The Economy Of Analysis - Part 1

The global economy is clearly slowing. The reasons for that slowing are not uniform, even though, as a single global economy, the reasons are interrelated. Yet, much, if not all, of the Left analysis of the Global Economy, and its current “crisis”, is framed in pretty uni-linear terms, as being simply a “Crisis Of Capitalism”.

Such an approach is not Marxist, because it does not begin from the starting point of any Marxist analysis, which is an analysis of the concrete reality of economic conditions, as they exist within each economy, and how these are, in turn, related to the global system. It fails to analyse the global economy, in the terms that most Marxist economic analysis has used, from Marx onwards, that of “combined and uneven development”. Instead it takes as its starting point the idea, put forward repeatedly by catastrophists, of various types, that Capitalism is in its death throes, and the only puzzle is how it has managed not to enter the, long awaited, final collapse before now!

Yet, even now, when the prospect of a serious economic crisis, even possibly a Depression, faces the US, Europe and Japan, the reality is that the global economy is clearly not on the verge of collapse.

Rather in those parts of the world that have, as part of the new Long Wave upswing, taken on the baton of development – China, S. Korea, Taiwan, Singapore, Malaysia, India, Russia, Brazil etc – dropped by the old world leaders in the US, Britain, and parts of Western Europe, growth continues at a pace. In fact, in many of these economies, the slowdown is a consequence not of any “crisis”, but of a deliberate policy by their Governments, to slow the pace of growth because it was seen as being too high!

But, in fact, the real reason for the slow down in the US, the UK and much of Western Europe, is also largely due to Government policy. Here, however, policies of austerity are motivated not by a desire to slow down growth that is seen as being too high, and unsustainable. Rather the reason for these austerity measures is based on ideology, and politics.

This fact has created all sorts of problems for much of the Left in terms of analysis, because it operates with what is a crude economic determinist view, in which an objective “Capital Logic” operates in the background, and can be observed in the actions of Governments and the State, both of which are reduced to nothing more than mere cyphers for Capital itself. Making the same mistake, that Lenin often made, of conflating the Government with the State, it sees all the actions of Governments as necessarily being directly related to the needs of Capital, and as being dictated by this Capital Logic.

But, this again is not Marxist. The Political superstructure does indeed arise upon the economic base, but dialectics shows how the relations of the two operate via a process of complex feedback loops, and how the superstructure has a dynamic, and a logic, of its own, that is not immediately, but only ultimately and proximately determined by the economic base. The analysis of much of the Left, here falls into a crude functionalism, as opposed to a Marxist analysis. For one thing, it requires a belief in some single Capital Logic, rather than an analysis that understands that Capital itself is not homogeneous.

Capital in reality, as Marx described it, is defined by “many Capitals”, each in competition with each other, each with divergent interests. Even within larger aggregates of Capital, say at an industry level, there are divergent interests between this industry, and other industries. There are different interests between Money Capital, Productive Capital and Merchant Capital. There are differences between Big Capital and Small Capital. There are differences between Capital, which is dependent upon the Home Market, and Capital which is dependent upon Exports, or Imports. So, it is impossible for there to be a single Capital Logic. Actions by the Government or by the State, designed to benefit one section of Capital may do so at the expense of other sections of Capital.

In general, the State, as a Capitalist State, as the “Executive Committee of the Ruling Class” has the job of managing these conflicting interests. But, the nature of the State, and of its personnel mean that concretely it will always tend to act in the interests of the dominant sections of Capital, and today that means of Big Capital.

It is with the children of the Big Capitalists that the personnel of the top tiers of the State went to school. It is with these same people they have regular meetings in various bodies, and capacities. It is to the Boards of these companies they usually retire, once they have done the required number of years within the State, to receive their lavish pensions. It is a different world from that of the Small Capitalist, such as the Engineering firm employing a few hundred people.

And, in fact, as I argued in my blog post A Bit Of A Pickle, things are even more complex than that. In developed economies today, the State accounts for around 40-50% of economic activity. In the last 60 years, vast State bureaucracies have developed, way beyond what existed in Trotsky's time, let alone the time of Lenin, and most certainly of Marx and Engels. As Trotsky demonstrated, in relation to the development of the State bureaucracy in the USSR – and to a lesser extent in his analysis of Fascism and other forms of Bonapartism – and as Lenin, had recognised too late in 1924 (when he argued for the establishment of Co-ops, having recognised the danger of the growing bureaucracy), all bureaucracies develop as a definite social formation, with their own sets of interests, which they will pursue to the maximum the given conditions allow them at the time.

A permanent State bureaucracy, in an economy where the State itself plays a considerable role in the economy – as under Stalinism or under Fascism, or under the kind of State Capitalist regimes that typically accompany various forms of Bonapartism – will have very definite sets of interests of its own that it wishes to pursue, and will have considerable economic, social and political power to pursue them. A look at the Bonapartist regimes in Egypt, Syria and other countries now being challenged by bourgeois democratic revolutions, shows how these State bureaucracies can have many of the characteristics of a ruling class.

But, in economies of developed Capitalism, where the State accounts for such a large slice of economic activity, where the top bureaucrats receive such huge salaries and benefits – though not in the same league as the actual ruling class – where their Departments are frequently the largest employers in the country – as for example with the NHS – then they will have a clear set of interests specific to themselves and separate from those of Capital, which they will pursue, and will have considerable power to do so.

But, the same is not true of Governments. Governments may have a high proportion of people who also went to Public School, and to the top Universities.

They too may have regular meetings with the top Captains of Industry, and may see themselves taking up some cushy, well paid, non-executive Directorship on the Board of a top company, when they end their days in the Commons – whether they move also to the Lords or not. But, unlike the top personnel of the State, these MP's, even Tory MP's, have to operate in a different milieu. The Tory Party, in most places, is dominated by the small Capitalists, the owners of the small and medium sized enterprises, that are the stuff of Tory mythology, about the backbone of the economy. Moreover, unlike the State officials, the politicians have to get themselves elected – a fact that Lenin himself seemed to skip over at times, as did Trotsky, when they sometimes seemed to imply that Capital could simply install Governments of whatever complexion suited its interests, at the particular time. Mass political parties act as coalitions of interest. That is particularly true of the bourgeois, “catch-all” parties that developed after WWII. They operate on the basis of seeking to ensure the votes of a core constituency, whilst winning over a sufficient number of the middle ground, to provide them with a working majority of seats.

As Engels demonstrated, by the end of the 19th Century an unusual coalition of interest existed between Big Capital, and Labour.

This was true without any resort to the ideas put forward by Lenin and others about an “Aristocracy of Labour” that arose due to the actions of Imperialism in super-exploiting sections of the world, in order to buy off sections of the domestic workforce. It was not Imperialism that provided the means of providing workers in Britain, and other developed economies with higher standards of living, with various measures such as Health and Safety provision, with measures of Welfare etc. It was the normal operation of Capital, its own internal growth, particularly as a result of the Long Wave Boom of the late 19th century, which made that possible.

Of course, for those such as Hillel Ticktin, who want to cling to the ideas of Lenin put forward 90 years ago, which saw Capitalism as being, even then, in its death agony, such a possibility is inconceivable. In a summary of a speech he gave to the CPGB's, Communist University 2011 he writes,

“The argument was - and I think it was correct - that the development of finance capital and imperialism stopped a possible long-term depression - Cecil Rhodes said, ‘Either we go imperialist or we face a revolution.’ And it has to be said that it worked - whether or not an aristocracy of labour came into existence, as Lenin believed. The trade cycle with its downturns became much less important in the period of imperialism’s development and the standard of living tended to rise in the developed countries.”

Yet, he seems to forget that just a few sentences before he had admitted that,

“Since then we have learnt that, while Lenin was right, most of the exported capital did not in fact go to the third world. Effectively it financed the development of the developed countries - most typically Germany and the United States.”

So, the idea that Capitalism had been saved by “Imperialism” exporting Surplus Capital to the Colonies, or that by such means of super exploitation it had been able to buy off its own workers is clearly nonsense. Capital was not exported because it had become in any objective sense “surplus” within its own economy. Different fractions of Capital moved overseas because they saw the opportunity to expand their business by establishing themselves in these markets, and generally speaking the markets where they could make most profits were other developed economies, not the undeveloped markets of the Colonies! That is no different today in the way that Wal-Mart entered Britain by buying out ASDA, or the way TESCO has sought to expand into the US and other countries.

It may reflect a RELATIVE surplus of Capital, in the sense that this particular Capital, having expanded within its home market, sees better opportunities to expand in other markets, but it is not, in any meaningful sense, an absolute surplus of Capital. In reality, it is no different to the normal actions of Capital within a national market, which seeing the potential to make a higher rate of profit in some new or different type of production, reallocates towards it.

So we are left asking Comrade Ticktin here, in what way WAS Lenin right. In fact, quite clearly as Bill Warren demonstrated in “Imperialism – Pioneer of Capitalism”, Lenin was most definitely wrong on pretty much all counts.

(See also my blog Imperialism, Industrialisation and Trade and related posts.) In order to cling to Lenin's Theory, as though it was some kind of religious sacrament, Ticktin, and others, of the same persuasion, are forced to explain the continued growth of Capitalism, and its failure to collapse, in terms of various external causes. In addition to Imperialism, Ticktin here falls back on the idea of Wars and Arms Spending as such external means to prevent collapse.

Yet, the obvious answer to the riddle posed by Ticktin here is the one that he does not consider. If Capitalism produces a Surplus Capital, which has to be used up unproductively, in Wars or in Arms Production, then why cannot it instead use it up in other forms of activity, for example, in building hospitals, or schools, or providing a measure of Social Security?

After all, these things also have the benefit for Capitalism of acting to reproduce Labour Power, and indeed of producing Labour Power of better quality than that available in previous generations. In part, this obvious solution – and the one that Capitalism, in fact, did adopt - cannot be put forward by Ticktin, and others on the Left, because of the other fetish of the Left – the idea that the Welfare State was something won from Capital by workers, rather than being a rational development for the dominant Big Capital, which flowed from the new Fordist production regime that was introduced at the beginning of the Twentieth Century, and which matured after WWII.

In short, that coalition of interest that Engels identified between Big Capital and Labour, which emerged in the latter part of the 19th century, became enshrined in a social-democratic consensus. That is not to be understood in a purely Party political sense, but in terms of a set of ideas that can be shared, in whole or in part, across parties, and whose actual location slightly to the right or left of centre, is determined concretely in each specific country, and time period.

This consensus, ensured that the higher wages, the better working conditions, the welfare provision and so on that Ford, and other Big Capitalists could well afford, due to the greater efficiency and profitability of these firms, gave them an advantage over their smaller brethren, facilitating a strengthening of Big Capital, and its greater concentration and centralisation. As Engels put it,

“Thus the truck system was suppressed, the Ten Hours’ Bill was enacted, and a number of other secondary reforms introduced — much against the spirit of Free Trade and unbridled competition, but quite as much in favour of the giant-capitalist in his competition with his less favoured brother. Moreover, the larger the concern, and with it the number of hands, the greater the loss and inconvenience caused by every conflict between master and men; and thus a new spirit came over the masters, especially the large ones, which taught them to avoid unnecessary squabbles, to acquiesce in the existence and power of Trades’ Unions, and finally even to discover in strikes — at opportune times — a powerful means to serve their own ends. The largest manufacturers, formerly the leaders of the war against the working-class, were now the foremost to preach peace and harmony. And for a very good reason.

The fact is that all these concessions to justice and philanthropy were nothing else but means to accelerate the concentration of capital in the hands of the few, for whom the niggardly extra extortions of former years had lost all importance and had become actual nuisances; and to crush all the quicker and all the safer their smaller competitors, who could not make both ends meet without such perquisites.”

Engels – The Condition of The Working Class in England 1892 English Preface

That was indeed the spirit of Ford, who alongside his mass production assembly lines, and scientific management system from Taylor, also introduced a large increase in wages for his workers, introduced welfare measures, created a paternalistic atmosphere, in which even the workers families were drawn in, to feel themselves a part of the firm, as a coalition of interest, and by which means he was able, not only to retain his workers, but, in so doing, was able to see a significant increase in their productivity, which more than compensated for the higher wages, and other provisions. The introduction of Welfare States of varying degree of extension, by all developed economies during the 20th Century, was simply an extension of these measures at a macro-economic level, and in the process taking the burden of paying for it off the backs of individual Big Capitalists, and transferring it on to workers, the Middle Class, and sections of the Small Capitalists.

But, the refusal to accept that the Welfare State is a creation of Capital, not of the Working-Class, the refusal to recognise that Capitalism, as a system, is not in its death agony, and has been, and is, able to resolve its repeated crises by the same kinds of internal mechanisms, of restructuring and reallocation of Capital – including at a global level – together with the functionalist analysis of the State, means that much of the Left ends up in all kinds of contradictions in trying to understand the current crisis, and the responses of States and Governments.

Forward To Part 2