Interpreting the Twentieth Century

At the turn of the century, as throughout the nineteenth century, mechanization of manufacturing industry was a great trend in technological change. What was new is that mechanization had invaded agriculture. The result was ironic from both Marxist and Neoclassical viewpoints, but for opposite reasons. Mechanization destroyed American capitalist agriculture, but not in the way that Marx anticipated. Instead of the huge consolidated factory farms that Marx anticipated, mechanization of agriculture pushed the landless agricultural laborer and the small owner-operator out of agriculture entirely, while reducing the status of the former employers and landlords to that of owner-operators -- a high-technology neopeasant class. But the numbers of this neopeasant class continued to dwindle as the smaller operators continued to be forced into the industrial working class.

(I grew up in one of those neopeasant families at midcentury. Our family bought one of the first cotton-picking machines in our area, but hadn't quite enough land to use it economically. My dad rented himself and the machine out to pick cotton for still smaller operators, for a few years, supplementing the farming income of the family partnership with service fees. But he was an industrial worker before 1960, and the family farm is now a mobile-home court.)

But the continuing technological revolution in manufacturing industry was able to absorb those forced out of agriculture. Mechanization simplified manufacturing tasks, so that the new proletarians, who might be skilled farmers but had no craft manufacturing skills, could still be highly productive in mechanized industry. A continuing high rate of labor productivity increase (and cheaper food) kept s/v, v/c and the profit rate stable despite continuing rapid capital accumulation.

But the boom-and-bust cycle kept getting more and more unstable. Marx expected Capitalism to collapse, and he expected that the collapse would be followed by a working-class revolution. In a real sense, capitalism did collapse in 1929. The economic systems we have had since then have not been "capitalism" as Marx knew it. What Marx seemingly did not anticipate was the emergence of a government-managed and profit-oriented class society. But that generally is what did emerge from the collapse of capitalism in the Great Depression. Where it was combined with one-party dictatorship, the government-managed profit-oriented system was called Fascism. Where it was combined with electoral government and universal suffrage (as in the United States) it was called mixed or "liberal" capitalism.

The Marxist diagnosis of the Great Depression did not differ greatly from the Keynesian one: at the last, the rate of exploitation rose so that the working class was not able to purchase what it produced, and there was no-one else to buy it, and so the capitalist market collapsed. To save capitalism, it would be necessary for government to manage "aggregate demand" through taxation, manipulation of the monetary system and deficit spending. This meant limitation of the power of "big business," monopoly capital, who largely opposed government management of the economy. The smaller-scale Local Capitalist classes could not govern alone, against the opposition of Monopoly Capital, so unionized labor had to be brought into a "New Deal" coalition with Local Capital to establish a mixed capitalist system. The price of this coalition was widespread unionization. Since Local Capital included some of the most racist elements in society, racism within the New Deal should not be surprising and was another price of the New Deal coalition. All the same, the New Deal wasn't successful in bringing the country out of the depression, and it took a war to do what dictatorship had done in NAZI Germany: to induce the government to spend enough to bring the country out of the depression.

After the war, Monopoly Capital remained (mostly) officially committed to eliminating the mixed capitalist economic system -- "liberalism" -- and with the ideology of anti-Communism they could appeal to nationalist feeling, which the 'liberal" view had held before the war. But they needed to bring local capital back into a capitalist class coalition. Senator Warren Knowles found the answer -- promise Local Capitalists tax cuts -- but the traditional capitalist opposition to government deficits was too strong to put this into effect in the 1950's.

But the coalition of labor and Local Capital was growing weaker. Labor in America had always been divided by race -- one of the most powerful tools of capital, and especially local capital -- but the war (and agricultural mechanization) had destroyed much of the economic basis of the racist system and Black People would no longer be subservient. The coalition of labor and local capital had great difficulty in incorporating the Civil Rights movement. Perhaps it would have succeeded -- at least outside the south -- had not the Anti-Communist ideology forced a reluctant (but cowardly) Lyndon Johnson to commit the country to the Viet Nam war. With Civil Rights, this left the New Deal coalition fatally divided, and the class coalition of Monopoly and Local Capital took control and began to feel out its power.

The technological trends also began to change. Mechanization of manufacturing industry was succeeded by automation, and, if anything, labor productivity growth was faster, but -- after the sixties -- markets could not grow at a similar rate, and industrial employment began to dwindle as farm employment already had. Thus, service sectors with low productivity growth began to dominate the trends for the capitalist system as a whole, and -- with slower productivity growth -- the tendency to a falling rate of profit began to assert itself as v/c declined. The capitalist class resisted by raising s/v, for the first time in America in the twentieth century. The most direct expression of this was "downsizing," which can best be understood as a direct reduction of v, raising s/v, gambling that a combination of productivity improvements and lengthening of the working day would validate the reduction in labor costs before the company loses all its business and goes bankrupt. Sometimes it worked. At the same time, automation and robotization (unlike mechanization) substituted complex jobs for simple ones, forcing a large segment of relatively uneducated male workers out of the labor market entirely, and (in the U. S.) into homelessness, illegal activity and prison in many cases.

Meanwhile, the class-coalition of Local and Monopoly Capital extended its power. What they had discovered is that government management of the economic system can itself be a means of extracting surplus-value. Deficit spending can be profitable. Consider: when the government runs a deficit, it issues bonds. The bonds are bought by capitalists, and the interest is paid out of taxes. Perhaps we should rewrite Marx' formulae like this:
The labor day is divided into v+s+t
where s is the market surplus and t the surplus extracted through taxes.
C=c+v+b
C'=c+v+s+b+t
So, despite all ideological cant to the contrary, deficit spending is a consequence of modern, government-managed capitalism, and is in the interest of the capitalist class as a whole. It is also the glue that holds the coalition together -- tax cuts for Local Capital, internationalism (and a decaying tax base that results) for Monopoly Capital, which now sees the world as its field of activity.

Regulation, too, can increase the profits. The danger here is that changes in regulation will increase the profits of one sector of the Capitalist class at the expense of another sector, creating conflict within the Class Coalition. What is called "deregulation," but would be more accurately called "reregulation," is a recasting of regulation in the interest of the capitalist class as a whole.

Were you wondering why a whole series of "conservative" governments, evidently sincerely committed to "balancing the budget" and "getting rid of regulation" have been unable to do it? There are no conspiracies, and the "conservatives" are genuinely sentimentally attached to the "conservative" program. But it is objectively against the class interests of the capitalist class, and a capitalist government will not do what is against the interests of the capitalist class, at least not for long.

But can this sort of government go on forever? There is a real possibility that the deficit spending is unsustainable, and will eventually collapse. This means not primarily an economic depression, but more than that, a collapse in the government itself. That has already happened in the former Soviet Union, and we had better be prepared in case it happens here.

After the Revolution