What went wrong with capitalism? – Michael Roberts

15th June 2024Leave a Commenton What went wrong with capitalism? – Michael Roberts

“Most Americans don’t expect to be “better off in five years” — a record low since the Edelman Trust Barometer first asked this question more than two decades ago.”

By Michael Roberts

Ruchir Sharma has a book out called What Went Wrong with capitalism? Ruchir Sharma is an investor, author, fund manager and columnist for the Financial Times. He is the head of Rockefeller Capital Management‘s international business, and was an emerging markets investor at Morgan Stanley Investment Management.

With those credentials of being ‘inside the beast’ or even ‘one of the beasts’, he ought to know the answer to his question. In a review of his book in the Financial Times, Sharma outlines his argument. First, he tells us that “I worry about where the US is leading the world now. Faith in American capitalism, which was built on limited government that leaves room for individual freedom and initiative, has plummeted.” He notes that now most Americans don’t expect to be “better off in five years” — a record low since the Edelman Trust Barometer first asked this question more than two decades ago. Four in five doubt that life will be better for their children’s generation than it has been for theirs, also a new low. And according to the latest Pew polls, support for capitalism has fallen among all Americans, particularly Democrats and the young. In fact, among Democrats under 30, 58 per cent now have a “positive impression” of socialism; only 29 per cent say the same thing of capitalism.

This is bad news for Sharma as a strong supporter of capitalism. What has gone wrong? Sharma says that it’s the rise of big government, monopoly power and easy money to bail out the big boys. This has led to stagnation, low productivity growth and rising inequality.

Sharma argues that the so-called neoliberal revolution of the 1980s that supposedly replaced Keynesian-style macro management, reduced the size of the state and deregulated markets was really a myth. Sharma: “the era of small government never happened.” Sharma points out that in the US, government spending has risen eight-fold since 1930 from under 4 per cent to 24 per cent of GDP — and 36 per cent including state and local spending.  Alongside tax cuts, government deficits rose and public debt rocketed.

As for deregulation, the result was actually “more complex and costly rules, which the rich and powerful were best equipped to navigate.” Regulatory rules actually increased. As for easy money, “fearful that mounting debts could end in another 1930s-style depression, central banks started working alongside governments to prop up big corporations, banks, even foreign countries, every time the financial markets wobbled.” So there was no neoliberal transformation freeing up capitalism to expand, on the contrary. 

But is Sharma’s economic history of the period after the 1980s really right? Sharma tries to portray the post-1980s period as one of bailouts for banks and companies during crises in contrast to the 1930s when central banks and governments followed the policy of ‘liquidation’ of those in trouble. Actually, this is not correct, saving corporate capital and the banks was the driving force of the Roosevelt New Deal; liquidation was never adopted as government policy.  Moreover, the 1980s were mostly a decade of high interest rates and tight monetary policy imposed by central bankers like Volcker, seeking to drive down the inflation of the 1970s. Indeed, Sharma has nothing to say about the ‘stagflation’ of the 1970s – a decade, according to him, where capitalism had small government and low regulation.

Sharma makes much of the rise in government spending including ‘welfare spending’ in the last 40 years. But he does not really explain why. After the rise in spending and debt during the war, much of the increased spending since has been due to a rise in population, particularly a rise in the elderly, leading to an increase in (unproductive for capitalism) spending on social security and pensions. But the rise in government spending was also a response to the weakening of economic growth and investment in productive capital from the 1970s.  As GDP grew more slowly and welfare spending grew faster, then government spending to GDP rose.

Sharma says nothing about other aspects of the neo-liberal period. Privatisation was a key policy of the Reagan and Thatcher years. State assets were sold off to boost profitability in the private sector. In this sense, there was a reduction in the ‘big state’, contrary to Sharma’s argument. Indeed, starting as early as the mid-1970s, public sector capital stock was sold off. In the US, it has been halved as a share of GDP.

Source: IMF investment and capital stock database, 2021

Similarly, post the 1980s, public sector investment as a share of GDP has been nearly halved while the private sector share has risen 70%. 

It’s not the ‘big state’ that is in control of investment and output decisions, it is the capitalist sector. This hints at the reason for reducing the role of the public sector. The problem for capitalism in the late 1960s and 1970s was the drastic fall in the profitability of capital in the major advanced capitalist economies. That fall had to be reversed. One policy was privatization. Another policy was the crushing of the trade unions through laws and regulations designed to make it difficult if not impossible to set up unions or take industrial action. Then there was the move of manufacturing capacity out of the ‘Global North’ to the cheap labour regions of the Global South, so-called ‘globalization’. Combined with weakening trade unions at home, the result was a sharp drop in the share of GDP going to labour along with cheap labour abroad; and a (modest) rise in profitability of capital.

Sharma admits that “globalisation brought more competition, keeping a lid on inflation in consumer prices” against his thesis of monopoly stagnation, but then argues that globalization and low imported goods prices “solidified a conviction that government deficits and debt don’t matter.” Really? Throughout the 1990s onwards, governments tried to impose ‘austerity’ in the name of balancing budgets and reducing government debt. They failed, not because they thought that ‘deficits and debt don’t matter’ but because economic growth and productive investment slowed. Public sector spending cuts were significant, but the ratio to GDP did not fall.

Sharma reckons that ‘recessions were fewer and farther between’ in the post-1980s period. Hmm. Leaving out the huge double slump of the early 1980s (another key factor in driving down labour power), there were recessions in 1990-1, 2001 and then the Great Recession of 2008-9, culminating in the pandemic slump of 2020, the worst slump in the history of capitalism. Maybe fewer and farther between, but increasingly damaging.

Sharma notes that after each slump since the 1980s, economic expansion has been weaker and weaker. This appears as a mystery for proponents of capitalism. “Behind the slowing recoveries was the central mystery of modern capitalism: a collapse in the rate of growth in productivity, or output per worker. By the outset of the pandemic, it had fallen by more than half since the 1960s.”

Sharma presents his explanation: “a growing body of evidence points the finger of blame at a business environment thick with government regulation and debt, in which mega-companies thrive and more corporate deadwood survives each crisis.”  The bailouts of the big monopolies (‘three of every four US industries have ossified into oligopolies’) and ‘easy money’ have kept a stagnating capitalism crawling along, breeding ‘zombie’ companies that only survive by borrowing.

Sharma puts the horse before the cart here. Productivity growth slowed across the board because productive investment growth dropped. And in capitalist economies, productive investment is driven by profitability. The neo-liberal attempt to raise profitability after the profitability crisis of the 1970s was only partially successful and came to an end as the new century began. The stagnation and ‘long depression’ of the 21st century is exhibited in rising private and public debt as governments and corporations try to overcome stagnant and low profitability by increasing borrowing.

Sharma proclaims that social “immobility is stifling the American dream.”  Whereas, in the rosy past of ‘competitive capitalism’, through dint of hard work and entrepreneurial drive, you could go from rags to riches, now that is not possible.  But the ‘American dream’ was always a myth.  The majority of billionaires and rich people in the US and elsewhere inherited their wealth and those that did become billionaires in their lifetime did not do so without sizeable start-up funds from parents etc.

And let me add, Sharma’s thesis is entirely based on the advanced capitalist economies of the Global North. He has little to say about the rest of the world where most people live. Has social mobility been stymied or never existed? Is there a big state with massive welfare spending in these countries? Is there easy money for companies to borrow?  Are there domestic monopolies squeezing out competition? Are there bailouts galore?

That brings us to Sharma’s main message about what is wrong with capitalism. You see, for Sharma, capitalism as he envisages it no longer exists. Instead, competitive capitalism has morphed into monopolies bolstered by a big state. “Capitalism’s premise, that limited government is a necessary condition for individual liberty and opportunity, has not been put into practice for decades.”

The myth of a competitive capitalism that Sharma projects sounds similar to the thesis of Grace Blakeley in her recent book, Vulture Capitalism, where she argues that capitalism has never really been a brutal battle between competing capitalists for a share of the profits extracted from labour, but instead a nicely agreed and planned economy controlled by big monopolies and backed by the state. 

In effect, both Sharma and Blakeley agree on the rise of ‘state monopoly capitalism’ (SMC) as the reason for what went wrong with capitalism. Of course, they differ on the solution. Blakeley, being a socialist, wants to replace SMC with democratic planning and workers coops. Sharma, being ‘one of the beasts’, wants to end monopolies, reduce the state and restore ‘competitive capitalism’ to follow its ‘natural path’ to provide prosperity for all. Sharma: “capitalism needs a playing field on which the small and new have a chance to challenge — creatively destroy — old concentrations of wealth and power.” 

You see, capitalists, if left alone to exploit the labour force, and freed of the burden of regulations and for having to pay for welfare spending, will naturally flourish. “The real sciences explain life as a cycle of transformation, ashes to ashes, yet political leaders still listen to advisers claiming they know how to generate constant growth. Their overconfidence needs to be contained before it does more damage.” So, according to Sharma, capitalism will be fine again, if we let the capitalist cycles of boom and slump play out naturally and not try to manage them. 

“Capitalism is still the best hope for human progress, but only if it has enough room to work.” Well, capitalism has had plenty of room to work for over 250 years with its booms and slumps; its rising inequalities globally; and now its environmental threat to the planet; and the increasing risk of geopolitical conflict. No wonder 58% of young Democrats in the US would prefer socialism.

---

• Michael Roberts is an economist and author, you can follow Michael Roberts’ blog on Facebook and YouTube.
• This article was originally published by Michael Roberts’ blog The Next Recession on May 27th, 2024. You can find out more about Michael Roberts here.

 

CRIMINAL CAPITALI$M

China Fines Alibaba, Tencent Unit Under

Anti-Monopoly Laws

STATE MONOPOLY CAPITALISM NOT COMMUNISM

Coco Liu and Shiyin Chen
Mon, December 14, 2020, 


(Bloomberg) -- China’s antitrust watchdog fined Alibaba Group Holding Ltd. and a Tencent Holdings Ltd. unit over a pair of years-old acquisitions and said it’s reviewing an impending Tencent-led merger, signaling Beijing’s intention to tighten oversight of internet sector deals.

The State Administration for Market Regulation said Monday it’s reviewing the combination of DouYu International Holdings Ltd. with Huya Inc., which could create a Chinese game streaming leader akin to Amazon’s Twitch. It fined Alibaba 500,000 yuan ($76,500) for failing to seek approval before increasing its stake in department store chain Intime Retail Group Co. to 73.79% in 2017, while China Literature Ltd., the e-books business spun off by Tencent, was also censured over a previous deal, according to a statement.

The penalties come after regulators last month declared their intention to increase scrutiny of China’s largest tech corporations with new anti-monopoly rules. Beijing in November unveiled draft regulations that establish a framework for curbing anti-competitive behavior such as colluding on sharing sensitive consumer data, alliances that squeeze out smaller rivals and subsidizing services at below cost to eliminate competitors. Shares in Alibaba and Tencent extended losses and closed down more than 2.5%.

“Investment and takeovers are important means for development and growth of internet companies,” the regulator said in the statement. “The above-mentioned companies have a large influence in the industry, carry out many investments and takeovers, have specialized legal teams and should be familiar with the regulations governing M&A. Their failure to actively declare has a relatively severe impact.”

Beijing’s heightened scrutiny is spurring fears of a broader crackdown on the country’s largest firms. On Monday, shares in No. 3 internet company Meituan plunged 3.8% after the People’s Daily wrote an editorial slamming the industry’s preoccupation with growing traffic and volumes in areas such as grocery delivery, at the expense of real scientific innovation.

China’s two largest corporations are also its most acquisitive, using scores of deals to expand into adjacent fields and groom some of the country’s most promising startups.Alibaba had led a $2.6 billion buyout of Intime as part of efforts to develop new business models that combine e-commerce with brick-and-mortar retailing. China Literature agreed in 2018 to buy New Classics Media for as much as 15.5 billion yuan to expand in filmed content.

The companies had failed to seek approval for the deals, which aren’t deemed anti-competitive, the antitrust regulator said Monday. China Literature said in a statement that it has been actively working with regulators on compliance, while Alibaba representatives didn’t immediately respond to requests for comment.

What Bloomberg Intelligence Says:

Alibaba’s ability to strengthen its domestic e-commerce ecosystem through M&A may be significantly weakened on rising anti-monopoly scrutiny, underlined by a 500,000 yuan fine by the State Administration for Market Regulation on Monday for failing to seek approval for its stake acquisitions of Intime Retail in 2014-18. While the amount is immaterial to Alibaba, retroactive application of new anti-competitive rules announced in November may be a stern warning to toe the line in future.

-- Vey-Sern Ling and Tiffany Tam, analysts

Huya in October agreed to buy DouYu in an all-share deal and Tencent, which currently owns stakes in both companies, was expected to hold about 68% of the merged business’s voting shares. That would have given the WeChat operator control over the leader in the live-streamed gaming market, estimated to generate 30 billion yuan in revenue this year, according to the latest numbers from iResearch.

An affiliate of SF Holding Co. was also fined for not declaring a takeover of a competitor, Monday’s statement showed.

“Despite its relative modest amount, the penalty announced today has a symbolic importance,” said Scott Yu, an antitrust lawyer with Beijing-based Zhong Lun Law Firm. “The announcement, together with the draft antitrust guidance unveiled in November, signals that Beijing will pay close attention to the monopolistic status of Chinese internet companies.”

The Era of State-Monopoly Capitalism - Tribune

Jun 7, 2020 — In the US, the average worker has been no better off than they were in 1979 and inequality has reached near-unprecedented levels. Throughout ...

Chapter 4: On the Concept of State-Monopoly Capitalism

libcom.org › library › economics-politics-and-the-age-...

Jul 28, 2005 — Capitalism is pleaded by monopolies and in large part determined by them. The state, whose function is to protect the social structure, is thus the state of monopoly capital. This is by no means a new phenomenon in capitalist society: it has always been a feature of capitalism, if not as pronounced in the past.

No Austrians In Foxholes

The old joke goes there are no athiests in foxholes. With the crash of international financial capitalism there are no Austrians in foxholes. Capitalism rushes to the embrace of it's state to bail it out. Everyone now accepts that State Capitalism resulted from the previous Great Depression and in order to avoid another one, the State is required to save the financial market. Some American libertarians and conservatives decried the state bail out of the banks, but no rational self interested capitalist was listening to them.

Nor contrary to some wags were they thumbing through the Communist manifesto to find a solution. They simply were returning to their Keynesian roots, apologizing abjectly for their folly of declaring him dead and useless.

Suddenly the darlings of the neo-cons, Ayn Rand, von Mises and Hyaek, were no longer the belle's of the ball. They once again quickly became relegated to the dustbing of history. Once again an anomaly of booming capitalism, a joyful ideology for those who embraced the greed of an unregulated market, an excuse to line pockets of the wealthy while ignoring the neccisity of producing real value; goods, services, infrastructure. Today the bankers and financiers are now fully fledged Keyensians.

In the Nouvel Observateur weekly, columnist Jacques
Julliard rejoiced that France was no longer hearing “diatribes” against its
“archaic” system.“Where have the (economic)
liberals gone?” he asked. “Since Bush nationalized the American banking system
we don’t hear from them anymore.

Even the most stalwart follower of Ayn Rand has admitted the failure of her ideology.

Alan
Greenspan is having a crisis of faith.
The former chairman of the Federal
Reserve and long-time deregulator admitted to U.S. lawmakers yesterday he "made
a mistake" in assuming banks could self-regulate the complex derivatives
market.
It was an about-face for Mr. Greenspan, a diehard supporter of
deregulation. He was a close friend of Ayn Rand, the most notable of
libertarians who champion the individual over the state. Yesterday, he threw her
theories under the bus, but it was no shock to Ms. Rand's followers.

It is in fact startling to hear the right wing President of France sounding like a socialist, but not unexpected given the gravitas of the current crisis.

"The
idea of the all-powerful market that must not be constrained by any rules,
by any political intervention, was mad. The idea that markets were always right
was mad," Mr Sarkozy said. "The present crisis must incite us to refound
capitalism on the basis of ethics and work & Self-regulation as a way of
solving all problems is finished. Laissez-faire is finished. The all-powerful
market that always knows best is finished," he added.

In fact it appears that the only ones proclaming the joys of unregulated markets are those from the Eastern Bloc, former communists and socialists who have never experienced the joys of American capitalism in all its gory glory.

In a
letter published on Tuesday by the daily Mladá fronta Dnes, Czech
President
Václav Klaus says that the global financial crisis did not result
from
insufficient market regulation, but, on the contrary, from excessive
government
interventions and increasing public spending.
According to
Klaus, there is a
risk that the rescue packages proposed by some governments
will turn the
European banking system into a partially state-owned and
centrally regulated
sector.

Ironic that. He sounds like Bush, Paulson, and Greenspan prior to the crash. They now have abandoned their faith in self regulated markets, and have embraced the need for state capitalism; a regulated capitalism supported by huge investments of public funds.

"I
know many Americans have reservations about the government's
approach,
especially about allowing the government to hold shares in private
banks. As
a strong believer in free markets, I would oppose such measures under
ordinary circumstances. But these are not ordinary circumstances," Bush
said.

But in reality the state promoted the ideals of the financial and monopoly capitalists as their own, they did their bidding, even as they do it now. Its about power in and over the markets. There never was an unbridled capitalism of small self employed artisans, which is the libertarian ideal, in fact capitalism is not about work or business, but about accrual of capital for its own sake.

Whether it was Keynes and the social contract after WWII or the shift towards monetarist policies and free trade in the seventies, eighties and ninties, it was all done by the capitalist state, in order to maintain and stabilize capitalism.

The mistake made by the left and the right was to assume that state capitalism was 'socialism'.

This mistaken link between public ownership and socialism was the result of the ideologues of the 2nd International, who adovcated that capitalism would evolve into socialism, that is public capitalism would arise from private monopoly capitalism.

After the Bolshevik revolution, and the subsequent Great Depression, capitalism was in a historical crisis, its old models no longer sufficient to meet the demands of those who create capital, the working class. Class war was on the horizon, the final death knell of capitalism was being wrung by a mobilized militant working class and by the failure of financial capitals coinciding.

The capitalist state was reformed to meet this crisis,based on variations of models of Keynes General Theory. State Capitalism is the highest form of capitalism, and that is what Randites and Austrian School apologists forgot.

Is this ciris out of the ordinary as Bush claims? Was i unpredicatable as Greenspan and Volker claim. Why no. Many pundits have pointed ot the similarities of this crash to those in the past; some going as far back as the Great Crash of 1873 in the U.S., the Great Depression of 1931-33, the 1973 post Viet Nam war crash.

What do all these crashes have in common? They occurred in relation to rapid industrialization of economies during and after large scale wars. In the case of 1873, it occurred after the civil war destroyed the last of the small scale artisinal base of American industry replacing family shoe making businesses and the like with large scale factory production.

The Great Depression occurred after WWI and the 1973 crash occurred as a result of America's incurssion into Viet Nam.

At the begining of the Bush regime in the U.S. the Republican government went from having a surplus to having a deficit. And those wags on the right, the very same neo-cons who a decade before had deonounced government deficits that led to expanded public sector infrastructure growth, now were cheering on the Bush government to expand its deficit especially when it came to planning for war against Afghanistan and then Iraq.

The wat in Iraq led to a government deficit that dwarfs those of the seventies and eighties.

That is the elephant in the room. America celebrated like it was 1929 for eight years under Bush, while sending their sons and dughters to fight in a foriegn war. There was no war rationing, no draft call, no need to commit by Joe or Jane Yank to Bush's war. So it was party time back home.

America also ended it dominance in manufacturing and actual production during the Reagan era. As we entered the new millineum right wing libertarian mags like Reason praised the end of America's dominance in production claiming the new capitalism in America would be based on service sector jobs.

And they were partially right. With contracting out and offshoring an essential part of the New World Order of the WTO and expanding globalization of capital, America now found itself no longer manufacturing goods at home, but buying them at WalMart from newly emerging fordist economies in Asia.

Americans laid off in manufacturing ended up in low paid jobs selling products they once made at the local WalMart. America now relied upon its citizens to produce capital not through manufacturing but through consumption.

America made credit easily available, and American's liquidated their savings in an orgy of spending that kept America going for the past eight years.

Was this crash unexpected? Of course not. It began a year ago, but Bush, Paulson, Greenspan, Bernake, and the right wing neo-cons were in denial. I have blogged as have others predicting this crash. That it would be as serious as the Great Depressions of 1873 and 1933 was also not unexpected, nor was the fact that the monopoly and financial capitalists flight back into the safe arms of the Nanny State unexpected.

There are no Austrians in foxholes when the economy melts down. Ideology is tossed out and capitalists and their politicians once again embrace state capitalism to bail them out.


SEE:

CRASH
Black Gold
The Return Of Hawley—Smoot
Canadian Banks and The Great Depression
Bank Run
U.S. Economy Entering Twilight Zone


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Greenspan Bitch Slaps Bush

According to the Wall Street Journal in his new biography ex Fed Chairman Greenspan, a follower of Ayn Rand, bitch slaps the Bush regime. Too bad he didn't say this when he was still Fed Chairman.

Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."

Mr. Greenspan discovered that in the Bush White House, the "political operation was far more dominant" than in Mr. Ford's. "Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he writes.

And interestingly he takes no blame for the current housing crisis sub-prime melt down that he created when he was fed chairman.

Many economists say the Fed, by cutting short-term interest rates to 1% in mid-2003 and keeping them there for a year, helped foster a housing bubble that is now bursting.

Instead he blames communism, or at least the melt down of the Soviet Union.

He attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates.

So it was not the Fed that brought down interest rates, or created the global capitalist boom rather it was the devolution of the Soviet Union and the massive amount of unemployed workers available world wide to drive down wages.

The wave of migrant workers now flooding Europe, like those flooding into America, created the housing boom, by being a cheap source of construction labour and as consumers of the housing.

Mr. Greenspan returns repeatedly to the far-reaching importance of communism's collapse. He says it discredited central planning throughout the world and inspired China and later India to throw off socialist policies.

As well as cheap labour in the new fordist economies of China and India, especially the formers transformation from state capitalism to monopoly capitalism directly impacted on the American and global markets more than anything he and his monetarist pals did.

Confession is good for the soul. Ironically that confession fits classic Marxism more than it does the wacky ideology of his idol Ayn Rand.

And here is another irony that the joy expressed by the monetarists over the transformation of state capitalist economies to fordist monopoly capitalism will result in more inflation, their bugaboo.

In coming years, as the globalization process winds down, he predicts inflation will become harder to contain. Recent increases in the price of imports from China and a rise in long-term interest rates suggest "the turn may be upon us sooner rather than later."

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Lenin's Critique of Global Capitalism

Excerpt from Introduction to International Political Economy by David N. Balaam and Michael Veseth, 2nd ed., 2001, pp. 76-78


Essay



Vladimir Ilich Lenin (1870-1924) is best known for his role in the Russian Revolution of 1917 and the founding of the Soviet Union. Lenin symbolized for many people the principles and ideas of the 1917 Revolution. In fact, in many ways, Lenin turned Marx on his head by placing politics over economics when he argued that Russia had gone through its capitalist stage of history and was ready for a second, socialist revolution.

Here we focus on Lenin's ideas about imperialism more than on his revolutionary strategies. Lenin developed a perspective on IPE that took Marx's class struggle, based on the mode of production, and used it to explain capitalism's international effects as transmitted through the production and finance structures of rich industrial countries to the poorer developing regions of the world. Lenin's famous summary of his views is Imperialism: The Highest Stage of Capitalism (1917).

Marx said that capitalism, driven by its three laws, would come to revolutionary crisis and suffer internal class revolt, paving the way for the transition to socialism. Lenin observed that capitalist nations had avoided this crisis by expanding the pool of workers they exploited. Capitalism, he argued, "had escaped its three laws of motion through overseas imperialism. The acquisition of colonies had enabled the capitalist economies to dispose of their unconsumed goods, to acquire cheap resources, and to vent their surplus capital."

In short, Lenin added to Marx what Robert Gilpin has called a "fourth law" of capitalism, which we might call the law of capitalist imperialism: "As capitalist economies mature, as capital accumulates, and as profit rates fall, the capitalist economies are compelled to seize colonies and create dependencies to serve as markets, investment outlets, and sources of food and raw materials. In competition with one another, they divide up the colonial world in accordance with their relative strengths.''

To Lenin, imperialism is another portion of the capitalist epoch of history that the world must endure on the road to communism. According to Lenin, "Monopoly is the transition from capitalism to a higher system.''

The critical element fueling imperialism, according to Lenin, was the decline of national economic competition and the growth of monopolies. Based on Marx's law of concentration, what emerged was an aggregation of market power into the hands of a few "cartels, syndicates and trusts, and merging with them, the capital of a dozen or so banks manipulating thousands of millions." Lenin went on to argue that.

"Monopoly is exactly the opposite of free competition; but we have seen the latter being transformed into monopoly before our very eyes, creating large-scale industry and eliminating small industry, replacing large-scale industry by still larger-scale industry, finally leading to such a concentration of production and capital that monopoly has been and is the result."

The key for Lenin was that because monopolies concentrated capital, they could not find sufficient investment opportunities in industrial regions of the world. They therefore found it necessary to export capital around the globe to earn sufficient profits.

Lenin argued that imperialist expansion allowed capitalism to postpone its inevitable crisis and metamorphose into socialism. It also created new, serious problems for the world. Lenin viewed World War I as an imperialist war, caused by tensions that arose from the simultaneous expansion of several European empires. As nations at the core of capitalism competed to expand their exploitative sphere, their interests intersected and conflicted with one another, producing the Great War.

Lenin's role in the Revolution of 1917 was to help defeat liberal political forces that sought to keep Russia within the European capitalist system. Under Lenin's leadership, Russia essentially withdrew from Europe and its imperialist conflicts, and resolved to move quickly and on its own toward a communist system free of class conflict and imperialist wars.

Lenin's imperialist theory of capitalism has been very influential, so it is worthwhile considering briefly a few other aspects of his analysis. Lenin sought to explain how it was that capitalism shifted from internal to international exploitation, and how the inequality among classes had as its parallel the law of uneven development among nations.

For Lenin, profit-seeking capitalists could not be expected to use surplus capital to improve the living standards of the proletariat. Therefore, capitalist societies would remain unevenly developed ones, with some classes prospering as others were mired in poverty. The imperial phase of capitalism simply transferred this duality of wealth and poverty onto the world stage, as capitalists, seeking to maintain and even increase their profits, exported to what contemporaries of Lenin called "backward" regions of the world. These poor peripheral countries were now integrated into the world economy as the new "proletariat" of the world.

According to Lenin, "Monopolist capitalist combines -- cartels, syndicates, trusts -- divide among themselves, first of all, the whole internal market of a country, and impose their control, more or less completely, upon the industry of that country. But under capitalism the home market is inevitably bound up with the foreign market. Capitalism long ago created a world market."

The uneven development of society within a nation now took place on an international scale.

Lenin saw imperial capitalism spreading through two structures of the IPE: production and finance. Both of these structures were so constituted, under capitalism, as to create dependency and facilitate exploitation. Cutthroat competition among poorer nations made them easy targets for monopolies in the production structure in the capitalist core. The same forces were at work within the finance structure, where the superabundance of finance capital, controlled by monopolistic banks, was used to exploit less developed countries.

The bottom line of imperialism, for Lenin, was that the rich capitalist nations were able to delay their final crisis by keeping the poorer nations underdeveloped and deep in debt, and dependent on them for manufactured goods, jobs, and financial resources. It is not surprising, then, that Lenin's theory of imperialism has been very influential, especially among intellectuals in the less developed countries, where his views have shaped policy and attitudes toward international trade and finance generally.

We include Lenin's imperialism under the general heading of "structuralism," as we did with Marx's theories, because its analysis is based on the assumption that it is in capitalism's nature for the finance and production structures among nations to be biased in favor of the owners of capital. While, in theory, the relationship between capital-abundant nations and capital-scarce nations should be one of interdependence, since each needs the other for maximum growth, in practice the result is dependence, exploitation, and uneven development. The same forces that drive the bourgeoisie to exploit the proletariat ultimately drive the capitalist core nations to dominate and exploit less developed countries.

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Corporatism

"Fascism should more properly be called corporatism because it is the merger of state and corporate power." - Benito Mussolini

Corporatism is a form of class collaboration put forward as an alternative to class conflict, and was first proposed in Pope Leo XIII's 1891 encyclical Rerum Novarum, which influenced Catholic trade unions that organised in the early twentieth century to counter the influence of trade unions founded on a socialist ideology. Theoretical underpinnings came from the medieval traditions of guilds and craft-based economics; and later, syndicalism. Corporatism was encouraged by Pope Pius XI in his 1931 encyclical Quadragesimo Anno.

Gabriele D'Annunzio and anarcho-syndicalist Alceste de Ambris incorporated principles of corporative philosophy in their Charter of Carnaro.

One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin "dangers" of the egalitarianism of the French Revolution and the laissez-faire economics of Adam Smith. In Germany and elsewhere there was a distinct aversion among rulers to allow unrestricted capitalism^{[citation needed]}, owing to the feudalist and aristocratic tradition of giving state privileges to the wealthy and powerful^{[citation needed]}.

Under fascism in Italy, business owners, employees, trades-people, professionals, and other economic classes were organized into 22 guilds, or associations, known as "corporations" according to their industries, and these groups were given representation in a legislative body known as the Camera dei Fasci e delle Corporazioni. See Mussolini's essay discussing the corporatist state, Doctrine of Fascism.

Similar ideas were also ventilated in other European countries at the time. For instance, Austria under the Dollfuß dictatorship had a constitution modelled on that of Italy; but there were also conservative philosophers and/or economists advocating the corporate state, for example Othmar Spann. In Portugal, a similar ideal, but based on bottom-up individual moral renewal, inspired Salazar to work towards corporatism. He wrote the Portuguese Constitution of 1933, which is credited as the first corporatist constitution in the world.

When you get rid of the paramilitary uniforms, the swaggering macho bravado, fascism is merely corporatism. And like its economic predecessor Distributism it shares a Catholic origin, a fetish for private property, and being a Third Way between Capitalism and Socialism. After WWI Corporatism, Distributism, and Social Credit, evolved as economic ideologies opposed to Communism and Capitalism.

Corporatism is sometimes identified as State Capitalism which it is a form of. However State Capitalism is a historic epoch in Capitalism that developed as a response to the Workers rebellions world wide between 1905-1921, in particular the Bolshevik Revolution. The epoch of State Capitalism begins with Keynes rescue of capitalism by using the State to prime the pump and to provide social reforms in response to the revolutionary workers movement.

Key features of the theory of state-capitalism.

1. A new stage of world capitalism
Dunayevskaya wrote that: “Each generation of Marxists must restate Marxism for itself, and the proof of its Marxism lies not so much in its “originality” as in its “actuality”; that is, whether it meets the challenge of the new times” The theory of state-capitalism met the challenge of the day in its universality, it was not narrowed to a response to the transformation of the Russian Revolution into its opposite, but of a new stage of world capitalism. She argued that: “Because the law of value dominates not only on the home front of class exploitation, but also in the world market where big capital of the most technologically advanced land rules, the theory of state-capitalism was not confined to the Russian Question, as was the case when the nomenclature was used by others.”

Whilst later theoreticians such as Tony Cliff, turned to the writings of Bukharin on imperialism and state-capitalism, adopting his linear analysis of the continuous development from competitive capitalism to state capitalism, Dunayevskaya explicitly rejected such an approach:

“The State-capitalism at issue is not the one theoretically envisaged by Karl Marx in 1867-1883 as the logical conclusion to the development of English competitive capitalism. It is true that “the law of motion” of capitalist society was discerned and profoundly analysed by Marx. Of necessity, however, the actual results of the projected ultimate development of concentration and centralization of capital differed sweepingly from the abstract concept of the centralization of capital “in the hands of a single capitalist or in those of one single corporation”. Where Marx’s own study cannot substitute for an analysis of existing state-capitalism, the debates around the question by his adherents can hardly do so, even where these have been updated to the end of the 1920’s”

Dunayevskaya went so far as to argue that to turn to these disputes other than for “methodological purposes” was altogether futile; and it is with regard to the dialectical method that Dunayevskaya stands apart from other approaches to this question. The state-capitalism in question is not just a continuous development of capitalism but the development of capitalism through the transformation into opposite. In the Marxian concept of history as that of class struggles, there is no greater clash of opposites than “the presence of the working class and the capitalist class within the same modern society”. This society of free competition had developed into the monopoly capitalism and imperialism analysed by Lenin in 1915, simultaneously transforming a section of the working class itself and calling forth new forces of revolt, making the Russian Revolution a reality. The state-capitalism Dunayevskaya faced emerged as the counter-revolution, which grew from within that revolution, gained pace. With the onset of the Great Depression following the 1929 crash, argued Dunayevskaya the “whole world of private capitalism had collapsed”:

“The Depression had so undermined the foundations of “private enterprise”, thrown so many millions into the unemployed army, that workers, employed and unemployed, threatened the very existence of capitalism. Capitalism, as it had existed – anarchic, competitive, exploitative, and a failure – had to give way to state planning to save itself from proletarian revolution”.

This state ownership and state planning was not a “war measure”, but rapidly emerged across the industrially advanced and the underdeveloped countries. State intervention characterised both Hitler’s Germany, with its Three Year Plans, as a prelude to a war to centralize all European capital, and the USA where Roosevelt launched his ‘New Deal’. This tendency did not decline after the war but accelerated such as under the Labour Government in Britain. Dunayevskaya argued that the “true index of the present stage of capitalism is the role of the State in the economy. War or peace, the State does not diminish monopolies and trusts, nor does it diminish its own interference. Rather, it develops, hothouse fashion, that characteristic mode of behaviour of capitalism: centralization of capital, on the one hand, and socialization of labour on the other.”

This was a world-wide phenomenon and whilst it was true that Russian state-capitalism, “wasn’t like the American, and the American New Deal wasn’t like the British Labour Party type of capital, nor the British like the German Nazi autarchic structure”. It found expression not only in the countries subjugated by Russian imperialism in Eastern Europe and in Communist China but also in the newly independent states following the anti-colonial revolutions.

Despite the varied extent of state control over sectors of these economies taken as whole all revealed we had entered a new epoch in history, differing from the period of Lenin’s analyses, as his was from that of Marx’s own lifetime. What Marx had posed in theory of the centralization of capital “into the hands of a single capitalist or a single capitalist corporation” had become the concrete of the new epoch.

While references to State Capitalism began in an attempt to define the post revolution Russia, and later in response to the rise of Fascism and the American New Deal, what was overlooked by traditional political Marxists was that State Capitalism was not just a feature of a particular kind of Capitalism but was a historic shift in capitalism. It was a shift that Left Wing Communists identified as the period of decline of capitalism, rather than its ascendency. A period of capitalist decadence. During the boom times of the fifties, sixties this seemed to be an outrageous assumption. Capitalism was booming, wages were increasing, a consumer society was being created that the world had never seen before. And yet by 1968 that was all to fall apart as the world under went a revolution not seen since 1919. And while that revolution failed to challenge capitalism it showed that it was rotten to the core.

The Seventies and on saw capitalism lurch from crisis to crisis, starting with the Oil Crisis of 1974. Massive inflation, wage and price controls, the decline of the world economy ending in the Wall Street crash of 1984. Truly those who said that capitalism was in a period of decadance were now having the last laugh.

State capitalism

On the economic level this tendency towards state capitalism, though never fully realised, is expressed by the state taking over the key points of the productive apparatus. This does not mean the disappearance of the law of value, or competition, or the anarchy of production, which are the fundamental characteristics of the capitalist economy. These characteristics continue to apply on a world scale where the laws of the market still reign and still determine the conditions of production within each national economy however statified it may be. If the laws of value and of competition seem to be ‘violated’, it is only so that they may have a more powerful effect on a global scale. If the anarchy of production seems to subside in the face of state planning, it reappears more brutally on a world scale, particularly during the acute crises of the system which state capitalism is incapable of preventing. Far from representing a ‘rationalisation’ of capitalism, state capitalism is nothing but an expression of its decay.

The statification of capital takes place either in a gradual manner through the fusion of ‘private’ and state capital as is generally the case in the most developed countries, or through sudden leaps in the form of massive and total nationalisations, in general in places where private capital is at its weakest.

In practice, although the tendency towards state capitalism manifests itself in all countries in the world, it is more rapid and more obvious when and where the effects of decadence make themselves felt in the most brutal manner; historically during periods of open crisis or of war, geographically in the weakest economies. But state capitalism is not a specific phenomenon of backward countries. On the contrary, although the degree of formal state control is often higher in the backward capitals, the state’s real control over economic life is generally much more effective in the more developed countries owing to the high level of capital concentration in these nations.

On the political and social level, whether in its most extreme totalitarian forms such as fascism or Stalinism or in forms which hide behind the mask of democracy, the tendency towards state capitalism expresses itself in the increasingly powerful, omnipresent, and systematic control over the whole of social life exerted by the state apparatus, and in particular the executive. On a much greater scale than in the decadence of Rome or feudalism, the state under decadent capitalism has become a monstrous, cold, impersonal machine which has devoured the very substance of civil society.

The epoch of State Capitalism as the historical reflection of the decline of capitalsim, its decadence, continues to this day. Called many things, globalization, post-fordism, post-modernism, it is all the same, the decline of capitalism. Global warming, the gap between rich and poor, nations and peoples, shows that capitalisms rapid post war expansion has reached its apogee and is now desperately scrambling to run on the spot.

Despite the so called neo-liberal restoration of the Reagan,Thatcher era. They simply reveresed the Keynesian model, by using the state not to prime the pump through social programs or public services but through tax cuts and increasing militarization/military spending. In fact one of the often overlooked aspects of the success of post WWII Keynesianism was what Michael Kidron called the Permanent War Economy.

Corporatism is the capitalist economy of the U.S. Empire, as seen in its continual permanent war economy that has existed since the end of WWII and continued with wars and occupations to enforce its Imperial hegemony across the globe. America is Friendly Fascism.

The Explosion of Debt and Speculation

Government spending on physical and human infrastructure, as Keynes pointed out can also fuel the economy: the interstate highway system, for instance, bolstered the economy directly by creating jobs and indirectly by making production and sales more efficient. However, spending on the military has a special stimulating effect. As Harry Magdoff put it,

A sustainable expanding market economy needs active investment as well as plenty of consumer demand. Now the beauty part of militarism for the vested interests is that it stimulates and supports investment in capital goods as well as research and development of products to create new industries. Military orders made significant and sometimes decisive difference in the shipbuilding, machine tools and other machinery industries, communication equipment, and much more....The explosion of war material orders gave aid and comfort to the investment goods industries. (As late as 1985, the military bought 66 percent of aircraft manufactures, 93 percent of shipbuilding, and 50 percent of communication equipment.) Spending for the Korean War was a major lever in the rise of Germany and Japan from the rubble. Further boosts to their economies came from U.S. spending abroad for the Vietnamese War. (“A Letter to a Contributor: The Same Old State,” Monthly Review, January, 1998)

The rise of the silicon-based industries and the Internet are two relatively recent examples of how military projects “create new industries.” Additionally, actual warfare such as the U.S. wars against Iraq and Afghanistan (and the supplying of Israel to carry out its most recent war in Lebanon) stimulates the economy by requiring the replacement of equipment that wears out rapidly under battle conditions as well as the spent missiles, bullets, bombs, etc.

To get an idea of how important military expenditures are to the United States economy, let’s look at how they stack up against expenditures for investment purposes. The category gross private investment includes all investment in business structures (factories, stores, power stations, etc.), business equipment and software, and home/apartment construction. This investment creates both current and future growth in the economy as structures and machinery can be used for many years. Also stimulating the economy: people purchasing or renting new residences frequently purchase new appliances and furniture.

During five years just prior to the wars in Afghanistan and Iraq (through 2000), military expenditures relative to investment were at their lowest point in the last quarter century, but were still equal to approximately one-quarter of gross private investment and one-third of business investment (calculated from National Income and Product Accounts, table 1.1.5). During the last five years, with the wars in full force, there was a significant growth in the military expenditures. The housing boom during the same period meant that official military expenditures for 2001–05 averaged 28 percent of gross private investment—not that different from the previous period. However, when residential construction is omitted, official military expenditures during the last five years were equivalent to 42 percent of gross non-residential private investment.*

The rate of annual increases in consumer expenditures fall somewhat with recessions and rise as the economy recovers—but still increases from year to year. However, the swings in private investment are what drive the business cycle—periods of relatively high growth alternating with periods of very slow or negative growth. In the absence of the enormous military budget, a huge increase in private investment would be needed to keep the economy from falling into a deep recession. Even with the recent sharp increases in the military spending and the growth of private housing construction, the lack of rapid growth in business investment has led to a sluggish economy.

See

State Capitalism




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