Chris Harman & Meghnad Desai


Is there an alternative to the market?

(June 1995)

From Socialist Review, No.187, June 1995.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Archive at
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

Many socialists used to believe that the state could intervene to regulate the market. Now that belief is out of fashion. Chris Harman, editor of Socialist Worker, and Meghnad Desai, a professor at the London School of Economics, debate whether capitalism can be controlled

Chris HarmanChris Harman

We live in a world in which for very large numbers of people life is hard and miserable and seems to be getting worse. A recent World Health Organisation report said that the biggest killer in the world today is not Aids, not TB, not cholera, but can be summed up in one word: poverty.

It estimates that 1.1 billion people in the world live in extreme poverty. And the poverty is concentrated, of course, in what we call the Third World countries. In the past ten years the International Monetary Fund and the World Bank have imposed what are called structural adjustment programmes on some 70 or 80 Third World countries.

The effect of these everywhere is more or less the same. At the top of society they increase the wealth of a minority of people who live luxurious lives, while at the base of society they increase intense poverty, unemployment and undernourishment.

In the advanced countries, the picture in terms of people’s absolute living standards is better, but the situation there has also changed dramatically over the last 25 years. The period after the Second World War is often now regarded as the golden age of capitalism.

The last 25 years have seen three major economic recessions – the third of which the world’s second industrial power, Japan, has not emerged from yet – and in the same period you’ve seen in the biggest industrial power, the United States, an increase in inequality and a drop in the real living standards of the mass of the population of about 5 percent. The average working week in the US has risen by about seven hours a week and there is an increased feeling of hopelessness in society.

In Western Europe during that period we’ve seen the rise in unemployment from a minimal level in 1970 to a figure of about 20 million now. This is a system which – far from offering any hope of a better life – offers the prospect of instability, insecurity, higher unemployment in the future.

Most people today don’t expect life to be better for their children than it is for them. This is a massive change from the 1950s and 1960s, when people expected their lives to get better as they got older, and that their children and grandchildren would have immeasurably better lives than they had had. That’s not the situation today among the mass of people.

This is a system where in each country a small minority of people control the means of production. Anyone else who wants a livelihood has to work for them. The choice in the advanced capitalist countries is that if you don’t work for those who own the means of production you have to live on benefits. In Third World countries there isn’t even that choice available.

But those who control the means of production don’t determine what is produced on the basis of any meaningful assessment of what people themselves require but on the basis of blind profit. This particular system we refer to as the market: those who own the means of production continually try to compete with each other on the basis of producing in order to make profit in order to further produce in order to further make profit.

There is no coordination of production. The whole history of the system is that it storms forward then lurches into crisis repeatedly. Each time it storms forward it uproots people’s lives and encourages them to move to large centres of industry. Each time it lurches into crisis, it creates unemployment, forces people to abandon the way of life they had created and destroys the possibility of reform. Even when the system is going forward, there is still periodic upset and upheaval in people’s lives.

The idea of the perfect market in which supply and demand fit together and satisfy what people want has been undermined.

Yet we have a paradox. Precisely those people in Britain who traditionally believed you had to reform the system, that massive state intervention was required in order to prevent the market from coming apart – the ideas which characterised the Labour Party from the 1940s right through to the beginning of the 1980s – these people have now abandoned any such notion.

If you read the speeches of the Labour front bench spokesperson on economics, Gordon Brown, the extent to which he has abandoned any idea that the state can intervene in the economy to overcome the absurdities of the market is amazing. Labour’s recent conference – allegedly to modernise the party’s doctrine – threw out the old formulation ‘to secure for workers by hand and by brain control of the means of production, distribution and exchange’, and replaced it by a formulation which praises the ‘enterprise of the market’ and ‘the rigour of competition’.

Hands up for the market

There’s this ‘modernisation’ of thought just at a period when all the old ideas are actually being falsified in terms of their own theory. Unfortunately Meghnad is one of the people who has been associated with the shift in ideas. It used to be argued in the Labour Party that you didn’t need to talk any longer about public ownership because capitalism itself had become a more rational system. A man called Anthony Crosland wrote a book called The Future of Socialism in 1956 which basically said capitalism no longer suffers from booms and slumps, capitalism can automatically make people’s lives better, capitalists are no longer simply motivated by greed, the system is no longer dominated by finance, or by profit. Capitalism is becoming a system more and more close to what people used to call socialism, he claimed. The system could redistribute wealth from the rich to the poor and could overcome any tendency towards crisis.

The change that has taken place in terms of the thinking of the present Labour leadership – and of people like Meghnad – has been the assumption that the state can’t do any of these things. Capitalism is a more market prone system, less subject to coordination, less subject to control.

Meghnad has written, ‘The national state is no longer able to exercise autonomous control over capital’, so ‘Clause Four is out of date’. He points to the failure of Socialist governments in Spain, France and Portugal to deal with the crisis that the system brings about, and says that, ‘We used to believe that left Keynesian methods could overcome the irrationality of the system’. Now he says you can’t do anything.

It’s an argument that says we can’t stop lunacy by limited reforms so we should embrace it: a bucket of water won’t put out the fire’ so why not pour petrol on the fire? The system’s out of control, there’s nothing we can do about it, therefore we have to live by the system. It’s a quite absurd argument.

If you read Will Hutton’s book, The State We’re In, three quarters of the book presents a picture of British capitalism and capitalism in general which is dire beyond belief. It is more and more characterised by class conflict, by irrationality, by ruining the lives not merely of the poorest third of the population but of the third who are above that. The idea that you look at that picture and then conclude that all we have to do is go along with the Labour Party leadership which has abandoned any notion of intervening in the system, or trying to control the system, is not a conclusion which any rational or sane person can come to.

Eric Hobsbawm, once described by the former Labour leader Neil Kinnock as ‘my favourite Marxist’, had this to say at the end of his book, The Age of Catastrophe:

‘We do not know where we are going. We only know that history has brought us to this point and why. However, one thing is plain. If humanity is to have a recognisable future it cannot be by prolonging the past or the present. If we try to build the third millennium on this basis, we shall fail. And the price of failure, that is the alternative to a changed society, is darkness.’

That’s the picture Hobsbawm paints of present society. The golden age of capitalism is over and – 25 years into a new era of crises – the crises get deeper, there is less and less control, no one knows what to do with the economy, all round the edges of the system there are an increasing number of wars and bloody conflicts.

There’s this picture of the system and we’re supposed to accept it. I would argue something different. The people who wanted to reform capitalism 25 or 30 years ago who based their ideas on the writings of the great interwar bourgeois economist Keynes grasped something important: that capital could not be left to its own dynamic, that if we were to prevent increasing irrationality and chaos in the world, somehow there had to be intervention to control the economy.

The mistake that Keynes made, or that Crosland made in the 1950s, or that Meghnad himself made 15 years or so ago, was to believe that the existing state – organised as it is, run as it is, on the basis of intervening at the top of society – could somehow influence the capitalists who control the economy in such a way as to make it behave rationally.

This belief has fallen apart partly because we see the increased power of international capital today, partly because the state in any advanced society is always run by certain groups of interests associated with and integral to the capitalist ruling class in each country.

But it doesn’t mean the need to control or the need to intervene don’t exist. What is required is a much more revolutionary project than anything imagined by Keynes, Crosland or by those who accepted reformist ideas in the 1970s. You have to look to seizing control of the major centres of the economy, of beginning to replace the irrationality of the market by planning at the centre of the economy – not planning every sweetshop or every tiny enterprise – but making key decisions determining control over the economy. If we don’t have that we’ll have a world more and more in crisis, with the accumulation of riches on the one hand for a minority of people and with vast pools of poverty on the other – with all the irrationality and barbarities that implies.

Meghnad DesaiMeghnad Desai

There are two kinds of people: there are optimists who say yes the system can be changed, and there are pessimists who say it’s going to go on like this for a long time. Having spent part of my life as an optimist, I have now joined the pessimists.

Chris referred to Eric Hobsbawm’s book. It characterises the 20th century as ‘the short 20th century’ – from the outbreak of the First World War in 1914 to the collapse of Eastern Europe in 1989. In the short 20th century people began to believe things about the capacity of the state to do things with something called the economy. It started in the First World War when it was possible for Germany to start to get a hold over the economy – a solution called ‘war socialism’ in Germany and later on called ‘state capitalism’ by Lenin.

People began to think that the state can control and shape the economy. Clause Four was characterised by the belief that the workers would take over collective ownership of production. The Labour Party would come to power and take over the commanding heights of the economy and the collective ownership of the means of production.

Keynesianism is also a version of that theory. Another version of the theory says, well you don’t actually take over the means of production but we can manage the economy in such a way that we can direct the economy.

Indeed for about 25 years – between 1948 and 1973 – it was almost possible for us to believe that high levels of employment and high levels of social spending were possible. And then the whole system broke up. In the 1950s and 1960s unemployment was 2 to 2.5 percent. Since then it has steadily increased.

I think what basically happened – Chris was quite correct about it – was that the people who owned the means of production first of all have no desire to be the citizens of one country. They don’t care about making profits here, they’ll make their profits anywhere. When profit in Britain slumped then capital started migrating to areas where more profits could be made.

Keynes and Crosland believed that the state could more or less challenge capital and capital would accept or surrender. The most remarkable thing that happened was the technological revolution which led to the growth of information technology. Capital became rootless, in the way that it was in the 19th century.

What is remarkable still about 19th century socialists is their total lack of a statist programme. Let me read to you my favourite quotation:

‘Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind.

‘The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the productions of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal interdependence of nations.’

This is from the Communist Manifesto by Karl Marx and Frederick Engels.

The world after the short 20th century has now gone backwards – at a slightly higher level – to what the 19th century was like. Because capital is mobile, capitalists can move from the United States to Malaysia or Indonesia or China. It’s no longer possible to think of the Western world as the advanced capitalist world which has control of its capital, control of technology. What is going on right now is that we are back to a global system in which the workers are confined to national boundaries but capital is not. Individual states – even the most powerful nations – are begging capital to either stay at home or come from abroad and settle here. That is a characteristic political change.

Today it would be folly for any government which comes to power to believe that it could actually control capital. What is actually happening is that due to the First World War, due to the Bolshevik revolution, people speeded up history. When Lenin left Zurich in the sealed train [in 1917] he told a group of students, ‘I won’t see socialism in my lifetime’.

The idea of socialism in the 19th century was never that it would happen tomorrow. Capitalism’s dynamic is still fantastic. The productive forces are still developing. What really happened between, say, the state capitalism of the Soviet Union and the bourgeois capitalist model of the West is that in terms of technological progress the West beat the hell out of the Soviet Union. While capital is reconstituting the globe and before we can establish international relations among the working class, are we going to pretend that is really possible? It isn’t happening. People like Lin Piao in the 1960s said the Third World is going to come and invade the First World. Revolution is going to come through Beijing and Calcutta.

The remarkable thing about capital and one of the reasons for the problems at the moment in the West is the fantastic development of Asian economics. Who would have thought 35 years ago that China would be developing at the speed it is? Who would have thought that a country like Korea would have companies such as Samsung with investments in the north east of England? What that actually does in a sense is to demonstrate that capitalism is reconstituting the world. It does so in part through its technological capabilities. So you get rapid industrial growth for the first time in the post-colonial world.

Capitalism is being reconstituted in a way people didn’t foresee. Paul Baran used to say there’s no way capitalism could develop the Third World. But South Korea, which was not a developed country but very poor country when Baran wrote, is an industrial country today.

I know that there are a substantial number of people who are in struggle over issues like hospital closures or anti-racist movements or animal rights. But what I am saying is the big struggle of how to get rid of capital, of how to change the world, is no longer possible. Nearly 80 years after Lenin wrote his great work, Imperialism, capitalism is still alive and kicking.

The problem of socialists everywhere is how to come to terms with this turnaround and how to engage in a longer term struggle with no immediate hope of fundamental change.

Chris Harman and Meghnad Desai will be debating at Marxism 95

Last updated on 21 December 2009