An activity can be determined not only by its utility expressed either in the value-in-use it has produced or by the value-in-exchange expressed in the price paid for the activity. It can also be determined by the satisfaction which is also two-sided: from the manifestation of the person’s technical dispositions in his activity which masters things,66 and from the display by the person of hissocial dispositions in his belonging to social categories which master other persons.
In the latter case the stake that effectively motivates the person’s decisions is not money but status.
Vance Packard was among the first to describe the phenomenon of seeking for status(The Status Seekers. Penguin Books Ltd.) which seems to be becoming just as general a passion of the man of the modern age as seeking for money used to be for people living under the conditions of a classical capitalist formation. This change is also evident in the fact that while the old craving spurred one to procure the money, this new passion may prompt you to spend the money you, eventually, have not yet got but only borrowed, and the kick you get is not out of consuming the commodity thus purchased according to its value-in-use but out of the spent for it money symbolizing status.
But money raised can symbolize status, too. On such occasions, what we are interested in the first place is not between expenses and income (for instance, between the inconvenience of an activity and the reward for it) but by the difference between our income and others’ income.
In his classic experiment Tajfel has found that – depending on the context of social reality – the subject may be prepared to regard the difference between the income of the “ingroup” and an “outgroup” as more important than the absolute size of the income of his own group even if the two “groups” were formed along such a negligible dimension as the outcome of a manipulated test “showing” which of two painters, Klee and Kandinsky, the subject allegedly prefers and which one the other supposed subjects, whom he knows only by their initials throughout the experiment, do. (Human groups and social categories. Studies in social psychology. Cambridge University Press. Cambridge etc., 198l; see esp. pp. 268-287).
It has often been suggested as one of the tasks to be done in connection with the economic reform in Hungary that the levelling policy should be replaced by payments better adjusted to unequal performances. One must realize that this “egalitarianism” has never meant equally allocated pay and additional benefits of l0 million Hungarians, and also that an efficiency wage will never mean keeping in evidence how much each and every of the 10 million performances, which are incommensurable for qualitative reasons, is worth to the society: in both cases we are dealing with spontaneous or deliberately set up social categories within each of which organizations attempt to establish some equality and between them an inequality. Now, we ourselves do the same when, according to established or just being established social categories (that may be, but may not be the same as those kept in evidence by the organization), we exaggerate our similarities and differences, respectively, and, thus, we find that it is just to have as much salary as X has but it is unjust that Y’s is as much too; when we find it natural that we earn three times less than K but immoral that L has a salary of Ft 5,500 against our 5,000.
When we say that remuneration must be equitably adjusted to performance, we have to take this into consideration:
The performance expresses the person’s technical disposition: the richer the variety of skills the person is in possession of, the higher performance he is capable of, in general. Remuneration, on the other hand, expresses his social disposition: the higher a status the person’s social identity has, the higher his pay, as a rule.
But a higher performance is not necessarily quantitatively measurable as greater performance: one feels that the performance of an astronaut is higher than that of a slaughterhouse butcher whose in turn is higher than that of the housewife, although the first does not produce anything that could be measured materially, while the third provides her services during a seven-day workweek and her merit can be calculated materially as well. It seems however that when one is considering merit, one’s intuition is led not by this but by the unconscious consideration of which performance is more distinguishing: this is why one regards it as appropriate that the astronaut even decades after his exploit may get a higher pay than the butcher, while the housewife who often continues her services right up to the end of her pensionable age does not get either pay or pension.
Neither is the only way for remuneration to be advantageous when it is expressed in more money: every organization develops its system of favoritism according to which a part of the staff is favored as against the whole, the whole staff as against those not belonging to the organization; the regular customers are favored as against the whole clientele, the latter as against the entire population from where they are recruited, etc. True enough the advantages include some whose utility can be computed in money: above their regular salary, the favorably treated members but, to a lesser extent, every employee of the organization can use the objects of the organization’s movable and immovable property free or at reduced price, or can get services paid for them fully or partly by the organization; for the regular customer some of the services of the organization are available at a reduced price, etc. It seems however that our intuition which keeps track of the value of remuneration is not basically guided by the consideration of how much it amounts to in terms of money but how distinguishing the procured favor is.
Thus, it is not only the larger remuneration paid for the larger performance in terms of material efficiency that can adapt reward to the merit: a person distinguishing himself by his performance may get equally distinguished by his recompensation. In this case it is no longer the produced thing but the merit of the producing person that is measured: underlying a performance to be distinguished our intuition guess a specific combination of technical dispositions which distinguishes due to its rarity the person who bears it and, in the same way, behind the recompense which distinguishes the person we guess his distinguished social disposition.
The recompense you keep in evidence by its distinguishing force symbolizes status; it drives people by their passion to seek status even if outwardly they seem to be money-seekers: the fraternal or family team of small enterprises, that reappeared recently or was newly created within etatic large enterprises in Hungary, whip themselves to work at an inhuman pace not only in order that they can maintain their living standard or gain access to commodities that they could not even dream of when they were industrial proletarians or employees in public services, but to show how far they can get when it is all up to them.
How far indeed they have got is for them and for the others best expressed in the material value measured by the money or goods he can obtain and show off. Not, however, by its absolute size but by its distinguishing force: the fridge or car, par example, that were in Hungary in the early 60s the most fashionable status symbols are no longer suitable to show where you have arrived.
As a rule, higher pay symbolizes higher status. That the motivating effect of the remuneration in question here is, however, that which it exerts via the seeking for status is clearly revealed by the paradoxical effect of underpayment upon the productivity of the referred to social category. It is revealing of the kind of mechanism that works hear that a representative of the underpaid category or an underpaid person within any category often proudly complains: “Where would you find another idiot like me doing this job for this money?” This is to express his paradoxical claim that if the exclusivity of his performance is not acknowledged by a pay that would be equally exclusive, at least the exclusivity of that other performance should be recognized that he overworks even being underpaid.
Kornai in his book of the planning system (The shortage. Közgazdasági és Jogi Könyvkiadó. Budapest, 1980. In Hungarian) describes the same passion labelling it the “internal pressure for expansion” when he seeks an answer to the question that is crucial for the economic psychology of this system: “What may drive the socialist business leader to invest and accumulate real capital when he is not interested in the profit?”
The most important element, he finds, is that “the leader gets identified with his job.” A leader like this “can always find a basis for comparison against which his department seems to be outdated and poor. This induces the executive to experience professional jealousy in the nice sense of the word. He would like to increase his professional prestige. To this some less noble but completely understandable human motives may, or may not, be added. Parallel with the growth of the company or institution grows the power, the social prestige of the leader and together with this his sense of his own importance. To direct ten thousand people is a greater thing than to guide five thousand, most people believe. The larger power may entail a larger salary and bonus, as well as more privileges.” (pp. 204-205).
The key word here is the one I italicized.
Let us imagine a state of affairs in which Hungary would be divided into administrative units of 5 000 people each. Now, let take a change that would double the population of each unit. In this case no arguments could be adduced to verify that the leaders of the administrative units would feel a greater thing to direct ten thousand people than to guide five thousand.
True enough, Kornai declares: “When someone has become the rector of one of the country’s largest universities, or is responsible for the conservation of all the monuments in the country, or is in charge of the water supply of the whole nation, neither his salary, nor his prestige or power will rise if he manages to obtain 20% more investment for his domain.” But then he himself recognizes that “the interior pressure for expansion is manifest at every level of the economic hierarchy: the head of a few-man-strong brigade to the minister in charge of hundreds of thousands or millions. When it comes to the distribution of the appropriation for investment every one of them fights so that our brigade, our enterprise, our ministry should get as large a share as possible.” (p. 206).
Another thought experiment may lead us to realize that what motivates the leader in cases like this is not so much the expansion of the unit he is in charge of as gauged by the material yardstick as the distinguishing nature of the possibility of this expansion:
Which business leader would meet with the greatest degree of approval from his staff and himself? The one who gets the adequate share of the investment appropriated for a nationwide development of 20%? The one who alone manages to clinch a 2% expansion possibility out of all the 100 economic units applying? Or the one who despite a nationwide freeze on investment which is strictly binding for 9999 out of 10 000 economic units still procures the investment necessary for an 0.2% expansion?
Comparing this psychological factor to such economic ones as the necessarily strained nature of the economic plan and the tendency of socialist enterprises to stockpile, Kornai points out that, as compared with the latter, “the interior pressure for expansion is even more momentous because its effect upon the operation of the system is more pronounced” (ibidem), and especially its effect in producing shortage, what he considers the most essential phenomenon of a planning system.
To attach such a great importance to a psychological factor in the operation of an economic system must be surprising for the logic manifest both in reasoning either in favor of the market or the planning system. Yet it very logically fits the basic feature of post-capitalist economic systems which the present paper has described: notably that they have to produce their personal conditions just as the classical capitalist formation had to produce all the material conditions for its operation.
The training of personal conditions in service organizations of various types is a process at whose idealizedbeginning one finds completely untrained, thus in their role interchangeable, persons while at its idealized end one finds persons who are irreplaceable in the role for which they have been specifically trained, or which has been shaped to fit the trained specificity of the person.67 One can therefore accept it as an idealized tendency that the status which indicates how irreplaceable the incumbent of a specific role within the organization is the measure that shows how far the person has progressed in being trained as the personal condition of the operation of the economic system.