The post-war restructuring of capitalism involving decolonization, the introduction of Keynesian demand management, and the institution of democracy based on universal adult suffrage, represented concessions made by the system to ward off the Communist threat which the enhanced prestige of the Soviet Union, the march of the Red Army across Eastern Europe, the sacrifices made by the Communists in the anti-fascist struggle all over Europe, and the Chinese Revolution had brought to the fore. True, the Yalta agreement had bound the Soviet Union into not supporting Communist ascendancy in Western Europe, in countries like France, Italy and Greece, in exchange for Eastern Europe’s joining the socialist camp, because of which it could not even properly support the Greek Communists whowere engaged in a civil war against opponentsenjoying the full backing of British imperialism; but even so, metropolitan capitalism could not take the Communist threat lightly. The Cold war was unleashed, in addition to the restructuring of the system just mentioned, to cope with this threat.
The point to note here however is that this restructuring did not represent the “spontaneous” development of capitalism; itrepresentedrather a specific concession wrung out of capitalismby the force of circumstances.Capitalism by itsvery nature is a “spontaneous system” in the sense that it is driven by its own immanent tendencies. The human agents who apparently take the decisions,which in the aggregate produce the behavior and the dynamics of the system, do so not according to their own individual volitions but under the coercion of competition. Because of this, one can visualize the system as if it self-propels itself through the coerced actions of human agents who are only the instruments of its self-propulsion. It is instructive that Marx himself had called the capitalist, supposedly the hero of the system, as mere “capital personified”. The capitalist too in short was seen as being alienated under the capitalist system, being forced to act in ways dictated by competition, which unleashed a Darwinian struggle among capitalists, rather than in accordance withhis own volition.
These immanent tendencies, such as the tendency towards the centralization of capital, the tendency to subjugate pre-capitalist production through a process of primitive accumulation of capital, the tendency to turn every object into a commodity, were aided and abetted by the capitalist State. The usual role of the capitalist State in other words was to accelerate and facilitate the operation of the immanent tendencies of capital, which is why within the capitalist order it is economics that typically drove politics.
There are however certain circumstances, of which the post-war conjuncture was one, when the balance of class forces is such that the State, even a State committed to the preservation of capitalism, acts not necessarily to further the immanent tendencies of capitalism but rather to restrain their operation. Such restraint, however, can never be a permanent phenomenon, since, as long as the system remains intact, these tendencies assert themselves, starting once again from the new, restructured situation. Restructuring in short only means a state-displacement not an end of the immanent tendencies. Any persistent attempt to thwart these tendencies makes the system dysfunctional, requiring either greater and greater State intervention in a recursive fashion, which ultimately leads to a transcendence of the system itself; or to a re-assertion of its immanent tendencies after the initial state-displacement, which then has the effect of rolling back altogether the State interventionthat was designed to restrain these tendencies.
This is exactly what we find happening in metropolitan capitalism in the post-second world war scenario. There were two phenomena to be noted here. One was the persistent maintenance of a high level of employment. The official unemployment rate in the early sixties in Britain was less than 2 percent and in the United States around 4 percent, which were far lower than what capitalism had ever achieved historically in peace time. Capitalism always needs a sizeable reserve army of labour, not just for the obvious reason of keeping down real wages and hence keeping the entire system of exploitation going, not just for maintaining work-discipline by hanging over the shoulders of the workers the Damocles sword of potential unemployment, but also for an additional and less-discussed reason. This is to ensure the stability of what Keynes had called the “wage-unit”, i.e. to prevent an increase in money wages that might cause cost-push inflation, which, even when it occurs at a steady rate without any acceleration, nonetheless poses a threat to the value of money under capitalism, and thereby makes this pre-eminently money-using system unviable. A sustained state of depletion of the relative size of the reserve army of labour, such as what post-war capitalism experienced, was therefore simply incompatible with the preservation of the capitalist system.
If unemployment had to be permanently kept down, then the process of restructuring of capitalism had to be further carried forward, through for instance public investment,which would be more willing to accept a “wages and incomes policy”,increasingly replacing private investment. Such recursive carrying forward of restructuringhowever would have ultimately led to a transcending of capitalism. But if, as the system became dysfunctional because of State interference with its immanent logic, any further interference that might lead ultimately to its transcendence was eschewed, then this dysfuntionality forces a rolling back of even such State interference as has occurred, and with it of the attempt to “improve” the system’s functioning.
The destabilization of the “wage-unit” through cost-push inflation, caused by the maintenance of persistently low levels of unemployment, occurred towards the end of the 1960s; but since it was not successfully converted into an occasion for further interference in the system, it ultimately brought the likes of Ronald Reagan and Margaret Thatcher to State power. And they used it for launching an attack on the working class and for yoking the State once again to the task of furthering the immanent tendencies of capital.
The second phenomenon to note, which also occurred during the so-called “Golden Age of Capitalism” that was a sequel to its restructuring, was an immense centralization of capital. There were two contributory factors towards this, though the importance of each varied over the period. To see their role, let us take the advanced capitalist world as a whole (including Japan). Since the post-war years of high growth also meant high rates of investment, they entailed high rates of savings for this reason. In addition the private savings had to be higher still in order to finance government dis-savings in the form of fiscal deficits, especially in the United States, which used this weapon to finance a whole range of military bases across the world and subsequently the Vietnam war, because the Bretton Woods arrangement that decreed the US dollar to be “as good as gold” allowed it to do so.
These savings were held in concentrated amounts in banks. But while the banks intermediated between the savers and investors, the U.S. government’s desire for “costless borrowing” (by printing dollars rather than floating bonds) meant that banks, especially those operating in Europe, had balance sheets that from their point of view were in optimal. They were flooded with dollars which they wanted to “invest” in income earning and capital-gains-fetching assets, but the international monetary arrangements under the Bretton Woods system, which allowed countries to impose capital controlsto ensure that finance remained “national”, so that nation-States could undertake Keynesian “demand management”, came in their way. These arrangements had to be dismantled, finance had to have the freedom to invest anywhere it liked, i.e. to go “global”, and, towards this end, all countries had to be prised open for the free flows of capital, especially finance, and of commodities.
Both these phenomena, one relating to the dysfunctionality that high employment rates and Welfare State measures introduced into capitalism whose immanent logic militated against them, and the other a fall-out of an immanent tendency of capital itself, namely the tendency towards centralization of capital, made the earlier post-war economic regime in the capitalist countries unsustainable. A regime of “globalization” which meant above all the globalization of capital, especially of finance capital, replaced it.
Since there are many misconceptions about this regime of globalization, it is best to begin by removing some of them. Since globalization is associated with the pursuit of a set of policies which go under the name of “neo-liberalism” and which pretend that their objective is to roll back intervention by the State and restore the supremacy of the market, there is an impression that what we are witnessing under the current globalization is a “retreat of the State”.
Nothing could be further from the truth. What globalization effects is not a retreat of the State but a change in the nature of its intervention. Since capital is globalized, while the State remains a nation-State, the State willy-nilly must bow before the demands of capital, for otherwise there would be an outflow of capital from the country in question. This has an important implication. Earlier, under the dirigiste regimes, the State, even though it was committed to the preservation and promotion of the capitalist order, and hence had the class character of a bourgeois State (or a bourgeois-landlord State in third world countries where the bourgeoisie, coming late on to the historical scene, had to enter into an alliance with feudal property in order to defend capitalist property), appeared to stand above society and look after the interests of all classes; but it now becomes exclusively committed to promoting the interests of international finance capital, and the domestic corporate-financial oligarchy integrated with it (together with its landlord allies). In fact the essence of the transition from the post-war arrangement to the current globalization lies precisely in this, namely a basic change in the nature of the bourgeois (or the bourgeois-landlord) State.
Before I discuss the significance of this change, I would like to clarify one point. The end of the Second World War itself ushered in an era when inter-imperialist rivalries were muted and when the U.S. had emerged as the undisputed leader of the capitalist world. This muting of inter-imperialist rivalry gets a further boost in the era of globalization. In fact if the post-war pre-globalization era had seen a muting of inter-imperialist rivalry because of the unquestioned dominance of the U.S. (which some writers have called a state of “superimperialism”), the muting of inter-imperialist rivalry in the current era of globalization derives from an altogether different source, namely, the fact of the internationalization of capital.
When Lenin had talked of imperialism he had seen different finance capitals as being nation-based, and nation-State-aided, with the financial and industrial interests within a particular country closely integrated with one another, and in rivalry with the similarly integrated financial oligarchy belonging to another advanced nation. There is a basic change in this respect between his time and ours. Today’s finance capital is globalized and hence international, of which the finance capitals located in different countries, not just in the advanced countries but even in third world countries like India, are integral components. The financial interests located in particular countries are not pursuing, in coalescence with their industrial counterparts within their respective countries, some specific “national” agenda of carving out a larger economic territory for themselves, with the help of their “own” particular nation-State, at the expense of financial oligarchies belonging to other advanced countries. On the contrary, any breaking up or division of the world into economic territories belonging to rival capitalist powers, which prevents the free flow of capital, especially of finance, across national boundaries, is opposed by international finance capital. This capital is not necessarily tied to industry (on the contrary its quest pre-eminently is for capital gains) and is unconnected with any strategic “national” interests.
The muting of inter-imperialist rivalry in the current conjuncture in short is rooted in the very nature of contemporary capitalism, characterized by the emergence into centrality of international finance capital; it does not simply derive, as in the immediate post-war years, from the sheer balance of power among the advancedcapitalist countries.
Some have seen in this denouement a vindication of Karl Kautsky’s position as against Lenin’s; this however is an error. Kautsky, it may be recalled, had argued, as opposed to Lenin, that a state of “ultra-imperialism” where a peaceful partitioning of the world through mutual agreement among the rival capitalist powers was possible, so that wars between these powers for acquiring larger economic territories for their respective financial oligarchies were not inevitable. Against this position, Lenin’s rejoinder had been that since any such agreement would necessarily reflect the prevailing balance of strength among the rival powers, and since capitalist development necessarily entailed uneven development, resulting in a change in the balance of such strength, these agreements would soon get out of sync with the changed relative strengths of these rival powers, necessitating fresh attempts to redraw them, and hence re-generating bitter inter-imperialist rivalry.
Both Lenin and Kautsky however saw capitalism as being dominated by rival nation-based capitals; their difference related to whether such capitals could reach agreement or be locked in bitter inter-imperialist rivalry. This entire world however is a far cry from today’s world of international finance capital. The muting of inter-imperialist rivalry today is not because of any agreement between rival national capitals, but because globalization has entailed a transcendence of a world of such national capitals, where each pursued its own national strategy of aggrandizement. To see in the current muting of inter-imperialist rivalry a vindication of Kautsky’s position therefore amounts to a misunderstanding of contemporary capitalism.
There are three main features of contemporary capitalism, and hence of the current globalization based upon it, which must be noted here. The first of these is an enormous increase in the weight of the financial sector, so much so that many have talked of the current period as one of “financialization”, analogous to the “industrialization” that had occurred earlier. The increase in the weight of the financial sector is ubiquitous, though obviously far more pronounced in the advanced countries, from where industrial and certain service sector activities have even been shifting out to third world economies like China and India.
The second process under globalization is in fact this very shift in the location of a whole range of activities from high-wage advanced countries to low-wage third world countries, for meeting not local but global demand. Such a shift in response to wage differences is precisely what had not occurred historically, for then we would not have had the sharp dichotomy that exists today between the developed and the underdeveloped countries. Central to this dichotomy is a difference in the average living standards of the people, an expression of which is the wage difference. If labour had been legally allowed to move freely from the underdeveloped to the developed world, or if capital, which was legally allowed to move freely from the developed to the underdeveloped world, had actually done so, then these wage difference would have disappeared.
But this did not happen. Capital from the advanced countries moved to the colonized or semi-colonized economies only in sectors like plantations and mining, which produced primary commodities, or in sectors like trade and finance which were required for servicing this international division of labour, but not in core manufacturing activities during the entire colonial period (barring some value addition to primary products, like jute). The current globalization has meant a break with this pattern, with international capital now locating manufacturing activities in China, and “outsourcing” several service sector activities to India. The activities spontaneously diffused in this manner still constitute mainly “lower order activities” in terms of technological intensity; but this diffusion nonetheless is a significant fact.
The third process under current globalization is a large-scale assault by capital on traditional petty production including peasant agriculture. This takes the form of outright dispossession of such producers (buying their assets at throwaway prices, usually with the connivance of the State), or a squeeze on their incomes, which is merely a slower process of dispossession. If outsourcing of activities from the metropolis to the third world marks a break with the colonial pattern, the dispossession of petty producers (what Marx had called a process of “primitive accumulation of capital”) is a continuation of the colonial pattern. It had been interrupted under post-colonial dirigisme because newly independent third world States had sought to protect, promote and defend petty production against the onslaught of capital (even while allowing a process ofinternal differentiation among such producers); but with the neo-liberal agenda being adopted under the regime of globalization, such protection by the State is withdrawn, a direct consequence of which is the agrarian crisis and the mass peasant suicides we see in India today. The crisis is not confined only to the agrarian economy; it afflicts the entire range of traditional petty producers, from fishermen to craftsmen to textile weavers.
Globalization had a profound impact on the socialist countries, though in different ways. I have mentioned in an earlier lecture the new alienation, different from the alienation under capitalism but an alienation nonetheless, that characterized the socialist countries with one-party dictatorships and “democratic centralism” as the principle of organization of the ruling party. The collapse or snuffing out of socialism however, though ultimately caused by this alienation, was mediated by the fact of these countries being drawn into the vortex of globalization. Ironically therefore it is not the so-called “Golden Age of Capitalism” that brought about the end of socialism; but globalization which brought about the end of both socialism and the “Golden Age of Capitalism”. The alienation under socialism forced these countries to get drawn into globalization which gave the coup de grace to their socialist character.
In the Soviet Union and Eastern Europe the easy availability of international credit, at a timewhen advanced country banks, flush with funds, were engaged in active loan-pushing, encouraged an external borrowing spree in order to boost domestic consumption as a means of bolsteringthe credibility and popularity of the regimes. This strategy worked for a while but when the time came to pay back, the regimes were left high and dry. In fact anticipating foreign exchange difficulties many State-owned export firms in the Soviet Union delayed bringing back their foreign exchange earnings (which constituted a de facto capital flight), bringing the economy to its knees. This is when several Party apparatchiks converted themselves into capitalists by filching State property, i.e. through a process of “primitive accumulation of capital” at the expense of State property that had been paid for by the people.
In China by contrast the new-found willingness of capital-in-production from advanced countries to locate plants in the third world, to take advantage of the low wagesthere for meeting global demand, was taken advantage of, to create an export surplus and hence build up external credit. Restrictions remained on the flows of capital-as-finance and implicitly even on imports, and domestic consumption was kept down. The high rates of export-led growth were used not so much for boosting per capita domestic consumption as for enlarging employment and holding larger claims on the outside world, especially the U.S.
The difference between the two cases, of the Soviet Union and China, may be explained by the fact that in the former, as opposed to the latter, labour reserves had already been used up, which was a remarkable achievement in itself. Or putting it in the jargon often used, the former economy was in a stage of intensive expanded reproduction while the latter was in the stage of extensive expanded reproduction.
Some have argued that labour reserves in China have got used up by now and that wages have started rising as a consequence; but whatever tightness exists in the labour market in China is confined to the coastal areas and does not characterize the interior; and whatever increase in wages has occurred is due to administrative fiat rather than any such tightness. Besides, there is even a limit to the extent to which wages can be increased in this manner, since in the era of globalization Chinese workers too are competing against workers in other third world countries which are still saddled with substantial labour reserves and near-subsistence wages. Notwithstanding China’s high growth in other words the ability of the strategy it has been pursuing to raise the living conditions of the mass of the people remains open to question. With the growth rate itself slowing down under the impact of the world capitalist crisis, these misgivings only increase.
Much has been written of late about Russia and China emerging as new centres of power, challenging the position of the advanced capitalist world, especially of the U.S. By all accounts however the ambition of the new-rich in China, as in Russia (and India), is to shift their wealth, their children, and eventually themselves, to the advanced capitalist world, especially the U.S. When the ambition of the elites in these countries is to migrate to the capitalist metropolis, it is difficult to visualize these countries emerging as threats to the capitalist metropolis. And under the impact of the current capitalist crisis, since holding dollars is likely to become even more attractive to the elites all over the world, visualizing an exacerbation of economic rivalry between the capitalist metropolis on the one hand and these so-called “newly-emerging” countries on the other seems even more far-fetched, no matter how serious the contradictions between them may appear from time to time.
Globalization has had a profound impact on the conditions of the various classes and hence on the overall class configuration within economies. This impact seems to be uniform across countries and throws much light on several contemporary developments. So, let me spend a little time over it.
The most significant gainer from the regime of globalization is of course the corporate-financial oligarchy within each country which is integrated into global capital flows. These oligarchies constitute the proverbial “one percent” which have been the target of “Occupy” and other such movements. The recent concern over growing inequality in wealth and income within most countries of the world, of which the reception accorded to Thomas Piketty’s book Capital in the Twenty-first Century is an indicator, has to do with the immense enrichment of these oligarchies in the period of globalization.
At the other end, there has been an absolute worsening in the conditions of vast masses of the “working people”, among whom I count the workers, both employed and unemployed (including those suffering from “disguised unemployment”), the peasants, the agricultural labourers, and the traditional petty producers. For the workers in the advanced countries, this is both clearly established and also expected, since the shifting out of certain manufacturing and service sector activities to third world countries because of their low wages necessarily puts a downward drag on these workers’ wages, by generating unemployment among them. In fact, Joseph Stiglitz has suggested that the real wages of an average male American worker in 2011 were marginally lower than in 1968.
The more intriguing case is of the working people of the third world: why should their conditions worsen under a regime of globalization? The simple reason is that the squeeze on traditional petty producers because of the withdrawal of State support (in the form of cuts in subsidies on their inputs, and of denial of assured prices such as what the Commodity Boards had provided in India in the pre-liberalization days), forces many of them to abandon their occupations and seek employment outside. But the removal of restrictions on technological-cum-structural change in the economy (of which allowing Foreign Direct Investment into multi-brand retail in India is an obvious recent example) raises the rate of labour productivity growth, constricting the rate of growth of employment, which falls short of the rate of growth of those seeking employment owing to both the natural increase in work-force and the displacement of traditional petty producers. This increases the size of the labour reserves relative to the work-force (though unemployment does not necessarily manifest itself in an open form), which not only is a cause of impoverishment per se but also pulls down the real wages of even organized workers. The privatization of essential services like education and health whose costs increase as a consequence adds to this process of impoverishment. The increase in hunger in India over the period of neo-liberal policies,which is an incontrovertible fact, testifies to this.
Between these two groups however there is a “middle class” (I use the term only in a descriptive sense) which has done well for itself in the period of globalization everywhere and become its votary. In advanced countries, those engaged in the financial sector constitute its core, while in third world countries, apart from this segment, those engaged in better-paid occupations within sectors to which activities are being outsourced from the metropolis, belong to its “core”. The demand for a range of goods and services (especially services) which arise because of the higher incomes of this “core” typically generates further middle class employment (as a “multiplier” effect), so that a relatively affluent middle class develops under globalization, and constitutes a major source of social support for it, not just by itself but also by generating expectations among those below that their progeny may move up to its ranks someday.
Whether the proportionof this “middle class” in the total work-force has increased during globalization remains unclear. But judging from the Indian example there is unlikely to have been much of an increase in the proportion of the middle class in the work-force. Its greater visibility is because it has detached itself from the rest of the work-force in terms of its relative income.
The period of globalization is thus marked by an intensified contradiction between the working people on the one side and the middle class beneficiaries of globalization on the other. This is a phenomenon visible everywhere. In the U.K. the working people voted for “Brexit” while London, where the affluent “middle class” is concentrated around the City of London, voted otherwise. In India, land acquisition from the peasantry, using varying degrees of coercion, for a “development” whose main drivers and beneficiaries are the middle class, exemplifies this contradiction.
How this contradiction is likely to develop in the coming days, and more generally the new conjuncture that is coming into being in the wake of the current capitalist crisis and the pervasive disillusionment with globalization, will be my topic of discussion in the next lecture. But before I end my present lecture, I would like to make one point.
The collapse of socialism all over the world has caused as much consternation as despair among those who saw in it the only hope for human freedom. In particular, what has caused disappointment is the fact that so little of the legacy of the October Revolution has survived in the country of its origin. This is in contrast to the earlier, bourgeois, revolutions, where even when the revolution apparently received a setback, it nonetheless left behind a residue of progressive achievement. The restoration of the monarchy in Britain in 1688 did not entail a negation of the gains of the English bourgeois revolution, just as Thermidor or even Napoleon did not entail a negation of the gains of the French bourgeois revolution. In the case of the October Revolution in contrast we do find the slate being wiped clean in the country of revolution, with little to show as its particular legacy; and much the same is true in Eastern Europe, with even fascism and semi-fascism being triumphant in countries which till the other day were a part of the socialist camp.
But this complete wiping away of the legacy of the revolution has an analytical explanation which, far from causing despair, should rather bring enthusiasm. What it shows is that there is no half-way house between capitalism and socialism, that with capitalism we only have an either-or situation: either it is overthrown and its “spontaneity” transcended, or it fully reasserts itself with its “spontaneity”, destroying the vestiges of all that had been achieved earlier by the socialist project. Capitalism in this sense is a unique mode of production, a fact often ignored in text-books on historical materialism which list the different modes of production as if they were more or less comparable entities.
This also means that the revolution to transcend capitalism will be very different from all preceding revolutions, not just in the sense that it would take mankind from its “pre-history” to its “history” as Marx had said, but above all in the sense that it would take mankind from a “spontaneous system” to one governed by the conscious collective intervention by the people. The fact that bourgeois revolutions of yore, unlike the October Revolution, left a legacy even when they appeared to have failed, is itself an expression of this “spontaneity” of the system, whose immanent tendencies had already eaten into the vitals of the earlier mode even before the political revolution to change the class character of the State was attempted. This is not so with socialism which does not grow “spontaneously” within the capitalist system (as capitalism does within the feudal system), and which indeed is not “spontaneous” at all in the sense of being bound by immanent tendencies.
In my student days we used to have intense discussions about whether the Soviet Union was a socialist country or represented some form of State Capitalism, or some other intermediate mode of production between capitalism and socialism. That entire discussion however missed the whole point about capitalism, namely its “spontaneity”, from which it follows that the transition from capitalism to socialism, though it cannot be reduced to one single revolutionary episode, constitutes nonetheless, as Eugene Pottier put it, lalutte finale (or“the final struggle”).