The second of the two talks that Michael Kidron gave in the Capitalism and Crisis course at Marxism 1977, on Thursday, 7 July.
Recorded by Colin Barker.
Transcribed & edited by John Rudge.
First published online in International Socialism 2 : 162.
Copied with thanks from the International Socialism Website.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
A couple of days ago, we were talking about the larger picture. What I was saying then was perhaps a bit unpopular – that some of us now recognise that we are in a different stage of the development of capitalism than perhaps we thought we were last week.
This stage is perhaps even more different than to the previous stage, monopoly capitalism, than monopoly capitalism was different to the capitalism of free enterprise and perfect competition. Perhaps there was never a real stage of free enterprise and perfect competition. Perhaps there was never a stage of pure monopoly capitalism. Perhaps there is not now a stage of pure state capitalism. But in the same sense that there was always differentiation between monopoly capitalism and free enterprise, I think we now can dare to differentiate between the stage of state capitalism and of monopoly capitalism – and actually structure our thinking and, as a result of different structured thinking, also, our practice rather differently to what we have done hitherto.
So now, I will be less all-embracing. I will try to show how the understanding of the crisis is different in the two models; the model of capitalism prior to state capitalism and the model of state capitalism.
Before I go on, I want to say one thing. When I talk about state capitalism, I am not talking about something that happened Tuesday, when we had the first lecture. I am not speaking about something that is fully developed, fully rounded out, some sort of a pure model. I am talking about a tendency. A tendency which had its greatest lunge forward, the crucial lunge, the dialectical leap, in the period of the Second World War and immediately thereafter. It was with that peace time adjustment to the destruction of the Second World War – the changes caused by the Second World War.
Of course, the Second World War itself was solution, or part solution, to the crisis of the major depression of the inter-war period. That in itself was some sort of reflection of the First World War, which in itself was the reflection of the development of monopoly capitalism worldwide. So what I am saying is that there is a historic continuum. That within that historic continuum there are leaps, there are changes, that we have to take account of. The changes that occur affect every aspect of the capitalist system.
One aspect is the crisis. There is a traditional view of what the crisis is about – how it occurs.
Let us take the two separate models.
Firstly, the model of competitive capitalism. There we could say that it was quite normal for a crisis to occur every so often. It was a moment in the normal trade cycle of booms and slumps. It was a fairly useful moment in the cycle of booms and slumps, in this sense. That the booms and the slumps themselves reflected the dance between accumulation and resources in the system. At one period, at one level of production, resources were relatively plentiful. When I say resources, I am looking at it from a capitalist point of view. In other words, when a worker walks into the factory, it is not a worker walking into a factory, it is a resource being part of an input into production. When raw materials come, they are not iron, steel or whatever it is. It is a resource being an input into production.
As far as the capitalist is concerned, as far as the system is concerned, it is quite useful to be in a situation that the resources are slightly more plentiful than is created by accumulation, by the wish to expand. Not a personal wish, not something that on certain days of the week, the capitalists think collectively, “oh, this is expansion day”! And on other days of the week, “this is contraction day”. It is always expansion day as far as they are concerned. But expansion only insofar as it is an expansion of profits. And it is only an expansion of profits insofar as there is something to put into production to create those profits – labour power, and also the tools, the machinery and the materials that labour power actually uses.
Under some circumstances, when expansion gets underway too far, or too vigorously, you run out of resources, the cost of those resources rises and the ability to make profits falls. So the cycle itself reflected that. In some periods, they could expand because the resources were available – labour and other resources. In other periods, they could not expand. In fact, they contracted, because the price for the inputs rose above what was profitable, given the market that was available.
The crisis was a moment in that cycle. The crisis told us that accumulation could not continue on the former basis. That accumulation, that the profitability of production, was being undermined by the change in the price relationship between inputs and outputs, between the productive factors that the capitalist was using and the commodities that the capitalist was selling.
During the crisis there is a different relationship in power between workers and capitalists. That on the rise, with more employment, more security in jobs, the ability to change jobs and to sell your labour power at a higher price, the workers grew stronger and stronger. Thus, the crisis was not only a moment in the life of the capitalist class, but it was also a moment in the life of the working class. If the crisis occurred at the point of greatest strength of the workers, at the point where capitalism is weakest – it was at the crisis point that we often had the confrontations that the socialist movement has lived on as the confrontations that might show the transition to a new society.
But it was only one moment in the cycle. It had a peculiar financial, monetary aspect, that changing relationship between accumulation and resources. Expansion by the capitalists did not happen by chance. Expansion came about because they had the resources. Somebody gave the capitalist the resources to expand.
Obviously, at least in the model of private capitalism, one says that every capitalist invests everything that he gets in profits into the expansion of the business. There is very little waste. In fact, at the beginning of the system, the capitalist was even personally very abstemious. They starved their wives and kids, and occasionally themselves, in order to put every penny into the business to expand, because only by expansion could they survive the competition of other capitalists that were expanding at that rate, or perhaps even at a greater rate. Nobody quite knew how fast they were expanding or how fast the enemy was expanding. Whatever it is, you had to invest to the maximum.
Now, if that is the case, real expansion can only come about by somebody else giving the resources for that expansion. This somebody else was always the banks. It worked very simply – that the capitalist in order to expand, particularly in order to grow by leaps, to grow from one kind of operation to another kind of operation, to install new machinery, or a new branch, or a new something – a thing that you could not do by accretion, by incremental bits. Only the bank could finance that kind of growth.
It was a very simple process. The capitalist came to the bank and said, “you know my record; you know that I am not a thief; you know that all my plans have always worked out; you know, that I am a very profitable business”. “Anyway, why not take a risk” – and the bank would say, “Okay, I know all this. I will take a risk. Here is a million pounds”. The million pounds is simply the ability to draw loans on the bank. It is called an overdraft. It is called a bank loan. It is called investment in industry. It is called faith in the country. It does not matter what it is called. Basically, the bank sat back and made some money. Made some money in the real sense that everybody, following the granting of the loan of a million quid, would accept the cheques from the capitalist, particularly if they knew that he had just come back from the bank and was quite willing to sign the cheques. Everybody would accept the cheques – they were money.
They were money, however, without the creation of an objective co-relative – something out there that reflected that money. When the bank gives you a million pounds, it does not mean that there is another million pounds worth of steel sitting outside in the yards, another million pounds worth of railway carriages waiting to be used, another million pounds worth of eager workers desperate to get into the factory.
It means that this capitalist has been selected from the other capitalists, by the grant of a loan, to wield more pull, more purchasing power, within a given market context, within a given supply of resources. In other words, what the capitalist has gained through the loan is a share of resources, a share of the surplus that is created in the whole of society that was larger than the share he had through his own profitable operations. That is quite significant, because it means that this capitalist can then pull in resources from other capitalists by offering a slightly higher price for them, in case the resources did not want to come naturally.
Of course, the other capitalists got very annoyed with this process. So, they also went to the bank and they said, “Look, our business is being ruined. There is this guy around the corner doing marvellously. He is expanding, and I cannot afford to expand. I will not be able to pay back the previous loans that I have got unless I can meet him in competition. You are in for a penny, you are in for a pound, cough up”. Or they might say, “the prices that we budgeted our operations upon in the past are changing, and we will not to be able to stick to the plan that you agreed when we came to you for financing before – unless you increase your involvement by offering me a million pounds as well”.
So it goes from one to the other. That an expansion anywhere in the system leads to an expansion elsewhere in the system, because it is a competitive system. At the same time the expansion itself is fueled by this “funny money”. In other words, money that does not reflect an increase in real resources. It merely reflects an increase in the number of claims on the real resources. You can see how this works, how it works in the larger picture, that the amount of money in the system, which remember is poured into the system through the banking system, which is not controlled by the individual capitalists. They go to the banks cap in hand, they put on their best suits, they polish up their accents, they join clubs in order to meet bankers. They go to this financial institution in order to be selected as the people that can increase their claims on the total amount of resources that exist.
Now, I am not saying that the amount of resource is fixed. Obviously, if there is more activity which is fueled by new finance – more people are employed, more mines are dug, more railway carriages carry the ores from the mines to the smelters etc, etc. So long as there are resources free to be employed, then the infusion of new money, new claims on those resources, will create new employment. This was the cardinal truth, the great insight, now that “insight” is a political word. It is the great insight of Keynesianism – that by juggling around with the monetary situation, you can also affect the real situation.
But that is true only insofar as there are free resources. After a time you utilise everything that there is available. After a time you come to a position where you cannot increase the amount of coal dug by any other means except by making a new mine. That might take 10 years – you get a real bottleneck. After a time, you get to the point where you cannot find new workers at the Labour Exchange – you actually have to wait for a new generation, or you have to conquer new territory, or bring them in from Turkey and Barbados, or whatever it is. It is very difficult to expand beyond a certain employment in any given society – or you have to drag them out from the kitchens and put them in the factories. That creates other problems which are dealt with elsewhere.
Whatever it is, the important things so far about the crisis or about the cycle of which the crisis was one bit, is that the crisis was only the transition from expansion to contraction in the traditional cycle. That the traditional cycle itself was fueled by the expansion of the money supply. Also, that the money supply came from outside of the contending capitalists. It came from the financial system.
There are a couple of other things that have to be said about the crisis and the cycle. That the fueling of expansion through the monetary system led ultimately, when they ran out of resources, to the rise in prices. When you cannot bring in new workers, you have got to pay the workers that you have got more. Simple as that – it is not a complex thing.
During the inflationary period of the cycle, a shift in power, and a shift in income towards workers, because they are the scarce resource as far as the capitalist is concerned – scarcer than most in the period of one cycle – during that period when workers get stronger, when inflation rises, when some raw materials run out, etc., the whole price situation changes. There are some capitalists that are doing worse than others. Perhaps because they are more labour intensive they suffer most from the workers’ pressure. Perhaps because they are more raw materials intensive, then they suffer worse from the lack of oil, or the lack of iron or whatever it is. For one reason or another, some make it, and some do not.
The ones that do not make it are then put on the carpet by banks. The bank says, “okay, you expected to pay the loan that we offered you three years back on the 25 December this year. We see from your previous annual report that you are not going to find it very easy to do. What are you going to do about it?” Either the capitalist leaves the country very fast, or the capitalist begs, gets down to his knees, and says, “please offer me a bigger loan”. In which case the bank then looks at all the capitalists that he has got in front of him on the computer and says, “no kiddo, you are not going to make it and, so that I do not sink with you, I am going to force you to repay your loan. If you do not repay your loan we are going to foreclose”. When the capitalist says, “you cannot, it is my life’s work. What will my children think of me?” He replies: “Well, you know there is a function for the banker. The banker is not cruel for no reason at all. The banker is the representative of the health of the society, because it is necessary for capitalism that some capitals go bankrupt. By forcing some capitals to go bankrupt, we are releasing the resources for those capitalists that actually have made it. We are allowing the biggest, the best, the most profitable, the most technologically inventive, the most ruthless, the most imaginative, the most this, that and the other capitalists to expand at the expense of the dead wood, the laggards, the sleepers”. You just have to read the Financial Times every day to get all the names for the one kind of capitalists and all the names for the other kind of capitalists!
The bank has an almost religious conviction in the cruelty with which they face the capitalists that cannot make it. They say: “Yes, it hurts me. It would be terrible not to see you at the club this Saturday, because we will not be able to pay the fees. It breaks my heart. Nevertheless, I have to drive you into the ground for the good of the system, because by destroying you, we have released resources. Released resources means reducing prices, the inflationary pressure which comes as a result of more money, but a fixed quantity of resources, will ease. We are shifting your resources indirectly, but we hope effectively, from the laggards, the backward ones, to the technologically more advanced ones and therefore changing the whole nature of the system. Seeing that it remains a revolutionary system and anchors those traditional people who are most in favour of the revolutionising of the system because that is where they make their money, because they are always funding that revolutionary process. Generally we are keeping the thing healthy by controlling the population of capitals. By being the eugenicists of the system”.
Now, it is so beautiful as described. It is so effective. It is so rational. It is such a marvellous system that we actually ought to worship it slightly. That is, of course, if you are not working for it, but you are part of the operations of the higher echelons of the system. You can understand why the bourgeois economists have always not only described and analysed it, but also fallen in love with what they are describing and analysing. It seems so perfect. Everything, without anybody intending anything, falls into place. There is material progress, expansion, increasing wealth. Those that are good are rewarded, those that are not good are destroyed. There is drama. There is confrontation. It is marvellous.
Unfortunately, it also leads to its own destruction in one way. I am not talking about the destruction that comes out of the intervention of workers. I am talking about the destruction that comes out of the centralisation of capital. That, after a time, the banks have done their business from cycle to cycle to cycle. They have backed the winning horses. The winning horses have become big fat carthorses. They have ceased racing because they are becoming so, so large. They are kept alive and kept going more and more. You get to the situation where it becomes a bit difficult to force them into the knacker’s yard, because there are very few horses left. In other words, capital becomes so centralised that something changes in the institutional framework of the system.
This is where we look at the same cycle from the point of view of state capitalism.
Let us look at the assumptions of the private capitalist system. One, that there is a distinction, there is a clear division, between the function of the banker and the function of the capitalist. That is the first overwhelming thing. We look at the world around us and we see – not really. There is no clear distinction between the one and the other. That, as we spoke about it a couple of days ago, individual capitals have become so large that we can talk seriously about there being national capitals. All the so called competing capitals, those that belong to that nation, are competing, but not competing in the market, they are competing for influence within a state bureaucracy, or competing for influence as part of the collectivised capitalist class in that country.
So part of that is also the banking mechanism. It does not surprise anybody that not only are the banks completely nationalised in countries like those of Eastern Europe, China, Cuba and so – but even in many Western European countries, the banks are nationalised. In other words, you take a country like Austria, you take a country like France, and even here, they are talking about the nationalisation of the banks. I do not suppose anybody here really feels that it is either impossible, or if it were impossible and they did it, a revolutionary situation would be created. We just think, well okay, so they have taken the banks over. They took over the Bank of England, they take over the four big clearing banks, they leave the merchant banks alone and then as the clearing banks get more involved in merchant banking they will take over the merchant banks. Nobody really feels that this is going to be a crucial decision on the part of the system.
Why? Because capital is now nationwide, and finance is now nationwide. There is a fusion between industrial capital and all the other bits of capital and finance capital. Given that, something therefore has changed. Whereas before the capitalists used to be selected by the banks for favour, for advance, they were rationed in the resources they could claim out of the system that were not really theirs. Now there is no real rationing mechanism; basically capital controls finance.
It is almost as if SW Litho use the press to print money to pay the comrades working in the press. It is almost like that. That capital nationwide has got the banks nationwide who can create as much money as capital wants. There are problems in it, but that is the fundamental situation.
I am not saying that there is no real finance, no real discipline, in the worldwide system. There is, but it is very marginal.
Whereas before, in the mid-19th century, no capitalist in Britain could print his own money. All money was external to the capitalist sector. All of it was, absolutely every bit of it was external to the capitalist sector. Now, there is some money that is external to the capitals themselves. It is called foreign exchange banking, it is called perhaps the euro-dollar market, it is called the gold reserves held by central banks. However, as a proportion of world money, all of that, however large it might seem, is minute. It might be important, but it is certainly not as important as external money was to the capitalists in the last century.
So that is the first thing that has changed. The distinction between producers and suppliers of goods and services, and the suppliers of finance has rather taken a knock in the state capitalist system.
Then there is another element which relates to this and which we discussed to some extent a couple of days ago. That is the distinction between the state and capital. Whereas before, the banks’ ultimate support, ultimate stanchion, was the state which was independent of every single capital. I am not saying that the state was not influenced by big capitals, that under certain circumstances, the state did not serve the private interests of a single capital as against the general interest. But it was more or less, particularly in the larger countries, independent of individual capitals, and more or less the support of the banking system.
Now, that has also gone. The state is merged with capital in the same way as the supply of finance is merged with the supply of goods and services.
This leaves the system without an external disciplining force. Of course, there is the International Monetary Fund that the British government calls in and says, tell us to do such and such. That does exist. It is also true that the International Monetary Fund acts as a discipline in a country like, say, Peru, where yesterday the IMF delegation left after two weeks haggling with the Peruvian government. But it has not got the same power, the same ability to impose a solution on the individual state capitals as the bank had, and behind the bank, the police and power of the state.
If that does not exist anymore, because if Peru does not want to do what the IMF wants, the IMF can only tell its members, look, I advise you not to lend them any more money, or we advise you to blockade the Peruvian economy in such and such a way. In other words, it can work through trying to influence, rather than sending in an IMF gunboat shooting the opposite of loans.
Right. So we come to the basic problem of the system. That it has no mechanism to clean out its dead wood. It has no mechanism to lighten the load. It is weak in controlling the population of capitals. It is weak in controlling the claims to resources by individual capitals. What actually is the case is that by the system losing a state which is larger, more powerful, than the individual capitals, it has lost most of the mechanisms to discipline the individual capitals. The only discipline is the discipline of the markets. The only discipline is the self-interest of each individual capital. That is why we have reached a situation in which inflation is more or less endemic – because nobody can really prevent it.
Now we are talking about the future great success in controlling inflation as bringing it down from 17 percent to 10 percent per year. Our grandfathers would have been appalled at the idea of a 10 percent per year increase in prices. Nobody now talks about the reduction in prices, nobody talks about the gradual falling prices that took place throughout the 19th century as productivity increased, etc., etc. It is beyond us. The only thing that can be hoped for is, perhaps, a reduction in the rate of increase in prices.
So it has lost its discipline as a system, or rather its external disciplines. It can only live by self-discipline, and by the interaction of the individual capitals themselves. It is a system in which there is no force that can reduce the number of capitals, and therefore a system in which there is no force which can release resources to those capitals that are more successful, or rather, it cannot do so in a clear way, a fundamental way, a way that releases resources very rapidly, which would then reduce prices and so on.
So, it is a system in which the crisis is a much longer-term thing than in the old system. It is a system in which the crisis is not a moment in the trade cycle, but could be a fairly long-term part, with the trade cycle rather subdued. In which we might expect a very long period of what could even be called relative stagnation, with fairly high unemployment, with an inability really to control the cause of crisis, with increasing pressure on them to solve the crisis through enhanced competition.
So far I have been speaking about the system as a whole. Let us now see what it looks like from the point of view of the individual capital, the individual country.
How do we get rid of unemployment? All sorts of things have been suggested. The most glorious is the French suggestion of paying every migrant worker the equivalent of £2,500 in order to run them out of the country. Here is a present, take it home! They have not had many takers. It is pretty obvious that they would not have many takers: a) because people have sunk roots in the country and b) because £2,500 is not going to last very long in the countries that they have come from. If there is unemployment in France, by God, there is unemployment in the countries they have come from. You cannot really build an independent life with your £2,500. Also, the migration of labour itself is part of the commerce between the different state capitals. In other words, it is not as if the Algerian or the Moroccan comes to France freely. It is that his move to France is part of an arrangement between the Algerian and Moroccan governments and the French government. In other words, there is a certain commercial relationship in the supply of labour power, which was not there before. In the private capitalist system the migration of labour was a free thing. In the state capitalist system, with passports every two yards, with governments arranging for foreign currency to be transferred from one place to another, with countries like Mozambique, still living on the gold that is supplied by South Africa for the labour that is supplied by Mozambique – these things are not matters of chance, not the spontaneous events in a market. They are part of a commercial deal between the recipient government and the exporting government, and so it complicates matters.
Not only do the people not want to go back, but also it could rather upset the larger relationship between the two state capitals that are in contact with one another.
So how do they do it? How do they get rid of the sore, which could be a political nightmare for them? Presumably by the expansion of their particular bit of the state capitalist world. By the expansion of their particular capital. How do they do that? You cannot easily. I am not saying it is impossible, certainly temporarily, it is possible. But you cannot easily put up barriers to the products of other capitals in your home market. You look at the Financial Times today. In the first half of the year, 43 percent of cars sold in this country are imports. It seems reasonable to suppose, 43 percent, that could almost double the market for British Leyland. We would solve this terrible stone that the system has hanging around its neck and that is sinking it. British Leyland could become a very profitable concern – if we can only stop these cars coming in. The Americans are saying Japanese steel should stop coming in. They also say that Brazilian shoes should not come in. Everybody is saying that Hong Kong textiles should not come in, etc, etc.
However, it is very difficult in the world that we know now. In the days of imperialism, it was fairly easy. When Japan started rearing its ugly commercial head and flooded India and Africa with knick-knacks, cotton textiles and other cheap goods, it was quite simple for British capital to say, we are putting a quota on Japanese goods. We are doing it because there are vast markets in the colonial territories, which we can yet develop through the export of British goods. Because there was a society out there that could be smashed up, pulped and turned into a part of capitalist society. They did not do it very successfully, but at least in principle, that was an option that was open to them. That vast territory, the territory was not all capitalised. It was not all a market. It could be made into a market, and it could be made into a market if the others were kept out. It was a choice between who was going to make the new market.
Now it is rather different. There is not that much of a new market knocking about. The British home market is the German export market. The British export market is the German home market. If you are going to put up tariffs, if you are going to stop German goods coming into Britain, they can easily retaliate and say, British goods should not go into Germany. In other words, protection is much less of a solution than it was in the previous stages of capitalism – because now there is no external market that is not somebody’s home market. Whereas then, there was, for long periods, a market external to British capitalism that was not somebody else’s internal market.
So what else can they do? State capitalism has rather changed the ability to expand into the space of somebody else, because there is no space that does not belong to somebody else. We cannot simply expand. They can adopt a price-cutting mechanism. Devaluation is what it is called. Now that we are talking about state capitals, we are talking about goods being joint products. In other words, that the whole of the output of the country can be seen really as one product and you cannot really allocate very easily the price of that product to it or the cost of the product to it. You have got a system in which price competition is really competitive devaluation.
Other people can also devalue competitively. If you are a large importer, by devaluing competitively, you come up against the resistance of your working class, and the working class is something that is fairly fixed and has roots. It can fight. We will come to that in couple of minutes.
There are problems about devaluing: a) You are not alone in the world. In other words, there are no external agencies that say, you can devalue, but you cannot. There is no such thing as a world government that makes these decisions. The decisions are always the decisions of the individual capitals and b) that one of the consequences of state capitalism as a world integrated market, is that you are importing as well as exporting. You are becoming as much dependent on your imports as you are on your exports – and that a great part of your imports form the standard of living of your workers. Competitive devaluation is something that hits at workers so hard that they do resist. A mere 5 percent cut in the standard of living over the last year has led even the Transport and General Workers’ Union to oppose any more. You can imagine what it would be like if devaluation went on regularly as the price cutting mechanism.
Of course, they can do other things. They can shift, or they think they can shift, workers from unproductive to productive work. In other words, to increase their productivity without increasing their wages – because workers do get wages even when they are doing unproductive work. But here there are also a couple of problems. One of them is, how do you differentiate between productive and unproductive work when you are a capitalist? Let us take an extreme example from an area some of you might not think is productive at all. From the capitalist’s point of view, there is a difference between a nurse looking after a worker and a nurse looking after an old age pensioner. What mechanism has the capitalist got to come to the nurse and say “the worker – see that he’s happy. The OAP do not worry. In winter keep the hospital wards where the workers are warm, reduce the temperature in the OAP wards. We will call it hypothermia, because it sounds scientific – but actually we are murdering them”. What mechanism has the system got for a thing like that? It has not got one. It cannot, because it has to work through members of the working class – it has to work through the nurses. How are you going to say to garbage collectors in the street, “collect garbage well here, let it rot there”? You do it to some extent because in working class areas garbage is collected, say once a week, occasionally if there is some trouble, once every two weeks. In middle class areas twice a week, and if there is trouble, three times a week. The key thing is that it is difficult to institute these things, because workers are connected with one another, and they do tumble to the fact that there is a difference in the operating instructions, and they might not accept the difference in the operating instructions.
So, it is very difficult. They do not quite know what is productive and what is not productive. Finally, they are hamstrung by their own ideology, in the sense that they define certain things as productive which are not, like advertising expenditure, but they do not define other things as productive which are, like housework. If they really cut the welfare services to the family, they would be in more trouble, but they cannot face it, because they are tied to a peculiar sort view of what is productive and what is not unproductive. A rather dead view.
So what can they do? I am going through the list trying to find how we can make a single capital profitable compared to the others. There is also, I suppose, rationalisation. They can make larger and larger units, which will therefore be more productive. However, it is not always true that larger and larger units are more productive. They are subject to greater and greater strains, greater and greater sabotage. Sabotage by the workers. There is a great new economic and engineering science where you fix it so that the production programmes of individual factories are so tied in with one another that, as the flow comes out of one factory, it becomes the input into another factory. Then they find that they are totally dependent on three forklift drivers who can go on strike and smash them for months! It is so tied and so tight a system that they cannot do it.
So there are limits to rationalisation. Also, there are limits to the managerial and administrative structures that they can bring to bear on that kind of rationalisation. As it becomes more complex, as the size grows larger, you have to suck more and more people into the administrative structure. The result of that is those administrators tend to become slightly more proletarianised, slightly more bolshie, slightly more unproductive from a capitalist point of view. So there are limits here as well.
There is also the limit in resources. In order to build new competitive structures, you have to be able to supply the investment. In other words, you have to find the resources to do so. One of the results of the destruction of a banking system is that most of these resources have to come from internal resources within the country itself. That means that you have to destroy smaller industries in order to build the bigger industries. It means that you have to come to agreements with foreign governments to allow the export of the product of the new industries. You have a problem of arranging with foreign capitals for mutual benefit. If you are getting some part of the mutual benefit, you have got to give some part of the mutual benefit. If you are finding a foreign market, you have got to open your own market. So there again it is a problem. Expansion becomes an increasing problem.
I suppose they could try to smash their workforce at home. It has always been an option for capital. Less of an option now than it ever was, and this relates to something we were discussing a couple of days ago. I suppose they could approach it gently. They could institute welfare cuts. They could say to their workers yes, welfare is an unproductive way of spending money. Welfare is government money and everything that government does is, according to ruling ideology, unproductive. A ruling ideology which, I am afraid, many Marxists have fallen into accepting – that government activity is, almost by definition, unproductive. Therefore, let’s cut welfare, let’s really get the thing going, let’s take away the £20 per head of population that comes from government.
There is a really fundamental problem. It is that the nature of the working class has changed, from being a relatively renewable resource, to being a fairly fixed thing. Fixed in its size and also fixed in the range of skills that is required from workers. It is very difficult to see how capital can break its working class and also continue in production. I am not altogether clear in my own mind how these two things relate. We all know that the workers are stronger now than they have been in many periods in the past. It’s a feeling that you get. You feel that, for example, even the most extreme government in power is thrust towards the middle ground and you know that is not as a result of them working it out. It is as a result of pressure, and the accumulation of pressures makes the fact that Heath was destroyed by the miners not so extraordinary. [32] The fact that throughout the world, crisis or no crisis, the political tendency is towards a sort of social democratic centre or the liberal centre, and I am not making too much of a distinction between them. That in a period of tremendous crisis for the system, the biggest crisis really since the 1930s, there has not been a real shove towards the right. In fact, the right has rather collapsed over this period. Whether it is in Greece, or Portugal or Spain – I am not saying that Spain does not have a right-wing government – but it is not as right-wing as it was. Somehow you get the feeling that they are enclosed. They cannot really move. But it is not only because of the confidence that has been bred in the working class over the last 30 years of high boom and high employment and so on – because that can also disappear. There is something larger than that. I know that it is somehow related to the fact that the working class is now a fixed quantity, a fixed resource. It is not something that can be renewed very easily. It is something that cannot be got rid of very easily.
You can imagine Enoch Powell sending a few million people back to the villages or towns of their previous country. You can see that is at least feasible in imagination. I do not think it is feasible in practical politics. What is not feasible is to send the German workers back to the German villages because the villages do not exist any longer, to send the British workers back to the British villages, or to send the French workers back to the French villages, where they are not a charge on the state, where they can be turned into peasants once again – feeding themselves, almost completely taken out of the money economy, and therefore also taken out of the welfare strain on the capitalist system.
Something has changed and because of that change, somehow workers have more power within the system than they had before. Whether they know of that power, whether they are conscious of it, or whether it is described properly or not, I do not know.
In fact, no working class has been smashed in recent years, except for one place, and that is Chile. There are special reasons for the Chile experience. Certainly nowhere else has the working class been smashed. It is not as if there have not been confrontations and it is not as if they have not had the opportunity.
The Polish working class is still alive and kicking and kicking fairly hard. The whole East European working class seems to be alive and kicking, and kicking very hard. Nothing has happened in the West that actually has shown us that they can do it. So what I am saying is that they are finding it difficult. That within the state capitalist system, there are reasons to believe that the system is much more tightly controlled, much more brittle, much more inflexible than was private capitalism.
So you just have to take something else. In the old days, it was possible to conquer resources. You had a good army and you sent them abroad. You usually sent them to those that you could conquer most easily – colonial or semi-colonial countries. You could actually get what you needed, you could expand. If you could not do it economically, you could do militarily. Usually you did both. Now there is a thing called the balance of terror, and it is a little more difficult to go swashbuckling abroad and get what you cannot get through the market.
It going to be even more difficult in the future. Until very recently, in order to be a member of this balance of terror, you perhaps had to spend $120 million on a B-1 bomber. Now you only have to spend $200,000 on a cruise missile – obviously I am impacting the future on to the present. But what I am saying is that such a great effort has gone into the mechanics of the strategic confrontations that it is becoming cheaper and cheaper for the state capitals to join the nuclear club and the nuclear delivery club. It is becoming therefore a much more dangerous world. Therefore, the constraints on the individual capitals are becoming greater.
So what have they really got? I am fairly desperate to see what they can do in order to break out of the crisis. I have said that the important conditions for the renewal of the cycle that existed in the private capitalist system do not exist anymore. I have said, okay, forget about the system, what can an individual capital do in order to break out of that particular crisis? You find no, they are put into a corner by their own workers. They are put into the corner by the fact that their relations with capital are relations that are not mediated by some larger institution, by some world state. They cannot use force because they are all armed. They are really stuck. There is no way that I can see, not by the traditional means of bankruptcy or destroying another capital in order to release the resources for those that survive or by expanding competitively and so you draw in the resources that you require and let them die gently – even if they will still litter the United Nations. They will be less and less important as economic factors. I cannot see what they can do.
Of course, they can sit on an oil gusher. It is quite a useful thing to have an oil well at the bottom of your garden. British capital is thinking that this is the salvation. Who knows? For the moment it seems wonderful for them, but I have not noticed that it has alleviated very much of the crisis up to now. Gas was supposed to do that a couple of years ago, but we still had the crisis. Now oil is supposed to do it. Anyway, who knows that oil is going to be such a successful thing. If it can solve Britain’s problem then it can solve everybody else’s problem. Everybody can find a gusher. I do not know whether you follow these things, but three months ago, the Mexicans had oil reserves of 11 billion barrels. That is nothing – everybody has got 11 billion barrels. Then they had to go to the States for a foreign loan and suddenly they had proven reserves of 63 billion barrels! That is more or less a Kuwait-size billionage. I have no doubt that in order to get a further loan, they will have 120 billion barrels. Everybody is sitting on an oil gusher. If it is false, then the people who are going to finance it are in trouble. If it is true, the people who are sitting on the oil gushers are in trouble. I am not sure that it is the solution. And if they are all actually going to use the same sort of solution, then it is clearly not a solution.
So let me end here. I have tried to show that, through looking at the crisis a little more closely, you can see that conditions have changed markedly between a previous phase of capitalism and today. That in a previous phase, the crisis was something that the system could overcome. In the current phase, my imagination is not strong enough to see how the system can overcome the crisis. Can overcome it without such upheaval that it will break. We have always said that capitalism has got two clay feet. One of them is the workers. The other one is the other capitalists. You can, I suppose, walk with two clay feet, but when the clay feet have invaded your whole anatomy, when you are all clay, it is very difficult. The only thing that is not clay is your brain. It is the only thing that allows you to see that the world is not made out of breakable material.
This is the situation I think that we have reached. I think it is a situation that we reached before the perception of the situation. For a long time we were obscured by the boom. Then from the mid-1960s, for the last 10 years, it has been falling apart. We have noticed it falling apart, but I do not think we have understood how deeply in crisis the system is. I think it is very deep.
Anon: It seems to me, although I may be wrong, that there is a very definite Friedmanite inference – not implication, but inference – in what you have been saying.
As I understand it, for 30 years on either side of the start of the century, the Gold Standard attempted in international terms to perform part of the control system that you mention, in conjunction with the banking system. When the General Strike came in this country, as I understand it, the mechanism of the Gold Standard, whereby wages were directly pushed downwards – a halt was called to that method – and the Gold Standard was not operated thereafter.
However, it does seem to me, that the system that we have experienced in this country over perhaps the last five years, is reminiscent of the Gold Standard to the extent that real living standards have been seriously depressed, perhaps greater proportionately, than at any stage in the past 40 years. We have a system whereby the government of the day is able to blame a part of it on exterior forces, like the quadrupling of the oil price in 1974, etc. So it does seem to me, that there is an alternative system operating, which is tending to help downwards, that part of the cycle. Maybe not as dramatically as it was in the 1930s, but nevertheless it seems to be operating. I say that it seems to have a Friedmanite inference in that we have seen over the last few months that this government in power at present has readily acquiesced in controlling the money supply within certain limits.
We have heard from the utterances of Keith Joseph, NAFF [33] and a few other right-wing monetarists, that there is no problem with doing away with the Social Contract. You simply tighten up the money supply and you take the consequences. To the extent that you can blame the consequences in greater unemployment on exterior forces, which in our case is relatively quite easy. You may find a way out of your dilemma, at least a partial way. You may succeed in bringing the country into part of the downswing of the cycle, and we have come into the downswing cycle over the past 5 years. So long as you can blame it on somebody else, you may be able to prevent the logical conclusion of workers actively protesting. I would like a little elaboration on that.
MK: The first question was about an alternative system to reduce standards. In other words, in the old days, the laws were projected on to the Gold Standard and the Gold Standard imposed, as it were, a certain kind of economic behaviour in the individual countries. What is it now that leads to a reduction of standards, or leads to the financial discipline that seems to have prevailed over the past couple of years in reducing British living standards? Also, what does this mean in terms of agreement or disagreement with the Friedmanite views?
As far as the first question is concerned – the alternative system to the Gold Standard. I would say that there is no outside compulsion on any country to impose a cut in living standards, except the compulsion of the market. The difference between now and then is an institutional difference. Here it is a voluntary act on the part of the governments as they interpret the world market situation. Now obviously, if one of their methods of competing is by cutting workers’ standards, then one of the methods they would try to use to cut workers’ standards is to impose a monetary corset on themselves. It is easier for them to do that by invoking an outside power. So they pump up the IMF as the big ogre. But in principle, it is a reaction by the capital itself to what it sees to be its best interest to the situation outside, rather than any imposed solution to the problems. It is complicated by the fact that the Gold Standard was run by British capital. By the British state disciplining both British capitalists, and certainly disciplining the rest of the world. Later there was a Gold Exchange Standard and the American dollar was king. For a long time, the American government acted, not only to control its own situation, but also to control the situation outside. Now with the break of the dollar supremacy – I am not saying the dollar is not a powerful currency and that the Americans do not have any influence – but the situation is more one of the major capitals competing to get their currencies accepted as reserve currencies by the rest of the world. There is no way that they can actually discipline the rest of the world. It is much more voluntary. The mechanism has changed completely.
As for Friedman and Friedmanism. I would say that their analysis, insofar as they are saying that there is no financial discipline within the modern world, they are right. Insofar as they are saying, that there is no way that the individual capitals can be forced to do something, they are right. When they say that the solution is to reinvigorate a private capitalist system, to restore a private capitalist system, they are so anachronistic as to be out of their minds. The scale of operation now is such that there is no possibility of having a private capitalist system. Now, it is true that you can, with the private capitalist system have financial discipline, because one of the consequences of a private capitalist system is an independent banking system. This is what they would love to do – have a banking system that actually rations money and is firm about it. When they complain about current Central Bank policies, it is because they know that the Central Bank can only be firm in periods. They cannot actually be the disciplinarian over the system, because they belong to the system. They are part of capital itself. That is where they are right – that there is no discipline. It is also where they are wrong. There is no way of re-imposing that discipline without reverting to the 19th century in the way that they want.
Anon: You have only spoken about state capitals. What about international capitals?
MK: I did not want to bore you with international capitals, because I assumed that so many people were at the meeting that we had on Tuesday.
Let me just summarise what I said there. It is that all the progress towards a state capitalisation is a two-fold process. On the one hand, it is the progress towards an integration of the state with capital, towards national planning, towards an explicit economic policy and long term economic policy, towards control over natural resources – insofar as you can control natural resources.
At the same time, it is a process of enclosure of the world’s market by other national capitals who are doing exactly the same thing. Which means that the only export market that a national capital has, and the process itself partly results from the increasing size of production, it means the need for world markets. Just to give you an example, Boeing Corporation provided something like half the planes for the entire world civil aviation fleet over the past 10 to 15 years. So Boeing could not exist only within the United States. The uranium processors cannot exist only in Britain, the United States and Russia or wherever. They need the world market. But that world market is made up of the home markets of the other state capitals. One of the most effective ways of getting into the home market of the other state capitals is, not by exporting goods, but by making the stuff in their home markets. For that there has to be an arrangement. You open yours for production, they open there’s for production. That means that a necessary part of the state capitalisation of the world is the growth of the multinational corporation as the economic mechanism for exports into the home markets of other countries. It is a dual process.
Anon: You say that you cannot think of any option capitalism has to get out of its crisis. You also seem to be saying that capitalism is about to collapse – not by workers doing anything, like revolution, but just by being strong.
MK: Yes, that it seems a very quietist view that the collapse of capital will come automatically?
I do not think that is right. I think that by describing, by trying to make this imaginative leap into the problems as seen by capital, is a necessary thing for us to do. If we confront capital, then we have to see where their weaknesses are and where the weaknesses are not.
Now, it might be that they themselves find that the crisis is the end. I do not think so. It might be that they think that they can still live with it. I should expect that, as far as most of the chancelleries of the world are concerned, they are saying to themselves, well, we do know that we can survive if some of us go under. That it is not going to be me. That in Whitehall, they are looking at Italy and rubbing their hands with glee to some extent, and saying, if only that country would sink into chaos, we would be able to buy up the best bits, and that would expand the place for British capital.
Throughout what I said, there was always in the background, one of the things that is restricting the capital worldwide, is the increased power of the working class and the limits that poses on the policy options that capital has.
Now, nobody is as wise as we are that the capitalists are pushing very hard for many of the traditional solutions that they found in the past. In the past they found a solution in keeping workers un-unionised. The most extreme of them turn to Grunwick and say, we will support you to the hilt in order to keep this place un-unionised. We do not want legislation to sustain workers.
There is a stream of opinion, even within the state capitalised world that we have, that wants to take on workers on a 19th century, private capitalist basis. Obviously, they are going to get their noses bloodied. Sometimes workers are going to lose. On balance, I think workers are going to win in that way. Now, what that means is that, where capital is weakest, where the workers’ situation is strongest, where the confrontation sometimes comes, obviously, the rest of the capitalists come round to support, for loyalty reasons, because they cannot be seen to lose etc., etc. They will come around to defend weak positions. This is where often a break will occur.
When I say that capitalism is in schtuck, I am not saying that they are going to resign. I am just saying that these are the delineations of their problem. Therefore, this is the general structure of our approach, that is all. I am not calling for quietism.
Anon: Is one of the possible solutions for capitals the fact that they are sitting on oil reserves? You also say that no working class has been smashed over the last few years. I am not sure if this is accurate – what about Thailand, where if they have not been smashed, they have been slowed down pretty well?
MK: Why would we be in trouble if everybody had oil gushers? No, we would not be in trouble if everybody had oil gushers. If everybody had oil gushers we would be in trouble, because then oil would not be a scarce resource. The trouble would move somewhere else. Whether it would be uranium, whether it would be skilled labour power or another thing – oil is just a symbol of something else.
Obviously, if oil is a scarce resource, and I do not know if every Mexico is sitting on an oil gusher, but it might be that only Mexico and Britain are sitting on oil gushers. If it remains a scarce resource, then clearly those that have it will win out in competition with those that do not. When I say that the world system is in crisis, it does not mean that some individual capitals are not going to survive longer than other capitals. It certainly seems to me that Germany will survive longer than Britain at the current situation. If Britain has oil and Germany does not have oil it will change the balance of advantage towards Britain and against Germany. In that case it might be that Britain will survive and not Germany. What I am saying is that the structure of the crisis means it is difficult for them to get rid of some of the components of the world system. It is difficult for them to thin out the population in an overcrowded capitalist market. Some of them are going to survive. It might be those with oil gushers.
As for the Thai working class being smashed – I do not know. I do know that there was a huge attack. What the results have been I do not know. You might be right, and Chile is not the only country with peculiar circumstances. That Thailand also has peculiar circumstances. In the major industrial economies it has not happened, and I think it is going to be a very difficult thing for them to engineer – because workers are so irreplaceable at this moment.
Anon: Can you elaborate more on under-developed countries?
MK: Again, this is something that we spoke about last time. That there was a period in the 1950s and 1960s in which it looked as if the state capitalisation of the world was extending through the industrialisation of backward countries and so on. It all looked really very rosy as far as they were concerned. It now seems that the cost of entry into the capitalist world was too great for even the biggest of the backward countries to manage. Whether it is China or India or Brazil or whatever – they each in turn came up against problems. Even countries that were so devoted to autarchy, independent development, nothing to do with the world market like Burma, for example, have recently changed their policy to accept loans, and therefore been tied to the consequences of accepting loans from the big capitals.
So what it seems to be is this. That the weak state capitals of Africa, Asia and Latin America are unlikely to develop into competing competitive capitals. That they are in for a period of stagnation in which their resources will be dragged into the sphere of influence, into the use of, the developed state capitals. For those reasons and other reasons as well, we are turning back into the period of the end of the 19th . A period of new imperialism, although it is not called colonisation. It means their resources can be absorbed, almost formally, into the sphere of operation of the larger capitals. That would save, to some extent, the larger capitals from the decline that I was talking about. But it will not save them very much, because the relative sizes of the larger capitals and the peripheral capitals are so different now than they were in the 19th century, that no amount of resource flow from those entire continents could provide the requisite inputs that are necessary for development.
32. A reference to Ted Heath calling, and losing, a general election in the middle of a miners’ strike in February 1974 under the slogan “Who Governs Britain?”
33. Joseph was a right-wing Conservative member of the shadow cabinet who worked closely with Margaret Thatcher. The National Association for Freedom (now The Freedom Association) was a notorious right-wing, anti-trade union pressure group founded in 1975.
Barker, Colin, 2019a, Notes on Capital and the State: part 1 (25 January).
Barker, Colin, 2019b, Notes on Capital and the State: part 2 (8 February).
Barker, Colin, 2019c, Notes on Capital and the State: part 3 (22 February).
Binns, Peter, 1978, Editorial, International Socialism 1 (summer).
Birchall, Ian, 2003, Michael Kidron (1930–2003), Revolutionary History, volume 8, number 3.
Birchall, Ian, 2011, Tony Cliff: A Marxist for his Time (Bookmarks).
Braverman, Harry, 1974, Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century (Monthly Review Press).
Callinicos, Alex, 1977, Editorial, International Socialism 100 (1st series, July).
Callinicos, Alex, 2003, Mike Kidron (1930–2003), Socialist Worker (5 April).
Callinicos, Alex, 1982, Is There a Future for Marxism? (Palgrave Macmillan).
Harman, Chris, 1977, Better a Valid Insight than a Wrong Theory, International Socialism 100 (1st series, July).
Harman, Chris, 2003, Permanent Legacy: Michael Kidron (1930–2003), Socialist Review (April).
Harman, Chris, 2009, Zombie Capitalism: Global Crisis and the Relevance of Marx (Bookmarks).
Kidron, Michael, 1977, Two Insights Don’t Make a Theory, International Socialism 100 (1st series, July).
Kidron, Michael, 2002, Failing Growth and Rampant Costs: Two Ghosts in the Machine of Modern Capitalism, International Socialism 96 (winter).
Rudge, John, 2018, Sam Farber and IS: The 1973 Visit and Beyond, Grim and Dim (14 May).
Last updated on 10 May 2022