The Age of Neoliberal Austerity: Part 2: The Impact of Neoliberalism

Copyright: John Sturrock/reportdigital.co.uk

 

Introduction

 

In the first article in this series, ‘The crisis of the system’, I argued that we face a crisis in the history of humanity, and that it is rooted in growing corporate power, ‘globalisation’, or what Marx called ‘the centralisation and concentration of capital’. I further argued that neoliberal capitalism’s dominant features – financialisation, privatisation, austerity, the race to the bottom, precariatisation, permanent mass unemployment/under-employment, etc – are now integral to the system’s functioning.

A number of conclusions seem to flow from this analysis: that there is a major contradiction between the scale of the crisis and the weakness of working-class political organisation ; that there are no credible ‘middle way’, ‘Keynesian’, or ‘left-reformist’ solutions to the crisis; that financialisation and privatisation have partially reconfigured class exploitation in such a way that the workplace is no longer the sole primary locus of struggle; and that contemporary experience of exploitation, oppression, and disenfranchisement involves numerous, diverse points of collision between rulers and ruled.

Here I want to explore the way in which neoliberalism has remodelled the wider social order.         

The decline of union power

The neoliberal counter-offensive tested in Chile in the mid 1970s, pioneered by the Thatcher government in Britain and the Reagan administration in the United States in the 1980s, and in due course rolled out across the rest of the world, especially after 1989 revolutions, was an attempt to restore profitability and competitiveness by breaking union power, dismantling welfare states, and redistributing wealth from labour to capital.

The bargaining power of workers was undermined by mass unemployment. The size of what Marx called ‘the reserve army of labour’ – the mass of unemployed and workers in various forms of low-paid, insecure, and often part-time employment (what have been dubbed ‘McJobs’) – was restored to the point where it became an effective constraint on the militancy of core unionised workers. The state, above all in Britain, then mounted a series of massive class battles to smash the unions, culminating in the year-long struggle waged by the Thatcher government against the National Union of Mineworkers in 1984-1985.

The defeat of the miners weakened organised labour in Britain. The NUM had twice defeated the previous 1970-1974 Tory government in national pay strikes and was widely considered to be the union movement’s strongest battalion. Its defeat, at a time when unemployment had risen above three million, shattered the confidence of organised workers across Britain.

The strike rate is a key measure of the industrial class struggle. The comparative figures make for grim reading.

Average annual strike-days ‘lost’ in Britain by period, 1900-2007

DATE	PERIOD	Average annual strike-days (in millions)
1900-1910		4.6
1911-1913	Great Unrest	20.9
1914-1918	First World War	5.3
1919-1921	Post-war upsurge	49
1922-1925		12
1926	General Strike	162
1927-1932		4.7
1933-1939	Great Depression	1.7
1940-1944	Second World War	1.8
1945-1954	Beginning of Great Boom	2
1955-1964	Middle of Great Boom	3.9
1965-1969	End of Great Boom	4
1970-1974	Heath government	14.1
1975-1978	‘Social Contract’	7.2
1979	‘Winter of Discontent’	29.5
1980-1983	First Thatcher government	6.3
1984-1985	Great Miners’ Strike	16.8
1986-1990	Third Thatcher government	3.3
1991-2000		0.7
2001-2007		0.7

The sharp fall in confidence and combativeness inside the workplaces represented by the falling strike rate translates into falling union membership. Historically, in the long run at least, union membership tends to track the strike rate: when workers fight, the unions recruit; when they do not, the unions shrink. Union membership has halved in Britain since the 1970s, and the basic reason is not that unions failed to sell enough insurance to their members, but that they failed to make sufficient gains through collective action.

It is important not to exaggerate. Often concessions have been achieved simply through threatening strike action; votes for action in strike ballots have made a difference. Union membership has held up well in the circumstances and the unions remain, by a long distance, the biggest voluntary organisations in British society. They are mass democratic organisations rooted in the working class.

The decline of old industries explains much of the fall. Public-sector unionism remains relatively strong. There has even been some modest recruitment over the last year or two, partly because the unions have taken a lead against austerity – through mass demonstrations and in alliance with other social groups – and partly because workers are seeking a measure of security in union membership. Initiatives like Unite Community indicate the potential for trade unions widening their reach beyond the workplace.

Since the 2008 Crash the unions have repeatedly demonstrated their mobilising power in a series of one-day strikes and mass street protests, with an extraordinary half a million people taking to the streets in March 2011 and, several months later, a national strike involving an unprecedented level of co-ordination. More recently there have been further national strikes, sometimes – as with higher education workers and teachers – involving a degree of co-ordination by different unions.

However, great swathes of modern industry are effectively un-unionised. Only 15% of private-sector workers are in a union, and millions of younger workers have never been union members. The meaning of union membership, moreover, has changed: fewer members now think of it in terms of collective activity in the workplace; many see the union as a provider of individual services and an occasional organiser of token strikes and demonstrations; there is still a substantial layer of workplace union reps, but many spend virtually all their time doing casework.

Britain had one of the strongest labour movements in the world in the early 1970s; the neoliberal counter-revolution was spearheaded in Britain during the 1980s and was driven through with exceptional ruthlessness; and the unions suffered a series of major defeats in set-piece class battles. If events were less polarised and dramatic elsewhere, the underlying trends – sharp falls in the strike rate and union membership – have been similar in many of the more developed capitalist countries.

Two caveats should be entered. One is that austerity has produced explosions of union-led struggle in some places. Greece is an obvious example, with a succession of general strikes. The other is that the trajectory of class struggle in the newly industrialising countries may be significantly different. China is experiencing an epidemic of strikes and other forms of protest that go almost entirely unreported in world media. Several other Asian countries have seen very impressive large-scale strikes in the last few years. But the focus here is on Britain, where many of the characteristics of what might be regarded as ‘classical’ neoliberalism seem to find clear expression. New Labour, for example, is an archetype of a social-liberal party.

Reformism without reforms

Social-democratic (or ‘reformist’) political parties reflect the rise and fall of the industrial struggle in a much less direct way than union membership. Nonetheless, there is a relationship. Strong unions and successful mass strikes tend to move workers to the left, and political parties in which unions and workers are influential tend to get pushed in the same direction.

But reformist parties are highly contradictory. They seek to run the state and manage capitalism, yet at the same time seek votes mainly among the working class. The tension between ‘nation and class’ can become acute in periods of heightened class struggle. When the class struggle diminishes, on the other hand, the balance shifts. The dominant influence on reformism is then that of the ruling class. The state and capital shape the reformist party more than the unions and the workers.

Enough of a difference usually still exists for class to remain the single most important determinant of voting behaviour; and the working-class electoral base continues to be a constraint on the behaviour of politicians. Witness ‘Red Ed’ Miliband’s recent slight tack to the left. And this matters, in that a small gap in mainstream politics can create a big space for debate at the base. But the fact remains that Labourism has shifted ground hugely under the impact of neoliberalism.

During the Second Great Boom (1948-1973), state-managed capitalism and relatively high growth-rates provided reformist governments with the opportunity to combine economic interventionism with spending on infrastructure, public services, and welfare provision. There was space for reform within the system, as well as pressure from below to deliver it.

Under neoliberal capitalism, the opposite has applied. The internationalisation of capital has undermined the capacity of national governments to direct and regulate economic activity; on the contrary, the masters of ‘old capitalism’ in the Global West are locked into a ‘race to the bottom’, competing with low-wage economies in the Global East for investment by multinational banks and conglomerates. At the same time, the decline of union power has removed the primary pressure for reform.

The effect, sustained over an entire generation, has been to turn mainstream reformist parties into pro-neoliberal parties staffed by technocratic career politicians advocating ‘free markets’, privatisation, and corporate power. This decay of the mainstream social-democratic tradition, its growing acceptance of bourgeois ideology, is the essential reason for the hollowing out of parliamentary democracy – the ‘democratic deficit’ – and the widespread disenchantment with, and disengagement from, mainstream politics documented by Ady Cousins in ‘The crisis of the British regime’ (at www.counterfire.org).

The centrality of class

The (closely related) declines in industrial struggle, union membership, and social-democratic politics do not alter in the smallest degree the class character of modern society. Mainstream commentators conflate the political organisation of the working class (what Marx called ‘class for itself’) with the social existence of the working class (‘class in itself’). The former depends upon class-based industrial and political organisation (a subjective matter), the latter upon the socio-economic structure of society (an objective fact). We live in a capitalist class society as surely now as in the 1970s; one in which around 1% form the ruling class, around 20% the solid middle class, and the rest the working class.

On the other hand, there is another kind of confusion on much of the Left: a presumption that working-class struggle necessarily takes the primary form of strong workplace organisation and mass strikes. History suggests otherwise. The power of workers may often be in the workplace; but not necessarily. Sometimes the power of workers is on the streets; sometimes the streets lead and the workplaces follow.

If our historical view is restricted to 1970s Britain, we experience an optical illusion: a form of mass struggle which arose in very specific circumstances is magnified out of proportion. But we may not see these circumstances replicated in our lifetimes. A unique conjuncture at the end of the Second World War made possible the Second Great Boom (see ‘The crisis of the system’). A key factor was an embittered and radicalised working class, millions of them veteran wartime service personnel, who, after ten years of slump and six years of war, were not prepared to take any more shit from their rulers. The pressure for full employment and social reform was, as the more intelligent members of the ruling class at the time realised, irresistible. Fortunately for them, the post-war conjuncture – US dominance, Cold War arms spending, ‘Keynesian’ economic management – made possible the Second Great Boom.

The ‘reserve army of labour’ evaporated during the 1950s and 1960s, when workers found they could leave a job one week and start another the next. Security of employment meant strong unions and rising real wages. The most characteristic form of class struggle became the short, sectional, unofficial (or ‘wildcat’) strike led by shop stewards, directly elected workplace representatives.

The explosion of mass strikes between 1969 and 1985 was a collision between two highly organised class forces. The employers and the state were determined to weaken workplace union organisation in order to drive down wages and restore the rate of profit and the competitiveness of British capitalism. The unions were not only massive, with well over half the working class in membership, but also firm-rooted in strong sectional organisation, with a third of a million shop stewards, developed rank-and-file networks across many industries, and a tried-and-tested tradition of independent workplace action. It cannot be stressed enough that this was a result of the exceptional conditions of the Second Great Boom. We live today in very different times.

The authoritarian state

In the 1980s, under the Thatcher government, both major social classes – the ruling class and the working class – were organisationally and ideologically strong. Today, after a generation of defeats, the working class is organisationally much weaker. The ruling class, on the other hand, is ideologically weak, the political and business elite being more unpopular than at any time since the 1930s, and virtually the whole of its core programme facing deep-rooted hostility.

On the one hand, we have the relative decline of the unions, the long-term rightwards shift of the Labour Party, and the hollowing out of parliamentary democracy. On the other, we have deregulation, financialisation, privatisation, austerity, and the dismantling of the welfare state. A corollary of this contrast is what we might call the ‘authoritarianisation’ of the state.

The core of the state comprises armed bodies of men and women – soldiers who form a military apparatus for projecting imperial power abroad, and police who form a paramilitary apparatus for internal repression. Were the state simply a coercive apparatus, however, it would not long endure. The ruling class are too few, the exploited too many, for stable polities to be based on repression alone. Capitalist class rule always depends upon a mix of coercion and consent (‘force and fraud’).

The balance between the two varies, from regime to regime, and from period to period. Western state-managed capitalism during the Second Great Boom was notable for the consensual character of its politics and policing. The system could afford rising living standards, improved public services, and welfare reforms. Strong unions meant strong social-democratic parties and pressure on the ruling class to negotiate and compromise. Top trade union leaders were frequent visitors to prime ministerial offices. Elaborate arbitration procedures were employed to mediate between employers and workers. Even right-wing party manifestos declared support for economic regulation and progressive taxation. Demonstrations were commonly met by police in soft helmets with linked arms.

All this has changed. The balance has shifted from consent to coercion. Ministers and union leaders rarely meet. Labour parties offer little meaningful reform for working people. A chasm has opened between government policy and popular aspiration. Mainstream politicians have abandoned the rhetoric of social reform and equality in favour of that of the market, privatisation, and ‘incentives’. And demonstrations are met by riot police with batons, tasers, pepper-spray, and tear gas.

This shift is a direct consequence of neoliberalism, financialisation, and the internationalisation of capital. The state can no longer regulate its own national economy; instead, it must offer a range of incentives to attract investment. Power has shifted from the imperial blocs that dominated the world economy up to the 1970s to the giant global banks and multinational conglomerates of neoliberal capitalism.

Mainstream politics has become a froth of lies, spin, and broken promises because the waters beneath are churned by the dynamics of international capital accumulation. Prices must be cut and profits must grow at the expense of wages. Taxes on business must be slashed. ‘Red tape’ (environmental, welfare, and health-and-safety protection) must be reduced. Public services and welfare are unaffordable. Labour must become more ‘flexible’ (precarious) and ‘competitive’ (low paid). All baggage must be shed to increase speed in the global race to the bottom.

Parliamentary democracy is hollow because the nation-state has been disembowelled by international capital. A majority in Britain votes for parties opposed to raising university tuition fees. One of those parties is elected to government and immediately raises them. An overwhelming majority in Britain is opposed to privatisation of the NHS, and no party dare declare this its policy. Yet an elected government passes a bill to privatise the NHS.

The growing gap between aspiration and actuality, between promise and policy, becomes a widely perceived ‘democratic deficit’. The contradiction – to stress the point – is rooted in the shift of economic power from the nation-state to multinational capital. It is therefore insoluble for the system. The collapse of the social-democratic consensus and the increasing authoritarianism of the state are the consequences. Police rule on the streets is simply the contradiction’s most visceral expression.

We also find here an explanation for the growing corruption and cronyism of the system. Union leaders representing millions of workers have no access to ministers, but bankers, bosses, and sundry ‘consultants’ do. Billions are spent on bank bailouts, arms contracts, and subsidies to privatised companies. A ‘revolving door’ moves over-paid politicians who fiddle their expenses into over-paid executive posts that pay eye-watering bonuses for ‘work’ without social purpose. The state becomes a junket at the centre of a vast mesh of zombie banks, vampire conglomerates, and multi-millionaire social parasites. Gargantuan prestige projects – sports stadiums, luxury shopping malls, conference venues, cultural facilities – are merely the most visible symbols of the corrupt state-capital nexus at the heart of the neoliberal order.

The neoliberal state is undemocratic, corrupt, and violent. It has therefore become as much a target of the accumulating anger at the base of society as capital itself. But alienation from the state is only one dimension of a wider alienation from the neoliberal social order as a whole.

Alienation

Neoliberal capitalism has engineered economic changes which have hollowed out collective institutions and atomised social life. At root, this is a sociological – and, to a significant degree, psychological, cultural, and ideological – artefact of the ongoing ‘centralisation and concentration of capital’ analysed by Marx in Capital (see ‘The crisis of the system’).

The growing size of global corporations means that the main centres of economic power are ever more remote from everyday human experience. There is a pervading sense of disempowerment due to the decoupling of economic control and social existence. There is an irreducibly local aspect to the way in which human beings experience the world. Each of us has a limited geographical range and social network. Improved communications do not alter this in any fundamental way; our lives – work, family, leisure, sex, culture, politics, and so on – still take the primary form of direct human interactions with a relatively small number of others. Yet power is more global and remote than ever before. Possible human action and the historical tasks to be performed seem disconnected.

Marxism allows us to perceive this contradictory reality in a joined-up way, since it is, in its very essence, a holistic way of looking at the world. The phenomenon of disempowerment is best grasped with reference to Marx’s concepts of reification and alienation. Reification is the way in which human relationships and activities are ‘fetishised’ and turned into things. The concept of ‘the market’, conceived as an impersonal force dominating our lives, is an obvious example. Alienation is the corollary of reification at the level of everyday human experience. The reification represented by corporate and state power leaves us feeling detached, powerless, at sea in an ocean of swirling forces we cannot control.

Marx’s theories of reification and alienation are much less discussed than his economic theories. This no doubt reflects the centrality of economics in Marx’s corpus of published work. He devoted himself to understanding the processes of competitive capital accumulation that were beginning to transform the whole of human social experience. He did not have time to develop his ideas about reification and alienation, and they are often treated as little more than sociological descriptions of the human experience of exploitation; they are rarely discussed as dynamic contradictions in their own right.

Yet reification is Marx’s overarching conception of humanity’s entire state of being in class society; his sense of the way in which economic processes and social relationships are transformed into malignant forces of exploitation, oppression, and violence that operate outside any framework of conscious, collective, rational control. Human beings are then alienated precisely because they have lost control over their own creativity and the products of their own collective labour.

As public services are privatised, as education and health are commodified, as ever more routine human interactions are commercialised, the realm of reification expands. As unions, communities, and civic institutions decay, as social life risks being reduced to the separate activity of millions of human atoms, alienation rises.

We are social beings who thrive in free collective work; solidarity is an instinct. But the system hates solidarity because when the many combine the few are threatened. So the drive is always to break up solidarities, to fragment society, to counterpose ‘the individual’, ‘the citizen’, ‘the consumer’ to the idea of a collective. For in isolation there is fear – fear of unemployment, fear of homelessness, fear of unpaid bills, fear of the consequences of answering back. And when there is isolation and fear, bullying at work can become routine, stress turn into an epidemic, and effective resistance dissolve.

Growing reification and alienation, though challenged, are key features of the neoliberal phase of capitalist development. They are reflections of the ongoing centralisation and concentration of capital. Let us explore this in a little more detail.

Centralisation and atomisation

Neoliberalism wears two faces, one turned to the corporations and the state, the other to the masses. On the one hand, corporate and state power becomes more concentrated. On the other, civil society is broken down into its smallest components – the worker, the consumer, the individual, the household, the family – and the existence of each of these components becomes more inward-looking and self-obsessed.

The trend towards a more atomised and privatised lifestyle has been characteristic of capitalist society in the developed world since at least 1945. But until the 1970s, workplace union organisation was an important exception, not least in Britain. That is less true today, and a number of studies have discussed the atomisation and privatisation characteristic of the neoliberal social order.

A recent example is Philip Mirowksi’s Never Let a Serious Crisis Go to Waste (2013). His argument is that neoliberalism is not simply an economic theory and a programme for restructuring capital and the state. It has sunk roots into society, seeking to transform social life as a whole and the very way in which individuals think about themselves and their relationships with others. It has sought to destroy any sense of society as a collective, and to replace this with a sense of it as an amalgam of atomised, isolated, vulnerable individuals. Mirowski writes of ‘the rise of the neoliberal agent’ in a world where the distinction between economics, society, politics, and culture have all broken down, and everything has become crystallised into two primary entities, ‘the market’ and the ‘entrepreneurial self’.

This view has limitations and problems, but it is nonetheless important stuff. It is about a mindset linked to alienation from ‘politics’, suspicion of formal organisation, and a generalised tendency to individualise problems, to seek personal solutions, and to remain oblivious to the social character of exploitation and oppression and the consequent need for collective responses. It provides part of the explanation for ‘apathy’; for the fact that so many people seem to be the passive victims of an all-powerful corporate juggernaut, obsessing about consumption, lifestyle, celebrities, and electronic gadgets.

Both of the central features of neoliberalism discussed here – disempowerment and reification in the economic sphere, atomisation and privatisation in the social sphere – feed into what might be described as ‘the retreat from politics’ among self-declared opponents of the system. The sense of powerlessness encourages withdrawal into a personal space which one feels one can control, while the erosion of collective organisation and experience makes this seem a natural, indeed the only conceivable, form of political action. Identity politics, ethical consumerism, online ‘activism’, alternative lifestyles, and one or another variant of moralism are contradictory, but they represent a broad acceptance of the basic neoliberal premise that all life is a matter of individual choice and action.

This is one reason we have a low level of organisation and effective resistance despite a high level of generalised anti-capitalist and anti-war consciousness. Joining organisations to fight the system – unions, parties, campaigns – still happens, but it is no longer an instinct embedded in a long tradition of struggle from below, as it unquestionably was in the 1930s, or even the 1970s.

We have to win the argument that classes exist, that class-based struggle is of primary significance, that class struggle from below is inherently collective, and that effective resistance always requires a high degree of unity, solidarity, and organisation. We have to defeat an ‘autonomist’ argument that is itself a product of neoliberalism.

A loose vanguard?

The starting-point of revolutionary politics is to locate oneself within the minority that is fighting back (always a minority this side of the revolution; when the majority of the class moves into action, we enter a revolutionary crisis). The starting-point, in other words, is to be embedded in some sort of ‘vanguard’ (an unfashionable and problematic term, but possibly still the best we have). Revolutionaries seek influence in the vanguard as a transmission-belt to influence in the class. A revolutionary party is therefore a party of the vanguard. It is a party of activists recruited from among the most class-conscious and combative people in the unions and the movements.

In the past, the vanguard has usually been relatively easy to identify. When there is a high level of class organisation, with strong unions, parties, and campaigns, the vanguard comprises mainly activists operating within and around these more-or-less permanent bodies. The hollowing out of labour and left organisation in the last 30 years or so has reduced the size of this vanguard group.

But the protest movements of the last 15 years have created a new vanguard. Though it overlaps considerably with the first, this second group, which includes many young activists new to political struggle, tends to be less well-defined, more amorphous, more changeable in composition. The Occupy Movement provides an obvious example.

A rough, if perhaps overly simplistic, distinction can therefore be made between ‘traditional’ activists and ‘new’ activists. The vanguard still includes many thousands of ‘traditional’ activists rooted in the unions, the movements, and the left parties. But it also includes thousands of ‘new’ activists, represented by looser groupings like UKUncut, the Occupy Movement, and a wide range of radical single-issue campaigns. A much higher proportion of the vanguard now belongs to the category ‘non-aligned’. This reflects a generation of defeat and retreat for formal labour and left organisation.

The relationship between the two categories is a critical question. Both groups are diverse and there is much overlap: lots of young workers join unions; many older activists are involved in the new campaigns; protests often involve both traditional and new activists. And revolutionaries, naturally, seek to unite the vanguard organisationally as a mechanism for uniting the class in struggle. But first we need clarity about the differences.

The new activism is rooted in the shift from industrial action to street protest as the dominant form of struggle since the end of the 1980s. The Poll Tax Revolt in Britain (1989-1991) may represent a turning-point, since it was a community-based tax strike sustained by direct action and militant street protest, culminating in the biggest clash between demonstrators and police in Central London since the 1930s. It was followed by a massive London demonstration against pit closures in 1992. Then, in 1999, the Seattle ‘Turtles and Teamsters’ demonstration gave birth to the anti-globalisation movement. Since then, across the globe, we have seen street demonstrations on a scale without historic parallel, most famously, of course, on 15 February 2003, when anti-war protests in more than 60 countries involved perhaps 15 million people in total, with up to two million on the streets in London.

The anti-capitalist and anti-war movements – and the wider anti-system mood they reflect – have, since the 2008 crash and the imposition of programmes of austerity, accelerated privatisation, and increased social inequality, spawned a succession of explosive urban uprisings. In the case of the Middle East, of course, these merged with long-standing hatred of corrupt dictatorships and swelled into full-scale revolutions.

The higher the level of class struggle, the deeper the insight into society’s primary fracture-lines. In the third and final article in this series, I will consider the rash of new urban uprisings in a little more detail as we attempt to define the vanguard of the class struggle under modern capitalism.

Conclusions
 

Again, as with the first article, I want to suggest some tentative conclusions:

1. The traditional distinction between economics and politics in the analysis of class struggle has to a degree broken down. The centralisation of corporate power, the financialisation of class exploitation, the growing authoritarianism of the state, and the profound alienation experienced by millions of people living under the domination of neoliberal capital have had the effect of fusing anger and resistance into a generalised opposition to ‘the system’.

2. At the same time, however, the degradation of civil society, most importantly the weakening of workplace trade unionism, and the partial sundering of the social world into two contrasting poles – corporate and state power on the one hand, the atomised individual on the other – has somewhat disoriented resistance, encouraging many people to think in terms of individual choices rather than collective action.

3. The vanguard from which revolutionary organisation must be built comprises a much reduced pool of ‘traditional’ union and movement activists alongside a large, diffuse, shifting layer of ‘new’ activists. The character of each, and the relationship between the two, must be understood and mediated – if we are to rebuild the revolutionary left.

 

Thanks are due to James Meadway, Alex Snowdon, and Alastair Stephens for specific comments on this series of articles, and to other Counterfire comrades for more general comments that have helped shape my thinking. It will also be apparent that I am indebted to two generations of theorists associated with Monthly Review; their ongoing analysis of capitalist development is, in my view, indispensable. I must also acknowledge a debt to the insights of David Harvey.

The third article in this series will explore the character of the new urban uprisings as exemplars of contemporary class struggle.

The Age of Neoliberal Austerity: Part 1: The Crisis of the System

Introduction

We face a grave crisis in the history of humanity: a compound crisis of the global capitalist system with economic, social, imperial, and ecological dimensions. It is insoluble within the framework of competitive capital-accumulation. It threatens the very survival of industrial civilisation and a collapse into ‘barbarism’ and ‘the common ruin of the contending classes’; indeed, in some imaginable scenarios, it threatens the very survival of humanity in any form.

The historic task of the international working class – the emancipation of humanity by socialist revolution – has never been more urgent. Yet the traditional labour movement has been weakened by a generation of defeats and a decline in the confidence and combativeness of workers. The revolutionary left is small, fragmented, and inward-looking; its influence is less than at any time since the 1960s. The contradiction between the scale of the capitalist crisis and the industrial and political weakness of the working class provides much of the broad context for discussion of left-wing strategy.

This is the first of three short articles intended as a contribution to that discussion. None will offer an analysis of the current turmoil in the British revolutionary left. Much has been written about this, some of it useful, much of it worthless. The aim here is to take a broader view, returning to the Marxist tradition and placing us in the context of broader economic and social development. The three articles will deal respectively with a) the current capitalist crisis, b) the character of neoliberal society, and c) the balance of class forces today.

The permanent debt economy

We cannot make intelligent decisions about left-wing praxis in the present without a clear sense of both where we are going and how we might get there. We must start, therefore, with the current conjuncture, and the likely trajectory, of world capitalism.

I want to stress one basic argument about the current economic crisis: that it is a permanent condition that will define the epoch in which we are operating into the indefinite future. The capitalist system is a broken system of intractable stagnation-slump, such that, under the system, we face decades of austerity, privatisation, and impoverishment. The rest of this article is effectively an attempt to substantiate that claim. I begin with neoliberalism – the current phase in the development of capitalism – but I then place this phase in the context of the entire history of the system and attempt to identify the long-term tendencies which have condemned it to permanent stagnation-slump.

The neoliberal counter-offensive has, since the 1980s, inflicted important – if highly contested – defeats on the working class and enabled a dramatic shift in the distribution of wealth and power from labour to capital. But the gains in competitiveness and profitability have been undermined by the consequent deflation of demand.

Capitalists require low wages in the production process (in their own factories) and high wages in the realisation process (in the market where their goods and services are sold). That they cannot have both constitutes one of the central contradictions of  the system. Its effect in the neoliberal era has been to intensify a long-term tendency towards ‘over-accumulation’ (too much productive capacity and output relative to demand) leading to low growth, stagnation, and slump. Overall growth rates since the 1970s have been only half those of the period before, and the system has been subject to increasing ‘turbulence’ and a succession of bubbles, crashes, and recessions.

The turbulence is caused by financialisation. The gap between supply and demand has been filled by debt. States, corporations, and households have become loaded with debt, the banking system has expanded into a gigantic casino, and the global super-rich have accumulated huge portfolios of electronic ‘wealth’. Even industrial conglomerates have become ‘financialised’, expanding less through productive investment than through financial speculation (often in their own shares) and through ‘mergers and acquisitions’ (often simply buying up privatised state assets).

Why has this happened? The neoliberal counter-offensive is rooted in the contradictions of the great post-war boom. Let us consider what has happened in Britain. Here and later I shall take Britain as an exemplar of what are in fact global trends.

Rapid economic growth between 1948 and 1973 meant full employment, strong unions, rising wages, and a squeeze on profits. This culminated in a period of intensive class warfare between 1969 and 1985. At the beginning of this period, workers fought back hard against an employers’ offensive designed to weaken union organisation and drive down wages, winning a succession of major victories, notably in 1972, when the then Tory government’s pay policy and anti-union laws were smashed by militant mass strikes.

In the second phase of the struggle, shop-floor organisation was undermined by rising unemployment, wage controls, public-spending cuts, and a joint government-union ‘social contract’. Crucial to this was the election of a Labour government in 1974 and the forging of an alliance between Labour ministers and union leaders to clamp down on ‘unofficial’ strikes and the shop-steward-led ‘rank and file’ movement in industry.

In the third phase of the struggle, with shop-floor organisation substantially weakened, and a new hard-right Tory government elected in 1979, the British ruling class launched an all-out offensive to break union power and restore the rate of profit. The year-long miners’ strike of 1984-1985 was the centrepiece of this offensive.

The Thatcher government was in the vanguard of neoliberalism. The National Union of Mineworkers was the strongest bastion of the British labour movement. Other leading battalions of the British labour movement, notably the dockers and the printers, succumbed soon after. The neoliberal counter-revolution – deregulation, privatisation, tax cuts for the rich, welfare cuts for the poor, the slow fiscal strangulation of public housing, health, and education provision – began to unroll.

But cutting wages – personal wages and the tax-funded ‘social wage’ – reduces demand at the same time as it increases corporate profit and the wealth of the rich. Capitalists have more surplus to invest, but workers have less money to spend. One way round this is for workers to borrow to compensate for falling real earnings. Rising household debt is both profitable for banks and a mechanism to sustain aggregate demand for the system as a whole. This is one of the basic reasons that neoliberal capitalism is a debt junkie.

But it is not the only one. Financialisation is rooted in other pathological complexes of late capitalism. To understand why this is so – and why the crisis, in consequence, is so intractable – we must take a short detour through Marxist theories of capitalist crisis.  

A redundant theory

Some Marxists have focused, especially since the 1950s, on the long-term tendency for the rate of profit to fall under capitalism, claiming that this leads to increasingly intractable crises and the eventual collapse of the system. The argument originates with Marx in Volume III of Capital, where he discusses both ‘the law itself’ and various ‘counteracting factors’.

Marx, it must be said, never completed his theoretical work on capitalist crisis. His notes, edited into a publishable text by Engels after his death, have the character of work-in-progress. Nonetheless, his provisional hypothesis of a long-term tendency for the rate of profit to fall (TRPF) has been given as the basic underlying cause of capitalist crisis by a number of leading Marxist commentators, most notably by the late Chris Harman.

The argument is as follows. The organic composition of capital rises over time, i.e. the mass of machinery (‘constant capital’) operated by each worker (‘variable capital’) gradually increases. The surplus-producing component of investment (‘living labour’ as opposed to the ‘dead labour’ represented by machines) therefore decreases as a proportion of total investment. In consequence, the rate of profit has a long-term tendency to fall.

This is an important and useful insight, but in reality matters are far more complex. Marx identified a number of ‘counteracting factors’ that offset the TRPF in practice: more intense exploitation of labour; reduction of wages below their value; cheapening of the elements of constant capital; the relative surplus population; foreign trade; and the increase in share capital.

This is neither a comprehensive nor a coherent list (reflecting its origin as unprocessed data in Marx’s notebooks). It lumps together a hotchpotch of factors that operate in different registers. It also seems to relegate processes which are full-blown ‘tendencies’ in their own right to subordinate status as ‘counteracting factors’.

A basic error has in fact occurred. The rising organic composition of capital in physical terms (the growing mass of machinery), which is an undoubted empirical fact, has been conflated with a rising organic composition of capital in value terms, which is an entirely contingent matter. It is contingent because two other things are happening at the same time.

First, the productivity of labour is rising. Because production becomes more mechanised with each new round of investment, each worker ends up producing more. This is true of both the capital goods and the consumer goods industries. This being so, there is no inherent reason why the organic composition of capital should rise at all in value terms. Does a robot on a car assembly line today cost more in relative terms – relative, that is, to the cost of labour – than, say, a spinning jenny in the 1840s? Do the labour-intensive industries of the modern world – think of Glasgow call-centres, Dhaka clothing sweatshops, and Shenzhen electronics factories – imply a shrinking proportion of ‘variable capital’ being expended on ‘living labour’?   

Second, the rate of exploitation can rise. Only if workers are exceptionally well organised and combative – only, indeed, if they are actually on the offensive – will wages automatically rise in line with increased labour productivity. This is hardly ever the case in the history of the system. Wages are almost always ‘catching up’ – if that – reflecting the simple reality that the working class is the subordinate class under capitalism. This means that there is no inherent reason why the organic composition of capital should rise in value terms. Indeed, capitalists invest in labour-saving machinery precisely with the expectation that wages will not rise commensurately.

All three factors operate in the same register, viz in the production process where surplus-value is generated. In other words, when capitalists invest in new machines, three things happen at the same time: the organic composition of capital rises; the productivity of labour rises; and the rate of exploitation rises. None of these three factors automatically has priority over the others; none of them can be regarded as the tendency, with the others merely ‘counteracting factors’.

In the history of capitalism, profits rise and fall. When they rise, the system booms. When they fall, there is slump. But falling profits are a symptom of crisis, not its underlying cause.

The centralisation and concentration of capital

The TRPF became a central focus for many Marxist economists from the 1950s onwards, as an explanation of crisis in the context of the Second Great Boom (1948-1973). Its effect was to reassure revolutionaries at the time that, despite appearances, the system had not solved its problems and crisis would eventually return. Yet in the light of recent developments, its limitations are apparent.

The second generation of Marxists, including Lenin, Trotsky, and Luxemburg, made little use of the TRPF in their analysis of imperialism and capitalist crisis. Of particular significance is the fact that Trotsky, when directly addressing the problem of slump in the early 1920s, and again in the early 1930s, makes no explicit use of the TRPF in his account of economic developments.

The analysis of capitalism developed a century ago to explain imperialism, war, and slump was based on a quite different observation by Marx: that there was a long-term tendency towards ‘the centralisation and concentration of capital’ (TCCC). That focus was sustained by later generations of Marxist economists, notably those associated with the long-running Marxist journal Monthly Review, particularly Paul Sweezy and Paul Baran in the Cold War era, and Fred Magdoff and John Bellamy Foster more recently.

The argument is as follows. Capital accumulation is competitive, and because larger corporations can achieve greater economies of scale, they tend to drive smaller rivals out of business. Production becomes ‘concentrated’ in large factories, with ownership ‘centralised’ in large corporations. By the late 19^th century, in Germany, the US, and other advanced capitalist economies, entire industries might be dominated by a mere handful of giant firms.

The size of these corporations was decisive: they were big enough to control the national economy and shape state policy. Major firms in each sector formed cartels or trusts, dividing the market between them, and fixing output, prices, and profits. Because access to credit was a precondition of large-scale investment, finance capital rose in tandem with monopoly capital; industry and banks became interdependent. The power of the industrial cartels and banking syndicates, moreover, transformed the role of the state, which became a major investor in industry (e.g. in railway construction), a primary market for industry (e.g. with arms contracts), and an imperial protagonist on the world stage on behalf of native capitalists, seeking access to raw materials and markets in competition with great-power rivals.

It was the TCCC that shaped the imperial capitalism of c.1875-1935 that produced the Scramble for Africa, the First World War, and the Great Depression. It was the TCCC which underlay the state-managed capitalism of c.1935-1975, when the state became a leading economic actor, providing infrastructure, running key industries, regulating capital flows, managing aggregate demand, and providing the education, healthcare, housing, and welfare to sustain a skilled, motivated workforce.

A central feature of neoliberal capitalism in the period since (c.1975 onwards) has been the way in which the continuing centralisation and concentration of capital has meant that the dominant corporate form has burst its national limits and now operates as a fully-fledged multinational (or ‘denationalised’) firm within a worldwide market. Finance, investment, and trade, in the past more firmly anchored within individual nation-states, have become truly globalised.

This does not mean that states have become less necessary to the functioning of capitalism; it means their role has been reconfigured. The economic management and welfare functions of the state have declined. But the state continues to be a market for capital (e.g. arms contracts or infrastructure projects), a conduit for the transfer of surplus from workers to capitalists (e.g. bank bailouts or NHS privatisation), and an imperial protagonist for specific capitalist interests (e.g. the British state protecting the City or the German state its manufacturing industry); and in some respects these state functions have grown in importance since the 1970s. Not least, the state remains a vital coercive apparatus, its repressive role becoming ever more urgent as austerity and privatisation tear apart the social fabric.

But the atrophy of the state’s ability to manage and regulate the economy – as opposed to having to ‘deregulate’ at the behest of global capital – is a defining characteristic of the current phase of capitalist development.

The stagnation-slump economy

There is a long-term tendency towards ‘over-accumulation’. In Marx’s day, in the mid 19^th century, industrial capitalists created factories for mass production based on steam power and new labour-saving machines, and this resulted in a mass of small and medium-sized firms competing in national and colonial markets. No firm was big enough to dominate the market. Therefore, any capitalist who abstained from competition – who failed to invest in new techniques and remained reliant on outdated machines and inefficient methods – would be driven out of business by more enterprising, low-cost rivals. It was this dynamic system of competition that powered capitalism’s First Great Boom between 1848 and 1873.

But monopoly capitalism does not work that way. Capitalists hate uncertainty because it is risky and they can lose a lot of money; they crave managed markets and guaranteed profits. When a handful of firms dominates an industry, they can achieve this by forming a cartel or trust, either formally constituted (as in the early 20^th century), or through informal networks and tacit understandings (as now). The aim is to control the market and fix the price. Better that each giant firm has a guaranteed share of the market, and that each enjoys a guaranteed price for its products, than that they should engage in cut-throat competition and all be damaged. This is the basic reason that prices rise but rarely fall in modern capitalism, and that inflation has become endemic.

But this has further consequences. With the pressure of competition reduced, the drive to invest in new technology is also reduced. This reinforces the growing risk-aversion of capitalist corporations as they get bigger. The greater the scale of operation, the greater the level of investment necessary to bring new world-class plant on line. An oil refinery, power station, steel mill, or car plant represents massive long-term investment with an eye to uncertain future markets. Boardroom decisions about such matters are no longer the stuff of buccaneering free-market capitalism; they are shrouded in the caution of corporate bureaucracies with much to lose. Safety first becomes the watchword.

The financial fix

Here, too, in monopoly capitalism’s long-term tendency to stagnation, we find the taproot of financialisation. The modern corporation is awash with surplus capital. Some of this gets invested in secondary activities like marketing. Reduced price competition need not mean reduced competition per se; it can mean a huge expansion of advertising, branding, packaging, and so on, in an effort to expand market share without the risks inherent in price competition. But much of it gets redirected into ‘mergers and acquisitions’, asset stripping, financial speculation, and so on. There is a vast expansion of the (misnamed) ‘financial services industry’, and an explosion of (parasitic) creativity in devising ever more elaborate ‘financial products’ – because there is so much surplus capital swilling around the system.

To summarise, over-accumulation is characteristic of monopoly capitalism for three main reasons. The first is the eternal contradiction whereby capitalists seek to drive down wages in their own factories yet require high wages in the economy as a whole to generate demand for their products; as explained above, the success of the neoliberal counter-offensive has widened this contradiction and necessitated a ‘permanent debt economy’ to fill the gap.

The second is the way in which price-fixing enables big corporations to extract additional surplus from workers at the point of consumption; indeed, a central characteristic of neoliberal capitalism is a huge expansion in what might be termed ‘financialised’ exploitation.

The third is the risk-aversion of the corporate giants, which means that far too small a proportion of the rising surplus is invested in developing industrial capacity.

Financialisation is an expression of all three of these processes: it sustains demand in the form of debt; it is an alternative source of profit because debt is a commodity like any other; and it can therefore absorb the rising mass of surplus capital which is not being invested in new means of production.

This neoliberal reconfiguration of capitalist development has had a substantial impact on the current character of class exploitation and therefore on the predominant shape of the class struggle today. Crucially, it has contributed to a broad (if uneven) shift of locus from the workplace to the city.

In Capital and his other economic writings, Marx correctly focused on the new form of capitalist exploitation in the factory, ‘at the point of production’ as it were. But this, of course, was overlain on older forms of exploitation, which did not disappear. In The Communist Manifesto, Marx and Engels noted in passing that no sooner does the worker receive ‘his wages in cash than he is set upon by the other portions of the bourgeoisie, the landlord, the shopkeeper, the pawnbroker, etc’. Engels, in The Condition of the Working Class in England, makes frequent reference to the way in which workers in 1840s Manchester were exploited as consumers.

So exploitation takes place during both production and consumption. The relative proportions vary depending on the configuration of capital in any particular social formation, and neoliberal capitalism, a ‘financialised’ debt-junkie prone to stagnation and slump, is more dependent on exploitation during consumption than the state-managed capitalism of the Second Great Boom with its high rates of industrial investment and growth. The process of exploitation/accumulation at the point of consumption takes many forms.

Taxes levied on workers are recycled as contracts and subsidies to private business. At the same time, tax rates on the rich and the corporations are slashed, and most, in any case, ‘off-shore’ their profits in one of the many tax havens that have swelled to form an intricate and impenetrable global web.

Monopoly prices are charged by handfuls of giant firms that collude to fix the market in most major commodities. Prices rise but hardly ever fall in a world of mega-corporations with no incentive to engage in price wars and every incentive to act collectively to manage the market, control prices, and maintain profits.

House prices soar and the flow of mortgage payments to banks and rent payments to private landlords skyrockets. Loan sharks from Wonga to Visa encourage workers and the poor to stack up debts and keep interest flowing.

In these and numerous other ways, working people are fleeced by neoliberal profiteers. This is what Marxist geographer David Harvey has called ‘accumulation by dispossession’. This realm of exploitation in consumption (as distinct from in production) is ever expanding as public provision shrinks. What liberal economist John Kenneth Galbraith called ‘private wealth and public squalor’ has been reconfigured by 35 years of privatisation, as public services are sold off and public need is commodified and commercialised by vampire corporations.

Let the global housing crisis serve as an example. Wherever you look, it is different city, same story: soaring prices in prime urban locations in a market driven by the neoliberal elite – the rich and the middle class, the top 20% or so who keep getting richer – while the workers, the poor, and the young are either driven out altogether or crippled by mortgages and rents they cannot afford.

The effect is a partial shift of the main battle-lines in the class struggle from the workplace to the community. If workers are exploited by rising prices at the point of consumption, taxes and/or prices may become the focus of struggle, and therefore community mobilisation the mechanism. The Poll Tax Revolt of 1989-1991 is a recent example of a successful struggle of this kind. Many contemporary forms of state and corporate fleecing provoke widespread anger – the rising price of food, energy, transport, and housing; the use of tax revenue to bail out banks and subsidise private business; corporate tax-dodging and the corruption of the political elite; the selling to profiteers of healthcare facilities, educational services, student debt, and just about anything else one can think of. Financialisation means that neoliberal capitalism in all its manifestations is politically toxic.

The rise of the Global East

Capitalism is a dynamic, competitive, ever-changing system. At certain moments in its development, the balance of economic power shifts decisively from one geopolitical region to another. Such a shift is taking place now, in the early 21^st century. 

The entire history of the system bears witness to the rise and fall of imperial powers. Britain built the biggest European empire in the 18^th century, and then led the Industrial Revolution in the 19^th, becoming ‘the workshop of the world’. But British capitalism was overhauled by German and US capitalism at the end of the 19^th century, and was then bankrupted and transformed into a financial dependant of the US as it became overextended fighting two world wars to defend its empire in the first half of the 20^th century.

The US and the Soviet Union emerged from the Second World War as the dominant imperial powers. The US was the more powerful of the two in economic terms. Nonetheless, largely because of the cost in military terms of maintaining it, this supremacy was short-lived, and the US share of global production has declined from around 50% in 1945 to about 20% today. This relative decline, especially when set against the rapid growth of Chinese capitalism – with Chinese GDP expected to exceed that of the US before the current decade is out – has created a new fracture-line in global politics.

Growing competition from developing industrial economies (‘the Global East’) has provided the essential backdrop to neoliberalism inside the Western states. Western capitalism can no longer afford the high wages and welfare provision of the Second Great Boom. Working-class living standards are being hammered down in a ‘race to the bottom’ with the rising sweatshop economies of the Global East. The ‘precariatisation’ of the Western working class is, along with the privatisation of public services, part of a long-term programme to re-engineer Western society in conformity with the evolving imperatives of global capital. Tory politicians like Cameron and Osborne make no bones about this: they speak openly of a permanent restructuring of the social order so as to remain ‘competitive’ in world market terms.

The permanent crisis

Only once in its history has capitalism experienced what might be considered ‘normal’ growth – i.e. relatively fast economic expansion in conditions of free-market competition. This was during the First Great Boom of 1848-1873. Then the system crashed, and growth remained sluggish and unemployment high through the Long Depression of 1873-1896. A new phase of expansion was made possible only by imperialism and arms expenditure, and the resulting tensions culminated in the First World War; this, of course, was the deeply pathological system analysed by Lenin and other second-generation Marxists.

The world economy slumped after the war. Unemployment never fell below a million in Britain in the interwar period. The ‘Roaring Twenties’ were a debt-fuelled speculative frenzy. When the bubble burst in 1929, the system was plunged into the Great Depression, with one in ten out of work in Britain, one in four in the US, and one in three in Germany.

The depression was ended by state capitalism, arms expenditure, and the Second World War. That there was no return to slump in 1945 was the result of a very specific conjuncture of circumstances: the global dominance of the US and the dollar; continuing high levels of arms expenditure during the Cold War; pressure from below for radical reform to prevent a ‘return to the 1930s’; and new techniques of state economic management developed during the depression and the war. This combination of circumstances gave rise to the Second Great Boom of 1948-1973.

Once launched, it was, to some degree, self-sustaining, as rising wages created demand for increased production. But this was in no sense ‘normal’ growth. The ‘permanent arms economy’ rested on the cone of a nuclear missile. Rising living standards were overshadowed by the risk of nuclear Armageddon and by a succession of protracted colonial and proxy wars that killed millions.

State-managed ‘welfare’ capitalism unravelled in the 1970s. US hegemony was weakening. New industrial economies were emerging. Powerful unions were squeezing profits. The happy conjuncture of the late 1940s came apart and the pathology of the system resurfaced in a rash of new contradictions. The neoliberal counter-offensive and the permanent debt economy have been the result.

Conclusions

I draw three main conclusions from the preceding analysis:

1. The modern capitalist system is sluggish, stagnant, and prone to slump. It is in permanent crisis, with austerity, privatisation, and a race to the bottom now hard-wired into its basic functioning. As an economic system, it threatens mass impoverishment, a growing risk of world war, and eventual environmental catastrophe. There appears to be no middle way: no reformist fix comparable with the state-capitalist/Keynesian remodelling of the system in the 1940s. Revolutionaries therefore have to argue openly for international working-class revolution, as well as uniting in common struggle and in broad coalitions with those influenced by reformist ideas.

2. Neoliberalism/financialisation has reconfigured class exploitation and restructured class society in ways likely to have an impact on the shape of the class struggle in the period ahead. The workplace and the unions remain central to the struggle, but they no longer represent its sole primary locus. Growing exploitation at the point of consumption has created a new terrain of mobilisation and resistance. The city as a whole has become a major battleground alongside the workplaces.

3. Explanations of the crisis in terms of a long-term tendency towards the centralisation and concentration of capital encourage us to see the system as a multi-dimensional whole, a complex web of contradictions, with numerous points of collision between the rulers of the world and the mass of humanity. In particular, it encourages us to think not just of exploitation at the point of production, but also at the point of consumption; and not just of the workplace as a locus of struggle, but also of the city as a whole.

 

Thanks are due to James Meadway, Alex Snowdon, and Alastair Stephens for specific comments on this series of articles, and to other Counterfire comrades for more general comments that have helped shape my thinking. Many of the ideas have proved extremely controversial, however, and I must therefore stress that I am entirely responsible for what appears here.

It will also be apparent that I am indebted to two generations of theorists associated with Monthly Review; their ongoing analysis of capitalist development is, in my view, indispensable. I must also acknowledge a debt to the insights of David Harvey.

The second article in this series will explore the nature of neoliberal capitalist society.