[The following is the text of a talk presented on behalf of the DSP National Executive to the Marxism 2000 conference, held in Sydney, January 5-9, 2000. It was later used as the basis for the pamphlet Imperialism in the 21st Century – Resistance Books 2002.]

A lot has been written, and will doubtless continue to be written, about how Marx’s theory of capitalist development is a relic of a bygone era, irrelevant for understanding the complex dynamics of the “globalised”, “post-industrial”, “financialised” capitalism that is supposed to have emerged only at the end of the 20th century. Contemporary capitalism, however, can only be scientifically understood using Marx’s theory of capitalist development.

The proof of such an assertion is demonstrated by the fact that Marx himself, in analysing the dynamics of capitalist economy in the 1860s, predicted that its further development would give rise to the fundamental features that characterise contemporary capitalism.

Marx’s analysis of capitalism

Marx began his analysis of capitalism by discerning that it was an economic system in which the direct producers of goods and services are dispossessed of the means of production and forced to sell their ability to produce goods and services to those who possess the means of production as capital, as means to accumulate surplus labour in the form of monetary values. In the capitalist system, capital is accumulated through buying the commodity labour-power.

The two basic social classes that are engendered by the capitalist system are the “personification” of this process. The working class are those people, Marx says, “who produce and valorise ‘capital’ and are thrown onto the street as soon as they become superfluous to the need for valorisation possessed by ‘Monsieur Capital’.” They’re people, for instance, who comprise many different kinds of workers, engaged in many different kinds of social activity, and who dress in many different kinds of clothes. But whether they wear a suit or overalls or are highly or poorly educated, or live in a comfortable surburban house or a squalid inner-city slum, if their income is solely derived from having to sell their labour-power to owners of capital, they are members of the class of wage-workers. Everyone, Marx quips in the first volume of Capital, “who lives only so long as they find work, and who finds work only so long as their labour increases capital” is a member of this class. In the Communist Manifesto Marx and Engels observed that “who must sell themselves piecemeal, are a commodity, like every other article of commerce, and are consequently exposed to all the vissitudes of competition, to all the fluctuations of the market”.(1)

Here, of course, one’s class definition hinges on one’s relationship to the process of accumulation of capital. Marx put a lot of emphasis in his theory of capitalism on this process. He describes in almost glowing terms its prodigious power to burst through every historical and geographical restriction it encounters, its power to conquer the world of social wealth, creating a whole array of new values along the way. Yet, at the same time, Marx was appalled by the brutality the process of accumulation of capital unleashes, by the horrors it inflicts upon the human race.

The drive to accumulate capital, Marx explains, pits capitalist against worker and worker against worker. But it also pits capitalist against capitalist. It subordinates, Marx says, “every capitalist to the immanent laws of capitalist production, as external and coercive laws”. So, as capitalists strive to accumulate capital, as their actions become mere functions of the process of capital accumulation, they inevitably clash with other capitalists.

But over time the process of capital accumulation and the competition between capitalists leads to the concentration and centralisation of capital in the hands of fewer and fewer capitalists as big capitalist fish gobble up the little capitalist fish. According to Marx, this enhances the scale of operations for both capital and wage-labour, leading both of them to become increasingly socialised in their actual operations.

The labour of each individual worker becomes interdependent upon the labour of other workers, not just within the their direct place of employment, but across whole branches of production within a nation and between nations.

The effects of concentration and centralisation of capital upon the capitalists also accelerates the socialisation of capital. This is because competition and the obligatory development of the credit system become powerful levers for the merging of private capitals into associations of capital – into joint-stock companies, in which capital in the form of the means of production is no longer the possession of any individual capitalist but of an association of capitalists.

The formation of joint-stock companies leads, Marx says in the third volume of Capital, firstly, to a “tremendous expansion of the scale of production” which would be impossible for individual capitalists operating on their own. Secondly, it leads to a situation in which one or a few firms are able to dominate whole spheres of social production. The production enterprises controlled by these firms no longer produce goods and services for a handful of wealthy people, but for the entire society, and they have thus become in fact social enterprises. Thirdly, it leads to the owners of capital ceasing to be the managers of the labour process, of the direct process of production of goods and services. This function is turned over to salaried employees, while the capitalist becomes, as Marx puts it, “a mere owner, a mere money capitalist”.

From this analysis of the nature and dynamic of joint-stock companies, Marx drew the conclusion that joint-stock companies, which were only just beginning to be formed in the second half of the 19th century, represented “capitalist production in its highest development” because they are the “abolition of the capitalist mode of production within the capitalist mode of production itself” and are therefore the “necessary point of transition towards the transformation of capital” as means of production “back into the property of the producers, though no longer as the private property of individual producers, but rather as their property as associated producers”, that is, as social property.

Joint-stock companies are “abolition of the capitalist mode of production within the capitalist mode of production itself” because they contradict the essence of capitalist relations of production. That is, rather than private ownership of means of production for private production of wealth, joint-stock companies give rise to social ownership of means of production for social production of wealth. But they do so within the framework of the private appropriation of the surplus labour embodied in the wealth of goods and services that are produced.

As this contradiction develops, Marx says, it “presents itself as such a contradiction even in appearance” by, firstly, giving “rise to monopolies”, which in turn demand increasing state intervention in economic activity and by, secondly, producing a “new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors, an entire system of swindling and cheating with respect to the promotion of companies, issues of shares and share dealings.”

In a supplementary note to the first edition of Volume 3 of Capital, Engels wrote in 1894 that when Marx wrote these words in 1865, “the stock exchange was still a secondary element in the capitalist system”, but that since then “a change has occurred that gives the stock exchange of today a significantly increased role, and a constantly growing one at that, which, as it develops further, has the tendency to concentrate the whole of production, industrial as well as agricultural, together with the whole of commerce – means of communication as well as the exchange of function – in the hands of stock-exchange speculators, so that the stock exchange becomes the most pre-eminent representative of capitalist production as such.”

The imperialist epoch of capitalism

Utilising Marx’s theory of capitalist development, Lenin concluded 85 years ago that all the features which Marx had forecast in 1865 as characteristic of “capitalist production in its highest development” had become dominant in Western Europe, North America, Japan and in his native Russia.

On the basis of economic data compiled by bourgeois economists in the early years of the 20th century, Lenin argued in December 1915 that “at the end of the 19th and the beginning of the 20th centuries, commodity exchange had created such an internationalisation of economic relations, and such an internationalisation of capital, accompanied by such a vast increase in large-scale production, that free competition began to be replaced by monopoly”.

The dominant type of capitalist businesses were, Lenin wrote, “no longer enterprises freely competing inside the country and through intercourse between countries, but monopoly alliances of enterpreneurs, trusts” which were carving up the world market between themselves.

“The typical ruler of the world”, Lenin wrote, “became finance capital, a power that is peculiarly mobile and flexible, peculiarly intertwined at home and internationally, peculiarly devoid of individuality and divorced from the immediate processes of production, peculiarly easy to concenterate, a power that has already made peculiarly large strides on the road to concentration, so that literally several hundred billionaires and millionaires hold in their hands the fate of the whole world”.

Lenin further concluded that the domination of the economic and political life of the advanced capitalist countries by these financial oligarchies had given rise to a new epoch in the history of the world which had superceded the epoch of the comparatively peaceful extension of the domination of capitalist production across the entire globe, “marked approximately by the years 1871 and 1914”. Of course, he noted that even this epoch of “peaceful” expansion of capitalism had “created conditions of life that were very far from being really peaceful both in the military and in a general class sense”. He pointed out that: “For nine-tenths of the population of the advanced countries, for hundreds of millions of peoples in the colonies and in the backward countries this epoch was not one of ‘peace’ but of oppression, tortures, horrors that seemed the more terrifying since they appeared to be without end.”

“This epoch has gone forever”, Lenin said. “It has been followed by a new epoch, comparatively more impetuous, full of abrupt changes, catastrophes, conflicts, an epoch that no longer appears to the toiling masses as horror without end but is an end full of horrors.”

This new epoch, Lenin explained in his 1916 book Imperialism, the Highest Stage of Capitalism, would be marked above all by the drive by each of the financial oligarchies of the advanced capitalist countries to use the coercive power and organised violence of the state machines they commanded to maintain their imperial domination over the economic and political life of the backward countries and to increase their wealth at the expense not only of working people at home and abroad but also in competition with the financial oligarchies that dominated the other advanced countries. Consequently, the new imperialist epoch of capitalism would be marked by repeated colonial wars, uprisings by imperialist-dominated peoples and inter-imperialist military conflicts that would create the political conditions for abolishing capitalism through successful working-class revolutions.

The global economy today

It is often claimed that the extent of internationalisation of production today has far outstripped the levels that existed when Lenin made his analysis of imperialist capitalism and that his analysis, which was based on a world market still fragmented into many national economies, is therefore “outdated”.

It is certainly true that there was a phenomenal increase in international movements of money-capital over the last two decades of the 20th century. Trillions of dollars flow in and out of bond, share and currency markets on a 24-hour basis. The massive inflation of these markets has been dramatic. In 1973, a typical day’s trading on the world’s currency markets amounted to US$15 billion. By 1983 it had risen to US$60 billion; by 1992 to US$900 billion. By the end of the 1990s it has risen to US$1,300 billion. In comparison, the total foreign currency reserves of the Western governments amount to only US$64 billion.

The total stock of financial assets – company stocks and derivatives, government bonds, etc – increased from US$5 trillion in 1980 to US$35 trillion in 1992 and is expected to be more than US$80 trillion this year – three times the total value of goods and services produced in the advanced capitalist economies.

However, claims that there has been a dramatic increase in cross-border trade in goods and services, or in transfers of productive capital, are vastly overstated. In 1913, for example, world trade in goods and services amounted to 16% of world output. After a sharp fall in the interwar years, it gradually climbed back up to 15% only in 1990. Similarly, the world’s accumulated stock of foreign direct investment was equivalent to 12% of world output in 1913. By 1990 it stood no higher than 10% of world output.

US economist Doug Henwood has shown that the much-hyped increase in the “globalisation” of the production operations of transnational companies is just that – hype. By 1994 transfers of partly finished goods to or from foreign manufacturing affiliates by companies operating in the US had risen from 12% of US trade in 1977 to 13%, that is, by a relatively negligible amount. Cross-border transfers of partly finished goods within transnational companies operating in the US, rose from 2% of US trade in 1977 to 3.2% in 1994. Today, it should be obvious to everyone that the features that Marx forecast back in 1865 as characteristic of “capitalist production in its highest development” – joint-stock companies, separation of capital ownership from managerial functions in the direct process of production, monopolies, extensive state intervention in economic activity, the existence of a “financial aristocracy” consisting of “parasites in the guise of company promoters, speculators and merely nominal directors” – are the dominant form through which the process of accumulation of capital occurs on a world scale.

Just about everyone can see that stock exchanges today do not operate to raise new money for investment in the production of goods and services by issuing titles to a share in a company’s profits in exchange for handing over one’s spare cash to its directors, which was their original role in the capitalist system. Today it is obvious to everyone that the stock exchanges are really billion dollar markets for speculation on already existing stocks, and that the responsibility of any CEO has little, if anything, to do with managing the production of goods and services but, rather, to make the shareholders, particularly the biggest shareholders, as much money as possible, as fast as possible, through ensuring a rapid and continuous rise in the price, the market value, of the company’s stock of money-market instruments (stocks, bonds, etc.). This is the logical outcome, and highest development, of a mode of production based upon the drive to accumulate capital, to accumulate paper values.

Capitalist production has become so concentrated in the hands of stock-exchange speculators and the stock exchange has become so obviously the most pre-eminent representative of capitalist production that contemporary capitalism is widely described by bourgeois pundits as a “casino economy” dominated by mere money- capitalists.

Of course, the big investors today are not mere money- capitalists. Finance capital is a new form of capital, in which the owners of capital in the form of stocks own not only banks and other financial institutions but industrial corporations as well.

In the 19th century industrial capital and banking capital had distinctly different owners, reflecting the smaller scale of capitalist operations. The rise of joint-stock companies as the dominant form of capitalist businesses at the end of the 19th century brought about a merger of industrial and banking capital into finance capital. The sixty or so families that Ferdinand Lundeberg identified in the 1930s, and again in 1968, as constituting the US financial oligarchy – the Rockefellers, Morgans, Mellons, DuPonts, Whitneys, Warburgs, Vanderbilts, etc., – did not just control all the major banks and insurance companies in the US, but also all the major industrial corporations. The Rockefeller family, for example, had effective ownership not only of the Chase banking corporation and the Met- Life insurance corporation, but also industrial corporations such as Exxon, Mobil and – in combination with the Mellon family – Westinghouse. The Morgan and Whitney families were not only the effective owners of the banks J.P. Morgan and Bankers’ Trust, but also of US Steel, General Electric and – in combination with the Du Pont family – of General Motors.

It thus utterly misleading to talk about the explosion of speculation on the money markets over the last two decades as the rise to “dominance” of finance capital – as though thereare the “good”, productive, “industrial” capitalists and the “bad”, speculative, finance capitalists, and the latter today dominate over the former. Since the beginning of the 20th century, capitalist production and capital accumulation has been dominated by finance capital. The financial oligarchs invest their money- capital in both the production of commodities and in speculation in the money markets. Speculation on the money markets has absorbed more and more of their investments because, since the end of long postwar expansion of capitalist production of goods and services, continued reinvestment of the profits they derive from investment in the production of real values has become less lucrative than the diversion of a growing share of these profits into gambling on the stock, bond and other markets for paper values.

‘Neo-liberalism’ and ‘globalisation’

The bourgeois pundits who describe modern capitalism as a “casino economy”, of course, do not acknowledge that this is the end result of the very laws of development of capitalism that Marx discovered. Instead, they attribute it to the changes in communications technology (the socalled “information technology revolution”) and the deregulation of the world’s financial markets, that is, markets in financial assets such as company shares. The latter, in turn, they claim, was made “inevitable” during the 1980s by a combination of the IT “revolution” and the “globalisation” of the production and marketing of goods and services by transnational companies. Furthermore, it is claimed that transnational companies have brought into being an integrated, borderless (at least for capital) world-wide market in which all nation-states have lost their ability to regulate their economies.

Many left-liberals and ex-radicals from the ‘60s and ‘70s, while nostalgic for the Cold-War period of Keynesian liberal- democratic “welfare” capitalism, have completely bought these claims and accepted the social and economic policies that have accompanied the supposed new rise to dominance of finance capital as being as irresistible as the change in the seasons. Others, including even big professional speculators such as George Soros, worry that “globalisation” and the neo-liberal “free market” policies that have been justified by it will undermine the public’s, that is, working people’s, acceptance in the rule of capital and lead to “massive social discontent”, which is their liberal-democratic euphemism for what might happen if working people cease to abide by the rules of the parliamentary system and seek to take the running of society into their own hands.

Even some of the most enthusiastic supporters of “neo-liberal globalisation” have expressed concern that the implementation of neo-liberal economic policies could undermine the stability of bourgeois political power embodied in the nation-state. For example, the British Economist magazine, a stalwart mouthpiece of the laissez-faire capitalism since it was founded in the early 19th century, commented:

The supreme difficulty of our generation… is that our achievements on the economic plane of life have outstripped our progress on the political plane to such an extent that our economics and politics are perpetually falling out of gear with one another. On the economic plane, the world has been organized into a single all-embracing unit of activity. On the political plane, it has remained… partitioned. The tension between these two antithetical tendencies has been producing a series of jolts and jars and smashes in the social life of humanity.

If you’d assumed that the “jolts and jars and smashes” that the Economist was referring to were such recent events as the series of financial crises and economic collapses that have hit countries like Japan in 1989, Mexico in 1994, South Korea, Thailand and Indonesia in 1997 and Russia in 1998 – then you’d be wrong. The Economist was actually referring to an even more massive economic crisis than any of these. It was actually referring to the Great Depression that was “globalised” to all capitalist countries when the speculative stock-market bubble on Wall Street collapsed in 1929 and industrial production in the world’s largest single national economy, the United States, fell by 48% between 1929 and 1932.

The fact that a comment taken from the London Economist in October 1930 could easily be assumed to be referring to the world situation nearly 70 years later should at least suggest to us that “neo-liberal globalisation” is not a new phenomena in the 20th century. Indeed, what is now called “neo-liberalism” was the dominant approach of the capitalist ruling classes, particularly in the richest capitalist countries, that is, Britain and the US, toward government economic policy right up to the mid-1930s.

Based upon the classical liberal bourgeois economic theory that the unfettered pursuit of private gain by individuals will, through the rationality of the market, ensure the satisfaction of the common good, orthodox liberal economists argued that intervention by the state into the operations of the market to create jobs and protect working people from the vicissitudes of supply and demand of labour-power would do more harm than good.

The liberal economic nostrums, however, were abandoned by the imperialist ruling classes during World War I. They imposed all sorts of state controls over capitalist production in order to marshal the entire resources of their countries and empires to the task of militarily defeating their imperialist rivals. Indeed, so extensive was state intervention in economic life during the war that orthodox liberal economists and many socialists called the regime of wartime state control “war socialism”.

After the world war, there was a concerted push to revert back to orthodox liberal economic policies by the imperialist governments. The 1922 Genoa Conference, organised by victorious Anglo-French imperialists to discuss trade relations in postwar Europe, issued a call for ending “futile and mischiveous” currency exchange controls, demanded greater independence for central banks, and less political interference in international banking.

The Great Depression and ‘welfare’ capitalism

Today we see a situation not unlike that of the latter years of the 1920s when structural overcapacity and unregulated financial markets led to an explosion of stock-market speculation. In 1927, a stampeding “bull” market, not unlike today’s, led the Federal Reserve Board to raise interest rates to moderate the “excessive” growth in credit-fuelled consumer demand and thus contain price inflation on goods and services. The rise in US interest rates forced up interest rates around the globe, damaging the credit-worthiness of heavily indebted countries. Capital-short countries tried to export their way out of financial crisis, protectionism increased, debt service burdens became heavier, defaults grew putting the international financial system under increasing strain. Cuts in wages and other austerity measures, as one purportedly “realistic” solution, made matters worse. Peripheral economies with inadequate reserves suspended payments as capital flight worsened.

In 1929 the speculative bubble on Wall Street burst as investors became aware that a normal cyclical downturn in the US economy was beginning. The stock-market crash, however, accelerated this downturn. The precipitious fall in stock prices from their previously inflated values sent many investors and their creditors bankrupt, leading to a dramatic fall of new investment in production.

As the slump in the US deepened and as the US cut it spending on the products of the rest of the world, in turn pulling it into the downturn, the US Federal Reserve refused to maintain the international trading system with massive government-to- government loans. Side by side with the disastrous curtailing of credit, the competing capitalist countries increasingly adopted protectionist measures. The process was again given its biggest stumulus by the United States, with the adoption in 1930 of a new law slapping prohibitive tariffs on a wide variety of imports, despite the opposition of orthodox liberal economists. Retailiatory measures by other countries soon followed. Stymied by tariffs, uncertain because of floating currencies, and impeded by saturated world markets, world trade spiralled downward. As a consequence, the US economic “downturn” of 1929 became a decade of unrelieved world-wide economic depression.

As unemployment rose in the US toward 13 million in 1933 it gave rise to growing disillusionment among working people with the capitalism system. This was an accute political problem for the capitalist rulers, since they were unable to plead that there was no “realistic” alternative to their system. Millions of destitute workers were able to contrast the failure of capitalism with the rapid expansion of the post-capitalist, planned economy of the Soviet Union during its first Five Year Plans.

When Democrat candidate Franklin D. Roosevelt was elected US president in 1933, his administration sought to head off a potentially explosive social and political crisis by large-scale state intervention to create jobs. An emergency relief apparatus was set up to hire unemployed workers on a massive scale. During the US winter of 1933-34 some four million people were given temporary employment in public works programs. In 1935 the Roosevelt administration pushed through the Emergency Relief Employment Act under which the federal government would undertake budget deficit spending on a more or less regular basis to finance public works programs for the unemployed. The most significant measure of Roosevelt’s New Deal was the Social Security Act of 1935, under which the federal government would set aside revenue raised through a special tax on both employers and workers to fund pensions for retired workers.

When orthodox liberal economists criticised these policies of state interference in the operations of the unfettered market as smacking of “socialism”, Roosevelt responded by saying “For capitalism to work, it needs a bit of socialism”.

In essence, Roosevelt’s New Deal was an acknowledgement of the fact that in the epoch of monopolistic corporations and the domination of finance capital, the capitalist economy, left to its own market devices, would collapse. Only state intervention to prop it up could keep capitalism working.

Of course, it was not the New Deal policies that pulled the US economy out of the depression. During the 1930s there were only two years that saw any improvement in the US economy – 1936 and 1937. The number of workers out of work stood at 13 million when Roosevelt took office. It declined to a low point of 4.5 million after the weak upturn of 1936-37. But a new downturn began in 1937, with unemployment reaching 11 million in March 1938, and remained at 10 million right up to the outbreak of World War II. It was only then – under the stimulus of government deficit spending on rearmament to prepare for and wage war – that mass unemployment ended in the US.

During the 1930s depression the highest US budget deficit was $4.4 billion in 1936. By comparison the deficit reached $57.4 billion in 1943. In the three years 1943-45, Washington’s deficits were more than five times as much as in the 10 depression years 1931-40. It was the successful effects of pumping massive amounts of government credit into the capitalist economy to purchase war goods in order to defeat their imperialist rivals (and reap huge profits) that convinced bourgeois policy makers and economic theorists that there was some worth in the ideas put forward in the mid 1930s by the social liberal British economist John Maynard Keynes.

According to Keynes, capitalist governments should undertake deficit spending in hard times to provide funds for production and jobs which the capitralist economy, left to its own mechanisms, could not provide. These deficits, that is, government expenditures over and above what the government takes in in taxes, would be raised by large-scale bank loans to the government. In good times the government would be able to repay the loans at interest and the banks would also profit from the whole exercise. But in a downturn government deficit spending to create jobs would lead to a flight overseas of money-capital unless the government imposed tight currency exchange controls. Furthermore, in an economy dominated by monopolistic businesses such Keynesian policies would simply stimulate an increase of the prices of goods and services unless the big investors who controlled these businesses – the financial oligarchy – could see an expanding market for an increased production.

Throughout the Great Depression, no such expanding market existed, which is why Keynesian policies – the essence of which is to inflatethe capitalist economy to stimulate purchasing power – were only applied in a very limited form. Only a major war – or preparations for it – could create such an expanding market, a market for war goods purchased by the state. Keynes himself had acknowledged this. In his most famous work, The General Theory of Employment, Interest and Money written in 1935, he observed that “wars have been the only form of large-scale loan expenditures which statesmen have thought justifiable”.

War production and the expansion of the capitalist market

There is a widely held myth that in the wake of World War II the adoption of Keynesian policies by the US and other imperialist states created the long postwar wave of high economic growth that lasted from the late 1940s until the early 1970s. In fact, it was the restoration of high profit rates on investments in production that led to this sustained upturn.

This restoration was created by: firstly, the driving down of real wages resulting from the mass unemployment of the 1930s depression; secondly, the wipping out of numerous competing businesses and the massive further concentration and centralisation of capital that the decade-long depression also stimulated; and, thirdly, the initial expanding market for production that government deficit spending to purchase war goods in World War II and then the massive deficits to fund purchases of war goods initiated by the US government from the beginning of the Cold War in the late 1940s.

The upturn that was initially stimulated by war and armaments expenditures was transformed into a sustained two-decades long “boom” – punctuated by the inevitable periodic cyclical downturns – due to the initiation of a technological revolution across whole branches of production.

This technological revolution – the increasing introduction of electronic devices so as to increase the automation of production processes – sustained the profit boom because it made possible substantial cuts in the cost of producing goods and therefore enabled these goods to be sold more cheaply and thus to a bigger consumer market.

The technological innovations themselves however entailed enormous initial outlays on research and development before they could be profitably applied in production, outlays that capitalist businesses would not make. It was massive government deficit spending on technical improvements on war goods, on armaments, during World War II and during the Cold War, that created practically all of the technological innovations of the second half of the 20th century. From radar (microwave transmitters and receivers) and electronic computing machines in the early 1940s to carbon fibre in the 1960s – all of the major technological innovations of the last 50 years were created and developed initially for waging war or preparing to wage war by researchers working for the military departments of imperialist states.

This fact, perhaps more than any other, illustrates the truth of Lenin’s description of capitalism in its imperialist stage as “moribund capitalism”. In the imperialist epoch, the epoch of the domination of capitalist production by finance capital, the process of accumulation of capital does not automatically impell capitalist businesses to develop technicological innovations. Left to their own devices, the monopolies may continue to expand society’s productive forces, but they will not revolutionise them. Technological progress only comes about in the imperialist epoch due to the funding of research and development by the imperialist state, which carries out such funding not for the purpose of private gain but for waging wars – an activity which involves the centralisation of society’s productive resources for achieving a social purpose, even though it also involves the use of the most anti-social of measures.

Keynesianism and the political needs of US imperialism

There is a further myth about the postwar “boom”, that is, that the US imperialist rulers sacrificed their own narrow interests at the end of World War II to rebuild the world capitalist economy through initiation of a range of multinational institutions such as the World Bank, the IMF, the International Trade Organisation and the General Agreement on Tariffs and Trade.

The US imperialists marched into World War II with their eyes solely on their own interests of world domination. The wartime and postwar trade, financial and political arrangements they initiated were aimed at making the rest of the 20th century one that they would dominate, of making it into the “American century”. All of their wartime assistance to their imperialist allies and their postwar assistance to their defeated imperialist rivals came with strings attached, strings that ensured that this assistance opened the way to the postwar domination of the capitalist world by US finance capital.

The wartime Lend-Lease program, for example, provided cheap loans to Washington’s allies to enable them to buy US goods, were conditional upon the recipient imperialist powers agreeing to open their (and their colonies’) markets to US investments. The Bretton Woods agreement that placed the international financial system on a stable basis was predicted upon a gold-exchange standard backed by the US dollar, which ensured that the US dollar dominated international banking and trade. And in the Marshall Plan (and NATO) Washington simply accepted the imperative necessity of pouring money and armaments into the weakened European countries to protect them from internal “communist takeover” (the Cold War euphemism for working-class revolution) and thus ensured their workers would be open to exploitation by subsidiaries of US corporations.

Certainly Washington had to pay a strategic price for helping its imperialist rivals in Europe and Japan recover their positions in the world economy, but it protected its own dominance in the world economy by placing its imperialist rivals’ ability to militarily protect their own international economic interests under the hegemonic command of the Pentagon.

Unlike doctrinaire “free market” liberals, the imperialist policy makers in Washington have always understood that force, that is, the organised violence that is the essence of state power, is a crucial tool of economic policy, and a decisive instrument in deciding who will be the winners and who will be the losers in the global competition to accumulate capital between rival gangs of profiteers. (Anyone who doubts that should examine the experience of the Iraqi economy since the 1991 Gulf War.)

That’s why, despite the end of the Cold War and despite all the claims by bourgeois pundits, ex-radicals and left-liberal intellectuals that “neo-liberal globalisation” has or is weakening the power of nation-states, US capital has continued to strengthen the coercive power of its nation-state – spending more on its military machine than the combined amount of military spending of the next six major powers.

“Neo-liberal globalisation” is just that – the globalisation, the extension to the entire world – of neo-liberal economic and social policies. But these policies have nothing to do with, and are not aimed at, weakening the coercive power of nation-states over their own working people, or of weakening the coercive power of the imperialist nation-states, and particularly that of the US nation-state, over the rest of the world. To the contrary, they are aimed at ensuring that the markets of the rest of the world are open to their goods and investments.

The organisations the imperialist rulers have used to impose neoliberal policies upon the underdeveloped capitalist countries – the World Bank and the IMF – are not supra-national bodies. Rather, they express the power of the imperialist nation-states, and above all the US nation-state, within the “global economy”.

The Cold War and ‘welfare’ capitalism

In the wake of the 1930s depression and the Second World War, the classical liberal economic and social policies of unrestricted market competition and unregulated international money-capital movements had become highly unpopular within the working classes of the imperialist nations.

In the immediate postwar period millions of working people in these countries, particularly in Western Europe and Japan, were politically attracted to the Soviet model of state ownership and centralised planning as an alternative to liberal capitalism. This posed an enormous threat to the stabilisation of capitalist political rule in Western Europe and Japan.

In the United States itself, an explosion of labour struggles had erupted with the end of the war as workers sought on the basis of the wartime boom conditions to restore the value of real wages eroded by a decade of depression and five years of wartime price inflation. The US rulers urgently needed to buy social peace at home if they were going to win mass acquiescence in their postwar drive to contain and roll back “communism”.

It was these political needs of finance capital that led to the modification of liberal bourgeois ideology in the postwar period from doctrinaire free-market nostrums to the extolling of national Keynesian, social-liberal, state-regulated, “welfare” capitalism.(2)

Throughout the history of imperialist capitalism, the capitalist rulers have used both the carrot, that is, timely concessions and social reforms, and the stick, that is, economic hardship and state repression, to maintain their political control over wage labour, over the big majority of the population of the imperialist countries.

Policies of social reform and material concessions to the working class – principally to its organised and therefore more politically powerful sections, but at times to the class as a whole – require a material basis which is to be found, in great measure, in the extraordinary superprofits which monopoly corporations and banks of the imperialist countries are able to wrest from the world capitalist economy.

Such superprofits are extracted by the monopolists from the labour of tens of millions of workers and small farmers of the imperialist-dominated countries of underdeveloped countries or out of the markets of the imperialist countries, particularly when their economies are expanding rapidly and productivity is also growing by leaps and bounds.

At the same time, the capitalists do not grant concessions to working people until and unless they feel absolutely obliged to do so by the strength and militancy of labour.

Beginning in the middle of the Great Depression in the 1930s the US monopolists, the US financial oligarchy, followed a course of timely concessions to large sections of the US working class in order to contain labour’s political militancy within confines which ruled out any challenge to the capitalists’ control of state power. As part of this course the US rulers utilised a limited Keynesianism – stimulating the economy by inflating the purchasing power of large number of workers.

In other imperialist countries, where the financial oligarchy had been harder hit by the depression and had much less resources with which to grant concessions to the working class, the capitalist rulers relied more heavily on repression, including military dictatorship (as in Japan) or fascist totalitarianism (as in Germany), to not only contain but to completely crush labour militancy.

While the concessions won from the capitalists in the US in the period prior to World War II were principally the result of militant labour struggles, most of the concessions granted in all of the imperialist countries in the postwar period had a more overt bribery quality.

Determined to contain the influence of pro-Soviet leftists in the labour movement as a key political step in enlisting the bulk of organised labour to support the US-led Cold War drive to “contain and rollback communism”, imperialist governments – whether they were led by Laborite “socialists” like Australia’s Ben Chifley or rabid anti- communist conservatives like Robert Menzies – struck an unwritten but nevertheless mutually understood deal with the top echelons of the trade union movement, i.e., favorable conditions for unions to operate, a relative measure of job security for unionised workers, steady improvements in wages and working conditions, “welfare” safety nets for unemployed or retired workers, in return for support for pro-imperialist, anti-communist politics.

Economically, this Cold War, social-liberal, “welfare” deal was made possible by the long wave of expansion of capitalist production and accumulation of capital in the imperialist countries from the late 1940s to the early 1970s.

The shift from direct colonial rule over the peoples of Asia and Africa to Latin-American-style “neo-colonialism” during this period was both a concession to the rising tide of anti- imperialist sentiment in the colonial empires of the European powers and was also beneficial to US imperialism since it removed many of the former legal barriers of European colonialism to the investment of US capital in the developing capitalist countries. Where, however, any anti-colonial movements, as in Korea or Vietnam, challenged capitalist political rule, Washington orchestrated fierce repression to crush them.

End of the long ‘boom’ and neo-liberalism

The postwar “social contract” between finance capital and organised labour in the imperialist countries served the political interests of finance capital up until the 1970s. But during the 1970s it became clear to the imperialist ruling classes that the long postwar “boom” had run out of steam. As growth in the world capitalist economy slowed, competition between the nationally based rival financial oligarchies of the imperialist countries to dominate markets and fields of investment intensfied.

Furthermore, the Soviet model of “socialism” with its bureaucratic mismanagement, political repression and low-quality consumer goods no longer appealed to broad masses of workers in the developed countries as an alternative to imperialist capitalism.

By the late 1970s the material basis for the policies of Cold War, social-liberal, state organised “welfare” capitalism and the political needs that had required it, had disappeared. Economically, the imperialist bourgeoisies needed to launch a sustained offensive against organised labour – and the working class as a whole in their own countries more generally – to take back the economic concessions granted during the long boom. Abroad, they needed to rollback the political concessions granted to the bourgeois regimes in the underdeveloped capitalist countries so as to force them to remove even the limited controls these regimes had in place to limit the extent to which imperialist finance capital dominated their economies.

This need for a general switch away from a course of granting concessions to wage labour in the imperialist countries and to the ruling elites in the imperialist-dominated countries toward a sustained offensive to take back the postwar concessions proved beyond the capacity of most of the ruling-class politicians and policy makers then in government. It was to be effected by a new breed of politicians and policy makers who would espouse classical liberal economic and social policies but dress these up as “radical reforms” which would “restore prosperity”, and who were not afraid to meet any manifestations of labour militancy or Third World resistance to imperialist dictats with the stick of repression rather than the carrot of concessions.

The election in 1979-1980 of the first of the politicians of “neoliberal globalisation” – Margaret Thatcher in Britain and Ronald Reagan in the United States – marked the beginning of imperialism’s global offensive against wage labour at home and the semi-colonial peoples abroad. Within a few years, all of the mainstream imperialist politicians – whether they called themselves social-democrats, liberals or conservatives – followed Thatcher’s and Reagan’s lead.

Of course, reversing the effects of policies pursued over a period of many decades – in the US from the mid-1930s and in most other imperialist countries from the mid-1940s – could not and cannot be achieved within a few years and will also require many decades, particularly because they generate increasing dissatisfaction and discontent among sections of the labouring population.

Neo-liberalism and liberal fears of socialist revolution

This is the chief source of concern by bourgeois commentators about “globalisation” of neoliberal economic and social policies, that is, will popular resistance to their implementation explode into open revolts that challenge the stability or even the survival of capitalist rule? Reflecting such concerns, Hans-Peter Martin and Harald Schumann, in their 1996 international bestseller, The Global Trap: Globalisation and the Assault on Democracy and Prosperity, wrote:

A democratically constituted society is stable only when voters know and feel that everyone’s rights and interests count for something, and not only those of people at the top of the economic ladder. Democratic politicians must therefore insist on a balance in society and limit the freedom of the individual for the common good. At the same time, however, if the market economy is to flourish, it absolutely requires entreprenurial freedom. Only the prospect of individual gain releases those forces which create new wealth through innovation and investment. Entrepreneurs and shareholders have therefore always sought to impose the rule of the strong – strong in capital, that is. The great success of postwar politics in the West was that it found the right balance between these two poles. This is precisely what lay behind the idea of a social market economy, which assured West Germans of peace and stability for four decades.

Now that equilibrium is being lost. As it is no longer possible for the state to direct activity in the world market, the pendulum is swinging ever further to the side of the strong. With astounding ignorance, the engineers of the new global economy throw overboard the insights gained by those who first made it a success. Constant wage cuts, longer working hours, reduced welfare benefits, and in the USA the abandonment of a whole system of social protection, are supposed to make nations “fit” for global competition. Most corporate bosses and neo- liberal politicians consider any resistance to this programme as a futile attempt to defend a status quo that can no longer be maintained. Globalization, they say, is as unstoppable as the industrial revolution was in its day. Anyone who opposes it will go under in the end, as [the] machine-wreckers did in nineteenth century England.

The worst thing that could happen would be that the globalizers are right in making this analogy. The beginning of the industrial age was one of the most terrible periods in European history, when the old feudal rulers joined with the new capitalists and overwhelmed with brute force the old order of values, the guild rules of craftsmen, and the customary rights of country people to a poor but secure living. Not only did this cause untold misery to millions of people; it also called forth uncontrollable counter-movements whose destructive power eventually shattered the emergent system of international free trade, and discharged itself in two world wars and the communist seizure of power in the Eastern part of Europe.

Martin and Schumann thus appeal to today’s imperialist rulers to change course, to abandon their “deregulation of the market” and their “dismantling of the welfare state”, by arguing that the “subjection of human labour” to the unregulated laws of the market threatens the “social stability” of capitalism and risks provoking economic chaos and political turmoil. They plead with the imperialist policy-makers to recognise that, as they themselves put it, “the taming of capitalism through basic social and economic rights was not some act of charity that can be abandoned when the going gets tough”.

The imperialist policy-makers, however, are well aware that the postwar course of placing controls on the operations of the market economy and instituting social reforms was not the result of philanthropic concern for the welfare of working people. They pursued this course, firstly, because they were economically able, and secondly, because they felt it was politically expedient in order to contain and defuse the threat posed to their rule by the prospect of “the communist seizure of power” resulting from mass working-class disillusionment with capitalism and widespread working-class support for Marxism.

Like so many other left-liberals today, Martin and Schumann do not understand that prevailing economic conditions do not readily allow the imperialist rulers to pursue such a course today; nor do the imperialist rulers feel any political need to do so. Martin and Schumann fail to recognise that, in unfavourable economic conditions social reforms are only made by the exploiters when “the going gets tough” for them politically, that is, when they begin to be haunted by the spectre of a revolution by the exploited.

Martin and Schumann correctly point out that as the drive to impose neoliberal globalisation has deepened, “the contradiction between market and democracy has been regaining its explosive force”. That contradiction, however, cannot be overcome within the framework of capitalism, no matter how democratic the political forms superimposed on it. It can only be overcome by ending the “subjection of human labour to the laws of the market” and replacing it with the subjection of actually socialised human labour to the democratic control of collectively organised labour, that is, with socialism.

The task and challenge that Marxists face in the 21st century is to turn the potential explosive force of the growing popular discontent at the impact of neo-liberal globalisation into an organised, consciously anti-capitalist mass movement – a movement that can explode the capitalist fetters that enslave the creative force of socialised labour. Only if we succeed in doing this will we be able to ensure that the horrors inflicted on humanity by the process of accumulation of capital in the 20th century are not repeated in the 21st.

Notes

1. In actual fact, wage-workers are not commodities but the owners of a commodity – labour power (their ability to perform labour) – which is what they sell “piecemeal” to capitalists.
2. The implementation of state welfare measures is, of course, not synonymous with Keynesian “pump priming” policies. State welfare measures (e.g., state-funded sickness and accident insurance, and old-age pensions) were first introduced on a wide scale in Germany in the 1880s under Chancellor Bismarck, following his govermnent’s repression of the Marxist-led German Social-Democratic Party (SPD) in 1879. The aim of these measures was to a “carrot” to counter the growth in the influence of the SPD within the German working class. In announcing the measures, the Kaiser declared that “the cure of social ills must be sought not exclusively in the repression of the Social-Democratic excess, but simultaneously in the positive advancement of the welfare of the working masses”.