Karl Marx was
right! That was the valuable lesson that Thomas Piketty unwittingly
delivered with his celebrated book, Capital in the Twenty-first
Century.
While Piketty should be credited with bringing inequality back into
the popular spotlight, his most significant contribution was the
powerful empirical proof that the historic trajectory of capitalism
was, in the final analysis, to reward the owners of capital and
beggar those who produce it.
For the post-World War II generations,
a different “truth” was fostered. The period of relative
prosperity (roughly defined as the growth of broad-based living
standards in close step with robust productivity growth) that endured
into the early 1970s was believed to be a new, permanent feature of
capitalism. Attached to this belief was a confidence that the policy
tools afforded by the economic doctrines of John Maynard Keynes would
guarantee that this prosperity would continue.
But this “truth” was challenged by
the explosion of inequality that began and persisted over the
subsequent forty years and beyond.
Looked at from the perspective of
Piketty’s data, centuries of growing global inequality is broken
only by the Great Depression and the later post-war interlude, what
the French call les trente glorieuses-- the 30 presumably
happy years of economic levelling. In light of the historic arc, they
are exceptions to the rule.
In the decade before World War II,
there was a dramatic collapse of economic growth and a shifting
of resources to the various governments’ temporary
employment-maintenance programs. These two factors slowed the
persistent concentration of wealth channeled toward the highest
tiers. The 1930s were a time of desperate efforts to restore
collapsing mass demand and to answer the utter despair of the
unemployed through projects that were, in effect, modestly
redistributive. Throughout the world, preparing for and conducting
war soon replaced these projects, substituting military spending and
the military absorption of the unemployed (and their subsequent
slaughter) for the earlier welfare-centered economic stimulation.
But the post-war period was an entirely
different matter. A proper explanation of the post-war anomaly
remains contested.
It is only in recent years (and
bolstered by the work of Piketty and his colleagues) that the notion
of capitalism’s fundamental tendency toward inequality seeped back
into the mainstream and commanded attention. The recent memory of
post-war “prosperity” leads many to falsely view the most recent
era of mounting inequality, tattering social safety nets, crumbling
infrastructure, forced austerity, debt, and falling living standards
as a mere “correction” of the profligacies and inefficiencies of
the earlier period. To Piketty’s credit, his unequalled research
into the historical long-term global tendencies of capitalist
economies demonstrates the opposite. Twenty-first century capitalism
and its massive inequalities constitutes the capitalist norm and not
a correction.
Piketty and Social
Democracy
If it is true that, except under
temporary, extraordinary circumstances, capitalism uniformly produces
and reproduces wealth and income inequality, then Piketty’s
findings present the social democratic left with great, seemingly
insurmountable challenges. Understanding social democracy, broadly
speaking, as an ideology that accepts capitalism as either reformable
or as a possible institutional platform for the gradual
transformation of the social order into something different, the
prospects for its success would seem dim at best.
Capital’s overwhelming domination of today’s political
institutions and the monopolization of the channels of mass influence
would likely foreclose any new gains from collaborating with or
conceding capitalism.
The last quarter of the twentieth
century and our twenty-first century experience find social democracy
declining nearly everywhere in both effectiveness and popular
legitimacy. With its “golden era” coinciding with the post-war
“golden era” of crisis-free economic growth, social democracy not
only failed to advance a substantive agenda after the crisis-ridden
decade of the 1970s, but actually surrendered the gains won in the
past.
Toward the end of the last century, the
traditional hosts of social democratic ideology-- the US Democrats,
the UK Labour Party, the French, Italian Socialists (and Communists),
and most similar parties-- cast the classic tenets of social
democracy into history’s dustbin, embracing the dominance of
markets, private-over-public initiatives, growth over redistribution
(“a rising tide lifts all boats”), the inefficiency of the public
sector, and homage to the market as a rational and moral calculator.
As the public soon found most social
democratic thinking a cheap imitation of conservatism, the
traditional social democratic parties sought a new “progressivism”
based upon promoting civil inclusion over aggressively fighting for
economic and political inclusion. Unlike economic inclusion, civil
inclusion-- the embracing of individual diversity and civil
tolerance-- does not address economic inequality; it requires no
change in the balance of power between capital and labor; it makes no
consequential demands or sacrifices on the rich and powerful; and it
requires no redistribution of material assets.
The economic crisis that began in
2007-2008 demonstrates emphatically the inadequacy of such a narrow
approach. Millions of people were and are directly or indirectly
wounded by the economic chaos generated by a global financial
collapse and by its collateral damage. Social democracy had no answer
and was justly rewarded for its policy bankruptcy. The traditional
bearers of the banner were drastically diminished in popular support,
in some cases, reduced to irrelevancy.
Understandably, an effort was made to
invigorate social democracy by shoring up its economic program,
adopting a critical stance toward markets-- especially financial
markets, advocating regulation of capital, imposing progressive
taxation, strengthening the social nets-- in short, returning to
elements of the social democratic agenda of the post-war “golden
era.”
In the face of the discrediting of the
traditional parties, new parties, political alliances, or formations
arose-- like SYRIZA, PODEMOS, and the Bernie Sanders movement.
But the twenty-first century was not
the 1950s with its war reconstruction, the Marshall Plan, massive
increases in military spending, Cold War compacts, its unleashed wave
of consumerism, strong unions, and most importantly, a powerful
revolutionary current to which social democracy could leverage its
offer of moderation toward capital. There is no useful role for
social democracy in the eyes of 21st century capitalists.
Twenty-first century capital-- absent a
life-and-death struggle against socialism-- is merciless and
ruthless, offering no compromise or social compact with social
democracy. The youthful leaders of SYRIZA learned this lesson when
they sought to reason with the custodians of European capital. They
experienced the harsh aggression of financial predators, reducing
SYRIZA militants to compliant middle-managers of Greek capitalism.
Sanders and his loyalists are being
similarly schooled in the realities of the Democratic Party and US
capitalism in the twenty-first century. The Democratic Party is owned
by monopoly capital, and monopoly capital has no intention of
surrendering its property rights to anyone else.
The Last Gasps of
Social Democracy?
The hope for finding an effective
strategy between resignation to capitalism and revolutionary
socialism will always inspire utopian schemes. Social democracy will
always survive for those frightened by the prospect of eliminating
the scourge of capitalism, but appalled by its pillage of working
people. Despite the failings of the latest incarnations, there are
new theories waiting in the wings, new models of social democracy.
Beyond his celebrated book, Thomas
Piketty has championed a social democratic agenda to address the
persisting inequalities deeply embedded in capitalism. In a new book,
Chronicles, he returns to these inequalities in the context of
current events as addressed in a collection of columns he wrote for
Libération and Le Monde. To his credit, he still
adheres closely to his central thesis: “During the postwar decades,
we mistakenly believed that we’d moved on to a new stage of
capitalism, a sort of capitalism without capital. In reality, it was
only a passing phase… In the long run, patrimonial capitalism is
the only kind that can exist.”
But if “patrimonial” capital (i.e.,
capital that persistently churns out inequality) is “the only kind
that can exist,” how can there be enduring capitalism without
obscene inequality? That-- put simply-- is the paradox of Piketty.
Indeed, that is the paradox of
social democracy.
To anyone who has read Capital in
the Twenty-first Century, Piketty’s answer to inequality is a
colossal disappointment: We must have a global wealth tax. Magically,
therefore, we could have both capitalism and less inequality. Of
course Piketty does not tell us how we can overpower or coax
“patrimonial” capitalism into accepting such a tax.
His answers in Chronicles,
written specifically to address the crisis in the European Union, are
more specific: The EU should be “federalized, tighter, centralized”
so that the existing debt and tax structures could then also be
federalized. To his way of thinking, a more tightly structured,
integrated, and centrally ruled EU could overcome national
disparities and-- not surprisingly-- institute a union-wide wealth
tax!
But this answer is even more
paradoxical. Would anyone believe that a union constructed to
institutionalize, to protect and promote “patrimonial” capital
would, by strengthening and centralizing that union, be more inclined
to have its predatory character tamed? Would the EU, constructed upon
the pillars of free markets, privatization, and the sanctity of
profits, be more likely to surrender the fruits of free markets,
privatization, and the sanctity of profits if given even greater
power?
Clearly, there is more “wish list”
in Chronicles than policy map. He joins the ranks of the
neo-utopians
who hope for a revival of social democracy through strategies that
call for capital to concede its domination simply through moral
suasion or dazzling intellect. Other neo-utopians like Yanis
Varoufakis share Piketty’s commitment to globalism and
supranational organizations, but with little acknowledgement that
these policies and institutions are the product of powerful elites
indisposed to heed the wise council of intellectuals. The EU, like
the global market, is a construct born from the womb of Piketty’s
“patrimonial” capitalism. The midwives will not surrender to
clever ideas or an appeal for political “democratization.”
The State and Modern
Monetary Theory
Others believe that they have found the
social democratic holy grail in Modern Monetary Theory.
William Mitchell and Thomas Fazi advocate this approach in their
recent book, Reclaiming the State.
Interestingly, they take the opposite tack to Piketty. Rather than
calling for a strengthening of supranational institutions towards a
global taxing body, they advocate a return to state projects free of
supranational fetters. For Mitchell and Fazi, “reclaiming the
state” is a necessary condition of reviving the social democratic
project.
The title’s subscript gives away the
game: “A Progressive Vision of Sovereignty for a Post-Neoliberal
World.” It is not a vision for a post-capitalist world or a
socialist world, but for a “post-neoliberal world,” a world like
the world before the dominance of the unfettered, market-dominated,
deregulated, private-ownership-worshiping capitalism that emerged in
the 1970s. There is more than a hint of nostalgia for that earlier
time, with the sincere hope that Modern Monetary Theory would open
the door to radical reforms of capitalism-- capital controls, a new
international framework, job guarantees, nationalization of “natural
monopolies” and banks, the outlaw of non-productive financial
transactions, and other measures.
In truth, the Mitchell and Fazi book is
impressive. The first section, The Great Transformation Redux:
From Keynesianism to Neoliberalism-- and Beyond, is a serious
and well researched description of the course of capitalism from the
end of World War II to the present. The authors fully recognize the
important changes that events, parties, and persons made in that
critical period. They also address some of the theories purporting to
explain the changes without advocating strongly for one over another.
For those reasons alone, the book is strongly recommended. No
understanding of today’s capitalism is possible without a
comprehensive understanding of the seventy-five years that preceded
it.
But the history offered, though richly
recounted, lacks a central motif, an underlying logic, linking and
explaining developments. It is not enough to string together a list
of factors that may, to a greater or lesser degree, shape the
dramatic changes between the confident economic celebration of the
fifties and sixties and the intractable problems of the 1970s.
Despite a number of suggestive hints, the question “but why?”
looms over the analysis. Without a deeper explanation, the account
courts becoming a naked “just-so” story.
But more seriously, there is virtually
no reference to the Soviet Union, the clash of post-war ideologies,
the Cold War, or the threatening growth of the socialist world in
size and influence (there is no citation for the Soviet Union in the
index-- or to socialism for that matter). To discuss the post-war
period without referencing the impact of Communism is like explaining
the decline of the Roman Empire without reference to the rise of the
Goths or of Christianity; it’s like explaining the US revolution
without referencing the rivalries between Britain and France; or it’s
like an explanation of the US Civil War without mention of slavery.
It is at best incomplete; at worst, distorted.
US and European post-war social,
political, and economic history arguably is the history of
relations with Communism, domestically and internationally. Yet it is
a commonplace for left and leftish academics to largely ignore the
role of the Soviet Union, the Socialist world, and Communist Parties
as though they were a mere sideshow.
The US and Western European left,
especially in the universities, never accepted the reality that
theory and practice were necessarily and inescapably located in
political space by their proximity to twentieth-century Leninism.
Consequently, the non-Leninist left failed to grasp the impact of
state-sponsored anti-Communism in determining that space.
The left never appreciated that Western
social democracy was not triumphant in the post-war decades,
but permitted to taste political power by a capitalist ruling
class in need of allies in the struggle against Communism.
To this day, non-Leninist theorists
struggle with the contradiction that a social democratic program
could be implemented in a state that is itself wholly captured by the
capitalist class. A compromise with social democracy is made possible
when the capitalist state is itself engaged in a life-or-death
struggle with socialism. Accordingly, radical social democratic
reforms that limit capital’s penetration, that retard or redress
the march of inequality, or that shift the balance of power are only
possible when the capitalist ruling class sees capitalism gravely
under siege, a condition that social democracy, by its very
definition, is unwilling to pursue to the demise of capitalism.
Mitchell and Fazi correctly identify
supranational formations, institutions, and organs as obstacles to
social change. Unlike Piketty and Varoufakis, they recognize that the
EU, the IMF, the World Bank, the multilateral trade agreements, etc.,
are fundamentally created to strengthen the stranglehold of monopoly
capital on the state. They are not impartial arbiters or
equal-opportunity tools for shaping a progressive destiny.
They also grasp that a part of the
globalization myth-- the claim that the state was in fatal decline--
is nonsense. Heavily promoted by academic leftists in the 1990s and
into the twenty-first century, the rise of US exceptionalism, the US
project of policing and dominating the world, and the 2007-2008
collapse, marked “paid” on the notion that the state was receding
in power and significance. It’s noteworthy that as early as 1998,
Linda Weiss demonstrably refuted this once fashionable position with
her The Myth of the Powerless State.
Mitchell and Fazi fall on the right
side of history with their defense of the resilience and centrality
of the capitalist state.
But it is
a capitalist state.
It is one thing to reclaim the state as
the nucleus of capitalist social, political, and economic relations;
it is quite another to reclaim the state from the tentacles of
monopoly capitalism. Mitchell and Fazi succeed in achieving the
former, but fail to open a path to the latter.
They are not alone in seeing Modern
Monetary Theory (MMT) as a tonic for social democracy.
They, like other liberals and social democrats, lament an opportunity
lost when public policy is dictated by debt scolds. (“Debt scolds”
are alarmist economists and policy makers who believe that debt is always dangerous, if
not evil.)
Conservative Monetarists have fostered
the notion that growing debt leads invariably to serious economic
mayhem, a notion that constitutes a myth of tragic proportions in the
eyes of Modern Monetary theorists. Put crudely, the Monetarist fear
springs from a category mistake-- the conflation of contemporary
state budgets (those not legitimized by precious metal reserves) and
accrued debt with the budget and debts of an ordinary household.
Unlike an individual household, a state’s central bank faces no
natural or institutional limit on the issuance of credit and the
incurrence of debt. The fears of the debt scolds are, therefore,
unfounded.
And, they argue, embracing MMT can, as
a result, break the stranglehold that debt-rating agencies, financial
speculators, Monetarist pundits, and market-obsessed politicians have
on government spending and social democratic programs.
But Mitchell and Fazi, like other MMT
advocates, mistake the debt rating agencies, the financial
speculators, the Monetarist pundits, and the market-obsessed
politicians for honest intellectual brokers. They are not swayed by
the avenues available to advance social democratic reforms. Their
interest is in solely growing profits.
Clearly that point is driven home by
the failure of prominent economists like Nobel laureate Paul Krugman
who have loudly advocated against the austerity and fiscal abstinence
of the Monetarist debt scolds for well over a decade. And to no
avail. In the teeth of the gale winds unleashed by the 2007-2008
crash, capitalist policy makers steered the course of austerity,
espousing a deep fear of debt-- every increase in government spending
threatened catastrophe. Never mind that their fears were never
realized.
The adherents of the continuing
centrality of the state and MMT surely underestimate the death grip
that the capitalist class has on all aspects of the state, especially
over policy. Whether government spending may cross a dangerous
threshold or not, whether MMT offers new life to the social
democratic program, today’s capitalist rulers show no inclination
to allow their hired politicians and servile journalists to engage or
promulgate challenging ideas.
The growth of inequality (and the
extreme concentration of wealth), the monopolization and subsequent
conformity of the media, the continual erosion of the institutionally
limited bourgeois democratic system, the deterioration of public
education, and the other marks of the tightening grip of elites
constitute a disappearing opportunity for social democracy.
It is not that social democracy will
wane; it will always offer a promise to those too timid for
revolutionary change. But it will offer, at best, a rear guard action
to an increasingly powerful capitalist ruling class. It may retard
the gains, slow the rot, but it will offer no reversal of
capitalism’s course. That can only come from a revolutionary
movement for socialism.
Taking issue with a venerated, sincere,
but short-sighted advocate of the working class, Karl Marx mounted a
measured defense of the value of trade union action to secure higher
wages:
The general
tendency of capitalistic production is not to raise, but to sink the
average standard of wages, or to push the value of labour more or
less to its minimum limit. Such being the tendency of things in this
system, is this to say that the working class should renounce their
resistance against the encroachments of capital and abandon their
attempt at making the best of the occasional chances for their
temporary improvement? If they did, they would be degraded to one
level mass of broken down wretches past salvation…
...the working
class ought not to exaggerate to themselves the ultimate working of
these everyday struggles. They ought not to forget that they are
fighting with effects, but not with the causes of these effects; that
they are retarding the downward movement but not changing its
direction; that they are applying palliatives, not curing the malady…
They ought to
understand that, with all the miseries that it imposes on them, the
present system simultaneously engenders the material conditions and
the social forms necessary for an economic reconstruction of society.
Instead of the conservative motto: “A fair day’s wages for a fair
day’s work!” they ought to inscribe on their banner the
revolutionary watchword: “Abolition of the wages system!”
Piketty and others have likewise shown
that the “general tendency of capitalistic production is…” to
increase inequality, paraphrasing Marx. Like trade union activism for
higher wages alone, social democracy can only succeed in
“...retarding the downward movement but not changing its direction;
...applying palliatives, not curing the malady…”
Instead of futilely seeking to turn the
clock back to before “neo-liberalism,” our modern day warriors
for social justice must embrace the revolutionary slogan: “Abolish
capitalism!”
Greg Godels
zzsblogml@gmail.com
1 Capital in the Twenty-First Century, Thomas Piketty, translated by Arthur Goldhammer, 2014
2 Where social democracy doesn’t occur as a movement or party under its own name, it is represented from time to time or as the left wing of another movement or party (eg. UK Labour Party or US Democratic Party).
3 Chronicles On Our Troubled Times, 2017, p. 3-4.
4 In the Communist Manifesto, Marx and Engels describe utopian socialism as arising when the working class “...offers to them [the advocates of utopian socialism] the spectacle of a class without any historical initiative or any independent political movement.” For practitioners of utopian socialism, “[h]istorical action is to yield to their personal inventive action; historically created conditions of emancipation to fantastic ones; and the gradual, spontaneous class organization of the proletariat to an organization of society specially contrived by these inventors.”
Cooperatives, for example, are among the neo-utopian “fantastic conditions of emancipation” visited on today’s left. Academic leftists are leading neo-utopian spinners of “society specifically contrived by these inventors.”
5 For a clear and concise explanation of Modern Monetary Theory, see Modern Money, Robert Hockett, in Dollars and Sense, March/April, 2018, pp. 7-14. Hockett explains MMT in its social, legal, historical context.
6 Thanks to Tony Coughlan for recommending this important book.
7 Modern Monetary Theory springs from the notion that after the break with the Bretton Woods system tying currencies to gold and the shift to the dollar as a fiat currency in 1971, the issuance of currency becomes solely a matter of central bank decision making. MMT essentially uncouples money from any objective theory of value and makes its creation, its use, and its purpose a matter of convention or social choice.
The grizzled Howard in the book/movie Treasure of the Sierra Madre as well as Karl Marx would be appalled by this view.
Its proponents overlook the danger of assets bubbles when any reasonable objective measure of value is lost.
8 Value, Price and Profit, addressed to Workingmen, Karl Marx, 1935, p. 61.
