Thursday, August 06, 2009

Analysing Last-Stage Capitalism

Irish Times
July 31, 2009

Twenty years ago Mr Strachey wrote The Theory and Practice of Socialism which was for many in the revolutionary 1930s a signpost to the future. His latest work, Contemporary Capitalism, is for the revisionist 1950s a guide to the present. In the intervening two decades Mr Strachey has moved from the extreme Left to left of centre . . .

His main thesis is that capitalism in the highly developed countries – the United States, Britain and Germany – has reached a new and distinct stage of development.

In each of these countries, the economy has become dominated by a handful of economic giants such as Dupont, General Motors, ICI, Unilever, IG Farben: he quotes Prof Galbraith of Harvard to the effect that “the heads of the corporations that produce between a third and a half of the national product of the United States could be seated comfortably in almost any neighbourhood motion-picture theatre” (ie about 400-500 persons) . . . Classical economic theory goes by the board as the major premise that prices establish themselves by competition becomes invalid.

This atrophy of competition Mr Strachey sees as the most important characteristic of what he terms last-stage capitalism.

In the course of a marvellously compressed survey of economic theory from Ricardo to Keynes, Mr Strachey pays close attention to Marx “to whose genius he is gratified to be able to pay the tribute of rigorous criticism”. His respect for Marx as an economist is undiminished: he remarks that the fate which has overtaken much of Marx’s work has been “to become a commonplace without ever being recognised as a valid discovery”.

Mr Strachey claims to discern in Capital the germ of Keynes’s crisis theory as well as his conclusions as to the rate of interest. He slyly hastens to add, however, that “nothing could be further from the truth than to suggest that Marx was a Keynesian”. Where Marx erred, Mr Strachey argues, was in his political judgment, in his failure to perceive the possibility that the mass of wage earners would be able to exert sufficient political pressure to deflect the innate tendency in capitalism towards ever-increasing misery (the so-called doctrine of “immiseration”). This brings him to his second major thesis, the all-important economic consequences of democracy.

Mr Strachey has little difficulty in showing that, contrary to what Marx expected, the standard of living in the advanced capitalist countries has risen considerably over the last hundred years. (This is not so evident in the case of undeveloped areas.) The surprising thing, though, that emerges from his analysis of the statistical evidence is that this improvement in the living standards of the masses has not been due to any radical redistribution of income.

The raising of living standards has been made possible by the tremendous increase in labour productivity. It has been effected by the pressure of the organised workers, politically and through their trade unions. Paradoxically, “the struggle of the democratic forces against capitalism has saved the system”. The economic consequences of democracy have been decisive.

For the future, Mr Strachey believes, either democracy's influence grows to a point where it steadily replaces capitalism by socialism, or is itself destroyed.

This article appears in the print edition of the Irish Times