The performance of the US economy from the mid-1970s to the
present was no match for its relatively robust performance during what
economists call the Golden Age – 1949 to 1973. This was in fact the
longest period of sustained growth in US history, when most (white)
working people had achieved a degree of material security unknown
earlier and unattainable since. But from the late 1960s and through the
1970s economic malaise was increasingly in evidence, signaling worse to
come: high rates of both inflation and unemployment -stagflation- was
not supposed to be possible in a
Keynesian(1) world, but there they
were, and seemingly intractable. At the same time workers’ productivity
declined dramatically. Profit rates fell steadily for more than ten
years as revived Japanese and European economic competitors increasingly
ate into US manufacturing’s share of both world trade and the domestic
market itself.
Corporate and political elites responded with the cold bath
treatment. “The standard of living of the average American,” pronounced
Fed chairman Paul Volcker on Oct. 17, 1979, “has to decline. I don’t
think you can escape that.” Interest rates went through the roof.
Austerity was the order of the day, and it still is.
In 1983 an analysis of US decline and the ensuing rise of Thatcher-Reaganism appeared, in the book
Beyond the Waste Land,
by three Harvard-based radical economists - Sam Bowles, David M.
Gordon and Thomas Weisskopf. The book received favorable reviews in many
mainstream media, including
The New York Times and The New York Review
of Books. Reviewers included the distinguished US economists John
Kenneth Galbraith, James Tobin and Kenneth Arrow.
The authors argued that a social-political factor of great importance
figured crucially in the decline of US hegemony: workers had become
more secure and therefore more emboldened by Keynesian New-Deal benefits
like
Social Security and
unemployment insurance, and the labor-friendly
social programs of Lyndon Johnson’s
Great Society.
Labor’s uppityness
was especially striking in the 1960s and early 1970s. There was a
notable increase in labor actions, from strikes to industrial sabotage.
With fewer workers worried about where the next mouthful would come
from, we saw an increase in goofing off on the job, tardiness,
job-switching, pressure for improved workplace safety measures and
demands for higher wages and benefits. The result was a decline in
productivity (output per unit of labor input) and a wage-push profit
squeeze.
Most importantly, the legacy of the New Deal and the Great Society
had resulted in a shift in the distribution of national income from
capital to labor.
Bowles, Gordon and Weisskopf argued that with effective unions and
unprecedented security, labor had achieved a degree of power over
capital hitherto unknown. This analysis has been developed more recently
by the economists Jonathan Goldstein and David Kotz, who show that
every Golden-Age recession was generated by a wage-push profit squeeze
in the preceding expansion. According to Bowles, Gordon and Weisskopf,
capital did not take this sitting down.
Corporate America initiated a
counteroffensive which the authors called the
Great Repression.
Capital’s counterattack, we may say, persists to this day.
Liberal Thinking About the Politics of the Elite
Several of the most prominent liberal reviewers of
Beyond the Waste Land were
scandalized by the authors’ claim that capital deliberately organized
active political resistance to working-class advances. In the
New York
Times (July 31, 1983) Peter Passell, who at the time wrote about
economics for the
Times’s editorial page, complained that the book
exhibits an “emphasis on conspiracy.” John Kenneth Galbraith was far
more insightful and dismissive of mainstream orthodoxy than liberals of a
Paul Krugman or
Robert Reich kidney. Yet he too could not imagine that
the vested interests deliberately muster forces antithetical to
working-class interests. In his otherwise generous praise for the book
in The
New York Review of Books (June 2, 1983) Galbraith registered a
“serious complaint about the authors’ position on political power…. They
see the present sorry behavior of the economy as the result of a
thoughtful and deliberate exercise of corporate power.” Galbraith
repudiated the authors’ “conviction that the present disaster is
designed – that it reflects in a deliberate way the interest of the
corporations. This I do not believe. I would attribute far more to
adherence by the corporate world to outdated and irrelevant ideology,
and to political leaders, not excluding the president, who do not know
what damage they are accomplishing.”
It is as if acknowledging elites’ political activism gives credence
to class analysis, which is thought to be too Marxian for our own good.
Talk of corporate dominance of the State opens the door to unacceptably
subversive reconceptualizations of matters we have been trained to
understand in safer, less seditious terms. Seeing a recession as a
strike of capital, for example, forces us to make the appropriate
readjustments in a range of related economic and political
understandings. Indeed, as Galbraith recognized,
Beyond the Waste Land requires
us to think and to act very differently regarding what political power
is all about. It is less unsettling to imagine that “irrelevant
ideology” and political ignorance lie at the heart of the current
economic debacle, than it is to see the depression as the outcome of a
deliberate assault on working people by the oligarchs.
These liberal objections are far less believable now than they were
28 years ago. Elites are not philosophers seeking to be guided by the
most intellectually cogent theories. Political power is not about
upholding this or that ideology; it is about legislating in this or that
group’s interest. Political power is exercised most successfully by
those whose interests are most consistently served by the exercise of
State power.
Cui bono? remains the best test of who matters most to the State managers. The latter govern; the former rule.
By this test only the blind fail to see that Wall Street is now
running the show. The blind abound among liberal intellectuals. In his
New York Times column on Nov. 23, 2009, Paul Krugman confesses that “It
took me a while to puzzle this out. But the concerns Mr. Obama expressed
become comprehensible if you suppose that he’s getting his views,
directly or indirectly, from
Wall Street.” You don’t say.
Krugman’s epiphany was available before Obama was elected. In
September 2008, finance capital stepped forward, openly and unabashedly
pushed aside its political representatives, and proceeded to dictate
policy to the Congress and the White House. Hank Paulson demanded $700
billion for the banksters, with no strings attached: there would be no
restrictions on how the handout was spent, no hearings, no Congressional
debate, no expert testimony and Paulson was not to be held accountable.
Obama suspended his campaign for a day to make phone calls urging
Congressional Democrats to obey Paulson’s orders. His top economic
advisors, his Treasury Secretary, his Fed chief, turned out to be mostly
Wall-Street-linked deregulators. It was more than a year before it
dawned on Krugman that Obama might be Charley McCarthy to Wall Street’s
Edgar Bergen.
Elite Responses To Crisis
The political activism of the elite is striking in
times of crisis, when the latter takes the form either of severe
economic contraction or of working-class militancy, or both. Let’s look
at the specifics.
The
ruling class has attempted directly to address crisis situations
in each of the three major economic downturn periods since 1823. I treat
nineteenth century American capitalism (1823-1899) as a single
depression period, since over the course of sixty years it featured
three steep depressions, 1837-1843, 1873-1878 and 1893-1897. Indeed, the
entire period 1823-1898, excluding the Civil War, saw the nation in
recession or depression more often than not. The Great Depression of the
‘30s was of course the second such period, and the years from late 2007
to the present constitute the third.
The
corporate oligarchy has also responded to the New Deal/Great
Society Golden Age as another crisis period, this time of a special
kind. In that case the crisis was not perceived by the elite as purely
economic, but as political, involving a transfer of both income and
power from the wealthiest to the rest. Ruling-class mobilization ensued.
The plutocrats openly “put politics in command.” Neoliberalism began to
take shape.
After a brief review of the plutocrats’ responses to the depression
periods and the Golden Age, I will look more closely at the stretch of
time from the mid-1970s to the end of the twentieth century as a
prolonged insurgency of the vested interests against regulated and
relatively-worker-friendly American capitalism, and as a buildup to the
current mess.
We begin with the corporate class’s first modern historical attempt
to coordinate its power as a class. This was an effort initially
confined to the economic sphere. Once the elite had established a
private regime of market collaboration, it became clear that subsequent
threats to its interests would require political mobilization. What we
face now is a ruling class politically organized as never before, and
with a firm grip on State power.
The Nineteenth Century: Depression Paves The Road To Corporate Organization
Railways and steel epitomized the chronic economic
instability of nineteenth-century US capitalism. In each case
enterprises repeatedly competed their profits away into bankruptcy or
receivership. Finance capital responded by pressuring its industrial
counterpart to consolidate in order to avert the perpetuation of what
was very close to three quarters of a century of sustained slump.
Keynes famously described a clear instance of irrational competition:
“Two masses for the dead, two pyramids are better than one; not so two
railroads from London to York.” In fact, in Britain and in the US the
railroad magnates had repeatedly built two or more railways from A to B,
with the predictable consequences: bankruptcies proliferated. By the
end of the nineteenth century the giant railway networks were the
largest business enterprises in the world, yet by 1900 half of them had
gone into receivership.
The financial magnate J.P. Morgan was attuned to the contribution of
fratricidal competition to recurring economic downturns and, not
incidentally, to the attending threat to bank profits. He persuaded the
biggest railway barons to organize. He had them form “communities of
interest” to reduce destructive competition by fixing rates and/or
allocating traffic between competing roads. Most of these efforts
failed; invariably at least one of the companies would try to take
advantage of the others’ compliance by breaking its promise.
Morgan’s response was, in retrospect, epoch-making. He implored his
real-economy counterparts to consolidate as a matter of policy.
Consolidation, he urged, was the most effective antidote to
cutthroat-competition-induced depression and falling bank profits.
Concentration was in capital’s best interests. Practicing what he
preached, Morgan took control of one sixth of the nation’s largest
railroads.
The steel industry exhibited a similar dynamic. The superinnovator
Andrew Carnegie introduced productivity-enhancing technological
improvements with uncommon frequency. His high rate of capital
replacement lowered his unit costs, raised his competitors’ costs and
devalorized their obsolete capital, enabling him to price-compete many
of them to bankruptcy.
This left bankers like J.P. Morgan with big debtors unable to service
their loans. Cutthroat competition was again rightly perceived by
Morgan as contrary to the interests of capital.
Carnegie was a special nuisance to Morgan, who repeatedly implored
him to slow down his innovations. When Carnegie resisted, Morgan simply
bought him out and consolidated the Carnegie Steel Company with some of
its weaker competitors. In 1901 Morgan’s steel behemoth became US Steel.
This gave precedent and impetus to the oligopolization of major
industries that was to become a hallmark of twentieth century
capitalism. Cutthroat price competition was replaced with “corespective”
competition, effected mainly through advertising, new products,
improved technology, and organizational change.
Morgan had become the nation’s first prominent active critic of
cutthroat competition. His effort consciously to limit competition was
the first historical attempt of a major ruling-class activist
deliberately to intervene in the dynamics of the economy in response to
viral bankruptcies and depression.
Morgan’s lessons are implicitly subversive. He instructed his
industrial brothers that their individual interests are best realized by
action in concert. Morgan understood that the most effective agent of
capitalist success is not the individual but the class. The same of
course applies to anti-capitalist success. This Morgan did not discuss.
Organized capitalism was strikingly different from its
nineteenth-century ancestor, with one exception. In both periods
economic liberalism persisted; government regulation was almost entirely
absent. The absence of regulation was a major factor in precipitating
both the Great Depression and the current severe downturn.
The Great Depression: Coup d’Etat as Response to the New Deal’s Politicization of the State
J.P. Morgan’s response to crisis was to recommend to
his class brothers a new form of industrial organization. The resulting
reconfiguration of the private economy was accomplished with virtually
no overt participation by the State, in accord with the prevailing
laissez faire ideology. The notion that the State could respond to
economic malfunction by active intervention had not yet entered
official thinking.
During the crisis of the 1930s the dominant orthodoxy was severely
challenged. Morgan’s precedent for dealing with economic collapse
generated by unbridled competition was that the Big Boys could put their
own house in order by teaming up. By contrast, 1930s capital was
without private, class-grown strategies adequate to the task of getting
the Great Depression under control.
The seeds of the Depression had been planted in the 1920s, when the
economic scene was strikingly similar to what precipitated the current
downturn. Output, investment, productivity and profits rose much faster
than wages. Unions were weak and inequality soared -1928 was the
then-record year for income inequality- and working people relied
heavily on debt to finance their purchase of the avalanche of newly
available consumer durables. During the latter half of the decade
economic growth was driven largely by credit-fueled consumption
expenditures.
The unprecedented inequality that emerged from this setup widened the
gap between productive capacity and effective demand and caused,
beginning in 1926, a marked slowdown in the purchases of the very
consumer durables -radios, refrigeratots, toasters, automobiles- on
whose growth the health of the productive economy had become dependent.
The growth rate of manufacturing declined dramatically, and
investment-seeking capital fled to speculative financial markets,
ultimately inducing the crash of 1929. Sound familiar?
Reflecting on these realities, the Keynesians surrounding Roosevelt
proposed the notion that the economy had reached “maturity” during the
end-stage industrialization of the 1920s. All previous expansions out of
downturns had been propelled by investment spending on means of
production and workplaces; the nation was still industrializing. This
time, and for the first time, it was different. Excess capacity abounded
at the end of the decade, but not, as in the nineteenth century, as a
result of serial bankruptcies. The triple blights of inequality,
over-investment and underconsumption were the culprits. With the basic
industrial infrastructure now in place, and productive facilities
glaringly superfluous, if the economy was to recover there had to be a
resurrection of consumption demand. But the condition of the private
economy ruled this out. This is what Keynes understood. His was a
prescription for the economic restoration of a mature industrialized
economy in the depths of a severe, sustained and self-perpetuating
downturn.
The historical stage was now set for the birth of the Keynesian
insight that only an agent outside the sphere of the market, and
unmotivated by the quest for private profit, can restore a mature
capitalist economy in deep depression. Many of FDR’s early “Brain Trust”
were solid Keynesians, and the combination of their tutelage with
mounting labor militancy convinced the president to initiate a major
break with free-market precedent. He initiated a grand plan of public
investment and government-provided jobs which not only brought about a
reversal of the downward plunge of 1929-1933, but also generated the
longest US cyclical expansion recorded up to that time, 1934-1938.
To the business class this seemed an unconscionably revolutionary
turn. FDR’s fierce denunciation of the banksters even as he politicized
the State in the name of working-class interests was viewed as an
unparalleled and horrific development, a popular assault by the State on
the power of Big Wealth. The logical response of the business class was
not to attempt to reconfigure the private sector as Morgan had done,
but to seek to capture the State, which it perceived as a greater threat
to its dominance than the Depression itself. Morgan had attended to
matters economic. But the emergence of a mature oligopolized form of
economic organization required from the superordinates a distinctly
political response.
The ruling elite proceeded in 1933 to organize a coup intended to
topple the Roosevelt administration and replace it with a government
modelled on the policies of Adolf Hitler and Benito Mussolini. (A 1934
Congressional committee determined that Prescott Bush, granddad of
Dubya, was in communication with Hitler.) The plotters included some of
the foremost members of the business class, many of them household names
at the time.
Prominent insurgents included Rockefeller, Mellon, Pew,
Morgan and Dupont, as well as enterprises like Remington, Anaconda,
Bethlehem and Goodyear, and the owners of Bird’s Eye, Maxwell House and
Heinz. About twenty four major businessmen and Wall Street financiers
planned to assemble a private army of half a million men, composed
largely of unemployed veterans. These troops would constitute the armed
force behind the coup and defeat any resistance the in-house revolution
might generate.
The revolutionaries chose Medal of Honor recipient and Marine Major
General Smedley Butler to organize its armed forces. Butler was appalled
by the plot and spilled the beans to journalists and to Congress. FDR
nipped the thing in the bud.
The attempted coup was a landmark event in US history, baring the
soul of America’s standing wealth. (We find no mention of this event in
US history textbooks. History unfit to print.) We have no reason to
think that these fascist instincts have been expunged from the class
character of our rulers. No less important, the scandal alerts us to the
elite’s Leninism, its identification of the State as the political
prize of prizes, the seat of class power.
Ironically, it was Keynes who put the deliberate capture of the State
on postWar capital’s agenda. 1930s Keynesianism saw the State
legislating in the interests of working people, and successfully
competing in the labor market with private companies. This was an
explicitly politicized State functioning, in the eyes of the elite, as
the executive committee of the working class.
Big capital learned a lesson of abiding importance: determining State
power must be their deliberate and overriding political agenda. Siezing
State power by force of arms, they had learned, is easier planned than
accomplished. The final years of the Golden Age saw the captains of
wealth devising a longer-term political strategy to roll back the New
Deal and Great Society, and to set in place arrangements that would
preclude their recurrence. This time it was to be a New Deal for
capital, a State unabashedly politicized for the class that counts.
These were the early formative years of neoliberalism.
The Golden Age Not So Golden For Capital
The Golden Age is distinguished by its remarkable
growth rate and the unprecedented material security enjoyed by a good
number of workers. But growth rates tell us nothing about how the fruits
of growth are distributed. The present moment illustrates this nicely.
The economy’s rate of growth has been very slow, while corporate profits
and the income of the top .01% have reached record highs. Ring this up
to a deliberate, policy-driven transfer of income and wealth from the
rest to the richest. Distribution counts a lot for the wealthy. Their
political power is a function of their wealth. If wealth and/or income
is redistributed to another class, so is power. That goes down badly
with rulers.
The New Deal/Great Society period saw
increasing redistribution
from capital to labor. The share of national income appropriated by the
top 1% of households steadily declined during those years. In 1928, the
most unequal year to date since 1900, the share of the top 1% stood at
more than 23%; by the late 1930s it was down to 16%. It declined to
11-15% in the 1940s, to 9-11% in the 1950s and 1960s, and finally fell
to its nadir of 8-9% in the 1970s.
This was the first 50-year redistribution of income from the very
richest to the rest in American history. The oligarchs were to take
steps to ensure that this would never happen again.
Elites saw redistribution as inherent in any State policy orientation
distributing toward working people benefits which the market by itself
would not produce. If you give them a little, little by little they’ll
want it all. To the boys used to being in charge, Lyndon Johnson seemed
to be responding to popular pressure to out-New-Deal the New Deal. The
latter had given us Social Security; Johnson expanded the program to
include disability payments and more. Johnson and a Democratic Congress
passed new or strengthened laws, mainly around consumer and
environmental issues, that cut into business profits by forcing
corporations to absorb some of the costs they had previously
externalized onto the rest of us.
In less than four years Congress enacted the Truth In Lending Act,
the Fair Packaging and Labeling Act, the National Traffic and Motor
Vehicle Safety Act, the National Gas Pipeline Safety Act, the Federal
Hazardous Substances Act, the Flammable Fabrics Act, the federal Meat
Inspection Act and the Child Protection Act. Whew.
Business-government relations had never before seen such an avalanche
of legislation limiting the freedom of capital in the interests of
working people.
Between 1964 and 1968 Congress passed 226 of 252 worker-friendly
bills into law. Federal funds transferred to the poor increased from
$9.9 billion in 1960 to $30 billion in 1968. One million workers
received job training from these bills and 2 million children were
enrolled in pre-school Head Start programs by 1968.
What made all this especially unnerving in the eyes of Big Wealth was
that even the Republicans seemed to have swallowed the
redistributionist line. Richard Nixon announced in 1971 “I am now a
Keynesian in economics” (not “We are all Keynesians now”, as the remark
is usually misquoted). Nixon was in fact a bigger domestic non-military
spender than Johnson. During his first term in office Congress enacted a
major tax reform bill, the Environmental Protection Agency along with
four major environmental laws, the Occupational Safety and Health
Administration and the Consumer Products Safety Commission.
The combination of regulation and redistribution left the working
class as materially secure as it had ever been, and more inclined to
feel its oats. When the economy began to approach full employment,
toward the peak of a Golden-Age expansion, workers’ slacking off,
tardiness, job switching and general militancy increased. The US topped
the OECD’s table in strikes per worker in 1954, 1955, 1959, 1960, 1967
and 1970.
This did not go unnoticed by business. Commenting on the causes of
the 1970-1971 recession following the long expansion of the 1960s, a
front-page Wall Street Journal article (January 26, 1972) noted that:
‘Many manufacturing executives have openly complained in
recent years that too much control had passed from management to labor.
With sales lagging and competition mounting, they feel safer in
attempting to restore what they call “balance”.’
It’s hard to overestimate the impact of new regulations,
redistribution and labor militancy on business. Regulations are a class
thing, and we shall see how they inspired the regulated to respond in
self-defense as a class. We might begin by contrasting neoliberal
anti-Keynesianism with the standard postwar efforts of business to
influence government.
To the extent that business sought to mobilize before neoliberalism,
its tactics were fragmented and limited in scope. The airline industry
would lobby the Civil Aeronautics Board and/or bribe a favorite senator
(e.g. Washington state’s Scoop Jackson, the “Senator from Boeing”),
steel companies would lean on Congress for protectionist legislation,
energy producers got tax breaks from their congressional favorite, and
firms would target trade organizations. Much of this was done through
personal contacts. Individual firms and specific industries had their
own strategies; there was no cross-sectoral means of resistance to
threats to business as a whole. But it is the nature of regulations to
pose just such threats by affecting many industries at once. It is no
surprise, then, that business should respond with a call for a new form
of class mobilization, an all-business attempt to secure State power by
political means less dramatic, though no less effective, than an
out-and-out coup.
The Counterrevolt of Capital: The Legacy of the Powell Memo
Toward the end of the nineteenth century Morgan had
urged industrial capital to organize itself within the private sector.
During the Great Depression big capital galvanized its energies
politically, in a coup attempt to sieze State power. The next major
effort by business to coordinate and mobilize itself was also a
political action, again aimed at control of the State apparatus, but
this time with a strategy of methodical long-term class warfare.
In 1971 future Supreme Court justice Lewis Powell distributed among
business circles a memo intended to politicize the captains of industry
in resistance to the legacy of the New Deal and Great Society. The memo
reads like a neoliberal instruction booklet:
“[the]American economic system is under broad attack.
Business must learn the lesson…that political power is necessary; that
such power must be assiduously cultivated; and that when necessary, it
must be used aggressively and with determination – without embarrassment
and without the reluctance which has been so characteristic of American
business…. Strength lies in organization, in careful long-range
planning and implementation, in consistency of action over an indefinite
period of years, in the scale of financing available only through joint
effort, and in the political power available only through united action
and national organizations.”
In their remarkable book
Winner-Take-All Politics,
political scientists Jacob Hacker and Paul Pierson describe the
organizational counterattack of business as “a domestic version of Shock
and Awe.” The accomplishments are impressive:
“The number of corporations with public affairs offices
in Washington grew from 100 in 1968 to to over 500 in 1978. In 1971,
only 175 firms had registered lobbyists in Washington, but by 1982,
nearly 2,500 did. The number of corporate PACs increased from under 300
in 1976 to over 1,200 by the middle of 1980. On every dimension of
corporate political activity, the numbers reveal a dramatic rapid
mobilization of business resources in the mid-1970s.”
This period also saw the birth of militant mega-organizations
representing both big and small business. In 1972 the Business
Roundtable was formed, its membership restricted to top corporate CEOs.
By 1977 the Roundtable’s membership included the CEOs of 113 of the top
Fortune 200 companies. The chairman of both the Roundtable and Exxon in
the early Reagan years, Clifton Garvin remarked “The Roundtable tries to
work with whichever political party is in power… as a group the
Roundtable works with every administration to the degree they let us.”
The Conference Board further sharpened capital’s political focus by
gathering leading executive especially well positioned to personally
contact key legislators. The Board developed an ingenious agenda: to
learn the tactics of public interest groups and organized labor in order
to subvert the agenda of those very groups.
The Roundtable and the Board lobbied and established ongoing
relationships with Congressional staffs. Organizations representing
smaller firms also grew rapidly in the 1970s. With higher unit costs and
no oligopoly pricing power to offset the administrative costs of
regulation, these firms were highly motivated to mobilize. The Chamber
of Commerce and the National Federation of Independent Businesses
doubled their membership, with the now very effective Chamber tripling
its budget.
It was during this period that the corporate presence on the Hill
became conspicuously ubiquitous. While business had always been
disproportionately represented in DC, never before had the chambers of
legislation seen such thoroughgoing corporatization.
Corporate strategy was not merely a matter of bribing top politicos.
The biggest organizations had learned their lessons well from their
antagonists, the public interest groups pressing the popular demand for
regulation, and organized labor. The business counterrevolt mimicked the
strategies of those groups. Corporate groups used their ample
resources, including sophisticated marketing and communications
techniques, to organize mass campaigns composed of a heterogenous
grouping of shareholders, local companies, employees and mutually
dependent firms like retailers and suppliers. Washington would be
deluged with phone calls, petitions and letters pushing business
interests.
In short order elites surpassed both public-service organizations and
organized labor in what they had done best, bottom-up organizing.
Within ten years the corporate takeover was well established. In the
1980s corporate PACs shelled out five times as much money to
congressional campaigners as they had put out in the 1970s.
The agenda of the political infrastructure of rallied capital was to
undo those policies and State priorities which had generated the
redistribution and labor activism limiting the freedom of capital and
enhancing the power of workers for almost three decades. In sum, the
legacy of the New Deal and Great Society had to be undone. But these
were political-economic projects which required ongoing bolstering by
the State if they were to be kept effective. Mobilized capital had to
capture the State and render it inoperative for proletarian purposes.
The State had to be as explicitly reconstituted as a capitalists’ State
as the elite perceived it to have been hitherto rigged for workers and
against the Big Boys. This required the functional equivalent of a coup.
And a coup there was. Simon Johnson, former chief economist of the
International Monetary Fund, wrote in one of the nation’s major weeklies
of the “the reemergence of an American financial oligarchy” in “The
Quiet Coup”,
The Atlantic (May 2009). Johnson made it clear
that his use of “coup” was not intended as a rhetorical flourish or a
metaphor. Finance capital had effectively privatized the State.
Neoliberalism had succeeded not merely in guaranteeing permanently
reactionary governments, it had captured the State itself. Previously, a
change in government -e.g. from the Eisenhower to the Kennedy
administration- might mean a significant change in domestic policy
within the context of an abiding Keynesian State. Neoliberalism has
sought to change the fundamental priorities of the State.
Mission Accomplished: The Privatized Neoliberal State
All of the major developed capitalist countries have
deindustrialized over the past thirty years. The industrial capacity of
the West is overripe, and widget production has accounted for a
declining share of total output, total employment and total profits in
these once-democracies. FIRE’s shares have correspondingly risen, and
its top dogs now rule the roost and call the global shots. This has gone
hand in hand with a string of financial crises.
(2) This setup requires
much more, not less, State implication in economic life.
To bail out or not to bail out – and who is to be rescued at whose
expense? How is manufacturing to thrive in the current climate of
intensified competition among deindustrialized developed countries, with
the emerging markets poised to enter the fray?
The present answers to
these questions are clear. The financial elite get everything while
manufacturing is “restructured” as a low wage sector targeting the
world’s fastest growing markets, which are not to be found in the
imperial metropoles. Unemployment rates are to be kept high until the
wage level drops low enough to render the US an effective competitor in
global markets. None of this could begin to get off the ground without
massive State collusion with corporate interests. The financial bailout
and Obama’s restructuring of the auto industry are but the most
conspicuous of many examples. The new State is to become -has become?-
a capitalist State not in the trivial sense of the State of a
capitalist country, but as a State unambiguously by and for Big Wealth.
Putting the Class Character of the State on the Political Agenda
The government is not the same as the State. The
governmental alternatives -Republican or Democrat- within the context of
an anti-Keynesian neoliberal State must be so limited as to count as no
alternatives at all. That there is not a dime’s worth of difference
between the Parties is what we should expect, given the dismantling of
the State’s postwar social functions. If the remnants of the New Deal
and Great Society are regarded by the State managers as “the old time
religion”, as Obama characterized them in
The Audacity of Hope,
then the policy alternatives must be, from the perspective of
working-class interests, piddling, and the pseudo-squabbles between the
Parties inconsequential.
The historical unfolding of American capitalism has put the class
character of the State squarely on the political agenda. It has been the
plutocracy’s top priority for a long time. It is clearer to more
Americans than ever that the entire political establishment is
unprepared and unwilling to manage the economy and the State in the
interests of working people. The ruling-class concerns of the neoliberal
State homogenizes policy options and renders standard Party politics
otiose and obsolete. An effective Left political program must make
available to its constituency a radically revised conception of what it
means to do politics. No less important is the forging of a political
practice which compellingly incarnates that radical reconception. An
independent OWS is just what such a practice would look like in its
embryonic stages. Very much hinges on how that movement develops.
Notes.
(1) References to Keynesian policy require the reminder that Keynes
encouraged economic policy far more radical than what the New Deal and
Great Society offered. Perhaps the most neglected Keynesian prescription
is his insistence that fiscal policy and government employment are not
tools confined to recessions. Keynes held that full employment required
ongoing targeted government stimulus, even during cyclical upturns.
(2) Savings and loans (early 1980s), Mexican debt crisis (1982),
Mexican peso crash (1994, one year after the passage of NAFTA), Asian
Financial Crisis (1997), Russian devaluation and default (1998),
Argentina’s eebt crisis (2001), Enron (2001), Worldcom (2002), the
hi-tech, dot.com bubbles of the late 1990s and the present turmoil, unparalleled of its kind in the history of capitalism.
