Sunday, August 28, 2011

Sorry! Once more on economics:

“Monopoly Capital” by Baran & Sweezy, 1966

This classic of American Marxism, written in a clear, somewhat dull style unlike the sometimes convoluted meanderings of Zizek, or the algebraic chapters of Amin, remains relevant today regarding present economic debates. It was written in the mid-sixties, when the ‘exceptional period’ of American corporate capital was in full swing. It claims to be an examination of monopoly capitalism in its highest form, similar to what Marx himself did to early British capitalism in “Capital.” This was prior to the full development of the corporation.

Like people who drive cars or live in homes and understand almost nothing of what makes them ‘tick’ – so too, Americans live in an economy in which many understand little about how it ‘ticks.’ And the result is, just as you will eventually pay a lot to some ‘professional’ to ‘fix’ your home or car, so too will you pay a lot when the ‘professionals’ of economics – monetarist or Keynesian - try their ‘fixes.’ However, unlike automobile or house repair, which can involve unneeded costs but is still a relatively straight-forward mechanical process, the economy is ‘political’ in the deepest sense; not merely a machine but more like several living organisms.

I am going to bullet-point Baran & Sweezy’s (B&S) most salient points. They quote and use the statistical work of various authors – Thorstein Veblein, Vance Packard, Kalecki, Schumpteter, etc. throughout their book:

1. The first point, and one largely accepted now by everyone but monetarists, Libertarians and Tea Party rhetoricians, is that corporations control the U.S. (and world) economy. As a result B&S think that ‘competition’ is now largely a fiction. Within those corporations, or the “oligarchy’ as the authors call it, prices are controlled informally between the giant combines. Small business, entrepreneurship and individually-owned ‘mogul’ businesses are no longer the dominant paradigm of capital, and as such, the ‘competitive’ system is no longer truly competitive.

2. For me, and others I imagine, the main theoretical problem is addressed on page 72 of the Monthly Review edition, in the chapter “The Tendency of the Surplus to Rise.” The authors here make the point that monopoly capital has mostly overcome the problem of the falling rate of profit. Instead, the problem to be addressed under oligarchy is the inability to get rid of surpluses, and without getting rid of them, a resulting stagnation. Certainly, excess ‘surpluses’ explain part of the frequent financial and manufacturing bubbles / busts, the massive amount of waste in the system and even military spending. Ideologically, on the surface though, a system that has ‘too many surpluses’ seems a pleasant problem to have! Their analysis does not explain why oligarchic / monopolist manufacturing concerns needed to go to the U.S. south, to Mexico and overseas if their profit rate was adequate. A good Marxist argument has been made that capital earns super-profits by receiving ‘imperialist rent’ from the financial colonies, as Amin puts it. Nor do they explain exactly why Marx’s analysis of fixed capital has so changed. I think these two factors are actually operating side-by-side, even under ‘monopoly’ - perhaps because it is not a perfect monopoly due to its current world-wide character.

3. Back to the authors’ arguments: Surpluses under monopoly capital can then be: A, invested; B, consumed or C, wasted. Baran/Sweezy discuss the various means whereby the system attempts to get rid of its surplus – foreign investment, R&D, technological innovation, capitalist consumption, sales efforts, military spending, etc. They do not, however, dwell on the issue of 'waste' except tangentially. On the issue of why there is always ‘too much’ under monopoly capital:
“If he is a worker, the ubiquitous fact of unemployment teaches him that the supply of labor is always greater than the demand. If he is a farmer, he struggles to stay afloat in a sea of crop surpluses. If he is a businessman, his sales persistently fall short of what he could profitably produce. Always too much, never too little.”

4. Baran/Sweezy point out that under monopoly capital, sales issues come to even dominate production. They look at the car industry in the 50s and conclude that 25% of every car was needless changes for marketing purposes only. They show studies that indicate cars used more gas and contained more unneeded changes in 1956 than the 1949 model car, so the issue of ‘progress’ was actually backwards. They also estimate that a rationally-built car would cost 75% less than one made by GM. Following this, it doesn't take much to understand that the present constant software and hardware changes in phones, computers, games etc. are mostly cosmetic, generating sales - making prior products unusable, thus a big part of the whole process of planned obsolescence.

5. They note that the FIRE sector (Finance, insurance and real estate) reached 10.2% of the nation’s aggregate economy in 1960, large for its time. They call it an almost entirely parasitic sector. However, they make no case in this book for ‘financialization.’

6. Baran & Sweezy go on to talk about how the government can attempt to absorb surpluses in 3 main ways – defense, transfer payments and non-defense benefits. B&S back-up Keynes’ understanding that government spending, even deficit government spending, has a ‘multiplier’ effect that goes beyond the simple amount of money spent by the government. Government spending can make idle capacity come alive, which leads to higher private profits. Of course, this analysis hurts monetarist / libertarian theories of the dangers of deficits. However, they also point out that the oligarchy will only put up with so much 'deficit spending' - thus a Keynesian solution can never really be tried.

This logic should still apply, at least up to some point where debt service to the banks and rich, of course drags down the original stimulus. Baran & Sweezy wrote this when government deficits were small. I am not aware of any Marxist analysis of the level of corporate and government debt now, however, and whether this Keynesian point still holds. I myself do not think it holds to the enth degree.

Corporate taxes during the '50s and early '60s were high due to rises in the war years, yet corporate profits continued at the same rate. Corporations raised prices or cut benefits to workers to pay the taxes. As another foot-noted writer said, “the government simply used the corporations as tax collectors.” Another lesson about high corporate taxes.

7. B&S have a great description of the U.S. governmental system that runs a few pages, but essentially captures the hollow notion that this is an actual democracy. The Pith? The system is ‘democratic in form and plutocratic in content.’ In this context, Baran & Sweezy note that the greatest government spending increase in 1957 since before the Depression was a 66% increase in defense spending. They call this ‘the key fact of post-war American economic history.’ They contend that if that spending was taken away, the economy would have fallen back into recession or depression, as 9% of the labor force was involved in military production. And here we come to the crux of the matter. Well-meaning calls by anti-war activists and pacifists for a reduction of the military budget and a switch to civilian production is actually impossible under capitalism, as it is a key source for the absorption of surplus. But, according to B&S, a continually increasing military budget, to avoid stagnation, is not a reality either. They cite reductions in military spending in the early 60s to indicate that it cannot grow endlessly.

8. In short, B&S conclude, there is no fail-safe way to avoid stagnation over the long term. However two things do counteract the effect of overly-large surpluses, which then lead to lack of production, unemployment and empty factories, and end in stagnation. They are technological innovations and war. They track U.S. capitalist history since the 1870s, when monopoly became dominant in capitalist economics. B&S look at the economic effect of steam power, railroads and the automobile, all which lead to periods of actual growth. Then they track the obvious effect of the wars – WWI and WWII – and show the same thing. Notably, they diagnose a period before WWI – between the effects of railroad expansion ending in 1907 and war spending in 1915, which showed a period of high unemployment, low capacity utilization and stagnation. If you were to apply this logic today, you would look at the ‘computer’ revolution, which fits their definition of ‘overturning’ prior methods, and should be able to find growth based on this new technological paradigm. And of course, war is now almost a constant. But you should also be able to find the economic end of this paradigm.

9. B&S take up the black question and show that black liberation is not possible under capitalism. They raise the well-known history of prior immigrant groups – the Irish, the Italians, etc., and how they rose out of poverty and marginalization to become ‘accepted’ members of society. And yet black people – to their day, certainly, and to THIS day, have not moved beyond being at the bottom of U.S. society. In the 60s, Lyndon Johnson’s decision to back programs creating a black petit-bourgeoisie was part of a global struggle against the USSR, and was also a way to remove talented leaders from the black masses. Johnson had to prevent the development of a mass ’fifth column’ with no allegiance to capital. However, without leaving the South as sharecroppers and becoming employed in the army and later, government jobs on the municipal, state and federal level, black people would have never been able to increase their economic level. They also benefited from the automobile revolution, but that has now run its course. At present, black people are the main target of reductions in government workforces. This crucial attack may lead to a revival of the radical black movement, who’ve finally seen through the tokenism of Barack Obama.

10. B&S look at the imperial strategy of the U.S. during this period, which boiled down to ‘defending profits’ anywhere in the world. Ultimately, this resulted simply in opposing the U.S.S.R. and its surrogates, and any independent political movements in the world. While their economic scope is not international, B&S mention that all U.S. policy was driven by anti-communism after WWII ended. And that was because any encroachments by nationalists or socialists on private property had to be resisted for the corporations sake. Thus the long, bloody history of the post-war period. It should be noted that the decay and the collapse of the USSR and eastern Europe in the late 1980s (and the long-time abandonment by China of any revolutionary intentions) was not inconsequential to the ‘triumph’ of neo-liberalism domestically and across the globe. I.E., there was a ‘global class war’ – not just one inside the U.S. - and one side won, at least for now.

11. The last section deals with the quality of capitalist culture – education, housing, poverty, human relations and artistic endeavors. In ways, this is an odd section, but attempts to reflect the bourgeois economic effect on human life here in this country. B&S first take on U.S. education, pointing out that it was far inferior to Soviet education. In 1960, U.S. outlay on education was 5.5% of national income; in the USSR it was 10-15%. In third grade, the American child was supposed to be familiar with 1,500 words while the Soviet child was supposed to be familiar with 8,000 words. In fourth grade, the American child was supposed to know 2,032 words, while the Soviet child was supposed to know 10,000 words. These discontinuities continue up into the upper levels of college. Anyone who knows graduates of schools in the USSR or eastern Europe can easily acknowledge the difference. They rake “IQ” tests over the coals as merely showing the likelihood of success at U.S academics and nothing else – certainly not indicators of actual intelligence. They point out that teaching schools in the U.S. were academic jokes. This was all because, under it all, the real intent was that only a small proportion of the upper-class students were to be educated.

B&S point out that poor-people’s housing programs were done in such a way as to fail. In anticipation of the writings of James Kunstler, B&S examine the deformed suburban lifestyle based on the automobile. They jump around on their opinion of divorce, sounding sometimes like stuffy right-wingers, and sometimes not. They make the correct references to Michael Harrington’s study of poverty, Paul Goodman’s “Growing Up Absurd”, Freud and Wilhelm Reich; poke fun at sports conversations at work; seemingly knock Henry Miller, Tennessee Williams and Edward Albee as ‘abandoning the language of art;’ (!) criticize people who collect records or books as phonies; and in one crotchety comment:
“so-called beatniks looking for emotional fulfillment through renunciation of the ‘square’ way of life with its comforts and amenities, and through the adoption instead of a way of life characterized by eccentricity, promiscuity and narcotics.’

OK, well, anyway, pass the weed. These chapters are still soaked – though unknowingly - in the coming civil rights, anti-war and cultural movements that were to define the second part of the sixties. Quite clearly, the early sixties were not a period of quiescence. At one point they make the claim that the war in Vietnam could be a turning point for U.S. capital – a prescient thought. This book is required reading for those seeking more modern Marxist viewpoints than the classics.

And I bought it in the used section at Mayday Books for $4.00.

August 28, 2011


PKM said...

Great review, again, Red Frog.

John Bellamy Foster and Robert McChesney are attempting to extend B&S's Monopoly Capital theory in 2 articles: the first was in the Aptil 2011 MR, "Monopoly and Competition in Twenty-First Century Capitalism" at and the second in June 2011 MR, "The Internationalization of Monopoly Capital", .

Red Frog said...

Thanks for the info. I will try to see what MR says now about 'surplus', government deficits and world competition.