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.
Nitzan Bichler - 2012 - Capital as Power
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. For Poulantzas, the state lives a more complicated double life - economic in principle, political in practice. In theory, the state is certainly 'determined' by the economy. This determination, though, happens only in the Althusserian 'last instance' - an asymptotic concept that Poulantzas leaves conveniently opaque and safely out of sight. In the interim the key is politics, which means that in its day-to-day operations the state enjoys a 'rela- tive autonomy' to act as it sees fit.
The result is acute schizophrenia. Given that any state action affects both the immediate and 'last' instances (and every instance in between), the state must constantly juggle its own short-term autonomy against the long-term structural interests of the economy. But, then, Poulantzas, whom taxono- mists for some reason like to classify as a 'structuralist', is completely silent on the economics of the 'last instance'. And since this silence leaves the struc- tural imperatives of capitalism undefined, it is rather unclear what exactly it is that the state tries to achieve. For his part, Poulantzas informs us, with emphasis in the original, that 'the State is precisely the factor of cohesion of a social formation and the factor of reproduction of the conditions of production of a system that itself determines the domination of one class over the others. . . ' (1969: 73), and it is obviously to our own demerit if we don't quite understand what this sentence is supposed to mean.
The hierarchical approach
The alternative, vertical approach is different in that it considers capital and state as conceptually unequal. The engine of capitalist history is the economic accumulation of capital. The capitalist state is merely part of that process. Writers who follow this approach are often labelled 'fundamentalists'. They emphasize the deep logic and inherent contradictions of capitalist production as articulated by classical Marxism - this in opposition to the neo-Ricardians who, they argue, deal with the secondary, surface phenomena of 'circulation', market structure and monopoly capital. 17
The contradictory logic of accumulation gives the state its concrete history. Thus, according to Perry Anderson (1974), the capitalist state was never functionally autonomous. In Europe, he argues, state formation was deeply intertwined with the underlying transformation of the mode of production. The feudal and absolutist states prepared the conditions for capitalist accu- mulation and, eventually, also for the political rule of the bourgeoisie. Seen from a functionalist viewpoint, the state doesn't have - and never had - an
17 It should be noted that, in practice, the differences between the two analyses of the state are not that clear cut. Fundamentalists customarily rely on 'surface phenomena', while circula- tionists often make references to 'inevitable contradictions' (see also footnote 9).
? Deflections of power 61
independent role. It merely shapes the requirements of the ruling class, a class that is, in itself, is a creature of the contemporary mode of production.
At a later stage, economic restructuring, driven either by the centralization of capital or the intensification of competition, further transforms the capi- talist state. Gabriel Kolko (1963), for example, maintains that the growth and strengthening of the American state were largely a consequence of a political alliance of big business. The large industrial owners, he says, did not enjoy greater monopoly power. On the contrary, they suffered from mounting competition. They solved the problem with government regulation, for which they needed a big state - hence the emergence of 'political capitalism'.
Whatever the reason, the assent of the state is unavoidable. In the hyped language of Ernest Mandel,
Capitalist private property, the private appropriation of surplus-value and private accumulation increasingly become an obstacle to the further development of the forces of production. State (and supra-national) centralization of part of the social surplus product has once again - as in numerous pre-capitalist societies - increasingly become a material precon- dition for the further development of the forces of production. . . . The strengthening of the State in late capitalism is thus an expression of capi- tal's attempt to overcome its increasingly explosive inner contradictions, and at the same time an expression of the necessary failure of this attempt.
(Mandel 1975: 580-81, original emphases)
And now in simple words: capitalism is born an economic-industrial crea- ture, generating surplus value that accumulates in the form of means of production (counted in undefined units of abstract labour). This process continues for a while, but sooner or later something goes wrong. There is a decline or intensification of competition, an increase in the organic composi- tion of capital, or some other inevitable development that causes normal accu- mulation to turn into over-accumulation (or normal production to become over-production or under-consumption - all fuzzy distinctions which the theorist commonly pays lips service to and quickly glosses over). As a conse- quence of this mishap, capitalism takes a quantum leap and becomes 'polit- ical' (which means that previously it was a-political). The capitalists turn the 'night-watchman' state into a 'regulating' state (a transition that both proves and refutes the ability of the system to survive), and the writer puts the full stop after the QED.
Political Marxism
In a certain important sense, the analysis of the capitalist state has become a fetter on Marxist theory. The problem is that the state - whether equal to capital, subordinate to capital, or derived jointly with capital from a broader
62 Dilemmas of political economy
materialist history as argued by the German 'state derivation debate' - always ends up fracturing the overall picture. 18 Because the state is assumed to be inherently and necessarily separate from accumulation, we end up with two distinct appearances: one of economics and the other of politics.
Some 'political Marxists' have attempted to transcend the problem by redefining the politics/economics duality in continuous rather than binary terms. According to Ellen Meiksins Wood (1981), capital is the 'privatization of politics' insofar as it gives private owners the authority to organize produc- tion. Meiksins Wood accepts the existence of the 'economy', complete with Marx's laws of capitalist development, etc. The novelty is that the boundaries of her economy are not rigid, but supple:
'Political Marxism', then, does not present the relation between base and superstructure as an opposition, a 'regional' separation between a basic 'objective' economic structure, on the one hand, and social, juridical, and political forms, on the other, but rather as a continuous structure of social relations and forms with varying degrees of distance from the imme- diate processes of production and appropriation, beginning with those relations and forms that constitute the system of production itself.
(1981: 78, original emphases)
Although this formulation sounds tempting, it really does little to square the circle. First, there is a confusion of terms. Meiksins Wood is right to argue that capital is the privatization of politics. But the private/public distinction is not the same as the distinction between economics and politics. And since capital is not an 'economic' entity, the fact that it privatizes power tells us nothing about the relationship between the 'economic' and the 'political'.
This confusion becomes evident when we consider Meiksins Wood's defi- nition of the economy: she doesn't have one. Meiksins Wood never tells us what she means by the 'immediate processes of production and appropria- tion', what constitutes the 'system of production itself', or how we can measure the 'degree of distance' from these yardsticks.
Perhaps these concepts had a clear enough meaning during the transition from the fields and meadows of pre-capitalist Europe to the factories of early industrialization. But as we shall see later in the book, this clarity has been lost since then, leaving us with a set of empty formulations. What exactly are the 'immediate' processes of production and appropriation of a modern pharmaceutical drug, of a jet fighter, of an automobile, of a complex software
18 The German 'derivationists' reject the orthodox 'fundamentalist' notion according to which the economic is somehow prior to the political, and instead seek to treat both as part of the same materialistic development. This rejection, though, seems largely semantic, since the deriviationists do not offer any meaningful rethinking of Marx's original category of capital. For a recent statement of the derivation approach, see Altvater and Hoffman (1990).
? Deflections of power 63
system, of an insurance system, or of health care? Where do these complex processes start and where do they end? Can the 'immediate' processes of production and consumption be delineated, even roughly, from those that are 'less immediate'? If this delineation is impossible to make, what constitutes the system of production 'itself'? And if the 'system of production' remains unspecified, what does it mean to say that the economy and politics are 'distinct', whether the distinction is rigid or supple?
The capitalist totality
As Marx himself put it, if there were nothing behind the 'thing', there would be no need for science. If we accept that the politics-economics fracture is merely the 'appearance' of capitalism, we need to see what lies behind this fracture. Physicists tell us that behind the separate appearance of colours lies the unifying logic of the wave length. Likewise, Marx tells us that behind the distinct appearances of economics and politics, of production and state, of exploitation and oppression, lies a single capitalist totality.
And yet, Marxists do not have a theory to explain this totality. They have an explanation for why the world seems bifurcated between factory and state, and for why this separation is cunning, misleading and alienating. But they offer no unified science to transcend the bifurcation, no alternative totality to stand against capitalism.
The flat, 'autonomous' explanations give up the possibility for such a unified science altogether by accepting from the start that politics and economics obey two semi-independent logics. By contrast, the hierarchical, 'structuralist' explanations do try to devise a single theory in which the state is derived from the material basis of accumulation. Yet they, too, cannot go very far: their conception of capital adheres to Marx's notion of abstract labour value, and this loyalty keeps them entangled in the same logical and historical impossibilities that have haunted Marxism for more than a century.
The result is a dead end. Since labour values cannot be observed and calcu- lated, it follows that structuralist theories - no matter how sophisticated - cannot know anything about the actual accumulation of labour values. And given that the value reality of accumulation remains unknown, structuralists have no concrete basis from which to 'derive' the state.
This entanglement serves to explain why structural Marxism has plenty to say on the logic of the capitalist state but little on its contemporary reality: fiscal and monetary policies, military spending and war, financial markets and workers' pensions, the debt and energy policies of the American empire - these are all issues that structuralists can do little more than speculate about (Block 1987: Part I).
During the early twentieth century, the meaning of 'socialism' was pretty clear. It was an alternative to the logic of capitalism and the reality of the capitalist state. Socialism represented a new way of democratically articu- lating the good of society, of scientifically assessing its possibilities, of
64 Dilemmas of political economy
systematically planning its production and consumption. But after a century of Stalinist abuse and academic fracturing, this vision has dissipated. We have neo-Marxian economics, cultural studies and state theory - but we no longer have a theory of the capitalist order as a whole. Marxism has been unable to either save the labour theory of value or come up with a different theory of value in its stead. There is no university, academy or forum where Marxists systematically study, debate and prepare an alternative democratic future. Today, no serious Marxist would claim to have a systematic alternative to capitalism. And the ruling class knows it: 'Even in crisis, capitalism remains fortunate in its enemies', concludes the ironic Financial Times commentator (Skapinker 2008).
As we shall see in the next part of the book, the reason for this vacuum is the lingering enigma of capital. Political economy, both mainstream and crit- ical, lacks a coherent conception of capital. And it lacks such a theory because it deflects the issue of power. The liberals analyse capital without power, while the Marxists explain capital and power - but what we need is to theorize capital as power.
Part II
The enigma of capital
5 Neoclassicalparables
The price is determined by the market, what we try to do is to make the market balanced. Today there is disequilibrium between supply and demand. Today we are trying to get the market to the normal equilibrium and the price will take care of itself.
--Ali Al-Naimi, Saudi Arabia's Oil Minister
The principal casualty of separating economics from politics is the theory of capital. Academic departmentalization placed it firmly in the hands of econo- mists, leaving political scientists, sociologists and anthropologists with practically no say. The economists have chosen to emphasize material consid- erations and to all but ignore power, yet that choice has hardly cleared the water. In fact, despite their complete monopoly, economists have been unable to even define what capital means.
While all agree that capital is monetary wealth, figuring out what makes this wealth grow has proven much harder. 'What a mass of confused, futile, and downright silly controversy it would have saved us', writes Joseph Schumpeter (1954: 323), 'if economists had had the sense to stick to those monetary and accounting meanings of the term instead of trying to "deepen" them! '
Of course, the problem lies not in the desire to deepen, but in the direction economists have gone digging. Their main goal has been to link accumulation with productivity, but with social production having grown in complexity the link has become increasingly difficult to pin down. And the difficulty persists precisely because economists insist it is exclusively theirs. According to Bliss (1975), once economists agree on the theory of capital, 'they will shortly reach agreement on everything else'. But then how could they agree on this theory, if capital, by its very nature, involves power, which they view as lying outside their domain?
68 The enigma of capital
The material basis of capital
Despite their pivotal significance, the definition of capital and the meaning of accumulation remain unsettled. 1 Historically, the principal contention stemmed from trying to marry two different perceptions of capital - one quantitative, the other qualitative. Originally, capital was seen as an income- generating fund, or 'financial wealth', and as such it had a definite quantity. It was also viewed as a stock of physical instruments, or 'capital goods', char- acterized by a particular set of qualities (Pasinetti and Scazzieri 1987). The key question concerned the connection between these two incarnations: are 'capital goods' productive, and if so, how does their productivity affect their overall magnitude as 'capital'? (Hennings 1987).
Mainstream economics has been trying to show that capital goods indeed are productive and that this positive attribute is what makes capital as a fund valuable. The marriage, though, hasn't work well, partly due to a large age difference: the concept of capital predates that of capital goods by a few thou- sand years, suggesting that their overlap is not that self-evident.
The older partner, capital, comes from the Latin caput, a word whose origin goes back to the Fertile Crescent in the Middle East. In both Rome and Mesopotamia capital had a similar, unambiguous economic meaning: it was a monetary magnitude. There was no relation to produced means of produc- tion. Indeed, caput meant 'head', which fits well with another Babylonian invention - the human 'work day' (Schumpeter 1954: 322-23; Bickerman 1972: 58, 63).
The younger partner, capital goods, was born millennia later, roughly together with capitalism. The growing significance of mechanized instru- ments captured the attention of pre-classical writers, but initially these were referred to mostly as 'stocks' (Barbon 1690; Hume 1752). The first to give capital a productive role were the French Physiocrats, and it was only with Franc? ois Quesnay and Jacques Turgot during the latter half of the eighteenth century that the association between capitals (as monetary advances) and mechanized production started to take shape (Hennings 1987).
Since then, the material-productive bias has grown ever more dominant. Thus, Adam Smith speaks of 'stocks accumulated into capital' which is 'necessary for carrying on this great improvement in the productive powers of labour' (1776: 260-61); similarly with David Ricardo, who equates capital with 'that part of the wealth of a country which is employed in production, and consists of food, clothing, tool, raw materials, machinery, &c. necessary to give effect to labour' (1821: 85); Karl Marx talks about 'constant capital' represented 'by the means of production, by the raw material, auxiliary material and instruments of labour' (1909, Vol. 1: 232); John Bates Clark asserts that 'Capital consists of instruments of production', which 'are always
1 For the deep sense of unease regarding the definition of capital, see Schumpeter (1954: 322- 27) and Braudel (1977; 1985, Vol. 2: 232-49).
? Neoclassical parables 69
concrete and material' and whose appearance as value is 'an abstract quantum of productive wealth' (1899: 116, 119); Irving Fisher takes capital as equivalent to the prevailing stock of wealth (1906: 52); Frank Knight sees capital as 'consisting of non-human productive agencies' (1921: 328); while Arthur Pigou conceives of capital as a heterogeneous material entity 'capable of maintaining its quantity while altering its form' (1935: 239). Summing it all up, Joseph Schumpeter naturally concludes that, in its essence, 'capital consisted of goods', and specifically of 'produced means of production' (1954: 632-33). No matter how you twist and turn it, fundamentally capital is a material entity.
Yet, the classical political economists did not have a complete theory of capital. Recall that these new scientists of society started to write when indus- trialization was still in its infancy, smokestack factories were few and far between, and the population was still largely rural. They therefore tended to treat the amalgamate of capital goods as a 'fund' or 'advance' whose role, in their words, is merely to assist the 'original' factors of production - labour and land. Although the general view was that capital goods were valuable due to their productivity, no attempt was made to quantify their 'amount'. The link between capital goods and capital therefore was left unspecified.
In hindsight, the principal obstacle in establishing this link was that the classicists still viewed capital goods as a secondary input, and in that sense as qualitatively different from the original primary inputs. This belief, though, proved no more than a temporary roadblock.
The production function
Taking the classical lead but without its associated inhibitions, the neo- classicists followed the Earl of Lauderdale (Maitland 1804) in making capital goods a fully independent factor of production, on par with labour and land. Their view of capital, articulated since the latter part of the nineteenth century by writers such as Phillip Wicksteed, Alfred Marshall, Carl Menger and, primarily, John Bates Clark, emphasized the distinct productivity of capital goods, and by so doing elevated these goods from mere accessories to requisites.
The two assumptions
In his book, The Distribution of Wealth (1899), Clark used this newly found symmetry among the factors of production to offer an alternative theory of distribution. The theory stipulates a two-step mathematical link between income and production.
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. For Poulantzas, the state lives a more complicated double life - economic in principle, political in practice. In theory, the state is certainly 'determined' by the economy. This determination, though, happens only in the Althusserian 'last instance' - an asymptotic concept that Poulantzas leaves conveniently opaque and safely out of sight. In the interim the key is politics, which means that in its day-to-day operations the state enjoys a 'rela- tive autonomy' to act as it sees fit.
The result is acute schizophrenia. Given that any state action affects both the immediate and 'last' instances (and every instance in between), the state must constantly juggle its own short-term autonomy against the long-term structural interests of the economy. But, then, Poulantzas, whom taxono- mists for some reason like to classify as a 'structuralist', is completely silent on the economics of the 'last instance'. And since this silence leaves the struc- tural imperatives of capitalism undefined, it is rather unclear what exactly it is that the state tries to achieve. For his part, Poulantzas informs us, with emphasis in the original, that 'the State is precisely the factor of cohesion of a social formation and the factor of reproduction of the conditions of production of a system that itself determines the domination of one class over the others. . . ' (1969: 73), and it is obviously to our own demerit if we don't quite understand what this sentence is supposed to mean.
The hierarchical approach
The alternative, vertical approach is different in that it considers capital and state as conceptually unequal. The engine of capitalist history is the economic accumulation of capital. The capitalist state is merely part of that process. Writers who follow this approach are often labelled 'fundamentalists'. They emphasize the deep logic and inherent contradictions of capitalist production as articulated by classical Marxism - this in opposition to the neo-Ricardians who, they argue, deal with the secondary, surface phenomena of 'circulation', market structure and monopoly capital. 17
The contradictory logic of accumulation gives the state its concrete history. Thus, according to Perry Anderson (1974), the capitalist state was never functionally autonomous. In Europe, he argues, state formation was deeply intertwined with the underlying transformation of the mode of production. The feudal and absolutist states prepared the conditions for capitalist accu- mulation and, eventually, also for the political rule of the bourgeoisie. Seen from a functionalist viewpoint, the state doesn't have - and never had - an
17 It should be noted that, in practice, the differences between the two analyses of the state are not that clear cut. Fundamentalists customarily rely on 'surface phenomena', while circula- tionists often make references to 'inevitable contradictions' (see also footnote 9).
? Deflections of power 61
independent role. It merely shapes the requirements of the ruling class, a class that is, in itself, is a creature of the contemporary mode of production.
At a later stage, economic restructuring, driven either by the centralization of capital or the intensification of competition, further transforms the capi- talist state. Gabriel Kolko (1963), for example, maintains that the growth and strengthening of the American state were largely a consequence of a political alliance of big business. The large industrial owners, he says, did not enjoy greater monopoly power. On the contrary, they suffered from mounting competition. They solved the problem with government regulation, for which they needed a big state - hence the emergence of 'political capitalism'.
Whatever the reason, the assent of the state is unavoidable. In the hyped language of Ernest Mandel,
Capitalist private property, the private appropriation of surplus-value and private accumulation increasingly become an obstacle to the further development of the forces of production. State (and supra-national) centralization of part of the social surplus product has once again - as in numerous pre-capitalist societies - increasingly become a material precon- dition for the further development of the forces of production. . . . The strengthening of the State in late capitalism is thus an expression of capi- tal's attempt to overcome its increasingly explosive inner contradictions, and at the same time an expression of the necessary failure of this attempt.
(Mandel 1975: 580-81, original emphases)
And now in simple words: capitalism is born an economic-industrial crea- ture, generating surplus value that accumulates in the form of means of production (counted in undefined units of abstract labour). This process continues for a while, but sooner or later something goes wrong. There is a decline or intensification of competition, an increase in the organic composi- tion of capital, or some other inevitable development that causes normal accu- mulation to turn into over-accumulation (or normal production to become over-production or under-consumption - all fuzzy distinctions which the theorist commonly pays lips service to and quickly glosses over). As a conse- quence of this mishap, capitalism takes a quantum leap and becomes 'polit- ical' (which means that previously it was a-political). The capitalists turn the 'night-watchman' state into a 'regulating' state (a transition that both proves and refutes the ability of the system to survive), and the writer puts the full stop after the QED.
Political Marxism
In a certain important sense, the analysis of the capitalist state has become a fetter on Marxist theory. The problem is that the state - whether equal to capital, subordinate to capital, or derived jointly with capital from a broader
62 Dilemmas of political economy
materialist history as argued by the German 'state derivation debate' - always ends up fracturing the overall picture. 18 Because the state is assumed to be inherently and necessarily separate from accumulation, we end up with two distinct appearances: one of economics and the other of politics.
Some 'political Marxists' have attempted to transcend the problem by redefining the politics/economics duality in continuous rather than binary terms. According to Ellen Meiksins Wood (1981), capital is the 'privatization of politics' insofar as it gives private owners the authority to organize produc- tion. Meiksins Wood accepts the existence of the 'economy', complete with Marx's laws of capitalist development, etc. The novelty is that the boundaries of her economy are not rigid, but supple:
'Political Marxism', then, does not present the relation between base and superstructure as an opposition, a 'regional' separation between a basic 'objective' economic structure, on the one hand, and social, juridical, and political forms, on the other, but rather as a continuous structure of social relations and forms with varying degrees of distance from the imme- diate processes of production and appropriation, beginning with those relations and forms that constitute the system of production itself.
(1981: 78, original emphases)
Although this formulation sounds tempting, it really does little to square the circle. First, there is a confusion of terms. Meiksins Wood is right to argue that capital is the privatization of politics. But the private/public distinction is not the same as the distinction between economics and politics. And since capital is not an 'economic' entity, the fact that it privatizes power tells us nothing about the relationship between the 'economic' and the 'political'.
This confusion becomes evident when we consider Meiksins Wood's defi- nition of the economy: she doesn't have one. Meiksins Wood never tells us what she means by the 'immediate processes of production and appropria- tion', what constitutes the 'system of production itself', or how we can measure the 'degree of distance' from these yardsticks.
Perhaps these concepts had a clear enough meaning during the transition from the fields and meadows of pre-capitalist Europe to the factories of early industrialization. But as we shall see later in the book, this clarity has been lost since then, leaving us with a set of empty formulations. What exactly are the 'immediate' processes of production and appropriation of a modern pharmaceutical drug, of a jet fighter, of an automobile, of a complex software
18 The German 'derivationists' reject the orthodox 'fundamentalist' notion according to which the economic is somehow prior to the political, and instead seek to treat both as part of the same materialistic development. This rejection, though, seems largely semantic, since the deriviationists do not offer any meaningful rethinking of Marx's original category of capital. For a recent statement of the derivation approach, see Altvater and Hoffman (1990).
? Deflections of power 63
system, of an insurance system, or of health care? Where do these complex processes start and where do they end? Can the 'immediate' processes of production and consumption be delineated, even roughly, from those that are 'less immediate'? If this delineation is impossible to make, what constitutes the system of production 'itself'? And if the 'system of production' remains unspecified, what does it mean to say that the economy and politics are 'distinct', whether the distinction is rigid or supple?
The capitalist totality
As Marx himself put it, if there were nothing behind the 'thing', there would be no need for science. If we accept that the politics-economics fracture is merely the 'appearance' of capitalism, we need to see what lies behind this fracture. Physicists tell us that behind the separate appearance of colours lies the unifying logic of the wave length. Likewise, Marx tells us that behind the distinct appearances of economics and politics, of production and state, of exploitation and oppression, lies a single capitalist totality.
And yet, Marxists do not have a theory to explain this totality. They have an explanation for why the world seems bifurcated between factory and state, and for why this separation is cunning, misleading and alienating. But they offer no unified science to transcend the bifurcation, no alternative totality to stand against capitalism.
The flat, 'autonomous' explanations give up the possibility for such a unified science altogether by accepting from the start that politics and economics obey two semi-independent logics. By contrast, the hierarchical, 'structuralist' explanations do try to devise a single theory in which the state is derived from the material basis of accumulation. Yet they, too, cannot go very far: their conception of capital adheres to Marx's notion of abstract labour value, and this loyalty keeps them entangled in the same logical and historical impossibilities that have haunted Marxism for more than a century.
The result is a dead end. Since labour values cannot be observed and calcu- lated, it follows that structuralist theories - no matter how sophisticated - cannot know anything about the actual accumulation of labour values. And given that the value reality of accumulation remains unknown, structuralists have no concrete basis from which to 'derive' the state.
This entanglement serves to explain why structural Marxism has plenty to say on the logic of the capitalist state but little on its contemporary reality: fiscal and monetary policies, military spending and war, financial markets and workers' pensions, the debt and energy policies of the American empire - these are all issues that structuralists can do little more than speculate about (Block 1987: Part I).
During the early twentieth century, the meaning of 'socialism' was pretty clear. It was an alternative to the logic of capitalism and the reality of the capitalist state. Socialism represented a new way of democratically articu- lating the good of society, of scientifically assessing its possibilities, of
64 Dilemmas of political economy
systematically planning its production and consumption. But after a century of Stalinist abuse and academic fracturing, this vision has dissipated. We have neo-Marxian economics, cultural studies and state theory - but we no longer have a theory of the capitalist order as a whole. Marxism has been unable to either save the labour theory of value or come up with a different theory of value in its stead. There is no university, academy or forum where Marxists systematically study, debate and prepare an alternative democratic future. Today, no serious Marxist would claim to have a systematic alternative to capitalism. And the ruling class knows it: 'Even in crisis, capitalism remains fortunate in its enemies', concludes the ironic Financial Times commentator (Skapinker 2008).
As we shall see in the next part of the book, the reason for this vacuum is the lingering enigma of capital. Political economy, both mainstream and crit- ical, lacks a coherent conception of capital. And it lacks such a theory because it deflects the issue of power. The liberals analyse capital without power, while the Marxists explain capital and power - but what we need is to theorize capital as power.
Part II
The enigma of capital
5 Neoclassicalparables
The price is determined by the market, what we try to do is to make the market balanced. Today there is disequilibrium between supply and demand. Today we are trying to get the market to the normal equilibrium and the price will take care of itself.
--Ali Al-Naimi, Saudi Arabia's Oil Minister
The principal casualty of separating economics from politics is the theory of capital. Academic departmentalization placed it firmly in the hands of econo- mists, leaving political scientists, sociologists and anthropologists with practically no say. The economists have chosen to emphasize material consid- erations and to all but ignore power, yet that choice has hardly cleared the water. In fact, despite their complete monopoly, economists have been unable to even define what capital means.
While all agree that capital is monetary wealth, figuring out what makes this wealth grow has proven much harder. 'What a mass of confused, futile, and downright silly controversy it would have saved us', writes Joseph Schumpeter (1954: 323), 'if economists had had the sense to stick to those monetary and accounting meanings of the term instead of trying to "deepen" them! '
Of course, the problem lies not in the desire to deepen, but in the direction economists have gone digging. Their main goal has been to link accumulation with productivity, but with social production having grown in complexity the link has become increasingly difficult to pin down. And the difficulty persists precisely because economists insist it is exclusively theirs. According to Bliss (1975), once economists agree on the theory of capital, 'they will shortly reach agreement on everything else'. But then how could they agree on this theory, if capital, by its very nature, involves power, which they view as lying outside their domain?
68 The enigma of capital
The material basis of capital
Despite their pivotal significance, the definition of capital and the meaning of accumulation remain unsettled. 1 Historically, the principal contention stemmed from trying to marry two different perceptions of capital - one quantitative, the other qualitative. Originally, capital was seen as an income- generating fund, or 'financial wealth', and as such it had a definite quantity. It was also viewed as a stock of physical instruments, or 'capital goods', char- acterized by a particular set of qualities (Pasinetti and Scazzieri 1987). The key question concerned the connection between these two incarnations: are 'capital goods' productive, and if so, how does their productivity affect their overall magnitude as 'capital'? (Hennings 1987).
Mainstream economics has been trying to show that capital goods indeed are productive and that this positive attribute is what makes capital as a fund valuable. The marriage, though, hasn't work well, partly due to a large age difference: the concept of capital predates that of capital goods by a few thou- sand years, suggesting that their overlap is not that self-evident.
The older partner, capital, comes from the Latin caput, a word whose origin goes back to the Fertile Crescent in the Middle East. In both Rome and Mesopotamia capital had a similar, unambiguous economic meaning: it was a monetary magnitude. There was no relation to produced means of produc- tion. Indeed, caput meant 'head', which fits well with another Babylonian invention - the human 'work day' (Schumpeter 1954: 322-23; Bickerman 1972: 58, 63).
The younger partner, capital goods, was born millennia later, roughly together with capitalism. The growing significance of mechanized instru- ments captured the attention of pre-classical writers, but initially these were referred to mostly as 'stocks' (Barbon 1690; Hume 1752). The first to give capital a productive role were the French Physiocrats, and it was only with Franc? ois Quesnay and Jacques Turgot during the latter half of the eighteenth century that the association between capitals (as monetary advances) and mechanized production started to take shape (Hennings 1987).
Since then, the material-productive bias has grown ever more dominant. Thus, Adam Smith speaks of 'stocks accumulated into capital' which is 'necessary for carrying on this great improvement in the productive powers of labour' (1776: 260-61); similarly with David Ricardo, who equates capital with 'that part of the wealth of a country which is employed in production, and consists of food, clothing, tool, raw materials, machinery, &c. necessary to give effect to labour' (1821: 85); Karl Marx talks about 'constant capital' represented 'by the means of production, by the raw material, auxiliary material and instruments of labour' (1909, Vol. 1: 232); John Bates Clark asserts that 'Capital consists of instruments of production', which 'are always
1 For the deep sense of unease regarding the definition of capital, see Schumpeter (1954: 322- 27) and Braudel (1977; 1985, Vol. 2: 232-49).
? Neoclassical parables 69
concrete and material' and whose appearance as value is 'an abstract quantum of productive wealth' (1899: 116, 119); Irving Fisher takes capital as equivalent to the prevailing stock of wealth (1906: 52); Frank Knight sees capital as 'consisting of non-human productive agencies' (1921: 328); while Arthur Pigou conceives of capital as a heterogeneous material entity 'capable of maintaining its quantity while altering its form' (1935: 239). Summing it all up, Joseph Schumpeter naturally concludes that, in its essence, 'capital consisted of goods', and specifically of 'produced means of production' (1954: 632-33). No matter how you twist and turn it, fundamentally capital is a material entity.
Yet, the classical political economists did not have a complete theory of capital. Recall that these new scientists of society started to write when indus- trialization was still in its infancy, smokestack factories were few and far between, and the population was still largely rural. They therefore tended to treat the amalgamate of capital goods as a 'fund' or 'advance' whose role, in their words, is merely to assist the 'original' factors of production - labour and land. Although the general view was that capital goods were valuable due to their productivity, no attempt was made to quantify their 'amount'. The link between capital goods and capital therefore was left unspecified.
In hindsight, the principal obstacle in establishing this link was that the classicists still viewed capital goods as a secondary input, and in that sense as qualitatively different from the original primary inputs. This belief, though, proved no more than a temporary roadblock.
The production function
Taking the classical lead but without its associated inhibitions, the neo- classicists followed the Earl of Lauderdale (Maitland 1804) in making capital goods a fully independent factor of production, on par with labour and land. Their view of capital, articulated since the latter part of the nineteenth century by writers such as Phillip Wicksteed, Alfred Marshall, Carl Menger and, primarily, John Bates Clark, emphasized the distinct productivity of capital goods, and by so doing elevated these goods from mere accessories to requisites.
The two assumptions
In his book, The Distribution of Wealth (1899), Clark used this newly found symmetry among the factors of production to offer an alternative theory of distribution. The theory stipulates a two-step mathematical link between income and production.
