Capitalism: A Work in Progress and Regress

capitalism is the crisis3

Capitalism: A Work in Progress and Regress

Capitalism differs from all previous systems/modes of production in a number of ways. Capitalism constantly seeks to expand( and in the process both creates and destroys) productive forces routinely. All systems which preceded capitalism sought to conserve existing productive forces in the interests of ruling classes, under ancient slave systems/modes of production and feudal systems /modes of production.

Capitalism also brings with it ideals of freedom and equality as against all systems/modes of production which preceded capitalism, which relegated freedom and equality to some spirit world in heaven, or through higher levels of a re-incarnated existence -- beliefs one finds in the world's leading religions.

But real inequalities become more visible under capitalism and objectively greater than ever before. Capitalism seeks to constantly expand production for exchange (sale) and profit while concentrating it in the hands of owners/investors/employers of labor---labor through its production of goods is the source of the wealth.

In those cases where capitalism also leads to masses of people gaining formal political rights through elections over the choice of political leadership of the government, it establishes the possibility of masses of people using political power to restructure the system and distribute income and opportunity in ways that threaten capitalist concentration .

However there is a central and under capitalism irreconcilable contradiction when it comes to peoples use of political rights to gain greater economic wealth and power . Capitalist states/governments, whether the masses of people have formal rights or not, like all other states in class divided societies which preceded capitalism, work effectively with the owning/ruling class to sustain their wealth and power.

Formal freedoms/rights and effective freedoms/rights are very different things under capitalism, although the former usually provide a necessary condition to achieve the latter. For the working class majority, the struggle for equal rights becomes the struggle to make formal rights /freedoms effective rights/freedoms, which they always are to ruling classes to begin with. This means challenging and redefining ruling class definitions of freedom , democracy, and equality.

In pre capitalist societies, everyone in principle knows his or her place and was expected to live and work within that place and prepare future generations to do the same. In capitalist societies, in principle, the system provides everyone with the possibility or opportunity of rising above his or her place by accumulating wealth through competition with others in a "free market."

But the huge expansion of wealth under capitalism in a context where no one is really supposed to know his or her place produced in reality the greatest inequalities in history-concentrations of wealth and privilege which are clear to anyone walking around a major city, reading magazines or watching television, individuals like Warren Buffet and Bill Gates with the net worth of small countries on the same streets cheek and jowl with homeless people.

And the differences are really greater than in societies which preceded capitalism.

As William Hinton noted in his classic study of the early Chinese Revolution, Fan Shen, the Chinese landlord class had access to food and homes and furnishings and of course property far greater than the debt ridden and sometimes starving poor peasants and landless laborers ;but the differences between what they had and what they could get was objectively small when compared to the differences between the capitalist upper classes and workers in the U.S and other advanced countries.

In pre-capitalist societies, also, religion or, as in China, Confucian philosophy justified inequality as a necessary part of the natural order.

Capitalist Justifications of Inequality

Capitalist ideology has dealt with this contradiction in a number of ways. The simplest and the most common has been to define it as "the price of progress". This justification appears and re-appears or has been recycled under many guises-- from Adam Smith in the 18th century to the followers of Milton Friedman in the 21st.


Limiting the accumulation of wealth, in these views, is interference with the "natural order" of the marketplace and can only lead to greater overall poverty and misery, less and less production and consumption, and greater inequality.

In the late nineteenth and early 20th centuries for example, defenders of laissez-faire capitalism often defined socialism as a return to feudalism, an "industrial feudalism" in which the masses of people would become impoverished serfs providing tribute to state bureaucrats (views which in the late 20th century were revived under a variety of headings, ranging from the resurrected "trickledown theory" to the present day ravings of "tea party" Republicans)

Social Darwinism, which connected the accumulation of private wealth with natural superiority and the failure to accumulate wealth with inferiority became in Europe and to a lesser extent North America a rationale for inequality with the caveat that the survival of the fittest(those who successfully competed to accumulate wealth) would see also the dying out of the unfit(the lower classes failures who were not only responsible for their poverty but whose very existence was an economic drain on society) .

These views reached their most sinister expression in Hitler fascism's merging of Social Darwinist ideology with a collectivist racism, launching a world war to organize all productive forces and social relations on a pseudo-scientific racist theory of a hierarchy of peoples where the racially defined "fittest"("Nordic Aryans" led by a European based German Empire) would exploit and ,where they wished ,exterminate all other peoples, the way humans exploited various species of animals and exterminated animals to clear "living space" for human habitation.

I have dealt with this sordid history of capitalist theory and practice as it has dealt with the contradiction of its promise equality of opportunity and the reality of its producing greater inequality and insecurity, because the worst of that history is far from over. The last sixty five years have seen capitalism as a world system suffer great defeats and, in the last few decades, make a large comeback, rather like the titles and the plot lines 4th and fifth films of the six part the Star Wars serial, A New Hope, and The Empire Strikes Back

A New Hope

A coalition of Left-Center nations and movement s defeated fascism in WWII, providing a "new hope" through the world.

The advance of Communist and socialist parties, anti-imperialist national liberation movements, labor based political parties and the governments they are created, came to lead, or influenced , in the period from the 1930s to the 1970s saw the greatest global reduction in measurable terms of income inequality along with increased access to education, and, although this was very uneven, employment and health care in human history

The existence of Communist led socialist governments in China, the Soviet Union, Eastern Europe and later Cuba and Vietnam, along with a socialist oriented neutralist government in India and various social democratic governments in Western Europe and socialist influenced nationalist regimes in the Near East and Africa collectively threatened or at least appeared to threaten the capitalist world system with eventual destruction, as more and more of the world potentially was taken out of capitalist production

These governments, some to construct socialism, others to advance reforms that would prevent Communists from coming to power, others still to find a "third path" of their own, pursued policies which, even with their many failings and the deleterious global effects of cold war politics and national and ethnic rivalries, did produce greater equality than ever before-a "golden age," of sorts, as the British Marxist historian Eric Hobsbawm contended.

State/government policies protecting labor from the "market" in terms of the import of foreign goods and capital, establishing various state subsidies for food prices, minimum wages, expanding public education systems, and establishing direct public ownership over areas of the economy, served as the basis for this period of progress and higher real living standards and for that matter "economic growth" globally, not any resurrection of "free market capitalism."

But capitalism, given a class struggle which is always in existence whatever forms class consciousness may take, is much more secure with insecurity and poverty for the masses of people than it is with prosperity and progress. Since its profits derive from labor, it has always connected its own security and prosperity with its ability to make labor cheaper and cheaper, even if that leads to stock market crashes, industrial breakdown, and catastrophic losses to groups of capitalists in economic crises.

The socialist challenge and especially the Soviet achievement globally "contained" the worst capitalist abuses. But a socialist global economic system/mode of production did not come into existence with the great expansion of socialist states after WW I to challenge the capitalist mode of production, although the Soviet Union did seek with some success to create a regional system that connected it to its Eastern European allies.

The great Communist led societies, the Soviet Union and the Peoples Republic of China became rivals and in effect enemies after 1960. The enormous expense of cold war based military spending undermined the Soviet economy particularly and served as a roadblock to Soviet economic reforms that would have made Soviet socialism both more efficient and more attractive to both its own people and working people in the industrial capitalist countries.

National Liberation struggles in former colonial regions, even when they produced political revolutions that were socialist oriented, still had to not only develop but employ feed and clothe people in what was a world capitalist system.

Many of these nations did receive aid from the Soviet Union and some of its allies, particularly the German Democratic Republic and later for Africans, Cuba. But there was no socialist IMF, World Bank, or global trade organization to organize international economy.

Also, the IMF and world bank particularly, whatever progressive features they had represented in their early decades in terms of supporting public sector activities in developing countries, began to turn to "free market development" by the late 1970s, which meant opening up economies to trade and investment, to the free flow of goods and capital, and eliminating government subsidies and public sector protections that served as roadblocks to such development.

The Empire Strikes Back-or "Progress and Poverty, Part Two"

Steve Fraser, a former PH.D student of mine and the author of a fine study of Sidney Hillman and American labor, recently wrote about contemporary U.S. society as a "second gilded age," a time when state /government policy has made possible huge increases income and asset inequality and social insecurity for youth seeking education and employment, for senior citizens seeking to live dignified lives in retirement, for the overwhelming majority of people.

Just as in the first gilded age of the late 19th century, inequality and insecurity has developed against the background of great advances in technology-railroads, large factories, advances in construction and communications, mass produced consumer products from clothing to canned goods in the first gilded age, computerization of machines and information, along with advances in the automation of productive processes in the second.

In the first gilded age, capital made the working class pay for the new technologies and new large corporations with periodic layoffs, wage cuts, longer hours of work, the loss independence in and control over the work process.

Millions of farmers, artisans, small business owners, lost their land and businesses and were compelled to compete with each other to sell their labor at the lowest price possible to employers who built monopolistic trusts that stifled the very competition that capitalist ideology hailed.

The security and protections and benefits of the system of commercial capitalism, far less productive in terms of the quantity and variety of goods produced and consumed, were being destroyed before the eyes of the masses of people, creating the opposite of what was considered normal, that is, more poverty not less poverty along with more progress.

This was the "new normal" of the first gilded age, which saw the rise of the populist movement and later party in rural states of the South and the west, a socialist movement, and a multi-faceted progressive movement which, with all of its divisions and differences, sought to use government power and policy to either dismantle or regulate the great corporations/monopolies and either end or restrict their power to exploit farmers, small business owners, and worker

The second "gilded age," roughly 1975 to the present, has been characterized by state/government policies to undo in the U.S. and globally the advances made in the U.S. since the 1930s and the advances made global since the victory over fascism in the Second World War

Economic stagnation and a huge increase in inflation, led to wage stagnation and decline, particularly among unorganized workers without unions to fight to gain contracts to keep pace with inflation, and a sharp rise in regressive taxes, particularly in the U.S., property taxes, where 70 percent of the population were homeowners by the 1970s and the re-evaluation of homes(personal property) sharply upward meant that tax payments were sharply increased, whether or not homeowners incomes had risen to keep pace with inflation.

The cost of public transportation and other public services also sharply increased. Although some sectarian left writers in the U.S. proclaimed a "fiscal crisis of the state" and looked confidentially to the rise of anti-capitalist movements as capitalist governments ran out of money to fund "welfare state" policies, the opposite occurred in the U.S. and many other advanced capitalist countries.

In the U.S. the Democratic Carter administration abandoned New Deal style policies to deal with the crisis. The anti-Communist, anti-left leadership of the AFL-CIO which had come to power after WWII had no policy to deal with the crisis except to retreat, negotiate contracts that provided protection for older workers often at the expense of younger workers, and look to the national Democratic Party to provide protection.

At the state and local level, rightwing politicians began to lead successful "tax revolts" that produced public sector layoffs and reductions in a variety of public programs, especially public education, as public school teachers, as one scholar said recently, became the "punching bags" for politicians in both parties who played them against the homeowners whose children they sought to teach.

These political trends were seen through the country but they were most visible in states and cities which had been the strongholds of progressive and pro-labor politics. In New York City, Edward I Koch, a liberal Democratic Congressman, was elected Mayor and proceeded to carry forward an administration that undermined rent control, closed public hospitals in Harlem and other working class and minority districts, and supported policies of "condo conversion" and gentrification, which destroyed hundreds of thousands of working class rental housing units in order to build luxury private housing for the benefit of the real estate interests and the city government, who would receive much higher property tax payments from such units.

In California, rightwing activists were able at the end of the 1970s to pass in a state referendum a state restriction on local property tax increases (proposition 13), which wreaked havoc with public education and other services in working class communities. With a weakened and largely ineffective trade union leadership, a Democratic party offering at the national level no leadership, large numbers of people who had been taught that they were the "middle class" saw their material condition and self image threatened by a sharp increase in inflation without price controls, a sharp increase in interest rates for automobiles new homes, and credit cards, which was finance capital's response to the inflation.

To keep their homes, their autos, their access to consumer goods (that which defined them as a middle class) they had to increase their incomes. And they turned in significant numbers to politicians of the right who pledged to do that by reducing their property and income taxes, defining all forms of taxation and the purposes for which taxes were used(except military spending)as the source of the economic crisis. Ronald Reagan's election to the presidency in 1980 against the background of a second oil crisis and further sharp increase in inflation and heightened cold war fears gave these rightist political forces control of the presidency for the first time in the post WWII era. The second gilded age now moved into high gear.


These trends had already taken shape politically when Ronald Reagan's election to the presidency increased them quantitatively and qualitatively

In its first years, the Reagan administration reduced "discretionary" spending for social programs(non payroll tax based social security and unemployment insurance spending) by 30% while more than doubling military spending and sharply reducing taxes on the wealthy and corporations.

Also, the administration began to organize federal social spending around "block grant" formulas which compelled various units within a specific program to compete with each other over a reduced amount of money.

Support for public housing and rent subsidies under the Department of Housing and Urban Development(HUD) dropped by 80% In a number of instances existing federal housing complexes were virtually given away to private developers and sometimes literally demolished While income taxes were reduced for upper income groups, regressive social security taxes were increased for working class families and minimum wages and unemployment insurance benefits were frozen. The real value of social security benefits dropped significantly.

The government's and capital's response was to provide tax benefits those employees who could to set up with employers stock market based 401 K pension funds, which seemed to work well as long as the market was rising sharply, but intensified income inequality through the society.

Various food subsidies going back to the New Deal era were reduced in value-the most famous being the administration's attempt to raise the cost of subsidized school lunches by among other things categorizing Ketchup as a vegetable and its less well known undermining of food stamps with such programs as direct distribution of surplus cheese.
The Reagan administration, beginning with its destruction of the air traffic controllers union and blacklisting all of its members from federal employment (1981) launched the most sustained attack on the trade union movement since the 1920s, while it pursued policies of economic deregulation which sharply increased the export of capital from the U.S.

The capital from abroad which began to come in in the 1980s for the first time in U.S. history was capital seeking and finding cheap labor, compared to European labor costs while U.S. capital sought cheaper labor in Latin America, the Pacific Rim, etc.

What is most important about these developments is that they have characterized U.S. political economy over the last three decades-moderated, but essentially left in place during the Clinton years and so far not effectively challenged, much less reversed by the Obama administration.

Here are a few highlights of what these policies have produced. First, the distribution of income has shifted very sharply to the upper 20% of income earners and in recent years to the upper 5% at the expense of all others, especially those in the lowest 20% of income earners, who have been literally priced out of housing and health care markets

For upper income earners, especially those "baby boomers" and others who already owned their own homes, sent their children to private schools or had adult children, and were positioned to profit from the rising stock market and the sharply increased salaries and "compensation for upper and middle management, of the banks and corporations which flush with cash from the detaxation and deregulation and ready to lend it around, these were the best of times,.

Those who dared mention that the super profit were coming s from corporate raiding, leveraged buyouts, the manipulation of junk bonds and were producing a mountain of debt, business, government, and over time, consumer debt were not taken seriously. Those who suggested that such policies undermined mass purchasing power and sustained "economic growth" only on paper, as represented by a rising stock market and credit based consumer spending., were largely ignored or seen as tender minded Keynesians with no knowledge of "real economic systems."

For those who lost their jobs as unemployment became chronically high (five percent unemployed became in effect the full employment goal of the "new normal"); who lost their apartments and homes as rental property was gentrified into condos and coops and houses were lost to foreclosure; who found themselves working two and even three jobs to keep a roof over their heads and food on the table( as they and their families went deeper into debt to pay for their children's education) --- these were the worst of times since the Great Depression.

In some respect they were much worse, because during the great depression, unions were being organized, Communists and others on the left were educating and coordinating the struggles of workers, farmers, tenants, and poverty was not accepted as the price of progress but progress was seen as the struggle of people to abolish poverty and social injustice.

I could lengthen this already long essay with an army of statistics on the enormous rise in income and asset inequality, telling readers what in general most know and what those who own and manage the wealth of the country steadfastly refuse to know. A few points through have to be mentioned before remedies are suggested.

The U.S. has the lowest rate of effective taxation on capital in the developed world. The U.S. has the largest spread of income inequality in the developed world. The U.S has the most "business friendly" labor laws and weakest social welfare benefits/safety net in the developed world-a crazy quilt public private pension system and an even crazier private insurance based health care system which adds greatly to inequality,

Specifically this includes , a social security system whose payouts are kept low, making it difficult for those who have no supplemental union, public or corporate stock market pensions to live with any dignity. And a health care system with tens of millions of uninsured and underinsured people(ironically, senior citizens, who suffer from the inequality of the pension system, do have the benefits of the Medicare system, which the people as a whole don't have .

These are facts and as Lenin once said, facts are stubborn things. Or as the old American adage goes "What you see is what you get."

This is what we see and this is what we have gotten in recent decades. If we withdraw, seek to save ourselves as individuals, as families, or as specific craft, ethnic or regional interest groups---if we struggle to get a piece of smaller and smaller block grants, wage funds, pensions, than the "Empire" aka monopoly capital will have succeeded and the U.S. itself in the 21st century will in the worst case scenario become something like a 19th century "burnt over district," where slash and burn agriculture devastated the region and the land speculators and commercial farmers moved West, leaving large numbers of working farmers to lose the land.

But there are no new industries being created for dislocated American workers as there was in the 19th century Nor are there foreign countries that Americans can immigrate to, as farmers and artisans from capital poor debt ridden Eastern and Southern European countries immigrated to the U.S. in the 19th century. Today, only capital exports itself to places that had not yet been clearly mapped until the later 19th century to seek higher profits.

The sixth and last episode of the Star Wars serial was title d "Return of the Jedi," the triumph of the good guy knights with super powers over the evil empire.

If I were to write a scenario for our future, the only one that offers working people hope, I would title it, "Return of the Comrades," meaning the return of open and militant class conscious Communists and socialists to educate, organize and coordinate economic and political struggles and reconstruct at least a center-left coalition, at most, construct a left-center to relegate the "new normal" of 2nd gilded age capitalism to the not to be recycled junk heap of history.

That will require many big victories-from the repeal of state right to work laws and the whole Taft-Hartley system, to tax reform of the kind not seen since WWII, to direct public control over the Federal Reserve system and the restoration or "return" of the regulation of banking and the stock market.

Before one repeats the conventional wisdom that is impossible one should remember that as late as 1932, the conventional wisdom was that social security, minimum wages, industrial unions, national jobs programs for the unemployed,) the policies that provided with the WWII and postwar expansion the sharp reduction in income inequality in the U.S.) were also seen as impossible.

There are policies short of the abolition of capitalism and the establishment of socialism that can reverse or even seriously challenge the huge increase in inequality in the U.S. in recent decades today

While the tactics and the alignments will in all likelihood have to be different then they were in the great peoples upsurge of the 1930s and 1940s in the U.S. , the basic strategy of education + organization+ coordination= effective action will I believe remain the same.

A vital and revitalized broad left movement and Communist Party presence, open and acknowledged will be the key to victories in the present and the future, just as its presence was the key to victories seventy five years ago and its absence the key to defeats thirty five years ago.



Post your comment

Comments are moderated. See guidelines here.


No one has commented on this page yet.

RSS feed for comments on this page | RSS feed for all comments