Every major event makes our history clearer. When our history gets clearer then we can see better what is happening and what we might do about it. When Capitalism (everybody uses this word today – especially now that all the alternatives seem to have disappeared) started its drive to conquer the world 300 years ago, it produced massive human progress! (By the way, many speak and act as though Capitalism has been around forever – and that in some fundamental way it is tied to our human nature. Empty-heads thought all of history had finished because they believed Capitalism had finally ‘won’ when the Soviet Union collapsed! Hard to believe.)
Progress through Capitalism’s 300 years existence was always unjust, unfair, uneven and deadly for whole tribes and races. Nevertheless the world did lurch forward. As the new system stomped across the globe it destroyed and remade everything it touched, all at a terrible cost in wars and bloody empires, but humanity as a whole edged ahead.
After a time and through huge effort and sacrifice, subordinate classes in the first industrially developed countries forced real concessions. Because technology had advanced, with it came the opportunity (if fought and won) for better health, a certain freedom from domestic drudgery, higher living standards and faster travel. (What have the Romans done for us?)
Then came a change in Capitalism’s engine room. The engines were slowed. The production of commodities, making things for the market, new technology advancing through competition to produce goods more cheaply, began to lose its dominant position - to the banks. The banks made money from money. Money became the new ‘commodity’ to be bought and sold to make profit. (The system’s line of travel may have shifted but the bottom line did not change!)
This is smoke and mirrors of course. Money cannot ‘make’ money. Billions of people working ‘make’ money when they get (far) less back for their work than what is received by the owner when the commodity is sold. Making money from money involves selling and buying already existing wages and profits that have been saved or invested – or using those savings and investments to borrow other money to sell as loans. That’s right. It’s a con.
Lenin was the first major political figure to notice this process, which he believed started from the end of the Capitalist crisis of the 1880s, and 90s. He called this new stage; Monopoly Capitalism and he thought it was the highest and also the final stage of the capitalist system. Most of his ideas about the urgent possibility of revolution and a new system of society flowed out from this view that Capitalism had now come to its final stage. (No. He did not think it would collapse of its own accord.)
But it did follow that if Capitalism had reached its final stage then it could no longer produce progress, however brutally and jerkily, for the whole of humanity. Here and there change would continue. Russia’s build up of monster factories in the early part of the 20th century was a case in point. But the overall push forward of the system, at a global level, must be over. And the carnage of WW1 appeared to confirm Lenin’s point. Socialism would win or Capitalism would ruin us and destroy the gains of our human civilisation such as they were – turning humanity backwards as it fought out its deadly competition over the diminishing resources of the earth.
Then, following his death in 1924, Lenin seemed to have got it dramatically wrong. Capitalism went on to survive both WW1 and then WW2. More importantly it continued to expand. Living standards in the world, taken as a whole, seemed to rise, right up to the 1970s, especially driven by the advances in the West. (Castro called the population of the West ‘the golden billion’.) There were breakthroughs like penicillin, technology like washing machines, jets and cars – despite the arrival of poison gas and the atom bomb. In fact the only major thing to collapse was the self-styled socialist Soviet Union.
Even after the 1980s, when global living standards stalled, particularly in the traditional industrial centres, new information and communication technology seemed about to usher in tremendous advances for in the future life of the whole world. Even major left wing thinkers like Ernest Mandel wrote about Capitalism’s ‘Third Industrial Revolution.’ The early 21st century saw what looked like the latest brand of corporate captains leading global IT companies and spouting about mass democracy and a brave new world.
But a new book that examines the current economic crisis (The Crisis of Neoliberalism by Dumenil and Levy) suggests that old Lenin’s opinion is worth another look.
The book studies the major capitalist crises since the 1890s. The authors point out, using a lot of evidence that the result of the late 19th century crash was summed up in the victory of the banks just as Lenin suggested. Stocks of wealth were harvested by the banks from loans, from property, from insurance. The bank’s direct industrial investments therefore tended to become less important and were left more and more to particularly wealthy private owners. The most energetic, vibrant and lucrative parts of Capital started to migrate to the banks. The banks of course did not make things (commodities). Nor, increasingly, were they the obvious source of funds for direct investment in new technology and industry. They began to make money from the burgeoning market in money itself: from rents; from mortgages; from loans and from ‘playing’ the market. The connection between the bank’s money and the direct making of things began to grow more distant.
The authors marshal a lot of evidence to show that this was the new feature of the organisation of Capitalism, at its heights, in the major industrial countries that were left standing after WW1, up to 1929. In the US and to a lesser degree in the rest of the West, ‘playing the market’ (buying shares cheap and selling them dear) became a national pastime. This was not just your Granny or the new vacuum cleaner seller – it was even the major companies that did make and sell things that got involved.
The 1929 crash nearly destroyed the capitalist world and finally led to WW2, the greatest single human catastrophe ever. But from the 1930s onwards, according to the authors, again backed up by huge amounts of evidence, the pendulum swung away from the banks (who had precipitated the crash by leading the stock market gambling of the previous 10 years) and towards the big owners of industries and companies again. This group, the book argues, first asserted its leadership of Capitalism in the West (and therefore the world) and then made its own ‘alliance’ with workers and their organisations, to use the state to build new infrastructure and invest in new industries. Roosevelt’s New Deal epitomised this arrangement. (And won the US worker to the Democratic Party for a generation. And stalled a possible US revolution.)
Capitalism – especially in the West – especially after WW2 - began to make technological, industrial, welfare and human progress again. Do you remember that? Three quarters of the world never had it of course. But the advances of the West, with the strongest labour movement ever, were extraordinary. Back to the drawing board Lenin!
Then the capitalist crisis of the late 1970s and 80s reversed the engines of Capitalism again – back to its default position from the 1890s. More brutally this time. The engines were put into reverse. Working class organisations, and most of their gains, could not be afforded. The change in the leadership of Capital no longer needed or wanted to make concessions to other classes. Reagan and Thatcher’s ‘voodoo economics’ conquered all. You do not need to make things! We can all make each other’s bed and sell each other phones – and insurance! Lots more soap was produced as our hands got less and less dirty.
The financial sector began to increase its grip and then its dominance within the capitalist class – as it had before 1929. Monopoly capitalism restarted! (Come back Lenin.) Working class incomes first stagnated across Anglo-American capitalism and then fell. Globalisation (the total freedom for Capital to move anywhere in the world) summed up the latest stage of the drive by capitalism’s dominant masters (and its occasional mistress) through the 80s the 90s and the early 21st century.
To produce human progress (something that has always been a bi-product of Capitalism’s drive for profit – the famous ‘bottom line’) the system has to make things, invest in new techniques (to beat the competition and drive up productivity) and make sure that the things can be afforded and bought in the market (so that they can be good little commodities and make profits.) Capitalism has to invest in technology; in plant; in people. Technology and plant are part of what is called ‘fixed’ Capital. Without investment in fixed Capital – you get no advances, because work plus technology is what produces productivity. Increasing productivity is what produces Capitalism’s bumpy version of progress – so long as its profits are mainly reinvested. Geddit?
In the US, the dominant capitalist power in the world in the last 25 years (and despite the IT’ revolution) investment in ‘fixed’ Capital (technology, plant etc) is now 32% lower than it was before. If profits (including from US corporations in China etc) are not being invested in new technology, plant etc, where are they going? This is the clincher. (Lenin, where are you? We need you.) First, great pools of floating Capital, unattached to any but the shortest of short term investments have been created, which have become the main weapons of the banks in their global operations. Second, the wealth of the rich has skyrocketed. The top 1% of US earners got 9% of the national income in the 1970s – remember, this is not the wealth they held, it was their annual earnings, their ‘wages.’ Now the top 1% gets 20% of the country’s annual income. This is an enormous shift in the structure of Capital away from investment in technology people and plant.
And this is where the profits from industry – whether outsourced to China or remaining domestic have gone – not to new investment or new technology. Not then to new ‘fixed’ capital. And without this investment in new industry, in new technology - the historical bi-product of Capitalism up to now (never mind the disasters, the wars, the crises, the man-made famines etc) overall human progress is threatened too. The system has gone bad at its core.
It is easy to see today how general human progress has declined in the more advanced industrial countries in the West. Living standards for the majority are falling, welfare is under threat, long term and deep seated under and unemployment is a rank condition for millions across Europe and the US. And where are the equivalents of the car or jet engine, penicillin or the washing machine? TVs (invented in the 1920s) computers (invented in the 1940s) and phones (invented in the 1880s) have changed our behaviour. But from the point of view of most people in the West there has been no substantial breakthrough that has cut our working hours, increased our health and welfare, or advanced our culture and understanding for 40 years. Unless you are distracted by ‘bread and circuses’ or are rich, most people alive today in the West believe that the future for their children will be worse than the life they had (and somewhere in their hearts, while dreaming of being a footballer or a wag, most of the kids know it.)
Massive changes in China, and to a lesser extent India and Brazil, have moved hundreds of millions from rural poverty and created vast new industrial infrastructures. No denying this is human progress of a sort. It is certainly a massive process of catch-up. Nearly a billion people have moved into the modern age – despite their continued political and economic oppression.
But all three countries remain massively underdeveloped and with extremes of poverty not experienced in the West since the 1930s.These great new developments have filled a hole for the Western corporations as their own markets dry up. But where is the new technology – and what happens when China can no longer sell old-fashioned consumer goods to the West? The uneven development, which Lenin saw, as the biggest factories in the world were built in Russia at the beginning of the 20th century, repeats itself. The insecurity of this development and its backward and dependent nature (reliant on western markets, not based on decisive new technologies etc) does not look like any sort of motor for the progress of humanity as a whole. (Although western banks would love to get their hands on Chinese wealth.) So a Chinese future for world Capitalism is unlikely folks.
The authors of the book speculate about a future, post the crash of 2008, where the owners of business take the reigns back from the banks and into their own hands again. They will use the state, as before, to build up industrial and technological investment just like they did in the 1930s. The authors admit that in the West the working class organisations are far weaker than before, and that the business owners do not need to make concessions – but living standards, they argue, still need to rise for the new goods to be sold by the new industries. They have come back to Keynes.
Unfortunately for their schema, the question of exactly who will wrest the vast wealth (and power) away from the banks that has been accumulated there is unanswered; let alone offering an explanation of who exactly would be dealing with the problem of beginning to reinvest in new infrastructure, plant and technology. The business class is a feeble thing compared with its Victorian or even its 1930s ancestors. (Where is Henry Ford when you need him?) It is hard to see even the most successful Bill Gates leading the charge. The business class has become deeply subordinated to the financial sector in the West. The state might do it, but everywhere the state across the West is doing the opposite, propping up the banks – now so central to the system as a whole - and at the cost of the mass of the people. The plebeian classes, led by an organised working class could do it; but would not do it in the defence of a capitalist system that has just ruined the future of its children. And the basic organisation, let alone the necessary ideas and politics, inside what remains of the working class movement, for that course of action have barely begun to emerge. (But it’s where to place your bets.)
Nevertheless we should still ask, what is the overall character of the stage, the phase, the epoch in which we live? Have we reached, as clever Lenin noted 100 years ago, the final stage of Capitalism? Depending on the answer we will know whether we are in a battle against one of the regular crises of the system, or whether the stakes are rather higher, and instead we face the prospect of steep decline of what bits of human civilisation that we have been able to achieve over the last couple of centuries.
Given all of its destructive and ruthless character, and the new contradictions at its heart, is it still possible that the capitalist system can take humanity’s productive forces, and therefore at least parts of its civilisation, forward? Or has this system now exhausted whatever potential it might have once possessed to do anything other than survive inside its bunkers while overlooking the decline of human civilisation as a whole? Brrr.
These are not stupid questions. Ancient Rome, lasting 500 years, based on slavery, fell to the ‘barbarians’ and it took half a millennia for Europe to crawl back to the standards of life it had known in the days of the Empire. Human progress is not inevitable. Social systems decay and collapse.
What do you think?
p.s. Thanks for getting this far.
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