociology is approached in academic disciplines – something that will become even clearer and more dramatic as the reader ventures further into our study when we deal with the Weberian concept of ‘charisma’. Almost invariably, these approaches begin with the erroneous interpretation of Weber’s stahlhartes Gehause as “modern rationalism” that turns Weber’s sociology precisely into that “romantic fantasy” that he himself denounced so vehemently! It is the mistaken equation of ‘the iron cage’ with “modern rationalism” that leads to a much more catastrophic misinterpretation and hypostatization of Weber’s entire work by hiding the immanent materiality and historical concreteness of the Nietzschean-Weberian Rationalisierung, its foundation upon “the system of needs and wants” (“the care for material and external goods”) and the ‘labor’ needed to provide for them that is the problem not just in Weber, but also in the greatest theoreticians of the bourgeois era from Hobbes through to Hegel and Marx, and then Schopenhauer, Nietzsche and Schumpeter, not to speak of the “liberal” tradition from de Tocqueville to Croce!)
The “system of needs and wants” can be satisfied best, most efficiently, as well as optimally through the “rational and systematical” application of industrial machinery, or means of production to the “steel-hard casing”, to the “increasing and finally… inexorable power over the lives of men” on the part of “material or external goods”. The “opposition” between private capitalism and the proposed Socialist “socialization of the means of production” on the part of a “state bureaucracy and its power” consists precisely in this: - that the “inexorable power of material goods over the lives of men” – or the iron cage – would then become even more binding, their “lives” or “labor” even less “free” than they are under “private capitalism”! The “rational organization of labor” on the part of “private capitalism” allows “a remnant of ‘individual’ freedom of movement” (Weber quoted below), of “autonomy” to “the lives of men” in terms of the “individual choices” that they make about the production of the “material and external goods” to which they are now almost “ascetically” devoted through “the system of needs and wants”. The “inexorable power” exercised by “material goods” over “the lives of men” induces the “rational organization of their labor”, of “modern industrial labor” so as to maximize the provision for and satisfaction of these needs and wants - which leads in turn to “concentration”, to “socialization” and to “bureaucratic rule” in the “provision of the most basic needs of social life”. But the “market mechanism” allows at least a modicum of “autonomy” between the “selection” of “material goods”, between “the rational organization” of their production and the “individual choices” of workers as to the nature and kind and quantity of the material goods that are produced!
Because the “Socialists” understand social relations of production as governed by a “scientific” Law of Value, the only point of disagreement with capitalists has to be ultimately not so much about the “separation” of the worker from the means of production, not about “the ownership of the means of production”, but rather about how this “separation” and “ownership” affect the production and distribution of this Value taken as a “rationally calculable” entity! That is why Weber can confidently dismiss the protestations of Socialists about “the anarchy”, the Planlosigkeit, of capitalist industry as the pathetic foibles of “lazy literati” and as “romantic fantasies”! “Socialism” in its current form, as the “cult” of “labor value”, its “deification” in the advent of the Socialist utopia of “bureaucratically planned production” is so infinitely inferior to the capitalist market system of consumer-driven production that its “ideals” can be dismissed with Nietzschean haughtiness and contempt! The Socialist Utopia is “Wille zur Ohnmacht” (will to powerlessness) right from the very start because any velleity toward its implementation would seek to deny the “conflict” inherent in production and promptly result in the erection of a “socialist bureaucracy” made up of “technocratic experts” that the workers themselves would be sure to oppose resolutely and violently precisely for their absurd denial of the existence or even the possibility of “conflict” in their “socialist paradise”! Weber would have relied here on the massive studies of the “massification” of German industry carried out by two of his Archiv colleagues, Werner Sombart (Der Moderne Kapitalismus and Sozialismus und die soziale Bewegung) and Robert Michels, whose well-researched Die deutsche Sozialdemokratie (published in Archiv für Sozialwissenschaft und Sozialpolitik XXIII (1906), S. 471-556) he would have appreciated much more than the ridiculous anecdotal generalities about the “Iron Law of Oligarchy” contained in his later “theoretical” compendium Political Parties, instantly translated in many languages! (The “controversy” is mentioned by G. Roth in his introduction to Economy and Society [at p.LXXI].)
Note that Weber intends the inevitable “conflict” over “the system of needs and wants” to cover not merely the “distribution” of material goods but also their “production” in terms of both working conditions and the choice of material goods produced. Yet the overall “rational conduct of capitalist business” will be dictated by the fact that for any given level of “conflict” there is only a given “rational conduct of business” possible for capitalists, related to the degree of market competition with other capitalists. Private capitalism allows this “conflict” to take place on two levels: - at the industrial level in terms of wages and conditions to be offered in the “labor market”, and at the broader market level in terms of workers’ demand for consumer goods. Private capitalism allows therefore the settlement of the conflict inherent to the wage relation both at the industrial-productive level of supply and also at the market-distributive level of demand. It is the relative political autonomy of demand for “labor” that determines its political “freedom” and permits thereby its “political organization and representation” – and it is this last that turns “free labor” into the real “motor of development” of capitalist industry and society overall.
If the worker goes to the entrepreneur today and says, ‘We cannot
live on these wages and you could pay us more', in nine out of ten
cases - I mean in peacetime and in those branches of industry where
there is really fierce competition - the employer is in a position to
show the workers from his books that this is impossible: 'My competitor
pays wages of such and such; if I pay each of you even only so
much more, all the profit I could pay to the shareholders disappears
from my books. I could not carry on the business, for I would get no
credit from the bank.' Thereby he is very often just telling the naked
truth. Finally, there is the additional point that under the pressure
of competition profitability depends on the elimination of human
labour as far as possible by new, labour-saving machines, and especially
the highest-paid type of workers who cost the business most.
Hence skilled workers must be replaced by unskilled workers or
workers trained directly at the machine. This is inevitable and it
happens all the time. (‘Socialism’, p.284 in CPW).
Were the entirety of private capitalist “industry” to fall into the hands of a “socialist state bureaucracy”, even this “remnant of ‘individual’ freedom of movement” would vanish, preventing the “political organization and representation” of conflict over wants and provision that private capitalism utilizes as the motor of its development! Were the “consumer choice” that the “free market” allows through its “price mechanism” regulating the allocation of “labor” to be abolished – labor intended as “modern industrial labour”, as a “rationally calculable” entity -, then the “rational organization” of industrial production would necessarily be eliminated, and so would the competitive dynamic of inter-capitalist rivalry and industrial conflict over wages and conditions; – were all this to be abolished through the “socialization of the means of production” and “socialist planning”, the disastrous consequence would be not only that workers, “labor”, would not achieve their socialist utopia because its “implementation” would be taken out of their hands by a “socialist technocratic elite”, but also that they would no longer be even “free” to choose which “material and external goods” are “rationally produced” by “modern industrial labour” or to negotiate the conditions and remuneration of that labour!
In other words, “labor” - a technically calculable quantity applicable rationally to the production of “material goods” - would no longer be “free” because its rational application to the production of “material goods” would also be “bureaucratically ruled” through the removal of “individual consumer choice” and the “market competition” between capitalist employers over wages and conditions that private capitalism allows! The “difference” between “wants” and their “provision” would no longer exist, and yet the conflict between the two - were the safety-valve of “the market” to be removed - would swell to the point of explosion! The elimination of the “anarchy” of capitalist production would lead straight to the elimination of “free labor” – that is, of the ability of “labor” to be “free to choose and to negotiate” the “material and external goods” (that make up “the iron cage”) and the working conditions for the satisfaction and provision of those wants and needs that jointly exercise their “inexorable power over the lives of men”.
It is entirely obvious here that whilst capitalist enterprise is able to rationalize the employment of labor power and the production process it adopts, it is unable to rationalize the “needs and wants” of workers! And this is why it is imperative that “labor” remain “free” if capitalist enterprise is to be run “rationally for profit” at all!
By removing the market pricing mechanism as a system of regulation, of social synthesis, as the ultimate “rationality” or “discipline” of private capitalism, Socialism would remove “the last remnant of ‘individual’ freedom of movement” within the iron cage – it would remove politics! -, and all this in the name of “a society finally free from conflict”!
The embarrassing thing would be that whereas the political and private-economic
bureaucracies (of syndicates, banks, and giant concerns) exist alongside one another
at present, as separate entities, so that economic power can still be curbed by political
power, the two bureaucracies would then be a single body with identical interests and
could no longer be supervised or controlled. In any event, profit would not be done
away with as the lode-star of production. Yet the State as such would then  have
to take its share of the workers' hatred, which is directed at the entrepreneurs at present.
(ibid., ‘Socialism’, pp.285-6)