…all the forces which promote full employment can only remain operative if they do not themselves undermine the rate of profit, or if they are not accompanied by other trends which do so. Likewise, all the forces which increase profits cannot achieve accelerated long-term growth if they do not at the same time lead to an expansion of the market for the ‘final consumers’, i.e. if they do not lead towards full employment.
– Ernest Mandel, “Keynes and Marx” in Dictionary of Marxist Thought, edited by Tom Bottomore
As I noted in my last post on As It Ought to Be:
The U.S. experienced increasing income and wealth equality from the time of the Great Depression until the late 1960s. (Then) (t)he U.S. capitalist class began, in the 1970s and even more markedly after the election of Ronald Reagan in 1980, to engage in conscious class warfare for the restoration of capitalist class power.
The economic crisis that began in 2007 and has continued to the present is the end result of these three decades of class warfare…
The economic order which has dominated for the last 30 years has been one that I have been describing as “neo-liberal.” I argued before that at the level of policy it has been characterized by a state that is focused on:
instituting strict welfare reform policies at home, disciplining the labor market through economic policies which exponentially increased the wealth of Wall Street, while keeping Main Street relatively secure by offsetting stagnating or declining hourly wages with an increase in working hours, and an expansion of the availability of consumer credit.
Neo-liberalism asserts that the state ought not to interfere in the economic realm, but this rule is unevenly and unequally applied. Under neo-liberalism, states have used their coercive powers not to bring the excesses of capitalism into check, but rather to act on behalf of capital to discipline labor and agents of dissent.
The question that this “neo-liberal” characterization of the present crisis begs, is “Is it possible for the current crisis to be resolved by a return to more ‘moderate’ capitalist policies such as those of Keynesianism or of the welfare state policies pursued by so many advanced industrial countries from WWII until the 1970s?”
If we believe that current crisis of the economic system is a crisis of neo-liberalism, one possible way to resolve the crisis would seem to be a return to economic policies that would address the problem of under-consumption through jobs stimulus or through the expansion of the social safety net. Taxes could be raised on corporations; government could be directly involved in the business of jobs creation, for instance through investments on building infrastructure; and social welfare benefits could be expanded, rather than contracted as is currently proposed by the Republicans.
As far as most American progressives are concerned, such a change would represent a return to the “normal” functioning of American capitalism, modeled on the situation that was true in the U.S. during the post-WWII economic boom. During this time there was strong economic growth, and this growth was accompanied by improving economic conditions for all classes.
So why do Republicans so stridently oppose a return to the normalcy of Keynesianism or of the Welfare State? Why does Capital dedicate so much money and effort to making sure that taxes are not increased on the wealthy, that the last remnants of a social safety net are ripped away, that the last vestiges of organized labor (concentrated in public sector unions) are destroyed? Is it simply because they are greedy? Is it simply because they are selfish, or mean-spirited? I would suggest that the answer is not that simple. I would suggest that Capital, cannot, as Capital, concede to demands for a return to a social welfare state.
During the course of writing Capital, Marx believed that he had discovered the most important law of capitalist political economy: the tendency of the rate of profit to fall. The decline in profits is a result of the long term trend toward ever more capital-intensive forms of investment, what Marx and Engels had famously referred to in the Communist Manifesto as the bourgeoisie’s drive to constantly “revolutionize the means of production.”
Anwar Shaikh writes of the tendency of the rate of profit to fall “Though various factors can temporarily counteract this trend, they operate within strict limits, so that the secular fall in the rate of profit emerges as the dominant tendency.” The falling rate of profit is ultimately responsible for periodic crises in the capitalist system that will continue to occur until the capitalist system is itself replaced. Shaikh further elaborates that:
… they (crises) cannot be simply ‘managed’ away by state intervention no matter how progressive its intent. Politics cannot and will not command the system unless it is willing to recognize that the capitalist solution to a crisis requires an attack on the working class, and that the socialist solution in turn requires an attack on the system itself.
When the high growth rates of the period 1947 until 1965 (an average of 4%) began to slow in the late 1960s and in the 1970s (to an average of under 3%), Capital set about the class warfare that I have been referring to as neo-liberalism as a solution to the long term decline in the average rate of profits. When the assault on labor, wages, and the social safety net was significantly under way, this assault acted as a countervailing tendency to the tendency of the rate of profit to decline. As a result especially of the “Reagan Revolution”, growth rates picked up again from 1982 until 1997 (3.6%), but have been very slow since the late 1990s (2.2%).
The only demands that “the 99%” could articulate under existing socio-economic power relations, are a return to the conditions that Capital sought to remove through the Capital Strike of the 1970s and through the subsequent neo-liberal assault on the working class. Such a return would not solve the current crisis of the capitalist system. It may bring temporary relief, but at the cost of exacerbating the underlying causes of the crisis in the first place.
There is one solution that history has shown to temporarily solve the crisis of over-accumulation brought on by the falling rate of profit: a major world war. While providing temporary economic stimulus, the New Deal did not solve the underlying crisis that caused the Great Depression. It was the Second World War, which was responsible for the mass destruction of a major portion of the productive capacity of the world’s major industrial nations that ultimately created renewed conditions for capital accumulation after the war.
Hoping that there is better way out of a Global Depression, in a 2009 piece in the Brooklyn Rail called “What Is to Be Done?” Paul Mattick, Jr. had the following to suggest as a possible alternative:
Will people instead turn their attention to bettering their own conditions of life in the concrete, immediate ways an unraveling economy will require? Will newly homeless millions look at newly foreclosed, empty houses, unsaleable consumer goods, and stockpiled government foodstuffs and see a way to sustain life? No doubt, as in the past, Americans will demand that industry or government provide them with jobs, but as such demands come up against economic limits, perhaps it will also occur to people that the factories, offices, farms, and other workplaces will still exist, even if they cannot be run profitably, and can be set into motion to produce goods that people need. Even if there are not enough jobs—paid employment, working for business or the state—there is work aplenty to be done if people organize production and distribution for themselves, outside the constraints of the business economy.
Or, as Ernest Mandel puts it in his entry on “Keynes and Marx” in the Dictionary of Marxist Thought, the inherent tendency of capitalism towards crisis implies:
…the need to create another economic system, with a different economic logic and relations of production; a transition towards socialism, the expropriation of the bourgeoisie, and the elimination of bourgeois state power.
These are the real tasks ahead. As I have argued here before, the choice before us is between Socialism or Barbarism.