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Is Capitalism Really Changing?

If the parties of reform cannot call the tune to Capitalism they can at least call it by fancy names. Tories and Liberals rather like the sound of “The People's State," "Progressive Industrialism,” or simply "The Welfare State." With unconscious irony the Labour Party in this never-never or hire purchase age, refer to it as yet a further instalment towards getting Socialism, while the ingredients for their recipes are the same each rival party seeks to sell its programme as a proprietary brand and the label assumes greater significance than the contents. Word magic then becomes an essential feature of political art and future historians may note that the differences among the reform parties were at bottom semantic differences.

Last Days of Pompeii

Mr. Strachey's book, Contemporary Capitalism, is yet another verbal variation of the current situation. Dramatically he names it, the last stage of capitalism. For all its relevance to actuality he could have called it. "The Last Days of Pompeii." Mr. Strachey deals with capitalism in terms of its symptoms, not the malady; which is as futile as a physician treating measles in terms of its spots or malaria in terms of its shudders and shivers.

Mr. Strachey in diagnosing the body politic and economic discovers by certain signs that capitalism has changed, is changing, and will continue to change—for the better. Mr. Strachey lists the signs as evidence for this, in the separation of ownership from management—which we shall deal with in a separate article—the increase in State activity, the appearance of the Welfare State and even the new method of setting out the national accounts. If all this is coupled with the atrophy of competition, which, says Mr. Strachey, is the essential regulating and controlling mechanism of capitalism, then a new kind of capitalism is being produced. A new kind of capitalism which in Mr. Strachey's view, it will in the foreseeable future be an abuse of language to call capitalism. It is the ending of what he calls unrestricted competition that is the basis of, to use another term of his, the mutation of capitalism.

Capitalism and Competition

Mr. Strachey by treating competition as the essence of capitalism is able by invincible logic to establish the proposition that as unrestricted competition is no longer with us, neither is capitalism, or at least only its last stage. The weakness of identifying capitalism with laissez-faire, i.e., individualistic competition and an absolute minimum of State interference in industry is that such a state of affairs corresponded only with the coming to maturity of English capitalism, while the development of capitalism in England went through a “free trade” phase, in the U.S.A. it went through an opposite phase—protection again in Germany, Japan, Italy, etc., the early stages of capitalism so widely departed from the classic English development as to say that a laissez-faire free trade capitalism was peculiar to, England. We might add that Soviet capitalism has never known anything remotely connected with laissez-faire.

What can be said is that laissez-faire and free trade were components of 19th century capitalist ideology, but its actual economic practice only came into operation under certain conditions. Also, if trusts, cartels, etc., are à la Mr. Strachey, evidence of a last stage capitalism, then U.S. and German capitalism must have come to it in the alleged traditional fashion of the Chinese by going through the last stage first, for such things were features of the early capitalist development of the above countries.

On historical and factual grounds it can be shown that individualistic competition and non-intervention by the State in matters industrial, although they corresponded to the growth of English capitalism were not features basic to the maturing of capitalism elsewhere. Laissez-faire and capitalism cannot then be regarded as synonymous terms. Even on purely logical grounds Mr. Strachey is guilty of a howler unpardonable in a high school student. Thus, if there is a last stage monopoly capitalism and a first stage competitive capitalism, and the species is still extant and recognisable, then competition cannot be the essence of capitalism. There must be some basic factor common to both stages.

The Nature of Capitalism

What that basic common factor is. Mr. Strachey never really attempts to explain. The nearest he gets to it is a casual observation (page 92) that “Marx showed that wealth is not due to capitalist abstinence but wealth and capital accumulate because workers produce much more than they consume.” But this does not tell us what makes capitalism tick or show its essential differences from other exploitative social systems.

It is not that the worker merely produces a value over and above his own upkeep—surplus value, but that this surplus value constitutes the warp and woof of capital accumulation, and it is capital accumulation on an ever-expanding scale which is the dominant objective of the owners of capital. For capitalists the most essential thing is the magnitude of capital under their control and its most desirable characteristic the ability to expand indefinitely. The fundamental urge of capitalist society is the same now as it was in all its yesteryears.

Nor is capitalism crucially altered because owners of capital fight in the massive formation of firms, corporations and cartels instead of rushing into battle single-handed with the cut-throat sword of naked competition, as was the wont of their early and mid 19th century counterparts. Capitalism is still a battleground of rival concerns, each trying to obtain the greatest possible spoils in their efforts to realise the greatest amount of surplus value for themselves. It is true that Agincourt was fought with bows and arrows and armed horsemen, but it was no less a battle than Stalingrad, which was fought with tanks and high explosives.

Capital accumulations have not ceased

If capital accumulation is the cardinal feature of capitalist society, then it is precisely here that Mr. Strachey should have directed his efforts, to show that capitalism is changing in some significant way. He should have sought to reveal that accumulation of wealth is no longer capital accumulation, but becoming social accumulation and that the means and instruments of wealth production are ceasing to become capital, that is, means of exploitation in the hands of individuals or groups of individuals, but were in the process of being invested in the democratic control of the community. If Mr. Strachey could have demonstrated this, then he surely would have proved that when he states that capitalism has undergone a mutation he is using the word in its correct sense. On the contrary, Mr. Strachey implicitly and at times explicitly shows that wealth accumulation still takes the form of capital accumulation.

Nor are the compulsions of capitalism any less compulsive than they were in the 19th century. The process of capital accumulation is not something over which capitalists can exercise a personal choice, to ignore it would be to invite elimination from the ranks of the owners of capital. Capitalists, and here we include management, although they are agents of capital, are not free agents. Capital is an historically conditioned form of wealth, expressed in the class ownership of the means of production and for that reason the motive and aims of the owners of capital are prescribed for them by this form of control. It is in the light of this that we are to understand Marx's statement when he says in the preface to volume one of Capital that "he treats of landlord and capitalist as personifications of economic categories, embodiments of particular class relations and interests."

Because reformist policies are themselves, the outcome and implementation of capitalist development the political parties in order to justify their existence seek to rationalise this development in terms of significant changes. But it is a mistake to suppose that development as such is synonymous with change in some transformative sense. Muscles may be developed, but they are still muscles. A plant may in its life cycle undergo change of form, but it is subject to an intrinsic pattern of development. Capitalist development may modify certain features of the system, but it does not alter the essential nature of the beast, any more than sawing off the legs of a Wolfhound if it were possible would make it a Daschund. It would still remain a Wolfhound with short legs.

The acid test of Reformism

It is because the conversion of capital accumulation of wealth to social accumulation provides the acid test to any genuine change in society that Mr. Strachey's political litmus paper not only fails to turn red, but even parlour pink. In Mr. Strachey's future society there will still be class ownership of the instruments of production and hence accumulation will continue to be capital accumulation. What will be necessary will be that the rate of investment must be kept as high as possible and in that case Mr. Strachey sees no objection why the economic mechanism cannot be left in private hands. Since, says the arch-revolutionary Strachey, the owners of the means of production or management cannot be ordered they must be induced not to let the level of investment drop. This can be achieved by public works investment and a whiff of inflation.

In Mr. Strachey's social mutation there will still exist all the characteristics of the old species, capital accumulation, private ownership, profits and wages. And so the more capitalism is changed the more it is like the same thing—only even more so.

Mr. Strachey, a little self-conscious, perhaps, that his mutation looks suspiciously like the old species writ large, implies that owners and management are becoming socialistic because the profit motive is today not the only motive. But if profits are not made owners and those who constitute management will go out of business. For capitalism it remains the golden rule of success and capitalists must play the game in accordance with that rule. Whatever other motives inspire the entrepreneur they are all subordinated to that one and whatever other rules are broken that one is the one which they can least afford to break.

We are all Socialists now

Mr. Strachey puts forward the threadbare apologia that those who direct and control investment do or can play a useful social role. That their job is one of those specialised jobs they do on behalf of the community and in taking profits they are merely being recompensed for their trouble like any other workers. No doubt under Mr. Strachey’s future economy, capitalists will murmur with pride and equanimity, “We are all Socialists now."

Competition as fierce as ever

Mr. Strachey, who in the matter of politics is the best second-hand dealer in the business, offers the commonplace of fifty years economic theory that competition has declined. It is an over-simplification amounting to falsification to say that price competition between the bigger concerns no longer operates. There are periods in various spheres where price stabilisation is achieved by agreements, but such agreements are temporary in character and have been broken time and time again, and so far as cartels being something new in capitalism they are almost as old as capitalism itself. In fact, the history of capitalism is replete with cartels, both national and international, coming together and falling apart.

Sometimes the conditions of the markets are such that price competition has to be resorted to. When the battle has reached exhausting limits, non-price competition, i.e. selling agencies and advertising take its place. But the antagonism between rival producers is as fierce as ever. Price competition or non-price competition are then merely forms of social antagonism inseparable from such a society as capitalism.

For someone who cannot define capitalism it is hardly to be expected that he can define Socialism. And this turns out to be so when Mr. Strachey gravely utters the nonsense that the outstanding difference between last stage capitalism and Communist societies is political rather than economic. It is the difference between democracy and dictatorship. On such a classification, Nazi Germany, Fascist Italy, the Argentine, and even Spain, are nearer to “Socialism” than England.

One can only say in conclusion that the height of Mr. Strachey's absurdity is equalled only by the depth of his ignorance.