III. Neo-capitalism
The Origins of
Neo-capitalism
The great economic crisis of
1929 first changed the attitude of the bourgeoisie and its
ideologists toward the state; subsequently it changed the
attitude of this same bourgeoisie toward the future of its own
system.
Some years ago a notorious
trial took place in the United States, the trial of Alger Hiss,
who had been an assistant in the State Department during the
war. At Hiss’s trial, one of his most intimate friends, a
journalist for the Luce publications named Whittaker Chambers,
was the key witness in his conviction for perjury, actually as a
Communist who had allegedly stolen documents from the State
Department and passed them on to the Soviet Union. This
Chambers, who was somewhat neurotic, had been a Communist during
the first ten years of his adult life and wound up as religious
editor of the weekly magazine Time. He wrote a
lengthy confessional under the title Witness.
In this book there is a passage stating approximately the
following concerning the 1929-1939 period: “In Europe the
workers are socialist and the bourgeoisie are conservatives; in
America, the middle classes are conservatives, the workers are
democrats, and the bourgeoisie are communists.”
It is obviously absurd to
present things in this outrageous way. But there can be no doubt
that the year 1929 and the period following the great crisis of
1929-1932 was a traumatic experience for the American
bourgeoisie which had been the only one in the whole worldwide
capitalist class to be imbued with a complete, blind confidence
in the future of the “free enterprise” system. It suffered a
terrible shock during this 1929-1932 crisis, a period which was
in general the equivalent for American society, so far as
becoming conscious of the social question and questioning the
capitalist system are concerned, to the period Europe went
through at the birth of the socialist workers’ movement, the
period from 1865 to 1890 in the past century.
For the bourgeoisie, this
questioning of the system various forms on the world scale. It
took the form of an attempt to consolidate capitalism by means
of fascism and other authoritarian experiments in certain
Western, Central and Southern European countries. It took a less
violent form in the United States, and it is this American
society of the years 1932-1940 which foreshadows what is called
neo-capitalism today.
Why is it that it was not an
extended and generalized fascist experience which gave
neo-capitalism its fundamental characteristic but rather the
experiment of an “idyllic detente” in social tensions? The
fascist system was a regime of extreme social, economic and
political crisis, of extreme tensions in class relationships,
which, in the final analysis, was determined by a long period of
economic stagnation, in which the margin for discussion and
negotiation between the working class and the bourgeoisie was
virtually reduced to zero. The capitalist system had become
incompatible with any residue of a more or less independent
working-class movement.
In the history of capitalism we
can distinguish between its periodic crises which recur every 5,
7, or 10 years and its cycles of a longer period, which were
first discussed by the Russian economist Kondratief and which
may be called long-term cycles of 25 to 30 years. A long-term
cycle characterized by high growth rates is often followed by a
long-term cycle characterized by a lower growth rate. It seems
obvious to me that the period of 1913 to 1940 was one of these
long-term cycles of stagnation in capitalist production, during
which all the successive cycles from the crisis of 1913 to that
of 1920, from the crisis of 1920 to that of 1929, were marked by
particularly severe depressions because of the fact that the
long-term trend was one of stagnation.
The long-term cycle which began
with the second world war, and in which we still remain – let
us call it the 1940-1965 or 1940-1970 cycle – has, on the
contrary, been characterized by expansion, and because of this
expansion, the margin for negotiation and discussion between the
bourgeoisie and the working class has been enlarged. The
possibility has thus been created for strengthening the system
on the basis of granting concessions to the workers, a policy
which is being practiced on an international scale in Western
Europe and North America and may even be extended to several
countries in Southern Europe in the near future. This
neo-capitalist policy is based on rather close collaboration
between an expansive bourgeoisie and the conservative forces of
the labor movement and is fundamentally sustained by a rising
trend in the standard of living of the workers.
Nevertheless, in the background
of this whole development remains the question mark placed over
the system, the doubts regarding the future of the capitalist
system, and on that level there is no longer any doubt. In all
the decisive layers of the bourgeoisie, the deepest conviction
reigns that the automatism of the economy of and by itself, the
“market mechanism” cannot insure the survival of the system,
that it is no longer possible to rely on the automatic internal
functioning of capitalist economy, and that a conscious and
expanding intervention, more and more regular and systematic in
character, is necessary in order to save this system.
To the extent that the
bourgeoisie itself is no longer confident that the automatic
mechanics of capitalist economy will sustain its rule, another
force must intervene for any long-term salvation of the system,
and this force is the state. Neo-capitalism is a capitalism
whose pre-eminent characteristic is the growth of intervention
by the state into economic life. From this point of view as
well, the current neo-capitalist experience in Western Europe is
only an extension of the Roosevelt experience in the United
States.
To understand the origins of
present-day neo-capitalism, however, we must also take a second
factor into account to explain the growing intervention in
economic life by the state, and that is the cold war. More
generally this can be viewed as the challenge which the totality
of anti-capitalist forces have hurled at world capitalism. This
climate of challenge makes the perspective of another serious
economic crisis of the 1929-1933 type completely intolerable to
capitalism. Imagine what would happen in Germany if there were
five million unemployed in West Germany while a scarcity of
labor existed in East Germany. It is easy to see how intolerable
this would be from a political point of view, and this is why
state intervention into the economic life of the capitalist
countries is above all anticyclic, or, if you prefer, anticrisis
in character.
A Permanent Technological
Revolution
Let us dwell a moment upon this
phenomenon of long-term expansion. Without this the specific
neo-capitalism we have witnessed in Western Europe for 15 years
is incomprehensible.
This long-term cycle started in
the United States with the second world war. In order to
understand the causes of this phenomenon we must remember that
in most of the other expanding cycles in the history of
capitalism we find the same common element repeated:
technological revolutions. It is no accident that a cyclical
expansion of the same kind preceded the period of stagnation and
crisis of 1913-1940. The end of the nineteenth century was an
extremely peaceful period in the history of capitalism, during
which there were no wars, or practically none, except for
colonial wars, and during which a whole series of technological
researches and discoveries from the previous phase began to find
their application. In the current period of expansion, we are
witnessing an accelerated technical progress, a genuine
technological revolution, for which the expression “second
industrial revolution” or “third industrial revolution”
hardly seems adequate. We find ourselves, in fact, before an
almost uninterrupted transformation of the techniques of
production. This phenomenon is virtually a by-product of the
permanent arms race, of the cold war in which we have been
involved since the end of the second world war.
In fact, if you carefully
examine the origin of 99 per cent of the technological changes
applied to production, you will see that they are military; you
will see that these changes are by-products of new techniques
which first found their application in the military sphere. It
is only later, after a longer or shorter time lag, that they
come into the public domain to a certain extent and are applied
in the sphere of civilian production.
So true is this fact that the
advocates for a French striking force (nuclear force) are using
it as a major argument today. They explain that if this striking
force is not developed, the techniques which will determine an
important part of industrial productive processes in 15 or 20
years will not be known in France, for they will all be the
by-products of nuclear techniques and their allied techniques on
the industrial level.
Here I do not wish to debate
this thesis which I consider unacceptable in other respects; I
simply wish to underline that it confirms, even in a somewhat
“extremist” fashion, that most of the technological
revolutions which we are undergoing in the industrial domain and
in productive technique generally are by-products of technical
revolutions in the military sphere.
To the degree that we are
involved in a permanent cold war, which is characterized by a
permanent search for technical changes in the sphere of
armaments, we have a new factor here, a so-to-speak,
extra-economic source, which feeds continuous changes into
productive technique. In the past, when this autonomy in
technological research did not exist, when it was essentially a
product of industrial companies, there was a major factor which
determined the cyclical progress of this research. The
industrialist would say: we must slow up innovations now,
because we have extremely costly installations which must first
be amortized. They must become profitable, their installation
costs must be covered, before we can start out on another phase
of technological change.
This is so true that economists
like Schumpeter, for example, have used this cyclical rhythm in
technical revolutions as the basic explanation for successive
long-term cycles of expansion, or for long-term cycles of
stagnation.
Today this economic motive does
not act in the same way. On the military level, no reasons are
valid for putting an end to the research for new weapons. On the
contrary, the omnipresent danger exists that the enemy will be
the first to find a new weapon. There is consequently a real
stimulus for permanent research, uninterrupted and practically
without any economic consideration (at least for the United
States), so that the river flows on with virtually no
obstruction. This means that we are passing through an era of
almost uninterrupted technological transformation in the sphere
of production. You have only to recall what has been produced
during the last 10-15 years, starting with the release of
nuclear energy and proceeding through automation, the
development of electronic computers, miniaturization, the laser
and a whole series of phenomena in order to grasp this
transformation, this uninterrupted technological revolution.
The term “continuous
technological revolution” is now just another way of saying
that the renewal period of fixed capital has been shortened.
This explains the worldwide expansion of capitalism. Like every
long-term expansion in the capitalist system, the limits of the
present expansion are determined by the amount of fixed
investments.
The rapid renewal of fixed
capital also explains the reduction in length of the basic
economic cycle. This cycle is normally determined by the age of
the fixed capital.
To the extent that this fixed
capital is now renewed at a more rapid rate, the length of the
cycle is also narrowed. We no longer have crises every seven or
10 years but instead have recessions every four to five years.
We have entered a far more rapid series of cycles of far shorter
duration than those which occurred prior to the second world
war.
Finally, to conclude this
examination of the conditions under which today’s
neo-capitalism is developing, there is a rather important change
taking place on a world scale in the conditions under which
capitalism exists and is developing.
On the one hand, there is an
enlargement of the so-called socialist camp, and on the other,
the colonial revolution. And while the balance, so far as a
widening of the “socialist camp” is concerned, effectively
represents a loss from the point of view of world capitalism –
loss of raw materials, investment opportunities for capital,
markets, and on all other levels – the balance, so far as the
colonial revolution is concerned, paradoxical as this may seem,
has not as yet resulted in a substantial loss to the capitalist
world. On the contrary, one of the concomitant factors
explaining the scale of economic expansion of the imperialist
countries occurring in this phase, is the fact that, insofar as
the colonial revolution remains in the framework of the
capitalist world market (except where it gives birth to other
so- called socialist states), it serves as a stimulus to the
production and export of industrial equipment, the products of
heavy industry in the imperialist countries.
This means that the
industrialization of the underdeveloped countries,
neo-colonialism, the development of a new bourgeoisie in the
colonial countries, all constitute further supports, together
with the technological revolution, for the long-term expansion
trend in the advanced capitalist countries. Since these
fundamentally have the same effects, they also lead to a growth
in production for heavy industry and for the industries engaged
in mechanical construction in the manufacture of machinery. A
part of this machinery serves for the accelerated renewal of
fixed capital in the advanced capitalist countries; another part
serves for the industrialization, the mechanization of the newly
independent colonial countries.
By approaching the subject in
this way, we are able to grasp the deeper meaning of the
neo-capitalist phase which we are now witnessing, which is that
of a long-term expansion of capitalism, a period which I believe
is limited in time, just like similar periods in the past. I do
not in the least believe that this period of expansion will last
forever and that capitalism has now found the philosopher’s
stone which will allow it to avoid not only its cyclical crises
but also its long-term cycles of successive relative expansion
and stagnation. But it is this phase of expansion which now
confronts the working-class movement of Western Europe with its
specific problems.
Let us now turn to the
fundamental characteristics of this governmental intervention
into capitalist economy.
The Importance of Armament
Expenditures
The first objective phenomenon
which is a tremendous factor in facilitating the growing
governmental intervention in the economic life of the capitalist
countries is precisely this permanence of the cold war and this
permanence in the armaments race. To say permanence of the cold
war, permanence in the armaments race, permanence of an
extremely high military budget, is also to say state control of
an important part of the national income. If we compare the
economies of all the big advanced capitalist countries of today
with those of all the capitalist countries prior to the first
world war, we immediately see the extremely important structural
change which has taken place and which is independent of every
theoretical consideration and research. It is a consequence of
the rise in the military budget. Whereas prior to 1914 the total
state budget took 5 per cent, 6 per cent, 4 per cent, 7 per cent
of the national income, the budgets of capitalist states today
represent 15 per cent, 20 per cent, 25 per cent or even in some
cases 30 per cent of this income.
If for the moment we disregard
all considerations of interventionism, the very fact alone of
this increase in permanent armament expenses signifies that the
state is already controlling an important part of the national
income.
I have stated that this cold
war may remain permanent for a long period. That is my personal
conviction. It is permanent because the class contradictions
between the two camps confronting each other on a world scale
are permanent. Because there is no logical reason for assuming,
whether for the short or long run, that the international
bourgeoisie will voluntarily disarm in the face of its global
enemies or that the Soviet Union and the United States will
reach an agreement which might permit a rapid reduction in these
armament expenses by one-half or two-thirds or three-fourths.
We therefore start from the
point that permanent military expenses will tend to rise in
amount and importance relative to the national income, or to
become stabilized, that is to say, increase to the extent that
the national income will expand during this phase. And it is the
very fact of this expansion in military expenses which creates
the important role played by government in economic life.
You may know the article by
Pierre Naville published in the Nouvelle Revue Marxiste
several years ago. In it he reprinted a set of figures presented
by the director of the [French] budget in 1956, showing the
practical importance of military expenses for a whole series of
industrial branches. There are many industrial branches, ranking
very high in importance and among the leaders in technological
development, which are working mainly on contracts with the
state and which would be condemned to an early demise if these
state contracts disappeared: aeronautics, electronics, naval
construction, telecommunications and even the engineering
profession and of course, the nuclear industry.
In the United States the
situation is similar; but to the degree that these leading
branches are more highly developed and that the American economy
is on a larger scale, these branches constitute the economic
axis for whole geographic regions. It can be said that
California, which is the state undergoing the greatest
expansion, is largely living off the American military budget.
If the country had to disarm and remain capitalist, it would be
a catastrophe for the state of California, where the missile
industry, military aviation industry and electronic industry are
all concentrated. It is unnecessary to draw a picture to
illustrate the political effects of this special situation on
the attitude of California’s bourgeois politicians: you will
hardly find them at the head of the struggle for disarmament!
A second phenomenon of this
expanding phase which at first sight appears to be in
contradiction with the first is the increase in what might be
called social expenditures, that is, everything tied more or
less closely to social insurance. These outlays have been
constantly increasing in governmental budgets generally, and
constitute a significant part of the national income over the
past 25-30 years.
How Crises are
“Amortized” in a Recession
This growth in social welfare
expenditures is the result of several concomitant phenomena.
There is, first of all, the
pressure of the working-class movement, which has always aimed
at ameliorating one of the most distinct characteristics of the
proletarian condition: insecurity. Since the value of
labor-power only roughly covers the needs of its current upkeep,
every interruption in the sale of this labor-power – that is
to say, every accident which interferes with the worker’s
normal job: unemployment, sickness, disability, old age –
casts the proletarian into the depths of poverty. In the
beginning of the capitalist system, there was only
“charity,” private or public, to which the jobless workers
could turn in distress, with only insignificant material results
and at the price of a terrible blow to his human dignity. Little
by little, the working-class movement has imposed the principle
of social insurance, first voluntary, then compulsory,
against these blows of fate: health insurance, unemployment
compensation, old-age insurance. And the struggle has finally
wound up with the principle of social security, which would
theoretically cover the wage and salary earner against all
losses of current earnings.
Then there is a certain
interest on the part of the state. The institutions receiving
the great amounts used for financing this social security
program often have large amounts of liquid funds. They can
invest these funds in government obligations, make loans to the
state (short-term obligations, as a rule). The Nazi regime
applied this technique and it subsequently spread to most of the
capitalist countries.
The ever mounting size of these
social security funds has, moreover, brought about a special
situation, posing a theoretical and practical problem to the
working-class movement. The latter properly considers that all
funds paid into the social security fund – either by the
employers, or by the state, or by withholdings from the wages of
the workers themselves – simply constitutes a part of wages,
an “indirect wage,” or “deferred wage.” This is the only
reasonable point of view, and one harmonizing, moreover, with
the Marxist theory of value, since everything received by the
worker in exchange for his labor-power should in effect be
considered the price of that labor-power, regardless of whether
it is paid him immediately (direct wage), or later (deferred
wage). For this reason, “parity management” (union-employer,
or union-state) of social security funds must be considered as a
violation of a worker’s right. Since these funds belong only
to the workers, any unwarranted interference in their management
by social groups other than the trade unions must be rejected.
The workers should no more allow “parity management” of
their wages than the capitalists permit “parity management”
of their bank accounts.
But the mounting size of these
payments into social security has managed to create a certain
“tension” between direct wages and deferred wages, since the
latter sometimes reach 40 per cent of the total wage. Many
trade-union centers are opposed to further increases in
“deferred wages” and want to concentrate on having every new
gain in the form of an immediate gain in direct payments to the
worker. It must be understood, however, that underneath the fact
of the “deferred wage” and of social security lies the
principle of class solidarity. Actually, the funds for
sickness, accidents, etc., are not based on the principle of
“individual return,” (each one eventually receiving
everything he or the employer or the state has paid in for his
account), but on the insurance principle. Those who do
not have accidents pay so that those who do may be fully
covered. The underlying principle in this practice is that of class
solidarity, i.e., the interest of the workers in avoiding
the creation of a sub-proletariat, which would not only
undermine the militancy of the laboring masses (each individual
fearing to be driven into this sub-proletariat sooner or later)
but would also represent a danger of competition for jobs and
its threat to wages. Under these conditions, instead of
complaining about the “excessive scale of the deferred wage,
we should demonstrate its pitiful inadequacy, for it
brings about a terrible drop in the standard of living of most
old workers, even in the most prosperous capitalist countries.
The effective answer to the
problem of the “tension” between direct and indirect wages
is the demand to replace the principle of a solidarity limited
solely to the laboring class by the principle of a solidarity
widened to include all citizens, the transformation of social
security into national services (of health, full
employment, old age) financed by a progressive tax on
incomes. Only in this way can the “deferred wage wind up
as a genuinely important increase in wages and a genuine
redistribution of the national income in favor of the wage
earners.
It must be recognized fully
that up to now this has not been accomplished on a great scale
under the capitalist system, and it is even necessary to pose
the question of whether this can be realized without provoking a
capitalist reaction of such character that we would soon find
ourselves in a period of revolutionary crisis. In point of fact,
the most interesting experiences with social security, such as
the one introduced in France after 1944 and more particularly,
the National Health Service in Great Britain after 1945, were
financed to a far greater extent by taxing the workers
themselves (mainly by increasing indirect taxes and by
increased taxation of even modest wages, as in Belgium for
example) than by taxation of the bourgeoisie. That is why we
have never seen a genuine and radical redistribution of the
national income by taxation in the capitalist system; it remains
one of the great “myths” of reformism.
There is another aspect to this
growing importance of “deferred wages,” of social insurance,
to the national income of industrialized capitalist countries:
it is their anticyclical characteristic. Here we find
another reason why the bourgeois state, neo-capitalism, is
interested in increasing the volume of these “deferred
wages.” It is because it plays the role of a shock-absorbing
cushion in preventing too sudden and too violent a drop in the
national income in the event of a crisis.
Formerly when a worker lost his
job, his income fell to zero. When a fourth of the labor force
in a country was unemployed, the income of wage earners and
salaried workers automatically decreased by a fourth. The
terrible consequences of this drop in income, this drop in
“total demand,” for capitalist economy in general has
frequently been described. It gave the capitalist crisis the
appearance of a chain reaction, which kept on going with
terrifying logic and inevitability.
Let us assume that the crisis
breaks out in a sector producing machines and that this sector
is compelled to close its plants and discharge its workers. The
loss of income by the latter radically reduces their purchases
of consumer goods. Because of this, there is very soon an
overproduction in the sector making consumer goods, which, in
its turn, is soon compelled to close its plants and dismiss some
of its personnel. Again, therefore, there will be a further drop
in the sales of consumer goods, and an increase in inventories.
At the same time, the plants manufacturing consumer goods, being
hard hit, will reduce or cancel their orders for machines, which
will bring about the shutdown of more firms engaged in heavy
industry, consequently, the dismissal of another group of
workers, followed by a new drop in buying power for consumer
goods, with another consequent sharpening of the crisis in the
light industrial sector, which will in its turn create new
layoffs, etc.
But once a system of effective
unemployment insurance has been instituted, these cumulative
effects of the crisis are dampened: the greater the
unemployment compensation, the stronger will be the dampening
effect on the crisis.
Let us return to the
description of the beginning of the crisis. The sector
manufacturing machinery experiences an overproduction and has to
lay off some of its personnel. But when the unemployment
compensation amounts to let us say 60 per cent of his wages,
this layoff no longer means a total loss of income to the
unemployed, but only a reduction of 40 per cent in his income.
Ten per cent unemployment in a country no longer means an
overall drop in demand of 10 per cent but only of four per cent;
25 per cent unemployment now means no more than a 10 per cent
drop in income. And the cumulative effect of this reduction
(which is figured in academic economic science by applying a
multiplier to this reduction in demand) will be correspondingly
reduced; the crisis will not hit the consumer goods sector so
forcefully; the latter will therefore lay off far fewer workers;
it will be able to continue some of its orders for machines,
etc. In brief, the crisis does not spread out in the form of a
spiral; it is “stopped” midway. Then it begins to be
resolved.
What we now call a
“recession” is nothing but a classical capitalist crisis
which has been abated, particularly by means of social
insurance.
In my Marxist Economic
Theory, I cite data on the last American recessions which
empirically confirm this theoretical analysis. In fact,
according to these figures, it appears that the recessions of
1953 and 1957 began with extreme sharpness and had an amplitude
comparable in every respect to the severest crises of capitalism
in the past (1929 and 1938). But contrary to these pre-second
world war crises, the recession of 1953 and of 1957 stopped
expanding after a certain number of months, were consequently
stopped halfway, then began to recede. We now understand one of
the fundamental causes for this transformation of crises into
recessions.
From the standpoint of the
distribution of the national income between capital and labor,
the mounting size of the military budget has an opposite effect
to the similar increase in “deferred wages,” since in every
case a part of the “deferred wage” always stems from
supplementary payments by the bourgeoisie. But from the
standpoint of its anticyclical effects, the mounting
size of the military budget (of public expenses generally) and
the mounting size of social insurance play identical roles in
“abating” the violence of crises, and gives neo-capitalism
one of its special aspects.
Aggregate demand can be divided
into two categories: the demand for consumer goods and the
demand for producer goods (machines and equipment). The
expansion in social security funds makes it possible to avoid an
extreme drop in expenditures (in demand) for consumer goods
after the outbreak of a crisis. The expansion in public
expenditures (especially in military expenditures), makes it
possible to avoid an extreme drop in expenditures (in demand)
for producer goods. Thus, these distinctive traits of
neo-capitalism operate in both sectors, not in suppressing the
contradictions of capitalism – crises break out just as they
did before, capitalism has not found a means of insuring a more
or less harmonious and uninterrupted growth – but in reducing
their amplitude and seriousness, at least temporarily.
The framework for this process
must be a long-term period of accelerated growth but at the cost
of permanent inflation.
The Tendency to Permanent
Inflation
One of the consequences of all
the phenomena we have just discussed, all of them anticyclic in
their effect, is what may be called a tendency to permanent
inflation. This has become an obvious manifestation in the
capitalist world since 1940, since the beginning or eve of the
second world war.
The fundamental cause of this
permanent inflation is the importance of the military sector, of
the armament sector, in the economy of most capitalist
countries. The production of armaments has this special
characteristic: it creates purchasing power in exactly the same
way that production of consumer goods or production of producer
goods does– wages are paid in plants making tanks or rockets,
just as they are paid in plants manufacturing machines or
textiles, and the capitalist owners of these plants pocket a
profit just like the capitalist owners of steel mills or textile
plants – but in exchange for this supplementary buying power,
there is no corresponding supplementary merchandise placed on
the market. Parallel with the creation of buying power in the
two fundamental sectors of classical economy, the consumer goods
sector and the producer goods sector, is the appearance of a
mass of merchandise on the market place, which is capable of
absorbing this purchasing power. In contrast, the creation of
purchasing power in the armament sector has no compensatory
increase in the mass of merchandise, either consumer goods or
producer goods, whose sale can be absorbed by the purchasing
power thus created.
The only condition in which
military expenses would not be inflationary would be if they
were completely paid by taxes, and that in proportions which
would permit a continuation of exactly the same ratio between
the buying power of workers and capitalists on the one hand and
between the value of consumer goods and producer goods on the
other. This situation does not exist anywhere, not even in those
countries where the tax bite is greatest. In the United States,
in particular, total military expenses are not at all covered by
taxation, by a reduction in the supplementary buying power, so
that there is a corresponding tendency toward permanent
inflation.
There is also a phenomenon of a
structural nature in capitalist economy in the period of
monopoly which has the same effect, namely, the rigidity of
prices so far as any decline is concerned.
The fact that the great
monopolistic trusts virtually or completely control a whole
series of markets, particularly the producer goods and hard
consumer goods markets, shows up in an absence of price
competition in the classical meaning of the term. Whenever
supply is less than demand, prices increase, whereas when supply
exceeds demand, prices do not fall but remain stable or fall
only slightly. This is a phenomenon which has been noted in
heavy industry and in the durable consumer goods markets over
practically 25 years. It is moreover a phenomenon tendentially
linked to the long-term cycle previously discussed, for it must
be frankly acknowledged that we cannot predict changes in the
prices of durable consumer goods after the close of this
long-term period of expansion.
It cannot be excluded that when
the automobile industry will increase its excess productive
capacity, this will wind up with a new competitive struggle over
prices and with spectacular declines. It is possible to defend
the thesis that the famous automobile crisis predicted for the
second half of this decade (1965, 1966, 1967), could be absorbed
relatively easily in Western Europe, if the selling price of
small cars was lowered by one half. If the day came that a
Citroen 4CV or a 2CV would sell for 200,000 or 250,000 old
francs, there would then be such an increase in demand that this
excess capacity would most likely disappear in a normal way.
This does not appear possible within the framework of present
agreements, but if we view the matter in terms of a long period
of five or six years of cut-throat competition, something
entirely possible in the European automobile industry, then the
eventuality cannot be excluded.
Let us immediately add that
there is a more likely eventuality, one in which excess
productive capacity is suppressed by the shutting down and
disappearance of a whole set of firms, in which case the
disappearance of this excess capacity will prevent any important
drop in prices. That is the normal reaction to such a situation
in the system of monopoly capitalism. The other reaction must
not be completely excluded, but up to this time we have not
witnessed it in any sphere. In the oil industry, for example,
the phenomenon of potential overproduction has existed for six
years, but the lowering of prices permitted by the big trusts,
which operate at profit rates of 100 per cent and 150 per cent,
is a drop in the bucket: the price reductions amount to 5 or 6
per cent, whereas the trusts could reduce the price on gasoline
by 50 per cent if they wanted to.
“Economic Planning”
The other side of the
neocapitalist coin has to do with the body of phenomena which
has been summed up in the terms “managed economy,”
“economic programming,” or still further indicative
planning.” It is another form of conscious intervention in the
economy, contrary to the classical spirit of capitalism, but it
is an intervention which is characterized by the fact that it is
no longer mainly a governmental act but is more an act of
collaboration, of integration, between government on one side
and capitalist groups on the other.
How can we explain this general
tendency to “indicative planning,” to “economic
programming,” or to a “managed economy”?
We must start from a real need
of big capital, a need which derives from precisely the
phenomenon which we described in the first part of our
discussion. We spoke there of an acceleration in the rhythm of
the renewal of mechanical installations; or a more or less
permanent technological revolution. But when we speak of an
acceleration in the rhythm of renewal of fixed capital we can
only be referring to the necessity of amortizing continuously
expanding investment expenses in periods of time which
continuously become shorter. Certainly this amortization must be
planned and calculated in the most accurate way possible, so as
to preserve the economy from short-term fluctuations, which
contain the danger of creating incredible disorder in
enterprises operating with millions of dollars. This fundamental
fact is the cause of capitalist economic programming for its
drive toward a managed economy.
Today’s capitalism of the
great monopolies assembles tens of millions of dollars in
investments which have to be amortized speedily. It can no
longer afford to run the risk of substantial periodic
fluctuations. It consequently requires a guarantee that its
amortization costs will be covered and assurance that its
revenue will continue, at least for average periods of time
corresponding more or less to the amortization period of its
fixed capital, periods which now extend between four and five
years.
Moreover, the phenomenon has
emerged directly from within the capitalist enterprise itself,
in which the ever increasing complexity of the productive
process implies increasingly precise planning efforts
in order for it to function as a whole. Capitalist programming
is, in the last analysis, nothing but the extension, or more
exactly, the coordination on a national level of what has
already been happening on the level of the large capitalist
enterprise or capitalist groupings such as the trust or cartel
embracing a group of companies.
What is the fundamental
characteristic of this indicative planning? It is essentially
different in nature from socialist planning. It is not
mainly concerned with setting up a set of objectives in
production figures and insuring the attainment of these goals.
Its major concern is with coordinating the investment plans
already drawn up by private firms and with effecting this
necessary coordination by proposing, at the very most, certain
objectives considered to have priority on the governmental
level. These are, of course, objectives corresponding to the
general interest of the bourgeois class. In a country like
Belgium or Great Britain, the operation has been effected in a
pretty crude way; in France, where everything happens on a much
more refined intellectual level, and a great deal of camouflage
is used, the class nature of the mechanism is less obvious. It
is nonetheless identical with that of the economic programming
of the other capitalist countries. In essence, the activity of
“planning commissions,” of “planning bureaus,” of
“programming bureaus,” consists of consulting
representatives of various employer groups, examining their
investment projects and market forecasts, and “harmonizing”
the forecasts of the different sectors with each other, and
endeavoring to avoid bottlenecks and duplications.
Gilbert Mathieu published three
good articles on this subject in Le Monde
(March 2, 3 and 6, 1962), in which he pointed out that as
against 280 trade unionists who have participated in the work of
the different planning commissions and subcommissions, there
were 1,280 company heads or representatives of employer
associations. “In practice, Mr. Francois Perroux believes, the
French plan is often set up and put into operation under the
preponderant influence of the big companies and financial
institutions.” And Le Brun, although one of the most moderate
trade-union leaders, asserts that French planning “is
essentially arranged between the higher agents of capital and
the higher civil servants, the former normally having greater
weight than the latter.”
This confrontation and
coordination of the decisions of firms is, moreover, very useful
for capitalist entrepreneurs; it constitutes a kind of sounding
out of the market on a national scale and over a long term,
something very difficult to achieve with present techniques. But
the basis for all these studies, all these calculations, still
remains the figures advanced as forecasts by the employers.
There are consequently two
characteristic fundamental aspects to this kind of programming
or “indicative planning.”
On the one hand, it is narrowly
centered on the interests of the employers which are the initial
element in the calculation. And when we say employers, we do not
mean all employers, but rather the dominant layers of the
bourgeois class, that is to say, the monopolies and trusts. To
the degree that a conflict of interest between very powerful
monopolies may sometimes arise (remember the 1962 conflict in
America between the steel producer trusts and the steel consumer
trusts regarding steel prices), the government plays a certain
role as arbitrator between capitalist groups. It is, in some
respects, an administrative council of the bourgeois class
acting in behalf of all stockholders, of all members of the
bourgeois class, but in the interest of the dominant group
rather than in the interests of democracy and the larger number.
On the other hand, there is an
uncertainty lying at the base of all of these calculations, an
uncertainty arising from the fact that the programming is based
purely on forecasts and from the additional fact that the
government has no means for carrying out such programming. As a
matter of fact, neither do the private interests have any way of
assuring the fulfilment of their forecasts.
In 1956-60, the
“programmers” of the Communauté Européenne du Charbon
et de l’Acier [European Coal and Steel Community] as well
as those of the Belgian Ministry of Economic Affairs, twice
missed the mark badly in their forecasts of coal consumption for
Western Europe and especially for Belgium. The first time, prior
to and during the crisis in supplies caused by the Suez events,
they forecast a substantial increase in consumption for 1960 and
a consequent increase in coal production, with Belgian
production going from 30 million tons of coal annually to 40
million tons. In reality, it fell from 30 to 20 million tons
during 1960; the “programmers” had consequently committed a
compound error of rather significant proportions. But no sooner
was this one on record when they made another in the opposite
direction. While this drop in coal consumption was occurring,
they predicted that the trend would continue and declared that
it was also necessary to continue closing coal mines. However,
the contrary took place between 1960 and 1963: Belgian
consumption of coal went from 20 to 25 million tons a year, with
the result that after having cut down Belgian productive
capacity in coal by one-third, there was an acute scarcity in
coal, particularly during the winter of 1962-1963, and it was
necessary to import coal post-haste, even from Vietnam!
This example gives us a vivid
picture of the technique which the “programmers”
must resort to ninety per cent of the time when making their
calculations for industrial sectors. It is simply a projection
into the future of the present trend, corrected at best
by a factor expressing the elasticity in demand, which in turn
is based on forecasts of general rates of expansion.
The State Guaranty of Profit
Another aspect of this
“managed economy,” which gives it a particularly dangerous
character vis-à-vis the working-class movement, is the
idea that “social programming” or “income policies” is
implicit in the idea of “economic programming.” It is
impossible to guarantee the trusts’ stability in their
expenses and incomes for a five-year period, the time necessary
for amortizing their new equipment, without simultaneously
guaranteeing the stability of their wage expenditures. It is
impossible to “plan costs” if “labor costs” cannot be
“planned” at the same time, that is to say, if wage
increases cannot be anticipated and contained.
The employers and governments
have tried to impose such a tendency on the trade unions in all
the countries of Western Europe. The attempts are reflected in
prolongation of the term of contracts; in legislation which
makes work stoppages more difficult or outlawing wildcat
strikes; and in a whole propaganda uproar in favor of “income
policies” which are apparently the “only guaranty” against
the “threat of inflation.”
This idea that we must orient
toward “income policies,” that the rates of wage increases
can be calculated exactly, and that we must in this way avoid
the incidental costs of strikes “which bring no return to
anyone, neither to the worker nor to the nation”; this idea is
also becoming widespread in France. Implicit in it is the idea
of deeply integrating the trade unions into the capitalist
system. From this angle, trade unionism basically ceases to be a
weapon of struggle of the workers for changing the
distribution of the national income. It becomes a guarantor of
“social peace,” a guarantor to the employers of stability
during a continuous and uninterrupted process of work and the
reproduction of capital, a guarantor for the amortization of
fixed capital during the entire of its renewal.
Obviously this is a trap for
the workers and the workers movement. There are many reasons why
this is so and I cannot dwell on them. But one basic reason
flows from the very nature of capitalist economy, of market
economy generally, and Mr. Masse, the present director of the
French plan, admitted it in a recent speech he made in Brussels.
Under the capitalist system,
the wage is the price of labor-power. This price varies around
the value of this labor-power in accordance with the laws of
supply and demand. What, then, is the normal development in the
relationship of forces, in the play of supply and demand for
labor, during the economic cycle in capitalist economy? During
the period of recession and recovery, there is unemployment,
which adversely influences wages, and the workers consequently
find the struggle for substantial wage increases a very
difficult one.
And what is the phase in the
cycle which is most favorable to the struggle for wage
increases? It is evidently the phase in which there is full
employment and even a scarcity of labor, that is to say, the
final boom phase, the conjunctural peak or “boiling
point.”
This is the phase in which the
strike for wage increases is easiest and in which the employers
have the greatest tendency to grant wage increases even without
strikes, under the pressure of labor scarcity. But every
capitalist technician of conjunctures will tell you that it is
precisely during this phase, from the point of view of
“stability,” of remaining within the limits required by
the capitalist rate of profit (for that is always at the
bottom of this kind of reasoning!), that it is most
“dangerous” to call strikes and get wage increases. For if
you increase total demand when there is full employment of all
the “factors in production,” then the supplementary demand
automatically becomes inflationary.
In other words, the entire
logic of a managed economy is precisely to avoid strikes and
attempted improvements during the only phase of the cycle in
which the relationship of class forces favors the working class.
This is the only phase of the cycle, this phase where the demand
for labor greatly exceeds the supply, in which wages can stage
an upward leap and reverse the unfavorable tendency in the
distribution of the national income between wages and profits at
the expense of wages.
This means that the
“management” is aimed at preventing so-called inflationary
increases in wages during this particular phase of the cycle and
simply winds up by reducing the overall rate of increase in
wages for the whole cycle. A cycle is then secured in which the
relative portion of wages in the national income will have a
permanent tendency to fall. It already has the tendency to fall
during the period of economic revival, since that is a period of
increased profit rate by definition (otherwise there would be no
revival!); and if the workers are prevented from correcting this
tendency during the peak period, it means that the trend toward
a deterioration in the distribution of the national income will
be perpetuated.
There is, moreover, a practical
demonstration of the consequences of a completely rigid policy
on incomes under state control with union collaboration; it has
been practiced in Holland since 1945 and the results are a
matter of record. There has been a marked decline in the ratio
of wages to national income, which is matched nowhere else in
Europe, not even in West Germany.
Moreover, there are two
decisive arguments on a purely “technical” level against the
proponents of an “incomes policy.”
- If you demand on
“conjunctural” grounds that increases in wages should
not exceed increases in productivity during periods of full
employment, why don’t you demand even greater wage
increases in periods of unemployment. On a conjunctural
basis, such increases would be justified at that time since
they would stimulate the economy by increasing total demand
...
- How can an “incomes
policy” be practiced with the slightest effectiveness if
incomes from wages are the only incomes which are really
known? Does not every “incomes policy” demand as a
prerequisite workers’ control of production, opening
up of company books, and the abolition of banking secrets,
if for no other reason that to establish the exact income of
the capitalists, and the exact increases in
productivity?
Besides, this does not at all
mean that we must accept the technical arguments of the
bourgeois economists. It is absolutely wrong to say that
increasing wages beyond the increase in productivity is
automatically inflationary in periods of full employment. This
is true only to the degree that the profit rate is left stable
and intact. If we were to reduce the profit rate thanks to a
tyrannical intervention against private property, as the Communist
Manifesto puts it, then there would be no inflation
whatever; we would simply take buying power from the capitalists
and give it to the workers. The only objection that can be
raised is that this runs the risk of slowing down investment.
But we can turn capitalist technique against its own authors by
telling them that it is not such a bad thing to reduce
investment when there is a period of full employment and a boom
at its “boiling point”; that on the contrary, this reduction
in investments is already on the way at the very moment, and
that from the standpoint of anticyclical policy, it is more
intelligent to reduce profits and increase wages. This would
permit the demand from wage workers, from consumers, to come to
the relief of investment in the interest of maintaining the
conjuncture at a high level, a conjuncture which is threatened
by the inevitable tendency for productive investments to fall
off at a certain state.
We can draw the following
conclusion from all this: state intervention in economic life,
managed economy, economic programming, indicative planning, are
not the least bit neutral from the social point of view. They
are instruments of intervention into the economy which lie in
the hands of the bourgeois class or of the ruling groups in the
bourgeois class, and are in no sense arbitrators between the
bourgeoisie and the proletariat. The only real arbitration which
the capitalist governments carry on is an arbitration between
different capitalist groups within the capitalist class.
The real nature of
neo-capitalism, of the growing intervention of government in
economic life, can be summarized in this formula: more and more,
a capitalist system left to its own economic automatism runs the
risk of perishing rapidly, and increasingly the state
becomes the guarantor of capitalist profit, the guarantor
of the profit of the ruling monopolistic layers of the
bourgeoisie. It guarantees this in the measure that it reduces
the amplitude of cyclical fluctuations. It guarantees this by
state orders, military or paramilitary, of increasing
importance. It guarantees this also by ad hoc
techniques which make their appearance precisely within the
framework of the managed economy. The “quasi-contracts” in
France illustrate this. They are explicit guarantees of profit
to correct certain disequilibriums in development, either
regional in character or between branches of industry. The state
tells the capitalists: “If you invest your capital in such and
such region, or in such and such branch, we will guarantee you
six per cent or seven per cent on your capital regardless of
developments, even if your junk proves unsaleable, even if you
fail.” This is the supreme and clearest form of the state
guaranty of monopoly profit but it is not the invention of the
French planning technicians, since Messrs. Schacht, Funk and
Goering had previously applied it within the framework of the
Nazi armament economy and its four-year rearmament plan.
In the final analysis, this
state guarantee of profits, like all of the genuinely effective
anticyclical techniques in the capitalist system, represents a
redistribution of the national income in favor of the leading
monopolistic groups through the agency of the state. It is
effected by the distribution of subsidies, by tax reductions and
by granting credits at reduced interest rates. All of these
techniques culminate in a rise in the rate of profit, and, given
the framework of a normally functioning capitalist economy,
especially in its phase of long-term expansion, this rise in the
profit rate obviously stimulates investment and works out
according to the expectations of the authors of these projects.
Either one stands squarely
inside the framework of the capitalist system on a completely
logical and consistent basis, and consequently accepts the fact
that the only way to guarantee a constant increase in
investments and the industrial upsurge based on such increases
in private investments is through increasing the rate of profit.
Or one refuses, takes a
socialist position, rejecting the road of increasing the rate of
profit, and advocates the only alternative road, which is the
development of a powerful public sector in industry, alongside
the private sector. This is the road out of the capitalist
framework and its logic, and passes over to the arena of what we
call structural anticapitalist reforms.
In the history of the Belgian
working-class movement in recent years, we have experienced this
conflict in orientation which awaits France in the coming years,
just as soon as it experiences the first rise in unemployment.
Some socialist leaders whose
personal honesty I don’t want to question have virtually said,
and in as brutal and cynical a manner as I put it just a moment
ago: “If you want to reabsorb unemployment in a short period
within the existing system, there is no other way to do it than
by increasing the rate of profit.” They did not add, though it
goes without saying, that this implies a redistribution of the
national income at the expense of the wage earners. In other
words, unless you are out to deceive people, you cannot
sermonize for a more rapid economic expansion, which under
capitalism implies an increase in private investments; and
simultaneously demand a redistribution of the national income in
favor of the wage earner. In the framework of the capitalist
system, these two objectives are absolutely incompatible, at
least for the short and middle range period.
The working-class movement is
therefore confronted with a fundamental choice between a policy
of reform in the neo-capitalist structures, which
implies an integration of the trade unions in the capitalist
system so that they are transformed into gendarmes for the
maintenance of social peace during the amortization phase of
fixed capital, and a basically anti-capitalist policy,
with a program of short-term anti-capitalist structural reforms.
The fundamental goal of these
reforms would be to take away the levers of command in the
economy from the financial groups, trusts and monopolies and
place them in the hands of the nation, to create a public sector
of decisive weight in credit, industry and transportation, and
to base all of this on workers’ control. This would mark the
appearance of dual power at the company level and in the whole
economy and would rapidly culminate in a duality of political
power between the working class and the capitalist rulers.
This stage in turn could usher
in the conquest of power by the workers and the establishment of
a working-class government which could proceed to the
construction of a socialist democracy free of exploitation and
all its evils.
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