In Capitalist Crisis, Rediscovering Marx

The rise, fall, and return of Marxian analyses – Richard Wolff

Marxian analyses are now resurfacing in public dialogues about economy and society. Thirty years of systematic and often successful anti-Marxism agitation are fading in politics, the media, academia, and beyond. A new generation discovers and wrestles with the diverse richness of that tradition’s insights. Capitalist economic crises contributed to Marx’s original insights and to their growing reception across the 19th and 20th centuries. Yet another crisis now renews broad social interest in Marxism. While the intensity of capitalism’s dysfunction in its recurring crises motivates that interest, the logic of Marxian analysis makes the capitalist system itself, in or out of crisis, the object of criticism.

In the century before the 1970s, the victims of capitalism’s recurring crises and its critics increasingly found theoretical and strategic resources in Marx’s and other Marxists’ works. That helped the Marxist tradition of social analysis spread widely across the world. As it interacted with many varied social contexts through changing times, the tradition developed multiple, different – and sometimes contested – interpretations or versions of Marxist social theory. Marxism accumulated diverse critical analyses of capitalism, varied critical engagements with theories that supported capitalism, and complex connections to an array of political movements and organizations. It gathered and debated the theoretical and practical lessons drawn from the experiences of social movements more or less inspired by Marxism. Even during periods when dogmatism promoted one interpretation (or “tendency”) within Marxism as “the” genuine Marxism and marginalized or suppressed other interpretations, the latter survived. At the same time, new tendencies arose. Marxism continues as a cumulatively enriched (albeit diverse and contested) resource for theorists and activists seeking social change beyond capitalism.

Capitalism’s defenders have variously sought to kill, repress, ignore, or otherwise marginalize Marxism and Marxists. Their efforts often succeeded in slowing or temporarily reversing Marxism’s advances in the century before the 1970s. Unevenly yet relentlessly, the Marxist tradition grew to encompass labor unions, political parties, newspapers, academic associations and research institutes, local, regional and national governing regimes, and internationals. It also generated internal differences, debates, and conflicts, mostly peaceful but sometimes violent, among its constituent tendencies.

However, the 1970s changed the conditions of and the social prospects for Marxism. Capitalism had by then recovered significantly from the damage to its institutions and public support caused by the Great Depression of the 1930s. The 1970s saw sharply intensified business and conservative counterattacks against the reforms, regulations, and other Depression-era state interventions imposed upon private capitalists. The US government cooperated by enhancing the demonization of all things Marxist, especially after Reagan became president. Well-funded crusades denounced state, labor-union, or popular interventions limiting private capitalism as Marxist, “anti-American,” dictatorial, and counterproductive. The deepening internal contradictions of the “actually existing socialisms” that officially celebrated Marx and Marxism facilitated those crusades. Marx, Marxism, and communism were conflated into synonyms – a conflation promoted by both the USA and the USSR albeit for different reasons.

A resurgent post-war capitalism celebrated its renewed strength and the weaknesses of its enemies, both foreign and domestic. In the US, the New Deal, already compromised from 1945 to the 1970s, was afterwards largely and systematically reversed. Unions’ membership and social influence declined. Together with shifting labor market conditions, unions’ weaknesses put a permanent end in the 1970s to the 100-year period of rising US real wages. Economics, politics, and culture shifted rightward, bringing a neoliberal era committed to privatizing means of production and deregulating markets. A reinforced individualism focused on getting rich quick while also denigrating and deriding most collective social efforts and values.

In the 1970s, a new set of global investment opportunities opened up for capitalist enterprises. Technological changes inside enterprises (computers), in transportation (jet aviation) and in telecommunication (the internet) greatly enhanced global coordination within and among capitalist corporations. Producing, installing, maintaining, and refining those technological changes became extremely profitable investment opportunities as well. Most important was combining global capitalism with vast new sources of relatively cheap labor (both located in and immigrating from the former “second” and “third” worlds). Technological changes driving up the productivity of labor combined with new supplies of labor power to keep real wages from rising. That made capitalist surpluses soar. The 30 years before 2008 thus saw one of the greatest profit booms in capitalist history.

Capitalism’s admirers in business, politics, media, and the academy celebrated. Labor, socialism, and Marxism weakened and shrank, unevenly but nearly everywhere. Capitalism’s apologists insisted yet again that capitalism had “overcome its crisis tendencies.” Alan Greenspan, the US Federal Reserve’s chairman, said in the late 1990s that we “now live in a new economy.” Once the USSR had imploded, Marxism’s enemies changed their attacks. Before 1989, they had portrayed it as an erroneous theory informing a failed and also treasonous practice. After 1989 they treated it more as a fading historic relic deserving no modern person’s serious attention. Capitalism had won the struggle with socialism. “There is no alternative” to capitalism, and the US is its appropriate superpower champion.

By means of such adjusted anti-Marxist rationales, Marxist analyses continued to be excluded from the mass media and Marxists from academic and political positions. They were not needed; history had rendered them anachronistic. The world had moved on. Not a few Marxists found it difficult to sustain their beliefs in so changed an environment; they therefore modified their positions or abandoned Marxism altogether.

Once Greenspan’s “new economy” had collapsed in 2008, exposed as the same old crisis-prone capitalism, Marx and Marxism were rediscovered yet again. The Marxian tradition was found to be helpful in understanding the crisis’s causes and costs and in finding solutions that entailed alternatives to capitalism. The rest of this paper illustrates that helpfulness.

Those newly encountering Marxism, like many familiar with the tradition, were both attracted and troubled by its richness and diversity. Some were sufficiently distressed by the multiplicity of contending tendencies that they fixed upon one tendency as if it were Marxism per se and either ignored other tendencies or read them out of Marxism; such theoretical sectarianism has been a recurring problem. Others embraced Marxism’s richness and engaged the debate among its internal tendencies. They supported, extended, and applied one or a subset of those tendencies and debated their reasons for doing so with advocates of alternative tendencies. They conceived their project as building a complex, diverse tradition struggling to move society beyond capitalism.

In that spirit, let me make clear that I am using here a particular interpretation of Marxian theory to provide a unique explanation of the current capitalist crisis’s multiple causes with emphasis on the US. On the basis of this interpretation, I offer arguments for a Marxist response to capitalist crises. My intervention, together with those of other Marxists, demonstrates again the productive insights made possible through Marxism’s critiques of capitalism. These interventions feed and foster today’s rediscoveries of Marxism’s indispensable resources for superseding the instabilities, social costs, and limitations of the capitalist system.

Capitalism as an Oscillating System

Capitalist economies everywhere display a recurring pattern of oscillation. Periods of relatively limited state interventions in markets and private property repeatedly encounter crises that they manage more or less well. Eventually, however, a crisis arrives that exceeds their management capacities. Then, transition occurs to a period with relatively more state economic interventions. This latter period then similarly encounters and manages some lesser crises before it too confronts one that it cannot contain. Then a reverse transition generates a period of relatively less state economic intervention. What remains the same across both periods of this oscillation is the capitalist structure of production inside enterprises. There, a small group of people oversees the production and sale of commodities produced by a large group of hired laborers. That small group appropriates and distributes the surplus – the excess of the value added by workers over their wages – embodied in those commodities.

We shall use the names “private” and “state” to differentiate these oscillating periods or forms of capitalist economy. Thus, for example, the 1929 crisis of a private capitalism in the US ushered in a state capitalism, Roosevelt’s New Deal. Eventually, in the 1970s, that state capitalism encountered a crisis serious enough to provoke a transition back to private capitalism. When the latter experienced a meltdown in 2008, that crisis provoked yet another move back toward a state capitalism. Comparable oscillations characterize all capitalisms.

Two different and contending mainstream (i.e., non-Marxian) theories have alternatively explained capitalism’s repeated crises over the last century. For each crisis, those different theories proposed correspondingly different solutions. Today’s crisis is no exception. Ideological hegemony has oscillated between those two theories just as capitalism has oscillated between its two forms.

One theory – now called “Keynesian economics” – claims that relatively unregulated private enterprises and free markets have structural limits and imperfections that periodically push capitalist economies into inflations, recessions, or even depressions. Without intervention from outside, private capitalism may remain depressed or inflated long enough to generate the mass opposition that could threaten capitalism itself. Keynesian economics identifies those key mechanisms that produce crises in private capitalisms and recommends various state interventions (regulations and monetary and fiscal policies) to reduce their depth, duration, and frequency.

The other mainstream theory is associated by its devotees with Adam Smith, the classical “founder of modern economics.” It celebrates private capitalism (free markets plus private property) as the economic system that generates the maximum possible wealth and thereby social stability. In its evolved “neoclassical” form, this mainstream theory emphasizes how and why private capitalism yields the best (“optimum”) of all possible economic outcomes. When non-optimal outcomes occur, neoclassical economists usually argue that their causes are either external (e.g., state) interventions into or internal violations of private capitalism’s rules of unfettered individual pursuit of self interest, competition, etc. Thus, the best solution for non-optimal outcomes is to re-establish a properly rule-driven private capitalism free of external interference.

The neoclassical economists denounce Keynesian-inspired state interventions as inevitably yielding regulators’ mistakes, politically manipulated markets, and such resulting inefficiencies as inflation, stagnation, and stagflation. State officials cannot, they argue, efficiently replace, let alone improve upon, the unregulated (“free”) market mechanism. Neoclassical economists insist that free markets accommodate the infinity of different demands and supplies and communicate the infinity of information about them more efficiently than any state could. On the other side, the Keynesians mock the neoclassical economists for their opposition to state interventions that are essential to support the capitalism those same economists champion.

From the 1970s to 2008, as private capitalists campaigned against national and international state interventions that constricted their profitability, neoclassical economists renewed and extended their theory under the rubric of a “neo-liberalism.” They overthrew the previous domination of Keynesianism in government economic policy and academia that emerged from the Great Depression of the 1930s. Neoclassical economists had always attacked the Keynesian economics of FDR’s New Deal for seriously distorting and slowing economic growth and promoting social conflict (sometimes dubbed “class war”). They sought to reinstitute the neoclassical utopia: private property and competitive markets lifting the incomes of both labor and capital and thereby avoiding class conflicts by means of growth.  

From the 1970s to 2008, market deregulation and privatization became the official and prevailing principles of business, politics, journalism, and academia. Neoclassical economics became once again, as before the Great Depression, the “correct” modern economics. It banished Keynesian economics as a theoretical mistake. Unrepentant Keynesians found their professional advances blocked. Such extreme intolerance and hostilities between these mainstream theoretical schools replicated some of the ways both of them had jointly suppressed Marxian economics and economists since the late 1940s.

From the 1970s to 2008, as productivity gains combined with stagnant real wages, corporate profits soared. Because this occurred together with neoliberal policy shifts, neoclassical economists credited the latter as the cause of the boom of the 1980s and 1990s. As the years passed, however, the relatively privatized economy also exhibited increasingly unequal income and wealth distributions and the associated explosion of debt and risky new credit instruments. Eventually, economic bubbles in stock, real estate, and credit markets burst, as had been darkly predicted by Keynesian and Marxian critics.

The new millennium opened with a stock market crash in the spring of 2000. A few years later, the rapid decline of interest rates (intended to limit the recessionary consequences of that crash) helped to propel a real estate bubble that collapsed into a liquidity-cum-credit crisis. Today a deep recession threatens to slide into a depression of major proportions. Neoclassical economists are in retreat as Keynesians resurface from ideological exile while conversions from the former to the latter also occur.

The Keynesian message remains what it always was: state intervention must save capitalism from its private form. That has become, again, today’s wisdom. Faced with the current crisis, those who remain neoclassical economists have become advocates of yesterday’s failed paradigm. However, if the Keynesian interventions begun by Bush and enlarged by Obama usher in a state interventionist form of capitalism for a while, capitalist crises will recur as they always have. Those crises will then again set the stage for yet another possible oscillation back to a private form of capitalism and to the associated hegemony of neoclassical economic theory.

Both sides share a profound conservatism vis-à-vis capitalism, despite their differences on state intervention. Each presumes the absolute necessity of (and never questions) the capitalist structure of production: a small group of employers – typically boards of directors chosen by major shareholders – that hires and controls, through its managerial staff, a different and much larger group (workers) who produce surpluses appropriated by the employers. The oscillations between the two forms of capitalism and between the two mainstream theories prevent crises in capitalism from becoming crisesof capitalism, wherein the capitalist production system itself is thrown into question. Oscillation between the two theories shapes and contains public debate when capitalist crises cause serious social suffering. It keeps the range of discussable solutions to more or less regulation, more or less monetary or fiscal policies, and so on. That range keeps the public from imagining, let alone considering, the Marxian alternative solution, namely transition out of either form of capitalism into a different system.

A Marxian alternative

Yet after repeated oscillations between neoclassical and Keynesian theories, the promises of both sides that their solutions would “prevent future crises” ring increasingly hollow. The scope and duration of the current crisis therefore tarnishes not only neoclassical theory. Even as Keynesians rush in to fill the void created when this crisis undercut neoclassical theory’s hegemony, they face an accumulated skepticism. Space opens for a rediscovery and consideration of Marxism. As Marxism produces distinctive explanations for the crisis and non-capitalist solutions, that space and its attractiveness expand.

The particular Marxian economic theory we deploy – and its application to the current capitalist crisis – is presented in detail elsewhere.[1] We will use it summarily here to explain the causes of the current crisis and to offer a new solution. Both the explanation and the solution differ radically from the neoclassical and Keynesian alternatives. They exemplify the fruits of applying Marxist theories to contemporary issues.

Today’s crisis has deep roots in US capitalism’s previous 125 years. From the 1870s to the 1970s, two key economic trends shaped the system: average real wages rose by about 1.3% per year while workers’ average productivity rose by just under 2% per year. For that century, workers enjoyed a rising standard of living purchased chiefly with rising real wages. Capitalist employers simultaneously appropriated a rising surplus (because value added to output per worker rose faster than wages paid per worker). The social gap between workers and capitalists thus grew. Yet it posed no political problem where and when workers were satisfied with rising real wages and not troubled by that rising gap.

The century before the 1970s was thus largely a sustained success for US capitalism. Capital’s steadily rising surpluses were distributed effectively to enhance the conditions for their further growth. Those surpluses helped to pay for technical change, for taxes to finance infrastructure development and public education, for mergers and acquisitions to gain economies of scale, etc. Workers became focused on the rising consumption made possible by their rising wages. They self-identified increasingly as consumers more than as workers. Consumerism became a powerful ideological and therefore social force. Unions accommodated that force by aiming chiefly to facilitate more consumption through better pay rather than to make basic social change. The exceptional “success” of US capitalism thus reflected but also depended on the continued growth of real wages combined with a faster growth of productivity.

However, that success had its costs. As the surpluses appropriated by capitalists rose faster than wages, the consequently growing economic disparity financed widening political and cultural gaps. Over the century before the 1970s, politics settled ever more deeply into an institutionalized, merely formal electoral democracy of money-driven elections and bureaucracies where capitalists’ interests prevailed. Likewise cultural divides increasingly distanced the growing mass of workers from an elite of multinational corporate capitalists, their larger shareholders, and their better-paid, more or less “professional,” dependents.

The dangers of deepening social divisions were postponed by the combination of rising personal consumption and a culture that celebrated it. The qualities and quantities of consumption became the measures of one’s personal achievements and worth. They likewise functioned as compensation for increasingly demanding work (the “other” side of rising productivity). The birth and remarkable growth of modern advertising both resulted from and reinforced that culture. It challenged the religious self-image of US culture sufficiently to provoke endless clerical repetitions of sermons that bemoaned and denounced “mass obsession with material rather than spiritual values.” Yet the rise of mass consumerism persisted. It had become the needed social glue binding workers and capitalists across the growing social gaps between them.

Starting in the mid 1970s, the long-running success formula of US capitalism stopped functioning. Real wages in the US stopped rising while labor productivity continued to rise (see chart below). The surpluses that capitalist employers appropriated consequently soared because their workers no longer shared in the rewards of their productivity gains. The social divide between producers and appropriators of the surplus surged as well.

Capitalist employers no longer had to pay rising wages for four major reasons. First, the computer revolution started displacing millions of US workers in the 1970s. Second, US corporations responded to growing European and Japanese competition by increasingly shifting production out of the US to lower-wage production sites. These developments slowed and further changed the composition (from manufacturing to services) of the demand for workers inside the US. Third and fourth, the mass movement of women from households into paid labor positions plus growing immigration increased the number of job-seekers. These changing demands and supplies in the labor market enabled employers to stop raising real wages.

Most importantly, the demise of rising real wages ended an era. The impact of that ending on the US cannot be overstated. A capitalism that had come to define, celebrate, and defend itself by reference to rising consumption afforded by rising wages could no longer do so. The impact was all the greater because the meaning and implications of the change were not even recognized – let alone debated. Workers experienced the change as a personal and individual matter rather than as a social issue of historic scope.

The post-1970s explosion of surplus value accruing to employers transformed US capitalism in multiple ways. Wealth poured into capitalists’ financial accounts. It financed a stunning further expansion of corporate wealth, power, and social influence. Corporate boards of directors distributed the exploding surpluses partly to themselves (as fast-rising top managerial salaries, benefits, and bonuses). They justified doing so by attributing the enhanced profitability of their enterprises not to the end of rising wages but to their own genius (as if they had suddenly become “much more entrepreneurial”). Corporate boards distributed another part to lower-level managers (as their remuneration and operating budgets), bankers (interest and fees), share owners (dividends), lawyers and advertisers, etc. These groups thus also prospered at one remove from the surplus trough, while the vast mass of workers with flat real wages found life increasingly difficult.

Those workers’ families faced a choice. They might have foregone rising consumption since they no longer earned the rising wages to afford it. They did not do that. Rising consumption was the realization of lifelong personal hopes, the sign of social success, the reward earned by hard work, and the promise to one’s children that had to be kept. When their wages no longer rose, workers responded by finding two other ways nevertheless to continue raising their consumption.

First, with real hourly wages stagnant, workers’ households sent more of their members to do more hours of paid labor. Husbands did more work while teenagers and retired people took at least part-time jobs. Most importantly, millions of housewives and mothers entered the paid labor markets. These responses helped add to family incomes, yet by also increasing the supply of job-seekers, they further undermined wages generally.

Increased paid labor by more members of workers’ families also imposed additional personal and social costs on workers’ households. Women increasingly held two fulltime jobs, one outside the household and one inside, since they continued to do most of the housework. The added stress of this double shift altered and strained household relationships. The emotional supports that integrated and sustained the institution of the family – performed so disproportionately by women – were often compromised when they added external wage-labor to their tasks. The divorce rate rose since the 1970s as did other signs of alienation and stress (drug dependence, intra-family abuse, etc.). The added cash costs of women’s paid labor outside the home (for appropriate work clothes, job-related transportation, purchased meals, cleaning expenses, childcare, drugs, etc.) reduced its net contribution to resuming rising consumption for the entire family.

Another way to raise family incomes had to be found. The solution was household debt. The Federal Reserve records a total household debt in 1975 of $734 billion. By 2006, it had risen to $12.8 trillion. This 30-year debt explosion has no historical precedent. Workers depleted their savings and took on ever-increasing debt levels. By 2007, US workers were exhausted by their long labor hours, emotionally stressed by the disintegration of families and households, and extremely anxious about unprecedented and, for millions of citizens, unsustainable debt levels.

The post-1970s squeezing of the American worker financed unprecedented prosperity for US capitalists. They and their associates enjoyed a new “gilded” age. Extreme personal wealth among them became the object of media adulation that cultivated mass envy. The US at the end of the 20th century replicated for a new group of capitalists what Rockefeller, Carnegie and their ilk had achieved at the end of the previous century. Corporate boards of directors could also spend lavishly on computerization, research and development, and costly shifts of production facilities abroad. They generously lubricated politicians to better control government at all levels, just as flat wages and household turmoil turned workers away from civic affairs to concentrate on jobs and families. Capitalists thus could and did make government much more responsive to them in enhancing the conditions and profitable outlets (lower tax burdens, technical change, immigration, job exports, etc.) for their exploding surpluses. Workers felt ever more alienated from politics and resentful of politicians.

Exploding wealth concentrated in relatively few hands fueled rapid growth in enterprises specialized in managing such wealth by finding profitable investments for it. Investment banks, hedge funds, and so on pandered to and competed for “high net worth individuals.” They discovered, invented and marketed new financial instruments as outlets for investment. As recurred so often in capitalism’s history, when profits soared, competitive wealth management slid seamlessly into speculation fueled by the euphoria of exploding riches at the top. The search for ever higher returns drove wealth managers and owners to take ever bigger financial risks. To a point, this process was self-validating and self-reinforcing.

Symptomatic of (and also contributing to) the deepening divisions in US society, one major financial speculation undertaken with corporate surpluses involved lending them at high interest rates to working-class families. As noted, the latter were eager borrowers to sustain their “American dream” of rising consumption after their wages had stopped rising. The so-called “sub-prime” loans – made to those working-class families at the greatest risk of becoming unable to service them – eventually punished the lenders when those borrowers defaulted. Workers’ families could no longer work more, earn more, borrow more, or support outstanding loans. The financial deals among banks, hedge funds, insurers – a house of cards dependent on mass consumer debt – crashed. The stagnant real wages that had enabled the capitalists’ boom came back finally to burst the capitalists’ investment bubble. Marx would not have missed the irony. People rediscovering Marxist analysis today are intrigued by the insight as well as the irony.

Contradiction and crisis

In Marxian idiom, the clashing interests of workers and capitalists (i.e. class structures and struggles) were key influences upon the real wage stagnation after the 1970s that launched the trajectory to crisis. Likewise, the clashing interests among capitalists (i.e. competition) drove their search for ever more and newer profitable investments for their expanding surpluses. They took on ever more risk. Financial innovation morphed into dangerous speculation that launched another trajectory toward crisis.

Capitalists exulted after the 1970s as the system delivered wealth to them on an unprecedented scale. They had, although without acknowledging the fact, substituted rising loans to their workers in place of the rising real wages paid over the previous century. This was little short of a capitalist fantasy come true. However, they preferred to believe instead that the entrepreneur-led, efficiency-driven mechanisms of private enterprise and free markets accounted for their good fortune. To them and their ideological supporters, their wealth proved that private, unregulated capitalism was superior to any conceivable alternative system. While the good times for capitalists rolled, the politicians, media spokespersons, and academics that they increasingly funded affirmed such beliefs only too eagerly.

Marxian theory offers the following basic theses about the roots of today’s crisis: (1) that the end of rising real wages was the hard reality underlying a debt-dependent prosperity since the 1970s, and (2) that the capitalists’ gains were the workers’ losses. In the long post-1970s neoliberal reaction to the 1960s, such theses were fundamentally unacceptable and therefore generally ignored. Only when mass worker exhaustion, stress and debt, coupled with capitalists’ poor investments and financial speculations, drove the system to collapse did capitalist triumphalism crumble. The return to Marxian analysis was partly an effect and is also a further cause of that crumbling.

 

A Marxian solution

Stagnating (if not falling) wages alongside rising productivity are always desiderata of capitalists in their endless struggles with their productive laborers. If and when conditions permit, capitalist corporations will seek to realize those desiderata. When they do, the results have repeatedly been growing inequality of wealth and income, financial speculation, booms, bubbles, and their bursting into crises. So it is yet again today.

The neoclassical economists and their allies insist, as usual, that the causes of today’s crisis were ignorant, misguided, or corrupt governmental intrusions into private capitalism. Their solution is to return to as pure a private capitalism as possible as soon as possible. Unfortunately for them, it was major private US capitalists who led the way this time toward massive governmental support and intervention to counter a crisis. Thus, such neoclassical arguments since 2008 got far less of the widespread uncritical support that had become customary over the last quarter-century. Those arguments struck ever more people as disconnected from the reality of a capitalist system mired in a costly and socially painful crisis.

Moderately Keynesian economists and their allies came to power with Obama.[2] They have begun, against an entrenched neoclassical “mainstream” establishment, to regain some of the social influence they had enjoyed before the 1970s. They argue that government deregulation and non-intervention since the 1970s were major causes of the crisis, and that a hefty dose of re-regulation and intervention is the solution. Yet they too, like their neoclassical counterparts, confront serious doubts. Skepticism about the likely efficacy of Keynesian state interventions now stems not only from a politically alienated public’s deep suspicion of government, but also from the actual history of the Keynesian response to the last great capitalist crisis in the 1930s.

FDR imposed a mass of regulations, spending programs, and taxes upon US capitalism in the 1930s. He intended thereby to end the Great Depression. In fact, that intent was not realized; his economic policies never solved unemployment. Very different policies – preparation for war and then war itself – finally ended the mass unemployment. New Deal economic regulations, expenditures, and taxes only partly ameliorated the social costs and pains of the Great Depression. FDR also promised that his state interventions would prevent future depressions. Yet, the US economy experienced a dozen economic recessions after the 1930s culminating in today’s crisis (frequently referred to as the Great Recession).

Marxism offers a quite unique explanation for the limits and failures of Keynesian policies. It proposes a corresponding alternative to them as well as to the neoclassical advocacy of a return to private capitalism. The growing attention to Marxian analyses and proposals reflects their status as serious alternatives to what both mainstream schools of economics are offering.

New Deal regulations, expenditures, and taxes often constrained the ways and means for capitalists to pursue their goals. However, those state interventions in the US economy never basically changed the capitalist class structure of production. That is, inside capitalist enterprises, the employers always remained in charge. They decided what to produce, where and how. They appropriated the surpluses and distributed them. Their employees lived with the consequences of the employers’ decisions, but they neither participated in reaching them nor exercised significant control over them. This structure of production existed even inside the state enterprises that were established at that time (e.g., Tennessee Valley Authority).

The employers of private capitalist enterprises – mostly organized as corporate boards of directors selected by major shareholders – faced competition from other enterprises and demands from their shareholders, government tax collectors, creditors, managers, suppliers, etc. Those pressures could be better contained or managed the more surpluses employers could appropriate and devote to those tasks. Thus, corporate boards had every incentive to evade, weaken or undo the New Deal state impositions that impinged upon their surplus appropriation – or, as they put it, upon their profits and the freedom to pursue their growth. Moreover, because they appropriated the surpluses generated inside the enterprises, corporate boards disposed of the resources needed to evade, weaken, or undo the New Deal. In fact, capitalists responded to those incentives starting in the 1930s, accelerating after war’s end in 1945, and soaring especially after the 1970s under Reagan, Bush 1, Clinton, and Bush 2.

Given this history, Obama’s current reliance on Keynesian policies poses two inescapable questions. First, why reinstitute such state interventions when they failed before? Second, since corporations accumulated great expertise in controlling, circumventing or undoing state interventions, will they not accomplish those same results faster and more effectively this time? Those who ask such questions and consequently lose confidence in Keynesian anti-crisis policies sooner or later encounter Marxism’s alternative analyses and proposals.

The Marxian response to such repeated crises would be neither an oscillation toward private capitalism (the neoclassical solution) nor one toward state capitalism (the Keynesian solution). It would not favor one form of capitalism over another. The Marxian alternative solution to capitalist crises would be to change the system, to move society beyond capitalism on the grounds that we can and should do better. Because traditional visions as well as “actually existing” versions of socialism were overwhelmingly and often exclusively focused on its macro-dimensions, our argument here will instead focus on the micro-level. That means we will sketch the sort of transformation inside enterprises that would mark a transition from capitalist into non-capitalist organizations of the production, appropriation, and distribution of the surpluses.

The goal would be to put workers inside each enterprise in the collective position of receiving the surpluses they produce in that enterprise. That would, of course, position them also as the distributors of those surpluses. The surplus-producing workers in each enterprise would, in effect, become their own collective board of directors. They would replace traditional corporate boards chosen by and responsible to major shareholders. This would eliminate the capitalist enterprise’s built-in confrontation between workers and capitalists. Workers who have become their own board of directors would systematically alter the what, where and how of production and likewise the distribution of enterprises’ surpluses. Had this change been in effect in the 1970s, real wages would not likely have stopped rising, nor would the export of jobs have soared, nor would so many health-endangering new technologies have been installed at worksites. And these are but some illustrative examples.

Such a change out of capitalism could be a major first step in the democratization of the economy generally. Economic democracy would require first that in each enterprise, productive employees would collectively and equally make such decisions. Subsequent steps would extend that economic democracy by integrating it with the democratic organization of residential communities (local, regional, etc.) interdependent with each enterprise. Workers and residents would then share democratic power over the products and the surpluses produced in and distributed by each enterprise as well as over public institutions, rules of behavior, etc.

Such a Marxian policy would aim to eliminate capitalism at the micro, individual enterprise level by fundamentally changing its class structure. As the “other” of capitalism, traditional socialism stressed the macro-level dimensions of superseding capitalism – e.g., changes in the public/private mix of ownership of productive property and changes in the mix of market and planned distributions of resources and products. Traditional socialism neglected its micro-dimensions. In contrast, the vision here of a 21st-century socialism presumes that, to succeed, those macro-level policies must henceforth be grounded on an enterprise/micro level transformation where workers become collectively the appropriators and distributors of the surpluses they produce.

Changing the class structure in this way will not eliminate contradictions or even crises arising in an economy. Crises occurred in pre-capitalist societies and they likely will in post-capitalist societies as well. However, crises occur differently, are understood differently, and provoke different responses depending on the different class structures comprising their contexts. And these differences matter. To take a particular example, in a post-capitalist class structure of the sort sketched above, crises will less likely emerge, as the current one did, from stagnating real wages. Had US workers collectively comprised their own boards of directors, the conditions of the 1970s would not likely have led them to stop raising their own real wages. To make the more important general case: the extension of democracy entailed by a post-capitalist transformation promises more equitable economic rules, regulations, adjudications of disputes, distribution of economic benefits and of costs than what exists today. Similar promises and goals lay behind movements for political democracy since before the French Revolution. Today they drive the movement for an economic democracy whose absence has so long hobbled political democracy, keeping it more formal than substantive.

The goal of a new 21st-century Marxism is finally to make the latter real by grounding it in economic democracy at the worksite. The sustained capitalist crisis that now imposes huge social costs globally also challenges the repeatedly oscillating neoclassical and Keynesian paradigms. That opens space for and drives the rediscovery of Marxism and its critique of capitalism at both the macro and micro levels. The alternative theoretical and practical possibilities that tradition offers are again becoming part of the international debates over social change.

[Published in Socialism and Democracy, no. 54 (vol. 24, no. 3), November, 2010
Subscriptions to Socialism and Democracy are available for $30 per year from Taylor & Francis 325 Chestnut St., 8th floor, Philadelphia, PA 19106]


[1] For the basic theory, see Stephen Resnick and Richard Wolff, Knowledge and Class: A Marxian critique of Political Economy, Chicago: University of Chicago Press, 1987, Chapter 3; Stephen Resnick and Richard Wolff, New Departures in Marxian Theory, New York: Routledge, 2006. For the theory’s application to the current crisis, see Wolff, Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It,Northampton, MA: Olive Branch Press, 2010.

[2] “Moderate” because they had been cowed and intimidated by the post-1970s hegemony of the neoclassical economists. Much less aggressive and social democratic than the earlier Keynesians from FDR’s to Lyndon Johnson’s times, these moderates showed their hesitant “centrism” as advisers first to the Clinton administration and then again to Obama’s. Unlike FDR and Johnson, they did not include massive aid programs to average workers (e.g., government jobs) in their Keynesianism.

Rick Wolff is a Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York.   He is the author of New Departures in Marxian Theory (Routledge, 2006) has a film on the crisism, Capitalism Hits the Fan, and a related book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.

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