Chris Harman

Economics of the Madhouse

Chapter 5
Things fall apart

22. A new stage

Capitalism in the mid-1990s seems as different to capitalism in the mid-1950s as that did to capitalism in the early 1930s. Once more we are faced with high levels of joblessness, recurrent recessions, huge pools of poverty. Overproduction combines with cuts into welfare budgets and a downward pressure on wages that reduces still further the market for what is produced. Once again there is despair even among supporters of the existing system about its prospects. Will Hutton sums up a widespread mood when he writes of Britain:

There is a mounting and quite proper sense of crisis spreading across all classes about the character and availability of work and its implications for every aspect of society – from the care of our children to the growing dereliction of our cities... Insecurity, low wages and wasted talent are widespread and the problem touches professions and occupations once thought inviolable.

One in four of the country’s males of working age is now unemployed or idle... The numbers living in poverty have grown to awesome proportions, and signs of social stress – from family breakdown to the growth of crime – mount almost daily... One in three children grows up in poverty...

The country is increasingly divided against itself, with an arrogant officer class apparently indifferent to the other ranks it commands. This privileged class is favoured with education, jobs, housing and pensions. At the other end of the scale more and more people discover that they are the new working poor, or live off the state in semi-poverty... In between there are growing numbers of people who are insecure, fearful for their jobs in an age of permanent ‘downsizing’, ‘cost cutting’ and ‘casualisation’ and ever more worried about their ability to maintain a decent standard of living.

Hutton tries to blame what is happening not on the tendencies of capitalism in general, but on the peculiarities of its British form, which he claims is distorted by the role of the financial institutions of the City of London. But he has to admit:

What is happening in Britain is only a more acute version of what is happening elsewhere... There is scarcely a Western country that cannot tell us at least one tale similar to Britain... In the US job insecurity is endemic, and the wages of the bottom 10 percent of the labour force are about 25 percent lower than they are for the same group in Britain... Nearly one job in five in the US does not carry sufficient income to rear a family of four.

One of the most prominent theorists of ‘the affluent society’ of the 1950s and 1960s was J.K. Galbraith. His description of the US today is nearly as damning as Hutton’s description of Britain:

In 1988 the top 1 percent of family groupings had annual incomes that averaged $617,000 (about £8000 a week) and controlled 13.5 percent of all income before tax... The top 20 percent lived in some comfort with incomes of $50,000 a year (about £700 a week) and above. To them accrued 51.8 percent of all income before taxes... [Their] comfort and economic well being is being supported and enhanced by the presence in the modern economy of a large, highly useful, even essential class that does not share in the agreeable existence of the favoured community... [This class] is integrally a part of a larger economic process and serves the living standard and the comfort of the favoured community. The economically fortunate are heavily dependent on its presence... The poor in our economy are needed to do the work that the more fortunate do not do and would find manifestly distasteful, even distressing.

Galbraith talks, confusingly, of a ‘contented majority’ of two thirds of people – but he means two thirds of those who bother to vote (half the electorate), not two thirds of the adult population. In fact, he notes, conditions for the great mass of the American population have been getting worse over the last decade and half, with four fifths of families seeing their incomes fall, with a fall for workers on the median wage of about 5 percent.

He also insists on the ‘intrinsic tendency of capitalism to instability, to recession and depression’, on ‘the powerful tendency of the economic system to turn damagingly, not only on consumers, workers or the public at large, but ruthlessly inward on itself...’ He writes of ‘recession and depression made worse by long term economic desuetude, the danger implicit in autonomous military power, and growing unrest in the urban slums caused by worsening deprivation and hopelessness...’

He even makes a comparison between the US today and the USSR in the final years before it fell apart:

Few things could have been further from accepted thought than the possibility that the explosive events in Eastern Europe could have a parallel in the United States or perhaps Britain. Communism had failed; capitalism was triumphant. Could anyone be so pessimistic to see that lurking in the successful system were grave flaws similarly concealed? Alas there are.

You do not, of course, get such damning indictments of what is happening from the economists of the Tory right. They are still trying to celebrate the collapse of the state run economies of the USSR and Eastern Europe. But even they have to accept that the system operates in a much more destructive way than was claimed in the 1950s or even the mid-1980s.

Former Tory chancellor Nigel Lawson can attack his successor, Clarke for failing to see the inevitability of the ‘trade cycle’ of boom and slump. The former enthusiast for monetarism, Samuel Brittan of the Financial Times, can note with puzzlement ‘deep seated factors such as the trend away from “jobs for life” which is being experienced in all countries’ and creating massive ‘job insecurity’. Tory papers reflect the increasingly stressful life of those with jobs in headlines like ‘Overwork: the middle class epidemic’, even while they continue to push for still more overwork with calls to ‘save on labour’ and diatribes against ‘old Spanish practices’. Meanwhile the ‘new right’ recognise in a back to front way the inability of the system to offer hope to many who live within it with calls for cutbacks in welfare benefits – even, in the case of Newt Gingrich in the US, extolling the 19th century workhouse as a way of dealing with the ‘underclass’.

Such a message is a far cry from that of the 1950s when even conservative politicians like Eisenhower in the US and Macmillan in Britain promised everyone a better life, when the American dream meant not merely success for those at the top but also security for those at the bottom, and when a British Tory government won an election around the slogans, ‘We’re all working class now’ and ‘You’ve never had it so good’. It is even a far cry from the 1980s, when Reagan in the US and Thatcher in Britain promised ‘people’s capitalism’, with wealth ‘trickling down’ from the rich to the poor.

In their own ways, both the centre left and the right are recognising that the system has entered a new phase in the last quarter of the twentieth century – a phase remarkably similar, but on a much bigger scale, to that of the first quarter of the century.

The bare statistics show it. Rates of economic growth in all the advanced countries and in almost all the third world and the non-East Asian ‘newly industrialising’ countries have been lower since the mid-1970s than they were in the 25 years before.

Unemployment rates have risen, on average, over this period too. In the advanced countries levels of 8, 10 or even (in the case of Spain and Ireland) 20 percent are common. In the world as a whole, the United Nations estimates, there are a billion unemployed. Even in the most rapidly growing part of the world economy, the so called ‘Chinese economic space’ (China, Hong Kong, Taiwan, Singapore) growth is centred around certain areas, while in the vast Chinese hinterland hundreds of millions are desperate to escape from rural poverty but cannot be provided with jobs in the cities.

Average rate of growth of real GDP
per person employed












W. Germany












The slowdown in growth rates reflects a fall in average profit rates, despite all the pressure to speed up work and hold pay down. Average profit rates in both the US and the European Union in the late 1980s were only about 60 percent of their level in the 1950s and 1960s.

Firms have responded to the pressure on profits as they always have in the past, with each trying to recoup its position by further cutbacks in the labour force and further ‘capital intensive’ investment.

The ratio of capital to labour has grown right cross the world. It grew by 2.4 percent a year in US ‘productive industry’ between 1977 and 1987; it rose by 2 percent a year for the British economy as a whole in the 1980s; it doubled in Chinese industry between 1985 and 1990; and in Latin America investment per worker grew by 2,000 dollars in the course of the 1980s. But this means new investment provides fewer and fewer new jobs. People are driven out of old, ‘uncompetitive’ sections of industry, without being provided with jobs in new, technologically advanced sectors.

Expansion of production using less and less labour could lead to a realization of all of humanity’s utopian dreams of the last 5,000 years – to a world without debilitating scarcity, to freedom from the pressure of work and to leisure for genuine creativity. But under the existing system it, instead, simply results in two devastating discrepancies. There is a growing imbalance between the level of investment and the level of profit required to sustain that investment. And there is a growing gap between the potential output of the economy and the ability of people’s pay packets to provide ‘effective demand’.

Productive capital accumulation takes place in fits and starts – suddenly surging forward and destroying old jobs, then, fearful of not making a profit, suddenly grinding to a halt and preventing the creation of new jobs. Firms slash workforces in order to keep ahead of their rivals and tell those workers who remain to toil ever harder. As competition grows ever more intense, firms devote ever greater resources to unproductive forms of competition – to expenditure on marketing and advertising, to promotion and packaging. And as average profit rates in industry fall, so there is an increasingly frenetic search for the profit to be gained from speculation, in the world’s stockmarkets, on office development and land values, in commodities markets, in foreign currencies. Trillions of dollars go into a whole world finance, of junk bonds and derivatives, apparently cut off from the real creation of wealth through work and machinery.

The system may have entered a new phase. But the way it operates is not new. It is, in its essentials, exactly the way described by Marx.

The only sense in which Marx is ‘outdated’ is not that the system is more rational than he thought, but rather his picture understates the destructiveness of the system. Capitalists do not merely battle against each other on markets. They also use the state to force rival capitalists to accept their dictates, supplementing economic competition with displays of military prowess. American capitalism seeks to persuade European and Japanese capitalism to accept its dictates by proving that it alone has the power to wage war in the vital oil rich regions of the Middle East; Iranian and Turkish capitalists rely on the help of their states as they compete with each other for influence and contracts in the southern belt of the former USSR; Turkish and Greek capitalists encourage a mini-arms race as each seeks to establish a dominant role in the Balkan countries once controlled by Russia; Germany backs Croatia, the US backs the Bosnian Muslims, and Greece backs the Serbs in horrific wars in former Yugoslavia; the Russian military wage vicious wars to hang on to vital oil pipelines through Chechnya and influence in the Tadjik republic bordering Afghanistan; China, the Philippines, Malaysia and Vietnam clash over control of the oil reserves thought to lie close to uninhabited islands in the China Sea; Israel tries to carve Egypt out from economic influence in the Arabian peninsular.

The result is that at any point in time there are half a dozen wars or civil wars, using the most horrendous forms of ‘conventional’ weaponry, in one part of the world or another.

Alongside the slaughter and devastation afflicting ever wider sections of humanity is another threat to us all which was hardly visible in Marx’s time – the threat of destruction of the environment we depend on to survive. Marx and Engels were fully aware that the mad drive to capital accumulation led to pollution, the poisoning of the ground and the air, the adulteration of foodstuffs and the spread of horrific epidemics. Engels wrote vividly of these things in his book Anti-Duhring. But they lived in a time when capitalist industry was confined to relatively small areas of the globe and the devastation was local devastation, affecting chiefly the workers employed in a particular factory, mill or mining village. Today capitalist industry operates on a global scale and its impact is on the global environment – as is shown by the way in which the radioactive clouds from Chernobyl spread out across the whole of Europe, by the way in which the seas are being fished clean of fish, by the damage to the ozone layer by the gases used in aerosols and refrigerators. Above all there is the threat of the ‘greenhouse’ gases destabilising the whole world’s climate, flooding low lying countries and turning fertile regions into deserts.

This is the state of affairs which defenders of the capitalist market expect us to glory in.

23. No more answers

The prospects look dire for the existing system – and for the five billion people who live under it. The most farsighted believers in reform of the system see this. ‘Unless Western capitalism in general and British capitalism in particular can accept that they have responsibilities to the social and political world in which they are embedded’, warns Will Hutton, ‘they are headed for perdition.’

Yet attempts to reform the system are infinitely less successful than they seemed to be in the 1950s, or even in the 1890s.

Hutton himself notes that in Sweden, which used to be portrayed as the finest example of social democratic regulation of capitalism, ‘the first attacks on the welfare state since the 1930s’ came from a social democrat government ‘curbing the rise in government borrowing’, while in France the Socialist Party government of the late 1980s embraced ‘competitive deflation and economic rigour’, leading to ‘youth unemployment even higher than in Britain’. ‘Spanish Socialists and the New Zealand Labour Party’ have been ‘no less enthusiastic about budget cutting, privatisation and restructuring the welfare state than say the Canadian Conservatives. Everywhere the ideological edge of political competition has been blunted. Different political parties, when in government, offer similar programmes’.

In Britain, Labour economic spokesman Gordon Brown used a conference on ‘global economic change’ in 1994 to criticise past attempts at reform: ‘Past Labour tried to counter the injustice and failure of free market force by substituting government for the market, and often saw tax, spend and borrow policies as the isolationist quick fix for national decline’. The Independent on Sunday – which goes along with many of Brown’s ideas – summed up his speech with the headline, ‘Brown ditches Keynes’.

Brown justified his stance by saying that the ‘globalisation’ of capitalism – that is the spread of multinational production and finance as well as marketing – rules out old style Keynesian attempts by national states to insulate themselves from the vagaries of the world economy. The argument has been more fully, and honestly, spelt out by one of Brown’s former advisers. Professor Meghnad Desai of the London School of Economics, in a series of columns in the paper Tribune, argues:

It is no longer possible to pursue left Keynesian policies in a single country context... We are now witnessing in the nineties a return to the sort of world socialists of the nineteenth century knew, with global movements of capital, and the state incapable of exercising much control over the economy...

‘The lack of success of Socialist and Labour Party governments’, he insists, does not result from ‘a failure of will, or the pusillanimity of the leadership. The problem is the resurgence of capitalism... A century after Marx and Engels it continues constantly to reproduce itself.’ This means even ‘public ownership of the economy is no guarantee of control of the market...’

Such arguments have led the Labour leadership to jettison the old version of Clause Four of the party’s constitution, with its commitment to ‘common ownership of the means of production, distribution and exchange’. Their arguments, like those of the ‘revisionist’ thinkers of the 1890s and the 1950s, are that such formulations are ‘out of date’, ignoring ‘fundamental changes’ in capitalism. In this they are backed by would be ‘left-of-centre’ economists like Hutton and Desai.

Yet there is a vital difference between the arguments of the Labour Party leadership today and those used by the ‘revisionists’ Bernstein in the 1890s and Crosland in the 1950s. Bernstein and Crosland argued that the system did not require revolutionary or root and branch transformation since it was changing, on its own accord, into something rational and humane. Thus Bernstein insisted:

In all advanced countries we see the privileges of the capitalist bourgeoisie yielding step by step to democratic organisations... The common interest gains in power to an increasing extent as opposed to private interest and the elementary sway of economic forces ceases... Individuals and whole nations thus withdraw an ever greater part of their lives from the influence of necessity compelling them...

The increasing internationalisation of the system meant that giant crises were a thing of the past. ‘The enormous extension of the world market has... increased the possibility of adjustment of disturbances... General commercial crises similar to the earlier ones are to be regarded as improbable’. Further, ‘speculative momentum ceases to play a decisive role’ in the major sectors of production.

Crosland, as we have seen, extended the argument, claiming government could ‘exert any influence it likes on income distribution and determine within broad limits the division of total output between consumption, investment, exports and social expenditure’. This permitted it, he claimed, to guarantee full employment, to reduce the level of poverty, to increase workers’ rights and to create conditions for ‘equality’. It was this ability which made a socialist take over of the privately owned means of production ‘unnecessary’.

By contrast, Blair, Brown and the others are saying the goal of social ownership has to be dropped because there is no way of stopping the domination of human beings by the economic compulsion of the market. The ‘dynamism of the market and the rigours of competition’ are welcomed in their rewrite of Clause Four – even though, as any Hayekite would point out, the ‘dynamism of the market’ is the ‘creative destruction’ of whole branches of industry and the livelihoods of those who work within them, while the ‘rigours of competition’ mean the pressure to work harder and longer for less.

The Labour leadership may not talk in such Hayekite terms themselves. But they accept the logic of the argument. They echo right wing politicians in saying people have to abandon the notion of ‘jobs for life’, they embrace the employers’ demand for ‘a flexible labour force’, and they refuse to commit themselves to any promise of ‘full employment’. Indeed, they have a worked out argument to the effect that past Labour governments appeared to fail because they promised things ‘they could not deliver’. The only way to avoid this in future, they claim, is to promise virtually nothing. What they offer, in fact, is not Bernstein and Crosland’s promise of unlimited reforms as the alternative to revolution, but a reformism without reforms.

24. Reformism’s last fling

‘Say what we mean and mean what we say’ is a favourite soundbite of the Labour Party leadership. But they can hardly admit in public that they can offer no reforms to the people who back them. So they juggle with particular arguments and rely on left of centre economists and journalists like Will Hutton and William Keegan to present them. These argue that there are alternative models of capitalism which work much better than that which has failed in Britain. The ‘social market’ and ‘peoplist’ (Hutton’s term) forms that exist in Germany and Japan are held up as examples. Such models, it is claimed, give workers greater security so winning greater cooperation from them. This allows firms higher profits while at the same time offering workers a better deal. What is more, the subordination of finance capital to industrial capital in these countries makes it easier for them to escape from crises. The result, claims Hutton, is that in Germany:

Unions forego the right to strike and to pursue their self-interests regardless of the firm’s plight; but management eschews the right to run business autocratically in favour of the shareholders’ narrow interests. Instead there is a compromise in favour of concerted and cooperative behaviour aimed at boosting production and investment... The German banks are stable backers of German industry and longterm shareholders... This stability of ownership and financial support is matched by a welfare system which offers a high degree of social protection, the visible expression of social solidarity.

East Asian and particularly Japanese capitalist structures emphasise trust, continuity, reputation and cooperation in economic relations... The firm is the core social unit of which individuals are members rather than simply workers... Income inequality is at the lower end of the international scale... The state seeks to build consensus and guides firms and the financial system in the direction established by the consensus.

The logic of both Hutton’s and Keegan’s (slightly different) arguments is for a reforming government in Britain to remodel British capitalism along these lines.

Yet it is not only the British model of capitalism that has been in crisis in the 1990s, but also the German and Japanese models. At the time of writing, Germany is emerging from a serious recession, with current levels of unemployment still above 8 percent in the west, up from the 2 percent of a quarter of a century ago. Real living standards of workers have been cut by a ‘unity tax’ designed to cover the costs of absorbing the east German economy into west German capitalism. The employers have provoked strikes in the key metal working industry in an unsuccessful attempt to hold wages down below the level of inflation and postpone the introduction of the 35 hour week. And there is a concerted campaign from an allegedly ‘socially conscious’ employing class to cut pensions and other welfare benefits.

As Hutton himself admits, his model is far from stable:

Under the pressure of globalisation and intense cost competition the Mittelstand (medium sized firms) have begun to lose ground and there are fears that large German firms are being forced to get their supplies in low-cost countries while overseas producers are winning business in the Mittelstand’s heartlands. German banks, under the same pressures, are allegedly becoming more short term in their horizons... Large firms, determined to emulate the Japanese and contain costs by sub-contracting out work and insisting on ‘just-in-time’ delivery, are asking suppliers to become ever more flexible.

As for the ‘far eastern’ model, Hutton admits it has always involved ‘long hours and often demeaning working conditions’. What is more it has usually been imposed by one party states (as are Taiwan, China, Singapore and as Japan effectively was for 40 years), or military dictatorships (Korea).

The biggest East Asian economy, in Japan, is now encountering many of the same problems as in Britain, the US and continental Europe. It ran into deep crisis in the early 1990s. The solvency of its great banks has been threatened. The Financial Times reports ‘a steady shift of production offshore’ until ‘about a sixth of manufacturing production is overseas’, while ‘many Japanese industries are burdened by excess capacity at home and face growing challenges abroad’. In 1994 unemployment rose to its highest level for 40 years, with only 64 jobs available for every 100 job seekers. It is difficult to see why the faltering Japanese and German capitalisms should offer a model for weaker capitalisms like that of Britain.

Talk of the ‘European’ or ‘East Asian’ model of capitalism is often linked to an argument about the importance of ‘human capital’ – the skills embodied in highly educated labour. Gordon Brown, for instance, has asserted that this is the key to capitalist development today rather than the means of production. Further, Brown claims this makes the ‘old arguments’ about who owns industry irrelevant.

The way for British capitalism to overcome its weaknesses, he argues, is for it to step up ‘investment in human capital’ through a greater stress on training a skilled workforce. The result then can be higher living standards and better social services paid for by higher productivity, as the economy enters a virtuous circle of rising output – so called ‘endogenous growth’.

The argument contains three elementary fallacies. First, even the most highly skilled labour today does not take place on its own, without advanced means of production. In fact, it is more dependent on them than before, which is why the ratio of investment to labour continues to grow right round the world.

Second, there is no reason why any one country should be able to corner the supply of skilled labour. Even industrially backward countries like India and China contain many millions of highly educated people – with all the skills required for highly sophisticated jobs like civil engineering, software engineering and so on, let alone less highly skilled jobs like computer input and wordprocessing. Only a very small percentage of the total population may have these skills, but the total population is large enough for this small percentage to offer international capitalism comparable amounts of skilled labour as are to be found in many advanced countries. Meanwhile, advances in communications technology are making it possible for skilled design and computer tasks to be done in less advanced countries for transmission back to the advanced centres of production.

Under these circumstances, capitalists will use the threat of moving, say, software engineering to somewhere like Bangalore in India as a lever to cut the wages and worsen the working conditions of a workforce in Britain. Nothing Brown or Hutton is prepared to suggest will stop them.

Thirdly, even if ‘human capital’ were central, this would not stop the overall drive in both the world system and its British sector towards deeper crises. The pressures would still be on employers to reduce the levels of employment. So, for instance, the new communications technology known as ‘telematics’ based on ‘the convergence between telecommunications and computing’, far from enlarging employment, is destroying more jobs than it creates, according to a study by Professor John Goddard of Newcastle University. And nothing stops the devastation caused by periodic ‘overproduction’, a devastation that will get worse over time because of downward pressures on the rate of profit.

Raising the level of skills in a national economy cannot ward off the tendencies of capitalism towards crisis noted not only by Marx in the mid-19th century, but also by Keynes in the interwar years. For, to use the jargon of the economists, the question of skills concerns the ‘supply side’ of an economy, not the ‘demand side’ – and so can do nothing about the ‘overproduction’ and unemployment which Keynesianism used to claim to be able to deal with. In dropping that claim today’s reformists are admitting they have no answers to the central problems facing the mass of people today – growing unemployment, job insecurity internationally, increased workloads and the pressure to accept lower living standards.

Hutton admits how limited the options for the national state are:

Foreigners own a quarter of British shares, bonds and bank deposits. The capitals markets’ veto is particularly strong, and any British government will be imprisoned by their demands for fiscal and monetary caution.

His conclusion, however, is not to see that under such circumstances Keynesian reformism is an unworkable fantasy, but instead to claim Keynesianism on a European scale can work where national Keynesianism cannot.

Britain has a particular interest in the construction of a more stable international order. But the country cannot act on its own – and this is where the European Union and its potential for organising concerted action becomes crucial. The countries of the EU together have the power to regulate financial markets and control capital flows, and to play a part in compelling the US and Japan to manage their relationship better as part of a world deal. They have the potential to manage demand, boosting and reducing it when necessary, without having their policies blown off course by capital markets... If Europe wants to defend its idea of a welfare state... it will have to do so in a united fashion.

However, any close examination of what has been called ‘Euro keynesian’ reformism proves it is as hollow as ‘human capital’ reformism. It assumes that the different European capitalist powers can simply sink their differences and cooperate economically, when so far they have failed to cooperate to maintain their currency parities within the European Monetary Union, or even to coordinate their foreign polices to deal with a civil war just across the Union’s borders in former Yugoslavia.

In fact, in each country of the Union, large national companies have close relations with the national state and exert pressure on it to protect their interests against other companies and other countries.

What is more, the internationalisation of the system means that even governments of the largest economies in the world, those of the US and Japan, are increasingly restricted in what they can do by the pressures of worldwide competition. A united capitalist Europe would find itself subject to the same pressures. The response of big business would be to step up its pressures on governments to attack workers’ conditions. Thus a Financial Times supplement Can Europe Compete? published early in 1994 claimed the alternatives were either ‘greater competitiveness, labour market deregulation and radical reform of the public sector’ or ‘Eurosclerosis’ which would make ‘the European Union a backwater of the global economy’.

Finally, and most importantly, the Eurokeynesians ignore the fact that the long post-war boom was not a result of Keynesian methods. Keynes no more caused the long boom than waking up in the morning causes the sun to rise. Rather, he signalled something which was happening anyway, as governments turned to a massive level of military spending and, with it, to massive intervention in the economy. Indeed, his own prescriptions for keeping booms going were rarely used during ‘the golden age’. Strangely enough, Hutton, one of the most enthusiastic of the latter day Keynesians, has recognised as much in one of his columns for the Guardian, pointing to ‘the proof offered by Robin Matthews as long ago as 1968 that the amount of Keynesian pump-priming to manage demand in the... 1950s and 1960s... was comparatively small’ and could not have been responsible for the long period of economic expansion. Attempts were made to use Keynesian methods in all the advanced countries when this period came to an end in the mid-1970s – and were abandoned everywhere because they did not work.

People like Hutton are wishing for the moon when they claim that such policies can work, if used on a European scale, 20 years later.

No doubt it is because they are dimly aware of this that politicians like Blair and Brown – and their equivalents in France, Germany, Italy, Spain and Scandinavia – refuse to promise improvements in welfare benefits, unemployment levels or working conditions. But this leaves them with economic policies hardly distinguishable from their Tory opponents.

Hutton has on occasion been forced to recognise this, as when he criticised ‘the leader of the Labour Party’ in the Guardian for delivering a speech ‘that could have been delivered by Eddie George, Governor of the Bank of England, or Michael Camdessus of the International Monetory Fund... This is a position straight from the new right revolution of the 1970s, whose intellectual authors include Milton Friedman and Friedrich Hayek.’

25. Socialism or barbarism

‘A reprise in the early 21st century of the conditions in the early part of this century’. Such is the danger that confronts the world if we cannot deal with the present crisis, concludes Will Hutton in his book The State We’re In. Those ‘conditions’ included two world wars, the rise of Nazism, the collapse of democracy across most of Europe, the victory of Stalinism, the death camps and the Gulag. If they were to be repeated in a few years time, there is no doubt it would be on a much more horrific scale. We would be facing fascist regimes armed with nuclear weapons, with devastation and death on a scale that even Hitler could not imagine.

We would indeed be facing a future of barbarism, if not the final destruction of the whole of humanity.

Warnings of such a future are not to be treated lightly. Already the crisis of the 1990s has begun to unleash the same barbaric forces we saw in the 1930s. In one country after another political adventurers who support the existing system are making careers for themselves by trying to scapegoat ethnic or religious minorities. In Russia the Hitler admirer, racist and proponent of nuclear war Zhirinovsky got 24 percent of the vote in the November 1993 poll. In Bombay another Hitler admirer, Bal Thackerey, runs the state government, threatening to wage war against the Muslim minority. In Turkey the government and the military wage a war against the Kurdish fifth of the population, while the fascists try to incite Sunni Muslims to murder Alawi Muslims. In Rwanda the former dictator unleashed a horrific slaughter of Tutsis by Hutus, while in neighbouring Burundi there is the threat of a slaughter of Hutus by Tutsis.

All this horror has its origins in the failure of market capitalism to provide even minimally satisfactory lives for the mass of people. Instead it leaves a fifth of the world’s population under nourished and most of the rest doubting whether they will be able to enjoy tomorrow the small comforts allowed to them today.

Both the out and out defenders of ruling class power and today’s timid and cowed reformists tell us there is no alternative to this system. But if that is true, then there is no hope for humanity. Politics becomes merely about moving the deckchairs on the Titanic while making sure no one disturbs the rich and privileged as they dine at the captain’s table.

But there is an alternative. The whole crazy system of alienated labour is a product of what we do. Human beings have the power to seize control of the ways of creating wealth and to subordinate them to our decisions, to our values. We do not have to leave them to the blind caprice of the market, to the mad rush of rival owners of wealth in their race to keep ahead of each other. The new technologies that are available today, far from making our lives worse, have the potential to make this control easier. Automated work processes could provide us with more leisure, with more time for creativity and more chance to deliberate on where the world is going. Computerisation could provide us with unparalleled information about the resources available to satisfy our needs and how to deploy them effectively.

But this alternative cannot come from working within the system, from accepting the insane logic of the market, of competitive accumulation, of working harder in order to force someone else to work harder or lose their job. The alternative can only come from fighting against the system and the disastrous effect its logic has on the lives of the mass of people.

The reformists say that such a fight cannot succeed because of the ‘globalisation’ of the system. Globalisation is another way of saying the system is increasingly dominated by a relatively few giant industrial and financial institutions, each of which reaches out from its national home base to dominate the lives of millions of people in scores of countries. The power of those who run these institutions is greater than ever before when it comes to forcing into line – or forcing out of office – governments which try to regulate their activities.

But this does not mean those of us who want a humane society need to fight these institutions and the system they make up less than in the past. Quite the opposite. It means we have to fight harder, in a more determined way. It means that they will take a ruthless revenge on us if we fight halfheartedly, rather than seeing the struggle as one to the finish. The British social reformist R H Tawney once pointed out, in one of his more radical moments, ‘You can peel an onion layer by layer, you cannot skin a tiger claw by claw’. By their talk of ‘globalisation’ the present day reformists are recognising that the system is a tiger, not a placid vegetable just awaiting parliamentary trimming as suggested by Crosland and his ilk 40 years ago. But though they see it as a tiger, today’s reformists’ conclusion is to let the beast run free. This is not a sane conclusion for anyone who does not want to be eaten alive.

Globalisation does not rule out a serious fight against the system. For it cuts both ways. The giant corporations are only strong so long as the millions of workers they employ around the world put up with their activities. They can be paralysed the moment a serious fightback starts. The very integration of their international operations can increase their vulnerability to action by workers in any one of their national constituents. What is more, an awareness of the multinational character of their employer can make workers in scores of countries see more concretely than ever before the common interests they share, as they are subject to the same disciplines, preached at by the same managers, even forced to wear the same company logo and sing the same company song.

Finally, the globalisation of communications means that workers in one part of the world are much more aware than ever before of what workers elsewhere are doing. Any upsurge of revolt can suddenly inspire people continents away. This happened back in 1968 with the national liberation struggle in Vietnam and the ‘May events’ in France. It happened in 1980 with the sudden rise of Solidarnosc in Poland. It happened through the mid-1980s with the sudden revival of the anti-apartheid struggle in South Africa. It happened again in 1994 with the Chiapas revolt in Mexico. It will happen the next time any great workers’ revolt occurs anywhere.

The international nature of the capitalist system prevents any national government, however radical and however great its support from the mass of the people, from breaking completely with the pressures that emanate from the system. This is not, however, a new phenomenon. Marx and Engels stressed the international character of the struggle against capitalism a century and a half ago. The Communist Manifesto insisted that ‘the workers have no fatherland’ and ended, ‘Workers of the world unite’. Eighty years ago, at the time of the First World War, the leaders of the workers’ revolution in Russia established a ‘Communist International’ as the forerunner of the ‘Communist United States of the World’, precisely because they recognised that no single country, least of all one as backward as Russia was at the time, could create a society of plenty by cutting itself off from the resources and the technical advance existing outside its borders. Seventy years ago Leon Trotsky repeated this argument against Stalin, insisting that talk of ‘socialism in one country’ was a ‘reactionary utopia’, since the attempt to rebuild society in its entirety without access to the wealth existing within the whole world system of capitalism would inevitably fail.

But these arguments have never meant waiting for revolution to break out everywhere simultaneously. Every process has to start somewhere, and the process of confronting the alienation, the misery and the barbarism of capitalism is no exception. It can begin in any place that capitalism exists – and today that is virtually anywhere in the world. But it cannot achieve final success simply in one place. The very survival of a revolt that challenges the system – particularly in a country like Britain which has depended on imports of food, raw material and many other goods for at least two centuries – is dependent upon gaining the support of those who are inspired by the revolt outside its borders. Long term success in remoulding society depends on the spreading of the revolt. A single country that overthrows capitalism cannot survive on its own. But it can be the bridgehead which encourages successful revolt in much wider parts of the world system.

Opponents of socialism say that even with such a spread of socialism across wide areas of the world, attempts to escape from the dictates of the market are doomed to fail. Trying to organise every area of production so as to satisfy a million and one human needs, they claim, is an enterprise beyond anyone’s abilities. All that can happen, they prophesy, is that a new ruling elite will emerge which will dictate to everyone else where they work and what they consume.

However, when Marx and Engels, Lenin and Trotsky talked about the transition to socialism they did not do so in terms of the state taking over all economic decision making overnight. What they stressed was that those who created the wealth had, through their democratic organisations, to take charge of the key decisions, the decisions that set the parameters within which the rest of the economy operated. The day after the socialist revolution, as the day before, the great mass of people would go to work in factories and offices, and would be paid in money for what they did. They would continue to spend this money as they wished to satisfy their consumption needs. What would change, however, was the representatives of ‘the associated producers’ – the delegates from the factories, offices, housing estates, pensioners groups and so on would decide on the overriding economic priorities. In particular, the major items of social investment would no longer be determined on the basis of blind competition between rival firms, but by cooperative decision making.

They recognised that every great change in history from one way of producing human livelihood to another has always involved both gradual (evolution) and sudden change (revolution). Thus the transition from feudalism to capitalism involved slow economic evolution over several centuries, as capitalist production for the market replaced feudal production in the more or less self contained manorial village, but also sudden, revolutionary political changes as the rising capitalist class ousted the old feudal ruling class from decisive positions of power. The point was that without the revolutionary change, the evolutionary change would have come to an abrupt halt and society would have started going backward rather than forward – as, in fact, it did when economic evolution was not accompanied by political revolution first of all through Europe in the 14th century and then in central Europe in the 17th century.

In the same way, the replacement of capitalism by a new economic mechanism based on human cooperation cannot take place all at once overnight. It will, in fact, take many decades for people to learn to control consciously very many of the mass of productive processes that take place in a modern society, and in the interim they will have little choice but to continue to put up with the old market mechanisms. But by seizing political control and by taking over the major industries, they can begin making the central decisions, which would then exert an enormous influence on everything else which happened. They could, for instance, stop rival firms wasting enormous resources on setting up industrial facilities in competition with each other and then telling each other’s workers they have to accept lower wages and harder work in order to pay for them. They could end the enormous waste on advertising, or on sending identical products in opposite directions around the world. They could turn the luxury homes of the rich into facilities which are so desperately needed by those made poor today. Overall they can begin to replace anarchy by conscious human decision.

When they do so, most of the decisions they have to take will be no more difficult than those taken by the handful of directors who dominate each major industry today. In Britain, for instance, four fifths of the processing and distribution of food is in the hands of five firms. Each of these firms has to coordinate, in a planned way, the production and distribution of thousands of items, trying to fit them in with the tastes of 50 million different men, women and children. They are able to do so, not because these directors are geniuses – in fact, many of them are typical upper class twits – but because their wealth enables them to employ large numbers of people with skills, using the most modern technology. But a huge portion of this skilled effort is wasted. The people with the skills are subject to competition between the rival firms and so are unable to cooperate with each other, with the people who work in food production and with those who consume the food. Instead, a huge amount of effort goes into aiding in the exploitation of the firms’ workers on the one hand and moulding the tastes of the consumers in unhealthy ways on the other. The ownership and control of these major firms by a democratic workers’ state, which based itself on the pooling of initiative from below in a cooperative manner, would actually make the coordination of production both simpler (since there would no longer be systematic duplication of efforts in rival firms) and more responsive to the real needs of the consumers.

That does not mean that such a socialist organisation of the major areas of production would be flawless. No doubt mistakes would be made, with overestimates of what people wanted in one sphere and underestimates in another sphere. No doubt there would be endless arguments about how exactly to proceed. No doubt there would be dissatisfaction as well as satisfaction. But these things would happen as passing incidents, not as something built into the very mechanism of the system. For at present no amount of argument on earth can correct the tendency to overproduction on the one hand and shortages of necessities on the other. The reason is that the system is not based on rational decisions made as a result of reasoned arguments between the mass of people, but on the efforts of small groups of rich people to subordinate everything to their competition with each other to get more riches.

It is this blind competition that is producing slumps and booms, growing unemployment alongside increased workloads, overproduction of goods and cutbacks in welfare provision, ever more horrific ‘local’ wars and bitter outbursts of ethnic and religious hatred.

Marx pointed out that whenever forms of class rule have clashed with changes in the way production was occurring two outcomes have been possible – the victory of a new class as a result of bitter struggles, or the throwing backwards of society through ‘the mutual destruction of the contending classes’. The German-Polish revolutionary Rosa Luxemburg put the issue even more starkly. The choice under capitalism she said, was ‘socialism or barbarism’.

If we look at the way society is developing today in many parts of the globe we can see, all too vividly, the face of barbarism. But we can also see struggles against the system that repeatedly throw up notions of real advance, based on solidarity, on cooperation, on people caring for each other as they consciously and collectively work out their own futures. Those who preach halfhearted reform of the existing system preach a capitulation to barbarism. Those of us who look to revolution see in these struggles the possibility of going forward, not back. There is still, as Marx and Engels wrote at the end of the Communist Manifesto, ‘a world to win’.


Last updated on 15 November 2009