First, whereas surplus value is denominated in terms of abstract labour time, the economic surplus is counted
directly
in prices.
Nitzan Bichler - 2012 - Capital as Power
It is true that the mechanical- scientific revolution introduced various laws of conservation, replacing reli- gious miracles with clear, finite boundaries.
It is also true that these natural laws and boundaries started to find their way into social theory.
But the actual process of estimating aggregate statistics, collating national data and measuring sectoral averages was still very much in its infancy.
12
Most nineteenth-century political economists - as well as their chief critic, Karl Marx - had little or no knowledge of the macro facts. There is little wonder that their discussion of surplus and capital was largely theoretical. And, at the time, few theorists thought something was missing. The very idea of 'testing' social theory with empirical evidence was not even on the radar screen.
In this social context, the notion that capital was a purely economic cate- gory hardly seemed problematic. With economics considered separable from politics, with aggregate concepts yet to be invented and diffused, and with the basic social data still to be created, it was possible to believe that capital was an objectively defined economic entity with a readily measurable quantity. There was really nothing to contest that belief.
12 The first attempts to collate aggregate economic statistics were made in the 1660s, by William Petty in England. These attempts were motivated by the need to assess the material strength and taxable capacity of England versus France and Holland. Subsequent attempts introduced additional innovations, including time series (Gregory King in England, 1696); input-output matrices (Franc? ois Quesnay in France, 1764); estimates based on production data rather than fiscal sources (Arthur Young in England, 1770); value added (Antoine Lavoisier in France, 1784); income distribution (Henry Beeke in England, 1799); national aggregates (Patrick Colquhoun in England, 1814); constant price estimates (Joseph Lowe in England, 1822); national debt burden (Pablo de Pebrer in England, 1831); rudimentary national income and product account broken down by industry and state (George Tucker in the United States, 1840); and gross versus net income (Alfred Marshall in England, 1879). But whereas the inventions were long in coming, their implementation was slow and limited. It was only in the 1920s, and particularly with the 'aggregate revolution' of the 1930s, that these individual initiatives started to be organized, institutionalized and system- atically estimated by national statistical services (the signposts in this footnote are taken from the detailed history of Kendrick 1970).
? 42 Dilemmas of political economy
Enter power
The turning point came at the end of the nineteenth century. Recall that clas- sical political economy differed from all prior myths of society in that it was the first to substitute secular for religious force. But note also that this secular notion of force was similar to its religious predecessor in that it was still heter- onomous. It was external to society. For the political economist, economic forces were as objective as natural laws. They were determined for human beings, not by human beings.
This external perception of force began to crack during the second half of the nineteenth century. More and more processes seemed to deviate from the automaticity implied by the natural laws of economics. Increasingly, force was subjectified by society, seen as determined for human beings, by human beings. Challenged and negated, heteronomous force gradually re-emerged as autonomous power.
The change in perception was affected by several important developments. First, the rise of large governments and big business undermined the New- tonian logic of competitive markets and political equilibrium. At the turn of the twentieth century, it was already clear that the guiding hand of the market was not always invisible and that liberal politics was far from equal. Power now was much more than a theoretical addendum needed simply to 'close' an otherwise incomplete economic model; it was an overwhelming historical reality, one that seemed to define the very nature of capitalism. This recogni- tion cast further doubt on the possibility of purely economic categories.
Second, the emergence of the aggregate view of the economy, the develop- ment of national accounting and the requirements of statistical estimates revealed serious difficulties with the measurement of capital. For the first time, political economists had to put the concepts of utility and abstract labour into statistical practice, and the result was disastrous.
According to received doctrine, the 'real' quantity of capital is denomi- nated in units of utility or abstract labour. But there is a caveat. As we shall see later in the book, such measurements are meaningful, if at all, only under conditions of perfectly competitive equilibrium. This qualification creates a bit of a headache since, by definition, perfectly competitive equilibrium evap- orates when infected by power. And given that even orthodox economists now agree that power is everywhere (if only as a 'distortion'), it follows that the theoretical units of 'real' capital are meaningless and that their practical measures break down. In fact, it turns out that even when we assume perfectly competitive equilibrium it is still logically impossible to observe and measure the utility or abstract labour contents of capital. And so, by attempting to measure the so-called 'real' quantity of capital, economists ended up exposing it for what it was: a fiction hanging by the threads of impossible assumptions and contradictory logic.
Third, and more broadly, the new reality of the twentieth century didn't quite fit the traditional way in which liberals and Marxists separated
Power 43
economics from politics. There was a massive rise in the purchasing power of workers in the capitalist countries, an uptrend that contradicted the cyclical patterns suggested by Malthus, Ricardo and Marx, and that therefore blurred their basic notion of 'subsistence'. Many types of labour became complex and skilled, rather than one-dimensional and simple as Marx had anticipated - a development that made the notion of 'abstract labour' difficult if not impos- sible to apply. And in contrast to the expectations of many radicals, profit cycles failed to implode capitalism, while the profit rate - although oscillating - trended sideway rather than down. Culture, media and consumerism became no less crucial for accumulation than production was. Inflation supplemented cost cutting as a key mechanism of redistribution, while finance took over the factory floor as the locus of power. Emerging categories of technology, corporate planning and public management could not easily be classified as either economic or political. It became increasingly clear that free competition and bourgeois ownership were insufficient, even as a starting point, to explain the nature and development of modern capitalism.
The very notion of class became contested. As an analytical tool, class originally emerged from a triple fusion of Ricardo's theory of labour value, Comte's industrial management and Marx's capital accumulation. The emphasis of class analysis on capitalists and workers was unmediated and obvious; it was materially embedded, ideologically accepted and legally enforced; and until the late nineteenth century it served both the liberal main- stream and its Marxist critiques.
But by the early twentieth century, the vision of class analysis had become blurred. Although still linked in some sense to material reality, class was now increasingly intertwined with political organizations and parties, culture, mass psychology and sociology. It was no longer immediate or obvious. It required subtle articulation. It became a speculative concept.
Worse still, class was now competing with new concepts, particularly the 'masses'. The twentieth century brought fascism, a new regime that rejected the Enlightenment, cast off rationalism and shifted the entire ideological emphasis of social theory. Instead of production, fascism accentuated power; in lieu of class, it spoke of state, organization and oligarchy. Following fascism, social scientists began to emphasize a new set of categories - 'mass', 'crowd', 'bureaucracy', 'elite' and, eventually, the 'system' - categories that appeared more flexible and better suited to the changing times than the rigid and anachronistic class demarcations of political economy.
Fourth and finally, the objective-mechanical cosmology of the Newtonian and liberal revolutions started to fracture. In its stead came an indecisive worldview of uncertainty, risk and probability, of relative time/space, of an unsettling entanglement of particles and of a rather hazy separation between observer and reality. These developments have been used to justify further movements away from the scientific-universal principles of political economy. Vitalism, ethnic identity and racism have all flourished in the name of cultural pluralism. Anti-scientists have challenged the so-called
44 Dilemmas of political economy
binary 'essentialism' of 'Eurocentrism'. Lord Bacon was dead. Ignorance has become strength.
Suddenly, power was everywhere, and it contaminated everything. The anonymous market, measurable capital and class have all become suspect. The old categories seemed to be melting, along with the determinism that held them together. Political economy had entered a new, uncharted territory.
4 Deflections of power
'Why don't you make everyone an Alpha Double Plus while you're about it? ' asks the Savage. 'Because we have no wish to have our throats cut', answers Mustapha Mond, the Resident World Controller for Western Europe.
--Aldous Huxley, Brave New World
The new realities of power posed a dilemma for twentieth-century political economists. There were two options, both unpalatable: ignore reality in order to protect the theoretical duality of politics and economics, or sacrifice the theoretical duality in order to better deal with reality. In general, mainstream theorists have taken the first path, trying to keep power out of their analysis. The result: a shrinking domain of admissible questions complemented by a widening range of ad hoc explanations. Marxists have tended to move in the opposite direction, seeking to incorporate power into their theories. But as they opened up their models, what they gained in practical insight and political expediency they lost in scientific cohesion, consistency and accuracy. Their explanations, although often illuminating and politically purposeful, served to fracture Marx's theoretical framework and undermine its original unity.
And so, in the end, power got deflected. Most theorists ignore it, and even the few who address it keep it safely outside the concept that matters most: capital itself. The reason isn't difficult to see. To put power in capital means the end of determinism and the beginning of autonomy. It undermines the foundations of existing models. It calls for a fundamental rethinking of polit- ical economy. To paraphrase Huxley, it is like opening a Pandora's Box in a Cyprian colony of Alpha Double Plus theorists. And since nobody likes having their theoretical throat cut, it is much safer to leave the matter locked in the box.
The purpose of this chapter is to highlight these deflections of power and assess their consequences for the development of political economy. This emphasis implies two important biases. First, our concern here is not the evolution of modern political economy as such, but how this evolution has been shaped in relation to power. Consequently, we make no attempt to be
46 Dilemmas of political economy
comprehensive. Since our aim is conceptual, we focus on seminal contribu- tions and important turning points, at the obvious expense of secondary sources and subsequent variations. Second, since liberal analyses tend to avoid power while Marxist theories to endorse it, we naturally pay more attention to the latter than the former.
Liberal withdrawal and concessions
Liberal theorists, being increasingly on the defensive, have generally opted for the first choice: protecting the duality by sidestepping reality. Toward the end of the nineteenth century, their fighting spirit withered and eventually mutated into neoclassical apologetics. By the beginning of the twentieth century, they began a mass retreat into the make-believe world of perfectly competitive equilibrium, a heavily subsidized twilight zone in which power could be safely ignored. They zealously excluded from their pure economic framework the capitalist state, wars, large corporations, classes, collective action, ideology and every other power process, organization and institution that could not easily be reduced to the atomistic logic of utility maximization. They ended up with a very narrow domain populated by fictitious 'actors', all small, rational and powerless. In this imaginary world, laissez faire interac- tions continued to yield an optimal utilitarian equilibrium, as the theory dictated. 1
The global crisis of the 1930s forced liberals to make a major concession. Following John Maynard Keynes' General Theory (1936), they conceded that in fact there was not one, but two economic realities: a competitive microeco- nomic sphere where the interaction of atomistic consumers and producers generates the efficient outcome stipulated by neoclassical manuals; and another macroeconomic realm that unfortunately produces occasional market failures. The first reality works exactly as it should and therefore must be kept free of political intervention. But the second reality has a built-in imperfection and sometimes needs the oversight of governments. Power,
1 After the Second World War, neoclassicists embarked on a counter-revolution that other social scientists decried as 'economic imperialism'. This intellectual imperialism, which emanated mostly from the Chicago School, argues that, no matter what you do, you simply can't beat the market. According to this view, distortions of 'perfect competition', such as oligopoly and labour unions, are more apparent than real, and those that do exist are politically motivated and therefore reversible. Furthermore, many so-called non-economic phenomena - from marriage, through unemployment, to war - are in fact based on utili- tarian decisions and therefore reducible to 'economic' reasoning (Stigler 1988: Ch. 10, 'The Chicago School'). In parallel, neoclassical economists have tried to hide the dogma's under- lying assumptions by developing models that presumably do not need such assumptions (see for example Arnsperger and Varoufakis 2005). Of course, these deviations are mostly lip service. If they were ever to become the rule, the dogma would become logically subversive and hence ideologically useless.
? Deflections of power 47
although merely 'political', was thus brought into economics through the back door.
Few liberals care to admit it, but this introduction of power has thrown their economics into disarray. Previously, neoclassicists could pretend that extra-economic distortions were local, or at least temporary, and therefore redundant for theoretical purposes. But how do you assume away the perma- nent presence of a large government that directly accounts for 20-40 per cent of all economic activity and that regulates and meddles with much of the rest? And with the government always in the picture, what remains of the assump- tions of perfect competition, efficient allocation and the primacy of individual choice? Most importantly, with state officials now setting the rules and making many of the big decisions, how could one continue to talk about spontaneous equilibrium? And if the autonomy of individual 'agents' and their equilibrium are thus contaminated, what is left of the textbook reality of microeconomics?
The answer is very little. Alfred Marshall's 'representative' firm - a trans- mutation of Descartes' corps hypothe? tique - has little to do with the likes of Exxon and Microsoft, Bechtel and Pfitzer, Mitsui and Adia. Given that the latter not only operate in a highly concentrated business structure, but are also embedded in an integrated corporate-statist space, liberal economists no longer have the tools to analyse them. They cannot tell us whether the profit and capitalization of these firms belong to the micro or macro spheres, what yardstick we should use to separate these two spheres, or if such separation is possible to begin with.
Neo-Marxism
In contrast to the liberals, Marxists addressed the new power reality head on. Their rethinking of power already began with Friedrich Engels, who, by the 1890s, established himself as the unofficial patriarch of the social-democratic church with the final say on all matters theoretic. These early revisions marked the birth of neo-Marxism, a multifaceted attempt to revisit and adapt Marx to the twentieth century.
The basic rationale of neo-Marxism rested on several related observations. First, the transition from competitive to monopoly capitalism made Marx's labour theory of value impractical. The problem was not only that mono- polistic market prices were set 'arbitrarily' and independently of labour time, but also that the value of labour power itself was no longer kept at subsistence.
In fact, there emerged what anarchist Mikhail Bakunin first referred to as an 'aristocracy of labour', a relatively well-paid, 'semi-bourgeois layer of workers' (1872: 294). Engels still tried to work around this 'aristocracy in the working class', arguing that although manufacturing and unionized workers saw their income rise, these gains were the exception, and that Marx's subsis- tence law of wages was still valid (cited in Howard and King 1989: 9-10). But
48 Dilemmas of political economy
the floodgates were now open and the idea of a two-pronged labour force spread quickly, including into radical utopian literature. 2
By the early twentieth century, the existence of a labour aristocracy had become a key assumption underlying Lenin's domestic and international strategy. In his famous tract on Imperialism (1917), he announced that, unlike in Russia, in Western Europe the workers and social democratic parties had been co-opted into collaborating with the imperialists against the proletariats of the periphery, and that this development completely changed the nature of the class struggle (as we explain below). 3
Second, capitalism, argued the neo-Marxists, had been 'financialized'. The 'industrial' capital that dominated Marx's analysis had given rise to 'finance capital', a fusion of the leading banks, commercial oligopolies and leading industrialists. Contrary to its competitive precursor, finance capital applied output constraints, manipulated financial markets and forced capitalist governments into protectionism, wage controls and militarized expansion of foreign markets (Engels 1894; Hilferding 1910).
Third, the nature of capitalist crisis had changed. Marx focused on cyclical crises, which he attributed to the anarchy of inter-capitalist competition. Monopoly capitalism, by contrast, was seen as suffering from a persistent lack of markets: chronic underconsumption mirrored by chronic overproduc- tion (Engels 1886; Hilferding 1910; Sweezy 1942: Chs XII and XV).
Fourth, as a consequence of these developments, capitalists changed their attitude toward the state. In the competitive phase, they preferred a small government financed by minimal taxation and whose sole purpose was to protect their property and prevent workers from revolting. But now finance capital needed a strong state - one that would generate sufficient demand, regulate internal politics and support the export of excess capital.
Fifth and last, the combination of monopoly capitalism and a strong state undermined the original liberal idea of peaceful accumulation. During the first part of the nineteenth century, international conflict appeared to be declining. But in the second half of the nineteenth century increased struggle for colonial extension caused bellicosity and violence to soar, and in the twen- tieth century militarization and expansionism already dominated. It seemed as if capitalism inevitably culminates in imperialism.
Together, these developments engendered a fundamental rethinking of the nature of conflict in capitalism. According to Marx, the central capitalist process is a class struggle between industrial workers and capitalist owners. Their conflict is waged over the productive process; its conceptual arena is the
2 In his novel The Iron Heel (1907), Jack London describes how the capitalist oligarchy bribes the large unions into submission, eventually leading to the creation of hereditary labour castes that align with the oligarchs against the rest of the working class.
3 It is perhaps worth noting that, in discussing the peripheral proletariat, Lenin and his succes- sors tended to avoid mentioning the many millions of Soviet workers who populated the abstract gulags of simple labour.
? Deflections of power 49
factory; and its geographical epicentre is the advanced capitalist nations of Western Europe and the United States.
The neo-Marxists shifted the focus from class to state. Many now argued that, in the twentieth century, the key conflict was no longer between capital- ists and workers per se, but between the developed capitalist states of the centre and the 'dependent' countries and regions of the periphery - or, in the Stalinist version, between the United States and the Soviet Union. For communists to participate in the anti-capitalist struggle now meant to blindly obey the party line dictated by Moscow.
All in all, very little was left of Marx's original science. In the process of coming to terms with power and adjusting their politics to the changing world, neo-Marxists have had to abandon the elegance and comprehensive- ness of Marx's model. The labour theory of value, the inherent crisis tenden- cies of capitalism, the nature of the class conflict - and, indeed, the very duality of politics and economics - were all put into question.
The three fractures
Stalinism in the Soviet Union, fascism in Europe and Keynesianism in the capitalist countries forced Marxists to rethink the intertwined nature of state and capital and the growing importance of 'bureaucratization'. This rethinking was certainly influenced by the work of Max Weber and Robert Michels; but perhaps the strongest catalyst, particularly among the Trotskyites, was the self-published monograph of Bruno Rizzi (1939).
According to Rizzi, the Soviet Union represented a new social order of bureaucratic collectivism. It was a different mode of production, one whose class structure and relations of production set it apart from both capitalism and socialism. Although this mode of production was for the time being unique to the Soviet Union and the fascist countries, its essential bureaucratic elements were already apparent - if only embryonically - in the capitalism of the New Deal. The famous works of James Burnham (1941), Milovan Djilas (1957), Max Shachtman (1962) and John Kenneth Galbraith (1967) repro- duced Rizzi's argument in different forms.
Bureaucratization melted the traditional definitions of politics and economics. This ambiguity, amplified by the chaos and confusion of the 1930s and 1940s, led Marxists to draw different (and often diametrically opposed) conclusions about the changing nature of capitalism.
On one side were those who emphasized the 'politicization' of capitalism (as if capitalism can be anything but political). The extreme position, held by Friedrich Pollock of the Frankfurt school, was that economics in fact had come to an end. Private capitalism, he argued, was being replaced by 'state capitalism', whether democratic or totalitarian. This new order 'signifies the transition from a predominately economic to an essentially political era', an era in which the will to political power supersedes the profit motive. And since according to Pollock there are no 'economic laws' to prevent this new
50 Dilemmas of political economy
state capitalism from taking hold, it follows that 'economics as a social subject has lost its object' (Pollock 1941: 78, 86-87).
An opposite perspective was offered by Pollock's colleague, Franz Neumann. In his classic study of National Socialism, Behemoth (1944), Neumann argued that fascism was neither a post-capitalist nor a post- economic phenomenon, but rather an extreme form of capitalist dictatorship. What Pollock mistakenly referred to as 'state capitalism' was in fact 'totali- tarian monopoly capitalism', an economic order in which the large capitalist organizations subjugate state organs to their own ends.
The wide gulf between these opposing interpretations signalled the end of universal Marxism. With no agreement on what constituted 'economy' and 'state', there could be no agreement on the source of value; and without a theory of value, Marxism lost its unifying basis.
The neo-Marxism that emerged from this breakdown was therefore neces- sarily fractured. It sometimes offered penetrating insights, but these insights were inherently partial and disjoined. Over time, the fracture developed into three distinct theoretical strands: (1) an attempt to rework Marxian economics; (2) a cultural critique of capitalism; and (3) a new theory of the capitalist state. We deal with each of them in turn.
Neo-Marxian economics: monopoly capital
The key hallmark of neo-Marxian economics is the explicit incorporation of power into 'economics' proper. This incorporation opens up new theoretical and empirical horizons, but it is also costly: it requires the abandonment, explicit or implicit, of the labour theory of value.
Kalecki's degree of monopoly
The post-war revitalization of Marxian economics owes much to the pioneering work of Michal Kalecki. Writing during the 1930s and 1940s, when much of Marxian economics was still stifled by Leninist-Stalinist dogma, Kalecki was breaking new ground on several fronts. He offered a triple theoretical synthesis, one that integrated Marxist class analysis, the new literature on oligopoly and big business and the aggregate view of Keynesianism. 4 He was also one of the first Marxists to incorporate into his research new mathematical and statistical techniques that were only begin- ning to make their way into mainstream economics.
In his articles from 1939 to 1943, collected posthumously in his Selected Essays on the Dynamics of the Capitalist Economy, 1933-1970 (1971), Kalecki identified what he called the 'degree of monopoly': a quantitative proxy for economic power whose effect is registered on the profit markup. By extending
4 In fact, several of Kalecki's writings, published in Polish during the early 1930s, anticipated the essential argument of Keynes' General Theory (see Kalecki 1971: vii).
? Deflections of power 51
this notion to the economy as a whole, Kalecki showed how changes in the structure of power are linked to the class distribution of income - and from there to broad patterns of consumption, investment, the business cycle and economic policy.
From surplus value to economic surplus
Kalecki's work had a significant influence on the Monopoly Capital school affiliated with the New York-based journal Monthly Review. 5 Capitalism, the theorists of this school claimed, had moved from a competitive to a monopo- listic footing, and that qualitative transition annulled Marx's capitalist laws of motion. Since power now varied across firms/sectors and changed over time, there was no longer a tendency for rates of profits to equalize, no longer a tendency for market prices to be proportional to labour values, and no longer a tendency for surplus value to be equal to profit. 6
Instead of Marx's surplus value, Baran and Sweezy proposed a new cate- gory: the economic surplus (Baran 1957; Baran and Sweezy 1966). 7 The two concepts differ markedly.
First, whereas surplus value is denominated in terms of abstract labour time, the economic surplus is counted directly in prices. Second, the two concepts have very different boundaries. The limit of surplus value is given by subtracting from maximum efficient production the subsistence wage of productive workers. In comparison, the notion of economic surplus is both broader and looser in that it also incorporates bygone production - due to inefficiency, unutilized capacity and wasteful spending. Finally, the two magnitudes have different determinants. Surplus value is created in the productive sphere, subject to Marx's tendency of the falling rate of profit. The economic surplus, by contrast, is affected by both production and demand and has a tendency to rise.
Realization and institutionalized waste
The tendency of the economic surplus to rise, though, is only latent and has to be 'realized'. On the one hand, the power of big business and its oligopolisitic interdependencies create an upward price bias: they make prices
5 Key contributions to this school include Josef Steindl (1952), Shigeto Tsuru (1956), Paul Baran (1957), Paul Baran and Paul Sweezy (1966), Harry Magdoff (1969) and Harry Braverman (1975).
6 This conclusion, Sweezy (1974) would later argue, did not invalidate the existence of labour values. It merely asserted that labour values are modified under monopoly capital and that this modification called for a new Marxist theory of capitalist development. As we shall see in Chapters 6-8, the problem with this solution is that labour values are impossible quite independent of monopoly power, and that impossibility leaves nothing to 'modify'.
7 There are in fact not one but three theoretical versions of the economic surplus - planned, potential and actual - along with a fourth, 'practical' measure that Baran and Sweezy use in their empirical estimates in Monopoly Capital (1966). In this paragraph, we deal with the features common to all versions.
? 52 Dilemmas of political economy
move up or sideways, but rarely down. On the other hand, large-scale produc- tion helps cut costs faster than ever. As a result of this divergence, profit margins tend to widen - but this widening is merely the first step. In order for the surplus to actually increase (be 'realized'), it has to be 'absorbed' into or 'offset' by profitable spending outlets. And here lies the problem.
In competitive capitalism firms are compelled to constantly invest lest they perish, which means that realization is rarely a lasting problem. Not so in monopoly capitalism. As large firms add new capacity, eventually the addi- tions begin to lower their rate of return on existing assets. Investment, there- fore, continues only as long as it is expected to boost average returns. The problem is masked during periods of 'epoch-making innovations' that amplify obsolescence on the one hand and propel profit expectations on the other, and in so doing fuel an investment-led boom. But in the absence of such innovations, Baran and Sweezy argued, monopoly capitalism requires wasteful expenditures - wasteful in the sense that they absorb more surplus that they create. 8 This waste can be generated, among other things, by a systemic sales effort, by the erection of a financial superstructure, and partic- ularly by military spending. Without such institutionalized waste, the rising tendency of the surplus manifests itself as chronic stagnation.
The limits of neo-Marxian economics
The explicit emphasis on power thus helped provide an alternative, neo- Marxian framework. It allowed the theorists of Monopoly Capital to chart the path of American capitalism in the second half of the twentieth century and shed light onto similar processes in other capitalist countries. During the 1950s and 1960s, their framework seemed consistent with the dominance of big business and government regulation, with high military spending and the aggressive posture of US neo-colonialism, and with the long economic boom and the apparent disappearance of economic crisis (Sweezy 1972).
Needless to say, classical Marxists didn't like this new theoretical trajec- tory. They criticized the neo-Marxian concepts as imprecise, subjective and - ultimately - 'non-Marxist'. Their critiques began to resonate during the 1970s and 1980s. Despite the persistence of massive institutionalized waste, the long boom had ended and profits margins declined. Growth had given rise to stag- flation, the global economy had opened up and international competition intensified. The models of Monopoly Capital and Military Keynesianism no longer seemed very persuasive. 9
8 Baran and Sweezy noted their indebtedness to Thorstein Veblen, who was probably the first to identify the role of institutionalized waste in the new order of business enterprise.
9 For critiques of Monopoly Capital, under-consumption theories and 'Military Keynes- ianism', see for instance Bleaney (1976), Shaikh (1978) and Weeks (1981: 149-69). For an attempt to reconcile Monopoly Capital with the classical (or 'fundamentalist') position, see Sherman (1985).
? Deflections of power 53
The classical Marxists, though, haven't offered a new alternative to Monopoly Capital and instead have called for a 'return to Marx'. The trans- formation from competitive to monopoly capitalism - if it ever happened - was merely a historical blip, they have argued, and the tendencies for crisis and for the rate of profit to fall remain intact. Consequently, the way forward is not to dilute Marxism with subjective concepts, but rather to re-examine and sharpen Marx's objective analysis.
This solution is unsatisfactory. To go back to Marx's original framework is to retain its conceptual problems, and that leaves us pretty much right where we started. It is true that the key contribution of the neo-Marxists - the explicit introduction of power into economics - is problematic. But the problem is not that neo-Marxists went too far. It is rather that they did not go far enough. They introduced power - yet retained the assumptions that power makes logically impossible. Specifically, they maintained the formal bifurca- tion between politics and economics, they kept the division between produc- tion and finance, and, most importantly, they continued to treat capital as a productive/economic entity.
The net result is a theoretical void. The neo-Marxists have abandoned Marx's labour theory of value, at least as a practical guide for understanding the pecuniary dynamics of capitalism. But to this day they haven't replaced it with a different theory of value.
The culturalists: from criticism to postism
During the 1930s, orthodox Marxism came under a parallel cultural attack. The disappointment with Stalinism, the apparent triumph of Nazism and the authoritarian nature of capitalist mass culture all pointed to the limits of 'materialist' analysis. At stake now was the very method of Marxist inquiry, and the first to systematically re-examine this method were the writers of the Frankfurt School. 10
Although deeply revolutionary in aim, these writers took Marx's assump- tions and methods merely as a starting point that must be re-examined - and, if need be, discarded. They challenged positivism and scientism - including their penetration into Marxism - and re-examined the meaning of what constitutes truth. Following Marx, they argued that theory - both social and natural - is part of the very constitution of society and therefore cannot be seen as something that stands entirely 'outside' of society. At the same time, and perhaps contradictorily, they also insisted on the autonomy of theory.
10 Originally founded in 1923 as the Institute for Social Research in Frankfurt University, the Frankfurt School later came to indicate a general approach rather than a physical location. The first-generation founders of the Frankfurt School included Friedrich Pollock, Max Horkheimer, Theodor Adorno, Walter Benjamin, Herbert Marcuse, Erich Fromm and Franz Neuman.
? 54 Dilemmas of political economy
In particular, they warned against the subjugation of theory to the alleged interests of the proletariat and the dictates of the Communist Party.
The early writings of the Frankfurt School spawned a radical literature that questioned the 'reified' nature of the economy, if not its very existence, and that focused instead on the oppressive cultural powers of capitalism. Initially, these questions were addressed as part of a re-examination of the young Hegel, the young Marx, Lucka? cs and Gramsci. But since the 1970s, the inquiry drifted in an entirely different direction, situated somewhere between Foucault and Derrida.
This new fashion, originally nourished in France and California, is often based on the cynical plagiarism of Marx, Hegel and particularly Marcuse, usually in the guise of original radical thought. The adherents of this fashion pretend to offer an anti- or postmodern examination of capitalism. But unlike the early critical theory of the Frankfurt School, the posture of this literature is largely anti-socialist, and its methods derive, often directly and consciously, from the intellectual depths of Nazism. 11
Although ground-breaking in its insight into the cultural dimensions of capitalism, the critical theory of the Frankfurt School had one glaring defi- ciency: it had given up on the 'economy'. Since the economic laws that Marx identified were supposedly 'politicized' and therefore annulled as an 'objec- tive' force, and since the very possibility of objective social facts was put into question, there was really little that critical theory could say on the systematic patterns of capital accumulation.
This original bias has been amplified many times over by the postists. The latter have been only too happy to abandon the systematic study of capitalist reality altogether and instead delve into the deconstruction of post-structur- alism, identity, race and gender. 12 The capitalists, for their part, have been keen on subsidizing this promising line of 'critical research'. And why wouldn't they? The investment carries hefty dividends.
As capitalism spread throughout the world and the rule of capital grew into a truly universal force, so did their potential negation. This negation is the counterforce that the young Hegel was perhaps the first to write about, if only opaquely: the possibility of democratic opposition, of democratic sharing, of democratically planning the good life. For capitalism to remain dominant, this potential negation had to be fractured, ridiculed and defused. And the best way to achieve these ends was to make capital itself invisible.
By spreading ignorance, the postists have helped keep the central power relations of capitalism unknown and therefore difficult to oppose. And with the intellectuals neutralized and the laity stupified, there has been little to prevent the wholesale spread of capitalism. Since the 1970s, the public autonomy of the welfare state, limited as it was to begin with, has been signifi-
11 For a scathing critique of this anti-philosophy, see Castoriadis (1991a).
12 For a critical survey of this transition, see Eagleton (2003).
? Deflections of power 55
cantly diminished. Large chunks of the public domain have been privatized and handed over to the capitalists. And oppressive regimes around the world have been legitimized in the name of 'cultural pluralism' and 'post colonialism'.
Statism
The third fracture of neo-Marxism focuses on the state. The need for such a focus became evident early in the twentieth century. It was clear that a new statist reality, totally unknown to Marx and his contemporaries, had emerged. First, the state not only grew to unpredicted proportions, it also became deeply integrated with - indeed, seemingly embedded in - the capi- talist process. Second, the scale of military conflict had changed, with war becoming both total and global. And third, war seemed to have become endemic and permanent - whether in the guise of an arms race between the superpowers, local ethnic conflicts, civil wars, wars of culture or clashes of civilization.
Neo-Marxists, of course, were not the only ones to grapple with this new reality. In the twentieth century, we could speak of three basic ideologies of power, all focused more loosely or more tightly on the state. One ideology is the techno-bureaucratic state associated with Comtean positivism, Weberian institutionalism and twentieth-century managerialism. A second speaks of an autonomous state that allegedly seeks power for its own sake. And a third, dealing with the capitalist state, criticizes and complements neo-Marxist economism.
Although these three ideologies have had different beginnings and purposes, their progressive academization has drawn them closer together - so close, in fact, that it is often difficult to differentiate their methodologies and sometimes even their conclusions. All three views - with the possible exception of some Marxist variants - tend to see the state as the centre of social power and the dominant force in human history. Some go even further to consider the state as the 'unity' or 'totality' that contains and shapes its inner economic and social components. And whatever their inclination, all seems to agree that, by the twentieth century, the state - regardless of its origins - had become the key force in domestic and international developments.
Given these overlaps, it seems useful to broaden the vista here beyond the Marxist analysis of the capitalist state and to consider, if only cursorily, also the mainstream approaches to the techno-bureaucratic and autonomous state.
The techno-bureaucratic state
During the Cold War, the debate was dominated by technological deter- minism. Key contributors such as Ralf Dahrendorf (1959), John Kenneth Galbraith (1967) and Daniel Bell (1973), although starting from different
56 Dilemmas of political economy
perspectives and using distinct terminologies, all speak of technological- bureaucratic imperatives. Modern societies, they argue, require massive research and development, complex planning and social stability, and there- fore necessitate giant organizations and intricate bureaucracies.
During the nineteenth century, these requirements were only beginning to take shape and hence were easy to misunderstand. What political economists mistakenly referred to as 'capitalism' was in fact the unorganized precursor of a coming industrial - and, eventually, post-industrial - order. By the early twentieth century, the unplanned market system was beginning to wither, together with the class conflicts and social struggles that socialists errone- ously considered inherent. The capitalists and bankers were demoted, replaced by managers and technocrats.
The move from anarchic market coordination to industrial and post- industrial society, went the argument, necessarily gives rise to bureaucratic statism, a system ruled by rationality and governed by technostructures. In the words of Daniel Bell:
If the dominant figures of the past hundred years have been the entrepre- neur, the businessman, and the industrial executive, the 'new men' are the scientists, the mathematicians, the economists, and the engineers of the new intellectual technology. . . . In the post-industrial society, produc- tion and business decisions will be subordinated to, or will derive from, other forces in society; the crucial decisions regarding the growth of the economy and its balance will come from government, but they will be based on the government's sponsorship of research and development, of cost-effectiveness and cost-benefit analysis; the making of decisions, because of the intricately linked nature of their consequences, will have an increasingly technical nature.
(Bell 1973: 344)
From this post-capitalist perspective, power can no longer be seen as possessed by private owners. Even social democrats such as Ralf Dahrendorf and radicals like Charles Wright Mills succumbed to Weberianism, seeking to replace an analysis of class division with a broader theory of statist-bureau- cratic power.
According to Mills (1956), the class-based approach of Marxism had become insufficient; specifically, it was unable to explain the apparent ascent of governmental-military organizations in the post-war United States. Mills' own solution, partly influenced by the managerialism of James Burnham and the institutionalism of Thorstein Veblen, was to abandon the notion of a capi- talist ruling class in favour of three-way power structure. There are three basic scarcities, he argued - a scarcity of power, a scarcity of wealth and a scarcity of prestige - to which there corresponds a tripartite 'power elite'. Each segment of this elite leverages its power through the effective control of key organizations and institutions:
Deflections of power 57
. . . the elite are not simply those who have the most, for they could not 'have the most' were it not for their positions in the great institutions. For such institutions are the necessary bases of power, of wealth, and of pres- tige, and at the same time, the chief means of exercising power, of acquiring wealth, and of cashing in the higher claims for prestige. By the powerful we mean, of course, those who are able to realize their will, even if others resist it. No one, accordingly, can be truly powerful unless he has access to the command of major institutions, for it is over these insti- tutional means of power that the truly powerful are, in the first instance, powerful. Higher politicians and key officials of government command such institutional power; so do admirals and generals, and so do the major owners and executives of the larger corporations.
(Mills 1956: 9)
This view provided fertile ground for empirical research, primarily by soci- ologists, such as William Domhoff, who have laboured to meticulously docu- ment the structure and behaviour of the power elite, the operational arm of the 'higher circles' (see for example Domhoff 1967, with four subsequent editions, the latest of which was issued in 2005; earlier editions include 1970 and 1979). 13
The techno-bureaucratic approach, however, still treats the state (or the overlapping networks of power in Mann's formulation) mostly as an arena, a framework that organizes and governs society. This perspective started to change during the 1970s, with new studies that emphasized the state as an autonomous institution and a personated actor.
The autonomous state
The instrumental and class-based approaches, some writers now argued, serve to conceal the true nature of the state. The state, they maintained, is not a capitalist means or a social instrument. Rather, it is an actor that stands in its own right, having its own logic and, indeed, its own interests.
The conceptual framework of this view contains three basic entities: (1) the state, (2) economic resources, and (3) an amorphous collection of individuals
13 An outlier of the techno-bureaucratic approach is Michael Mann's work on The Source of Social Power (1986; 1993). Mann rejects the notion of a 'unitary totality'. Society, he argues, is not a well-defined system that can be divided into subsystems such as state, culture and economy, or a clearly bounded entity that has dimensions, levels and factors. Instead, he offers to think of societies and their histories as an overlapping network of inter- actions between four sources of social power: ideological, economic, military and political. The focus of his inquiry, though, is still Weberian. His concern is the organizational means associated with each source of power, and how these develop and change in relation to each other. Earlier in history, he says, political and sometimes military means were primary, whereas in recent times economic power, along with its 'class' relations, has become paramount.
? 58 Dilemmas of political economy
and groups, called society. In this structure, the state holds a unique position: it monopolizes the organized means of violence. The state mobilizes economic groups - be they industrialists, merchants, rentiers, or farmers - in order to obtain economic resources. And it then uses these resources to organize and control its society, as well as to fight and defend itself against other states.
This view is evident in the historical account of Charles Tilly (1975; 1992). The origin of the autonomous state, he argues, goes back to the twilight of feudalism in the second millennium AD. The state was invented not by the bourgeoisie to serve capital accumulation, but by political elites who sought to consolidate their power. The key purpose of the state - from its princely feudal beginnings, through its absolutist and monarchic phase, to its present national form - has been twofold: to organize and finance increasingly expen- sive wars and to discipline tax payers. Capitalism from this viewpoint is merely the economic means that supplies the military and strengthens the state apparatus.
A similar history is told by Theda Skocpol (1979; 1985), who argues that the European and American revolutions were the result not of class struggles but of political weakness in the face of inter-state conflicts. Her argument, although rich in historical detail, boils down to fiscal-organizational deter- minism. The anciens re? gimes, she notes, were burdened by excessive and inef- ficient taxation that strained their access to material resources and limited their ability to finance organized violence; therefore, they were replaced by more rational states with streamlined tax structures and superior war-making capabilities.
In the final analysis, then, history is the cunning of the state. The liberal and Marxist theses, according to which the state serves its citizens, the bour- geoisie, or capital accumulation more generally, are mere fantasies. The state develops in its own right and for its own sake. It inevitably grows and central- izes. It is driven not by an external economic determinism, but by its own statist determinism.
The capitalist state
Marxists began to re-evaluate the role of the state in capitalism around the same time as the 'autonomists'. 14 The post-war era brought new develop- ments - from the ascent of social democratic parties in Europe, through the student movements, to the rise and demise of Keynesianism - and these developments called for new explanations. It was no longer possible to treat the state as a simple extension of the 'capitalist interest'. The state had clear limitations, it had a concrete history, and it was being heavily dissected by competing bourgeois theorists. It was time for Marxists to re-examine their own views.
14 For critical reviews of Marxist state theory, see Holloway and Picciotto (1978b), Block (1987), Jessop (1990; 2002), Clarke (1991), Mann et al. (2001-2) and Anievas et al. (2007).
? The state imperative
Beyond their many disagreements, all Marxists seem to accept that capitalism requires a state for four main reasons. First, the state helps prevent the inher- ently conflictual nature of capitalist production from becoming overtly politi- cized. The capitalist class, argues Gerald Cohen (1978), has 'power' over every worker, but the 'right' over none. It has the systemic ability to act in its own interest, but it lacks the normative, moral and legal sanction that makes such action acceptable. This sanction is provided by the state. Second, the state can help counteract the anarchic, crisis-prone nature of capitalism. Whether the tendency for crisis comes from production or realization, history suggests that the state is able, within limits, to mitigate it (Miller 1987). Third, the state serves to absorb, temporarily or permanently, the bloating social cost of accumulation (O'Connor 1973). Fourth and finally, at the global level, the state system mediates the conflicting and mutual interests of capitalists as well as their relation with non-capitalist entities, although the precise nature of this mediation as well as its logical necessity remain heatedly debated (Mann et al. 2001-2; Callinicos 2007).
Marxist state theorists further agree that the state needs to be sufficiently separate from capital. This is the common point of departure. The debate is over the precise nature and extent of this separation, and here there seem to be two distinct views. The first, 'flat' approach is to treat capital and state as belonging to two interdependent yet distinct spheres - economics and politics - and to consider each sphere as having a separate and equally significant logic. The other, 'hierarchical' approach is to consider the logic of capital as primary, and then derive the state from the broader imperatives and contra- dictions of accumulation.
The flat approach
The flat approach underlies the famous debate between Ralph Miliband and Nicos Poulantzas over the 'autonomy of the state'. 15 The two begin from seemingly different assumptions. Miliband considers the state as an instru- ment of the capitalist class, whereas Poulantzas sees it as rooted in the objec- tive structure of capitalism. Yet both cast their argument in purely political terms. This exclusively political language can be traced back to Friedrich Pollock's 'end of economics' - and, indeed, references to the autonomy of the state have been criticized as neo-Ricardian. The neo-Ricardians have rejected Marx's labour theory of value along with his laws of motion. And since this rejection eliminates economic inevitability (at least in the immediate term), the state is left economically indeterminate (at least for the time being). 16
15 See Miliband (1969; 1970; 1973) and Poulantzas (1969; 1973; 1975).
16 A neo-Ricardian critique of Marx's analysis of production is given in Gough (1972), and its
implications for the state are articulated in Gough (1975). For counterarguments, see Fine and Harris (1976b; 1976a) and Holloway and Picciotto (1978a).
Deflections of power 59
? 60 Dilemmas of political economy
For Miliband, economic indeterminacy means that the state can serve the immediately observed interests of the capitalists, whatever they may happen to be.
Most nineteenth-century political economists - as well as their chief critic, Karl Marx - had little or no knowledge of the macro facts. There is little wonder that their discussion of surplus and capital was largely theoretical. And, at the time, few theorists thought something was missing. The very idea of 'testing' social theory with empirical evidence was not even on the radar screen.
In this social context, the notion that capital was a purely economic cate- gory hardly seemed problematic. With economics considered separable from politics, with aggregate concepts yet to be invented and diffused, and with the basic social data still to be created, it was possible to believe that capital was an objectively defined economic entity with a readily measurable quantity. There was really nothing to contest that belief.
12 The first attempts to collate aggregate economic statistics were made in the 1660s, by William Petty in England. These attempts were motivated by the need to assess the material strength and taxable capacity of England versus France and Holland. Subsequent attempts introduced additional innovations, including time series (Gregory King in England, 1696); input-output matrices (Franc? ois Quesnay in France, 1764); estimates based on production data rather than fiscal sources (Arthur Young in England, 1770); value added (Antoine Lavoisier in France, 1784); income distribution (Henry Beeke in England, 1799); national aggregates (Patrick Colquhoun in England, 1814); constant price estimates (Joseph Lowe in England, 1822); national debt burden (Pablo de Pebrer in England, 1831); rudimentary national income and product account broken down by industry and state (George Tucker in the United States, 1840); and gross versus net income (Alfred Marshall in England, 1879). But whereas the inventions were long in coming, their implementation was slow and limited. It was only in the 1920s, and particularly with the 'aggregate revolution' of the 1930s, that these individual initiatives started to be organized, institutionalized and system- atically estimated by national statistical services (the signposts in this footnote are taken from the detailed history of Kendrick 1970).
? 42 Dilemmas of political economy
Enter power
The turning point came at the end of the nineteenth century. Recall that clas- sical political economy differed from all prior myths of society in that it was the first to substitute secular for religious force. But note also that this secular notion of force was similar to its religious predecessor in that it was still heter- onomous. It was external to society. For the political economist, economic forces were as objective as natural laws. They were determined for human beings, not by human beings.
This external perception of force began to crack during the second half of the nineteenth century. More and more processes seemed to deviate from the automaticity implied by the natural laws of economics. Increasingly, force was subjectified by society, seen as determined for human beings, by human beings. Challenged and negated, heteronomous force gradually re-emerged as autonomous power.
The change in perception was affected by several important developments. First, the rise of large governments and big business undermined the New- tonian logic of competitive markets and political equilibrium. At the turn of the twentieth century, it was already clear that the guiding hand of the market was not always invisible and that liberal politics was far from equal. Power now was much more than a theoretical addendum needed simply to 'close' an otherwise incomplete economic model; it was an overwhelming historical reality, one that seemed to define the very nature of capitalism. This recogni- tion cast further doubt on the possibility of purely economic categories.
Second, the emergence of the aggregate view of the economy, the develop- ment of national accounting and the requirements of statistical estimates revealed serious difficulties with the measurement of capital. For the first time, political economists had to put the concepts of utility and abstract labour into statistical practice, and the result was disastrous.
According to received doctrine, the 'real' quantity of capital is denomi- nated in units of utility or abstract labour. But there is a caveat. As we shall see later in the book, such measurements are meaningful, if at all, only under conditions of perfectly competitive equilibrium. This qualification creates a bit of a headache since, by definition, perfectly competitive equilibrium evap- orates when infected by power. And given that even orthodox economists now agree that power is everywhere (if only as a 'distortion'), it follows that the theoretical units of 'real' capital are meaningless and that their practical measures break down. In fact, it turns out that even when we assume perfectly competitive equilibrium it is still logically impossible to observe and measure the utility or abstract labour contents of capital. And so, by attempting to measure the so-called 'real' quantity of capital, economists ended up exposing it for what it was: a fiction hanging by the threads of impossible assumptions and contradictory logic.
Third, and more broadly, the new reality of the twentieth century didn't quite fit the traditional way in which liberals and Marxists separated
Power 43
economics from politics. There was a massive rise in the purchasing power of workers in the capitalist countries, an uptrend that contradicted the cyclical patterns suggested by Malthus, Ricardo and Marx, and that therefore blurred their basic notion of 'subsistence'. Many types of labour became complex and skilled, rather than one-dimensional and simple as Marx had anticipated - a development that made the notion of 'abstract labour' difficult if not impos- sible to apply. And in contrast to the expectations of many radicals, profit cycles failed to implode capitalism, while the profit rate - although oscillating - trended sideway rather than down. Culture, media and consumerism became no less crucial for accumulation than production was. Inflation supplemented cost cutting as a key mechanism of redistribution, while finance took over the factory floor as the locus of power. Emerging categories of technology, corporate planning and public management could not easily be classified as either economic or political. It became increasingly clear that free competition and bourgeois ownership were insufficient, even as a starting point, to explain the nature and development of modern capitalism.
The very notion of class became contested. As an analytical tool, class originally emerged from a triple fusion of Ricardo's theory of labour value, Comte's industrial management and Marx's capital accumulation. The emphasis of class analysis on capitalists and workers was unmediated and obvious; it was materially embedded, ideologically accepted and legally enforced; and until the late nineteenth century it served both the liberal main- stream and its Marxist critiques.
But by the early twentieth century, the vision of class analysis had become blurred. Although still linked in some sense to material reality, class was now increasingly intertwined with political organizations and parties, culture, mass psychology and sociology. It was no longer immediate or obvious. It required subtle articulation. It became a speculative concept.
Worse still, class was now competing with new concepts, particularly the 'masses'. The twentieth century brought fascism, a new regime that rejected the Enlightenment, cast off rationalism and shifted the entire ideological emphasis of social theory. Instead of production, fascism accentuated power; in lieu of class, it spoke of state, organization and oligarchy. Following fascism, social scientists began to emphasize a new set of categories - 'mass', 'crowd', 'bureaucracy', 'elite' and, eventually, the 'system' - categories that appeared more flexible and better suited to the changing times than the rigid and anachronistic class demarcations of political economy.
Fourth and finally, the objective-mechanical cosmology of the Newtonian and liberal revolutions started to fracture. In its stead came an indecisive worldview of uncertainty, risk and probability, of relative time/space, of an unsettling entanglement of particles and of a rather hazy separation between observer and reality. These developments have been used to justify further movements away from the scientific-universal principles of political economy. Vitalism, ethnic identity and racism have all flourished in the name of cultural pluralism. Anti-scientists have challenged the so-called
44 Dilemmas of political economy
binary 'essentialism' of 'Eurocentrism'. Lord Bacon was dead. Ignorance has become strength.
Suddenly, power was everywhere, and it contaminated everything. The anonymous market, measurable capital and class have all become suspect. The old categories seemed to be melting, along with the determinism that held them together. Political economy had entered a new, uncharted territory.
4 Deflections of power
'Why don't you make everyone an Alpha Double Plus while you're about it? ' asks the Savage. 'Because we have no wish to have our throats cut', answers Mustapha Mond, the Resident World Controller for Western Europe.
--Aldous Huxley, Brave New World
The new realities of power posed a dilemma for twentieth-century political economists. There were two options, both unpalatable: ignore reality in order to protect the theoretical duality of politics and economics, or sacrifice the theoretical duality in order to better deal with reality. In general, mainstream theorists have taken the first path, trying to keep power out of their analysis. The result: a shrinking domain of admissible questions complemented by a widening range of ad hoc explanations. Marxists have tended to move in the opposite direction, seeking to incorporate power into their theories. But as they opened up their models, what they gained in practical insight and political expediency they lost in scientific cohesion, consistency and accuracy. Their explanations, although often illuminating and politically purposeful, served to fracture Marx's theoretical framework and undermine its original unity.
And so, in the end, power got deflected. Most theorists ignore it, and even the few who address it keep it safely outside the concept that matters most: capital itself. The reason isn't difficult to see. To put power in capital means the end of determinism and the beginning of autonomy. It undermines the foundations of existing models. It calls for a fundamental rethinking of polit- ical economy. To paraphrase Huxley, it is like opening a Pandora's Box in a Cyprian colony of Alpha Double Plus theorists. And since nobody likes having their theoretical throat cut, it is much safer to leave the matter locked in the box.
The purpose of this chapter is to highlight these deflections of power and assess their consequences for the development of political economy. This emphasis implies two important biases. First, our concern here is not the evolution of modern political economy as such, but how this evolution has been shaped in relation to power. Consequently, we make no attempt to be
46 Dilemmas of political economy
comprehensive. Since our aim is conceptual, we focus on seminal contribu- tions and important turning points, at the obvious expense of secondary sources and subsequent variations. Second, since liberal analyses tend to avoid power while Marxist theories to endorse it, we naturally pay more attention to the latter than the former.
Liberal withdrawal and concessions
Liberal theorists, being increasingly on the defensive, have generally opted for the first choice: protecting the duality by sidestepping reality. Toward the end of the nineteenth century, their fighting spirit withered and eventually mutated into neoclassical apologetics. By the beginning of the twentieth century, they began a mass retreat into the make-believe world of perfectly competitive equilibrium, a heavily subsidized twilight zone in which power could be safely ignored. They zealously excluded from their pure economic framework the capitalist state, wars, large corporations, classes, collective action, ideology and every other power process, organization and institution that could not easily be reduced to the atomistic logic of utility maximization. They ended up with a very narrow domain populated by fictitious 'actors', all small, rational and powerless. In this imaginary world, laissez faire interac- tions continued to yield an optimal utilitarian equilibrium, as the theory dictated. 1
The global crisis of the 1930s forced liberals to make a major concession. Following John Maynard Keynes' General Theory (1936), they conceded that in fact there was not one, but two economic realities: a competitive microeco- nomic sphere where the interaction of atomistic consumers and producers generates the efficient outcome stipulated by neoclassical manuals; and another macroeconomic realm that unfortunately produces occasional market failures. The first reality works exactly as it should and therefore must be kept free of political intervention. But the second reality has a built-in imperfection and sometimes needs the oversight of governments. Power,
1 After the Second World War, neoclassicists embarked on a counter-revolution that other social scientists decried as 'economic imperialism'. This intellectual imperialism, which emanated mostly from the Chicago School, argues that, no matter what you do, you simply can't beat the market. According to this view, distortions of 'perfect competition', such as oligopoly and labour unions, are more apparent than real, and those that do exist are politically motivated and therefore reversible. Furthermore, many so-called non-economic phenomena - from marriage, through unemployment, to war - are in fact based on utili- tarian decisions and therefore reducible to 'economic' reasoning (Stigler 1988: Ch. 10, 'The Chicago School'). In parallel, neoclassical economists have tried to hide the dogma's under- lying assumptions by developing models that presumably do not need such assumptions (see for example Arnsperger and Varoufakis 2005). Of course, these deviations are mostly lip service. If they were ever to become the rule, the dogma would become logically subversive and hence ideologically useless.
? Deflections of power 47
although merely 'political', was thus brought into economics through the back door.
Few liberals care to admit it, but this introduction of power has thrown their economics into disarray. Previously, neoclassicists could pretend that extra-economic distortions were local, or at least temporary, and therefore redundant for theoretical purposes. But how do you assume away the perma- nent presence of a large government that directly accounts for 20-40 per cent of all economic activity and that regulates and meddles with much of the rest? And with the government always in the picture, what remains of the assump- tions of perfect competition, efficient allocation and the primacy of individual choice? Most importantly, with state officials now setting the rules and making many of the big decisions, how could one continue to talk about spontaneous equilibrium? And if the autonomy of individual 'agents' and their equilibrium are thus contaminated, what is left of the textbook reality of microeconomics?
The answer is very little. Alfred Marshall's 'representative' firm - a trans- mutation of Descartes' corps hypothe? tique - has little to do with the likes of Exxon and Microsoft, Bechtel and Pfitzer, Mitsui and Adia. Given that the latter not only operate in a highly concentrated business structure, but are also embedded in an integrated corporate-statist space, liberal economists no longer have the tools to analyse them. They cannot tell us whether the profit and capitalization of these firms belong to the micro or macro spheres, what yardstick we should use to separate these two spheres, or if such separation is possible to begin with.
Neo-Marxism
In contrast to the liberals, Marxists addressed the new power reality head on. Their rethinking of power already began with Friedrich Engels, who, by the 1890s, established himself as the unofficial patriarch of the social-democratic church with the final say on all matters theoretic. These early revisions marked the birth of neo-Marxism, a multifaceted attempt to revisit and adapt Marx to the twentieth century.
The basic rationale of neo-Marxism rested on several related observations. First, the transition from competitive to monopoly capitalism made Marx's labour theory of value impractical. The problem was not only that mono- polistic market prices were set 'arbitrarily' and independently of labour time, but also that the value of labour power itself was no longer kept at subsistence.
In fact, there emerged what anarchist Mikhail Bakunin first referred to as an 'aristocracy of labour', a relatively well-paid, 'semi-bourgeois layer of workers' (1872: 294). Engels still tried to work around this 'aristocracy in the working class', arguing that although manufacturing and unionized workers saw their income rise, these gains were the exception, and that Marx's subsis- tence law of wages was still valid (cited in Howard and King 1989: 9-10). But
48 Dilemmas of political economy
the floodgates were now open and the idea of a two-pronged labour force spread quickly, including into radical utopian literature. 2
By the early twentieth century, the existence of a labour aristocracy had become a key assumption underlying Lenin's domestic and international strategy. In his famous tract on Imperialism (1917), he announced that, unlike in Russia, in Western Europe the workers and social democratic parties had been co-opted into collaborating with the imperialists against the proletariats of the periphery, and that this development completely changed the nature of the class struggle (as we explain below). 3
Second, capitalism, argued the neo-Marxists, had been 'financialized'. The 'industrial' capital that dominated Marx's analysis had given rise to 'finance capital', a fusion of the leading banks, commercial oligopolies and leading industrialists. Contrary to its competitive precursor, finance capital applied output constraints, manipulated financial markets and forced capitalist governments into protectionism, wage controls and militarized expansion of foreign markets (Engels 1894; Hilferding 1910).
Third, the nature of capitalist crisis had changed. Marx focused on cyclical crises, which he attributed to the anarchy of inter-capitalist competition. Monopoly capitalism, by contrast, was seen as suffering from a persistent lack of markets: chronic underconsumption mirrored by chronic overproduc- tion (Engels 1886; Hilferding 1910; Sweezy 1942: Chs XII and XV).
Fourth, as a consequence of these developments, capitalists changed their attitude toward the state. In the competitive phase, they preferred a small government financed by minimal taxation and whose sole purpose was to protect their property and prevent workers from revolting. But now finance capital needed a strong state - one that would generate sufficient demand, regulate internal politics and support the export of excess capital.
Fifth and last, the combination of monopoly capitalism and a strong state undermined the original liberal idea of peaceful accumulation. During the first part of the nineteenth century, international conflict appeared to be declining. But in the second half of the nineteenth century increased struggle for colonial extension caused bellicosity and violence to soar, and in the twen- tieth century militarization and expansionism already dominated. It seemed as if capitalism inevitably culminates in imperialism.
Together, these developments engendered a fundamental rethinking of the nature of conflict in capitalism. According to Marx, the central capitalist process is a class struggle between industrial workers and capitalist owners. Their conflict is waged over the productive process; its conceptual arena is the
2 In his novel The Iron Heel (1907), Jack London describes how the capitalist oligarchy bribes the large unions into submission, eventually leading to the creation of hereditary labour castes that align with the oligarchs against the rest of the working class.
3 It is perhaps worth noting that, in discussing the peripheral proletariat, Lenin and his succes- sors tended to avoid mentioning the many millions of Soviet workers who populated the abstract gulags of simple labour.
? Deflections of power 49
factory; and its geographical epicentre is the advanced capitalist nations of Western Europe and the United States.
The neo-Marxists shifted the focus from class to state. Many now argued that, in the twentieth century, the key conflict was no longer between capital- ists and workers per se, but between the developed capitalist states of the centre and the 'dependent' countries and regions of the periphery - or, in the Stalinist version, between the United States and the Soviet Union. For communists to participate in the anti-capitalist struggle now meant to blindly obey the party line dictated by Moscow.
All in all, very little was left of Marx's original science. In the process of coming to terms with power and adjusting their politics to the changing world, neo-Marxists have had to abandon the elegance and comprehensive- ness of Marx's model. The labour theory of value, the inherent crisis tenden- cies of capitalism, the nature of the class conflict - and, indeed, the very duality of politics and economics - were all put into question.
The three fractures
Stalinism in the Soviet Union, fascism in Europe and Keynesianism in the capitalist countries forced Marxists to rethink the intertwined nature of state and capital and the growing importance of 'bureaucratization'. This rethinking was certainly influenced by the work of Max Weber and Robert Michels; but perhaps the strongest catalyst, particularly among the Trotskyites, was the self-published monograph of Bruno Rizzi (1939).
According to Rizzi, the Soviet Union represented a new social order of bureaucratic collectivism. It was a different mode of production, one whose class structure and relations of production set it apart from both capitalism and socialism. Although this mode of production was for the time being unique to the Soviet Union and the fascist countries, its essential bureaucratic elements were already apparent - if only embryonically - in the capitalism of the New Deal. The famous works of James Burnham (1941), Milovan Djilas (1957), Max Shachtman (1962) and John Kenneth Galbraith (1967) repro- duced Rizzi's argument in different forms.
Bureaucratization melted the traditional definitions of politics and economics. This ambiguity, amplified by the chaos and confusion of the 1930s and 1940s, led Marxists to draw different (and often diametrically opposed) conclusions about the changing nature of capitalism.
On one side were those who emphasized the 'politicization' of capitalism (as if capitalism can be anything but political). The extreme position, held by Friedrich Pollock of the Frankfurt school, was that economics in fact had come to an end. Private capitalism, he argued, was being replaced by 'state capitalism', whether democratic or totalitarian. This new order 'signifies the transition from a predominately economic to an essentially political era', an era in which the will to political power supersedes the profit motive. And since according to Pollock there are no 'economic laws' to prevent this new
50 Dilemmas of political economy
state capitalism from taking hold, it follows that 'economics as a social subject has lost its object' (Pollock 1941: 78, 86-87).
An opposite perspective was offered by Pollock's colleague, Franz Neumann. In his classic study of National Socialism, Behemoth (1944), Neumann argued that fascism was neither a post-capitalist nor a post- economic phenomenon, but rather an extreme form of capitalist dictatorship. What Pollock mistakenly referred to as 'state capitalism' was in fact 'totali- tarian monopoly capitalism', an economic order in which the large capitalist organizations subjugate state organs to their own ends.
The wide gulf between these opposing interpretations signalled the end of universal Marxism. With no agreement on what constituted 'economy' and 'state', there could be no agreement on the source of value; and without a theory of value, Marxism lost its unifying basis.
The neo-Marxism that emerged from this breakdown was therefore neces- sarily fractured. It sometimes offered penetrating insights, but these insights were inherently partial and disjoined. Over time, the fracture developed into three distinct theoretical strands: (1) an attempt to rework Marxian economics; (2) a cultural critique of capitalism; and (3) a new theory of the capitalist state. We deal with each of them in turn.
Neo-Marxian economics: monopoly capital
The key hallmark of neo-Marxian economics is the explicit incorporation of power into 'economics' proper. This incorporation opens up new theoretical and empirical horizons, but it is also costly: it requires the abandonment, explicit or implicit, of the labour theory of value.
Kalecki's degree of monopoly
The post-war revitalization of Marxian economics owes much to the pioneering work of Michal Kalecki. Writing during the 1930s and 1940s, when much of Marxian economics was still stifled by Leninist-Stalinist dogma, Kalecki was breaking new ground on several fronts. He offered a triple theoretical synthesis, one that integrated Marxist class analysis, the new literature on oligopoly and big business and the aggregate view of Keynesianism. 4 He was also one of the first Marxists to incorporate into his research new mathematical and statistical techniques that were only begin- ning to make their way into mainstream economics.
In his articles from 1939 to 1943, collected posthumously in his Selected Essays on the Dynamics of the Capitalist Economy, 1933-1970 (1971), Kalecki identified what he called the 'degree of monopoly': a quantitative proxy for economic power whose effect is registered on the profit markup. By extending
4 In fact, several of Kalecki's writings, published in Polish during the early 1930s, anticipated the essential argument of Keynes' General Theory (see Kalecki 1971: vii).
? Deflections of power 51
this notion to the economy as a whole, Kalecki showed how changes in the structure of power are linked to the class distribution of income - and from there to broad patterns of consumption, investment, the business cycle and economic policy.
From surplus value to economic surplus
Kalecki's work had a significant influence on the Monopoly Capital school affiliated with the New York-based journal Monthly Review. 5 Capitalism, the theorists of this school claimed, had moved from a competitive to a monopo- listic footing, and that qualitative transition annulled Marx's capitalist laws of motion. Since power now varied across firms/sectors and changed over time, there was no longer a tendency for rates of profits to equalize, no longer a tendency for market prices to be proportional to labour values, and no longer a tendency for surplus value to be equal to profit. 6
Instead of Marx's surplus value, Baran and Sweezy proposed a new cate- gory: the economic surplus (Baran 1957; Baran and Sweezy 1966). 7 The two concepts differ markedly.
First, whereas surplus value is denominated in terms of abstract labour time, the economic surplus is counted directly in prices. Second, the two concepts have very different boundaries. The limit of surplus value is given by subtracting from maximum efficient production the subsistence wage of productive workers. In comparison, the notion of economic surplus is both broader and looser in that it also incorporates bygone production - due to inefficiency, unutilized capacity and wasteful spending. Finally, the two magnitudes have different determinants. Surplus value is created in the productive sphere, subject to Marx's tendency of the falling rate of profit. The economic surplus, by contrast, is affected by both production and demand and has a tendency to rise.
Realization and institutionalized waste
The tendency of the economic surplus to rise, though, is only latent and has to be 'realized'. On the one hand, the power of big business and its oligopolisitic interdependencies create an upward price bias: they make prices
5 Key contributions to this school include Josef Steindl (1952), Shigeto Tsuru (1956), Paul Baran (1957), Paul Baran and Paul Sweezy (1966), Harry Magdoff (1969) and Harry Braverman (1975).
6 This conclusion, Sweezy (1974) would later argue, did not invalidate the existence of labour values. It merely asserted that labour values are modified under monopoly capital and that this modification called for a new Marxist theory of capitalist development. As we shall see in Chapters 6-8, the problem with this solution is that labour values are impossible quite independent of monopoly power, and that impossibility leaves nothing to 'modify'.
7 There are in fact not one but three theoretical versions of the economic surplus - planned, potential and actual - along with a fourth, 'practical' measure that Baran and Sweezy use in their empirical estimates in Monopoly Capital (1966). In this paragraph, we deal with the features common to all versions.
? 52 Dilemmas of political economy
move up or sideways, but rarely down. On the other hand, large-scale produc- tion helps cut costs faster than ever. As a result of this divergence, profit margins tend to widen - but this widening is merely the first step. In order for the surplus to actually increase (be 'realized'), it has to be 'absorbed' into or 'offset' by profitable spending outlets. And here lies the problem.
In competitive capitalism firms are compelled to constantly invest lest they perish, which means that realization is rarely a lasting problem. Not so in monopoly capitalism. As large firms add new capacity, eventually the addi- tions begin to lower their rate of return on existing assets. Investment, there- fore, continues only as long as it is expected to boost average returns. The problem is masked during periods of 'epoch-making innovations' that amplify obsolescence on the one hand and propel profit expectations on the other, and in so doing fuel an investment-led boom. But in the absence of such innovations, Baran and Sweezy argued, monopoly capitalism requires wasteful expenditures - wasteful in the sense that they absorb more surplus that they create. 8 This waste can be generated, among other things, by a systemic sales effort, by the erection of a financial superstructure, and partic- ularly by military spending. Without such institutionalized waste, the rising tendency of the surplus manifests itself as chronic stagnation.
The limits of neo-Marxian economics
The explicit emphasis on power thus helped provide an alternative, neo- Marxian framework. It allowed the theorists of Monopoly Capital to chart the path of American capitalism in the second half of the twentieth century and shed light onto similar processes in other capitalist countries. During the 1950s and 1960s, their framework seemed consistent with the dominance of big business and government regulation, with high military spending and the aggressive posture of US neo-colonialism, and with the long economic boom and the apparent disappearance of economic crisis (Sweezy 1972).
Needless to say, classical Marxists didn't like this new theoretical trajec- tory. They criticized the neo-Marxian concepts as imprecise, subjective and - ultimately - 'non-Marxist'. Their critiques began to resonate during the 1970s and 1980s. Despite the persistence of massive institutionalized waste, the long boom had ended and profits margins declined. Growth had given rise to stag- flation, the global economy had opened up and international competition intensified. The models of Monopoly Capital and Military Keynesianism no longer seemed very persuasive. 9
8 Baran and Sweezy noted their indebtedness to Thorstein Veblen, who was probably the first to identify the role of institutionalized waste in the new order of business enterprise.
9 For critiques of Monopoly Capital, under-consumption theories and 'Military Keynes- ianism', see for instance Bleaney (1976), Shaikh (1978) and Weeks (1981: 149-69). For an attempt to reconcile Monopoly Capital with the classical (or 'fundamentalist') position, see Sherman (1985).
? Deflections of power 53
The classical Marxists, though, haven't offered a new alternative to Monopoly Capital and instead have called for a 'return to Marx'. The trans- formation from competitive to monopoly capitalism - if it ever happened - was merely a historical blip, they have argued, and the tendencies for crisis and for the rate of profit to fall remain intact. Consequently, the way forward is not to dilute Marxism with subjective concepts, but rather to re-examine and sharpen Marx's objective analysis.
This solution is unsatisfactory. To go back to Marx's original framework is to retain its conceptual problems, and that leaves us pretty much right where we started. It is true that the key contribution of the neo-Marxists - the explicit introduction of power into economics - is problematic. But the problem is not that neo-Marxists went too far. It is rather that they did not go far enough. They introduced power - yet retained the assumptions that power makes logically impossible. Specifically, they maintained the formal bifurca- tion between politics and economics, they kept the division between produc- tion and finance, and, most importantly, they continued to treat capital as a productive/economic entity.
The net result is a theoretical void. The neo-Marxists have abandoned Marx's labour theory of value, at least as a practical guide for understanding the pecuniary dynamics of capitalism. But to this day they haven't replaced it with a different theory of value.
The culturalists: from criticism to postism
During the 1930s, orthodox Marxism came under a parallel cultural attack. The disappointment with Stalinism, the apparent triumph of Nazism and the authoritarian nature of capitalist mass culture all pointed to the limits of 'materialist' analysis. At stake now was the very method of Marxist inquiry, and the first to systematically re-examine this method were the writers of the Frankfurt School. 10
Although deeply revolutionary in aim, these writers took Marx's assump- tions and methods merely as a starting point that must be re-examined - and, if need be, discarded. They challenged positivism and scientism - including their penetration into Marxism - and re-examined the meaning of what constitutes truth. Following Marx, they argued that theory - both social and natural - is part of the very constitution of society and therefore cannot be seen as something that stands entirely 'outside' of society. At the same time, and perhaps contradictorily, they also insisted on the autonomy of theory.
10 Originally founded in 1923 as the Institute for Social Research in Frankfurt University, the Frankfurt School later came to indicate a general approach rather than a physical location. The first-generation founders of the Frankfurt School included Friedrich Pollock, Max Horkheimer, Theodor Adorno, Walter Benjamin, Herbert Marcuse, Erich Fromm and Franz Neuman.
? 54 Dilemmas of political economy
In particular, they warned against the subjugation of theory to the alleged interests of the proletariat and the dictates of the Communist Party.
The early writings of the Frankfurt School spawned a radical literature that questioned the 'reified' nature of the economy, if not its very existence, and that focused instead on the oppressive cultural powers of capitalism. Initially, these questions were addressed as part of a re-examination of the young Hegel, the young Marx, Lucka? cs and Gramsci. But since the 1970s, the inquiry drifted in an entirely different direction, situated somewhere between Foucault and Derrida.
This new fashion, originally nourished in France and California, is often based on the cynical plagiarism of Marx, Hegel and particularly Marcuse, usually in the guise of original radical thought. The adherents of this fashion pretend to offer an anti- or postmodern examination of capitalism. But unlike the early critical theory of the Frankfurt School, the posture of this literature is largely anti-socialist, and its methods derive, often directly and consciously, from the intellectual depths of Nazism. 11
Although ground-breaking in its insight into the cultural dimensions of capitalism, the critical theory of the Frankfurt School had one glaring defi- ciency: it had given up on the 'economy'. Since the economic laws that Marx identified were supposedly 'politicized' and therefore annulled as an 'objec- tive' force, and since the very possibility of objective social facts was put into question, there was really little that critical theory could say on the systematic patterns of capital accumulation.
This original bias has been amplified many times over by the postists. The latter have been only too happy to abandon the systematic study of capitalist reality altogether and instead delve into the deconstruction of post-structur- alism, identity, race and gender. 12 The capitalists, for their part, have been keen on subsidizing this promising line of 'critical research'. And why wouldn't they? The investment carries hefty dividends.
As capitalism spread throughout the world and the rule of capital grew into a truly universal force, so did their potential negation. This negation is the counterforce that the young Hegel was perhaps the first to write about, if only opaquely: the possibility of democratic opposition, of democratic sharing, of democratically planning the good life. For capitalism to remain dominant, this potential negation had to be fractured, ridiculed and defused. And the best way to achieve these ends was to make capital itself invisible.
By spreading ignorance, the postists have helped keep the central power relations of capitalism unknown and therefore difficult to oppose. And with the intellectuals neutralized and the laity stupified, there has been little to prevent the wholesale spread of capitalism. Since the 1970s, the public autonomy of the welfare state, limited as it was to begin with, has been signifi-
11 For a scathing critique of this anti-philosophy, see Castoriadis (1991a).
12 For a critical survey of this transition, see Eagleton (2003).
? Deflections of power 55
cantly diminished. Large chunks of the public domain have been privatized and handed over to the capitalists. And oppressive regimes around the world have been legitimized in the name of 'cultural pluralism' and 'post colonialism'.
Statism
The third fracture of neo-Marxism focuses on the state. The need for such a focus became evident early in the twentieth century. It was clear that a new statist reality, totally unknown to Marx and his contemporaries, had emerged. First, the state not only grew to unpredicted proportions, it also became deeply integrated with - indeed, seemingly embedded in - the capi- talist process. Second, the scale of military conflict had changed, with war becoming both total and global. And third, war seemed to have become endemic and permanent - whether in the guise of an arms race between the superpowers, local ethnic conflicts, civil wars, wars of culture or clashes of civilization.
Neo-Marxists, of course, were not the only ones to grapple with this new reality. In the twentieth century, we could speak of three basic ideologies of power, all focused more loosely or more tightly on the state. One ideology is the techno-bureaucratic state associated with Comtean positivism, Weberian institutionalism and twentieth-century managerialism. A second speaks of an autonomous state that allegedly seeks power for its own sake. And a third, dealing with the capitalist state, criticizes and complements neo-Marxist economism.
Although these three ideologies have had different beginnings and purposes, their progressive academization has drawn them closer together - so close, in fact, that it is often difficult to differentiate their methodologies and sometimes even their conclusions. All three views - with the possible exception of some Marxist variants - tend to see the state as the centre of social power and the dominant force in human history. Some go even further to consider the state as the 'unity' or 'totality' that contains and shapes its inner economic and social components. And whatever their inclination, all seems to agree that, by the twentieth century, the state - regardless of its origins - had become the key force in domestic and international developments.
Given these overlaps, it seems useful to broaden the vista here beyond the Marxist analysis of the capitalist state and to consider, if only cursorily, also the mainstream approaches to the techno-bureaucratic and autonomous state.
The techno-bureaucratic state
During the Cold War, the debate was dominated by technological deter- minism. Key contributors such as Ralf Dahrendorf (1959), John Kenneth Galbraith (1967) and Daniel Bell (1973), although starting from different
56 Dilemmas of political economy
perspectives and using distinct terminologies, all speak of technological- bureaucratic imperatives. Modern societies, they argue, require massive research and development, complex planning and social stability, and there- fore necessitate giant organizations and intricate bureaucracies.
During the nineteenth century, these requirements were only beginning to take shape and hence were easy to misunderstand. What political economists mistakenly referred to as 'capitalism' was in fact the unorganized precursor of a coming industrial - and, eventually, post-industrial - order. By the early twentieth century, the unplanned market system was beginning to wither, together with the class conflicts and social struggles that socialists errone- ously considered inherent. The capitalists and bankers were demoted, replaced by managers and technocrats.
The move from anarchic market coordination to industrial and post- industrial society, went the argument, necessarily gives rise to bureaucratic statism, a system ruled by rationality and governed by technostructures. In the words of Daniel Bell:
If the dominant figures of the past hundred years have been the entrepre- neur, the businessman, and the industrial executive, the 'new men' are the scientists, the mathematicians, the economists, and the engineers of the new intellectual technology. . . . In the post-industrial society, produc- tion and business decisions will be subordinated to, or will derive from, other forces in society; the crucial decisions regarding the growth of the economy and its balance will come from government, but they will be based on the government's sponsorship of research and development, of cost-effectiveness and cost-benefit analysis; the making of decisions, because of the intricately linked nature of their consequences, will have an increasingly technical nature.
(Bell 1973: 344)
From this post-capitalist perspective, power can no longer be seen as possessed by private owners. Even social democrats such as Ralf Dahrendorf and radicals like Charles Wright Mills succumbed to Weberianism, seeking to replace an analysis of class division with a broader theory of statist-bureau- cratic power.
According to Mills (1956), the class-based approach of Marxism had become insufficient; specifically, it was unable to explain the apparent ascent of governmental-military organizations in the post-war United States. Mills' own solution, partly influenced by the managerialism of James Burnham and the institutionalism of Thorstein Veblen, was to abandon the notion of a capi- talist ruling class in favour of three-way power structure. There are three basic scarcities, he argued - a scarcity of power, a scarcity of wealth and a scarcity of prestige - to which there corresponds a tripartite 'power elite'. Each segment of this elite leverages its power through the effective control of key organizations and institutions:
Deflections of power 57
. . . the elite are not simply those who have the most, for they could not 'have the most' were it not for their positions in the great institutions. For such institutions are the necessary bases of power, of wealth, and of pres- tige, and at the same time, the chief means of exercising power, of acquiring wealth, and of cashing in the higher claims for prestige. By the powerful we mean, of course, those who are able to realize their will, even if others resist it. No one, accordingly, can be truly powerful unless he has access to the command of major institutions, for it is over these insti- tutional means of power that the truly powerful are, in the first instance, powerful. Higher politicians and key officials of government command such institutional power; so do admirals and generals, and so do the major owners and executives of the larger corporations.
(Mills 1956: 9)
This view provided fertile ground for empirical research, primarily by soci- ologists, such as William Domhoff, who have laboured to meticulously docu- ment the structure and behaviour of the power elite, the operational arm of the 'higher circles' (see for example Domhoff 1967, with four subsequent editions, the latest of which was issued in 2005; earlier editions include 1970 and 1979). 13
The techno-bureaucratic approach, however, still treats the state (or the overlapping networks of power in Mann's formulation) mostly as an arena, a framework that organizes and governs society. This perspective started to change during the 1970s, with new studies that emphasized the state as an autonomous institution and a personated actor.
The autonomous state
The instrumental and class-based approaches, some writers now argued, serve to conceal the true nature of the state. The state, they maintained, is not a capitalist means or a social instrument. Rather, it is an actor that stands in its own right, having its own logic and, indeed, its own interests.
The conceptual framework of this view contains three basic entities: (1) the state, (2) economic resources, and (3) an amorphous collection of individuals
13 An outlier of the techno-bureaucratic approach is Michael Mann's work on The Source of Social Power (1986; 1993). Mann rejects the notion of a 'unitary totality'. Society, he argues, is not a well-defined system that can be divided into subsystems such as state, culture and economy, or a clearly bounded entity that has dimensions, levels and factors. Instead, he offers to think of societies and their histories as an overlapping network of inter- actions between four sources of social power: ideological, economic, military and political. The focus of his inquiry, though, is still Weberian. His concern is the organizational means associated with each source of power, and how these develop and change in relation to each other. Earlier in history, he says, political and sometimes military means were primary, whereas in recent times economic power, along with its 'class' relations, has become paramount.
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and groups, called society. In this structure, the state holds a unique position: it monopolizes the organized means of violence. The state mobilizes economic groups - be they industrialists, merchants, rentiers, or farmers - in order to obtain economic resources. And it then uses these resources to organize and control its society, as well as to fight and defend itself against other states.
This view is evident in the historical account of Charles Tilly (1975; 1992). The origin of the autonomous state, he argues, goes back to the twilight of feudalism in the second millennium AD. The state was invented not by the bourgeoisie to serve capital accumulation, but by political elites who sought to consolidate their power. The key purpose of the state - from its princely feudal beginnings, through its absolutist and monarchic phase, to its present national form - has been twofold: to organize and finance increasingly expen- sive wars and to discipline tax payers. Capitalism from this viewpoint is merely the economic means that supplies the military and strengthens the state apparatus.
A similar history is told by Theda Skocpol (1979; 1985), who argues that the European and American revolutions were the result not of class struggles but of political weakness in the face of inter-state conflicts. Her argument, although rich in historical detail, boils down to fiscal-organizational deter- minism. The anciens re? gimes, she notes, were burdened by excessive and inef- ficient taxation that strained their access to material resources and limited their ability to finance organized violence; therefore, they were replaced by more rational states with streamlined tax structures and superior war-making capabilities.
In the final analysis, then, history is the cunning of the state. The liberal and Marxist theses, according to which the state serves its citizens, the bour- geoisie, or capital accumulation more generally, are mere fantasies. The state develops in its own right and for its own sake. It inevitably grows and central- izes. It is driven not by an external economic determinism, but by its own statist determinism.
The capitalist state
Marxists began to re-evaluate the role of the state in capitalism around the same time as the 'autonomists'. 14 The post-war era brought new develop- ments - from the ascent of social democratic parties in Europe, through the student movements, to the rise and demise of Keynesianism - and these developments called for new explanations. It was no longer possible to treat the state as a simple extension of the 'capitalist interest'. The state had clear limitations, it had a concrete history, and it was being heavily dissected by competing bourgeois theorists. It was time for Marxists to re-examine their own views.
14 For critical reviews of Marxist state theory, see Holloway and Picciotto (1978b), Block (1987), Jessop (1990; 2002), Clarke (1991), Mann et al. (2001-2) and Anievas et al. (2007).
? The state imperative
Beyond their many disagreements, all Marxists seem to accept that capitalism requires a state for four main reasons. First, the state helps prevent the inher- ently conflictual nature of capitalist production from becoming overtly politi- cized. The capitalist class, argues Gerald Cohen (1978), has 'power' over every worker, but the 'right' over none. It has the systemic ability to act in its own interest, but it lacks the normative, moral and legal sanction that makes such action acceptable. This sanction is provided by the state. Second, the state can help counteract the anarchic, crisis-prone nature of capitalism. Whether the tendency for crisis comes from production or realization, history suggests that the state is able, within limits, to mitigate it (Miller 1987). Third, the state serves to absorb, temporarily or permanently, the bloating social cost of accumulation (O'Connor 1973). Fourth and finally, at the global level, the state system mediates the conflicting and mutual interests of capitalists as well as their relation with non-capitalist entities, although the precise nature of this mediation as well as its logical necessity remain heatedly debated (Mann et al. 2001-2; Callinicos 2007).
Marxist state theorists further agree that the state needs to be sufficiently separate from capital. This is the common point of departure. The debate is over the precise nature and extent of this separation, and here there seem to be two distinct views. The first, 'flat' approach is to treat capital and state as belonging to two interdependent yet distinct spheres - economics and politics - and to consider each sphere as having a separate and equally significant logic. The other, 'hierarchical' approach is to consider the logic of capital as primary, and then derive the state from the broader imperatives and contra- dictions of accumulation.
The flat approach
The flat approach underlies the famous debate between Ralph Miliband and Nicos Poulantzas over the 'autonomy of the state'. 15 The two begin from seemingly different assumptions. Miliband considers the state as an instru- ment of the capitalist class, whereas Poulantzas sees it as rooted in the objec- tive structure of capitalism. Yet both cast their argument in purely political terms. This exclusively political language can be traced back to Friedrich Pollock's 'end of economics' - and, indeed, references to the autonomy of the state have been criticized as neo-Ricardian. The neo-Ricardians have rejected Marx's labour theory of value along with his laws of motion. And since this rejection eliminates economic inevitability (at least in the immediate term), the state is left economically indeterminate (at least for the time being). 16
15 See Miliband (1969; 1970; 1973) and Poulantzas (1969; 1973; 1975).
16 A neo-Ricardian critique of Marx's analysis of production is given in Gough (1972), and its
implications for the state are articulated in Gough (1975). For counterarguments, see Fine and Harris (1976b; 1976a) and Holloway and Picciotto (1978a).
Deflections of power 59
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For Miliband, economic indeterminacy means that the state can serve the immediately observed interests of the capitalists, whatever they may happen to be.
