Theories of the passing of capitalism

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Content THEORIES O F
THE PASSING O F CAPITALISM
A T hesis
P resen ted to
the F a c u lty o f the Department of Economics
U n iv e rsity o f Southern C a lifo rn ia
In P a r ti a l F u lfillm e n t
o f th e Requirem ents f o r the Degree
M aster of A rts
by
Tony Harry Adrean
June 1949
UMI Number: EP44685
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y
MASTER OF ARTS
i n Econoiaics
Date. __________
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TABLE OF CO N TEN TS
CHAPTER PA G E
I . INTRODUCTION: TH E PRO BLEM A N D TH E THEORIES . . 1
The problem ........................................... 2
The th eo ry of c a p i t a l i s t permanence . . . . 2
Economics of s o c ia l re o rg a n iz a tio n .................. 3
Theory of c a p i t a l i s t d ec lin e ............................... 7
Main ty p es of t h e o r i e s ................................................ 8
C atastro p h ic th e o rie s ............................................ 9
G ra d u a list th e o rie s . . . 10
S ta g n a tio n is t th eo ry ................................................. 11
The success d o c trin e ................................... 12
P s y c h o lo g ic a l-in s titu tio n a l approach . . . . 13
Meaning of c a p i t a l i s m ................................................. 13
C ontroversy over d e f in itio n s ............................... 14
Foundations of c a p i t a l i s m .................................... 17
C ap italism d efin ed . . . . . 18
C r ite r ia fo r m easuring the p assin g of
c a p i t a l i s m ....................................................................... 20
B asis f o r v ario u s c r i t e r i a .................................... 20
P o lic y i m p l i c a t i o n s ............................................. . 21
Problem of i n d i c a t o r s ............................................ 23
The e a r l i e s t th e o r is t o f c a p i t a l i s t
decom position . . ............................................... 26
i i i
CHAPTER PA G E
P la y f a ir ’s model . . .. .. . 28
C o unteracting ten d en cies ... .. ..................... 31
O rganization of the th e s is . . . . . . . . . . 32
I I . TH E SOCIALIST INDICTMENT ........................... 35
In tro d u c tio n ....................................................................... 35
Purpose of th is c h a p t e r ........................................ 35
The d riv in g fo rc e s . . . . . 36
The common h e r i t a g e .......................... 38
The re v o lu tio n a ry p h ilo s o p h y ............................ . 38
The c la s s s t r u g g l e ..................................................... 41
The th eo ry of e x p l o i t a t i o n .......................... 43
Summary ..................... 47
I m p e r i a l i s m ........................................... 46
B ack g ro u n d ................................................................... . 46
A p o lic y of c a p i t a l i s m ............................................ 50
A stag e of development ............................................ 52
S u m m a ry .......................................................................... 54
Role of the S o v iet S t a t e ........................... ! . . . . 54
Piece-m eal d e c o m p o s itio n ........................................ 55
S ta l in ’ s tw o-fold purpose . . . . .................. 55
V u lg a riz a tio n of M arx ism ........................................ 56
The r e v o l u t i o n .................................................................. 57
The re v o lu tio n a ry s itu a tio n ............................... 57
N ature of the S t a t e ................................................ 56
iv
CHAPTER PA G E
The ebb and flow of r e v o l u t i o n ........................... 59
Another v i e w .................................................................. 60
The breakdown co n tro v ersy ........................... 61
B ack g ro u n d ........................................... 61
I n e v it a b i l it y of the breakdown . . . . . . . 63
Orthodox c o u n te ra tta c k • ........................................ 64
Rosa Luxemburg’s th eo ry ...................... 66
K autsky and the s ta g n a tio n t h e o r y .................. 67
C hronic d ep ressio n ................................................ . 69
No p o s s ib ility o f r e f o r m .................................. .... . 73
Sweezy’s b lu e p rin t ........................................... 75
P iece-m eal passing o f c a p ita lis m . . . . . . 75
P ro sp ects fo r c a p ita lism . . . . . . . . . . 80
S u m m a ry .............................................................................. 82
I I I . GRADUALIST THEORIES.......................................................... 86
I n t r o d u c t i o n ...................................................................... 86
D e fin itio n s and d is tin c tio n s ............................... 86
The p o l i t i c a l economy of gradualism . . . . 87
N o n -s o c ia lis t th e o rie s ....................... 90
¥
The s o c ie ty of t e c h n i c i a n s ................................... 93
The m anagerial re v o lu tio n .................................... 97
Summary ..................... 104
Development o f c o lle c tiv e e n te r p ris e .................. 105
The h y p o t h e s i s ...................................................................106
V
CHAPTER PA G E
Meaning of s o c i a l i s m ................................................ 109
S u m m a ry ........................................................................... 114
Fabian s o c i a l i s m .............................................................. 115
S o c ia liz in g f o r c e s ......................................... • 116
L e a d e r s ....................................................... 118
I n e v ita b i li t y of so c ia lism ............................... 119
The economic t h e o r y ................................................ 121
S u m m a ry ........................................................................... 123
IV. STAGNATION A N D TH E SLIPPING-AWAY TH EO R Y . . . 125
A d if f e r e n t type of t h e o r y ................................... 125
Statem ent o f the p ro b le m .................................... 125
S u m m a ry ........................................................................... 128
The a n ti- in te r v e n tio n is t argument . . . . 129
V anishing investm ent o p p o rtu n itie s ....................... 131
Major co m p o n en ts.......................................................... 131
The problem of our tim es ....................... 133
Growth of p o p u la ti o n ............................................ 134
New lands and r e s o u r c e s ..................... 134
P rogress o f technology ............................................. 134
Summary and c r i t i c i s m ............................................. 135
The g e n e ra l th eo ry .................. . . . . . . . . 136
Keynes* in flu e n c e ............................................. 136
The mechanism . ...................................................... 137
v i
CHAPTER PA G E
The p ro p en sity to c o n s u m e ...................... 139
Inducement to in v e s t • .................................. 139
Keynesian p o lic y ........................................ 141
Concluding n o tes ... .. ............................. 144
C onclusions ......................................................... 148
V. TH E SUCCESS THESIS . . .................................................. 151
The success d o c trin e ............................................ 151
O rgan izatio n of the th e s is . . ......................... 154
Dynamics o f c a p i t a l i s t success ........................... 155
Some c r i t e r i a o f success ............................... 155
P la u s ib le c a p ita lis m . . ............................... 158
C reativ e d e s tru c tio n ............................... . . . 160
The p e re n n ia l g ale ...................... 162
Environm ental in flu e n c e ? .................................... 165
C a p ita lis t c iv iliz a tio n . . . . .................. 166
The d eath k n e l l .................................. 169
Crumbling w a l l s ..................................................... 169
Growing h o s t i l i t y ............................................. 171
D e c o m p o s itio n ......................................................... 177
Summary .............................. 179
VI. . A PSYCHOLOGICAL-INSTITUTIONAL APPROACH . . . . 182
An elem en tal ex p la n a tio n ................................... 182
The d riv in g m otives ............................... 186
The p sy ch o lo g ical b a s is . . . . . . . . . 186
v i i
CHAPTER PA G E
G r e e d ................................................................................ 192
E n v y .................................................................................... 194
W ill-to-pow er .............................................................. 194
F e a r .................................................................... 195
i
I g n o r a n c e ................................................................ 196
Summary .............................................................. 198
The. i n s t it u t i o n a l f r a m e w o r k ............................... 200
Im portance of the f r a m e w o r k ........................... 200
Major in s t it u t i o n s .................................... 201
R e l i g i o n ........................................................................... 202
Moral and e th ic a l codes ............................... 205
The fam ily .................................................................. 206
C o m p e t iti o n .............................................................. 208
The breakdown . : .......................................... 210
Environm ental fa c to rs ............................................. 210
Growth of modern e d u c a tio n ............................... 211
Development of a d e m o c ra tic -p o litic a l
s t r u c t u r e .............................................................. 212
Breakdown of r e lig io n ....................................... 214
Breakdown in m oral c o d e s ............................. . 219
Summary . ................................................................... 221
C urrent a ttitu d e s .......................................................... 221
R ejectio n o f c a p i t a l i s t id e a ls . . . . . . 222
A ttitu d e s of b u sin ess men . . . . . . . . 225
v i i i
CHAPTER PA G E
P u b lic opinion in tr a n s itio n ........................... 228
Summary and e v a lu a tio n ........................................ 230
V II. W O R L D IN TRANSITION..................................................... 236
C ap italism i s p assin g . .................................... 238
The v e h ic le s o f c a p i t a l i s t d e c lin e .................. 242
V arious v e h ic le s of d e c lin e ........................... 242
Summary . .................................................................. 244
C ritic is m of the t h e o r i e s ................................... 245
N ature of c r i t i c i s m s ............................................ 245
The c r itic is m o f M a r x ........................................ 248
G ra d u a list th e o rie s . ........................................ 254
C o n trib u tio n s of Schumpeter and P helps . . . 256
Role of th ese t h e o r i e s ........................................ 256
C o n trib u tio n s ............................................ 257
Other c o n t r i b u t i o n s ............................................ 259
C r i t i c i s m .................................................................. 261
The K eynesian r e v o l u t i o n ........................................ 262
C a p ita lis t e v i l s ............................................ 263
H is to ric fu n c tio n s o f K eynesians . .. .. 265
F u ll employment and c a p i t a l i s m ...................... 267
E pilogue: The case f o r s o c i a l i s m .................. 268
The fu tu re o r d e r ........................................... 268
The p r o s p e c t s ......................................................... 269
The t r a n s i t i o n ................................................ 270
ix
CHAPTER PA GE
Need f o r a labor p a rty ........................................ 271
Forces in th e t r a n s i t i o n .............................. . 273
Meaning o f s o c ia l re v o lu tio n . . . . . . . 276
Role of th e S o v iet S ta te .................................... 279
N ature of S o v iet im p e r ia lis m .................. 283
S u m m a ry .............................................................. 287
BIBLIOGRAPHY........................................................................... 289
CHAPTER I
INTRODUCTION: THE PROBLEM AND THE THEORIES
Ever since tiie dawn o f th e c a p i t a l i s t economic e ra
th e re have been those who have fo re to ld th e ev e n tu a l down
f a l l and p assin g o f th e system . This view developed s id e -
b y -sid e w ith i t s o p p o site , th e th e o ry of c a p i t a l i s t perman-
0
ence, and today c o n s titu te s a v a st body of th o u g h t.
The most famous, and h i s t o r i c a l l y the most im p o rtan t,
o f th e d o c trin e s o f c a p i t a l i s t d e c lin e i s th e M arxian th e o ry .
Judged w ith regard to i t s in flu e n c e and i t s re p e rc u ssio n s ,
t h i s d o c trin e has been w ithout doubt th e most im p o rtan t p o li
t i c a l ( i f n o t the most im p o rtan t economic) a n a ly s is o f the
p a s t one hundred y e a rs .
R ecen tly , o th e r d o c trin e s have been advanced which
e ith e r p re d ic t or f o r e t e l l the e v e n tu a l p assin g o f the c a p i
t a l i s t system . These e x p la n a tio n s may be considered o f double
s ig n ific a n c e : on th e one hand, th ey serve as a lte r n a tiv e s to
the M arxian p ro g n o sis; on th e o th er hand, some o f th e re c e n t
e x p la n a tio n s mark a d e p a rtu re o f s u b s ta n tia l s e c tio n s of
econom ists who only y e ste rd a y would have adhered to the th eo ry
o f th e permanence o f c a p ita lis m , but who have been fo rced to
day, by th e w eight o f argument and e v e n ts, to view the fu tu re
o f c a p ita lis m w ith deep pessim ism . So f a r as th i s w rite r
knows, th e se d o c trin e s have never been brought to g e th e r fo r
the purposes o f a n a ly s is and comparison*
2
I TH E PROBLEM
Those h is to r ia n s , o th er s o c ia l s c i e n t i s t s , and w rite r s
in te r e s te d in th e fu tu re course o f h is to r y f a l l ro u g h ly In to
two g re a t camps. One group h o ld s to th e th e o ry of the p e r
manence o f th e c a p i t a l i s t s tr u c tu r e o f s o c ie ty . The o th er
adheres to the th e o ry o f th e in e v ita b le d e c lin e and p assin g
of c a p ita lis m , th e th e o ry o f s o c ia l re o rg a n iz a tio n . This
booh d e a ls w ith th e l a t t e r th e o ry . M oreover, i t i s concerned
w ith re c e n t m ajor economic th e o rie s r e la tin g to th e d e c lin e
and p assin g of c a p ita lis m , sin ce i t does not ta k e in to account
th e "dozens, perhaps even hundreds, o f ’th e o rie s o f h is to ry * "
which have been e la b o ra te d , a l l designed to show e ith e r the
permanence of c a p ita lis m or i t s in e v ita b le p a ssin g .^
The th eo ry o f c a p i t a l i s t permanence. A lthough concern
ed w ith th e o r ie s o f c a p i t a l i s t d e c lin e , we should ta k e note
of t i e e s s e n tia l ch a ra c te r and fundam entals of the th e o ry o f
permanence. The th e o ry o f permanence i s based on two im p lic it
assum ptions (to fo llo w James Burnham’s a n a ly s is ) , u s u a lly l e f t
u n sta te d by c a p i t a l i s t th e o r i s t s . These assum ptions a r e ,
f i r s t , th e b e lie f t h a t s o c ie ty has alw ays been c a p i t a l i s t in
1 . James kurnhamT~The M anagerial R evolution (Hew Yorkt
John Day C o., 1941) p . 29.
3
s tru c tu re and presum ably always w ill rem ain so , and second,
th e id e a th a t c a p ita lis m "has some n ecessary kind o f e o r-
o
r e la tio n w ith ’human n a tu re * ."
B e lie f in th e se two assum ptions has re c e n tly been
shaken, both by argument and by the ev en ts o f re c e n t y e a rs,
b u t Burnham b eliev ed in 1941, when he wrote h is magnum opus,
th a t the th e o ry of permanence i s s t i l l held by the m a jo rity
o f A m ericans. However, i f Americans did s t i l l b e lie v e i t ,
th ey have been (and a r e ) ra p id ly lo s in g the b e l i e f , a s se v e ra l
o f th e l a t e r th e o rie s to be examined w ill dem onstrate w ith
both argument and ev id en ce.
Economics o f s o c ia l re o rg a n iz a tio n . The economics of
s o c ia l re o rg a n iz a tio n (o r what many w r ite r s term "th e scien ce
o f modern so c ia lism ") c o n s is ts o f th re e main d iv is io n s :
(1) th e th eo ry of c a p i t a l i s t d e c lin e , w ith which we are con
cerned in t h i s th e s is ; (2) th e theo ry of th e tr a n s i ti o n from
d e c lin in g c a p ita lis m to some type of new s o c ia l o rd e r; and
(3) th e economic th eo ry o f the fu tu re s o c ie ty , u s u a lly , but
n o t n e c e s s a r ily , conceived o f as being s o c i a l i s t or c o lle c tiv
i s t in n a tu re .
In o rd er to make c le a r ju s t th a t phase o f th e g en e ral
s u b je c t of s o c ia l re o rg a n iz a tio n w ith which we a re concerned
in t h i s t h e s i s , we p re se n t a c la s s if ic a tio n of the g e n e ra l
T 7 m sr: p , i o - i .
th eo ry o f re o rg a n iz a tio n proposed by Burnham P. Beckwith.
The p o rtio n of the o u tlin e to be covered in our th e s is is
u n d e rlin e d .
I . The economic th eo ry o f S o cialism .
A. C r i t ic a l a n a ly s is o f C ap italism .
1 . Methodology."
2 . H isto ry of th e o ry .
3* Theory.
B. Theory o f t r a n s it i o n .
1. M ethodology.
2 . H isto ry of th e o ry .
3. Theory.
C. Theory o f a S o c ia lis t economy.
1 . M ethodology.
2. H isto ry of th e o ry .
3 . Theory.
a) S t a t ic .
b) Dynamic.
The f i r s t d iv is io n o f the above c la s s if ic a tio n (th e
d iv is io n w ith which we a re concerned in t h i s th e s is ) i s th e
a n a ly s is and c r itic is m of c a p ita lis m and th e c a p i t a l i s t
economic system , th e th eo ry o f i t s d e c lin e and ev en tu al p ass
in g . I t c o n s is ts o f what S ta lin c a lls th e theo ry and th e pro
gram of s c i e n t i f i c so c ia lism . The th e o ry d e a ls w ith d e s c rib in g
and an a ly sin g those fo rc e s in h e re n t in the economy i t s e l f , or
i t s immediate environm ent, le a d in g to the ev e n tu a l p assin g o f
the system , o r th e development o f re v o lu tio n a ry c r i s i s . The
3. B .P. Beckw ith. The Economic Theory o f a S o c ia lis t
Economy (S tan fo rd : S tan fo rd U n iv e rsity P re s s , 1949) P* 15*
5
program o f th e s o c i a l i s t movement, based on th e th e o ry of
c a p i t a l i s t developm ent, d e a ls w ith th e science or a r t of s o c ia l
re v o lu tio n , or of a s s is tin g or f a c i l i t a t i n g the p assin g o f the
system .
The second m ajor d iv is io n o f th e above c l a s s i f ic a ti o n ,
th e th eo ry o f the tr a n s i t io n to an other system , does n o t con
cern us except as i t hinges upon th e f i r s t problem . Most
w r ite r s are concerned w ith the th eo ry of c a p i t a l i s t d e c lin e ,
however, because th ey b e lie v e we are today in th e p ro cess o f
tr a n s i ti o n from c a p ita lis m to some d if f e r e n t type of s o c ia l
s tr u c tu r e . Probably most w r ite r s conceive of the fu tu re
s o c ie ty as being s o c i a l i s t in c h a ra c te r. However, K arl Marx
h im self d ec la red t h a t, as a r e s u lt of c la s s s tru g g le , e ith e r
a new type of s o c ie ty or chaos and common ru in could f o l l o w . 4
Burnham b e lie v e s th a t th e fu tu re w ill be a "m anagerial s o c ie ty "
r a th e r than so c ia lism . Some th e o r is ts of c a p i t a l i s t d e c lin e
and p assin g argue th a t fa sc ism , when i t comes, d e stro y s c a p i
ta lis m in i t s only j u s t if i a b l e and h i s t o r i c a l meaning and (in
disagreem ent w ith s o c i a l i s t s ) th a t fascism re p re s e n ts a d i f f e r
e n t type of s o c ia l o rd e r. As D r. G.W. P helps d e c la re s :
The n ext epoch may be a kind of "fascism " (might be
u n io n -la b o r fa sc ism , government b u re a u c ra tic fa sc ism , e t c . ) .
What seems to be c le a r i s th e tendency toward th e p assin g
o f c a p ita lis m in to some kind of c o lle c tiv is m —f a s c i s t ,
4 . C f. Communist M an ife sto , fo r example.
s o c i a l i s t , communist, e t c .5
Thus, tiie problem of th e p assin g depends much upon
the d e f in itio n o f c a p ita lis m , and a ls o upon what in d ic a to rs
one w ill accept as to th e a c tu a l p o in t of the p assin g of
c a p ita lis m in to a n o th er system . These p o in ts w ill be d e a lt
w ith a few pages l a t e r on. Our only fu rth e r comment i s th a t
we are p rim a rily concerned here w ith th e d e c lin e and p assin g
o f c a p ita lis m , n o t w ith th e new s o e ia l o rd e r. And w hile
our own b e lie f i s th a t the new o rder w ill be s o c i a l i s t , we
do n o t need to prove here the form o f th e fu tu re system ,
although we m ight ad v ise th e s o c i a l i s t s to be ready to p rev en t
th e d e c lin in g system from p assin g in to o th er than s o c i a l i s t
form s.
The th ir d g re a t d iv is io n o f the above c la s s if ic a tio n
o f s o c ia l re o rg a n iz a tio n , the economic th eo ry of the fu tu re
s o c ie ty , does n o t concern us a t a l l in th i s th e s is and our
only comment would be to r e f e r th e in te re s te d re ad er to
Beckwith*s good book which d e a ls e x p l i c i t l y w ith th i s d iv is io n
o f the s u b j e c t . ^ The l i t e r a t u r e on th e economic th e o ry of
so c ia lism is growing ra p id ly as the world moves e x p lo siv e ly
through an a p p a re n tly world-w ide tr a n s it io n (re v o lu tio n ? )
5. Q uotation is from n o te s tak en in d isc u ssio n s w ith
B r. Phelps on t h i s s p e c if ic s u b je c t.
7
from tli© old l i b e r a l c a p ita lis m to new, some ugly and some
prom ising, form s.
Theory o f c a p i t a l i s t d e c lin e . T his theory i s the
su b je c t of oar th e s is and f a l l s lo g ic a lly in to two p a r ts :
(1) a d e s c rip tio n of th e many fo rc e s econom ists b e lie v e are
ten d in g to th e d e e lin e and p assin g o f c a p ita lis m , and s o c ia l
p o lic y designed by v a rio u s movements to f a c i l i t a t e th e pro
c e ss, and (2} the in d ic a to rs o f the a c tu a l p assin g o f th e sy s
tem.
Gur purpose w ill be f i r s t to survey the m ajor economic
th e o rie s of c a p i t a l i s t d e c lin e . Second, in our concluding
c h a p te r, we w ill p o in t out the m ajor weaknesses and th e m ajor
s tre n g th s o f each of th e th e o rie s surveyed. Since we are
re se rv in g t h i s p a rt of our ta s k fo r our concluding ch ap ter
we w ill p re se n t each th eo ry sy m p a th e tic a lly ; and t h i s man
n e r o f p re se n tin g the v a rio u s th e o rie s should n o t be con
stru e d to mean th a t we a re o u rse lv e s f u l ly sym pathetic vdLth
any one o f them.
Indeed, the j u s t i f i c a t i o n fo r t h i s th e s is i s the
p ro p o sitio n th a t each of the th e o rie s develops (more or le s s )
only one (or an o th er) sid e o f the problem ; th a t each empha
s iz e s c e r ta in f a c to rs in the p assin g and underem phasizes or
overlooks the im portance o f o th e r fa c to r s ; in s h o r t, th a t n o t
any one th e o ry alone g iv es th e f u l l p ic tu re of th e problem
8
before a s . The p re s e n ta tio n of th e m ajor th e o rie s , s id e -
b y -sid e in the same volame, and the p o in tin g up o f th e m ajor
stre n g th s and w eaknesses o f eaeh, seems to the p re se n t
w rite r to be th e most c o n s tra c tiv e method o f developing a
m any-sided, f u l l view of th e m u ltitu d e o f f a c to r s a t work
in th e economy, or i t s immediate environm ent, lead in g
in ex o rab ly to s o c ia l t r a n s itio n and re o rg a n iz a tio n , i . e . ,
to s o c ia l re v o lu tio n .
The rem aining s e c tio n s o f t h i s ch ap ter w ill be
devoted to summarizing the th e o rie s we a re going to survey
in t h i s th e s is , and to c le a rin g up a number o f p re lim in a ry
c o n s id e ra tio n s .
I I M AIN TYPES O F THEORIES
H is to r ic a lly th e most im p o rtan t th e o rie s p re d ic tin g
th e dow nfall of the c a p i t a l i s t system have been of th e
s o c i a l i s t communist, and a n a rc h is t v a r ie ty . The g re a t
names in th e se schools have been Proudhon, R odbertus, Marx,
E n g els, L enin, T ro tsk y , S ta lin , K autsky, e te .
But alth o u g h th e s o c i a l i s t th e o rie s have been h i s
t o r i c a l l y the most i n f l u e n t i a l , we w ish to emphasize in th is
th e s is the s ig n if ic a n t f a c t th a t m ajor proponents of the
c a p i t a l i s t system have them selves fe a re d th a t fo rc e s are
p re se n t in the economy which e v e n tu a lly w ill b rin g about
c a p ita lis m ’ s d e s tru c tio n . F urtherm ore, th ese th e o rie s are
9
becoming more im portant* More and more w r ite r s a re emphasing
t h i s f a c t . For exam ple, Burnham n o te s th e la rg e number
o f c a p i t a l i s t s and c a p i t a l i s t th e o r e tic ia n s who b e lie v e in
the in e v ita b le p assin g of t h e i r system :
The second and only o th er s e rio u s a lte r n a tiv e to th e
th e o ry o f th e m anagerial re v o lu tio n i s the th e o ry th a t
c a p i t a l i s t s o c ie ty i s to be re p la c e d by s o c i a l i s t s o c ie ty .
T his b e l i e f i s h eld by s o c i a l i s t s , com munists, in g e n e ra l
by a l l who c a ll them selves M a rx ists; and, in s li g h tly
d if f e r e n t w ords, by a n a rc h is ts and a n a rc h o -sy n d ic a lists*
I n te r e s tin g ly enough, i t i s a ls o held by many o th e rs who
do not a t a l l consider them selves to be M a rx ists, by not
a few, even, who a re a g a in s t so cialism * Many " lib e r a ls "
b e lie v e t h a t so c ia lism i s going to come* And th e re a re -
stau n ch c a p i t a l i s t s and d efen d ers o f c a p ita lis m , who,
though th e p ro sp ec t i s n o t a t a l l to t h e i r t a s t e , b e lie v e
lik ew ise* 7
Of th e th e o rie s t o be review ed h e re , two are proposed
by staunch su p p o rte rs of th e c a p i t a l i s t system , both o f
whom have lo s t f a it h in the th e o ry o f th e permanence o f
c a p ita lis m , both o f whom f e a r th a t e v il fo rc e s a re a t work
making in e v ita b le th e e v e n tu a l p assin g of th e s o -e a lle d
fre e e n te r p ris e system*
For our p u rp o ses, we s h a l l c la s s if y th e v a rio u s
th e o rie s in to fiv e main ty p e s, as follow s*
C a ta stro p h ic th e o rie s * F i r s t , th e re a re th o se
th e o rie s which p re d ic t the c a ta s tro p h ic p a ssin g of c a p ita lis m
because o f th e e v ils and c o n tra d ic tio n s in h e re n t in the system*
In th e sense used h e re , c a ta stro p h e means th e clo se
or co n clu sio n o f a long s e r ie s o f developing e v e n ts, as
th e tu r n , the change, or the group o f a c tio n s c o n s titu tin g
th e clo se o f a drama* This f i n a l ev en t or d is a s tro u s end
i s a sudden " q u a lita tiv e " change* I t may be p ea cefu l or
v io le n t, but change comes suddenly, a l l a t once, ra th e r than
by g rad u al e v o lu tio n a ry processes* C a p ita lism develops
g ra d u a lly up to a p o in t, th e c a ta s tro p h e , a t which tim e a
" q u a lita tiv e change" occurs in th e economic system , c a p ita lis m
p a sse s, and e v o lu tio n proceeds on a s o c i a l i s t basis*
The c a ta s tro p h ic th e o rie s appeal p a r tic u la r ly to
re v o lu tio n a ry s o c ia lis ts * The o b je c t o f such an a n a ly s is
i s , o f co u rse , to u t i l i z e the c o n tra d ic tio n s of the c a p i t a l i s t
system to speed th e day o f d e s tin y when th e system w ill bog
down o f i t s own in n er c o n tra d ic tio n s , w ith c a ta s tro p h ic
r e s u l t s , and w ith no a lte r n a tiv e open to th e masses ex cep t
to d e stro y th e b a s ic i n s t i t u t i o n s o f th e c a p i t a l i s t i c s o c ie ty
and re p la c e them , a l l a t once, w ith s o c i a l i s t in s titu tio n s *
G ra d u a list th e o rie s* Opposed to c a ta stro p h e th e o rie s
a re th e g r a d u a lis t th e o rie s*
A group of American econom ists, fo r exam ple, have
developed a th e o ry o f c o lle c tiv is m based on th e g ra d u a l
n a tio n a liz a tio n and s o c ia liz a tio n o f in d u s try due to th e
p re ssu re o f consumers* and p u b lic* s needs and demands*
11
C lo sely a s s o c ia te d w ith t h i s g ra d u a lis t or e v o lu tio n
ary or re fo rm is t view a re th e E n g lish F abians and t h e i r
numerous fo llo w e rs , The F abians a ls o , however, b e lie v e
th a t m o tiv a tin g th e e v o lu tio n a ry process a re n o t only con
sumers* needs but th e e v ils and c o n tra d ic tio n s o f the system ,
which spur people to p a rlia m e n ta ry a c tio n to change th e system .
Two o th e r th e o rie s o f the g ra d u a lis t o r e v o lu tio n a ry
p assin g o f c a p ita lis m may be m entioned. One i s T h o rstein
Veblen*s th e o ry o f th e s o c ie ty o f te c h n ic ia n s . The o th er i s
James Burnham's m an ag erial re v o lu tio n .
S ta g n a tio n is t th e o ry , d u rin g th e 1930s, a number of
econom ists under th e le a d e rsh ip o f John Maynard Keynes,
th e c e le b ra te d E n g lish econom ist, and A lvin Hansen of H arvard,
developed the now famous S ta g n a tio n is t th e s i s , or th e th eo ry
o f the m ature economy.
T his school d e n ie s th a t i t s d o c trin e , now g e n e ra lly
Known as th e K eynesian th e o ry , p r e d ic ts th e p assin g o f
c a p ita lis m . Indeed, th e sch o o l claim s i t s th e o ry p ro v id es
a p o lic y bulw arh to p ro te c t the c a p i t a l i s t system . The
K eynesians do a s s e r t , however, th a t the a lte r n a tiv e to
governm ental in te rv e n tio n in th e economy fo r f u l l employment
w ill be mass unemployment and economic sta g n a tio n , c o n d itio n s
which le a d to s o c ia l d is o rd e r and p o s sib ly to re v o lu tio n .
The "liberal** opponents o f Keynesianism provide th e
12
o th er horn o f th e dilemma * With governm ental in te rv e n tio n ,
the orthodox l i b e r a l s a s s e r t , th e economy i s condemned t o
"creep in g s o c ia lis m ." There i s no stop p in g p o in t, once
government in te rv e n tio n based on K eynesian p o lic ie s i s
began; i t le a d s s te p -b y -s te p to th e p assin g o f ca p italism *
th e r e f o r e , th e l i b e r a l s d e c la re t h a t K eynesian th e o ry i s
a n t i - c a p i t a l i s t and t h a t K eynesian th e o ry i s th e v e h ic le
of so cialism * I t i s a "damned i f you do, damned i f you
don’t " p ro p o s itio n . , W ithout K eynesian p o lic y , re v o lu tio n i s
p o ssib le i f not p ro b a b le ; w ith K eynesian p o lic y , ^creeping
so cialism " makes c a p i t a l i s t d e c lin e in e v ita b le .
The su ccess d o c trin e . R ecen tly a new th e o ry has been
developed which p r e d ic ts the p a ssin g of c a p ita lis m a s a r e s u l t
o f i t s v ery su c c e ss . The d o w n f a ll- d u e - to - e a p ita lis tic -
success view was f i r s t advanced by Joseph A. Schumpeter of
H arvard, in h is now famous book, C a p ita lism . S o cialism and
Democracy.* *
S chum peter's th e o ry i s a d ep a rtu re from the c a p i t a l i s t
th e o ry o f th e pexmanenoe o f c a p ita lis m . I t has caused consid
e ra b le excitem ent and co n tro v ersy among orthodox l i b e r a l
econom ists, fo rm erly com placent w ith th e ir d o c trin e o f perm
anency, and has sp u rred many o f them to ask w hether i t i s
n o t p o s sib le t h a t c a p ita lis m i s doomed by i t s own dynamic
A * F i r s t p u b lish ed in 1942 by H arper & B ros*, New York;
second e d itio n , 1947*
p o te n tia l fo r ra p id p ro g ress
13
P s y c h o lo g ic a l- in s titu t io n a l approaoh. T his is
an o th er th e o ry which openly f o r e t e l l s the doom o f c a p ita lis m ,
alth o u g h i t s ad h eren ts are orthodox l i b e r a l econom ists who
see g re a t e v i l in the s o c ia l tra n sfo rm a tio n in v o lv ed .
Human b e in g s, being what th e y a r e , a re no lo n g er capable
o f m ain tain in g a system based on c a p ita lis m , t h i s view
a s s e r t s . People a re p o ssessed o f c e r ta in m otives which
must be h e ld a t bay o r a p p ro p ria te ly m odified in a c a p i t a l
i s t i c dem o cratic s o c ie ty , and they are h eld in check and so
m odified only by a group o f counter fo rc e s which take such
i n s t i t u t i o n a l forms as r e lig io u s and m oral codes, th e
fam ily , and th e co m p etitiv e system . I f fo r some re a so n
th e m oral f ib e r o f th e community begins to change a d v e rse ly ,
th e a n t i - c a p i t a l i s t d riv e s w ill g e t th e upper hand, come
in to f u l l p la y , and d e s tro y th e f r e e m arket c a p i t a l i s t
system . Such a view i s developed, fo r example, by D r. C.W.
P helps o f th e U n iv e rsity of S outhern C a lifo rn ia economics
departm ent and e d ito r o f th e Jo u rn a l o f M arketing.
I l l M EANING OF CAPITALISM
Any d is c u s s io n r e la tin g to th e p assin g or breakdown
of c a p ita lis m must be based on an u n d erstan d in g o f j u s t what
i s meszit by th e term c a p ita lis m . Are th e re s p e c if ic f e a tu re s
w hich, i f d e stro y e d , w ill s p e ll th e end of the c a p i t a l i s t i c
14
system ? How do we know w hether the system i s p a ssin g , or
sim ply ©hanging or a d ju s tin g ? C le a rly , much th a t is to he
s a id concerning th e p a ssin g of the system depends on what
i s meant by cap italism *
C ontroversy over d e fin itio n s * There h as been a long
co n tro v ersy over th e d e f in itio n s o f cap italism * M aurice Dobb
o f Cambridge n o te s th a t th re e se p a ra te meanings assig n ed to
th e n o tio n of c a p ita lis m stand o u t in the major in flu e n c e
th ey have had on h i s t o r i c a l re se a rc h and h i s t o r i c a l i n t e r
p re ta tio n * ^
The f i r s t meaning he m entions i s the one popularized
by th e w ritin g s of Werner Som bart, who sought th e essence o f
c a p ita lis m in th e t o t a l i t y o f th o se a s p e c ts , or the s p i r i t ,
th a t has in s p ire d the l i f e of th e whole c a p i t a l i s t epoch*
The s p i r i t o f in d iv id u a l e n te rp ris e i s th e e s s e n tia l c h a ra c te r
i s t i c which d i f f e r e n t i a t e s c a p ita lis m from o th er systems*
The second meaning d i f f e r e n t i a t e s c a p ita lis m from
o th e r system s on th e b a s is o f p ro d u c tio n fo r a d is ta n t m arket
and in th e use o f money to fin an c e a s e r ie s o f exchange
tra n s a c tio n s w ith th e o b je c t of p riv a te gain* Money i s used
to make money through round-about m ethods o f p ro d u ctio n ,
which re q u ire a passage o f tim e, prod u ctio n b ein g fo r d is ta n t
m arkets* Thus, th e s e concepts a re used to d if f e r e n t i a t e
9• 6 t • M aurice Dobb, S tu d ie s in th e Development o f
C ap italism (New York: In te r n a tio n a l P u b lis h e rs , 1 9 4 7 ) P* 1-11*
15
c a p ita lis m from the more p rim itiv e s o c ie tie s which preceded
i t and a ls o from a fu tu re s o c i a l i s t s o c ie ty .
The t h i r d school m entioned by Dobb is dom inated by
E a rl Marx, and lo o k s f o r the meaning o f c a p ita lis m in th e
p a r tic u la r mode o f p ro d u c tio n , or in the way in whieh th e
means of p ro d u ctio n are owned and th e s o c ia l r e la ti o n s between
men r e s u ltin g from t h e i r connections w ith th e p ro c e ss of
p ro d u c tio n . Here the "buying and s e ll in g o f la b o r power
i s th e d i f f e r e n t i a s p e e if ic a o f c a p ita lis m ," to use ^ a u l
Sweezy*s words
a n o th e r d e f in itio n we m ight m ention h ere i s th e one
used by Joseph A, Schumpeter in h is th e o ry o f th e i n e v i t a b i l
i t y o f th e p assin g of c a p ita lis m . He d e fin e s c a p ita lis m
as an e v o lu tio n a ry p ro c e ss, c h a ra c te riz e d by an in c e s s a n t
re v o lu tio n a ry movement, d e stro y in g old s tr u c tu r e s , old
in d u s tr ie s , o ld m ethods, old te c h n iq u e s, and alw ays c r e a t
ing new and more advanced forms and methods and s tr u c tu r e s
of p ro d u c tio n .
L a s tly , a f i f t h sch o o l o f thought i s worth m en tio n in g .
The fa c t t h a t th e term c a p ita lis m has been used v a rio u s ly ,
and w ith no common measure o f agreem ent, serv es as th e b a s is
o f t h i s f i f t h p o in t o f view . With a d h e re n ts among econom ists
and h is to r ia n s a lik e , t h i s seh o o l re fu s e s even to reco g n ize
10» P au l Sweezy, The Theory o f C a p ita lis t Development
(New Yorkt Oxford U n iv e rsity P re s s ,T 9 4 2 ) p , 5b*
16
th e term c a p ita lis m a s a t i t l e for a d eterm in ate economic
system , holding t h a t th e term cannot he given e x a c t m eaning,
fo r re s e a rc h o r fo r any o th er p u rp o se .1* The in flu e n c e o f
t h i s p o in t o f view le d R. H* Tawney to w r ite , in a 1937
p re fa c e , th e fo llo w in g paragraphs
"W hen t h i s book f i r s t ap p eared , i t was p o ssib le for a
f r ie n d ly re v ie w er, w ritin g in a s e rio u s jo u rn a l, to
d ep recate in a l l g ra v ity th e employment of the term
"C apitalism * in an h i s t o r i c a l work, as a p o l i t i c a l
cateh-w ord, b e tra y in g a s i n i s t e r in te n tio n on the p a r t
o f th e m isguided author*
ini innocent so lecism o f th e kind would n o t, i t i s
p ro b a b le , occur so r e a d ily to d ay . O bviously, th e word
"C a p ita lism ," lik e "Feudalism " and "M e rcan tilism ," i s
open to misuse* O bviously, th e tim e has now come
when i t is more im portant to determ ine th e d if f e r e n t
sp e c ie s of C a p ita lism , and the su c c e ssiv e phases o f i t s
grow th, th an to con tin u e to lab o u r th e e x is te n c e o f th e
genus *
B ut, a f te r more th an h a lf a cen tu ry of work on the
s u b je c t by sc h o la rs of h a l f a dozen d if f e r e n t n a t io n a l i tie s
and o f every v a r ie ty o f p o l i t i c a l o p in io n , to deny t h a t
th e phenomenon e x is ts ; or to su g g est t h a t , i f i t does
e x i s t , i t i s unique among human i n s t i t u t i o n s , i t h av in g ,
lik e M elehizedek, e x is te d from e t e r n it y ; o r t o imply
t h a t , i f i t has a h is to r y , p ro p rie ty fo rb id s t h a t h is to r y
t o be d is in te r r e d , i s to run w ilf u lly in b lin k e rs* V erbal
c o n tro v e rsie s are p r o f i t l e s s ; i f an a u th o r d isc o v e rs
a more s u ita b le term , by a l l means l e t him use it* He
i s u n lik e ly , however, to make much o f th e h is to r y o f
Europe d u rin g th e l a s t th re e c e n tu rie s , i f , in a d d itio n
to eschewing th e w ord, he ig n o res th e f a c t *3-2
W ithout going deeper in to th e debate over d e f in itio n s ,
•' ll « Cf * Dobb* O p*~c it* * p* 1“ *2*
12. R. H* Tawney, R elig io n and the R ise of C ap italism
(Mentor Book e d itio n ) p . JZ
17
we w ill add here only a word of w arning about some a s p e c ts of
tb e d e f in itio n s , m erely t o in d ic a te the c o n tro v e rs ia l ch a r
a c te r and vagueness of th e problem . Quoting from Dobb:
Both S om bart's conception of th e c a p i t a l i s t s p i r i t
and a conception of C ap italism as p rim a rily a commercial
system sh are th e d e f e c t, in common w ith conceptions w hich
fo cu s a tt e n ti o n on th e f a c t o f a c q u is itiv e investm ent
o f money, t h a t th ey are in s u f f i c i e n tl y r e s t r i c t i v e to
co n fin e th e term to any one epoch o f h is to r y , and th a t
th ey seem to lead in ex o ra b ly to th e conclu sio n t h a t n e a rly
a l l p erio d s of h is to r y have been c a p i t a l i s t , a t l e a s t
in some d e g re e . As our knowledge o f e a r l i e r economic
s o c ie tie s has in c re a se d , th e tendency on th e p a r t o f
th o se who give such m eanings to the term has been to
extend th e b o u n d aries o f C a p ita lism f u rth e r back in ttim e .13
Foundations o f c a p ita lis m . Many w rite r s on compar
a tiv e economic system s app eal to th e e s s e n tia l o b je c tiv e
c h a r a c te r is tic s o f th e c a p i t a l i s t system , fo r the purpose
of d isc o v e rin g c r i t e r i a of i t s e x is te n c e or fo r i t s p a s s in g .
Some w r ite r s em phasize one group o f fundam ental f a c to r s ,
o th e rs em phasize an o th er group.
James Burnham l i s t s seven c h a r a c te r is tic s o f c a p ita l
ism w hich he b e lie v e s d is tin g u is h t h i s mode o f p ro d u c tio n
from fe u d a l eoonomy.*^ (1) P ro d u ctio n in c a p it a l i s t economy
i s commodity p ro d u ctio n ; (2) th e a ll-im p o rta n t ro le of
money and i t s a l l p erv asiv en ess i s an e q u a lly obvious fe a tu re
o f c a p i t a l i s t economy, i s Indeed a n e c e ssa ry consequence
13. Dobb. O p . o itT . p . 8 .
14* Burnham, Op. c l t . . p . l l f f .
18
of commodity p ro d u ctio n ; (3) the use o f money as c a p ita l
is another fundam ental f e a tu r e ; (4) under c a p ita lis m ,
p ro d u c tio n i s pursued f o r p r o f i t : (5) re cu rre n ce o f a
c h a r a c te r is tic and p e rio d ic economic c r i s i s ; (6) produ ctio n
a s a whole i s re g u la te d p rim a rily by the m arket; and (7) th e
i n s t i t u t i o n a l r e la tio n s p e c u lia r to c a p ita lis m s e rv e , f i n a l l y ,
to s t r a t i f y la rg e s e c tio n s of th e p o p u la tio n in to two c la sse s*
Another group o f w r ite r s s tr e s s th e fundam ental
i n s t i t u t i o n s on w hich c a p ita lis m i s based. F i r s t , c a p ita lis m ,
or the c a p i t a l i s t s tr u c tu r e o f s o c ie ty , i s based on th e
i n s t i t u t i o n o f p riv a te pro p erty * The i n s t i t u t i o n o f p riv a te
p ro p e rty is given c o n tin u ity through th e i n s t i t u t i o n o f
in h e rita n c e * And th ir d , th e owners o f p r iv a te p ro p e rty ,
under c a p ita lis m , must be f r e e to engage i n any b u sin ess or
e n te r p r is e th e y choose and, f u r th e r , e n te r in to the n ec essary
c o n tra c tu a l r e la tio n s fo r the p ro d u ctio n and a c q u is itio n o f
w ealth* The system i s , fu rth erm o re, su b je c t to c o n tro l by
com petition*
C ap italism d e fin e d . Turning to our d e f in itio n o f
c a p ita lis m fo r t h i s p ap e r, we might fin d some h e lp from
Louoks and H oot.1- ’ A ccording to th e se a u th o rs , c a p ita l means
man- and nature-m ade goods used in th e p ro d u ctio n o f other
th in g s which e v e n tu a lly a re used to s a t i s f y consumer wants*
15* W*N*Loucks and J*W, H oot, Comparative Economic
Systems (Hew York: H arper & B ro s ., 1943, re v ise d )*
19
C ap italism r e f e r s to one p a r ti c u la r system o f ow nership
and o p e ra tio n ( i . e . , c o n tro l) o f the p ro d u ctiv e in stru m e n ts,
under which th e major p a r t of th e c a p ita l i s owned and
c o n tro lle d by in d iv id u a ls o r a s s o c ia tio n s o f in d iv id u a ls ,
such a s b u sin e ss c o rp o ra tio n s . Hence c a p ita lis m i s d efin ed
by Loucks and Hoot as " th a t system o f economic o rg a n iz a tio n
which i s fe a tu re d by th e p riv a te ow nership and use f o r
p riv a te p r o f it o f man-made and nature-m ade c a p ita l.* * ^
T his d e f in itio n does not mean th a t a l l producers*
c a p ita l must be p r iv a te ly owned. How much must be p r iv a te ly
owned t o c o n s titu te a c a p i t a l i s t i c system , then? I f c a p ita lis m
i s th a t system under which th e main p a r t o f th e in stru m en ts and
re so u rc e s o f p ro d u c tio n a re p r iv a te ly owned and o p erated fo r
a p r o f i t , so c ia lis m i s a system under which th e main p a r t
o f th e in stru m e n ts and re so u rc e s a re s o c ia lly owned and oper
ated w ith o u t re g ard fo r a p r o f i t . What i s meant by the
main p a rt? Norman Thomas t e l l s u s , in every ra d io ad d ress
and campaign speech he makes, th a t so c ia lism alms a t s o c ia l
ow nership and dem ocratic c o n tro l o f th e coBmanding h e ig h ts o f
in d u s try . A p p aren tly , th e se in clu d e the system o f money and
banking, the tr a n s p o r ta tio n system , th e n a tu ra l re so u rc e s
(c o a l, o i l , uranium , iro n ©i.e, e t c . ) , and a l l those corpor
a tio n s , m o n o p o listic or sem i-m o n o p o iistic, in which th e
c o n tro l fu n c tio n has been se p a ra te d from ow nership. Hub
i6ribrar. pr^s.
20
perhaps we s h a ll be aid e d by tu rn in g to th e n ex t phase
o f th e problem .
IV CRITERIA FOR M EASURING THE PASSING O F CAPITALISM
A v a r ie ty o f c r i t e r i a fo r th e p assin g of c a p ita lis m
i s a v a ila b le , i f somewhat c o n tro v e rs ia l and f u l l o f dangerous
im p lic a tio n s . C r i te r i a may a r is e out of th e v a rio u s d e fin
i t i o n s of c a p ita lis m , or out of o th e r, e m p iric a l f a c to r s .
The c r i t e r i a accepted u s u a lly imply c e r ta in ty p e s o f p o lic y
and even d e fin e , along g e n e ra l li n e s , v a rio u s s o c ia l move
m ents. The problem o f c r i t e r i a in v o lv es th e problem s o f
o f (o r the tre n d tow ards) the p assin g of c a p ita lis m , and
th e in d ic a to rs o f the a c tu a l p o in t o f tran sfo rm atio n (o r
p assin g ) o f th e system . Thus i t i s n ec essary to be fle x ib le
in d e a lin g w ith c r i t e r i a , u n t i l t h e i r f u l l im p lic a tio n s
a re comprehended.
B asis fo r v a rio u s c r i t e r i a . The fo re g o in g d isc u ssio n
o f th e d e f in itio n s of c a p ita lis m i s r i c h i n co n ten t fo r th e
purpose o f e s ta b lis h in g c r i t e r i a fo r the p a ssin g of c a p ita lis m .
I f , as according to Som bart, th e " s p i r i t o f e n te r p ris e " i s
th e d is tin g u is h in g c h a r a c te r is tic o f th e system , we have
only to note th e dampening o f t h i s " s p i r i t . " Or i f , according
to another sc h o o l, c a p ita lis m produces fo r d is ta n t m arkets
through an exchange p ro c ess based on use o f money fin an c e
fo r th e purpose o f g a in , we have o nly to note th e breaking
21
up o f tM s system , or i t s f r u s t r a t i o n .
Or a g a in , i f a s according to K a rl Marx, th e use o f
wage la b o r i s th e b a s is fo r d is tin g u is h in g th e system , we
must look f o r th e p assin g o f th e wage system and th e s o c ie ty
based on th e buying and s e llin g o f la b o r power to p riv a te
in d iv id u a ls . Or, in lin e w ith th e d e f in i ti o n o f Loucks
and H oot, and Norman Thomas, we have only to look fo r th e
p assin g o f th e commanding h e ig h ts o f in d u s try from th e hands
o f p riv a te p r o f it- ta k e r s in to s o c ia l ow nership and dem ocratic
c o n tro l; and so f o r t h .
Or we may phrase a l l t h i s somewhat d if f e r e n t l y , and
s e t up c r i t e r i a fo r n o tin g th e p assin g of c a p ita lis m , such
f a c to r s as (1) th e s o c ia liz a tio n o f p ro p e rty , (2) th e
s o c ia liz a tio n o f incom e, (3) th e s o c ia liz a tio n o f c o n tro l
and d ir e c tio n of p ro d u c tio n ; (4) the growing h o s t i l i t y o f
th e p u b lic tow ards th e c a p i t a l i s t r e la ti o n s o f p ro d u c tio n
and th e p r o f i t m otive, and (5) th e grow ing s tre n g th , organ**
iz a tio n , and p o l i t i c a l co n sciousness o f th e la b o r movement,
th e i n t e l l e c t u a l group, and th e s o c i a l i s t s t r a t a them selves.
P o lic y Im p lic a tio n s . Since we aim a t f l e x i b i l i t y in
t h i s t h e s i s , however, we s h a ll not s e t up a s p e c if ic y a r d s tic k
f o r m easuring th e p assin g o f c a p ita lis m , depending in s te a d
upon a thorough d isc u ssio n o f th e Is s u e s and problems involved
to b rin g out enough o f th e e s s e n tia l f a e to r s so th a t common
sense judgment can r u le in th e m a tte r. And th is i s a p a r tie u -
22
l a r l y im portant d e c is io n , a s re fe re n c e to p o lic y co n sid
e r a tio n s c le a r ly in d ic a te s * For when one sta n d a rd i s s e t
as to the c h ie f f a c to r s in the p assin g o f c a p ita lis m ,
p o l i t i c a l p o lic y i s im m ediately in f e r r e d , form u lated on the
h a s is of th e s e le c te d sta n d a rd , e ith e r as a prop to d efend
th e c a p i t a l i s t system o r as a wedge to break i t up i n
p re p a ra tio n f o r th e re o rg a n iz a tio n o f s o c ie ty .
The f a e t th a t c r i t e r i a , once s e le c te d , im ply a c e r ta in
ty p e o f p o lic y i s i l l u s t r a t e d in p ra c tic e by re fe re n c e to
th o se socio-econom ic movements w hich aim a t th e d e s tru c tio n
o f c a p ita lis m . Some re v o lu tio n a ry s o c i a l i s t s , fo r exam ple,
hold th a t c a p ita lis m w ill pass only through a g re a t c a ta stro p h e
and v io le n t re v o lu tio n . C onsequently, th e ir p o l i t i c a l p o lic y ,
o rg a n iz a tio n and t a c t i c s , b ein g based on t h i s e s tim a te , are
designed fo r mass re v o lu tio n a ry a c t i v i t y and bold t h r u s t s
in tim es o f s o e ia l upheaval and f o r c o n s p ir a to r ia l, s e c r e t,
and e d u c a tio n a l a c t i v i t i e s d u rin g re c e s s io n s in the re v o lu
tio n a ry ebb and flow o f p opular sen tim en t.
Other s o c i a l i s t s , to develop th e exam ple, may h o ld
th a t c a p ita lis m w ill pass p e a c e fu lly , sm oothly, s te p -b y -s te p ,
in a g ra d u al reform p ro c e s s. Having made t h i s e s tim a te ,
the s o c i a l i s t s in q u e stio n plan t h e i r t a c t i c s on th e b a sis
o f p a rlia m e n ta ry a c ti v it y and reform programs* And so i t
g o es, each e stim a te su g g e stin g th e wisdom o f p a r tic u la r
p o lic y and t a c t i c s . Hence we must keep our minds open on
23
the m atter of c r i t e r i a o f th e p a ssin g of c a p ita lism u n t i l
a f te r an exam ination o f th e v a rio u s th e o rie s * each o f
which im p lies c e r ta in c r i t e r i a .
Problem o f in d ic a to r s . W ith th e se w arnings, we may,
however, p re se n t c e r ta in in d ic a to rs o f (1) th e tre n d tow ard
th e p a s sin g , and (2) the a c tu a l p a ssin g (or p o in t of tr a n s
form ation) of th e system .
In d ic a to rs o f the tre n d tow ards th e p assin g o f c a p ita l
ism may be concerned w ith th e p assin g o f i t on th e w orld
s c a le , or w ith i t s p a ssin g w ith in a s in g le n a tio n . C e rta in ly ,
the tre n d tow ards the p assin g o f w orld c a p ita lis m i s v ery
c le a r to d ay , what w ith th e e x te n sio n of world communism
in both e a s te rn Europe and th e &ar l a s t , and w ith th e
c a lc u la te d s o c ia liz a tio n p o lic y o f England,
On the n a tio n a l le v e l, a ls o , th e re a re many in d ic a to rs
o f th e p a ssin g o f c a p ita lis m . In th i s re g a rd , one o f th e
b e st in d ic a to rs o f th e p a ssin g o f c a p ita lis m in th e U nited
S ta te s i s th e e x te n sio n o f governm ental ow nership, Seba
E ld rid g e , in surveying th e e x te n sio n o f c o lle c tiv e e n te r
p r is e , fin d s ten c m ajor f i e l d s in w hich p r iv a te c a p ita lis m
has a lre a d y been crowded out and te n more in th e p ro cess
1 7
of n a tio n a liz a tio n * The most im portant e x te n sio n o f
governm ental e n te r p r is e o f re c e n t y e a rs was the Tennessee
17* S eta A ld rid g e, e t . a l , . Development o f C o lle c tiv e
E n te rp ris e (haw renee: U n iv e rsity of Kansas P re s s , 1943)• ~
24
T a lle y A u th o rity , which se rv e s as a model fo r f u r th e r
governm ental developm ent p r o je c ts c u rre n tly under c o n sid e r-
a t io n by co n g ress.
Of n e x t im portance as an in d ic a to r of the tre n d tow ards
the p a ssin g of c a p ita lis m i s th e e x te n sio n o f governm ental
c o n tro l over v a s t f i e l d s o f e n te r p r is e , d e stro y in g th e
c o n tro l fu n c tio n o f ow nership (and a s many w r ite r s p o in t o u t,
where c o n tro l i s , th e re is where r e a l ow nership i s } .
P u b lic U t i l i t i e s com m issions, la b o r boards, and innum berable
bureaus and a lp h a b e tic a l ag e n cies e x is t today in the f i e l d
of economic d ir e c tio n and c o n tr o l.
O ther w r ite r s i n s i s t t h a t th e grow th o f th e n a tio n a l
s te e p ly p ro g re ssiv e income ta x d em o n strates, fo r exam ple,
th e s o c ia liz a tio n o f income and a d e f in ite tre n d tow ards
th e e lim in a tio n of c a p ita lis m (through e f f e c tiv e ly e lim in a tin g
th e p r iv a te in v e s to r ) .
As fo r in d ic a to rs of th e a c tu a l p o in t o f p assin g of
c a p ita lis m in a s in g le c o u n try , two extrem es are to be n o te d .
On th e one hand th e re are some in d iv id u a lis ts who would
d e fin e any degree o f governm ental in te rv e n tio n a s i t , i . e . .
as evidence th a t c a p ita lis m i s gone. On th e o th er hand,
th e re a re some s o c i a l i s t s who b e lie v e , ju s t as a r d e n tly ,
th a t so long a s any p riv a te e n te r p r is e e x i s t s , so c ia lism
has not been ach iev ed ; fo r th e s e p eo p le, th e government
must own e v e ry th in g , down to th e l a s t one-man hamburger s ta n d ,
2 5
or c a p ita lis m is s t i l l dangerously w itii u s . These two
extrem es ta k e refuge behind two term s, s t a te so c ia lis m
ig
and s ta te c a p ita lis m . I f seme degree o f governm ental
ownership or c o n tro l e x is t s , th e one group d e fin e s th e
system as s ta t e s o c ia lis m , or i f much of i t e x i s t s , th e
o th e r group i n s i s t s th a t i t i s s ta te c a p ita lis m .
Some d e c la re t h a t i f 30 or 40 p e r cent o f the
n a tio n a l Income i s taken in ta x a tio n , c a p ita lis m cannot
continue to e x is t and w i l l pass out of the p ic tu re *
O thers d e c la re t h a t i f 50 p e r cen t of th e m ajor in d u s tr ie s
a re s o c ia liz e d , c a p ita lis m sim ply i s no m ore, alth o u g h
th e re would be p le n ty o f p riv a te e n te rp ris e l e f t . The
commanding h e ig h ts d o c trin e , however, h o ld s th a t a l l th e
g re a t In d u s tr ie s m ust be s o c ia liz e d , e s p e c ia lly banking
and c r e d i t , tr a n s p o r ta tio n and ccm aunication, and th e b a sic
in d u s tr ie s , f o r c a p ita lis m to be d e f in i te ly e lim in a te d .
T hat those who hold to the commanding h e ig h ts c r i
t e r i a co n sid er " la r g e ” a re a s of p riv a te e n te r p r is e com pati
ble w ith so c ia lism i s confirm ed by th e two fo llo w in g sta te m e n ts.
F i r s t , th e E ighth N a tio n a l Convention (1944) o f
th e C anadian Commonwealth f e d e r a tio n , C anada's s o c i a l i s t
p a r ty , d e c la re d i n i t s m an ifesto on s o c ia l ow nership:
18. James Burnham p re se n ts an in te r e s tin g d isc u ssio n
o f t h i s p o in t, op. o i t . . p . 1 9 9 ff•
. ^
26
The s o c ia liz a tio n o f la r g e - s c a le e n te r p r is e , however,
does n o t mean ta k in g over every p riv a te b u s in e s s . Inhere
p riv a te b u sin e ss shows no s ig n s o f becoming a monopoly,
o p e ra te s e f f i c i e n t l y under decent w orking c o n d itio n s , and
does n o t o p erate to the d e trim e n t o f th e Canadian p eo p le,
i t w ill be given e v e ry o p p o rtu n ity to fu n c tio n , to e a rn
a f a i r r a te o f r e tu r n and to make i t s c o n trib u tio n to th e
n a tio n * s w ealth .
As fo r th e second exam ple, M aurice Dobb, one of th e
most b r i l l i a n t a p o lo g is ts o f th e S t a l i n i s t regim e, w rite s :
I t was during th e e a r ly y ea rs o f the s o -c a lle d New
Economic P o lic y , o r Nep, in the ’tw e n tie s th a t th e mach
in e ry o f S o v ie t planning had i t s o r ig in and went through
i t s f i r s t l e s s o n s ... . i t re p re se n te d a t r a n s i t i o n a l
p erio d when s o c i a l i s t elem sn ts c o e x isted w ith sm a ll-
sc a le p e a sa n t a g r ic u ltu r e , coverin g more than n in e -te n th s
o f th e c u ltiv a te d a re a , and a ls o w ith a c e r ta in amount
of p riv a te tra d e , both w holesale and r e t a i l . Most of
t h i s p riv a te tra d e was on a p e tty s c a le ; much o f i t
th a t o f p e d d le rs and bazaar v en d o rs. N ev e rth eless in the
e a rly ’ tw e n tie s i t accounted fo r more th an a h a l f o f the
tra d e tu rn o v e r. In the m iddle ’tw e n tie s th is p ro p o r
tio n dim inished; and th e S o v ie t s t a t e always c o n tro lle d
th e "commanding h e ig h ts " in th e economic system by
v ir tu e o f i t s ow nership of la r g e - s c a le in d u s try , fin a n c e ,
and tr a n s p o r t. u
W e may be s u re , however, th a t th e B olsheviks consid ered
t h i s s ta te o f a f f a i r s to be " s o c ia l i s t " o nly because th e y ,
th e B o lsh ev ik s, were firm ly in c o n tro l o f the s t a t e m achinery.
V THE EARLIEST THEORIST O F CAPITALIST DECOMPOSITION
Henryk Grossman re c e n tly uncovered a work e n t it le d
19. Reproduced in M. J . C oldw ell, L e ft Turn. Canada
(New York: Due11, Sloan and P e a rc e , 1945) p . 2?7.
20. M aurice Dobb, S o v iet P lan n in g and Labor {New York:
I n te r n a tio n a l P u b lis h e rs , 1943) p . 11-27
27
An Tngtitry In to Permanent Causes of th e B eeline and F a ll o f
Pow erful and W ealthy N a tlo n s, by W. P la y f a ir (1759-1823),
a B r i t is h econom ist o f the h is to r ic a l sch o o l, who Grossman
d e c la re s to have been th e f i r s t th e o r i s t of c a p i t a l i s t
21
developm ent. An account o f P la y fa ir* s view s are apropos
fo r th re e main re a so n s .
F i r s t , i t w ill serv e to in d ic a te t h a t th e th e o ry o f
c a p i t a l i s t decom position i s by no means o f re c e n t o rig in ,
th a t th e fo rc e s a t work w hich are d e s tru c tiv e of th e system
have been recognized by econom ists as f a r back as 1805 a t
l e a s t , th e y ear in w hich th e above m entioned book was p u b lish e d .
F urtherm ore, in h is book, P la y f a ir a n tic ip a te d K a rl Marx on
s e v e ra l p o in ts , one b ein g a s ig n if ic a n t m eth o d o lo g ical p o in t.
Second, i t w ill serve to p o in t up th e f a c t th a t one
need not be a s o c i a l i s t , nor even a n t i - c a p i t a l i s t , in order
to reco g n ize fo rc e s a t work ten d in g tow ards th e u ltim a te
decom position o f c a p ita lis m . P la y f a ir is as stau n ch a
c a p i t a l i s t as Joseph A. Schumpeter o r G. W. P h e lp s. As
Grossman w rite s :
I t i s notew orthy th a t w h ile th e p re v io u sly known French
t h e o r is ts o f th e o b je c tiv e tre n d s o f c a p ita lis m were
u to p ia n or p e tty bourgeois s o c i a l i s t s , o r s e m i- s o e ia lis ts ,
who sh a rp ly c r it i c i s e d c a p ita lis m and proposed to re p la c e i t
“ 21. Henryk Grossman, * * W . P la y f a ir , th e E a r li e s t Theor
i s t o f C a p ita lis t Development,** The Economic H isto ry Review.
18 :6 5 -8 3 , Hos. 1 and 2 , 1948. : “ --------
28
by another more o r le s s s o c i a l i s t form of s o c ie ty , P la y fa ir
was a spokesman f o r th e p e tty b o u rg eo isie* B © to o c r i t i
c iz e s tb s f a ilin g s o f c a p ita lis m , b u t b is c r itiq u e i s
p u re ly sen tim en tal* He does n o t conceive of any way
out o f tb e s it u a tio n ; d e s p ite a l l th e f a il in g s of c a p ita l
ism tb a t be p o in ts o u t, be wants to p reserv e i t , and
does n o t propose to re p la c e i t by an o th er sy stem .22
T h ird , tb e in c lu s io n o f P la y f a ir ’ s views a t t h i s
p o in t w il l serve as an example o f some of tb e th e o rie s tb a t
are to be p resen ted i n tb e c h a p te rs t b a t follow *
P la y f a i r ’ s model* B r ie f ly , th e n , P la y f a ir , according
to Grossman, foresaw tbe doom of c a p ita lis m as tbe r e s u lt o f
a number o f "dom inant te n d e n c ie s" w hich a re in tb e meantime
prevented from d e stro y in g tbe system o u trig h t by a whole s e t
of " c o u n te ra c tin g f o r c e s ." Thus, P la y f a ir uses a pow erful
a n a ly tic a l method l a t e r adopted by Marx t o e x p la in tb e
check on b is c o n tra d ic to ry fo rc e s which were le a d in g to
socialism *
A lso lik e Marx, P la y fa ir based b is th eo ry oh k h i s t o r
ic a l conception o f development* But u n lik e M arx’ s th e o ry of
s p ir a l d i a l e c t i c a l developm ent upwards, P la y f a ir bad a c y c lic a l
view o f h is to r y , b e lie v in g tb a t n a tio n s fo llo w a " l i f e c y c le ,"
moving from p o v erty to w e a lth , to decay, and d e a th . In tb e
p r e - c a p i t a l i s t s ta g e s , decay re s u lte d in tb e over-ru n n in g and
d e s tru c tio n o f tb e old s o c ie ty by b a rb a ric h o s ts , such as
^ rrbra.T' p * 6 8
29
tliose w hich overran th e g re a t Homan em pire. But w ith th e
r i s e of c a p ita lis m , t h i s f i t t i n g end i s choked o f f . C a p ita l
i s t and in d u s tr ia l n a tio n s organize arm ies based on modem
weapons which cannot be m atched by any except e q u a lly
advanced in d u s tr ia l n a tio n s . So th e deceased c a p i t a l i s t
n a tio n s have met th e i r doom in a n o th e r, an economic m anner,
w hich re q u ir e s h i s t o r i c a l in v e s tig a tio n .
A c a p i t a l i s t n a tio n , said P la y f a ir , goes through th re e
phases o f accum ulation. In the f i r s t s ta g e , le s s c a p it a l is
a v a ila b le th a n can be in v e ste d ; in th e second s ta g e , he
c o n tin u e s, th e re is s u f f ic ie n t c a p ita l; but in the t h i r d and
d e c isiv e s ta g e , th e re becomes a v a ila b le more c a p it a l th an
cm be p r o f ita b ly in v e ste d a t heme•
As c a p it a l accum ulation proceeds i t undergoes c e r t a i n
developm ental tr e n d s . (1) There i s a tendency to the con
c e n tr a tio n and c e n tr a liz a tio n of c a p ita l in a few han d s.
(2) A nother tendency i s th a t th e p ro d u ctiv e c la s s e s become
p o o re r; Marx l a t e r term ed t h i s tendency the d o c trin e o f
in c re a s in g m isery . (3) There i s a tendency fo r the m iddle
c la s s e s to d is a p p e a r, another d o c trin e developed by Marx
in h i s th e o ry .
A fte r t h i s rev iew , Grossman w rite s :
W e s h a ll now pass to th e most im portant se c tio n of
P l a y f a i r ’s th e o ry of accum ulation—h is view th a t a t a
s p e c if ic s ta g e , c a p ita l accum ulation reach es a maximum
l i m i t . This r e s u l t s in a profound s tr u c t u r a l change o f
th e whole economy. I t i s a t t h i s l a te stag e th a t a
fo u rth tre n d a p p e a rs—th e tendency o f in d u s tr ia l n a tio n s
to ehange in to c r e d ito r (in v e s to r) n a tio n s , which u l t i
m ately le a d s to th e d is in te g r a tio n o f th e whole economic
system . For i f c a p it a l accum ulation reaeh es th e th ir d
phase (c h a ra c te riz e d by superabundance o f c a p it a l ) , the
p r o f i t s earned in the e x is tin g e n te r p r is e s cannot be
p r o f ita b ly absorbed a t home; t h i s becomes s u rp lu s c a p ita l,
and must th e re fo re be ex p o rted
T his passage would in d ic a te t h a t P la y f a ir , w ritin g a t
th e beginning of th e l a s t c e n tu ry , a n tic ip a te d the l a t e r
w r ite r s on modern Im p erialism , such as Hobson, H ilfe rd in g ,
and L enin, whose views w il l be examined in th e nex t chapter*
P la y f a ir goes on to d e fin e a l l th e c h a r a c te r is tic s o f
a p a r a s i t i c c r e d ito r (in v e s to r) n a tio n , which were c le a r to
him . He b e lie v e s the in v e sto r s t a t e , a n e c e ssa ry and u ltim a te
phase o f in d u s tr ia l developm ent, i s a phase w hich In a u g u rates
d e c lin e and decay . A n a tio n w hich l i v e s on i n t e r e s t from
abroad undergoes a tw o -fo ld change: (1) a s tr u c tu r a l change
occurs in th e economic b a se , and (2) p a r a lle l to i t occurs
a fa r-re a c h in g change in th e s p i r i t u a l s u p e r s tr u c tu r e •
P la y f a ir uses the H olland of h is day as an exam ple.
From a m anufacturing s o c ie ty , th e Dutch evolved in to m erchants
th e m erchants th en evolved in to c a r r i e r s . The lan d was
s a tu ra te d w ith c a p i t a l , u n t i l investm ent a t home became no
lo n g e r p r o f it a b le . T h e re fo re , more and more c a p ita l went
2 3 . I b i d . . p. 7 4-5.
31
in to th e fo re ig n c a p ita l m arket. The D utch became commercial
a g e n ts fo r fo re ig n c o u n trie s . From m erchant c a r r ie r s th e
Dutch developed in to r e n t i e r s . The in d u s tr ie s were n e g le c te d
and the n a tio n slo w ly , b u t s u re ly , changed from an in d u s t r ia l
in to a c r e d ito r n a tio n .
The economic tra n sfo rm a tio n was accompanied by a
p a r a l l e l change of m e n ta lity , w hich re a c te d on the economic
b a s is and fu rth e r accen tu ated i t s w eakness. an in v e sto r
n a tio n ' i t is n o t m erely a n e g le c t o f in d u s tr y .• .t h a t is
h u r tf u l; the g e n e ra l way o f th in k in g and a c tin g becomes
d i f f e r e n t . '
The m e n ta lity o f an id le c la s s of r e n t i e r s vfao d esp ise
p ro d u ctiv e work le a v e s i t s im press on th e whole of an
in v e s to r n a tio n . This 'd e g ra d a tio n o f m oral ch aracter*
o f an in v e s to r n a tio n i s ag a in i l l u s t r a t e d by Holland.24
C o u n teractin g te n d e n c ie s . For P la y f a ir th e re are
s e v e ra l c o u n te ra c tin g te n d e n c ie s to th e fo rc e s lead in g to
th e d e c lin e o f w ealthy n a tio n s , o f which Grossman d isc u ss e s
o nly one, th e e x p o rt o f c a p it a l.
The government i s to e n te r the p ic tu re to encourage
and a id in th e e x p o rt o f c a p it a l, which i s th e major c o u n te r
a c tin g tendency, ^ t even t h i s can o n ly f o r a s h o rt tim e
prevent th e dow nfall o f th e w ealthy n a tio n . As c a p ita l
e x p o rts grow, th e poor n a tio n s b eg in to overtake the i i c h .
B esides b e n e fitin g from th e c a p ita l e x p o rts to t h e i r la n d s ,
the ppor n a tio n s have o n ly to Im ita te in o rder to grow and
develop—but th e advanced n a tio n s , in order to d ev elo p , must
---------- ^ T l'bld.. p 'T 77-ff.
32
r e ly on in v e n tio n s , in n o v a tio n s, and th e c h a rtin g o f new
eourses o f economic and te c h n o lo g ic a l advancem ent.
M oreover, th e backward n a tio n s g e t only th e new est
and b e s t m achines, w hereas in d u s try in th e old n a tio n s i s
committed to use up i t s old m achines in o rd er to r e a liz e
i t s c a p ita l in v estm en t before in tro d u c in g new equipm ent.
Hence, th e ex p o rt of c a p ita l i s b u t a tem porary d e v ic e ,
o f n e c e s s ity s h o r t- liv e d , to d e la y th e c o lla p se o f power
f u l n a tio n s . And i t i s n o t long b efo re the o ld , r ic h coun
t r i e s a re overtaken and surpassed by y o u th fu l, r i s i n g n a tio n s .
The old c o u n trie s , as did H olland, decay and pass in to th e
background o f h is to r y .
T© t h i s , as we s h a ll se e , Marx adds th e id e a th a t
th e c a p i t a l i s t p ro cess s o c ia liz e s la b o r in th e process o f
th e c o n c e n tra tio n and c e n tr a liz a tio n of c a p ita l , which ends
w ith the tra n sfo rm a tio n of a lre a d y s o c ia liz e d p ro d u ctio n
in to s o c ia liz e d ow nership, c o n tro l, and d i s tr i b u tio n .
VI ORGANIZATION OF THE THESIS
In C hapter I I we s h a ll examine modern s o c i a l i s t and
communist th e o rie s r e la tin g to the dow nfall and p a ssin g o f
c a p ita lis m , which we above lumped to g e th e r under the c l a s s i
f ic a tio n of th e e v i l s and c o n tra d ic tio n s th e o ry . T his chap
t e r w i ll be a survey o f th e s c i e n t i f i c so c ia lism o f K arl
Marx, th e d o c trin e o f im p e ria lism , the S t a l i n i s t th e o ry o f
33
th e ro le o f th e S o v iet S ta te and th e g e n e ra l c r i s i s o f c a p i
ta lis m , and th e views o f an American S t a l i n i s t , P aul Sweezy,
an ex-H arvard econom ist*
In C hapter I I I we w ill review two sch o o ls o f s o c ia l
i s t th o u g h t: (1) th e view th a t c o lle c tiv is m comes as a r e
s u lt o f consumers* demands and p u b lic n eed s, and (2) th e
view o f th e B r itis h g r a d u a lis t school or Fabianism *
C hapter IV w ill be a survey o f th e Keynes-Hansen
th e s i s th a t governm ental in te rv e n tio n le a d s to th e p assin g
o f c a p ita lis m through a p ro cess o f "creep in g s o c ia lis m ," a
th e s is o f economic m a tu rity and stag n atio n *
In C hapter V, we tu rn to the su ccess th e o ry o f th e
p a ssin g o f c a p ita lis m , proposed by Joseph A. Schumpeter o f
the H arvard Economies departm ent*
In C hapter V I, we p re se n t a c o n stru c tio n of our own,
designed to i l l u s t r a t e how a th e o ry o f th e p a ssin g o f ca p i
ta lis m could be developed by s ta r ti n g out from th e b a s ic
p sy ch o lo g ical d riv e s which m o tiv a te men to economic a c t i v i t y .
Such a th eo ry s a t i s f i e s th o se econom ists who b e lie v e th e re i s
a more elem en tal e x p la n a tio n of th e p assin g of c a p ita lis m than
th e e la b o ra te s tr u c tu r e s m entioned so f a r . Indeed, th e fram e
work p re se n ted in th i s c h a p te r i s based on n o tes from le c
tu r e s given by D r. C.W. P helps o f the U n iv e rsity o f Southern
C a lifo rn ia economics departm ent d u rin g the p a s t few y e a rs .
F in a lly , C hapter V II i s devoted to a summary, e v a lu -
a tio n , c r itie is m , and g e n e ra l rem arks, which n e c e s s a rily
w ill r e f l e c t our own n o tio n s as to th e type o f th eo ry and
th e c h ie f fo rc e s on which must he based a socio-econom ic
program and movement which w ants s e rio u s ly to re o rg an ize th e
American economy on a s o c i a l i s t b a s is .
CHAPTER IX
THE SOCIALIST INDICTMENT
I . INTRODUCTION
Purpose o f t h i s c h a p te r* The f i r s t o f th e m ajor
th e o r ie s o f e a p i t a l i s t decom position, and by f a r th e most in
f l u e n t i a l d o c trin e o f s o c ia l tra n sfo rm a tio n abroad to d ay , i s
reviewed in t h i s chapter* T his i s the d o c trin e o f " s c ie n ti
f i c s o c ia lis m ,” th e h i s t o r i c a l s o c i a l i s t in d ictm en t o f c a p i
ta lis m , and i t s main neo-M arxian v a ria n ts *
A ccording to th e s c i e n t i f i c s o c i a l i s t d o c trin e , found
ed by K arl Marx, e v i ls and c o n tra d ic tio n s r e s u ltin g p rim a rily
from the e la s s s tr u c tu r e o f modern c a p i t a l i s t s o c ie ty lead
in e v ita b ly to a c a ta s tro p h ic s o c ia l tra n sfo rm a tio n , e ith e r
through economic breakdown and re v o lu tio n a ry c r i s i s , or
through a p opular mass d e c is io n to change th e s o c ia l s tr u c
t u r e , through e f f e c tiv e p a rlia m e n ta ry a c tio n , from a c a p i
t a l i s t to s s o c i a l i s t base*
The s o c ia l tra n sfo rm a tio n does n o t oeeur a u to m a tic a lly ,
however* O b jectiv e economic c o n d itio n s cause the w orking
c la s s e s to beeome a lig n e d a g a in s t the old o rd e r through a
s e r ie s o f p o l i t i c a l and economic stru g g le s* But fo r s o c ia l
tra n sfo rm a tio n to o cc u r, as a r e s u l t o f the cu lm in atin g
c a ta s tro p h e , th e s o c i a l i s t le a d e rs o f the working c la s s e s
36
m ust c o n sc io u sly o rg an ize and c a rry through th e s o c i a l i s t
re v o lu tio n . The w orking c la s s e s are th e h i s t o r i c v e h ic le o f
th e new o rd e r, th e only s o c ia l s t r a t a capable o f b rin g in g
about th e f i n a l p assin g o f c a p ita lis m ; but th e go al o f s o c ia l
re o rg a n iz a tio n cannot be achieved u n t i l th e m asses a re con
scio u s o f t h e i r d e s tin y , tr a in e d , and organized to f u l f i l l
t h e i r h i s to r i c m ission#
The th e o ry does n o t n e c e s s a r ily im ply v io le n c e , how
e v e r. The s o c ia l tra n sfo rm a tio n may th e o r e tic a lly be ac h ie v
ed by e ith e r p e a c e fu l or v io le n t means. Peace or v io len ce
depends upon th e o b je c tiv e circum stances and p o l i t i c a l con
d itio n s a tte n d in g the tra n s fo rm a tio n . S o c ia lis ts g e n e ra lly
argue th a t p ea cefu l tr a n s i ti o n i s both p o ssib le and d e s ira b le #
The d riv in g f o r c e s . The fo rc e s te n d in g to th e d e s
tr u c tio n o f c a p i t a l i s t s o c ie ty , acco rd in g to th e th e o ry under
c o n s id e ra tio n , c o n s is t of a number o f e v ils and c o n tra d ic tio n s
in h e re n t in the system i t s e l f .
The ad h e ren ts o f t h i s p o in t of view have c o n stru c te d
a body o f d o c trin e s based on th e e v ils and c o n tra d ic tio n s
b e lie v e d to be in h e re n t in the system . These d o c trin e s
u s u a lly are c la s s if ie d as fo llo w s: (1) th e c la s s s tru g g le ;
(2) the s ta te as an agency o f o p p ressio n ; (3) the in c re a s in g
m isery o f the p r o l e t a r i a t ; (4) th e d e c lin in g r a te of p r o f i t s ;
(5) th e c o n c e n tra tio n and c e n tr a liz a tio n o f c a p ita l; and
37
(•6) monopoly and fin an c e c a p it a l , or im perialism * These are
th e e s s e n tia l d o c trin e s which e x p la in , a t l e a s t fo r the
M arxian s o c i a l i s t s , the in e v ita b le f a te o f c a p ita lis m as
th e h e lp le s s v ic tim o f i t s own in h e re n t c o n tra d ic tio n s and
antagonism s*
The th e o rie s to be review ed in t h i s c h a p te r c o n s is t
of the most im portant M arxian and neo-M arxian views on the
p assin g o f c a p ita lis m . A ll th ese views have t h e i r source
in a common h e r ita g e , th e d o c trin e s of K a rl Marx. The
c e n tr a l id e a s o f Marx com prise, th e re fo re , th e s t a r t i n g
p o in t o f the survey o f th e th e o rie s review ed in t h i s chapter*
A fte r exam ining Marx*s views we w ill survey the th e o ry of
im p erialism , a l a t e r M arxian developm ent. A s p e c ia l s e c tio n
w ill be devoted to the S t a l i n i s t t h e s is on th e r o le o f th e
S o v iet S ta te in the w orld re v o lu tio n , sin ce t h i s d o c trin e
p lay s such a dynamic and th re a te n in g ro le in w orld a f f a i r s
to d ay . The o b je c tiv e and su b je c tiv e c o n d itio n s of th e revo
lu tio n w ill fin d s p e c ia l tre a tm e n t. T his i s the problem o f
d e fin in g a re v o lu tio n a ry s itu a tio n and fo rc in g s o c ia l tr a n s
fo rm atio n . A s e c tio n a ls o w ill be devoted to th e breakdown
co n tro v e rsy , th e problem o f w hether th e c a p i t a l i s t system
w i ll f i n a l l y break down and c o lla p se of i t s own weight* F in
a l l y , th e re w ill be a review o f P aul Sweezy’s re c e n t b lu e
p r i n t o f c a p i t a l i s t d is in te g r a tio n and p a ssin g , and a c r i t i
cism o f th i s b lu e p rin t*
I I THE C O M M O N HERITAGE
38
A ll modern s o c i a l i s t and communist movements owe much
o f t h e i r co n ten t and in s p ir a tio n to K a rl Marx and h is system
o f S c ie n tif ic S o c ia lism . Indeed, the Communist M anifesto and
Das K a p ita l a re w ithout p a r a l le l among economic d o c trin e s in
modern tim es in re s p e c t to the in flu e n c e th ey have had upon
men*s m inds. In t h i s s e c tio n we w il l review th e fundam entals
o f th e M arxian system , i t s p h ilo so p h ic a l b a s is , th e d o c trin e
o f the c la s s s tru g g le , and the th eo ry o f e x p lo ita tio n .
The re v o lu tio n a ry , philosophy. The system of views
and te a c h in g s Known as Marxism i s based on th re e major
so u rc e s: (1) German p h ilo so p h y , (2) B r itis h c la s s ic a l po
l i t i c a l economy, and (3) French so c ia lism and re v o lu tio n a ry
d o c tr in e •
W ith reg ard to h is p h ilo so p h y , what Marx did was to
combine Feuerbach*s m a te ria lism w ith H egel1s d i a l i c t i e s to
form a re v o lu tio n a ry p h ilo so p h y , i . e . , an a n a ly s is which
d ire c te d a tte n tio n to th e p ro c e sse s, th e law s o f develop
m ent, and the t r a n s ito r y c h a ra c te r o f th e m a te ria l w o rld .
Thus, fo r d i a l e c t i c a l philo so p h y , n o th in g i s f i n a l , sa c re d ,
or a b s o lu te ; e v e ry th in g i s r e la tiv e and su b je c t to change.
M oreover, change i s n o t m erely q u a n tita tiv e , but slow q u a n ti
t a t i v e changes accum ulate to a p o in t where th e re oecurs a
sudden q u a lita tiv e , or r a d ic a l change, as when u n its o f h e a t
39
are added to w a te r, a c e r ta in p o in t a r riv e s a t which a sudden
r a d ic a l change o c c u rs, th e liq u id b u rs tin g in to a b o il and
becoming q u a lita tiv e ly transform ed in to a g a s.
Marx developed from t h i s philosophy h is m a te r ia lis t
conception of h is to r y . From t h i s i t fo llo w s th a t c a p ita l
ism i s m erely a stage in h i s t o r i c a l developm ent, t r a n s it o r y
in c h a ra c te r, and d e stin e d in e v ita b ly to pass out of e x is te n c e .
In order to understand how t h i s e v o lu tio n a ry p ro c e ss
o f developm ent o c c u rs, Marx w r ite s , i t i s n ecessary to look
in to the m a te ria l base of c a p i t a l i s t s o c ie ty , and th e re
f e r r e t o u t and an aly ze i t s c o n tr a d ic tio n s . For th e evo
lu tio n a r y p ro cess from low er to h ig h forms occurs d i a l e c t i -
e a lly , n o t as a harmonious u n fo ld in g o f phenomena, b u t as a
r e s u l t of the c o n tra d ic tio n s in h e re n t in th in g s , as a s tru g g le
between opposing te n d e n c ie s based on th ese c o n tra d ic tio n s
and a tte m p tin g to overcome th e c o n tra d ic tio n s . The b a s is of
every s o c ie ty i s i t s mode of p ro d u c tio n , which c o n s is ts of
th e m a te ria l ag en ts or means o f p ro d u ctio n and the r e la ti o n s
of p ro d u c tio n . Where s o c ie ty i s s p l i t in to c la s s e s , the
r e la tio n s of p ro d u ctio n come in e v ita b ly in to c o n f lic t w ith
............................... 1 t
th e developing means of p ro d u c tio n , s e ttin g up the d i a l e c t i
c a l fo rc e s fo r s o c ia l change. As Marx p u ts i t :
The g e n e ra l co n clu sio n a t utiiieh I a rriv e d and w hich,
once re a c h e d , continued to se rv e as th e lead in g th re a d
in my s tu d ie s , may be b r ie f ly summed up a s fo llo w s:
In th e s o c ia l p ro d u c tio n which men c a rry on they e n te r
40
in to d e f in ite r e la ti o n s th a t are in d isp e n sa b le and in d e
pendent o f t h e i r w il l; th e s e r e la tio n s of p ro d u ctio n
correspond to a d e f in it e stag e o f developm ent of th e ir
m a te ria l powers o f p ro d u c tio n . The sum t o t a l o f th ese
r e la ti o n s of p ro d u c tio n c o n s titu te s th e economic s t r u c t
ure o f s o c ie ty —th e r e a l fo u n d a tio n , on which r i s e le g a l
and p o l i t i c a l s u p e rs tru c tu re s and to w hich correspond
d e f in ite forms o f s o c ia l co n scio u sn ess.
The mode o f p ro d u c tio n in m a te ria l l i f e determ ines
the g en e ral c h a ra c te r o f th e s o c ia l, p o l i t i c a l , and
s p i r i t u a l p ro c esses o f l i f e . I t i s n o t th e conscious
n ess o f men th a t d eterm in es th e ir e x is te n c e , b u t, on
the c o n tra ry , t h e ir s o c ia l ex iste n c e determ in es th e ir con
s c io u sn e ss. At a c e rta in stag e o f th e i r developm ent,
the m a te ria l fo re e s o f p ro d u ctio n in s o c ie ty come in con
f l i c t w ith the e x is tin g r e la tio n s of p ro d u c tio n , o r—
what i s b u t a le g a l ex p ressio n f o r the same th in g —w ith
the p ro p e rty r e la ti o n s w ith in which they had been at
work b e fo re . From form s, of developm ent of the fo rc e s o f
p ro d u c tio n , th e s e r e la tio n s tu r n in to t h e i r f e t t e r s . Then
comes th e p e rio d of s o c ia l re v o lu tio n . Where the change
of th e economic foundation occurs the e n t i r e immense
s u p e rs tru c tu re i s more or le s s ra p id ly tra n sfo rm e d .
In c o n sid e rin g such tra n sfo rm a tio n s th e d is t in c tio n
should alw ays be made between the m a te ria l tra n sfo rm a tio n
o f the economic c o n d itio n s of p ro d u c tio n which can be
determ ined w ith the p re c is io n o f n a tu ra l sc ie n c e , and
the le g a l, p o l i t i c a l , r e lig io u s , a e s th e tic or p h ilo s o
p h ic — in sh o rt id e o lo g ic a l forms in which men become
conscious of t h i s c o n f lic t and f ig h t i t o u t. J u s t as
our o p in io n o f an in d iv id u a l i s not based on what he
th in k s o f h im se lf, so can we n o t judge o f such a p e rio d
o f tra n sfo rm a tio n by i t s own co n scio u sn ess; on th e con
t r a r y , t h i s consciousness must r a th e r be ex p lain ed from
th e c o n tra d ic tio n s o f m a te ria l l i f e , from th e e x is tin g
c o n f lic t between th e s o c ia l fo rc e s of p ro d u c tio n and the
r e la tio n s of p ro d u c tio n . No s o c ia l o rd e r ever d isa p p e a rs
before a l l th e p ro d u ctiv e fo rc e s , fo r w hich th e re is
room in i t , have been developed; and new h ig h er r e la tio n s
o f p ro d u ctio n n ev er appear befo re th e m a te ria l condi
tio n s of th e i r e x is te n c e have m atured in th e womb of the
old s o c ie ty . T h e re fo re , mankind alw ays ta k e s up only
such problem s as i t can so lv e ; sin c e , looking a t the
m atter more c lo s e ly , we w ill always fin d th a t the problem
i t s e l f a r is e s only when th e m a te ria l c o n d itio n s n ece
ssa ry fo r i t s s o lu tio n a lre a d y e x i s t or are at le a s t
in th e p ro c ess o f fo rm a tio n .
41
In broad o u tlin e s we can d e sig n a te th e A s ia tic , th e
a n c ie n t, the fe u d a l, and th e modern bourgeois methods of
p ro d u c tio n as so many epochs in th e p ro g re ss o f eco
nomic fo rm atio n s of s o c ie ty . The bourgeois r e la tio n s
o f production a re the l a s t a n ta g o n is tic form of the s o c ia l
p ro cess of p ro d u c tio n —a n ta g o n is tic n o t in the sense of
in d iv id u a l antagonism , but o f one a r is in g from condi
tio n s surrounding the l i f e of in d iv id u a ls in s o c ie ty ;
a t th e same tim e the p ro d u c tiv e fo rc e s develo p in g -in
th e womb of bourgeois s o c ie ty c re a te th e m a te ria l con
d itio n s f o r the s o lu tio n o f th a t antagonism .1
The C lass S tru g g le . A ccording to Marx, th e h is to r y
o f a l l s o c i e ti e s , except th e .most p rim itiv e communal s o c ie ty ,
i s th e h is to r y o f c la s s s tr u g g le .2 T his d o c trin e p ro v id e s th e
m otive o f h i s t o r i c a l developm ent w herever s o c ie ty i s d iv id ed
in to c la s s e s . And Marx does n o t mean by c la s s e s th a t whole
a rra y o f s o c ia l groupings based on r e lig io u s d if f e r e n c e s , e t c .
While a d m ittin g th a t a l l such c la s s e s or groups of th i s
n a tu re do e x is t and can be used to e x p la in c e rta in ty p es of
s o c ia l a c t i v i t y , Marx c a ll s a tte n tio n to those g re a t economic
c la s s e s determ ined by the ow nership r e la tio n s o f men to th e
in stru m e n ts o f p ro d u c tio n .
H is to r ic a lly the most developed form of c la s s s o c ie ty
i s c a p ita lis m , Marx h o ld s, and in i t the c la s s stru g g le i s
brought to i t s h ig h e st form o f developm ent. In i t , s o c ie ty
IT K arl Marx. A C o n trib u tio n to th e C ritiq u e o f
P o l i t i c a l Economy. (C hicago: C h arles H. K err b o ., 1904)
p . 1 1 - 1 3 .
2 . C f. Communist M an ife sto , in K a rl Marx S e le c te d
Works. V ol. 1 . (New York: in te r n a tio n a l P u b lis h e rs , n . d . ) .
p T T ! 9 f f .
42
i s d iv id e d in to two g r e a t c la s s e s , in to two g re a t h o s tile
camps b rought face to fa c e to g e th e r fo r th e **final c o n f l i c t ,1 1
th e b o u rg e o isie and th e p r o le ta r ia t* In t h i s c a p i t a l i s t
s o c ie ty , th e i n d u s tr i a l p r o l e t a r i a t i s the only re v o lu tio n a ry
c la s s —th e only c la s s which c o n ta in s th e m otive-pow er to
b rin g about the tra n sfo rm a tio n of s o c ie ty , according to
Marx. A ll o th er c la s s e s a re t r a n s i t o r y in n a tu re and
"decay and f i n a l l y d isa p p e a r in th e fa c e o f modern in d u s try ;
the p r o l e t a r ia t i s i t s s p e c ia l and e s s e n tia l p ro d u e t.^
Thus th e stag e o f h is to ry is s e t f o r Marxf s g re a t
re v o lu tio n a ry clash * On the one s id e are the owners o f cap
i t a l , who o rg an ize and c o n tro l p ro d u c tio n and reap i t s f r u i t s
and b e n e fits ; on the other are th e w orkers, who liv e o n ly by
s e l l i n g t h e i r la b o r pow er, the most p e ris h a b le o f a l l commod
i tie s * On the one sid e a re the e x p lo itin g c a p i t a l i s t s , on
th e o th e r sid e a re the e x p lo ite d w orkers, who s u f f e r th e
r is k s and v ic is s itu d e s o f a h o s tile economic environm ent*
I t i s the haves a g a in s t the h a v e -n o ts, fu rth e rm o re , the
h a v e -n o ts a re c o n tin u a lly growing in number w hile th e haves
d im in ish in num bers. The fo rc e s of c o m p e titio n , co n cen tra
ti o n , and c e n tr a liz a tio n e x p ro p ria te s th e m iddle c la s s e s , -
d riv in g the members o f th e se c la s s e s in to th e ranks o f th e
w o rk ers, or in to the new p ro fe s s io n a l and se rv ic e m iddle c la ss e s*
j . I b id .. p. 216.
43
Thus, due to the m iserab le co n d itio n s o f t h e i r e x is te n c e ,
the workers c o n s titu te a re v o lu ti© n ary c la s s o f (1) growing
num bers, (2) growing d is c ip lin e and o rg a n iz a tio n , (3) growing
consciousness of th e ir h i s t o r i c a l d e s tin y , Marx continues*
With n o th in g to lo s e b u t t h e i r c h a in s, the w orkers become
in c re a s in g ly aware o f the whole world they have to g a in ,
m erely by th e ta k in g . Sooner or l a t e r a s e c tio n o f the r u lin g
c la s s a ls o becomes aware o f th e h i s t o r i c a l tre n d o f th in g s ,
becomes eapable o f view ing the h i s t o r i c a l movement as a w hole,
and s p l i t s o f f from th e b o u rg e o is ie , jo in in g th e ran k s o f
th e w orkers* Sooner o r l a t e r th e w orkers, torm ented by
co n d itio n s o f economic! s ta g n a tio n , d e p re ssio n , mass unemploy
m ent, o r th e r u in s and shambles o f im p e r ia lis t w ar, a re
sp u rred to r e v o l t . The s o c ia l re v o lu tio n is on.
The th eo ry of e x p lo ita tio n . What is the n atu re o f
th e c a p i t a l i s t system which le a d s to c la s s s tru g g le and th e
tra n s fo rm a tio n o f the s o c ia l o rd e r?
I t was the sea rch fo r the answer to the above q u estio n
which le d Marx to undertake h is famous economic s tu d ie s ,
r e s u ltin g in th e p u b lish in g of the th re e volumes o f ca p i t a l .
T h is work e la b o ra te d the famous th e o ry o f e x p lo ita tio n . I t
c o n s is ts o f a stu d y o f th e "law s o f developm ent” o f c a p i t a l
ism ( a c tu a lly , a stu d y o f th e c o n d itio n s, c o n tra d ic tio n s , and
e v i l s in h e re n t in th e economic system ) which prompt the
w orkers to r e v o lt.
44
Marx viewed c a p ita lis m a s a system of commodity p ro
d u c tio n , m otivated by th e urge o f c a p i t a l i s t s to accum ulate*
In th i s system of exchange, p ro d u c tio n , and d is t r i b u tio n ,
ev e ry th in g exchanges fo r i t s v a lu e , which i s determ ined by
th e amount o f s o c ia lly n e c e ssa ry la b o r tim e re q u ire d fo r th e
production o f th e p a r ti c u la r com m odities. T his i s th e Marx
ia n la b o r th eo ry of v a lu e .
Marx was concerned w ith the su rp lu s which a ro s e in
the form ula M —1 C —M * • A c a p i t a l i s t advanced a c e r ta in sum
o f money M to h i r e f a c to rs to produce a commodity 0 , which
s e l l s fo r M*, re tu rn in g the o rig in a l investm ent p lu s a s u rp lu s ,
th e p ro fit*
But t h i s su rp lu s does not a r is e in th e f i e l d of exch
ange o r c ir c u la tio n o f commodities* E v ery th in g exchanges fo r
i t s v a lu e . Of c o u rse , th e re are tem porary f lu c tu a tio n s of
p ric e s above and below th e lo n g -ru n norm al o r " n a tu r a l” p r ic e ,
but th e se can cel o u t so th a t the average p r ic e i s eq u al to
the lo n g -ru n norm al, which i s d e fin e d a s th e s o c ia lly n e c e ss
a ry la b o r tim e re q u ire d to produce the p a r tic u la r commodity.
S ince each commodity s e l l s a t i t s v a lu e , no more aa&rno l e s s ,
no one has been com pelled, in t h i s tra n sfo rm a tio n o f M in to
M * to g iv e m ore, o r re c e iv e le s s , th an th e value o f any of
th e com m odities or f a c t o r s . Y et a su rp lu s has a r is e n . How
can t h i s be?
The answ er l i e s i n the f a c t t h a t one commodity, la b o r
45
power, w hile paid i t s f u l l v a lu e , can produce more th a n i t s
v a lu e — i t can produce a su rp lu s v a lu e . So lo n g as the la b o re r
i s p aid enough to reproduce h is la b o r power, in i t s f u l l en
erg y and s k i l l , and to re p la c e h im self w ith a new g en eratio n
o f la b o r o f lik e q u a lity , he is paid a t h is f u l l v a lu e . But
th e w orter can produce more than t h i s wage; he can produce a
su rp lu s over and above what i s n ecessary to reproduce h i s own
la b o r pow er. I t is t h i s s u rp lu s t h a t i s a p p ro p ria te d by the
c a p i t a l i s t in th e form ula M —G—M * • ^ h is i s over and beyond
th e c a p i t a l i s t 's own e f f o r t s in o rg a n iz in g p ro d u c tio n , and i t
r e p re s e n ts e x p lo ita tio n o f la b o r.
T his f a c t of e x p lo ita tio n i s th e b a sic c o n tra d ic tio n
o f th e c a p i t a l i s t system , a c c o rd in g to M arx. Under c a p ita lis m ,
w ith th e expanding d iv is io n o f la b o r and fa c to ry system o f
p ro d u c tio n , commodities a r e produced s o c ia lly ; th a t i s ,
p ro d u c tio n i s s o c ia liz e d , so th a t thousands o f w orkers coop
e r a te in one f a c to r y , under one management, to produce one
commodity. Bui although p ro d u ctio n i s s o c ia liz e d , d i s t r i
b u tio n i s n o t. The s o c ia lly produced commodity i s p r iv a te ly
a p p ro p ria te d , i . e . . i t i s a p p ro p ria te d by the p riv a te c a p it a l
i s t (or c a p i t a l i s t s ) who advanced M. T his c o n tra d ic tio n le a d s
to a l l th e e v i ls o f th e c a p i t a l i s t system .
For exam ple, th e c e n tr a l fa c t o f c a p i t a l i s t i c e x p lo it
a tio n le a d s t o a whole range o f f in a n c ia l and i n d u s t r i a l
c r is e s , from over p ro d u ctio n -u n d er consumption e r is e s , to c r is e s
4 6
r e s u ltin g from o v erin v estm en t, the m is d ire c tio n o r anarchy
o f p ro d u c tio n , and so f o r t h . On the one hand, th e re i s a te n
dency tow ard underconsum ption which we s h a ll examine l a t e r ,
due to su rp lu se s a r is in g from e x p lo ita tio n . On th e o th e r hand,
th e re i s th e p r in c ip le o f th e i n d u s t r i a l re se rv e army w hich
checks c a p i t a l i s t expansion and le a d s to c a p i t a l i s t c r i s i s .
W e must he c o n te n t h ere to d e sc rib e only th e l a t t e r type o f
c r i s i s , flow ing from Marx*s th e o ry o f w ages, the f a c t o f
e x p lo ita tio n , and th e urge o f c a p i t a l i s t s to accum ulate.
The p ro c ess o f c a p i t a l i s t accum ulation le a d s to ra p id
expansions o f c a p ita l, and w ith i t , to a r i s i n g demand fo r
la b o r . But t h i s would r e s u l t in th e d riv in g of wages above
th e s u b siste n c e l e v e l. F urtherm ore, as f u l l employment i s
approached, th e p o s itio n of th e w orkers i s stro n g e r and t h e i r
tra d e unions a re more capable o f d riv in g h ard b a rg a in s. But
as wages a re fo rc e d up, th ey begin to e a t in to p r o f i t s , and
so soon as th e r a te o f p r o f i t s o f p a r ti c u la r em ployers are
th re a te n e d , th e y w ill c o n tra c t p ro d u c tio n , th u s c r e a tin g un
employment. A g e n e ra l r i s e o f wages a tta c k in g th e t r a d i t i o n a l
r a t e o f p r o f i t , o r what c a p i t a l i s t s c o n sid er t o be a " f a i r
re tu r n " w i l l le a d to a g e n e ra l c o n tra c tio n o f p ro d u c tio n , i . e . .
to a c r i s i s .
Thus th e c a p i t a l i s t system p ro v id es i t s own mechanism,
th e c r i s i s , to p re se rv e th e system o f e x p lo ita tio n . The c r i s i s
w ith i t s c o n tra c tio n o f p ro d u c tio n and exmployment may make
47
the s itu a tio n worse a t f i r s t (d u rin g the y e a rs o f re c e s s io n
and d e p re ssio n ) but sooner or l a t e r the wages of la b o r are
d riv e n down to th e p o in t where th e r a te o f p r o f i t i s no
lo n g er th rea te n ed * Thus, in c re a s in g unemployment r e s to r e s
th e " in d u s tr ia l re se rv e army” o f unemployed, r e s to r in g
co m p etitio n among th e w orkers in th e la b o r m arket, on th e
b a s is of whieh th e su p p ly and demand f o r lab o r o p e r a te s ,
and p re v en ts the system from rem aining in a s t a te o f p e rp e tu a l
c r is is * A r e l a t i v e " s u rp lu s p o p u la tio n ” i s th e in h e re n t
n e c e s s ity of a c a p i t a l i s t system* I t a s su re s the p e rso n a l
in s e c u r ity n e c e ssa ry to m ain tain th e su b se rv ie n t a t t i tu d e and
i n d u s t r i a l d is c ip lin e o f th e w orker in norm al tim e s.
Hot only does the th eo ry o f e x p lo ita tio n e x p la in the
b u sin e ss c y c le , in a l l i t s m u ltitu d in o u s form s and c a u se s,
b u t i t a ls o e x p la in s o th er and d is t in c ti v e l y e v il te n d e n c ie s ,
of “law s o f developm ent" o f c a p ita lis m , such as the tendency
\ ;
o f th e r a t e o f p r o f it to d e c lin e , th e c o n c e n tra tio n and c e n tr a l
iz a tio n of c a p ita l , th e in c re a s in g m isery o f th e m asses, and
so on and so f o r th , each sp u rrin g to re v o lu tio n *
Summary. Thus we have b r i e f l y surveyed the th re e
fo u n tain h ea d s of M arxian re v o lu tio n a ry th e o ry , e x p la in in g
th e in e x o ra b le movement tow ard s o c ia l tra n s fo rm a tio n . The
re v o lu tio n a ry philosophy adm its n o th in g a s s t a t i c , b u t sees
only change and development on th e b oasis* o f the in n e r con-
hS
t r a d ie tio n s of m a te ria l l i f e and r e la ti o n s . The th e o ry
o f e x p lo ita tio n a n a ly se s th e c o n tra d ic tio n s and antagonism s
w ith in the r e la tio n s of production* And the th e o ry o f th e
c la s s s tru g g le provides the engine o f h i s t o r i c a l s o c ia l
tra n s fo rm a tio n , ^ i t h t h i s w orld-view o f th e modern s o c i a l i s t
h e r ita g e , we tu r n now to neo-Marxism, t o judge i t s c o n trib u
tio n to the the ory o f c a p i t a l i s t decom p o sitio n .
I l l IMPERIALISM
Background. The th e o ry of im p e ria lism i s a neo-Marx
ia n developm ent. K a rl Marx h im se lf was n o t concerned w ith th e
s u b je c t; in d eed , Marx liv e d a t a tim e when c o lo n ia lism and
m e rc a n tilism were on t h e i r way out and l a i s s e z fa ir e was com
in g in to f u l l dom inance. Only l a t e r , w ith the developm ent of
fln a n e e c a p it a l , la r g e - s c a le monopoly, and a resurgence o f
am bition fo r em pire d id modern im p erialism become a problem ,
and t h i s came as a new development* In d eed , a s M aurice Dobb
w r ite s :
• ••betw een M ercan tilism and Im p erialism th e re l i e s , o f
c o u rse , the whole d iffe re n c e betw een a p rim itiv e sta g e in
the grow th of c a p ita lis m and the most advanced stag e o f
la r g e - s c a le i n d u s tr ia l te c h n iq u e , o f in te g r a tio n o f fin an ce
w ith in d u s try and o f m o n o p o listic o rg a n iz a tio n and p o l i c i e s .
C onsequently, in the l a t t e r the e x p o rt o f c a p ita l comes
to p lay a dom inant r o l e , and w ith i t th e export o f c a p ita l
goods and the hypertro p h y o f th e in d u s tr ie s producing
th e l a t t e r . In d eed , among the c o n tr a s ts whieh d is tin g u is h
th e old from the new c o lo n ia l system , th e f a c t of c a p ita l
in v estm en t in th e c o lo n ia l a re a s ap p ears to be th e
4 9
c h ie f
John A. Hobson was the f i r s t econom ist to tak e n o te
o f th e new developm ents and he p o p u la rliz e d them in h is book
Im p e ria lism , p u b lish ed in 1902. T his work le d t o a v e r ita b le
flo o d o f l i t e r a t u r e on th e s u b je c t and the r i s e of a whole
group o f th e o r ie s claim ing to e x p la in the new phenomena.
A su g g e stiv e c l a s s i f i c a t i o n , in d ic a tin g the range o f th e s e
th e o r ie s , m ight be p re se n ted a s fo llo w s:
1 . Hon-Economic T h eo rie s o f Im p erialism .
A) C la s s ic a l view : c a p ita lis m i s a s e lf-c o n ta in e d
system w ith o u t any in h e re n t fo rc e s com pelling i t
to expansionism .
B) The p o l i t i c a l th e o ry : im p e ria lism r e s u l t s from
m i l i t a r i s t and p o l i t i c a l m otives and n o t from
economic causes (in d e e d , im p e ria lism i s a n t i -
c a p ita li s t ) •
2 . Economic T h eo ries o f Im p e ria lism .
A) The e c l i c t i c view .
B) H is to r ic a l th e o r ie s .
G) Hobson’ s th e o ry : th e tr u e economic th e o ry .
3 . T heories o f C a p ita lis t Im p eria lism .
A) Im p erialism as a p o lic y o f c a p ita lis m .
B) Im p erialism as an in e v ita b le stag e o f c a p i t a l i s t
developm ent.
The non-econom ic th e o rie s ta k e th e c l a s s ic a l economic
view o f a harm onious system , w ith no tendency to c o lo n ia lism
in h e re n t in i t . Thus, im p erialism i s a p o l i t i c a l , a s o c i a l ,
or an a t a v i s t i c m ilita r y phenomenon, a product o f n a tio n a lis m
or m ilita ris m and imposed upon c a p ita lis m . The economic th e o r ie s
4 . M aurice Dobfe, P o l i t i c a l Economy and C a p ita lism (Hew
York: I n te r n a tio n a l P u b lis h e rs , 1937) p . 2 5 ^ 3 6 .
50
are based on su rp lu se s o f c a p ita l and goods which seek o u t
l e t s abroad* W hile s o c ia l o r id e o lo g ic a l f a c to r s (such as
p a trio tis m ) may cause im p erialism , b u sin ess i n t e r e s t s give
e x p a n s io n ist p o lic y a c a lc u la te d d ire c tio n * H is to r ic a l
th e o r ie s o f im p erialism exp l a in n a tio n a l aggrandizem ent as
b ein g based on the search fo r p r o f i t s . But we a re concerned
h ere w ith th e v a rio u s view s of c a p i t a l i s t im p e ria lism , which
h o ld s th a t im p erialism , w hether a s a p o lic y or a sta g e o f
developm ent, i s an in e v ita b le p ro d u ct o f c a p ita lis m i t s e l f
and can be e lim in a te d o nly by e lim in a tin g c a p ita lism *
A p o lic y o f c a p ita lism * Rudolph H ilfe rd in g and O tto
Bauer o f th e Vienna sch o o l o f M arx ists developed th e th eo ry
o f Im p eria lism as a p o lic y of th e c a p i t a l i s t e la s s . H ilf e r d
in g , th e most o r ig in a l w r ite r in the f i e l d , s t a r t e d from th e
f a c t th a t fin a n c e c a p ita l was beginning to dom inate th e
economic scene* The developm ent o f t a r i f f system s t o p ro te c t
b ig b u sin e ss m onopolies; th e r i s e of m onopolies and c a r t e l s ;
the r i s e and dominance o f fin a n c e c a p ita l and th e b ig banks,
a re among the c e n tra l elem ents o f modern im p e ria lism , acco rd in g
to H ilfe rd in g * A lthough n o t n e c e ssa ry f o r the m aintenance
o f th e c a p i t a l i s t system , fin a n c e c a p ita l seeks o u tle ts fo r
c a p ita l investm ent abroad as c la s s policy* J'rom th e p o in t
o f view o f s o c ie ty , however, fin a n c e c a p ita l i s th e dominant
p o l i t i c a l fo rc e , h o ld in g u n d isp u ted sway, and i t s p o lio y in e v -
51
i t a b ly becomes th e p o lic y of governments* N eedless to add,
th e p o lic y cannot be changed by p o l i t i c a l ao&Lon s h o rt o f
s o c ia l re v o lu tio n . E • M. Winslow summarizes H ilfe rd in g 1 s
p o s itio n as fo llo w s:
U nlike O tto B auer, who took i t f o r g ra n te d th a t su rp lu s
value i s tr a n s f e r r e d in in te r n a tio n a l tra d e through th e
mere exchange o f p ro d u c ts, w hich s e ts in motion th e p ro c e s s
o f e q u a liz in g th e r a te o f p r o f i t , H ilfe rd in g i n s i s t s t h a t
only th e e x p o rt o f c a p ita l can e f f e c t such a t r a n s f e r ,
and th en only i f ow nership o f c a p ita l rem ains in the ex
p o rtin g c o u n try . In somewhat th e same way th a t f in a n c ie r s
w ith in a co u n try c r e a te su rp lu s value by su p p ly in g c a p it a l
to th e in d iv id u a ls whom th e y c o n tr o l, c a p i t a l i s t c o u n trie s
re a p p r o f i t from th e c o u n trie s to which th ey supply c a p i t a l .
A nnexation—th e f i n a l im p e r ia lis tic to u g h —i s a n a tu r a l
outcome o f t h i s p ro c e s s .
In c o n tra s t w ith th e fr e e - tr a d e e r a o f in d u s tr ia l c a p i
ta lis m , when goods were exchanged f o r goods and e x c lu siv e
t e r r i t o r i a l c o n tro l was u n n ecessary , fin a n c e c a p ita l
demands p ro te c tiv e t a r i f f s as the means o f m onopolising
th e dom estic m arket and the com plete dom ination o f back
ward or c o lo n ia l a r e a s in o rd er to m a in ta in ex c lu siv e
c o n tro l o f th e source o f p r o f i t s . And i f th is p o lic y
m eets r e s is te d c e , fin a n c e c a p ita l i s s tro n g enough to
induce th e s t a t e to su p p o rt i t s claim s by fo rc e .
^ o r a tim e th e g re a t banking houses and in te r n a tio n a l
c a r t e l s may succeed in m ain ta in in g a p re c a rio u s economic
s t a b i l i t y and th e semblance o f peace and may even appear
to c o n tro l th e w o rld , but sooner or l a t e r th e tru c e i s
broken and th e u n d erly in g c o n f lic t o f n a tio n a l i n t e r e s t
em erges in th e form o f ecnomic w a rfa re , w hich e v e n tu a lly
d eg en erates in to m ilita r y h o s t i l i t i e s , ^n th e g re a t sweep
o f e v e n ts th e movement i s from i n d u s t r i a l c a p ita lis m to
fin a n c e c a p ita lis m , from fre e tra d e to p ro te c tio n ism ,
from th e e x p o rt o f consumer goods to th e e x p o rt o f c a p it a l ,
and from an u n s ta b le f re e e n te r p r is e to the r e g i d i t i e s o f
monopoly, and from a p e a c e fu l p o lic y of li v e - a n d - le t- liv e
to im p e ria lism and w a r.5
5. E . & t. W inslow, The P a tte rn o f Im p erialism (New
York: Columbia U n iv e rsity P re s s , i948T~p. 16, 8-9 .
A sta g e o f developm ent. Another s ih o o l o f M a rx ists,
however, denied t h a t im p e ria lism i s a p o lic y o f th e c a p i t a l i s t
c la s s . Rosa Luxemburg h e ld th a t im p erialism is th e in e v ita b le
r e s u l t o f c a p ita lis m see k in g to r e a l i z e i t s su rp lu s v a lu e .0
She d id n o t b e lie v e th a t c a p ita lis m was a s e lf-c o n ta in e d
system , being an u n d ereo n su m p tio n ist, holding in s te a d th a t
c a p ita lis m can e x is t only by invading new, n o n - c a p ita lis t
backward a r e a s . C a p ita lism needs o u tle ts c h ie f ly fo r s u r
p lu se s o f consumers goods whieh could n o t fin d a m arket a t
home, due to e x p lo ita tio n of th e w o rk ers. Thus, im p e ria lism ,
o r ex p ansion in to backward a r e a s , i s n o t a p o lic y , but an abso
lu te n e c e s s ity o f th e c a p i t a l i s t system .
V. I . L enin, le a d e r o f the R ussian B olsheviks and founder
o f th e S o v ie t s t a t e , agreed w ith Rosa Luxemburg t h a t im p e ria l
ism i s n o t a p o lic y o f c a p ita lis m ; but he c r it i c i s e d h e r fo r
n o t re c o g n iz in g the ro le o f fin a n e e c a p i t a l . To L en in , im
p e r ia lis m i s a sta g e of c a p i t a l i s t developm ent—n o t m erely a
p o lic y , but the " h ig h e s t sta g e " of c a p ita lis m .^ I t is a
s ta g e , ra th e r th a n a c o n tin u a tio n of c a p ita lis m ’s search fo r
o u tle ts f o r s u rp lu s com m odities as Luxemburg had h e ld —an
epoch c h a ra c te riz e d by the developm ent o f fin an ce c a p ita lis m
and monopoly.
In t h i s s ta g e , a c c o rd in g to L enin, the w orld has a lre a d y
57 g f7 jfoflffT. p .~ l6 9 f f.
?• C f. V. I . L en in , Im p e ria lism in C o llected W orks. V ol.
XIX (New York: I n te r n a tio n a l P u b lis h e rs , 1942) p . 19-196.
53
been d iv id ed among th e g r e a t pow ers; monopoly c a p it a l dom inates
m arkets and w ill prey n o t only upon backward and c o lo n ia l
p e o p le s, but a ls o upon o th er I n d u s t r ia l s t a t e s to p ro te c t i t s
p riv ile g e d p o s itio n s * The r e la ti o n s between s t a t e s a re u n s ta b le ,
s u b je c t to the law o f uneven developm ent o f c a p ita lis m in
d i f f e r e n t c o u n trie s , some developing and expanding a t a more
ra p id r a te in d u s t r i a l l y th a n o th e rs .
O u tle ts a re sought f o r c a p ita l e x p o rt, to escape
from , o r c o u n te ra c t the tendency tow ards d e c lin e in th e r a te
of p r o f i t s in the home c o u n tr ie s , and to r e lie v e p re ssu re o f
wages on su rp lu s v alu e a r is i n g from th e growth o f pow erful
tra d e u n io n s. S u rp lu s goods, o f c o u rse , must be dumped abroad
to p r o te e t th e home m arket p r ic e s tr u c tu r e . Tjms a re s e t up
pow erful te n s io n s in th e w orld sy s te m of Im p erialism , te n s io n s
te n d in g tow ard p e rio d ic r e d iv is io n o f th e w o rld .
S ince L en in ’ s day, th e investm ent banker has disappeared
from th e scene as th e k in g o f fin a n c e and c a p ita lis m . Conse
q u e n tly , L en in ’ s views have been m odified by h is American
d i s c ip le , P aul Sweezy, fo rm erly of Harvard U n iv e rs ity economics
d ep artm en t•
Sweezy’ s views w ill be examined in d e t a i l l a t e r . But
in acco u n tin g fo r th e d e c lin e of th e in v estm en t b an k er, he
d e c la re s t h a t the c e n tr a l f a c to r s o f im p e ria lism , d e sc rib e d
by L enin, s t i l l h o ld : (1) an in te n s if ic a tio n o f the in te r n a l
c la s s s tru g g le s in th e advanced c o u n trie s ; (2) in t e n s i f i c a t io n
54
o f r i v a l r y among th e g re a t powers fo r tra d e and investm ent
o u t l e t s ; (3d; i n te n s i f i c a t i o n o f th e s tru g g le between advanced
c o u n trie s and the c o lo n ia l p eo p les, who fin d a l l i e s In the
working c la s s e s of the advanced c o u n trie s . The w orld im per
i a l i s t c h a in , under th e s t r a i n of c r i s i s , p a r ti c u l a r ly of
w orld w ar, break s in i t s w eakest lin k .
Summary. One may be a M arx ist w ith o u t ac cep tin g any
p a r tic u la r th e o ry o f im p erialism , and th e th e o ry o f im p e ria l
ism accepted does n o t n e c e s s a r ily ta g a p a r tic u la r M arx ist as
a Communist, a S o c ia l Dem ocrat, a S o c i a l i s t , or w h atn o t.
But th e f a c t i s t h a t most M a rx ists hold to a th eo ry o f im
p e ria lis m , e ith e r as a p o lic y or a sta g e o f developm ent of
c a p ita lis m .
IV ROLE O P THE SOVIET STATE
The c o n tra d ic tio n s of c a p ita lis m , th e development of
modern im p erialism , th e in te n s if ic a tio n of the th re e m ajor
c o n tra d ic tio n s o f the w orld-system o f c a p ita lis m (th e in te n
s i f i c a t i o n o f the c la s s s tr u g g le , th e s tru g g le between the
advanced and the su b ju g ated c o lo n ia l w orld, and the r i v a l r y
among th e g r e a t powers fo r th e l i o n 's sh are of the backward
a r e a s ) , and th e o u tb reak o f the f i r s t w orld-w ide war fo r
r e d iv is io n o f th e w o rld , le d to th e s h a tte r in g o f th e im p e ria l
i s t chain a t i t s w eakest l i n k , R u ssia , and to the e s ta b lis h -
55
ment o f a new type o f system , the S o v iet system . T his con
c a te n a tio n o f e v e n ts , in B olshevik re v o lu tio n a ry th in k in g ,
added a new and a l l im p o rtan t f a c to r to the seheme o f w o rld
c a p i t a l i s t d is in te g r a tio n and d e c lin e . T his new f a c to r i s ,
o f c o u rse , th e S o v ie t S ta te .
P iece-m eal decom p o sitio n . The th e o ry o f th e r o le o f
th e S o v ie t S ta te in the piece-m eal decom position o f c a p it a l
ism has been developed by Joseph S ta lin and is adhered to by
Communists throughout the w o rld . C le a rly , i t has m odified
the c l a s s i c a l M arxian d o c trin e and h as le d to the su b o rd in a tio n
o f th e Communist in te r n a tio n a l movement to th e R ussian Com
m unist P a r ty .
T h is m o d ific a tio n i s so Im portant in i t s im p lic a tio n s ,
and in th e p r a c t ic a l ta s k s s e t b efo re th e w orld re v o lu tio n a ry
movement by S ta l in , th a t i t i s b e t te r to r e f e r to th e Commun
i s t s a s S t a l i n i s t s r a th e r th an a s M a rx ists, alth o u g h S t a l in
ism i s based on Marxism and re p re s e n ts a o n e-sid ed develop
ment o f th e g e n e ra l s o c i a l i s t h e rita g e * One may be a M arx ist
and hold to Lenin*s th e o ry o f im p erialism w ith o u t a c c e p tin g
the ro le of th e S o v iet S ta te .
S ta lin * s tw o -fo ld purpose. With the r i s e of th e S o v iet
S ta te , th e g o a l o f th e S t a l i n i s t s became one o f c o n s o lid a tio n
o f th e d ic ta to r s h ip o f th e Communist P a rty in one co u n try fo r
the purpose o f u sin g t h a t country as a base fo r the overthrow
56
o f im p erialism in o th e r c o u n trie s . S ta lin saw M s ta s k as
tw o -fo ld : (1) to M ild a pow erful base i n R u ssia , and (2) to
use R ussia to a t t r a c t th e l o y a l t i e s o f th e oppressed i n im
p e r i a l i s t c o u n trie s and to r a is e r e v o lts a g a in s t th e c a p i t a l
i s t s t a t e s , " r e v o lts " b ein g d e fin e d b ro ad ly enough to in c lu d e
in te rv e n tio n s by th e Red Army*
The im m ediate o b je c tiv e o f S o v iet p o lic y , ac co rd in g
to th e th e o ry , i s to e lim in a te th e " im p e r ia lis t e n c irc le m e n t’ *
o f th e S o v ie ts ; the f i n a l aim i s n o th in g le s s than the conq,UBSt
o f th e w o rld , the I n te r n a tio n a l S o v ie t S ta te *
When prep ared a s a b a se , the S o v iet Union w i l l more and
more a g g re s s iv e ly "aid** re v o lu tio n abroad* Two c e n te r s of
power w ill develop in th e w orld, th e S o v iet c e n te r and th e
I m p e r ia lis t c e n te r, and th e s tru g g le between th e s e two c e n te rs
w i l l com prise the h is to r y o f th e world re v o lu tio n a ry move
m ent, ac co rd in g to S ta lin *
V u lg a riz a tio n of Marxism* Towards th e end o f th e
s tr u g g le , how ever, i f im p e r ia lis t en circlem en t o f th e S o v ie t
sphere i s superceded by th e S o v ie t en circlem en t o f th e im
p e r i a l i s t sp h ere, th e p e a c e fu l tra n sfo rm a tio n o f th e rem ain
in g a re a s o f c a p ita lis m i s reg ard ed as p o ssib le * The most
l i k e l y developm ent, however, i s an open war between th e U nited
S ta te s , th e " c e n te r of Im p e ria lism ," and th e S o v ie t U nion.
T his l a t t e r view , t h a t th e S o v iet Union w ill be p i tte d
a g a in s t an Anglo-Am erican c o a litio n , has le d to th e rem arkable
57
c h a ra c te r o f re c e n t S o v ie t propaganda, i t s n a tio n a liz a tio n ,
ana p a r tic u l a r ly i t s pan-S lavism , th e m ixing o f which w ith
Communism accounts fo r the v u lg a riz a tio n o f M arxian d o c trin e
by Communist P a r tie s everyw here, so th a t in th e ir hands i t
amounts now to no more th a n a M arxian term in o lo g y , The
Communists are as g u ilty o f p ittin g S lav s a g a in st Anglo-Ameri
cans as H itle r was of p i t t i n g Aryans a g a in s t non-A ryans, pure
Germans a g a in s t "m ongrel” n a tio n s ,
V. TH E RE VOLUTION
For Communists and re v o lu tio n a ry s o c i a l i s t s a lik e , th e
old o rd er w ill n o t sim ply p ass away in to a new s o c ia l o rd e r,
a l l by i t s e l f . C a p ita lism m erely c r e a te s th e c o n d itio n s ,
th ro u g h i t s in h e re n t e v ils and c o n tra d ic tio n s , fo r i t s own
d e s tr u c tio n .
The re v o lu tio n a ry s i t u a t io n . When the system i s sub
je c te d to g re a t c r i s i s , a re v o lu tio n a ry s i t u a t io n may (o r w i l l )
dev elo p . A ccording to L en in , t h i s i s an o b je c tiv e s i t u a tio n
re c o g n iz a b le by i t s th re e - f o ld c h a r a c te r is t ic s : (1) i t i s
im p o ssib le fa r the governm ent to continue to govern, i . e . , i t
i s im possible f o r th e r u lin g e la s s e s to co n tin u e in ”the o ld
way” ; (2) th e w ants and s u f f e r in g s of th e re v o lu tio n a ry e la s s e s
become more acu te th an u s u a l, and (3) in consequence, th e re
i s a c o n sid erab le in c re a se in th e a c t i v i t y o f th e m asses gen
e r a l l y , a growing d i s s a t i s f a c t i o n and r e s tle s s n e s s on the p a r t
58
o f v a s t s e c tio n s o f the populace*
The a b i l i t y to reco g n ize and u t i l i z e the re v o lu tio n a ry
s itu a tio n i s o f fundam ental im portance in th e L e n in is t th e o ry
o f the p assin g o f c a p ita lis m . L enin developed th e s t r i c t l y
re v o lu tio n a ry sid e o f Marxism, h o ld in g th a t c a p ita lis m w ill
n o t— can n o t—pass w ith o u t v io le n t re v o lu tio n and th e smash
in g o f th e b ourgeois s ta te *
M ature o f th e S t a t e * L en in ’ s d o c trin e was developedi
in a s e r i e s o f w r itin g s , th e most im p o rtan t of which i s th e
c l a s s i c a l S ta te and R ev o lu tio n , f i r s t pu b lish ed in 1917*
From the very f i r s t page, Lenin denounces a l l a tte m p ts to
see in Marxism th e p o s s i b i l i t y o f c a p ita lis m p assin g sh o rt
o f v io le n t re v o lu tio n , and he c lo se s th e f i r s t s e c tio n o f
S ta te and R evolution w ith a b l i s t e r i n g a tta c h on K a rl K aut-
sky, le a d e r o f German S o c ia l Democracy:
On th e o th er hand, th e "K autskyan" d is to r tio n o f Marx
ism i s f a r more su b tle * " T h e o r e tic a lly ,” i t i s n o t denied
t h a t th e s ta t e i s th e organ of c la s s r u le , or th a t c la s s
antagonism s a re irre c o n c ila b le * But what i s l o s t s ig h t
o f o r g lo ssed over i s t h i s : i f th e s ta te i s th e pro d u ct
o f ir r e c o n c ila b le c la s s antagonism s, i f i t i s a power
stan d in g above s o c ie ty and "in c re a s in g ly a lie n a tin g i t s e l f
from i t , " i t i s c le a r th a t the lib e r a tio n o f th e oppressed
c l a s s T s , im p o ssib le , n o t only w ith o u t a v io le n t re v o lu
tio n , but a ls o w ith o u t the d e s tru c tio n o f th e a p p a ra tu s
o f s t a t e power which was c re a te d by the ru lin g c la s s and
which i s th e embodiment of t h i s " a lie n a tio n ." ...* M arx
v ery d e f in it e ly drew t h i s th e o r e tic a lly s e lf- e v id e n t
co n c lu sio n from a co n crete h i s t o r i c a l a n a ly s is o f th e ta s k s
o f th e re v o lu tio n . And—i t i s p r e c is e ly th is co n clu sio n
w hich K autsky has " fo rg o tte n " and d is to rte d .®
1 T Z L enin, £frate and R evolution from S elected Works
The ebb and flow o f r e v o lu tio n . Thus fo r L e n in is ts
and o th e r r e v o lu tio n a r ie s , the problem o f d e fin in g a re v o lu
tio n a ry s i tu a t io n , and re c o g n isin g i t s approach and developm ent,
i s o f fundam ental Im portance to t h e i r th e o ry of the p a ssin g
of c a p ita lis m .
F urtherm ore, a re v o lu tio n a ry s itu a tio n can be expected
to develop c h ie fly as a r e s u l t o f a w orld-w ide r i s i n g tid e
o f re v o lu tio n a ry se n tim e n t, r e s u ltin g from an i n t e n s i f i
c a tio n o f th e c o n tra d ic tio n s o f c a p ita lis m and th e im p e ria l
i s t w orld system . S t a l in c h a ra c te r is e s th e se movements, a t
one tim e m ounting in to a v a s t w orld-w ide re v o lu tio n a ry
wave e n g u lfin g th e w orld in im p e r ia lis t w ar, c o lla p se and
breakdown, and a t an o th er tim e re c e d in g , as th e ebb and flow
o f th e re v o lu tio n under the c o n d itio n s of world i m p e r i a l i s m . 9
But even in a re v o lu tio n a ry s itu a tio n , as d efin ed ob
je c tiv e ly above, th e old government w i ll n o t sim ply f a l l —
i t must be made to c o lla p s e . To th e o b je c tiv e c o n d itio n s
th e re must be added th e proper s u b je c tiv e c o n d itio n s , th a t
i s , th e a b i l i t y o f th e re v o lu tio n a ry c la s s e s to c a rry out
proper t a c t i c s , namely mass a c tio n s pow erful enough to break
(to s h a tte r} th e old governm ent. Hence men, o rg anized fo r
a c tio n and w ith a p u rp o se, must c o n sc io u sly b rin g about th e
re v o lu tio n d u rin g a re v o lu tio n a ry c r i s i s , i f th ey w ish to
( in te r n a tio n a l P u b lis h e rs , New Y ork), V ol. V II, p . 10.
9. Of. S trajtegy £hd TactLc.S o£ £h§ P ro le ta r ia n Revolu
tio n , e d ite d by V. B ystryansky and M. M ishin, (New Y ork:'
tra n sfo rm so c ie ty * 10 They m ust, upon achievem ent o f power,
cru sh th e i n s t it u t i o n s of c a p ita lis m and "more or l e s s ra p id
l y ” e f f e c t th e t r a n s i t i o n to s o c ia lis m hy the use o f naked
power •
Another view . In sh arp c o n tra s t to th e L e n in is t
fo rc e and v io le n c e th e o ry , Marx h im se lf recognized th e p o s s i
b i l i t y o f ach iev in g th e re v o lu tio n th ro u g h p eacefu l m eans.
At the Hague convention in 1072, Marx, in a noted speech on
.t a c t i c s , d e c la re d th a t in c o u n trie s lik e England and Am erica,
w ith t h e ir dem ocratic p ro c e sse s, th a t th e w orker m ight a t t a i n
h is o b je c tiv e by p e a c e fu l means*11 L ik ew ise, K arl K autsky de
c la r e s :
N e ith e r do any p a r tic u la r form s of the a p p lic a tio n o f
fo r c e , a s , f o r exam ple, s t r e e t f i g h t s , or e x e c u tio n s,
c o n s titu te the e s s e n tia ls o f re v o lu tio n in c o n tra s t to
refo rm . These a r is e from p a r tic u la r circ u m stan c es, a re
a re n o t n e c e s s a r ily connected w ith re v o lu tio n s , and may
e a s ily accompany reform m o v e m e n t s *12
S o c ia l re v o lu tio n c o n s is ts o f th e conquest of p o l i t i
c a l power by a h ith e r to oppressed c la s s and i t s use o f t h i s
power to e f f e c t a more or le s s ra p id tra n sfo rm a tio n o f th e
fo u n d a tio n s o f th e j u r i d i c a l and p o l i t i c a l s u p e rs tru c tu re o f
I n te r n a tio n a l P u b lis h e rs , 1936), p , 25.
10, O f, Theory o f th e P r o le ta r ia n Re v o lu tio n (New York
I n te r n a tio n a l P u b lis h e rs , 1936}, p . 130-1,4
11, C f, H arry W . L a id le r, S o c ia l Economic Movements,
12, K arl K autsky, The S o c ia l R e v o lu tio n , p . 7 ,
61
s o c ie ty a r is in g from a change in i t s economic fo u n d a tio n s.
T his i s n o t to im ply, how ever, th a t Marx p laced much
f a i t h in th e p ea cefu l eonquest o f power. The mere f a c t th a t
an old ru lin g c la s s i s decaying does n o t make i t any le s s r e
lu c ta n t to abandon i t s p o s itio n s o f p riv ile g e and power. They
w i ll n o t w illin g ly tu rn over t h e i r p o s itio n s to th e w orkers,
in th e M arxian view . Thus Marx’s whole outlook was one of a
re v o lu tio n a ry seeking a way to overthrow th e e x is tin g system
of s o c ia l r e l a t i o n s , and he devoted much thought to th e prob
lem o f f o r c ib le overthrow . But Marx, u n lik e some o f h is
fo llo w e rs , was n o t a d o c tr in a ir e and he did n o t overlo o k th e
p o s s i b i li t y o f ac h ie v in g s o c ia lis m peaceably in c o u n trie s
where th e dem ocratic p ro cess i s k e p t open.
V. TH U B R E A K D O W N CON TRO VERSY
Background. S o c ia lis t l i t e r a t u r e , p a r ti c u l a r ly o f
th e M arx ist v a r ie ty , speaks o fte n of th e in e v ita b le o r u l
tim a te breakdown o f th e c a p i t a l i s t system . The in fe re n c e i s
th a t fo re e s w ith in t h e ' system w i l l f i n a l l y b rin g th e system
to a h a l t and th a t i t w i l l c o lla p se lik e th e p ro v e rb ia l "one-
h oss s h a y .” T his i s th e day o f d e s tin y , "th e f i n a l c o n f li c t ”
o f which th e r e v o lu tio n a r ie s s in g , th e ’’eve o f th e p r o le ta r
ia n r e v o lu tio n ," th e "dawn o f th e a c c e ssio n to power of the
w orking and t o i li n g m a sse s,” th e "th re sh o ld o f th e s o c i a l i s t
re c o n s tru c tio n o f s o c ie ty ." G rad u ally , th e c o n d itio n s o f
62
e a p i t a l i s t s o c ie ty d e s tro y i t s i n d iv id u a lis tic base and
" s o c ia liz e * the mode ©f p ro d u c tio n . But d e s p ite s o c ia liz e d
p ro d u c tio n , p riv a te a p p ro p ria tio n rem ains. Thousands o f work
e r s co o p erate in th e d iv is io n o f la b o r to produce a p a r tic u
l a r commodity, i . e . , in s o c ia liz e d fa c to ry p ro d u c tio n , b ut
th e re i s s t i l l p riv a te a p p ro p ria tio n of the f r u i t s of pro
d u ctio n by p riv a te c a p i t a l i s t s . T his b a s ic c o n tra d ic tio n
of th e system f e t t e r s p ro d u ctio n and b rin g s about the im
p a sse , or breakdown, o f which M arxians speak. By r e lie v in g
t h i s c o n tra d ic tio n , by b rin g in g harmony in to th e s it u a tio n
through e s ta b lis h in g s o c ia l a p p ro p ria tio n ( i . e . , by s o c i a l i
zin g ow nership and d is tr ib u tio n ) th e im passe i s so lv e d . P ro
d u c tio n can be resum ed. The way i s open to p ro g re ss ag a in .
So i t i s th a t the c o n tra d ic tio n between s o c ia liz e d
p ro d u c tio n , which forms th e b a s is of th e new o rd e r, and p r i
v a te a p p ro p ria tio n , o r c a p i t a l i s t d is t r i b u ti o n , i s u s u a lly
regarded as f i n a l l y re sp o n s ib le fo r th e b u sin e ss e y e le , which
grows ever worse w ith the c o n c e n tra tio n and c e n tr a liz a tio n
o f c a p it a l . The p o s s i b i l i t y o f in d e f in ite c a p i t a l i s t expan
sio n i s d en ied . The very n a tu re o f c a p i t a l i s t p ro d u ctio n
and d is tr ib u tio n p re v e n ts th e system from expanding in d e fin
i t e l y , le a d in g in s te a d to the f i n a l breakdown. But t h i s i s
mere a s s e r tio n u n t i l th e mechanism of th e breakdown has been
d esc rib ed and dem o n strated . Does i t come th ro u g h an eco
nomic c r i s i s ? I f so , how? How i s i t being proved? T his i s
63
th e q u e stio n d iscu ssed by P au l S w e e z y * 1-^
T n a v lta b ility of the breakdown* Sweezy examines th e
view s o f the r e v is io n i s t s and orthodox M arx ists on th e sub
j e c t o f the i n e v i t a b i l i t y o f th e breakdown of c a p ita lis m .
Sweezy f i r s t examines the views o f the r e v is i o n i s t s , th o se
fo llo w e rs o f Marx who, toward th e end o f th e l a s t c e n tu ry ,
began to doubt the re v o lu tio n a ry co n clu sio n s o f t h e i r m aster
and s y s te m a tic a lly began a re v is io n of M arx's fundam ental
d o c trin e s which im plied a re v o lu tio n a ry overthrow . P robably
th e most famous o f th e r e v is io n is ts was Eduard B e rn s te in ,
le a d e r o f th e German S o c ia l D em ocratic p a r t y . ^
B e rn ste in could fin d no p ro o f o f the in e v ita b le and
c a ta s tr o p h ic breakdown o f th e c a p i t a l i s t system and he r e
garded the M arx ist d o c trin e s as g e n e ra l te n d e n c ie s r a th e r
th an as fo rc e s le a d in g to in e v ita b le breakdown. S o c ia l con
d i tio n s , he h e ld , d id n o t develop to so ac u te an o p p o s itio n
between the c la s s e s as the d o c trin e o f th e c la s s s tru g g le
would in d ic a te . And w hile th e c o n c e n tra tio n and c e n t r a l i
z a tio n o f c a p ita l was b eing accom plished, i t was n o t d e v e l
oping evenly and w ith eq u al thoroughness in a l l branches o f
in d u s try .
But if, c a p ita lis m does n o t lead to c a ta s tro p h ic break-
TJl P aul Sweezy, Theory o f C a p ita lis t Developm ent.
14* Eduard B e rn s te in , E v o lu tio n a ry S o cialism (New
York; V iking P re s s , 19 09). “
64
town a n t c r i s i s , a t w hich tim e i t w i ll be p o s s ib le to ov er
throw the regim e, th en w hat becomes of re v o lu tio n a ry p o lic y ,
t a c t i c s , a n t o rg a n iz a tio n ? C le a rly re v o lu tio n i s by no means
in e v ita b le or even i n d i c a t e t , and to o rg an ize th e vanguard
o f the w orkers, t h e i r advanced and most p o l i t i c a l l y i n t e l l i
gent elem en ts, f o r re v o lu tio n a ry s tru g g le would be to sap
t h e i r e n e rg ie s and d iv e r t t h e i r a tte n tio n from a c o rre c t
p o lic y in keeping w ith the a c tu a l developm ent o f th e system*
L ikew ise, Tugan-Baranowsky r e je c te d th e breakdown
t h e o r y . H e held th a t Marx foresaw th e u ltim a te breakdown
as coming about due to one of two te n d e n c ie s : (1 ) through
th e tendency o f the r a te of p r o f i t to d e c lin e , o r (2 ) through
underconsum ption. Both te n d e n c ie s would lead to c r i s i s ant
breakdown. Tugan denied both o f th ese th e o r ie s . He held
t h a t mankind cannot w ait fo r th e system to c o lla p se o f i t
s e l f . I f men r e a l l y want s o c ia lis m , th ey must s e t i t up as
a conscious go al and s tru g g le fo r i t . Like Tugan, an o th er
r e v i s i o n i s t , Conrad S c h m id tj^ a ls o re je c te d the breakdown
th e o ry .
Orthodox c o u n te ra tta c k . Orthodox M a rx ists im m ediately
ro se in d efense o f t h e i r m a ste r: K arl K autsky in Germany,
15. Tugan-Baranowsky, Modern S o c ia lism in I t s H is to r i
c a l Development (London: Sonnenschein, 1910).
16. Conrad Schm idt, *Zur T heorie d er H an d elsk risen
und d er Bber p ro dukteon, 1 S o z ia lis tis c h e M o n atsh efte. *Thr«.
V, Bd. 2, Ho. 9 (1901) pp."T6'9-¥ £ . ~ --------------------
6 5
L ouis B. Boudin in Am eriea, and a h o s t o f o th e rs , in c lu d in g
H e in ric h Cunow, Rosa Luxemburg, H ilfe r d in g , O tto B auer, and
Henryk Grossman* Many o f th e se a d h e re n ts adm itted th a t
Marx had e rre d in some o f h is a n a ly s e s . Some reg ard ed him
as p a r ti c u l a r ly o p tim is tic concerning th e tim e elem en t.
Yet fo r th e most p a r t, th e se d is c ip le s h eld th a t Marx him
s e l f had n o t developed any dogmas p re d ic tin g the a c tu a l u l
tim a te breakdown o f th e system . At l e a s t , th e c o n d itio n s
of the breakdown need n o t be c a ta s tr o p h ic . However, th e re
was in Marx th e re v o lu tio n a ry id e a th a t the system co n tain ed
w ith in i t s e l f th e seeds o f i t s own d e s tr u c tio n . I t could
n o t expand i n d e f i n i t e l y . A tim e m ust come when i t must o f
n e c e s s ity pass away.
H ein rie h C unow ^developed a th e o ry of breakdown based
on a sh o rta g e o f m arkets w hile Louis B oud in ^d ev elo p ed one
based on crude underconsum ption th e o ry . Boudin even speaks
o f a p u re ly econom ic-m echanical breakdown; but he d id n o t
b e lie v e th a t the w orking c la s s must aw ait such m iserab le
tim es b efo re beg in n in g th e c o n s tru c tio n o f the fu tu re s o c ie ty .
Long b efo re th e a c tu a l econom ic-m echanical breakdown, th e
system f e t t e r s p ro d u c tio n and becomes h i s t o r i c a l l y im p o ssib le .
17• H ein ric h Cunow, *Zur Zusammenbruchs T heorie,* Die
HCue Z e i t . J h rg . XVII, Bd. 1 , (1698-9) pp. 356-64 f f . . -----
18. L ouis Boudin, The T h e o re tic a l System o f K ari Marx
(C h arles K err & C o., C hicago, 19 0 7 ). ' —
For ttie tim e b e in g , Boudin ad m itte d , c a p i t a l i s t s had ob
ta in e d a new le a s e on l i f e through im p e r ia lis t expansion.
But im p erialism could never a b o lis h th e in h e re n t c o n tra
d ic tio n s o f c a p ita lis m ; th e se would go on f e t t e r i n g the sy s
tem, f i n a l l y s p e llin g out i t s d o w n fall.
Rosa Luxem burg^ th e o ry . Rosa Luxemburg developed
h e r famous th e o ry on th e b a s is o f c a p ita l accum ulation and
th e r e a liz a tio n o f su rp lu s value .^ S u r p lu s value i s th e su r
p lu s produced by la b o r over i t s own s u b s iste n c e {wages p lu s
th e t r a d i t i o n a l com forts) and which goes to ow nership as
p r o f i t s .
A ccording to Luxemburg, th e w orkers cannot buy back
enough o f what th ey produce so th a t , in a clo sed system , the
c a p i t a l i s t s eannot r e a liz e t h e i r su rp lu s v a lu e . The only
way the c a p i t a l i s t s can r e a liz e t h e i r s u rp lu s i s by fin d in g
buyers o u tsid e the c a p i t a l i s t system , in th e backward, non
c a p i t a l i s t a re a s and n a tio n s . Hence, c o lo n ia lism and im
p e ria lis m ! But t h i s i s a s e lf - d e f e a tin g p r o je c t, as i t tu rn s
o u t. For sooner or l a t e r , th e backward n a tio n s a re drawn in
to th e c a p i t a l i s t v o rte x and them selves become c a p i t a l i s t
n a tio n s , p a r t o f th e c a p i t a l i s t o r b i t . E v e n tu a lly a l l the
w orld i s c a p i t a l i s t . But th e n the w orld i s a closed system ,
in which th e c a p i t a l i s t s cannot r e a liz e t h e i r su rp lu s v a lu e .
19. Rosa Luxemburg, S o zialrefo rm oder R evolution?
(B e rlin , 1925)* -------------------- --------------------------
67
Hence, th e system i s doomed to breakdown, c o lla p s in g o f
i t s own w eig h t, or i t s own f a ilu r e to r e a l iz e su rp lu s v a lu e .
I t should be added th a t t h i s e x p la n a tio n has been
w idely c r i t i c i s e d as to o m echanical by many M arx ists who
have f e l t th a t Rosa Luxemburg, in o rd er to e s ta b l is h h er
e a se , m is tre a te d Marx*s re p ro d u c tio n schemes as developed
in Volume I I o f C a p ita l.
K autsky and th e S ta g n a tio n th e o ry . By f a r the most
im p o rtan t re p ly to the r e v i s i o n i s t s , however, came from the
German re v o lu tio n a ry le a d e r K arl K autsky, acco rd in g to
Sweezy.20 K autsky held th a t c a p i t a l i s t c r is e s are becoming
ev er more sev ere in scope. He b e liev ed t h a t c a p ita lis m was
headed toward a p erio d o f ch ro n ic d e p re ssio n .
There are lim i ts to w hich c a p i t a l i s t p ro d u c tio n can
expand, acco rd in g to K autsky. These lim its a re la r g e ly due
to th e lim i ts o f the w orld m ark e ts. Sooner or l a t e r th e re
w ill be ushered in a p erio d o f economic s ta g n a tio n o f a
perm anent c h a ra c te r, o f p ro d u ctio n a t le s s th a t c a p a c ity , o f
r e s t r i c t i o n o f the p ro d u c tiv e fo r c e s , t h e i r f e t t e r i n g . When
t h i s tim e comes th e re may s t i l l be p e rio d s o f ups and downs,
c y c lic a l f lu c tu a tio n s , but th e se w ill occur w ith in th e fram e
work o f economic s ta g n a tio n . There w i ll never be a n o th er
20. K autsky1s views in th is reg ard were p rin te d in an
a r t i c l e * K ris e n th e o rie n ,* Die Neue Z e it, J h r g ,. XX. Bd. 2
(1901-2). “
68
p erio d of expan sio n , no hope o f ever b reak in g out o f th e
framework o f s e c u la r s ta g n a tio n .
T his f a c t w il l be enough to cause th e breakdown and
c o lla p se o f th e c a p i t a l i s t system , K autsky contended. In
o rd e r fo r c a p ita lis m to l i v e , i t must expand i n d e f i n i te l y .
I t must c o n s ta n tly grow, c o n s ta n tly open up new v is ta s o f
e n te r p r is e ; f o r o nly by in c e s s a n tly expanding can i t keep
ahead o f i t s own d e s tr u c tiv e te n d e n c ie s . In th e p erio d o f
s ta g n a tio n , th e p o v erty and m isery of th e m asses a re in
te n s if ie d and c o n d itio n s become u n b earab le; in s e c u r ity
th re a te n s n o t only th e w orkers but sm all businessm en and
o th e r elem ents of th e p o p u la tio n ; f e a r , in s e c u r ity , and
w idespread m isery c re a te confusion and a sense o f impend
in g d i s a s te r ; th e m asses begin a se a rc h f o r a way o u t. F in
a l l y , hope comes in th e form o f a re v o lu tio n a ry s tru g g le fo r
so c ia lis m . D eath i s b e tte r th an continued e x iste n c e under
th e old c o n d itio n s . The re v o lu tio n i s on.
Thus, c r i s i s i s incom patible w ith the m e lio ra tio n of
c la s s antagonism s. The c la s s s tru g g le i s in te n s if ie d by th e
c r i s i s . But th i s i s n o t a l l ; th e c r i s i s becomes a world
c r i s i s . As a way o u t the ru lin g c la s s e s engage in ever more
sev ere s t r i f e and s tru g g le fo r th e dominant share o f world
tr a d e . E x p lo ita tio n o f th e c o lo n ia l and backward a re a s i s
i n te n s i f ie d . The s tru g g le s between r i v a l powers fo r a domi
n an t share in the tra d e i s supplem ented by th e stru g g le o f
69
o f the c o lo n ia l peoples fo r n a tio n a l independence. On a l l
f r o n ts th e re v o lu tio n i s i n t e n s if i e d . C a p ita lism i s doomed*
C hronic d e p re s s io n * Taking up K autsky*s c a se , P aul
Sweezy begins h is a n a ly s is o f c a p i t a l i s t breakdown by p o in t
in g out th a t a s o c ia l o rd er p a sse s in one o f two ways: (1)
e i th e r slow ly by d is in te g r a tin g over a p erio d o f tim e , or
(2) more or le s s ra p id ly , being q u ick ly re p la c e d by a new
o rd e r. N e ith e r p ro c e ss , he say s, i s a p tly d e sc rib e d by th e
term breakdown.
A pplying th ese c o n s id e ra tio n s to th e case o f c a p it a l
ism , we see th a t the r e a l l y s ig n if ic a n t q u e stio n cannot
be grouped around the concept o f c a p i t a l i s t breakdown—
th e term s mean e i t h e r too l i t t l e or to o much. What we
want to know i s w hat, i f any, a re the d is in te g r a tin g
fo rc e s v a t work in c a p i t a l i s t s o c ie ty . As r e la te d to eco
nomic c r i s i s , t h i s q u e stio n can be made more s p e c if ic :
do th e c ris is -p ro d u c in g fo rc e s tend to become more s e
vere in th e eourse o f c a p i t a l i s t developm ent, so t h a t
e v e n tu a lly d ep ressio n ten d s to be th e r u le ra th e r th an
th e ex c ep tio n ? I f so , we may account t h i s a c h ie f e l e
ment in th e tra n sfo rm a tio n o f c a p i t a l i s t r e la tio n s *from
form s o f developm ent of th e fo rc e s of p ro d u c tio n * . .in to
t h e i r f e t t e r s .* And we may f e e l c e r ta in t h a t the m e li
o ra tio n o f s o c ia l c o n f lic ts to which the r e v is i o n i s t s so
c o n fid e n tly looked forw ard i s th e fo re c a s t o f w ish fu l
th in k in g and n o t of s c i e n t i f i c analysis.21
What a re th e c o n d itio n s of c a p i t a l i s t p ro d u c tio n which
le a d , th e n , i f not to u ltim a te breakdown, a t l e a s t to a p erio d
o f c h ro n ic d e p re ssio n ? By an a n a ly s is o f the system , which
we have n o t tim e to reproduce h e re , Sweezy fin d s a tendency
to underconsum ption (o v e rp ro d u c tio n ). T his tendency i s m anl-
ST! Op. Git., p. 215.
70
f e s te d by (1) r e c u rrin g c r is e s (th e b u sin ess c y c le ) and (2)
by economic sta g n a tio n * Now b oth of th e s e te n d e n c ie s in th e
system p re v en t accum ulation of c a p ita l from o u tru n n in g th e
req u irem en ts o f th e m arket fo r consum ption goods* They p ro
vid e th e check a g a in s t th e too ra p id developm ent o f th e p ro
d u c tiv e fo rc e s under c a p ita lis m . The tendency of th e system
to o u tru n i t s m ark ets, th e tendency to o v erp ro d u ctio n , i s
in h e re n t in th e system , and can be overcome only by the
p a r t i a l n o n - u tiliz a tio n o f th e p ro d u ctiv e re so u rc e s* Hence
s ta g n a tio n is th e norm tow ards which the c a p i t a l i s t system
in e v ita b ly te n d s .
But i f t h i s i s t r u e , how are we to account fo r th e
ra p id p ro g re ss of th e p ro d u ctiv e fo rc e s o f th e c a p i t a l i s t
w orld over th e p a s t s e v e ra l c e n tu rie s ? C ap italism h as been
expanding p ro g re s s iv e ly , and a t an u n b e lie v a b le r a t e , fo r
over fo u r c e n tu rie s* T h is can be ex p lain ed by d isc o v e rin g
c o u n te ra c tin g f o r c e s * th a t i s , fo rc e s which c o u n te ra c t and
overcome th e fo rc e s te n d in g to s ta g n a tio n . The co u n ter fo rc e s
have been overcom ing th e fo rc e s o f s ta g n a tio n fo r fo u r cen
t u r i e s , and the q u e stio n a r is e s a s to w hether th e y can con
tin u e to o p e ra te , and i f s o , f o r how long? I s the system in
an e r a , s t i l l , o f p ro g re s s , or h&s i t tu rn e d the c o rn e r, e n te r
in g now upon an e ra o f sta g n a tio n ?
C o u n terac tin g f o r c e s * Sweezy g iv e s a tw o -fo ld class**
71
i f i e a t i o n o f th e fo rc e s c o u n te ra c tin g th e te n d e n c ie s to s ta g
n a tio n and ch ro n ic d e p re s s io n . These a re (a ) th o se w hich r a is e
th e le& el o f consum ption, the most im p o rta n t o f which a re (1)
p o p u la tio n grow th, (2) u n p ro d u ctiv e consum ption, and (3) s t a t e
ex p en d itu res} and (b) th o se fo rc e s w hich d ep riv e a d isp ro p o r
tio n a te growth in th e means o f p ro d u c tio n o f i t s econom ically
d is ru p tiv e consequences. These are c h ie f ly two, (1) th e
growth o f new in d u s tr ie s , and (2) f a u lty in v estm en ts.
T aking up th e f i r s t of th e s e f a c t o r s , th o se which ten d
to r a is e the le& el of consum ption, Sweezy concludes t h a t (1)
th e developm ent o f new in d u s tr ie s i s a th in g of the p a s t, as
an e f f e c tiv e fo re e to co u n ter s ta g n a tio n . As fo r (2) f a u lty
in v estm en t, i t i s in g en eral a fo rc e which c o u n te ra c ts th e
tendency to underconsum ption most s tro n g ly when i t i s l e a s t
needed and h a rd ly a t a l l in the p e rio d of s ta g n a tio n he c o n tin u e s ,
when i t would be most h e lp f u l. T his i s because i t occurs
during the booms g e n e ra lly , when i t i s n o t needed, and i s
excluded by monopoly and combines d u rin g th e p e rio d of s ta g
n a tio n . T urning to (3), p o p u la tio n grow th has been ex trem ely
im p o rtan t in the p a s t as a fo rc e c o u n te ra c tin g the tendency
to underconsum ption.
I f p o p u la tio n has been im portant in th e p a s t, i t w ill
be no le s s so in th e fu tu re * I t I s in t h i s connectio n t h a t
the w ell-know n downward tre n d in the r a te of p o p u la tio n
grow th w hich i s c h a r a c te r is t ic of a l l h ig h ly developed
c a p i t a l i s t c o u n trie s , a c q u ire s s p e c ia l s ig n if ic a n c e . T his
tr e n d , stemming im m ediately from a d e c lin in g b i r t h r a t e ,
72
i s in no sense a c c id e n ta l. The im p o rtan t c o n trib u tin g
f a c to r s , such as u rb a n iz a tio n , a r i s i n g stan d ard of liv in g ,
in s e c u r ity o f liv e lih o o d , and d if f u s io n o f knowledge
among the m asses, to m ention o n ly the most obvious,
appear to be unavoidable p ro d u cts o f c a p i t a l i s t develop
ment ...S o f a r a s n a tu r a l growth in numbers i s concerned,
th e r e f o r e , r e s is ta n c e to underconsum ption is s te a d ily
d im in ish in g ; and on t h i s count th e d r i f t of c a p ita lis m
tow ards a s ta te o f ch ro n ic d e p re ssio n seems d i f f i c u l t to
c o n tro v e rt • ^
Two more c o u n te ra c tin g fo rc e s rem ain to be co n sid ered
(th o se w hich d ep riv e a d is p ro p o rtio n a te growth in th e means
o f p ro d u c tio n of i t s econom ically d is ru p tiv e consequences),
and in c o n tra s t to th o se ju s t examined th e se d a s t two fo ro e s
seem to be growing s tro n g e r . As re g a rd s (4) u n productive
consum ption, we fin d th a t n o t only c a p i t a l i s t s spend a la rg e
p a rt of t h e i r income on consum ption but t h a t a new m iddle c la s s
i s developing in th e se rv ic e in d u s tr ie s , which consumes but
does n o t produce (a t l e a s t , i t does not produce ta n g ib le g o o d s).
T h is f a c t le a d s Sweezy t o s t a t e :
. . . ( 1 ) th a t a c o n sid erab le f r a c tio n o f u n p ro d u ctiv e con
sum ption o f t h i s k in d c o n s titu te s , lik e th a t o f the landed
a r is to c r a c y , an a d d itio n to t o t a l consum ption and a
deduction from su rp lu s v alu e otherw ise a v a ila b le fo r
accum ulation; (2) t h a t unproductive consum ption o f t h i s
k in d has been s te a d ily growing in im portance f o r a t le a s t
th e l a s t h a lf - c e n tu r y and g iv es every in d ic a tio n o f con
tin u in g to grow in the f u tu re ; and (3) t h a t , from the
p o in t o f view o f o f f - s e t t i n g the tendency to underconsump
t i o n , t h i s seems to be e a s ily th e most s ig n if ic a n t tre n d
in th e f i e l d o f u n p ro d u ctiv e consum ption.-^5
14* I b i d », p i 224-3*
I b i d . . p . 231.
73
T h is f a c t o r , th a n , weakens the id ea of a ch ro n ic de
p re s s io n , But i t is not so im portant a s th e l a s t item , (5)
s ta te e x p e n d itu re s . These ex p e n d itu re s in c lu d e c a p ita l o u t
la y s by the s t a t e , w hich are not very im p o rta n t, s t a t e tr a n s
f e r s , w hich have been ev o lv in g in a d ir e c tio n to o f f s e t th e
tendency to under eon sum ption, and f i n a l l y , most im p o rtan t of
o f a l l , s t a t e consum ption, which c o n s is ts of the o rd in a ry
l e g i s l a t i v e , j u d i c i a l , and e x e c u tiv e a c t i v i t i e s o f th e s t a t e ,
p u b lic w orks, and m ilita r y e s ta b lis h m e n ts . Sweezy concludes
th a t s t a t e e x p e n d itu re s a re becoming in c re a s in g ly im p o rtan t
and s ig n if ic a n t as c o u n te ra c tin g fo rc e to th e tendency to
underconsum ption.
No p o s s i b ili ty o f re fo rm . The t o t a l r e s u l t of th e
d is c u s s io n le a d s Sweezy to the co n c lu sio n th a t th e s t a t e can
d e lib e r a te ly c o u n te ra c t th e te n d e n c ie s to eoonomic s ta g n a tio n
and underconsum ption c r i s i s , i f i t can c a rry out a spending
program . C re a tio n o f p u rc h asin g power by governm ental borrow
ing can have v ery fa v o ra b le e f f e c ts on p r iv a te in v estm en t.
Why n o t, th e n , have a th e o ry o f managed s t a t e c a p ita lism ?
T h is, in d eed , i s what some c a p i t a l i s t th e o r e tic ia n s p ro p o se.
Sweezy i s fo rc e d to f a l l back upon S t a l in i s t id e a s of
th e p a ssin g of c a p ita lis m . He f i n a l l y concludes th a t th e
s t a t e , w hile i t m ig h t, w ill n o t tak e the n e c e ssa ry a c tio n to
p revent underconsum ption by th e method of s ta te e x p e n d itu re s.
a s th e re fo rm e rs b e lie v e . The re fo rm e rs , Sweezy a s s e r t s , have
74
a f a ls e conception o f tlie s t a t e as an in stru m en t o f " s o c ie ty ,"
w hich can r e s t r i c t accum ulation and r a is e consum ption. But
our a u th o r sees the s t a t e as an in stru m en t of the c a p i t a l i s t
c la s s . Thus, i t w ill do n o th in g to r e s t r i c t c a p i t a l i s t con
sum ption so lo n g a s th e p ath to im p e r ia lis t expansion i s
open. M onopolies by t h e i r n a tu re w ill r e s i s t refo rm , fo rc in g
im p e r ia lis t expansion upon th e governm ent, a s the "o n ly way
o u t."
The ru le o f c a p ita l would indeed be secu re i f i t were
th re a te n e d by n o th in g more dangerous th a n re fo rm , whether
o f a l i b e r a l or s o c i a l i s t o r ie n ta tio n . But , o f c o u rse ,
t h i s i s n o t th e c a s e , ^he r e a l l y deadly enemy o f c a p it a l
ism i s i t s own s e lf - e o n tr a d ic to r y c h a ra c te r— *th e r e a l
b a r r ie r o f c a p i t a l i s t p ro d u c tio n i s c a p ita l i t s e l f . * In
seek in g a way out o f i t s self-im p o sed d i f f i c u l t i e s , cap
i t a l plunges th e w orld in to one c r i s i s a f t e r a n o th e r, f i n
a l l y s e ttin g lo o se fo rc e s w hich i t i s no lo n g er able to
c o n tr o l. The p e rsp e c tiv e is c e r ta in ly not a p le a s a n t one,
b u t in our f i n a l s e c tio n we s h a ll atte m p t to show t h a t , i t
has a more h o p efu l sid e fo r those who c a re to see i t . 1®
The way Sweezy p o ses t h i s whole q u e stio n o f spending
v e rsu s im p e r ia lis t ex p an sio n , as a lte r n a tiv e waysooht o f i n t e r
n a l c a p i t a l i s t c o n tra d ic tio n s , le a v e s the im p ressio n t h a t
im p e ria lism i s a p o lic y o f c a p ita lis m , ra th e r th a n as an abso
lu te n e c e s s ity , a " s ta g e o f developm ent" o f c a p ita lis m . T his
approach i s a d e v ia tio n from Leninism (and S ta lin is m ) . But
t h i s i s not th e only example o f Sweezy*s d e v ia tio n from S ta lin
ism , as w ill be in d ic a te d l a t e r , alth o u g h Sweezy fo llo w s
S ta lin * s m ajor c o n te n tio n s f a i r l y c o n s is te n tly *
16* I b i d . . p* 352.
VI SW EEZY»S BLTJEHRIHT
75
Sweezy tu rn s to S ta lin , who i s quoted as se e in g two
f o c i develo p in g in th e w o rld , one o f im p e ria lism and th e o th e r
o f S o v ie t c o u n trie s* The s tru g g le betw een the r i v a l sy stem s
and i t s h is to r y com prise the h is to r y o f th e world re v o lu tio n .
The O ctober re v o lu tio n was the f i r s t stag e in th e world re v o l
u tio n and i t s e t up in R u ssia a pow erful base whence the world
re v o lu tio n and S o v ietism ean co n tin u e to d ev elo p . W ith the
r i s e o f th e U .S .S .R ., th e "g e n e ra l c r i s i s " of c a p ita lis m was
i n s t i t u t e d . The S o v ie t Union became th e c h ie f " s o c ia liz in g
f o r c e ," b rin g in g w ith i t th e i n t e n s i f i c a t i o n of the g e n e ra l
c o n tra d ic tio n s o f im p e ria lism , the i n t e r n a l c la s s s tru g g le s
in th e c a p i t a l i s t n a tio n s , th e i n t e r - c a p i t a l i s t c o n f lic ts
between r i v a l c a p i t a l i s t pow ers, and r i v a l r y between th e ad
vanced powers suad th e backw ard, c o lo n ia l n a tio n s . The
e x is te n c e of th e S o v ie t Union se rv e s to develop th e se con
t r a d i c t i o n s .
F leee-m eal p a ssin g of c a p ita lis m . As a r e s u lt o f th e
in te n s iv ic a tio n o f th e c o n tra d ic tio n s in h e re n t in the world
c a p i t a l i s t system , c a p ita lis m w i ll pass p iece-m eal—one c o u n try
a f t e r a n o th e r. Here we pass from the c o n s id e ra tio n of how
c a p ita lis m w il l pass in a, p a r tic u la r country to how i t w ill
p ass in th e w orld as a w hole, o r how i t w il l p ass as a w o rld -
system .
T his tr a n s f e r o f a tte n tio n from how c a p ita lis m w ill
pass in a s in g le c o u n try to how c a p ita lis m w ill pass in a
w orld system av o id s a l l th e problem s ra is e d in the breakdown
c o n tro v e rsy and s h i f t s the d is c u s s io n to a d if f e r e n t l e v e l,
w hether Sweezy i s aware of i t or n o t. W e seem to have jumped
from one problem to an o th er w ithout having solved th e f i r s t
one, namely o f how s o c ia lis m w ill come w ith in one c o u n try .
The reaso n fo r t h i s i s t h a t S ta lin is m r e j e c t s th e r o le of
th e p r o l e t a r i a t as th e c h ie f s o c ia liz in g f o r c e , th e m ain fo rc e
in th e d e s tru c tio n of c a p ita lis m now being th e S o v ie t S ta te .
The consequences o f t h i s s h i f t in fo rc e s i s n o t c le a r ly p e r
ceived by most Communists o r M a rx ists, but i t e x p la in s most
o f th e ap p a ren t enigmas o f S o v iet and Communist p o lic y and
th e a b je c t su b serv ie n ce o f Communist p a r ti e s abroad to the
S o v ie t fo re ig n o f f ic e .
F u rth erm o re, Sweezy*s ev asio n o f th e problem o f how
c a p ita lis m w ill come in one co u n try , and h is s h i f t o f a t t e n t io n
to th e world system , may be ex p lain ed by the f a c t t h a t he
b e lie v e s t h a t c a p i t a l i s t governm ents, i f n o t provided w ith
th e a lt e r n a ti v e o f im p e r ia lis t expansion, could and p erh ap s
would r e s o r t to K eynesian te c h n iq u e s to p re v e n t c a p i t a l i s t
breakdown or c o lla p s e . But i f c a p i t a l i s t n a tio n s pursue the
im p e r ia lis t p o lic y , th e y must be d e s tin e d to move along the
p a th (b u t i s t h i s ac co rd in g to L enin?) to c o lo n ia l and im per
i a l i s t r i v a l r y , w ar, and breakdown in the w eakest l i n k .
77
A ccording to S t a l i n ’ s view , the c o lla p s e w ill come a s
a r e s u l t o f open c o n f lic t between tb© S o v ie t and c a p i t a l i s t
s e c to rs o f th e world* But S ta lin , fo r t a c t i c a l purposes of
fo re ig n p o lic y , a ls o was quick to add th a t c a p ita lis m and
S o v ietism can p e a c e fu lly c o -e x is t in th e same world* Sweezy
g ra sp s fo r t h i s stra w j he even claim s to d evelop i t independ
e n t l y .1^
The piece-m eal p assin g of c a p ita lis m , s t a t e a f t e r s t a t e ,
w i l l come w ith o u t S o v ie t a g g ressio n from the o u ts id e , says
Sweezy. T h is i s because th e S o v ie ts , ac co rd in g to Sweezy, a re
1 ? . I t i s i n t e r e s ti n g to c o n tr a s t Sweezy’ s m ental
gym nastics in th i s re sp e c t w ith the a r t i c l e by H is to ric u s ,
’’S ta lin on He v o lu tio n ," in th e m agazine F o reig n A ff a irs fo r
Jan u ary , 1949, s e c tio n I I I , "The A rt of R e v o lu tio n ."
E is to r le u s in d ic a te s the h i s t o r i c a l developm ent o f
S t a l i n 's view s on re v o lu tio n and th en ta k e s in to acco u n t the
few c o n tra d ic to ry or in c o n s is te n t sta te m e n ts of S ta lin to such
men as Hoy Howard and Mr. K ing, o f R e u te rs , which in d ic a te
the p o s s i b i l i t y of the p e a c e fu l co e x iste n c e o f th e two sy ste m s.
H is to ric u s th e n shows e l e a r l y t h a t th e se apparent in c o n s is
te n c ie s were b a i t , e n t ir e l y c o n s is te n t w ith S t a l i n ’ s f le x ib le
t a c t i c s , to w in an a l l y in the s tru g g le a g a in s t Germany, or
t o l u l l an opponent to s le e p w h ile he p rep ared the conquest
o f a country (Poland fo r exam ple).
He th e n quotes S t a l in as say in g : "We cannot fo rg e t the
saying of Lenin to the e f f e c t th a t a g re a t d e a l in th e m a tte r
o f our c o n s tru c tio n depends on w hether we succeed in d elay in g
war w ith th e c a p i t a l i s t c o u n trie s , which i s in e v ita b le b u t
which may be delayed e i t h e r u n t i l p r o le ta r ia n re v o lu tio n r ip e n s
in Europe, or u n t i l th e c o lo n ia l re v o lu tio n s come f u l ly to a
head, o r, f i n a l l y , u n t i l the c a p i t a l i s t s f i g h t among th em selv es
over d iv is io n of th e c o lo n ie s . T h erefo re th e m aintenance o f
p e a c e fu l r e la ti o n s w ith c a p i t a l i s t c o u n trie s i s an o b lig a to ry
ta s k fo r u s . The b a s is o f our r e la tio n s w ith c a p i t a l i s t
c o u n trie s c o n s is ts in a d m ittin g th e c o e x iste n c e o f two opposed
sy stem s."
78
n o t ( s i o l ) i m p e r i a l i s t i c .1^ Not b ein g ag g re ssiv e (o n ly "im
p e r i a l i s t i c " c o u n trie s a r e a g g r e s s iv e !), the U .S .S .R , would
never ta k e th e i n i t i a t i v e in s t a r t i n g World War I I I , N0r i s
th e S o v ie t Union th e o nly co u n try in th e w orld th a t could or
would s t a r t a w ar. In d eed , ac co rd in g to Sweezy, the co u n try
most l i k e l y t o be th e source of war i s A m erica, h e a d q u a rte rs
o f W all S t r e e t , th e g re a t s e a t o f w orld c a p i t a l i s t im p e ria lism .
But would American im p e r ia lis ts s t a r t a w ar? T h is i s th e
d e c is iv e q u e s tio n ,
D uring th e war a llia n c e and th e S ta lin -R o o s e v e lt lo v e
f e a t —when R o o sev elt was g ra n tin g S ta l in the r i g h t to occupy
a n d /o r in c o rp o ra te in the S o v ie t Union a number o f t e r r i t o r i e s ,
c o u n trie s , and fo rm erly independent p eo p les—Sweezy w rote in
th e book under rev iew t h a t th e answer w as, No. At t h a t tim e ,
America would not s t a r t an a n ti-S o v ie t w ar. The answer was
s t i l l No, f o r reaso n s o f w orking c la s s o p p o sitio n to w ar,
even a s l a t e as 18 Janu ary 1946, when Sweezy added a new
p re fa c e :
In th e p re se n t work i t i s contended th a t such a f i n a l
s tru g g le between c a p ita lis m and so c ia lis m —w hich, in view
o f th e most re c e n t advances in th e a r t of w a rfa re , m ight
w ell le a d to t h e i r common ru in —i s by no means in e v ita b le .
I t seems a t l e a s t e q u a lly p o s s ib le th a t in th e p e rio d now
opening th e in h e re n t s u p e r io r ity o f s o c ia l ism a s a
method o f h arn e ssin g th e p ro d u c tiv ity o f modern tech n iq u e
in the i n t e r e s t s o f s o c ie ty a t la rg e w ill be so c le a r ly
18, !rJbtis v e rb a l t r i c k i s a m a tte r o f d e f in i ti o n , L en in ’s
d e f in i ti o n o f im p e ria lism exempts th e S o v ie ts , "So how can
th e y be im p e r ia lis t? ” 11
79
dem onstrated a s to b rin g ab o u t s ig n if ic a n t changes in
th e p u b lic opinion o f th e c a p i t a l i s t w o rld . Assuming
th e continued v i t a l i t y of dem o cratic i n s t i t u t i o n s in th e
key c e n te rs o f c a p ita lis m , G reat B r ita in and th e U nited
S ta te s , such a s h i f t in p u b lic o p in io n should be o f a
s o r t to make th e o rg a n iz a tio n of a crusade a g a in s t s o c ia l
ism an in c re a s in g ly d i f f i c u l t and u n p ro fita b le v e n tu re .
At th e same tim e , i t may be a n tic ip a te d t h a t th e s o c i a l i s t
n u c le u s w ill s te a d ily grow as one co u n try a f t e r an o th er
fin d s th a t i t s b a sic problem s a re in s o lu b le under th e
c o n s tr ic tio n s o f th e r u le of c a p it a l . E v e n tu a lly , th e
tim e fo r a show-down w ill have p assed : on th e in te r n a t
io n a l l e v e l , so c ia lism w ill have won th e day. Once t h i s
has happened, a r e l a t i v e l y q u ie t t r a n s i t i o n w il l f o r th e
f i r s t tim e become p o s s ib le even in th e innerm ost c ita d e ls
o f ca p ita lism * “
One m ight ask i f Sweezy means by t h a t l a s t sentence
t h a t th e t r a n s i t i o n w i ll fo llo w th e C zechoslovakian p a tte rn ?
But t h i s p u ts us back in to th e dark a s to th e p assin g
o f c a p ita lis m , i f i t i s n o t to be imposed by im p e r ia lis t war
and the d i r e c t stru g g le between th e S o v ie t and im p e r ia lis t
s e c to r s o f th e w o rld , a s S ta lin d e c la re s . For Mr. Sweezy*s
a n a ly s is o f th e breakdown c o n tro v e rsy le d to th e co n c lu sio n
t h a t th e s ta te has two ways open to i t to avoid breakdown:
(1) s ta te in te r v e n tio n to spend, to consume, and to re g u la te
accu m u latio n , or (2) to tu r n to im p e r ia lis t ex p an sio n .
The f i r s t wculd av o id c a ta s tro p h e , but th e c a p i t a l i s t s
won*t ac c e p t i t so long a s th e second a l te r n a tiv e i s open,
Sweezy sa y s. But in p u rsu in g th e second r o u te , can c o n f lic t
between th e S o v ie t and c a p i t a l i s t s e c to r s be avoided? Sweezy
sa y s, Y es, p ro b ab ly co n fu sin g S t a l i n 's t a c t i c a l b a it fo r h is
1£. Ib id .. p. x -x l.
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re v o lu tio n a ry theory* Yet Sweezy say s c a p ita lis m w ill pass
in s t a t e a f te r s t a t e ? How can t h i s b e , i f a spending program
can save c a p i t a l i s t s i f im p e ria lism won’t , and i f th e im per
i a l i s t p o lic y i s adopted a c la sh w ith th e S o v ie ts can be
aboided?
Sweezy has not answ ered d i r e c t l y ; he jumped from
th e breakdown in one s t a t e to an exam ination o f S t a l i n ’ s
p o s itio n on th e w orld-system o f im p e ria lism and th e p iece
m eal p a ssin g o f c a p ita lism * Somewhere between th e end o f
the breakdown th e o ry and th e p o s s i b i l i t y o f avoiding a c la s h
between th e S o v ie t and c a p i t a l i s t s e c to r s , c a p ita lis m w ill
p ass p iece -m eal, in s t a t e a f te r s ta te * L e t’ s pursue t h i s
in te r e s tin g puzzle f u r th e r .
P ro sp e c ts fo r ca p ita lism * Sweezy ta k e s us on a Cook’ s
to u r o f th e postw ar w orld s itu a tio n w ith o u t throw ing much
more l i g h t on th e s u b je c t. In d is c u s s in g F ran ce, fo r exam ple,
he t e l l s us t h a t t h i s i s th e key co u n try in Europe* I f i t
g oes, a l l w il l go* So long a s i t rem ains c a p i t a l i s t , a l l th e
c o u n trie s w est o f Germany w i ll a ls o rem ain c a p ita lis t* But
how w i l l c a p ita lis m p ass in France? About t h i s he i s vague,
but a p p a re n tly through a r e v o lu tio n a ry c r i s i s :
W e have to look forw ard in France to a s e r ie s o f govern
m ental c r is e s , any one o f which may tu rn in to a more gen
e r a l p o l i t i c a l and s o c ia l c r i s i s . The chances are th a t
a t some sta g e the r i g h t , su p p o rted by th e new p s e u d o -le ft
w i l l a tte m p t to launch a new v e n tu re i n B onapartism w ith
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th e o s te n s ib le purpose o f ’r e s to r in g law and o rd e r.* What
the outcome of such an a tte m p t m ight be i t is o f course
im p o ssib le to f o r e t e l l . 0
T his statem en t t e l l s u s two th in g s . F i r s t , c a p it a l
ism can p a ss, n o t as a r e s u l t of economic breakdown or w ar,
but th ro u g h a p o l i t i c a l and s o c ia l c r i s i s . But we suppose
t h a t Sweezy tr a c e s t h i s c r i s i s to th e economic base ra th e r
th a n to d is ru p tiv e fifth -c o lu m n a c t i v i t y . Second, Sweezy
p re f e r s to re g a rd th e r e v o lu tio n a ry overthrow by Communists
a s a "d e fe a te d a tte m p t” on the p a r t o f the governm ent " to
— . . .
launch a new v en tu re in B onapartism " in o rd e r to p re v e n t
th e S o v ie t fifth -c o lu m n from d is ru p tin g th e c o u n try and s ta g
ing another c e le b ra te d orgy, a f t e r the fa sh io n o f ev en ts in
C zech o slo v ak ia. How one says t h i s i s s t r i c t l y a m a tte r o f
t a s t e .
In E ngland, th e p o s s i b i l i t y o f p e a c e fu l p a ssin g o f
c a p ita lis m i s even more rem o te, perhaps because the B r itis h
Labour p a rty i s in pow er. Sweezy, o f co u rse , f e e l s t h a t th e
le a d e rs of th is s o c ia l i s t - o r i e n t e d Labour p a r ty a re n o t
" v e ry f o r c e f u l" ; th ey w i l l ach iev e "n o th in g ." A p p aren tly
one m ust be a S t a l i n i s t to be " f o rc e f u l" and to ach iev e
"som ething."
A p p aren tly , th e n , th e fo rc e s le a d in g to s ta g n a tio n and
ch ro n ic c r i s i s a re ta k in g th e upper hand in th e c a p i t a l i s t
£o. I b i d . . p. xvTT
82
w o rld , fo rc in g th e ru lin g c ir c le s in to im p e r ia lis t a d v e n tu re s,
in o rd e r to avoid breakdown an d /o r reform s n e c e ssa ry to p r e
v en t c o lla p s e • But even i n tb e se ad v en tu res th e r e i s n o t
muck danger o f a c la s h between s e c to r s , a t le a s t so long as
democracy e x i s t s in America and th e w orking c la s s r e ta in s i t s
o rg a n iz a tio n a l freedom , The w orkers can hobble American im
p e ria lis m and though " th e re w ill undoubtedly be ex p ansio n o f
American in t e r e s t s abroad and a l l s o r ts of m aneuvering in
th e g u ise of n a tio n a l d e fe n s e ,” th e re " w ill be no campaigns
of conquest and no crusades to fre e th e world o f dangerous
s o c ia l e x p e rim e n ts," Sweezy concludes ( 1 9 4 6 ) . S t i l l ,
c a p ita lis m w ill p a ss, country a f t e r c o u n try , p iece -m eal.
T his w ill be due to c r is e s a r is in g w ith in v ario u s c o u n trie s
and betw een d i f f e r e n t c o u n tr ie s .
V II S U M M A R Y
The above d is c u s s io n does n o t do com plete ju s tic e to
M arxian and neo-M arxian th e o ry o f th e i n e v i t a b i l i t y o f th e
p a ssin g o f c a p ita lis m . A number o f im p o rtan t c o n trib u to rs
to M arxian th e o ry have n o t been m entioned o r a d e q u ately
d is c u s s e d . By no means do most o f th e s e t h e o r i s t s accep t
th e S t a l i n i s t p o s itio n as developed by R aul Sweezy.
The p a r t i a l p re s e n ta tio n in t h i s ch ap ter i s j u s t i f i e d
£ l . I b i d . . p . x x l - x x i i •
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fo r s e v e ra l re a s o n s , however* F i r s t , S ta lin is m c le a r ly dom
in a te s Marxism today* I t is the o f f i c i a l d o c trin e o r id e o l
ogy o f th e S o v ie t Union and i t s many s a t e l l i t e s * -& 11 Commun
i s t p a r tie s o u ts id e th e S o v ie t U nion, and t h e i r t h e o r i s t s ,
a re M a r x is t- S ta lin is ts * A ll the a p o lo g is ts o f th e S o v ie t
p o lic e s t a te giv e s u p p o rt, o f one h in d o r a n o th e r, to the
S t a l i n i s t d o c trin e and i t s c r iti c is m o f c a p i t a l i s t im p e ria lism ,
su p p o rtin g th e id e a o f c a p i t a l i s t e n c irc le m e n t, e t c . In d eed ,
S ta lin is m i s one o f th e g re a t id e o lo g ie s o f a l l tim e , a l b e i t
i t * s fo rc e i s based on th e Red Army, and only fo o ls would
b lin d them selves to th i s overwhelm ing f a c t .
Beeause o f the im portance of S ta lin is m , i t i s a l l th e
more dangerous and re q u ir e s exposure* For th a t re a s o n , so
much tim e was given t o Sweezy, one of th e most b r i l l i a n t of
the American S t a l i n i s t s and a p o lo g is ts of the S o v iet S ta te .
H is r o le a s an a p o lo g is t i s b e s t played i s h is l a t e r booh,
22
S o c ia lism * W e s h a ll r e tu r n to a d is c u s s io n o f S ta lin is m
in th e f i n a l c h a p te r o f t h i s th e s is *
E a r l Marx p ro v id es th e h e r ita g e fo r S ta lin is m , L enin
ism , and o th er branches of neo-Marxism* Marx*s th re e g r e a t
c o n trib u tio n s were th e re v o lu tio n a ry p h ilo so p h y , d i a l e c t i c a l
m a te ria lism ; th e th e o ry o f c a p i t a l i s t e x p lo ita tio n o r "law®
of developm ent” in clu d ed i n h is th re e volumes of C a p ita l. and
Z2l P au l Sweezy. S o c ia lism (New Y orh: McGraw-Hill
Booh C o ., 1949)*
84
th e m a te r ia lis t con ca p tio n o f h is to r y , w ith i t s em phasis upon
th e e la s s s tru g g le as th e m o tiv a tin g fo rc e of h i s t o r i c a l d e v e l
opment and th e t r a n s i t i o n to th e c la s s le s s s o c ie ty o f th e
f u tu r e .
Im p erialism was a l a t e r developm ent. 1?he s u b je c t be
came p opular w ith H obson's economic in te r p r e ta tio n o f im per
ia lis m , which sp u rred th e M arx ists to in c o rp o ra te the phenom
enon in to t h e i r d o c trin e of c a p i t a l i s t developm ent. Two
g re a t sch o o ls a ro se , one which saw im p erialism as a p o lic y
of th e c a p i t a l i s t c la s s , and th e o th e r which saw i t a s a
n e c e ssa ry o r in h e re n t f e a tu r e o f c a p ita lis m , e s p e c ia lly as
a " l a t e r s ta g e " o f c a p i t a l i s t developm ent.
W ith th e O ctober (1917I re v o lu tio n and th e r i s e to
power o f th e B o lsh ev ik s, th e concept o f th e " r o le o f the
S o v ie t S ta te " as th e m ain fo rc e te n d in g to b rin g th e p a ssin g
of c a p ita lis m became dom inant, f i n a l l y , we saw Sw eezy's
m a g n ific e n t h an d lin g o f t h i s co n c ep t. F u rth e r c r itic is m
o f Marxism and neo-M arxism w ill be delayed u n t i l the f i n a l
c h a p te r.
CHAPTER I I I
GRADUALIST THEORIES
I . INTRODUCTION
In t i l l s ch ap ter we leav e c a ta s tr o p h ic th e o rie s f o r
g r a d u a lis t th e o r ie s o f th e d e c lin e and p a ss in g o f th e c a p ita l
i s t system* S o c ia l tra n s fo rm a tio n by g ra d u al r a th e r th a n by
c a ta s tr o p h ic change i s th e essen ce o f th e th e o r ie s b e fo re us
a t t h i s tim e*
D e f in itio n s and d i s t in c t i o n s . The th e o r ie s to be
review ed in t h i s ch ap ter have been s e le c te d , grouped, and
se p a ra te d from th o se t h a t fo llo w in l a t e r c h a p te rs , somewhat
a r b i t r a r i l y * But th e grouping s e le c te d se rv e s a p r a c tic a l
p u rp o se, of p re s e n ta tio n , a s w e ll a s co v erin g th e main p o in ts
of view in g r a d u a lis t th e o ry .
M oreover, by u sin g the term " g r a d u a lis t" we do n o t
im ply t h a t th e th e o r ie s to be examined l a t e r do n o t a ls o ta k e
the e v o lu tio n a ry r a th e r th an th e c a ta s tr o p h ic view . However,
in p r a c t ic a l l i f e , the term " g ra d u a lis t" h as become so c lo s e ly
a s s o c ia te d w ith th e th e o r ie s under c o n s id e ra tio n in t h i s chap
t e r th a t i t i s more o r le s s synonymous w ith t h e i r more fozm al
names* T h o rste in V eblen’ s i n s t i t u t i o n a l approach, James Burn
ham* s "m an ag erial s o c ie ty ," a lre a d y in f u l l tr a n s it io n as
Burnham c la im s, F ab ian s o c ia lis m , and the th e o ry o f th e d ev elo p -
86
ment o f c o lle c tiv e e n te r p r is e , a re a l l e v o lu tio n a ry and
g r a d u a lis t both, by r e p u ta tio n and c h a ra c te r .
On th e o th e r hand, th e o r ie s to be d isc u sse d l a t e r ,
w hile e v o lu tio n a ry , are so s tr ik i n g fo r o th e r re a so n s t h a t
few pause to type them a s " g r a d u a lis t” t h e o r ie s . T his i s
because they do not propose o r advocate a program fo r b rin g
in g about s o c ia lis m w hich c a ll s fo r one or a n o th e r ty p e of
t a c t i c , e ith e r "F abian" or R e v o lu tio n a ry ." W e w i l l fin d
th a t th e y a re more concerned w ith d ela y in g th e tra n sfo rm a tio n
th a n th e y a r e w ith u rg in g one o r a n o th e r ty p e o f r e s is ta n c e
to c a p ita lis m i n o rd er to f a c i l i t a t e and speed i t s p a s s in g .
Thus th ey a re in sh arp c o n tra s t w ith th e fo u r th e o r ie s t o
be d isc u sse d in th e p re s e n t c h a p te r, a l l o f which urge th e
m ost ra p id tra n sfo rm a tio n of s o c ie ty c o n s is te n t w ith human
w e lfa re .
.Among th e g r a d u a lis t th e o r ie s th e m selv es, a d is t in c ti o n
i s to be made betw een th o se which p r e d ic t s o c ia lis m and th o se
which p r e d ic t o th er form s o f s o c ie ty . The n o n - s o c ia lis t th e
o r ie s to be review ed a re th o se o f T h o rste in V eblen and James
Burnham, one p re d ic tin g th e e n g in e e rin g s o c ie ty , th e l a t t e r
p r e d ie tin g the m an ag erial s o c ie ty , a s su c c e sso rs o f c a p ita lis m .
V eblen p r e d ic ts th a t th e te c h n ic ia n s w i l l be th e fu tu re r u l e r s
of th e w o rld ; Burnham se e s th e fu tu re in th e hands o f th e
m an ag erial c la s s .
As fo r the th e o r ie s w hich p r e d ic t a s o c i a l i s t f u tu r e ,
87
th e two to he review ed here a re (1) the th eo ry of th e d e v e l
opment o f c o lle c tiv e e n te r p r is e , and (2) Fabian s o c ia lis m .
A nother d is tin c tio n * .to be made i s w ith re g a rd to th e
two sen ses in whieh "g rad u alism ” is used, both sen ses of
which can be found ru n n in g through g ra d u a lis t l i t e r a t u r e o f
a l l ty p e s .1
In one se n s e , grad u alism im p lie s t h a t c a p ita lis m i s
p a ssin g and s o c ia lis m i s coming a u to m a tic a lly , in an e v o l
u tio n a ry way, w ith o u t any conscious d ir e c tio n o r p la n n in g in
th e o v e r a ll p o l i t i c a l se n s e . Even i f th e r e were no s o c i a l i s t
id e o lo g y , nor s o c i a l i s t p a r ty , nor any movement f o r s o c ia lis m ,
th e s o c i a l i s t s t a t e would come, th ro u g h a p ro c ess o f ex ten
sio n o f governm ental c o n tro l and ow nership in th e economy*
In th e o th e r s e n se , s o c ia lis m w i l l come, i f i t does,
o n ly w ith th e h e lp o f a c tiv e s u p p o rte rs organized fo r e f f e c
tiv e p o l i t i c a l a c tio n ; th a t i s , c a p ita lis m w ill p ass only
under conscious a tta c k and p o l i t i c a l a c tio n . But t h i s p a s s
in g of c a p ita lis m w il l be p ieee -m eal w ith in th e n a tio n —e v o l
u tio n a ry , o r g ra d u a l—a s th e r e s u l t o f i n t e l l i g e n t p a r l i a
m entary a c tio n and p o l i t i c a l a c t i v i t y .
The p o l i t i c a l economy of g ra d u a lism . Thus, the th e o r ie s
under review in t h i s ch ap ter a re s h a rp ly c o n tra s te d w ith the
1 . C f. P a u l Sweezy, "F abian P o l i t i c a l Economy," J o u rn a l
o f P o l i t i c a l Economy. 57:241-46, June 1949.
88
M arxian th e o r ie s d isc u sse d in th e l a s t c h a p te r. In f a c t ,
th e re i s s u b s ta n tia l evidence t h a t g rad u alism aro se as an
a tta c k on M arxian p o l i t i c a l economy and re v o lu tio n a ry th e o ry ,
form ing an id e o lo g ic a l base fo r the r i s e o f a s o c i a l i s t move
ment w hich would a t t r a c t in d iv id u a ls who could n o t ac c e p t
th e p h ilo so p h y and re v o lu tio n a ry im p lic a tio n s o f Marxism*2
F i r s t , th e proponents o f th e g ra d u a lis t th e o r ie s deny
th e d i a l e c t i c , th e id e a th a t h is to r y develops by sudden le a p s
fo llo w in g upon g ra d u a l im p e rc e p tib le changes; th a t i s , th e y
deny th e c a ta s tr o p h ic d o c trin e o f h i s t o r i c a l developm ent, th e
re v o lu tio n a ry philosophy*
Second, th e g r a d u a lis ts deny a t l e a s t th e s t r i c t L enin
i s t d o c trin e o f th e s t a t e , b e lie v in g th a t c a p ita lis m can
p a ss in to the fu tu re s o c ie ty w ith in the framework o f th e p a r
lia m e n ta ry s ta te * Whereas Lenin b e lie v e d th a t th e s t a te
m achinery m ust be smashed b efo re c a p i t a l i s t can be d e stro y e d ,
th e g r a d u a lis ts b e lie v e th a t the p re se n t s t a te m achinery can
be (and i s being) used to f a c i l i t a t e the p assin g o f c a p i t a l
SZ Gf.» I b i d . . p . 242* Sweezy w r ite s : "When Fab
ian ism appeared on th e c o n tin e n t, i t c a lle d i t s e l f 'r e v is io n
ism* i . e . , a movement based on an a lle g e d 're v is io n * o f Marx
ism* But a s re g ard s c o n te n t, F abianism and re v isio n ism a re
blood b r o th e r s —or perhaps I should say 'f a t h e r and s o n ,' be
cause both the p r i o r i t y o f F abianism and the d i r e c t r e la tio n
between F abianism and re v isio n ism a re dem onstrable f a c t s i
P e a se , th e h is to r ia n o f th e F abian s o c ie ty , b o a sts w ith re a so n
th a t th e F ab ian s led an in te r n a tio n a l r e v o lt a g a in s t Marxism*
So f a r as the c o n tin e n t was concerned, Pease t e l l s u s , 't h e
r e v o lt came from England in th e person of Eduard B e rn s te in * *
89
ism . In p r a c tic e , th e s e two views have r a th e r fa r-re a c h in g
e f f e c t , as i l l u s t r a t e d by G.D.H. Cole in d is c u s s in g the p o s t
war r e la tio n s between R u ssian Communism and B r it is h S o c ia lism .
The problem (o f a p o l i t i c a l se ttle m e n t fo r Europe) i s
le s s sim ple econom ically th an i t is in p o l i t i c a l m a tte rs ,
because B r itis h Labour and th e S o v ie t Union stan d fo r
r a d ic a lly d i f f e r e n t co n cep tio n s o f S o c ia lism . B r itis h
Labour i s aim ing a t a kind o f S o c ia lism th a t can be d e
veloped on th e b a s is of p a rlia m e n ta ry i n s t i t u t i o n s , the
m ore-than-one p a r ty system , and an alm ost com plete f r e e
dom f o r anybody, and any p a r ty , to advocate an y th in g th ey
l i k e . The R u ssia n s, la rg e ly fo r h i s t o r i c a l r e a s o n s ,...
re fu s e to b e lie v e in th e p o s s i b i li t y of t h i s kind of Soc
ia lis m , which seems to them to involve a d e n ia l o f th e
d e r iv a tiv e n a tu re of p o l i t i c a l i n s t i t u t i o n s and of the
prim acy o f economic f o r c e s . C onsequently, w herever
th e re a r is e s in Europe a keen te n s io n s o f economic fo r c e s ,
th e R ussians look fo r a way o u t through s o c ia l re v o lu tio n ,
in v o lv in g a sim u ltan eo u s tra n sfo rm a tio n o f economic and
p o l i t i c a l i n s t i t u t i o n s , whereas B r itis h Labour aims p r i
m a rily a t a p o l i t i c a l s o lu tio n , both in th e b e l i e f th a t
democracy means p a rlia m e n ta rism and th a t p arlia m e n ta rism
i s th e re fo re r ig h t in i t s e l f , and in th e hope th a t th e
e sta b lish m e n t o f a dem ocratic P a rlia m e n t w ill e le a r th e
way fo r economic m easures o f dem ocratic S o c ia lis m .3
A th ir d m ajor d iffe re n c e the g r a d u a lis ts have w ith
Marxism concerns th e group o r c la s s which i s th e h i s t o r i c
conveyor o f s o c ia lism . Marx held th a t th e working c la s s , or
more n arro w ly , th e i n d u s t r i a l p r o l e t a r i a t , was ( is ) th e o n ly
re v o lu tio n a ry c la s s in s o c ie ty , the only c la s s capable of
b rin g in g about th e c o lla p s e o f c a p ita lis m and the r i s e of
s o c ia lis m . Veblen d e n ie s t h i s and h o ld s th a t the te c h n i
c ia n s w i l l b rin g about the p a ssin g of c a p ita lis m ; Burnham
Tl G.D.H. C ole, World in T ra n s itio n (Hew York; Oxford
U n iv e rsity P re s s , 1949), p . 1 3 ^ 9 .
90
d e n ie s b o th Marx and V eblen, d e c la rin g th a t th e m anagers
a re a lre a d y ta k in g o v er. The Lawrence t h e o r i s t s o f c o ll e c t
iv e e n te r p r is e hold th a t the consumers (and th e "p u b lic in
t e r e s t" ) are the tru e conveyors o f th e f u tu r e o rd er and have
gone f a r a lre a d y to d e s tro y c a p ita lis m . The F abians a re more
cosm opolitan in view p o in t and, w hile s tr e s s in g th e ro le o f
la b o r , b e lie v e in a w ider fro n t a g a in s t c a p ita lis m and give
more c r e d it to w ider s o c ia l fo rc e s th a n th e o th e r th re e
g r a d u a lis t s c h o o ls .
As fo r economic th e o ry , V eblen*s e v o lu tio n a ry i n s t i
tu tio n a lis m i s famous both fo r i t s s i m il a r it y and i t s d e n ia l
o f Marxism. For V eblen, i n s t i t u t i o n s undergo g rad u al ev o lu
tio n a ry change r a th e r th a n c a ta cly sm ic changes. C o n trasted
w ith Y eblen, th e Fabians* p o l i t i c a l economy i s an a d a p ta tio n
of Henry George*s r e n t concept to g e th e r w ith Jevons* m a rg in a l
ism to th e problem o f s o c ia liz a tio n , which i s held to be
n e c e ssa ry to e lim in a te unearned incom es, s u rp lu s e s , and ex
p l o i ta ti o n . The o th e r g r a d u a lis ts f i t in to one or an o th er
o f th e se two g re a t sc h o o ls, th e i n s t i t u t i o n a l i s t or th e m ar-
g i n a l i s t .
I I NON-SOCIALIST THEORIES
The in flu e n c e of K arl Marx upon the two th e o r is ts o f
g r a d u a lis t co n cep tio n s of th e d e c lin e and p assin g o f c a p i-
ta lis m , to be review ed in th is s e c tio n , i s c le a r . Y et both
th e o rie s a re to be c la s s i f i e d a s n o n - s o c ia li s t.
A p p aren tly , T h o rste in V eblen‘s p re o ccu p atio n w ith h is
concepts of psychology le d him to r e j e c t th o se fundam ental
p re c e p ts of K a rl Marx which would have p laced him c le a r ly
on the sid e o f the s o c i a l i s t s . On th e o th e r hand, James
Burnham re p re s e n ts a r e t r e a t from e a rly M arxian c o n v ic tio n s ,
alth o u g h he s t i l l b e a rs th e stam p of th e re v o lu tio n a ry d ia
l e c t i c in a l l th a t he w r ite s .
Xn what sense a re th e th e o rie s o f th e se two men non
s o c i a l i s t ? The s o c i a l i s t s look forw ard to a c la s s le s s so
c ie ty based upon th e power, a t f i r s t , o f the w orking c la s s e s
w hich, w ith th e e lim in a tio n o f p riv a te p ro p e rty and the p ro
p e r tie d c la s s e s , become c o -e x te n siv e and a t one w ith s o c ie ty
i t s e l f . Both Burnham and Veblen r e j e c t th i s p ic tu r e o f a
w o rk in g -c la ss dom inated tr a n s i t i o n t o a c la s s le s s s o c ie ty .
For Yeblen th e m otive fo rc e of tra n s fo rm a tio n i s th e en g in eer
th e fu tu re i s th e s o c ie ty o f te c h n ic ia n s and t h e i r p o l i t i c a l ,
s o c ia l, and economic dominance* F or Burnham, th e m otive
fo rc e o f t r a n s i ti o n i s th e m anager; th e fu tu re i s the s o c ie ty
o f m anagers and t h e i r p o l i t i c a l , s o c ia l, and economic domi
n an c e. And w hile s o c ia l ow nership of the means and i n s t r u
m ents of p ro d u ctio n i s n e c e ssa ry fo r th e com plete v ic to r y o f
th e m anagers o r perhaps even f o r th e e n g in e e rs , th ese w ill
9 2
n o t be c la s s le s s s o c ie tie s and, a s Burnham em phasizes,
th e r e f o r e , n o t s o c i a l i s t s o c i e t i e s .
Also;, i t m ight be ash ed , in what sen se a re th e se two
th e o r ie s g r a d u a lis t? T eblen developed h is th e o rie s of the
fu tu re o rd e r in a s e r ie s o f a r t i c l e s f o r the D ia l, in th e
months fo llo w in g th e A rm istice of th e F i r s t World War and
a g a in s t th e background of h y s te r ia which swept th e country
as a r e s u l t o f th e su ccess o f the R ussian B olshevik rev o
lu tio n . Not only were the "Cruardians o f th e T ested I n t e r s s t s "
in a s t a t e o f w ild h y s te r ia due to th e le v e lin g o f p riv ile g e
and p o s itio n in R u ssia , but a lso th e prim ary p o st-w ar de
p re ssio n was descending upon them, w ith a l l i t s th r e a ts o f
s o c ia l d is lo c a tio n and u n r e s t. Thus T eblen developed h is
th e o r ie s a g a in s t the background of v io le n t c a ta s tro p h ic
re v o lu tio n in E urope, and w ild h y s te r ia a t home, and he
posed h is problem a s th e b a s is o f the p o s s i b i l i t y of su c c e ss
f u l re v o lu tio n in A m erica. N e v e rth e le ss , he r e j e c t s revo
lu tio n as p o s s ib le in America and we m ust conclude on th e
w eight o f h is psychology, p h ilo so p h y , and i n s t i t u t i o n a l eco
nom ics, th a t T eblen was s t r i c t l y an e v o lu tio n is t and gradu
a l i s t in h is o u tlo o k .
On the o th e r hand, Burnham b e lie v e s t h a t the t r a n s i
tio n to the m an ag erial s o c ie ty w ill be th e r e s u l t of a lo n g -
run e v o lu tio n a ry p ro c ess having l i t t l e to do w ith c a ta s tr o
93
ph ic r e v o lu tio n . In d eed , th e t r a n s i t i o n i s underway today
in every advanced i n d u s t r i a l c o u n try . C a tastro p h es may r e
s u l t in tem porary s h i f t s of power among g ro u p s, perhaps
never d i r e c tl y in v o lv in g the m anagers. But w ith or w ith o u t
th e s e p o l i t i c a l tu rn o v e rs , the m anagers w il l come in to power,
re g a rd le s s of w hether th e country is ru le d by c a p i t a l i s t s
or b o ls h e v ik s , because of t h e i r s t r a t e g i c economic and te c h
n ic a l p o s itio n .
The S o c ie ty of te c h n ic ia n s . V eblen*s views of th e
fo rc e s te n d in g tow ard th e d e c lin e and p a ssin g of c a p ita lis m
appear s u c c in c tly in The E ngineers and th e P ric e System , a
c o lle c tio n o f a r t i c l e s w r itte n fo r th e D ia l d u rin g 1919.^
Since th e t i t l e s of th e s e a r t i c l e s throw l i g h t on th e s u b je c t
as Veblen develo p s i t , a re p ro d u c tio n i s in o rd e r: (1) On
th e N ature and B'ses 0f S abotage; (2) The I n d u s tr ia l System
and th e C ap tain s of In d u s try ; (3) The C ap tain s o f F inance
and the E n g in eers; (4) On th e Danger o f a R ev o lu tio n ary Over
tu rn ; (5) On th e C ircum stances which Make f o r a Change; and
(6) A Memorandum on a P r a c tic a b le S o v ie t of T ec h n ic ia n s.
For V eblen, th e c a p i t a l i s t system i s based upon c e r
t a i n c o n tra d ic tio n s , a r is in g from th e com m ercial v e rsu s th e
te c h n ic a l a sp e c ts of modern in d u s try . T his i s th e c o n tra -
4* T h o rste in V eblen, The E n g in eers and the P ric e System
(New York: The V iking P re ss7 l92lT.
9 4
d ic tio n between s c a r c ity and e f f ic ie n c y ; between b u sin e ss
sabotage v e rsu s the te c h n ic a l and o rg a n iz a tio n a l a b i l i t y t©
produce in abundance. On th e one hand, we have th e in d u s
t r i a l g e n e ra l s t a f f of e n g in e e rs and te c h n ic ia n s who d e fin e
economic a c t i v i t y in term s o f e f f ic ie n c y , o r th e g re a te s t
o u tp u t per man h o u r; on th e o th e r hand, we have the c a p ta in s
o f in d u s try , th e f in a n c ie r s and a b se n te e ow ners, who d e fin e
economic a c t i v i t y in term s o f p r o f i t s and l o s s , and who
sabotage e f f ic ie n c y o u t o f re s p e c t f o r value of s c a r c ity in
th e supply and demand r e la tio n s h ip s o f th e p ric e system .
S c a r c ity means h igh p r ic e s and good p r o f i t s ; abundance means
low p r ic e s , perhaps flo o d in g the m ark e ts, and lo s s e s .
But in th e com m ercial system , th e e n g in e e rs and te c h
n ic ia n s are su b o rd in ate to th e absen tee ow ners. The ab se n te e
owners fo rc e th e e n g in e e rs and te c h n ic ia n s to r e s t r i c t p ro
d u c tio n in th e i n t e r e s t s of s c a r c i t y . An economy o f abun
dance i s out o f th e q u e stio n u n le ss and u n t i l th e en g in ee rs
depose the ab sen tee owners and e s ta b lis h th e i n d u s tr ia l sy s
tem on th e b a sis o f e f f ic ie n c y as opposed to s c a r c ity .
The prim ary e v ils o f th e commercial system a re to be
found in i t s a d v e rtis in g and w aste, unemployment, unequal
d i s t r ib u ti o n , th e p ro d u ctio n o f s u p e r f lu iti e s and sp u rio u s
goods, and the sy ste m a tic d is lo c a tio n , sab o tag e , and d u p li
c a tio n o f goods and s e rv ic e s by the p r o f it- s e e k e r s .
9 5
The o p p re ssiv e c h a ra c te r o f th e se e v i ls and th e con
tr a d ic tio n s of the system lead to h o s t i l i t y and to the e v e n t
u a l p a ssin g of c a p ita lis m .
As fo r the p o s s i b i l i t y o f re v o lu tio n o f th e B olshevik
ty p e , how ever, th e p ro sp e c ts a re dim in i n d u s t r i a l ly advanced
c o u n trie s . U nlike people in backward a r e a s , such a s in
R u ssia , who a re la r g e ly s e l f - s u f f i c i e n t , people in advanced
c o u n trie s a re te c h n ic a lly im p o te n t. For an o v e rtu rn to be
s u c c e s s fu l, any economic d is lo c a tio n s would have to be
ra p id ly overcome, and t h i s would be im p o ssib le w ith o u t th e
su p p o rt of the te c h n ic ia n s .
Thus th e ro le o f th e te c h n ic ia n s i s s t r a t e g i c . In
f a c t , th e te c h n ic ia n s a re e s s e n t ia l to an in d u s tr ia liz e d
s o c ie ty of w hatever ty p e . They are n e c e ssa ry w hereas owners
a re n o t {although c a p it a l i s n e c e s s a ry ). ”The te c h n ic ia n s
a re in d isp e n sa b le to p ro d u c tiv e in d u s try o f t h i s m echanical
s o r t; th e V ested I n t e r e s t s and t h e i r ab sen tee owners a re
n o t. The te c h n ic ia n s a re in d isp e n sa b le to the V ested I n t e r
e s t s and th e ir ab se n te e ow ners, as a working fo rc e w ith o u t
w hich th e re would be no in d u s tr i a l o u tp u t to c o n tro l or d i
v id e ; w hereas th e V ested I n t e r e s t s and t h e i r ab se n te e owners
a re of no m a te r ia l consequence to th e te c h n ic ia n s and t h e i r
work, excep t as an e x tra n eo u s in te r f e r e n c e and o b s tr u c tio n .” 5
I b i d . . p. 136.
96
T h erefo re any q u e stio n o f a re v o lu tio n a ry o v e rtu rn ,
in American or in any o th e r of th e advanced i n d u s t r i a l
c o u n tr ie s , re s o lv e s i t s e l f in p r a c t ic a l f a c t in to a
q u e s tio n of what th e g u ild of te c h n ic ia n s w ill do. In
e f f e c t i t i s a q u e stio n w hether th e d is c r e tio n and r e s
p o n s ib ility in th e management o f th e country*s in d u s try
s h a l l p ass from th e f in a n c ie r s , who speak fo r th e V ested
I n t e r e s t s , to th e te c h n ic ia n s , who speak fo r th e in d u s
t r i a l system as a going co n cern . There i s no t h ir d p a r
ty q u a lif ie d to make a c o lo ra b le b id , or ab le to make
good i t s p re te n s io n s i f i t should make a b id . So long
as th e v e ste d r i g h t s o f a b se n te e ow nership rem ain i n t a c t ,
th e f i n a n c ia l powers—th a t i s to say th e V ested I n t e r
e s t s —w i ll co n tin u e to d isp o se o f th e country*s i n d u s t r i a l
fo rc e s fo r t h e i r own p r o f i t ; and so soon, or so f a r , as
th e se v e ste d r ig h ts give way, th e c o n tro l of th e p e o p le ’ s
m a te ria l w elfare w ill p a ss in to th e hands of th e te c h
n ic ia n s . There i s no th ir d p arty .®
But what a re the chances o f a te c h n ic ia n ’ s re v o lt?
The chances are v e ry s lim th a t an y th in g l i k e a S o v ie t o f
T echnicians can be s e t up.
By s e ttle d h a b it the te c h n ic ia n s , the e n g in e e rs and
i n d u s t r i a l e x p e rts , are a h arm less and d o c ile s o r t , w e ll
fed on th e w hole, and somewhat p la c id ly c o n ten t w ith the
**full d in n e r - p a il" which th e lie u te n a n ts o f th e V ested
I n t e r e s t s h a b itu a lly allo w th em .7
In so f a r as th e te c h n ic ia n s are o rg an ized th ey are
(o r were a t the tim e Veblen w rote in 1919) organized in th e
A .F. o f L.
The n e a re s t approach to a p ra c tic a b le o rg a n iz a tio n
o f i n d u s t r ia l fo rc e s in A m erica, ju s t y e t, i s the A.S’, o f
L .; which need o n ly be named in o rd e r to d is p e l th e i l l
u sio n th a t th e re i s an y th in g to hope or f e a r in the way o f a
6 . i b i d . . p. 155-6.
7* X bid. . p . 88-9*
9 7
r a d ic a l movement a t i t s han d s. The A .F . o f L. i s i t s e l f
one o f th e V ested I n t e r e s t s , as read y as any o th e r to do
b a t t l e fo r i t s own m argin of p r iv ile g e and p r o f i t . . . i t i s
o ffic e re d by t a c t i c i a n s s k ille d in th e ways and means
of b a rg a in in g w ith p o l i ti c i a n s and in tim id a tin g employ
e rs and em ployees; n o t by men who have any s p e c ia l i n
s ig h t in to o r i n t e r e s t in th e ways and means o f q u a n tity
p ro d u c tio n and t r a f f i c management. . .I n e f f e c t , the F ed er
a tio n i s o ffic e re d by s a fe and sane p o l i t i c i a n s , and i t s
rank and f i l e a re v o ta r ie s o f " th e f u l l d in n er n a i l . ”
No G uardian need w orry about the F e d e r a tio n ....®
Thus w hile th e te c h n ic ia n s a re th e o n ly group capable
o f e f f e c tin g re v o lu tio n th e re i s l i t t l e chance of th e ir a c t
in g in a re v o lu tio n a ry m anner. But a n a ly s is in d ic a te s th h t
th e y are h i s t r o i c a l l y th e s t r a te g i c group, n e c e ssa ry to so
c ie ty ; and th e p re s e n t com m ercial system i s in c o n tra d ic tio n
to the w e lfa re o f hum anity. E v o lu tio n m ust th e re fo re be
counted upon to b rin g ab o u t a fa v o ra b le s o lu tio n .
The m an ag erial r e v o lu tio n . lam es Burnham*s a n a ly s is
of the d e c lin e and p a ssin g o f c a p ita lis m d i f f e r s from Veb
len* s in th a t Burnham em phasizes a d if f e r e n t s o c ia l fo rc e or
c la s s as w e ll as d if f e r e n t f a c to r s in the p a s s in g .9 i f le s s
b r i l l i a n t , Burnham i s a t l e a s t more p o s itiv e in h is a n a ly s is
o f th e p a ssin g .
W e can, I th in k , l i s t c e r ta in s e ts o f f a c t s which give
a l l th e grounds th a t a re aso n ab le man should need fo r be-
Ibid. . p.
9. James Burnham, M anagerial R e v o lu tio n .
98
lie v in g tiiafc c a p ita lis m i s n o t going to c o n tin u e ; th a t
i t w il l d isa p p e a r in a couple o f decades a t most and p e r
haps in a couple o f y e a rs (w hich i s as e x a e t a s one
should p reten d to be in th e s e m a tte r s ) . These f a c t s do
n o t dem onstrate t h i s in th e way t h a t a m athem atical or
lo g ic a l theorem i s d em o n strated ; no b e l i e f about fu tu re
e v e n ts can be so d em o n strated . They sim ply make th e
b e l i e f more pro b ab le th a n any a lte r n a tiv e b e l i e f , which
i s as much as can be done .3-0
Burnham l i s t s n in e re a so n s s u f f ic ie n t to cause any
i n t e l l i g e n t man to b e lie v e th a t c a p ita lis m cannot l a s t .
1 . The f i r s t , and perhaps c r u c ia l, evidence fo r th e
view t h a t c a p ita lis m i s n o t going to contin u e much lo n
g er i s th e co n tin u o u s presen ce w ith in th e c a p i t a l i s t
n a tio n s o f mass unemployment and th e f a ilu r e o f a l l means
t r i e d fo r g e ttin g r id o f m ass unemployment. . . .C o n tin u
ous mass unemployment i s n o t new in h is to r y . I t i s , in
f a c t , a symptom t h a t a g iv en type of s o c ia l o rg a n iz a tio n
i s j u s t about f in is h e d . I t was found among th e p o o re r
c itiz e n s d u rin g the l a s t y e a rs o f A thens, among the
urban ”p r o l e t a r i a t " (a s th e y were c a lle d ; in th e Homan
E m pire, and very n o ta b ly , a t th e end o f th e M iddle Ag e s ,
among th e d isp o sse sse d s e r f s and v i l l e i n s who had been
throw n o f f th e lan d in o rd e r to make way fo r c a p i t a l i s t
use o f th e la n d .
2 . C a p ita lis t b u sin e ss c y c le s , booms and b u s ts .
3 . The volume o f p u b lic and p riv a te d eb t i s le a d in g
to th e u t t e r d is lo c a tio n o f a l l c a p i t a l i s t i n s t i t u t i o n s .
k . The growing lim ita tio n s on f r e e m onetary e ichange
tr a n s a c tio n s , so v i t a l to c a p ita lis m .
5 . The perm anent a g r i c u l t u r a l d e p re ssio n which began
11. I b i d . . p . 3 1 -2 .
99
s h o r tly a f t e r World War I (and was only te m p o ra rily a l l e v
ia te d by the o u tb reak o f World War II? )*
6* The d ry in g up o f o u tle ts fo r a v a ila b le in vestm ent
funds*
7* The grow ing i n a b i l i t y o f th e g r e a t c a p i t a l i s t
n a tio n s "any lo n g er to manage th e e x p lo ita tio n and d evelop
ment" o f backward a re a s o f th e world*
8* C a p ita lism i s no lo n g e r dapable of u sin g i t s own
te c h n o lo g ic a l p o s s i b i l i t i e s , a s in d ic a te d by th e i n a b i l i t y to
c a rry o u t a housing program , and th e e x is te n c e o f w idespread
te chnologi c a l unemployme n t .
9* As sym ptom atic and d e c is iv e a s th e s e economic and
te c h n ic a l developm ents i s the fa c t t h a t th e id e o lo g ie s
o f c a p ita lis m , th e bourgeois id e o lo g ie s , have become im
p o ten t* Id e o lo g ie s , we have see n , a r e th e cement t h a t
b in d s to g e th e r th e s o c ia l f a b r ic ; when th e cement lo o s e n s ,
the f a b r ic i s about to d i s i n te g r a t e . And no one who h as
watched th e w orld d u rin g th e p a s t 20 y e a rs can doubt the
e v e r-in c re a s in g im potence o f the bourgeois id e o lo g ie s .12
As f o r the p ro c e ss o f tra n s fo rm a tio n , the t r a n s i t i o n
to th e m an ag erial s o c ie ty i s a lre a d y w e ll under way in a l l
advanced c o u n tr ie s . But who a re th e m anagers?
C e rta in in d iv id u a ls —th e o p e ra tin g e x e c u tiv e s , p ro d u c tio n
m anagers, p la n t s u p e rin te n d e n ts , and t h e i r a s s o c ia te s —
have charge o f th e a c tu a l te c h n ic a l p ro c e ss o f producing*
I t i s t h e i r job to o rg an ize the m a te r ia ls , t o o ls , m achines,
p la n t f a c i l i t i e s , equipm ent, and la b o r in such a way as
to tu r n out the a u to m o b ile s. These are the in d iv id u a ls
X£. Ibid*, p > 3$.
100
whom I c a l l "th e m an ag ers.”-* -3
The m anagers a re to be d is tin g u is h e d from th e f in a n c e -
e x e c u tiv e s , who have the fu n c tio n o f g u id in g th e company
tow ard a p r o f i t , as w ell as from the f i n a n c e - c a p it a li s t s ,
the b ankers and b ig f in a n c ie r s , who a c tu a lly a p p o in t the
boards o f d i r e c to r s , s e t up h o ld in g companies and i n t e r
lo c k in g d i r e c to r s , and make use o f o th e r d ev ice s to secu re
c o n tro l and to se rv e f i n a n c ia l en d s. "T h eir d ir e c t concern
i s n o t or need n o t be, e ith e r the te c h n ic a l p ro cess of p ro
d u c tio n or even th e p r o f i t of th e p a r ti c u l a r company.” N ei
th e r a re th e managers to be confused w ith th e sto c k h o ld e rs,
th e " le g a l owners” o f th e com panies.
I t i s to be noted t h a t the m anagers depend, fo r t h e i r
p o s itio n , on the tech n o lo g y of modern in d u s try . They are
in d is p e n s a b le , and w in t h e i r p o s itio n s of p riv ile g e due to
t h e i r in d u s tr ia l n e c e s s ity . But fo r th e o th e r c la s s e s of p r i
v ile g e —the f in a n c ie r s , e x e c u tiv e s , sto c k h o ld e rs, e t c . —th e y
depend upon p r e v a ilin g r e la tio n s o f p ro d u c tio n fo r t h e i r p r i
v ile g e s and can be e lim in a te d w ith o u t d is r u p tin g th e produc
tiv e p ro cess i t s e l f . In d eed , mass unemployment may be in th e
i n t e r e s t s o f th e e x e c u tiv e s , f in a n c ie r s , and s to c k h o ld e rs —
who may te m p o ra rily w ithhold (" b u sin e ss sabatoge” ) i n s t r u
m ents and s e rv ic e s o f p ro d u c tio n in o rd e r to p r o te c t a c e r ta in
IT ! I b i d . . p . 82.
101
p rio e s tr u c tu r e or to defend t h e i r i n t e r e s t s in tim e s of
“u n c e rta in ty " and " p ric e a d ju stm e n ts"—b u t opposed to th e
i n t e r e s t s o f th e m anagers who, lik e V eblen*s te c h n ic ia n s ,
a re in te r e s te d in e f f i c i e n t o rg a n iz a tio n and o u tp u t and who
o n ly lo s e by p o lic ie s o f re s tr ic tio n is m *
The p o s itio n , r o l e , and fu n c tio n o f th e m anagers are
in no way dependent upon th e m aintenance o f c a p i t a l i s t
p ro p e rty and economic r e la tio n s (even i f many o f th e man
a g e rs them selves th in k s o ); th e y depend upon th e te c h
n ic a l n a tu re o f th e p ro c e ss of modern production* Conse
q u e n tly , th e p re s e rv a tio n o f th e c a p i t a l i s t r e la tio n s i s
n o t an a b s o lu te ly d e c is iv e q u e stio n fo r th e managers*
The p o s itio n , r o l e , and fu n c tio n o f th e most p riv ile g e d
o f a l l th e g roups, th e f i n a n e e - c a p it a li s t s , a r e , how ever,
e n t i r e l y bound up w ith c a p i t a l i s t p ro p e rty and economic
r e l a ti o n s , and t h e i r p re s e rv a tio n i s d e c is iv e f o r even
th e continued e x is te n c e of t h i s group* This h o ld s in
g e n e ra l and cannot h e lp a f f e c tin g the s i t u a t io n w ith
re s p e c t to more s p e c if ic problem s*14
O ccupational b ia s , a s w e ll a s economic i n t e r e s t s , is
a source of c o n f lic t among th e s e c o n tro l groups*
The m anagers, due t o t h e i r p o s itio n o f b ein g techno
lo g ic a lly in c o n tro l o f p ro d u c tio n and th e re b y in d isp e n sa b le
to the modem in d u s t r i a l en g in e, and due to the p a s s iv ity
o f th e s to c k h o ld e rs , th e le g a l ow ners, w ith re s p e c t to th e
o p e ra tio n of th e modern c o rp o ra tio n s , in e f f e c t have r e a l
c o n tro l o f a c c e ss to th e in stru m e n ts o f production* The
m anagers a re se c u rin g more and more c o n tro l o f th e economic
system and a re m aneuvering in to a p o s itio n o f power and p r i -
14, I b id * , p* 91.
of Southern California LlbFOfrS
102
v ile g e , the d is tin g u is h in g marks o f th e r u lin g c la s s of any
s o c ie ty . However:
The b ig b o u rg e o is ie . th e f i n a n c e - c a p it a l i s t s , a re
s t i l l th e r u lin g c la s s in th e U n ited S ta te s ; th e f i n a l
c o n tro l i s s t i l l in t h e i r hands, ^ u t we must n o t view
th e w orld too narrow ly nor lim i t our ey es to the su rfa c e *
For i t i s a w orld p ro c ess w ith w hich we a re d e a lin g ,
sin c e c a p ita lis m i s a world system ; th e U nited S ta te s i s
lin k e d eco n o m ically , s o c ia lly , c u l t u r a l l y , and, most
d ra m a tic a lly o f a l l (how w e ll we know t h i s to d a y !) , s t r a
t e g i c a l l y w ith a l l th e world* &nd p ro c e ss goes
a l l th e way to th e ro o ts of s o c ie ty ; i t does n o t rem ain
m erely on th e o u te r la y e r s . I f we l i f t our ey es to th e
w orld a re n a and sin k them to the r o o t s , we w i ll see
what i s th e r e : th a t th e c a p i t a l i s t s , th e ru lin g c la s s
o f modern s o c ie ty , a re lo s in g c o n tr o l, th a t the s o c ia l
s tr u c tu r e whieh p laced them in the p o s itio n o f r u lin g
c la s s i s b e in g tran sfo rm ed , n o t tomorrow, b u t now, as
we w atch . In th e new s tr u c tu r e , when I t s fo u n d a tio n s
a re com pleted, th e re w ill be no c a p i t a l i s t s . 15
But t h i s does not mean t h a t the few hundred g re a t
fa m ilie s cannot s t i l l c ra c k a m ighty w hip:
There can be no q u est ion today about the c o n tro l over
p r e f e r e n tia l tre a tm e n t in d i s t r i b u t i o n which i s possessed
by th ese f a m ilie s . The funds a v a ila b le to them are c o lo s
s a l in r e l a t i o n to t h e i r sm all num bers. In s p ite of much
t h a t i s w ritte n and s a id on th e s u b je c t, probably few
o u ts id e t h e i r ra n k s r e a l l y comprehend th e s c a le o f lu x u ry
on w hich many o f them l i v e , a s c a le exceeding a n y th in g
known b e fo re in h is to r y .
N e v e rth e le s s , we have seen t h a t of th e two d e c is iv e
elem ents in a c tu a l ow nership, c o n tro l over p r e f e r e n tia l
tre a tm e n t in d is t r i b u t i o n is su b o rd in a te to c o n tro l over
access* W ith r e s p e c t t o th e l a t t e r , though i t i s by no
means y e t o u t of th e hands o f th e b ig b o u rg e o is ie , though
I t can be e x e rc ise d by them on c r u c ia l o c c a sio n s, i t h as
x5* Ib id * . pT 97*
1 £
on th e whole heen d im in ish in g d u rin g th e p a st g en eratio n *
F or one th in g , th e r e has been a w ith d raw al o f th e
b ig c a p i t a l i s t s from p roduction* There has been a d e le g a tio n
o f power to th e managers* But such a d e le g a tio n o f power i s
u n s ta b le , and in th e p a s t has le d to a new c la s s se c u rin g
dominance th ro u g h m onopolizing a c c e s s .
The in stru m e n ts o f p ro d u c tio n are th e s e a t of s o c ia l
dom ination; who c o n tr o ls them , i n f a c t , n o t in name, con-
t o l s s o c ie ty , fo r th e y a re th e means whereby s o c ie ty
l i v e s . The fa c t to d a y is th a t th e c o n tro l of th e big
c a p i t a l i s t s , c o n tro l based upon c a p i t a l i s t p riv a te
p ro p e rty r i g h t s , over the in stru m en ts o f p ro d u c tio n
and t h e i r o p e ra tio n , i s , though s t i l l r e a l , grow ingly
ten u o u s, i n d i r e c t , in t e r m i tte n t. More and more o f the
tim e , over more and more phases of th e p ro d u c tiv e pro
c e s s , no c a p i t a l i s t in te rv e n tio n a p p e a r s . 7
F urtherm ore, c o n tro l i s p a ssin g from the b o u rg e o isie
over in to th e hands o f managers through the e x te n s io n o f
government in to th e economy, both as owner and r e g u la to r .
When th e government owns, th e m anagers are the group which
re c e iv e s th e h ig h e s t p r e f e r e n tia l tre a tm e n t; th e r e a re no
fin a n c e c a p i t a l i s t s over them . When the government r e g u la te s ,
i t i s f a c t ex ten d s c o n tro l over th e c a p i t a l i s t s th em selv es,
and t h i s c o n tro l i s e x e rc is e d by government managers*
A c le a r w itn ess to th e t r u t h o f t h i s l a s t o b se rv a tio n
TF l Tb'i d *.' "p * ' "T E K T .
17* I b i d . . p . 102.
104
i s provided by th e grow th in th e number o f " b rig h t youhg
m en," o f tr a in e d and ed u eated and am b itio u s y o u th , who
s e t out fo r c a re e r s in th e governm ent, not as p o l i ti c i a n s
in th e old s e n s e , but a s m anagers i n the v a rio u s ag en cies
and b u reaus in a l l th e myriad f i e l d s where th ey now o p er
a t e , A g e n e ra tio n ago th e se young men would alm ost a l l
have been headed fo r p riv a te e n t e r p r is e , w ith th e g o al o f
making a name f o r them selves in b u s in e s s , in d u s try , o r
fin a n c e , and perhaps o f fin d in g a p la c e in the charmed
ranks of th e upper b o u rg e o is ie , l ^ r e and more of them
u n d erstan d now t h a t s e c u r ity , pow er, o r sim ply th e chance
to e x e rc is e t h e i r t a l e n t s a re n o t to be found in th e o ld
ways b u t must be sought elsew h ere. The young men th in k in g
and a c tin g in t h i s way in c lu d e , s ig n i f i c a n t l y enough,
many o f th e c h ild re n of the c a p i t a l i s t s th em selv es, who
p erhaps sense t h a t the dom inion e x e rc ise d by t h e i r
p a re n ts as c a p i t a l i s t s can be co n tin u ed by th e c h ild re n
only th ro u g h g iv in g up c a p ita lis m .18
The t r a n s i t i o n w il l be com plete when the means and
in stru m en ts of p ro d u c tio n are s o c ia liz e d , and th e sto ck h o ld
e r s , f in a n c ie r s , and e x e c u tiv e s a r e d e f in i t e l y e lim in a te d .
Then th e group w ith th e most p r e f e r e n t i a l tre a tm e n t w i l l be
th e m anagers, and the r u lin g c la s s i s d efin ed in term s o f
a c c e ss to p r e f e r e n ti a l tre a tm e n t.
Summary. Marx*a c la s s le s s so c ia lis m , to be o b tain ed
th ro u g h the w orking c la s s and th e s o c i a l fo rc e making fo r
fundam ental change, i s c o n tra s te d w ith th e p re s e n t two th e o r
i e s , both o f w hich see a fu tu re dom inated by p riv ile g e d g ro u p s,
e ith e r te c h n ic ia n s or m anagers, depending on which th e o ry
m ight be c o r r e c t, who com prise th e fo rc e s of change.
W e now tu r n to two s o c i a l i s t th e o r ie s of the g ra d u a l
18. Ibid^, p. 109.
105
d e c lin e and p a ssin g o f c a p ita lis m . W e w ill ta k e up f i r s t
the th e o ry of th e developm ent o f c o lle c tiv e e n te r p r is e and
th en tu rn to th e most im p o rtan t th e o ry o f t h i s s e c tio n , th e
F abian th e o ry o f s o c ia lis m .
I I I . DEVELOPM ENT 0W COLLECTIVE ENTERPRISE
The p u b lic a tio n in 1943 of a volume e n t i t l e d D evelop
ment o f C o lle c tiv e E n te rp ris e b rought to an end a fiv e - y e a r
in v e s tig a tio n by a group of t h i r t y c o lla b o r a to r s , th e s o -c a lle d
“Lawrence G roup," in to th e problem o f th e p assin g o f c a p it a l
i s m .^ The Lawrence G roup, s o -c a lle d because th e c h ie f c o l
la b o ra to r s re sid e d in Lawrence, K ansas, was headed by Seba
E ld rid g e , who w rite s in th e p re fa c e o f th e fin d in g s o f th e
in v e s tig a tio n :
The group s e t up two g e n e ra l o b je c tiv e s : (1) d e te r
m in a tio n , th ro u g h an in d u c tiv e s tu d y , o f th e b a s ic f a c to r s
in th e grow th o f c o lle c tiv e u n d e rta k in g s, p a r ti c u l a r ly
in th e U nited S ta te s ; (2) an e x p o s itio n o f th e s e u n d er
ta k in g s a s going co n cern s, in c lu d in g th e u n d erly in g
c o n tr o ls , a d m in is tra tiv e p a tte r n s , f in a n c ia l p o l i c i e s ,
p erso n n e l c o n d itio n s , and so f a r as p o ssib le t h e i r o p er
a tio n a l e f f i c i e n c i e s . A tte n tio n has been c e n te re d m ostly
on th e f i r s t o b je c tiv e , b ecau se, s tra n g e as i t seem s,
no s tu d y of th a t n a tu re has been made h i t h e r t o . W e have
been c o n te n t w ith h ig h ly s p e c u la tiv e th e o r ie s on th e sub
j e c t , v i r t u a l l y a l l o f them im ported from a b ro a d . In
view o f th e g r e a t and a c c e le r a tin g grow th o f c o lle c tiv e
e n te r p r is e s , our stu d y may throw some l ig h t on th e dynam
ic s o f an em ergent economy d e stin e d to p r e v a il in the
19. Seba E ld rid g e and a s s o c ia te s , Development of
C o lle c tiv e E n te rp ris e (feawrence: U n iv e rs ity o f Kansas P r e s s ,
106
f u t u r e ; and a t a l l ev e n ts i t o f f e r s an in d u c tiv e th<
o f tre n d s in th a t d i r e c tio n up to th e p re se n t tim e*'
The h y p o th e s is . W ith v a rio u s w r ite r s p re se n tin g th e
view s o f th e group on p a r tic u la r s u b d iv is io n s o f th e in v e s t
i g a tio n , the " th e o r e tic a l a s p e c ts " are p re se n te d by Seba
E ld rid g e , th e prom otor, m o re -o r-le s s , o f th e p r o je c t.
A ccording to A ld rid g e , th e group began i t s p ro je c t
w ith a c r iti c i s m o f p re v a ilin g h y p o th eses, th e two m ajor
ones b ein g th e M arxian d o c trin e " th a t a c o l l e c t i v i s t regim e
i s to be e s ta b lis h e d through a c tio n of th e w age-earning
c la s s " ; and a s i t u a t io n a l h y p o th e sis to th e e f f e c t th a t many
f a c to r s , and not jp s t one i n p a r ti c u la r , w i ll b rin g about
th e end o f c a p ita lis m .
R e je c tin g th e p r e v a ilin g h y p o th e se s, th e group form
u la te d i t s own:
In a " c a p i t a l i s t i c democracy" (where c a p ita l i s owned
m ainly by in d iv id u a ls , and where u ltim a te p o l i t i c a l power
i s e x e rc is e d —in some m easure— by the "m asses") e x te n sio n s
o f c o lle c tiv e e n te r p r is e (in w hich c a p ita l i s . owned by
g ro u p s, n o t by in d iv id u a ls ) a re e f f e c te d m ainly and
p rim a rily th ro u g h th e p re ss u re o f consumer a n d /o r g e n e ra l
p u b lic needs or i n t e r e s t s ; alth o u g h a l l o th e r major c a te
g o rie s o f economic and s o c ia l i n t e r e s t s w i l l o p e ra te v a r
io u s ly as m inor, seco n d ary , a u x ilia r y , d e r iv a tiv e , o r
c o n d itio n in g f a c to r s in p ro c e sse s of c o l l e c t i v i z a t i o n .21
Thus th e m otive fo rc e s o f h is to r y , d e s tin e d to b rin g
^0. I b i d . . p . vT
2 ! . I b i d . . p . 5 .
107
about th e p assin g o f c a p ita lis m , a re n o t Marx*s p r o l e t a r i a t ,
V eblen*s e n g in e e r, Burnham*s m anager, e t c . , but th e **consumer
an d /o r g e n e ra l p u b lic needs o r i n t e r e s t s . "
E ldrddge th en goes in to an a n a ly s is o f h is g ro u p ’s
"m o tiv atin g f o r c e s ," d is tin g u is h in g f i r s t , two m ajor c a te
g o rie s o f consumer i n t e r e s t s : (1) the f i n a l consumers and
(2) th e In te rm e d ia te consum ers. The i n t e r e s t s o f th e f i r s t
group a re f e l t p a r ti c u l a r ly in th e f i n a l goods in d u s tr ie s ,
b u t th e y can re e n fo rc e th e i n t e r e s t s o f th e In te rm e d ia te
consumers who buy and use producers* goods, in c lu d in g b u ild
in g s and m achines, raw m a te r ia ls or p a r tly p ro cessed m ater
i a l s , f u e l, power, c r e d i t s , tr a n s p o r ta tio n , e t c .
The p u b lic i n t e r e s t , E ld rid g e d e fin e s as "th o se of
community, s o c ie ty , or s t a t e as a whole" which are broken
down in to two main g ro u p s. P u b lic i n t e r e s t s may be s e l f i s h .
Businessmen d e s ire W P A in o rder to b e n e f it from s e llin g goods
to those who work under W PA; o th e rs support p u b lic e d u c a tio n ,
to use E ld rid g e * s example a g a in , because th ey hope to b e n e f i t ,
n o t them selves d i r e c t l y , b u t i n d i r e c t l y through an improved
community.
A gain, p u b lic i n t e r e s t s may be a l t r u i s t i c . P eople may
su p p o rt p u b lic a c tio n to p re v en t e a ^ p lo ita tio n , fo r exam ple.
F a c to rs in s o c ia liz a tio n a re th u s th o u g h t o f in term s
o f human needs and intei® sts> and r e la te d group p re s s u r e s ,
such as a re open to f a i r l y d ir e c t o b se rv a tio n . But i t
was reco g n ized t h a t id e n tif ie d w ith and la r g e ly shaping
108
th e se i n t e r e s t s a re " in d u s tr i a l tech n o lo g y (in c lu d in g
means o f tr a n s p o r ta tio n and com m unication), p r e v a ilin g
modes of p ro p e rty , o p e ra tio n of p r ie e and m arket mechan
ism s, s ta n d a rd s of liv in g , th e system of p o l i t i e s , govern
m ent, and c i v i l l i b e r t i e s , in flu e n c e s o f e d u c a tio n a l
and o th e r s o c ia l i n s t i t u t i o n s , c u rre n t mores and f o lk
ways (in a d d itio n to th o se in d ic a te d ) , lan d and o th er
geographic c o n d itio n s , inborn human t r a i t s and c a p a c itie s ,
and th e whole system o f p ro d u c tio n and d i s t r i b u ti o n w ith
i t s p e rso n n e l and c a p it a l equipm ent grow ing o u t o f such
f a c t o r s ,22
The m ethodology of th e Lawrence Group a ls o i s to be
d is tin g u is h e d from th e M arxian method review ed in th e l a s t
c h a p te r, sin c e Marx went beyond in d u c tiv e s tu d ie s and a p p lie d
a d i a l e c t i c a l m ethod. As fo r the scope o f the Lawrence G roup's
s tu d ie s , A ldridge w rite s :
The c o lla b o ra to r s on due c o n s id e ra tio n decid ed to
assem ble m a te ria ls on s ig n if ic a n t f e a tu r e s o f c o lle c tiv e
e n te r p r is e o th e r th an f a c to r s in th e p ro c e ss o f s o c i a l
iz a ti o n . . .A lto g e th e r, e ig h t a s p e c ts were to be covered:
(1) Growth o f c o lle c tiv iz a tio n as in d ic a te d by c a p ita l
equipm ent, c u rre n t e x p e n d itu re s , la b o r em ployed, an d /o r
e x te n t o f s e rv ic e s re n d e re d .
(2) F a c to rs re s p o n s ib le fo r t h i s grow th, in c lu d in g
p u b lic o p in io n , group p re s s u re s , and s p e c ia l prom otive
e f f o r t s fo cu ssed on p r a c t ic a l is s u e s , to g e th e r w ith
lim ita tio n s o f p r iv a te e n te r p r is e , f a i l u r e s o f le g a l
r e g u la tio n , and th e l i k e .
(3) Ty§e o f ow nership and c o n tr o l, w hether by th e
s t a t e ( f e d e r a l, s t a t e , lo c a l, or a com bination of th e se )
o r by v o lu n ta ry a s s o c ia tio n s ; and re p re s e n ta tiv e of work
e r s , consum ers, and p u b lic in the fo rm u latio n of p lan s
and p o lic ie s .
(£) A d m in istra tiv e o rg a n iz a tio n , w hether c e n tr a liz e d ,
22. Ibid. . p. 6
109
d e c e n tra liz e d , or fe d e ra tiv e in s t r u c t u r a l p a tte r n :
n a tu re o f a u th o r ity e x e rc ise d by c e n tr a l ag e n cies ( e .g .,
l e g i s l a t i v e assem bly, ex e cu tiv e d ep artm en t, o r fe d e ra
t i o n o f c o o p e ra tiv e s} , and r e la te d questions*
(5) F is c a l p o lic ie s r e la ti v e to c a p ita l fu n d s, o p er
a tin g re v en u es, s e rv ic e c h a rg e s, and o th e r f e a tu r e s .
(6) Work in c e n tiv e s —p ec u n ia ry re w ard s, s e rv ic e mo
t i v e s , v o c a tio n a l s ta n d a rd s , and o th e rs .
{7) Working c o n d itio n s —q u a lif ic a tio n s fo r p o s itio n s ,
r a te s o f pay, f a c to r s in prom otion, s e c u r ity o f te n u re ,
p ro v is io n o f in su ra n c e , management of p e rso n n e l, s a fe
guards a g a in s t a c c id e n ts and d is e a s e , o rg a n iz a tio n o f
w orkers fo r b a rg a in in g or o th e r p u rp o ses.
(8) E ffic ie n c y o f se rv ie e as judged by a c c e p te d
sta n d a rd s , and a ls o as compared w ith lik e s e rv ic e s o f
p riv a te u n d e rta k in g s (where com petent s tu d ie s o f th e s e
q u e stio n s have been m ade).
The f i r s t a sp e c t c o n s titu te s the main f i e l d of in q u iry ,
and our c e n tr a l problem is i d e n t if i e d w ith th e second
a s p e c t. Some tra tm e n t of th e s ix o th e r a s p e c ts i s r e a l ly
e s s e n tia l in d e s c rib in g a f i e l d of e n te r p r is e , b u t a l l
th e se a re o f g re a t i n t e r e s t in th e m se lv e s.2^
Meaning o f s o c ia lis m . The problem o f u n d ersta n d in g
what i s meant by th e developm ent o f c o lle c tiv e e n te r p r is e ,
w r ite s E ld rid g e , i s one of u n d ersta n d in g th e i n s t i t u t i o n a l
c o n te x t, th e i n t e r e s t complex, and tra n sfo rm a tio n o f, ifche p o l
itic o -e c o n o m ic o rd e r.
C o n trary to Marx, th e problem o f s o c ia liz a tio n i s n o t
bound up w ith economic cau ses a lo n e , E ld rid g e d e c la r e s . Far
from being th e c h ie f m o tiv a tin g in flu e n c e , th e economic s y s
tem i s o nly one o f s e v e ra l fundam ental i n s t i t u t i o n s and th e
2J. I b i d . .' p. 7.
1 X 0
grow th o f c o lle c tiv e e n te r p r is e must beeseen in r e la tio n to
th e whole o f our c u lt u r a l p a tte r n in order to be understood*
The economic in te r p r e ta tio n i s " f a ls e when i t makes produc
tio n and consum ption o f w ealth the d riv in g fo rc e in s o c ie ty ,
f o r g e ttin g t h a t t h i s d riv e and i t s ever changing form s are
them selves d e r iv a tiv e s o f fo rc e s more p rim itiv e and funda
m ental*"2^
A lso c o n tra ry to Marx, th e i n t e r e s t group te n d in g to
b rin g ab o u t s o c ia liz a tio n i s not th e p r o le ta r ia t*
Program s o f s o c ia liz a tio n a re designed to e lim in a te
p riv a te in v e s to rs as an economic c l a s s , and t r a n s f e r
c a p ita l ow nership to some p o l i t i c a l u n it or v o lu n ta ry
c o lle c tiv e * That le a v e s fo u r d i s t i n c t groups w hich
m ight be expected to favor or a t l e a s t a c c e p t the change*
I t i s s ig n if ic a n t th a t we now have fo u r com peting
co n cep tio n s o f s o c ia liz a tio n , each re g a rd in g a d if f e r e n t
group as th e s o c ia liz in g force* ^hey a re , in o rd e r, (1)
th e m an ag erial th eo ry o f Burnham; (2) th e consum er-public
h y p o th e sis; and (4) th e s i t u a t i o n a l h y p o th e sis em bracing
a l l th e s e g ro u p in g s, ex cep t fo r th e e x c lu sio n o f p r iv a te
c o rp o ra tio n managers* The t h i r d and fo u rth h y p o th esis
c o n s titu te th e c e n tr a l problem o f th e p re s e n t in q u iry .2 5
As a r e s u l t o f t h e i r in v e s tig a tio n , the Lawrence group
decided th e y could e lim in a te th e m anagers "as a p o s s ib le
s o c ia liz in g fo rc e b ecau se, as the re c o rd shows, th ey have
l i t t l e to do w ith s h i f t s from in d iv id u a l to c o lle c tiv e owner
s h ip ." 2^
24. Ib id * , p * 11*
25. I b id * , p . 1 2.
26* I b i d . . p . 12.
I l l
What m o tiv a te s the o tte r groups to su p p o rt s o c ia l
iz a tio n ? T his q u e stio n has a lre a d y been answered in some
f i e l d s of s e rv ic e stu d ie d in th e p re s e n t in v e s tig a tio n .
T o g eth er, la b o r, consumer, and p u b lic have th e p o l i t i c a l
fo rc e to e f f e c t s o c ia liz a tio n , once t h e i r common i n t e r e s t s
have been d efin ed and th e y have been o rg an ized f o r a c tio n .
The g e n e ra l q u e stio n i s w hether consumer p re s s u r e ,
or c i t i z e n p re s s u re , or la b o r p re s s u r e , o r some combin
a tio n o f th e s e p re s s u re s —i n each case re p re s e n tin g much
but n o t a lto g e th e r th e same p erso n s—has been th e prim ary
s o c ia liz in g f o r e e . Any type o f p re ss u re to be e f f e c tiv e
must make i t s e l f f e l t in governm ental a c tio n , fo r th e an
a l y s is h e re i s concerned w ith s o c ia liz a tio n m easures
sponsored by the s t a t e . And t h i s w ill tu r n on the
e le c tio n o f policy-m aking o f f i c i a l s , and th e re fo re on
th e p o l i t i c a l s tr e n g th o f our s e v e ra l p re ssu re c a te g o r
ie s where s o c ia liz a tio n is s u e s a re i n v o l v e d . 2 ?
Lqbor i s ru le d out as a b a s ic s o c ia liz in g f o r c e , fo r
one th in g because em ployees of a firm a re few er th a n i t s
custom ers; la b o r m ight or m ight n o t see any p a r tic u la r ad
vantage in p u b lic over p riv a te ow nership from th e sta n d p o in t
o f i t s own i n t e r e s t s in a p a r tic u la r firm ; an d , "a s a m a tte r
o f f a c t , i t i s n o t known w hether la b o r f a r e s b e t t e r in
p u b lic o r in p r iv a te em ploym ent."2®
On th e o th e r hand, th e "unmet needs o f consumers and
o f th e community a t la rg e may be r e a d ily dem o n strated , and
27. I b i d . . p . 13.
28. I b i d . . p . 13.
112
©ifough people convinced to make p u b lic a c tio n e x p e d ie n t,” 29
As fo r th e a c tu a l tra n s fo rm a tio n to a new o rd e r, th e
fin d in g s of th e in v e s tig a tio n shows th a t "th e p rim ary f a c to r s
in the growth of c o lle c tiv e e n te r p r is e have been consumer
and p u b lic i n t e r e s t s , as th e s e a re in te r p r e te d by consum ers
and c itiz e n s th e m se lv e s .” 3©
The lo n g -ran g e tra n sfo rm a tio n i s from (1) l a i s s e z - f a i r e
c a p ita lis m , th ro u g h (2) p u b lic ly c o n tro lle d c a p ita lis m , to
(3) dem ocratic s o c ia lis m , a lth o u g h a t any tim e a p o s s ib le
re v o lu tio n could le a d to e ith e r (4) faseism -n azism ( t o t a l
i t a r i a n c a p ita lis m ) or t o (5) communism ( t o t a l i t a r i a n s o c ia l
ism}*
Uhat we have now i s a m ixture o f th e f i r s t , second,
and t h i r d sy stem s, w ith elem ents o f th e f i r s t b u lk in g
la r g e s t in p r a c tic e ; th e second re p re s e n tin g our o f f i c i a l
n a tio n a l p o lic y and probably d e s tin e d to be the co re
o f our economy fo r some decades; but w ith components from
th e th i r d system s te a d ily in c re a s in g in amount and r e l
a tiv e im p o rtan ce•31
The in v e s tig a tio n . Having th u s d efin e d t h e i r hypothe
s i s and th e scope of t h e i r s tu d ie s , the Lawrence group in d u c
t i v e l y in v e s tig a te d " f ie ld s a lre a d y c o l l e c t i v i z e d ,” " f i e l d s
undergoing c o l l e c t i v i z a t i o n ,” and some s p e c ia l pro b lem s, to
51“ I b i d . , p . 14.
3,0,. I b i d . . p . 542.
31. I b id ., p . 16.
113
determ ine to w hat e x te n t and degree th e h y p o th e sis eould he
v e rifie d *
I n v e s tig a tin g th e fo rc e s w hich a p p a re n tly w ere most
re sp o n sib le fo r the s o c ia liz a tio n o f th e f i e l d s a lre a d y
c o lle c tiv iz e d , Theodore P a u llin s tu d ie d th e a re a o f p ro
te c tio n of p erso n s and p ro p e rty ; John A. V ieg stu d ie d the
a re a o f ro ad s and s t r e e t s ; H arold K elso stu d ie d h a rb o rs and
w aterw ays; Edwin 0* S te n e , p o s ta l s e r v ic e s ; W. H olland
Maddox, w ater and sew erage w orks; George S te w a rt, la n d r e c la
m ation; E rn e st E* B ayles and George Pox M ott, e d u c a tio n and
re s e a rc h ; E s th e r E. Twente, s o c ia l work and i n s t i t u t i o n a l
c a re ; H erb ert Goldhamer and Noel P . G is t, s o c ia l clu b s and
f r a t e r n a l s o c i e t ie s ; and J* H. S hera s tu d ie d l i b r a r i e s and
museums*
In v e s tig a tin g th e fo rc e s most a c tiv e ly a t work in
f i e l d s undergoing c o l le c tiv iz a tio n a t th e p re s e n t tim e , John
Is e stu d ie d th e demand fo r s o c ia liz a tio n o f f o r e s tr y ; Harvey
W . Peek and W illiam V * W ilmot, J r * , s tu d ie d th e a r e a o f
e l e c t r i c power; Lowry N elson, r u r a l re s e ttle m e n t; Seba
E ld rid g e , housin g ; R obert P* W allace, Joseph H. T a g g a rt,
and Ross M. R o b ertso n , c r e d it and banking; C a rro l M * M ickey,
p ro p e rty in su ra n c e ; 1*B* Dade, l i f e in su ra n c e ; D. G ag liard o ,
minimum income in su ra n c e ; M arcella R. Lehmann, m edical
s e rv ic e and h e a lth c a re ; M arston M * McCluggage, re c re a tio n
and le is u r e - tim e a c tiv ity *
114
Some s p e c ia l problem s in the f ie ld o f the develop
ment o f c o lle c tiv e e n te r p r is e a ls o w ere s tu d ie d by th e Law
rence g ro u p , H ilden G ibson made a s p e e ia l stu d y of consumers*
and producers* c o o p e ra tiv e s ; Royal E , Montgomery stu d ie d
org an ized la b o r as a s o c ia liz in g agency” ; C arro l C la rk ,
p u b lic o p in io n in th e developm ent o f c o lle c tiv e e n te r p r is e ;
H arold W, G u est, f in a n c ia l a s p e c ts o f c o l l e c t i v i s t develop
m ent; and C. 1 . A yres, th e s ig n ific a n c e o f economic p la n n in g .
Summary, As a r e s u l t o f th e se ex ten siv e in v e s tig a
tio n s by the v a rio u s members o f th e Lawrence group, th e
th e o ry o f c o lle c tiv e e n te r p r is e was developed and i s p re se n te d
in P a rt V o f th e volume under c o n s id e ra tio n , au th o red by
Seba E ld rid g e ,
In g e n e ra l, the in v e s tig a tio n s bear out th e h y p o th e s is ,
ac co rd in g t o E ld rid g e , alth o u g h w orkers* i n t e r e s t s , fo r
exam ple, a re seen to predom inate i n such a c t i v i t i e s as W PA
and o th e r r e l i e f p r o je c ts d u rin g th e 1930s,
However, enough evidence was accum ulated, w ith in
th e framework o r scope o f th e s tu d ie s , to convince the
Lawrence group th a t consumers* i n t e r e s t s an d /o r p u b lic
needs and i n t e r e s t s a re the c h ie f s o c ia liz in g f o r c e s , a t
l e a s t in th e f i e l d s w hich were in d u c tiv e ly exam ined.
These co n clu sio n s a re th e n a p p lie d to th e whole f i e ld
and q u e s tio n o f s o c ia liz a tio n , and th e fu tu re tra n s fo rm a tio n
o f th e s o c ia l o rd e r, and i t i s th e re b y h e ld t h a t Marx was w rong.
IV FABIAN SOCIALISM
115
Nemt t o the M arxian a n a ly s is , Fabian S o cialism i s
th e most im p o rtan t s o c i a l i s t d o c trin e (from th e s ta n d p o in t
both o f th e o ry and in flu e n c e ) o f th e d e c lin e and p a ssin g o f
c a p ita lis m , fu rth e rm o re , Fabianism b rin g s to an end a lo g
i c a l course o f development o f s o c ia lis m in B r ita in , and n o t
in B r ita in a lo n e , ^ab ian s o c ia lis m swept th e co n tin e n t of
Europe under th e name o f R ev isio n ism , a f a c t reco g n ized w idely
by both F abians and M a rx is ts . Under cue name or a n o th e r,
F abianism e x i s ts today in every advanced co u n try (except in
th e censored "tommy-gun dem ocracies" o f e a s te r n Europe and
R u ssia ) as an a lte r n a tiv e to Marxism.
F abian s o c ia lis m i s th a t system o f th o u g h t which has
developed out o f th e w ritin g s o f th e members of th e B r it is h
F ab ian S o c ie ty . To u n d erstan d F abianism , i t i s n e c e ssa ry to
u n d erstan d th e F abain S o c ie ty and th e a t t i t u d e s and th in k in g
of i t s le a d in g members. As Beer w rite s :
The Fabian S o c ie ty i s n e ith e r a s o c i a l i s t p a rty nor
p re -e m in e n tly a sch o o l o f s o c i a l i s t d o c tr in e s , but a
group o f men and women who are en d eav o rin g to spread
p r a c t ic a l view s on th e immediate and p re ss in g s o c ia l
problem s, and to in d ic a te the way f o r t h e i r embodiment
in l e g i s l a t iv e o r a d m in is tra tiv e m easures. A ccording to
th e se view s s o c ia lis m i s n o t a re v o lu tio n a ry movement o f
th e w orking c la s s e s fo r th e purpose of e s ta b lis h in g some
new form o f s o c ie ty , n o r is i t an a n t i — p a rlia m e n ta ry
and an e x tr a - n a tio n a l system o f c o -o p e ra tio n . I t i s th e
r e s u l t of a long s e r ie s of n a tio n a l problem s, which have
a r is e n out o f th e m an ifo ld econom ic, s o c i a l , and s p i r i
t u a l changes t h a t were ta k in g p lace in th e l a s t cen tu ry
1 1 6
and which, must he d e a lt w ith by th e n a tio n i f i t d e s ir e s
to r a is e i t s e f f ic ie n c y and to co n tin u e i t s upward pro
g re ss .-52
S o c ia liz in g f o r c e s . Thus, the ^ a b ia n s r e j e c t any
ap p eal to a s p e c ia l group a s th e s o c ia liz in g fo rc e and ap p eal
to th e n a tio n as a w hole, w hich u s u a lly amounted o r ig in a lly
to an ap p eal to th e m iddle c la s s e s . The e v o lu tio n a ry s o c ia l
i s t s do b e lie v e , how ever, th a t c a p ita lis m w i ll p a ss due to
i t s in h e re n t e v i l s and c o n tr a d ic tio n s , and b elie v e th a t some
form o f c o lle c tiv is m o f f e r s a b e tte r and more r a ti o n a l a l
te r n a tiv e to the m asses o f the p eo p le. But they r e je c t re v o l
u tio n a ry t a c t i c s and o rg a n iz a tio n , b e lie v in g th a t s o c ia lis m
can be a tta in e d more r a p id ly by e v o lu tio n a ry m ethods.
The g r a d u a lis ts b e lie v e th a t s o c ia lis m can be a c h ie
ved by p e a c e fu l economic and p o l i t i c a l a g e n cies a lre a d y a t
hand. As Beer p o in ts o u t:
The Owenites went o u tsid e th e S ta te f o r the purpose
o f b u ild in g up a co o p e ra tiv e commonwealth.. .The M arx ists
scorned a l l sk e tc h e s and a l l q u e stio n in g s fo r th e d e t a i l s
of th e fu tu re S ta te , b u t urged upon th e w orking c la s s e s
to f ig h t a g a in s t th e e x is tin g o rd e r, to o b ta in p o l i t i c a l
power, to s e iz e th e s ta te f o r th e purpose o f th e a b o li
tio n o f the c a p i t a l i s t s y s te m ,. .Webb (le a d e r of th e Fab
ia n s ) in v e s tig a te s th e p a r ti c u l a r e v i l s o f s o c ie ty , p o in ts
o u t the remedy f o r each o f them in accordance w ith th e
g e n e ra l p rin c ip le s o f s o c ia lis m , and endeavors to p e r
suade th e n a tio n t h a t th o se rem edies a re p ra c tic a b le and
s u ita b le l e g i s l a t i o n . •••
32. M. B eer, A H is to ry o f B r itis h S o c ia lism , Y ol. I I .
(London, 1921), p . 276^7. ---------------------------------
117
The °w en ites ad v ised the w orking men to abandon p o l
i t i c a l and tra d e u n io n is t a c tio n ., and to devote t h e i r
e n e rg ie s and funds to c o lle c tiv e p ro d u c tio n . The Marx
i s t s ad v ised th e w orking men to conquer p o l i t i c a l power
and to use t h e i r tra d e unions f o r s o c ia l re v o lu tio n a ry
p u rp o se s. Webb asks th e working men to vote s t r a i g h t
and send s o c ia l re fo rm ers to P a rlia m e n t in s u f f i c ie n t
numbers to form a m a j o r i t y , , , ,
Owenite so c ia lis m was i d y l l i c ; M arxist s o c ia lis m was
re v o lu tio n a ry and t h e o r e ti c a l ; F abian s o c ia lis m i s e v e ry
day p o l i t i c s fo r s o c ia l r e g e n e r a tio n .23
The im portance of th is d o c trin e o f th e p a rlia m e n ta ry
and g ra d u a l p assin g of c a p ita lis m is c le a r from th e B r i t is h
e x p e rie n c e . But r e a l su ccess had to w ait u n t i l F abians
came a lo n g who began t o em phasize th e im portance of th e work
in g c la s s e s and who appealed f o r th e B r itis h w orkers to form
t h e i r own Labour p a r ty . But t h i s a p p e a l to th e w orkers never
took precedence over th e e f f o r t to aro u se th e c o n sc io u sn e ss
o f th e community g e n e ra lly to th e need fo r re p la c in g th e
c a p i t a l i s t system fo r a new and b e t te r one.
Emphasis was alw ays on p a rlia m e n ta ry m ethods and te c h
n iq u e s . The old t r a d i t i o n a l , r a d ic a l slo g a n s were dropped;
th e concepts o f th e s t a t e p re se n te d to th e p u b lic was th a t
of an in stru m en t whieh could be used to achieve s o c ia lis m ,
r a th e r th an an in stru m e n t fo r th e su p p re ssio n and o p p ressio n
o f one c la s s by a n o th e r and which must be smashed by the work
e r s b efo re s o c ia lis m could be o b ta in e d . The m ission of the
t t . TO Trrrraro-i.
118
th e s o c i a l i s t s was n o t to b rin g about c i v i l war and re v o lu
tio n but to p e r fe c t te c h n iq u e s and mechanisms fo r b rin g in g
about th e t r a n s i t i o n to so c ia lis m g ra d u a lly , but in e v ita b ly .
The F abians d e c la re th a t t h e i r S o c ie ty i s an o rg a n i
z a tio n which c o n s is ts of s o c i a l i s t s , who aim a t th e re o r
g a n iz a tio n o f s o c ie ty , th e e x tin c tio n o f p riv a te p ro p e rty in
land and in d u s try , and th e a b o litio n o f a l l r e n ts and o th e r
su rp lu s incomes going to a le is u re d or p riv ile g e d c la s s .
To a t t a i n th e se ends, th e F abians are bound to (1) spread
s o c i a l i s t o p in io n s and (2) to d issem in ate knowledge as to
the r e la tio n between in d iv id u a l and s o c ie ty . The F abian
m otto i s :
For th e r i g h t moment you must w a it, as, F ab iu s d id ,
most p a ti e n tl y , when w arrin g a g a in s t H an n ib al, though
many censured h is d e la y s ; but when th e tim e comes you
must s tr i k e h a rd , as F ab iu s d id , o r your w a itin g w ill be
in v ain and f r u i t l e s s ,34
le a d e r s . Some o f th e people who b u i l t th e F abian
s o c ie ty were S idney and B e a tric e Webb, W illiam C la rk e , George
B ernard Shaw, Graham W allas, Sidney O liv ie r , Annie B esant,
H ubert B land, H.W. Massingham, Edward R. P ease, H.H. Champion,
5 4 T H a r r y L a id le r , in commenting on t h i s slo g a n ,
d e c la re s : "H.G. W ells a fte rw a rd s p o in ted o u t, however,
t h a t F abius never did s tr ik e h a rd ." Social-E conom ic Move
m ents (New York: C row ell, 1947) p . 188-9. While Fabius”-
may never have s tru c k h a rd , h is t a c t i c s had a w ith e rin g
e f f e c t on h is evemy no more d is a s tro u s to H annibal th an —
F abian t a c t i c s have had sin ce World War I I on B r i tis h c a p i
ta lism *
119
P e rc iv a l Chubb, G.D.H, C ole, H.G. W ells, and K eir H ardie*
These men c o n trib u te d to th e id eo lo g y o f the move
ment through a v e r ita b le flo o d o f l i t e r a t u r e , propaganda
t r a c t s , le c tu r e s , e s s a y s , p la y s , n o v e ls , and s h o rt s t o r i e s .
Most famous o f the works a re F abian E ssays in S o c ia lism by
Shaw and o th e rs , and the F abian T r a c ts ,
I n e v i t a b i l i t y o f s o c ia lis m . The i n e v i t a b i l i t y of th e
d e c lin e and p a ssin g o f c a p ita lis m i s due to a v a s t number
o f supplem entary fo r c e s . S o c ia l, h i s t o r i c a l , econom ic, in
d u s t r i a l and m oral fo rc e s are c o o p e ra tin g to b rin g about
th e e v e n tu a l trium ph o f s o c ia lis m , th e F abians a s s e r t .
S o c ia lism i s an h i s t o r i c a l movement, developed w ith
and o u t o f the dem ocratic s tru g g le s o f th e p a s t. The eco
nomic and p o l i t i c a l h is to r y o f th e p a s t c e n tu ry i s an alm ost
co n tin u o u s reco rd of th e p ro g re ss o f s o c ia lis m . But t h i s
p ro g re ss has been g rad u al in i t s developm ent, i f h i s t o r i c a l l y
n e c e s s a ry .
Im p o rtan t changes in s o c ie ty can come only w ith the
consent and su p p o rt o f the m a jo rity o f the p e o p le , who must
be p rep ared fo r th e changes. T his im p lie s th a t changes
must come in a dem ocratic m anner, i f th ey a re to be m o rally
imposed on s o c ie ty . They must come g ra d u a lly in o rd e r to
cause no s e rio u s d is lo c a tio n s , alth o u g h th e p ro g re ss may be
as ra p id as i s c o n s is te n t w ith o rd e r. They must come, m ore-
120
o v er, by c o n s titu tio n a l and p e a c e fu l m ethods, a t l e a s t in
E ngland, th e S o c ie ty h o ld s . And i f changes are made in
t h i s way, th ey w i ll n o t be regarded as immoral by a sub
s t a n t i a l s e c tio n o f th e people and so n o t d em o ra lizin g .
Since the i n d u s t r i a l re v o lu tio n , democracy has been
making g re a t s t r i d e s , b u t i t has been accompanied by a b ru
t a l , v ic io u s in d iv id u a lis m . The b r u t a l i t y o f t h i s in d iv id u
a lism has le d to much s ta te re g u la tio n and the advance o f
s ta t e ow nership. A s tro n g s o c i a l i s t tre n d has been d ev elo p
in g among econom ists who, lo o k in g a t th e system as a w hole,
r e a liz e th a t s o c ia lis m i s th e obverse o f p o l i t i c a l dem ocracy,
in the economic f i e l d . Ever sin ce John S tu a r t M i l l 's P r in c i
p le s th e re has been a tre n d among econom ists to become in
c re a s in g ly s o c i a l i s t in o u tlo o k .
J u s t as s o c ia lis m i s seen as a r e s u l t , n o t o f a c a ta
clysm ic change, b u t as a r e s u l t of th e developm ent of p o l i t i
c a l democracy and a changed co n cep tio n on th e p a r t o f the
p eo p le, th e re has been growing up an i n d u s t r i a l b a s is fo r
th e advent o f the new o rd e r. T his i s seen in th e fa c to ry
l e g i s l a t i o n , th e su rre n d e r o f the c a p i t a l i s t 's fu n c tio n s to
h ire d m anagers under c o rp o ra te form s o f b u sin e ss o rg a n iz a tio n ,
th e developm ent o f t r u s t s , and the a c tu a l growing need fo r
e lim in a tio n o f the p r iv a te c a p i t a l i s t . The f i r s t ste p in th e
d ir e c tio n o f s o c i a l i s t ow nership i s c o n tr o l. The in ju s tic e
of the system which p erm its a few people to liv e o f f r e n ts
121
and su rp lu se s w hile o th e rs are ground down under th e h e e l o f
m isery and p o v e rty , low wages and unemployment, i s being r e
je c te d by v a s t numbers of the people who see the need fo r
th e s o c ia l a p p ro p ria tio n o f economic re n t and u n ju s t p riv ile g e *
F u rth erm o re, th e F ab ian s arg u e, the p re se n t system i s
immoral because th e system o f p r iv a te ow nership i s immoral*
C a p ita lism has a deg rad in g e f f e c t on th e c h a ra c te r o f i n d i
v id u a ls . On the o th e r hand, s o c ia lis m r a ti o n a li z e s , o rg a n iz e s
and g iv es su b stan ce to in d iv id u a lis m and the f u l l e s t develop
ment o f the p e r s o n a lity ; i t p ro v id e s him w ith le is u r e and
e d u c a tio n , and i n d u s tr i a l c o o p e ra tio n , based on s o c i a l i s t
form s o f p ro p e rty , and le a d s to a h ig h er form of s o c ia l
m o ra lity .
L a te r on, the F abians began to p u t more em phasis upon
i n s t i t u t i o n s , such as tra d e u n io n s, th e co o p erativ e movement,
and m u n icip al s o c ia lis m , a s fo rc e s te n d in g to b rin g about
th e end o f c a p ita lis m and th e advent of so c ia lism in B r ita in .
The economic th e o ry * The F ab ian s r e je c te d Marxism
and developed an economic th e o ry o u t o f th e law o f r e n t as
developed by R icard o , Jev o n s, J .S . M ill and Henry George.
As Beer w r ite s :
The so c ia lis m o f Webb i s based on th e e x te n sio n o f
th e th e o ry o f r e n t and on th e grow th of th e s o c ia l con
sc ie n c e o f the n atio n *
Webb s ta n d s on th e sh o u ld ers o f J .S . M ill. He i s th e
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d ir e c t m ental descen d an t of th e l a s t g re a t U t i l i t a r i a n .
He h as tak en up th e work o f s o c ia lis m where M ill l e f t
i t —nam ely, h a lf-w a y between in d iv id u a lism and s o c ia l
refo rm , and has c a r r ie d i t a good d is ta n c e f u r t h e r .35
R ent was d efin ed by S^aw as the d iffe re n c e between
th e f e r t i l i t y o f th e lan d f o r which i t i s paid and th a t o f
th e w o rst land under c u l tiv a tio n . A pplied to p riv a te owners
o f p ro p e rty , th e w orkings o f t h i s law led to grave i n j u s t i c e s .
T his law e x p la in s why some men do n o th in g and g e t.a g re a t sh are
o f th e produce of the n a tio n , w hile th e many t o i l and g et
n o th in g .
The s tru g g le fo r s o c ia lis m develops out of the s tru g g le
fo r the su rp lu s p ro d u c t. For in the r e a l w o rld , where v a s t
numbers o f men do n o t even have land o f t h e i r own, good or
bad, th in g s a re i n f i n i t e l y w orse. These men a re h ire d out
t o work fo r le s s th an th ey can add to th e pro d u ct o f t h e i r
la b o r, le a v in g over a g a in fo r those who h i r e . Men a c tu a lly
c o st n o th in g , sin c e "th e y p urchase t h e i r own p r i c e , ” and
c re a te in a d d itio n , a su rp lu s fo r th e b u y er. These men w ith
n o th in g bur t h e i r la b o r to s e l l are so p l e n t i f u l t h a t , " f o r —
bare s u b siste n c e wages, you can buy a s much common la b o r as
you w an t." And the more th e w orkers a re degraded and e x p lo it
ed , th e more ra p id ly th ey rep ro d u ce, throw ing ever f r e s h
su p p lie s o f la b o r on th e m a rk e t.36
---------- 5T....Tb'il".----------
36. C f ., L a id le r , ojg. e i t . , p . 206-7.
123
The law of r e n t a p p lie s to c a p it a l a s w ell as to la n d ,
o f c o u rse . B usiness e n te r p r is e i s as d iv e rs e in i t s p ro d u c t
i v i t y as a re th e v a rio u s c la s s e s of s o i l and the d i f f e r e n t i a l
advantages of s i t e s , m achinery, th e more fav o red b u sin e sse s
c o n s is t of g re a t in d u s t r ia l re n ts w hich a re n o t produced by
th e ow ners. These r e n ts a re a p p ro p ria te d by a few a t th e ex
pense of th e people as a w hole.
Summary. The F ab ian s b rin g to a clo se a lo g ic a l d e v e l
opment in the th eo ry o f s o c ia lis m . Marx h e ld th a t th e w ork
in g c la s s would b rin g about the dow nfall o f c a p ita lis m ; we have
seen th a t o th e r t h e o r i s t s l a i d em phasis on d i f f e r e n t g ro u p s,
such as th e te c h n ic ia n , th e m anager, the consumer, th e " p u b lic
i n t e r e s t " and (we s h a l l d isc o v e r l a t e r ) th e i n t e l l e c t u a l .
The F ab ian s r e j e c t a l l th e se th e o r ie s and ap p eal to men and
women o f a l l c la s s e s who see th e e v i l s o f s o c ie ty and d e s ire
to remedy them . L a te r F abians la id more em phasis upon th e
tra d e unions and c o o p e ra tiv e movement, b u t th e app eal rem ains
g e n e ra l.
L ik ew ise, th ey do n o t appeal to a d i a l e c t i c , and fo cu s
th e ir i n t e r e s t upon some group and i t s i n t e r e s t s , but th ey
see so c ia lis m eoming as a com bination o f many fo rc e s , m oral,
e t h i c a l , econom ic, s o c ia l, p o l i t i c a l , and h i s t o r i c a l . Now
i t w i l l n o t come through any p a r tic u la r type o f re v o lu tio n ,
byt th ro u g h many d if f e r e n t chan n els of p a rlia m e n ta ry a c t i v i t y , ;
124
on th e l o c a l , m u n ic ip a l, county and s t a t e l e v e l .
F in a lly , lik e th e M a rx is ts, th e F abians can ap p eal to
the r e a l world (to G reat B rita in ) where t h e i r a n a ly s is and
program has been put in to o p e ra tio n . In E ngland, a s in E a s t
e rn Europe and R u ssia , c a p ita lis m i s p a ssin g , b efo re our
v e ry e y e s.
CHAPTER IV
STAGNATION A N D THE SLIPPING-AWAY THEORY
I . A DIFFERENT TYPE OF THEORY
In t h i s c h a p te r we tu rn to a d if f e r e n t type o f theory*
In the l a s t two c h a p te rs we d e a lt w ith th e o rie s h o s t i le to
c a p ita lis m , and which p re d ic te d i t s p a ssin g through (1) c a ta
clysm ic changes and (2) g ra d u a l p a rlia m e n ta ry o r te c h n o lo g ic a l
developm ent. B efore d e a lin g w ith two more th e o r ie s , th e se
f r ie n d ly to c a p ita lis m b u t convinced o f i t s t r a n s i t i o n a l ch a r
a c te r , in C hapters V and V I, we must d e a l w ith a w id e-sp read
c o n tro v e rsy which h as sprung up around K eynesian economies*
T his c o n tro v e rsy ra g e s around what p o lic y can b e s t be fo llo w
ed to "save American c a p ita lis m ,” a s Seymour H a rris o f Har
vard m ight say .
S tatem ent o f th e problem * The h e a r t o f th e co n tro v e rsy
ra g in g around K eynesian economics d e a ls w ith the problem o f
th e p re s e rv a tio n or p a ssin g of c a p ita lis m . W ill governm ental
in te rv e n tio n alo n g K eynesian lin e s le a d to " c re e p in g s o c ia l
ism ” or w ill i t save c a p ita lis m from re v o lu tio n a ry overthrow ,
which would be "th e c e r ta in r e s u l t ” of c o n tin u in g a p o lic y
o f " l a is s e z - f a i r e " ? The c o n tro v e rsy , which we w il l b r ie f ly
review in t h i s c h a p te r, re v o lv e s around (1) th e th e o ry , th e
p o lic y im p lic a tio n s of w hich c a l l fo r in c re a s in g governm ental
126
In te rv e n tio n in the c a p ita lis m economy, and (2) th e c r i t i
cism o f th e th e o ry and p o lic y .
The th e o ry i t s e l f , propounded in th e w ritin g s of th e
l a t e John Maynard Keynes of E ngland, and th o se o f A lvin H.
Hansen o f H arvard, claim s to be c o n se rv a tiv e in n a tu re and
to provide a p o lic y bulw ark which w ill p ro te c t and m a in ta in
a t l e a s t th e e s s e n tia l f e a tu r e s o f th e c a p i t a l i s t system .
The th e o ry i s v a rio u s ly r e fe rr e d to as the S ta g n a tio n Doc
t r i n e , the Theory o f th e M ature Economy, th e Theory of V anish
in g In v estm en t O p p o rtu n itie s , o r more sim ply, the "K eynesian
T heory," a f t e r th e le a d in g f ig u r e of t h i s school o f economic
th o u g h t.
The th e o ry r e s u l t s , in i t s p o lic y im p lic a tio n s , in a
mixed o r in te r v e n tio n is t economy. Thus i t does n o t, f o r th e
K ey n esian s, le a d to th e e v e n tu a l p a ssin g o f th e system i t
s e l f . The system won’ t n e c e s s a r ily p ass; but i t w i ll s e t t l e
down to s ta g n a tio n w ith a h ig h le v e l o f unemployment, u n le ss
th e government in te rv e n e s to b rin g f u l l employment. The
a lte r n a tiv e to governm ental in te rv e n tio n i s s ta g n a tio n , w ide
spread unemployment and s u f f e r in g , and co n seq u en tly , s o c ia l
d is tu rb a n c e s which m ight p ro b ab ly le a d to s o c ia l re v o lu tio n .
In o rd e r to save c a p ita lis m from t h i s f a t e , th e K eynesians
propose to e lim in a te unemployment, n o t by th e c la s s i c a l
method of wage c u ts and au to m atic a d ju stm en t, but through
a c tiv e governm ental in te r v e n tio n ( c h ie f ly by m an ip u latin g
12?
th e i n t e r e s t r a te th ro u g h m onetary p o lic y , p u b lic w orks, and
o th e r ty p e s o f government investm ent or spending, and re d u cin g
in e q u a lity th ro u g h ta x a tio n ) .-1 -
The opponents o f t h i s th e o ry see in i t , however, a
g re a t danger to th e c a p i t a l i s t system . They argue t h a t : (1)
the th e o ry on which in te rv e n tio n is m is b u i l t i s a n ti- c a p i
t a l i s t in n a tu re ; and th a t (2) th e p o lic y o f in te rv e n tio n
d eriv e d from th e th eo ry w ill lead to a s te p -b y - s te p d e s tru c
tio n of c a p ita lis m , a p ro c e ss th a t w i ll e v e n tu a lly end up in
some form of c o lle c tiv is m . C a p ita lism w i l l sim ply " s l i p away"
in to c o lle c tiv is m . H eed less to say , th e se opponents o f i n t e r
v en tio n ism a re members o f th e orthodox l i b e r a l sc h o o l, which
i d e n t i f i e s c a p ita lis m w ith a re g u la te d r a th e r th a n a d ire c te d
economy.
Thus, th e problem tu rn s around two argum ents, p re se n te d
as a lte r n a tiv e s fo r p o lic y : (1) W ithout the p o lic y of i n t e r
v e n tio n ism , s ta g n a tio n is t c o n d itio n s may (or w ill) le a d to
re v o lu tio n a ry s o c ia lis m o r t o ta lita r ia n is m . (2) I f th e p o lic y
o f in te rv e n tio n is m i s a c c e p te d , on the o th e r hand, i t w il l
le a d through a s te p -b y -s te p in te rv e n tio n is m to th e u ltim a te
37 As A lvin Hansen w r ite s , "Keynes h im se lf th o ro u g h ly
an aly sed the employment e f f e c t s of wage c u ts under a v a r ie ty of
assu m p tio n s. His co n c lu sio n i s th a t under c e r ta in c o n d itio n s
wage c u ts may indeed in c re a s e employment, but th e m edicine may
k i l l th e p a tie n t ( s o c ia l r e v o lu tio n ) . T his r i s k m ig h t, however,
w ith in re aso n ab le l im i t s be run i f th e re were good re aso n to
b e lie v e the m edicine would q u ite c e r ta in ly cure th e m alady.
But th e re i s no such a s s u ra n c e ." M onetary Theorv and F i s c a l
P o lic y , (Hew York: M cGraw-Hill, 194917 P* 1 2 6 . -----------------
128
p a ssin g of c a p ita lis m and to th e trium ph of c o lle c tiv is m .
Summary. Thus, th e s ta g n a tio n is t d o c trin e must be
viewed from th e vantage p o in t o f w hether i t i s a n t i - c a p i t a l i s t
in th e o ry and p o lic y . T his th e o ry w ill be p re se n te d h ere as
fo llo w s: F i r s t , th e re w ill be a sta te m e n t o f th o se e n v iro n
m ental f a c to r s which a lle g e d ly r e s u l t in s e c u la r s ta g n a tio n ;
seco n d ly , a review o f th e K eynesian th e o ry w i ll be p re s e n te d ,
to b rin g o u t those f a c to r s which o p e ra te w ith in th e economy
i t s e l f to b rin g about se c u la r s ta g n a tio n ; and l a s t l y , an
a n a ly s is w i l l be made o f Keynes* p o lic y , which r a is e s th e
q u e stio n o f w hether c a p ita lis m can su rv iv e in th e proposed
environm ent o f governm ental in te r v e n tio n .
Four main c o n s id e ra tio n s o f K eynes’ th eo ry seem p a r
t i c u l a r l y im p o rtan t fo r th e purpose o f t h i s t h e s i s . F i r s t ,
he h o ld s th a t as n a tio n s grow r i c h e r , t h e i r problem s and e v i l s
grow worse and p o v erty in th e m id st o f p o te n tia l p le n ty i s an
unavoidable c o n tra d ic tio n .
Second, th e " a n t i - c a p i t a l i s t n a tu re " of h is th e o ry i s
seen to depend upon K eynes' consum ption fu n c tio n t h e s i s ,
underw hieh c a p ita lis m can be p ro g re ssiv e only in poor c u ltu r e s
w hereas an in h e re n t movement in the system ta k e s th e r i c h
n a tio n backw ards, in a w h irlp o o l o f m isery and mass unemploy
m ent, so th a t i s can be saved only by governm ent.
T h ird , th e re are many co n c lu sio n s to be drawn from
129
t h i s n o tio n o f lag g in g consum ption which in d ic a te th e a f f i n
i t y of K eynes’ th e o ry to th e M arxian system .
F o u rth , in h is concluding rem arks, Keynes sounds th e
d eath k n e ll o f th e r e n ti e r and th e i n t e r e s t ta k e r , th e ”fu n c -
t io n le s s c a p i t a l i s t , ” c a llin g f o r t h e i r g en e ral e u th a n a s ia .
N e v e rth e le ss, Keynes h im se lf su p p o rts p riv a te p ro p e rty
and c a p ita lis m fo r s e v e ra l re aso n s w hich he re g a rd s a s im
p o r ta n t, and p e r s is te n t ly d e c la re s th a t h is th e o ry i s n o t a n t i
c a p i t a l i s t in n a tu r e , hut i s in s te a d e s s e n t ia ll y c o n s e rv a tiv e .
The a n t i - i n t e r v e n t i o n i s t argum ent. The argum ent t h a t
irTiinr—n —i T ~ -iitm r— tr ~ r —ttttt ------------------------- -- - - -— r W
governm ental in te rfe re n c e le a d s along the ”road to serfdom ”
has been put forw ard in re c e n t y e a rs by such ab le w r ite r s
as Henry 0 . S i m o n s ,F r i e d r ic h von H ayek,2 and Ludwig von
Mises,^ to m ention only th re e o f th e most w idely known. Ac
co rd in g to t h i s argum ent, a p p ly in g government p lan n in g o r
d ir e c tio n to c a p ita lis m w ill le a d u ltim a te ly to f u ll- f le d g e d
c o lle c tiv is m *
There are o nly two sy stem s:^ f re e m arket c a p ita lis m or
“ TI Henry C. Sim ons, Economic P o lic y f o r a F ree S o c ie ty
(C hicago: U n iv e rsity o f Chicago P re s s , 1948).
2 . F r ie d r ic h von Hayek, Road to Serfdom (C hicago: U ni
v e r s i t y o f Chicago P re s s , 1942).
3 . Ludwig von M ises, Omnipotent Government (Yale U ni
v e r s ity P re s s , 1944).
4* O f. Planned Chaos, F oundation f o r Economic Educ-
c a tio n , 1947*
130
t o t a l i t a r i a n c o lle c tiv is m or so c ia lism , ac co rd in g to von
M ises. The id ea of a m iddle system (th e mixed economy) i s
a b su rd , M ises d e c la re s ; th e re i s no such th in g as a m iddle
way.
Once the in te r v e n tio n is t p a th (in the sense o f govern-
m e n ta lly planned economy) i s ta k e n , th e re i s no sto p p in g p la c e
s h o rt of f u l l c o lle c tiv is m . T his i s because governm ental
c o n tro l ( ih th e sense o f d e c is io n making by p u b lic a u th o rity )
le a d s to a w orsening o f c o n d itio n s sin ce the system can work
w e ll o n ly a s a r e s u l t o f d e c is io n making by th e m ark et. N at
u r a ll y , th e more the c o n tro ls th a t are imposed on th e working
o f th e m arket fo r c e s , th e more the system bogs down.
But as the system bogs down, acco rd in g to t h i s in d i
v id u a li s t argum ent, p o l i t i c a l re a c tio n is n o t to r e la x th e
c o n tr o ls , allo w in g n a tu r a l fo rc e s in th e economy to purge th e
system and clean se i t ; on th e c o n tra ry , the p o l i t i c a l r e a c tio n
i s to clamp on more c o n tr o ls , to extend them , in a f u t i l e e f
f o r t to plug up th e h o le s . Government t r i e s to cover up i t s
own e r r o r s by i n s t i t u t i n g more and e v e r more r e g u la tio n s , e t c .
There i s no sto p p in g p la c e . The in e v ita b le r e s u l t i s some
form o f ( t o t a l i t a r i a n ) c o lle c tiv is m , ac co rd in g to th e c r i t i c s
o f K eynes.
Thus we see th a t th e K eynesians argue t h a t u n le s s t h e i r
p o lic y i s ad o p ted , c a p ita lis m cannot be sav ed . But th e ir
opponents re p ly th a t the K eynesian p o lic y i t s e l f le a d s to
131
"c re e p in g s o c ia lis m ," T h is i s the dilemma whiGh c o n fro n ts
u s in t h i s c h a p te r. W e now tu r n to th e m ain props of th e
"New Economics" o r "Modern Econom ics," as th e fo llo w e rs of
Keynes lik e to term th e i r reT O lt a g a in s t t r a d i t i o n a l economic
th in k in g *
I I VANISHING INVESTMENT OPPORTUNITIES
George Terborgh h as p o in ted o u t th a t a c u rio u s a s p e c t
o f th e s ta g n a tio n is t th e o ry i s th a t i t s developm ent h as o ccur
red p rim a rily in th e U nited S ta te s : " I t i s n o t too s e r io u s ly
6
m isle a d in g to c a l l i t an American th e o r y ," he w rite s* Of
co u rse , th e th e o ry draws m ost o f i t s b a s ic id eas from th e
w ritin g s o f Lord K eynes. But the " p e c u lia r d o c trin e s o f
economic m a tu rity " were e la b o ra te d c h ie f ly under the le a d e r
sh ip o f A lvin H ansen. This i s c e r ta in ly rem ark ab le, in
l i g h t o f th e f a c t th a t America i s much f u r th e r from economic
m a tu rity th a n th e g re a t i n d u s t r i a l powers o f W estern E urope,
Terborgh p o in ts o u t. "By any t e s t , " he d e c la r e s , the European
n a tio n s should be f u r th e r along th e road to s ta g n a tio n th a n
A m erica. But be t h i s as i t may, we tu r n now to co n sid er th e
m ajor components o f Hansen*s theory*
Major com ponents, There are s ix m ajor components o f
6 . George T erborgh, The B o g e y o f Economic M a tu rity
(C hicago: M achinery and A llie d ^roduc^s I n s titu tf e , 1
p . 3 .
th e th e o ry o f economic m aturity.*^ ^he f i r s t c o n s is ts o f an
a n a ly s is of th e saving-investm ent-incom e p ro c e ss , ^hen oamesi:
an a n a ly s is of th e th re e components of economic p ro g re s s :
\
(a ) p o p u la tio n grow th, (b) new t e r r i t o r i e s and re s o u r c e s , and
(c) in v e n tio n s . These elem ents o f p ro g re ss are seen to be
p a ssin g —d e c lin in g in im p o rtan ce. Hence, th e system i s more
and more d ependent upon replacem ent o f c a p ita l as an o u tle t
fo r in v estm en t; b u t t h i s i s a r e s t r i c t e d and t o t a l l y in a d e
quate o u t l e t . L a s tly , th e re is a r e i n t e r p r s t a t i o n o f th e
"new e r a ," o f th e " ro a rin g ‘tw e n tie s ," in o rd e r to make t h a t
decade c o n s is te n t w ith the s ta g n a tio n is t t h e s i s .
Thus, the main e s s e n t i a l s o f th e th e o ry o f v a n ish in g
o f in vestm ent o p p o rtu n itie s a re based on an a n a ly s is of en
v iro n m en tal f a c to r s o u tsid e th e econom ic system i t s e l f —on
th e t r i n i t y o f p o p u la tio n , new la n d s , and in v e n tio n s . Hansen
em phasized th e im portance o f th e se f a c to r s in h is P re sid e n
t i a l speech to th e ^ i f t y - E i r s t Annual M eeting o f th e American
Economic A s s o c ia tio n , held in D e tr o it, 1938. ^he g e n e ra l
s u b je c t of t h i s m eeting was "The Changing C h ara cter o f the
Am erican Economy," and Hansen*s theme was on "Economic P ro -
o
g re ss and D ec lin in g P o p u latio n G row th."
T * C f. I b i d . . p. 15.
8 . P u b lish e d in the Am erican Economic A s so c ia tio n
P ro c e e d in g s. 1938, and re p rin te d in the A sso c ia tio n * s p u b lio a -
tlo n R eadings in B usiness C ycle Theory (York: B la k is to n , 1944)
p . 366-384.
133
W e a re p a s s in g , so to speak, over a d iv id e which
s e p a ra te s the g re a t e r a o f growth, and expansion of the
n in e te e n th ce n tu ry from an e r a w hich no man, u n w illin g to
embark on pure c o n je c tu re , can a s y e t c h a ra c te riz e w ith
c l a r i t y o r p re c is io n . W e a re moving s w if tly out of the
o rd er i n which th o se o f our g e n e ra tio n were brought up,
in to no one knows w h a t . 9
The problem o f our tim e s. The g re a t problem o f our
tim e i s n o t th e problem o f b u sin e ss c y c le s , o f boom and b u s t,
Hansen d e c la r e s . I t i s th e problem of s e c u la r s ta g n a tio n and
perm anent, w idespread unemployment. Of c o u rse , th e re w ill
be c y c lic a l movements w ith in the framework o f s ta g n a tio n ,
tem porary f lu c tu a tio n s about a lo n g -te rm , descending tre n d
lin e o f in v estm en t, p ro d u c tio n , incom e, and employment. Thus
th e m ajor problem o f our tim e i s to achieve f u l l employment.
Mot u n t i l the problem o f f u l l employment o f our p ro
d u c tiv e re so u rc e s $rom th e lo n g -ru n , s e c u la r sta n d p o in t
was upon u s , were we com pelled to g iv e s e rio u s co n sid
e r a tio n t o th o se f a c to r s and fo rc e s in our economy w hich
ten d to prolong and deepen th e course o f d e p re s s io n s .
T his is th e essen ce o f s e c u la r s ta g n a tio n —s ic k re c o v e rie s
which d ie in t h e i r in fan cy and d e p re s sio n s w hich feed on
them selves and lf§ v e a h ard and seem ingly immovable core
of unem ploym ent.!0
The a n a ly s is o f s ta g n a tio n le a d s Hansen to c o n sid er the
f a c to r s o f economic p ro g re s s , l i s t e d above as in v e n tio n s , th e
d isc o v e ry and developm ent o f new la n d s and re so u rc e s , and :the
grow th o f p o p u la tio n . The changes in th e s e f a c to r s account
9* I b i d . . quoted from R eadings. p . 367*
1 ° . I b i d . , p . 370.
134
botli fo r th e p ro g re ss of c a p i t a l i s t c i v i l iz a t i o n d u rin g th e
n in e te e n th c e n t u r y and f o r the s ta g n a tio n w hich h i t us in
th e tw e n tie th c e n tu ry .
Growth o f p o p u la tio n . D uring the l a s t h a lf o f th e
n in e te e n th c e n tu ry , p o p u la tio n growth accounted fo r about
f o r t y per cen t o f t o t a l volume o f c a p it a l fo rm a tio n in w este rn
/ 1
Europe and about s i x t y p er cent in the U nited S ta te s , Hansen
c a lc u la te d . But everyone i s aware to d ay o f th e d e c lin e in th e
r a t e o f p o p u la tio n grow th. Hence an im p o rtan t o u tle t f o r
in vestm ent i s b ein g closed o f f .
Hew Lands and re s o u rc e s . A gain, th e new c a p ita l th a t
was c re a te d in th e n in e te e n th c e n tu ry was to a g re a t e x te n t
th e d i r e c t consequence o f th e opening up o f new t e r r i t o r i e s ,
th e developm ent o f new c o u n trie s and re s o u rc e s . T o g eth er,
th e opening o f new t e r r i t o r i e s and p o p u la tio n grow th were
re s p o n s ib le f o r a v e ry la rg e f r a c tio n —as much a s o n e -h a lf
in H ansen’s e s tim a te —o f the t o t a l volume o f new c a p ita l
fo rm a tio n . These o u tle ts a re now b ein g r a p id ly choked o f f .
P ro g re ss o f tech n o lo g y . Technology, Hansen co n tin u ed ,
played a d e c is iv e r o le in s tim u la tin g p o p u la tio n growth an
in opening up new t e r r i t o r y in th e l a s t c e n tu ry . W ith th e
p a ssin g o f th e f r o n t i e r s and the re v e rse d tre n d of p o p u la tio n ,
we must f a l l back more and more on in v e n tio n s , in n o v a tio n s ,
135
and te c h n o lo g ic a l grow th, to p ro v id e th e in v estm en t o u tle ts
adequate to m ain tain f u l l employment. Of f i r s t r a te im
p o rta n c e , i s developm ent o f new in d u s tr ie s , which in th e p a s t
c e n tu ry accounted fo r v a s t o u tle ts f o r p riv a te in v estm en t.
Examples in c lu d e th e r a i l r o a d s , th e autom obile in d u s try , e tc *
But a f t e r the 1920s, n o th in g new em erged. Ho new in d u s tr ie s
were in s ig h t; a t l e a s t , none th a t would absorb much p riv a te
c a p ita l in v estm en t. C u rren t i n s t i t u t i o n a l developm ents,
fu rth e rm o re , a re r e s t r i c t i n g investm ent f o r in c re a s in g o u tp u t
—tra d e u n io n s, tra d e a s s o c ia tio n s , m o n o p o listic co m p e titio n ,
e t c . P ro g re ss i s th ere b y slowed down and th e o u t l e t s a v a il
a b le fo r new c a p ita l fo rm a tio n under a more dynamic s o c ie ty
a re choked o f f .
Summary and c r itic is m . The p ro g re ss o f c a p i t a l i s t
e v o lu tio n le a d s t o g r e a te r and g re a te r amounts o f sav in g fo r
in v estm en t on the one hand, and a d ry in g up o f th e so u rces o f
investm ent on th e o th e r, ac co rd in g to t h i s d o c tr in e , -^ut
th e f a c t s of th e case have been d is p u te d , e s p e c ia lly by T er
borgh in th e work c it e d . F urtherm ore, the th e o ry i s o b v io u sly
a n t i - l i b e r a l or a n t i - c l a s s i c a l . A ccording to orthodox l i b e r a l
economic th e o ry , th e fu tu re i s by no means d a rk , and w h ile i t
d e n ie s th e d ry in g up o f in v estm en t o p p o rtu n ity , i t h o ld s th a t
th e system i s provided w ith the f o r c e s , in h e re n t in th e
system i t s e l f , to co n tin u e economic p ro g re s s . Hence, th e
l i b e r a l s reg ard th e above t h e s i s a s a n t i - c a p i t a l i s t .
I l l THE GENERAL THEORY
136
Keynes in flu e n c e . John Maynard Keynes (1883-1946)
has p ro b ab ly had more In flu e n c e on economio th e o ry and p u b lic
p o lie y th an any s in g le man sin c e K a rl Marx, acco rd in g to b o th
h is d is c ip le s and h i s opponents. H is c o n trib u tio n s have been
many and v a r ie d , and alth o u g h many are in d is p u te , th e e x te n t
and in flu e n c e o f them are n o t q u e stio n e d . H is a tta c k on th e
old econom ics has been so e f f e c ti v e , and has won so many
a d h e re n ts , th a t h is opponents are prone to o v e rsta te t h e i r
case a g a in s t him . The ex c e sse s to w hich some o f h is opponents
have gone h as le d Seymour H a rris to rem ark:
At t h i s p o in t i t may be w e ll to i n s i s t th a t Keynes was
e s s e n t i a l l y a d efen d er of c a p ita lis m . Only th e s tu p id ity
o f th o se whom he su p p o rts can account fo r any o th er inter**
p r e ta tio n . Keynes indeed o f f e r s governm ent a la r g e r
degree o f o p e ra tio n th a n th e o ld -fa s h io n e d c la s s i c a l econ
o m ist; but h is m otive i s to save c a p ita lis m , n o t d e s tro y
i t . Those who a re n o t p rep ared to accep t t h i s i n t e r
p r e ta tio n should re ad P a rt IT o f th e A ssays in P e rsu a
s io n . Keynes wanted government to assume r e s p o n s ib ility
f o r demand, because o therw ise th e system would n o t
s u rv iv e . I t was p o ssib le to have b o th more government
a c t i v i t y and more p riv a te a c t i v i t y — i f unemployment could
only be ex clu d ed • And above a l l , Keynes would not
remove th e fo u n d a tio n s o f c a p ita lis m : fre e c h o ic e , th e
d riv in g fo rc e o f th e q u est fo r p r o f i t s , fche a llo c a tio n o f
re s o u rc e s in resp o n se to th e p ric e in c e n tiv e . H is l a s t
book, How to Pay f o r th e War, confirm s h i s lif e - lo n g
f a i t h i n t h o s e in g re d ie n ts of c a p ita lis m .I 1
1 1. Seymour H a r r is , e t . a l . , The New Econom ics. H a rris
e d ito r (New Y rk : A lfre d A. Knopf, 19471”p 7 3 - i."
O
137
Tlie mechanism. A ccording to Keynes, tile main problem
o f economic th e o ry was to d is c o v e r th e d eterm in an ts o f th e
le v e l o f n a tio n a l income and employment, sin ce th e g re a t
problem o f our tim es i s th e problem o f f u l l employment* H is
a n a ly s is can be b rie fe d down to th e fo llo w in g e s s e n t ia ls fo r
our purposes*
The le v e l o f employment in a community depends on th e
l e v e l o f income* The le v e l of income depends on two factors":^
(1) th e ag g reg ate amount of consum ption and (2) the r a te o f
new in v e stm e n t. The p ro p e n sity to consume is a r e l a t i v e l y
s ta b le f u n c tio n . But the second f a c to r , the r a te of new
in v e stm e n t, depends on p r o f i t e x p e c ta tio n s and th e r a te o f
i n t e r e s t , and can f lu c tu a te w id e ly . Now i f betw een them , th e
p ro p e n sity to consume and th e ra te o f new investm ent r e s u l t
in a d e f ic ie n t e f f e c tiv e demand, th e le v e l o f employment w ill
f a l l s h o rt o f the a c tu a l supply of la b o r a v a ila b le a t the
e x is tin g r e a l wage. There w i l l be a spread o f unemployment.
T h is e x p la in s th e paradox o f p o v erty in th e m id st o f
p le n ty , Keynes d e c la re s , sin c e the mere e x is te n c e o f an in
s u ffic ie n c y o f e f f e c tiv e demand may b rin g the in c re a s e o f
employment to a s t a n d s t i l l long b e fo re a le v e l o f f u l l
employment i s re a c h e d . The economic system can s e t t l e down
in to a s ta b le e q u ilib riu m w ith a v a s t, "perm anent” i n d u s t r i a l
re se rv e army o f unem ployed. In d eed , th e ric h e r th e community,
the more pow erful a re th e fo rc e s te n d in g tow ards an e q u ilib -
138
rium s h o rt o f f u l l employment. By in e x o ra b le law , the
w e a lth ie r a community grow s, the le s s chance have our two
f a c to r s , th e p ro p e n sity to consume and th e r a t e o f new
in v estm en t, to r e s u l t i n a high le v e l o f employment; or s a id
the o th er way, th e growing fo rc e s o f p ro d u c tio n , accompanied
by the growing w e a lth of the community, b rin g s in e v ita b ly
in to p lay e e r ta in eo u n ter fo rc e s w hich condemn th e system to
v a s t unemployment and m ise ry .
M oreover th e r ic h e r the community, th e w ider w i l l
ten d to be th e gap between i t s a c tu a l and i t s p o te n tia l
p ro d u c tio n ; and th e re fo re the more obvious and o u tra g e
ous th e d e f e c ts of th e economic sy stem . For a poor
community w il l be prone to consume by f a r th e g re a te r
p a r t o f i t s o u tp u t, so th a t a v ery m odest m easure o f
in v estm en t w il l be s u f f ic ie n t to p ro v id e f u l l employ
m ent; w hereas a w ealth y community w i l l have to d isco v er
much am pler o p p o rtu n itie s fo r in v estm en t i f th e saving
p ro p e n s itie s of i t s w e a lth ie r members a re to be com pati
b le w ith th e employment o f i t s p o o rer members. In a
p o t e n ti a ll y w ealth y community th e inducem ent to in v e s t
i s weak, th e n , in s p ite of i t s p o te n tia l w e a lth , th e
w orking o f th e p r in c ip le o f e f f e c tiv e demand w i l l compel
i t to reduce i t s a c tu a l o u tp u t, u n t i l , in s p ite o f i t s
p o te n tia l w e a lth , i t has become so poor t h a t i t s s u rp lu s
over i t s consum ption i s s u f f i c ie n t l y dim inished to c o r
respond to th e weakness of th e inducem ent to in v e s t.
But worse s t i l l , n o t only i s th e m arg in al p ro p e n sity
to consume weaker in a w ealthy community, b u t, owing to
i t s accum ulation o f c a p ita l being a lre a d y la r g e r , th e
o p p o rtu n itie s fo r fu rth e r investm ent a re le s s a t t r a c
tiv e u n le ss th a r a t e o f i n t e r e s t f a l l s a t a s u f f i c i e n tl y
ra p id r a t e . . . ^
1&. J'ohn Maynard Keynes, The G eneral The or y of Employ
m ent. i n t e r e s t and Money (New York: H a rc o u rt, Brace & C o.,
1935) p . 31.
139
Keynes* system th e re fo re depends on an a n a ly s is o f
the fo rc e s behind th e two f a c t o r s , the p ro p e n sity to con
sume and th e ra te o f new in v e stm e n t, a s determ ined by
v a rio u s fa c to rs *
The p ro p e n sity to consume* T his i s a f a i r l y s ta b le
fu n c tio n , acco rd in g to K eynes’ a n a ly s is . I t depends c h ie f ly
on th e ag g reg ate income of th e community. As th e ag g reg ate
income r i s e s , ag g reg ate consum ption' r i s e s • But here we en
co u n ter a v e ry i n te r e s ti n g and s ig n if ic a n t p sy c h o lo g ic a l law .
For as p e o p le ’ s income r i s e s , t h e i r consum ption r i s e s , b u t
n o t by so much. In o th e r w ords, w h ile people w ill consume
more, as t h e i r incomes in c r e a s e s , th ey w i l l a ls o want to
save m ore, so t h a t n o t a l l of th e in c re a s e in income goes
in to im m ediate consumption* The ag g reg ate sa v in g s o f th e
community grow. T herefore Keynes* problem n ex t i s to d i s
cover w hether investm ent o p p o rtu n itie s are a v a ila b le in
s u f f i c i e n t amount so th a t th e le v e l o f employment (b ein g a
fu n c tio n o f th e e f f e c tiv e demand p ro v id ed by consum ption
and in v estm en t) can be m aintained*
Inducem ent to in v e s t. H ansen’s v a n ish in g in vestm ent
o p p o rtu n itie s th e o ry d e sc rib e d above p laced em phasis upon
en v iro n m en tal f a c to r s , o u ts id e th e economy* When we t u r n to
K eynes, however, he a n a ly sz e s in a d d itio n th o se fo rc e s
in h e re n t in th e system i t s e l f which le a d s to a c o n tra c tin g
140
investm ent dem and-schedule a s a community grows w e a lth ie r.
For K eynes, new in v estm en t o p p o rtu n itie s depend on t o t a l
p r o f i t e x p e c ta tio n s , which, he c a ll s th e m arg in al e f f ic ie n c y
of c a p i t a l . T his r e s u l t s in th e in vestm ent dem and-schedule.
The r a te of in v estm en t depends on th e s t a t e o f lo n g -term
p r o f i t e x p e c ta tio n s and on the r a te o f i n t e r e s t . The r a t e
o f i n t e r e s t depends on th e l i q u i d i t y p re fe re n c e of the
community and on th e q u a n tity o f money.
Thus, in vestm ent w i l l go forw ard i f the i n t e r e s t r a t e
i s low and p r o f i t e x p e c ta tio n s are good. But i f th e i n t e r e s t
r a te begins to clim b , the r a te o f new investm ent d e c lin e s .
Investm ent w i l l alw ays be c a rrie d to th e p o in t where the
r a t e of i n t e r e s t i s j u s t e q u a l to th e m arginal e f f ic ie n c y
o f c a p it a l . I f a t t h i s p o in t, th e ra te o f investm ent i s s h o rt
o f f u l l employment, i t can be in c re a se d by lo w erin g the
r a t e o f i n t e r e s t .
F or in v estm en t to expand a g a in , th e n , e ith e r new
e f f ic ie n c ie s in p ro d u c tio n must appear o r th e r a te o f i n t
e r e s t must f a l l , ^he f a c t i s t h a t under the c o n d itio n s o f
m aturing c a p i t a l i s t i c economy, th e inducem ent to in v e s t i s
so a d v e rse ly a f fe c te d by the r a te o f i n t e r e s t and the s ta t e o f
lo n g -te rm e x p e c ta tio n s , t h a t th e r a te o f new investm ent
d e c lin e s s te a d ily , condemning th e system to w idespread
unemployment. The w orking of th e system i t s e l f is th e cause
o f b o th o f th e se ad v erse e f f e c t s , o p e ra tin g c h ie f ly th ro u g h
141
th e e x p e c ta tio n s o f th e fu tu re and th e l i q u id i t y p re fe re n c e
o f the community. The system would be plunged a lt e r n a te ly
in to c a ta s tr o p h ic i n f l a t i o n s and b o tto m less d e p re ssio n s were
i t not f o r th e s t a b i l i z i n g e f f e c t o f th e consum ption fu n c tio n ,
w hich p u ts li m i t s to b o th upper and low er le v e ls o f employ
ment and o u tp u t.
K eynesian p o lic y . Keynes ad v o cates a p o lic y th a t
would m a in ta in a h ig h le v e l o f consum ption and in v estm en t,
which fo rc e s to g e th e r p ro v id e th e e f f e c tiv e demand f o r
employment. S e v e ra l such p o lic ie s a re im m ediately su g g e ste d .
A r e d is t r i b u t i o n of income would put income in to th e hands
of th e p o o r, who o f co u rse, consume p r a c tic a ll y a l l o f t h e i r
incom e. A11 th o se p o lic ie s aimed a t keeping up th e con
sum ption o f th e m asses and k eeping sm all th o se funds t h a t
a re now going to th e r i c h to be sav ed , would h elp keep up e f f e c
tiv e demand.
T urning to th e in v estm en t s id e , s e v e ra l p o lic ie s can
be p u t in to e f f e c t to keep up th e le v e l o f in v e stm e n t.
One way to do t h i s i s by re d u cin g the i n t e r e s t r a te below
th e m arg in al e f f ic ie n c y o f c a p i t a l . An easy money p o lic y
i s su g g e ste d , a s a way to overcome l i q u id i t y p re fe re n c e and
low er the # a te . R e g u la tio n o f th e sto ck m arket m ight h e lp .
But t h i s w il l n o t be enough in a v e ry r ic h community. T&e
government i t s e l f w i l l have to e n te r th e f i e l d o f in v e stm e n t,
142
in th e w ealthy community, and commit la rg e sums, m ainly by
borrow ing,
^ h is p o in t o f view i s so v io le n tly a n t i - c l a s s i c a l
or a n t i - f r e e e n te r p r is e , th a t th e o ld e r econom ists accuse
Keynes o f w anting t o overthrow th e c a p i t a l i s t r e la tio n s o f
p ro d u c tio n . Even th e M a rx is ts , w hile n o t d o u b tin g th e
s in c e r it y o f K eynes, accuse him o f f a i l i n g to u n d erstan d
th e n a tu re o f h is own system , o r o f K idding h im s e lf and
fo o lin g the r e s t o f u s , 1^ But w h ile th e M arx ists r e j e c t
him as a n t i - s o c i a l i s t , th e l i b e r a l opponents o f Keynes are
ju s t as anxious to r e j e c t him as being a n t i - c a p i t a l i s t .
I f th e s o c i a l i s t s accuse him of d e v is in g props to p rolon g th e
m iserab le e x is te n c e o f c a p ita lis m , the orthodox l i b e r a l s
are ju s t as eager to p o in t to q u o ta tio n s from h is book, to
prove Keynes* a n t i - c a p i t a l i s t b ia s and h is th e o ry ’ s " c re e p -
in g s o c i a l i s t policy,**
S ev eral exam ples could be g iv en by th e orthodox
l i b e r a l s . In d is c u s s in g th e s t a t e o f lo n g -term e x p e c ta tio n s ,
Keynes a n a ly se s th e sto ck m arket and th e s e p a ra tio n o f owner
sh ip and c o n tro l, conclu d in g t h a t th e dom inating fo rc e s on
the exchange p rev en t a r a ti o n a l o p e ra tio n o f the m ark et.
S p e c u la to rs a re no lo n g er s p e c i a l i s t s in lo n g -term
13, See C hapter I I above fo r Sweezy’ s e stim a te o f
K eynesian refo rm p o lie y .
143
economic tre n d s , Keynes a s s e rts * They become, in s te a d ,
p s y c h o lo g is ts whose s o le a c t i v i t y c o n s is ts in gam bling on
how th e g e n e ra l, ig n o ra n t mass o f uninform ed buyers and
s e l l e r s o f s e c u r iti e s a re going to r e a c t t o the momentary
v ic is s itu d e s o f th e news.
The s p e c u la to rs lo se a l l s ig h t o f lo n g -term co n sid
e r a tio n s w hich should in flu e n c e investm ent d e c is io n s ,
under th e in flu e n c e o f a m arket la r g e ly dom inated by th e
s h if tin g whims o f mass psychology. And th e y are r i g h t , says
Keynes, because i s i t s e n s ib le to pay 25 f o r an in v estm en t
o f vfcieh you b e lie v e the p ro sp e c tiv e y ie ld to J u s ti f y a
v alu e o f 30, i f you a ls o b e lie v e t h a t th e m arket w i l l -value
i t a t 20 th re e months from now? Ihe r e s u l t i s chaos in th e
investm ent f i e l d . Out o f im p a tie n c e , Keynes a s s e r t s :
The s p e c ta c le o f modern investm ent m arkets has some
tim es moved me toward th e c o n c lu sio n t h a t to make th e
purchase o f an in v estm en t perm anent and in d is s o lu b le ,
lik e m a rria g e , excep t by re a so n o f d e a th o r o th er
grave c a u se , m ight be a u s e fu l remedy f o r our contem
p o ra ry e v i l s . . .
The only r a d ic a l cure fo r th e c r i s i s o f co n fid en ce
w hich a f f l i c t th e economic l i f e o f the modern w orld
would be to allow th e in d iv id u a l no choice betw een con
suming h is income and o rd e rin g th e p ro d u c tio n of the
s p e c if ic c a p it a l - a s s e t w hich, even though i t be on
p re c a rio u s e v id e n c e , im presses him as the most p ro
m isin g in v estm en t a v a ila b le to him . I t m ight be t h a t ,
a t tim e s when he was more th a n u s u a lly a s s a ile d by
doubts concerning th e f u tu r e , he would tu r n in h is p e r
p le x ity tow ards more consum ption and le s s in v estm en t.
But th a t would av o id th e d is a s tr o u s , cum ulative and
fa r-re a c h in g re p e rc u s s io n s of i t s being open to him ,
144
when th u s a s s a ile d by d o u b ts, to spend b is income
n e ith e r on th e one nor on the o t h e r .x4
But th e d efen d ers of c a p ita lis m as jUt is_ a re even more
h o r r if ie d a t Keynes1 su g g e stio n th a t " w a ste fu l” lo an expen
d itu r e may e n ric h th e community on b a la n c e , "P y ra m id -b u ild in g ,
e a rth q u a k e s, even w ars may serv e to in c re a se w e a lth , i f the
ed u c a tio n o f our statesm en on th e p r in c ip le s o f the c l a s s
i c a l econom ics sta n d s in th e way o f anyth in g b e t t e r , ” Keynes
d e c la re d , adding:
A ncient Egypt was doubly f o r tu n a te , and d o u b tle ss owed
to t h i s i t s fa b le d w e a lth , in th a t i t p o ssessed two
a c t i v i t i e s , nam ely, p y ra m id -b u ild in g as w e ll a s the
se a rc h f o r th e p re c io u s m e ta ls , the f r u i t s o f w hich,
sin c e th ey could not s e rv e the needs o f man by being
consumed, d id n o t s ta l e w ith abundance. The M iddle
Ages b u i l t c a th e d ra ls and sang d ir g e s . Two pyram ids,
two m asses fo r th e dead, a re tw ice as good a s one;
b u t n o t so two ra ilw a y s from London to York, ^hus we
a re so s e n s ib le , have schooled o u rse lv e s to so c lo se
a sem blance o f pru d en t f in a n c ie r s , ta k in g c a r e f u l
th o u g h t b efo re we add to the " f in a n c ia l" burdens o f pos
t e r i t y by b u ild in g them houses to liv e in , th a t we have
no such ea sy escape from th e s u ffe rin g s o f unemployment.
W e have to a c c e p t them a s an in e v ita b le r e s u l t o f ap p ly
in g to th e conduct o f th e S ta te th e maxims w h ie h a re
b e s t c a lc u la te d to e n ric h an in d iv id u a l by e n a b lin g him
to p ile up claim s to enjoym ent which he does n o t in ten d
to e x e rc is e a t any d e f in it e tim e .3-5
Concluding n o te s . In h is conclu d in g n o te s Keynes
comes to even more d is tu r b in g sta te m e n ts which convince h is
14. Op. c i t . . p . 160-61.
15. I b i d ., p . 131.
145
opponents t h a t Keynes i s a n t i - c a p i t a l i s t . P o in tin g out t h a t
th e g re a t e v i ls o f c a p ita lis m a re i t s f a ilu r e to provide f u l l
employment and i t s ’ ’a r b it r a r y and in e q u ita b le ” d is tr ib u tio n
o f w e a lth and income, Keynes c a ll s f o r th e ’’e u th a n a s ia " o f
r e n ti e r s and i n t e r e s t ta k e r s .
In a m atu rin g economy, a more e q u ita b le d i s tr ib u tio n
i s deemed n e c e ssa ry to keep up th e r a te o f consum ption,
e f f e c tiv e demand, and employment. While in e q u a lity may have •
a v a lu a b le in c e n tiv e fu n c tio n , th e in e q u a lity need n o t be so
g re a t as i t i s to d a y .
But more im p o rtan t is th e g eneral th e o r y 's s ig n ific a n c e
f o r th e r a te o f i n t e r e s t . Investm ent i s induced by a r a te
o f i n t e r e s t which i s low compared w ith th e m arg in al e f f ic ie n c y
o f c a p i t a l . C onsequently, government should a c t in b e h a lf of
th e community to keep th e ra te low . Here i s what Keynes has
to say about i n t e r e s t and th e r e n t i e r :
Now though t h i s s t a t e o f a f f a i r s would be q u ite com
p a tib le w ith some m easure o f in d iv id u a lis m , y e t i t would
mean th e e u th a n a sia o f the r e n t i e r , and, co n seq u en tly ,
th e e u th a n a sia o f the cum ulative o p p re ssiv e power o f
th e c a p i t a l i s t to e x p lo it the s c a rc ity -v a lu e o f c a p it a l .
I n t e r e s t to d a y rew ards no genuine s a c r i f i c e , any
more th an does th e r e n t o f la n d . The owner o f c a p ita l
can o b ta in i n t e r e s t because c a p ita l i s s c a rc e , ju s t as
th e owner o f lan d can o b tain r e n t because l and i s s c a rc e .
But w h ils t th e re may be i n t r i n s i c re aso n s fo r the s c a r
c ity o f la n d , th e re a re no i n t r i n s i c re aso n s fo r the
s c a r c ity o f c a p i t a l . An i n t r i n s i c reason fo r such
s c a r c ity , in th e sen se o f a genuine s a c r i f i c e which could
o nly be c a lle d f o r th by the o f f e r o f a rew ard i n th e
shape o f i n t e r e s t , would n o t e x i s t , i n th e lo n g ru n ,
146
ex c e p t in th e e v e n t o f th e in d iv id u a l p ro p e n sity to con
sume pro v in g to be o f such a c h a ra c te r t h a t n e t sa v in g
in c o n d itio n s of f u l l employment comes to an end b efo re
c a p ita l has become s u f f i c ie n tl y abundant. But even so ,
i t w ill s t i l l be p o s s ib le fo r communal sa v in g through th e
agency of th e S ta te to be m ain tain ed a t a le v e l which
w i l l allow th e grow th o f c a p it a l up to th e p o in t where
i t ceases to be s c a rc e ,
I s e e , th e r e f o r e , th e r e n t i e r a sp e c t o f c a p ita lis m as
a t r a n s i t i o n a l phase which w ill d isap p ea r when i t has done
i t s work. And w ith th e d isap p earan ce of i t s r e n t i e r a s
p e c t much e ls e in i t b e sid e s w ill s u f f e r a sea -eh an g e .
I t w i l l be, m oreover, a g re a t advantage o f the o rd er o f
e v e n ts w hich I am a d v o c a tin g , th a t th e e u th a n a s ia o f th e
r e n t i e r , o f th e fu n c tio n le s s in v e s to r , w i l l be n o th in g
sudden, m erely a g ra d u al but prolonged continuance o f
what we have seen r e c e n tly in Gread B r ita in , and w ill
need no re v o lu tio n ,
Keynes would aim in p r a c tic e a t an in c re a se in th e
volume o f c a p ita l u n t i l i t ce ases to be s c a rc e , "so th a t th e
fu n c tio n le s s in v e s to r w il l no lo n g e r re c e iv e a b o n u s." He
a ls o would aim a t a scheme of d ir e c t ta x a tio n which would
le v e l incomes w ith o u t d e s tro y in g in c e n tiv e . £he f in a n c ie r ,
th e e n tre p re n e u r e t hoc genus omne, a re c e r ta in ly so fond o f
t h e i r c r a f t th a t t h e i r la b o u r could be o b tain ed much cheaper
th a n a t p re s e n t, Keynes d e c la r e s . T h eir s k i l l s could be h a r
nessed to th e s e rv ic e o f the community on much more re a s o n
ab le term s o f rew ard.
But Keynes d e c la re s he i s no s o c i a l i s t , th a t s o c ia lis m
i s n o t even n e e e ssa ry to so lv e the g r e a te s t e v ils o f c a p i t a l
ism nam ely in e q u a lity and unemployment. Here i s some evidence
it>. Ibid." p. 37^6.
147
o f h is lo y a lty to the system :
•••F u rth erm o re , i t seems u n lik e ly th a t the in flu e n c e o f
banking p o lic y on the r a te o f i n t e r e s t w i l l be s u f f i c ie n t
by i t s e l f to determ ine an optimum r a te o f in v e stm e n t. I
co n ceiv e, th e r e f o r e , th a t a somewhat com prehensive s o c ia l
iz a tio n o f investm ent w i l l prove the o n ly means o f s e c u r
in g an approxim ation to f u l l employment; though t h i s
need n o t exclude a l l manner o f compromises and o f d ev ice s
by which p u b lic a u th o r ity w il l co o p erate w ith p r iv a te i n i
t i a t i v e .
But beyond t h i s no obvious case i s made out fo r a sy s
tem o f S ta te S o c ia lism w hich would embrace most o f th e eco
nomic l i f e o f th e community. I t i s n o t th e ow nership o f
th e in stru m e n ts o f p ro d u c tio n which i s im p o rtan t fo r th e
s t a t e to assum e. I f th e S ta te i s a b le to determ ine th e
ag g reg ate amount of re s o u rc e s devoted to augm enting th e
in stru m e n ts and th e b a sic r a te o f rew ard to th o se who
own them, i t w i ll have accom plished a l l th a t i s n e c e s s a ry .
M oreover, th e n e c e ssa ry m easures o f s o c ia liz a tio n can be
in tro d u ced g ra d u a lly and w ith o u t a break in th e g e n e ra l
tr a d i t io n s o f s o c ie ty .17
While Keynes c a l l s f o r government in te r v e n tio n , he
claim s th a t h is p o lic y i s in r e a l i t y c o n s e rv a tiv e , and he
even pauses to co n sid er th e advantages o f p riv a te e n te r
p ris e *
Thus I agree w ith G e se ll t h a t the r e s u l t o f f i l l i n g
in th e gaps in th e c l a s s i c a l th e o ry i s n o t to d isp o se of
th e "M anchester S ystem ," but to in d ic a te th e n a tu re o f
th e environm ent which the fre e p lay of economic fo rc e s
re q u ire s i f i t i s to r e a liz e th e f u l l p o t e n t i a l i t i e s o f
p ro d u c tio n . The c e n tr a l c o n tro ls n e c e ssa ry to en su re
f u l l employment w i l l , o f c o u rse , in v o lv e a la rg e e x te n
sio n o f th e t r a d i t i o n a l fu n c tio n s o f governm ent. F u r
therm ore, th e modern c l a s s i c a l th e o ry has i t s e l f c a lle d
a tte n tio n to v a rio u s c o n d itio n s in which th e f r e e p lay
o f economic fo rc e s may need to be curbed o r g u id ed .
I T . " Ibid..' pi 377-3.
148
But th e re w ill s t i l l rem ain a wide f i e ld fo r th e e x e r
c is e of p riv a te i n i t i a t i v e and r e s p o n s i b i l i ty . W ithin
t h i s f i e l d the t r a d i t i o n a l advantages o f in d iv id u a lism
w ill s t i l l hold good.
L et us sto p fo r a moment to rem ind o u rse lv e s what
th e se adv an tag es a r e . They are p a r tly advantages of
e f f ic ie n c y — th e advantages of d e c e n tr a liz a tio n and o f th e
p lay o f s e l f - i n t e r e s t . . . , 1 8
T h e re fo re , Keynes does n o t p r e d ic t th e p assin g o f
c a p ita lis m as in e v ita b le . He is occupied w ith th e problem s
o f f u l l employment and economic a n a ly s is . B ut, re g a rd le s s
o f h is good in te n tio n s toward c a p ita lis m , th e q u e stio n i s
ra is e d as to w hether h is p o lic ie s can be follow ed f o r any
p erio d of tim e w ith o u t fundam entally a l t e r i n g th e s tr u c tu r e
and th e p ro c e sse s o f th e c a p i t a l i s t i c system .
IV CONCLUSIONS
W e d e a lt w ith th e se th e o r ie s o f th e m aturing economy
because of th e c o n tro v e rsy which f o r f i f t e e n y e a rs has been
ra g in g about them, e h ie f ly ta k in g the form th a t (1} they a re
a n t i - c a p i t a l i s t in n a tu re and (2) th a t t h e i r p o lic y im p li
c a tio n s amount to "c re e p in g s o c ia lis m ."
Our own c o n c lu sio n s must now be summed up, and th ey
fra n k ly depend on w hether we take th e s h o rt run o r long
run view . In th e s h o rt run I t i s c le a r th a t K eynesian p o lic y
does n o t p re d ic t nor have in mind th e p a ssin g o f th e c a p i-
TZZ Ibid.. p. "550.
149
t a l i s t system . The elem ents o f K eynesian th e o ry w hich have
an a f f i n i t y w ith some of th e d o c trin e s o f K arl Marx a re
s t r i e t l y of th e s h o rt run c h a r a c te r .
N e ith e r Keynes n or Hansen claim t o b e lie v e in the in
e v ita b le p a ssin g o f c a p ita lis m , a t l e a s t as re g a rd s th e th e o ry
of economic m a tu rity . They are concerned w ith reform s to
achieve f u l l employment on th e b a s is o f c a p ita lis m . The
p o lic y im p lic a tio n s , th e y f e e l , a re e s s e n t ia l ly c o n se rv a tiv e
in n a tu r e •
As re g a rd s lo n g -ru n c o n s id e ra tio n s th e p ic tu re i s n o t
so c le a r* Keynes and Hansen give no p re d ic tio n s t h a t th e
fo rc e s w ith in c a p ita lis m w i ll a c tu a lly r e s u l t in so c ia lism
i f government does n o t in te rv e n e , and th ey a s s e r t t h a t th e y
w ish government in te r v e n tio n to save c a p ita lis m . The c r i t i
cism th a t th e p o lic y w ill condemn us to "c re e p in g so c ia lis m ”
comes from the orthodox l i b e r a l opponents. C le a rly i f
K eynesian p o lic ie s lead to s o c ia lism th e se p o lic ie s can be
b e tt e r accounted fo r under o th e r a n a ly se s th an th o se r e s tin g
on a m ature economy or o v ersav in g b a s is .
S ta g n a tio n is t th e o ry and p o lic y does seem, however, to
s tre n g th e n g ra d u a lis t, co n c ep ts. Keynes i s q u ite fra n k about
th e tendency tow ards s o c ia liz a tio n of investm ent and th e
e u th a n a sia o f r e n t i e r and fu n c tio n le s s c a p i t a l i s t . C e rta in ly
th e s tru c tu re o f c a p ita lis m w i l l r a d ic a l ly change under the
im pact o f an accep ted p o lic y of in te rv e n tio n is m to m a in ta in
150
f u l l employment. There a ls o i s d e f i n i t e l y th e q u e stio n of
how long p u b lic o p in io n w ill t o le r a te w a ste fu l governm ental
e x p e n d itu re s , and w ith g re a t o u tla y s , th e re w ill be le s s
r e s is ta n c e to governm ent in v estm en t in p riv a te f i e l d s .
CHAPTER V
THE SUCCESS THESIS
In C hapters I I and I I I , th e o r ie s of the p a ssin g o f
c a p ita lis m by t h e o r i s t s h o s tile to th e system were reviewed*
In C hapter IV, the c o n tro v e rsy as to w hether th e K eynesian
d o c trin e o f governm ental in te rv e n tio n would le a d to " c re e p
ing s o c ia lis m ” and th e e v e n tu a l p a ssin g of c a p ita lis m was
c o n sid e re d . W e now tu r n our a tte n tio n , in t h i s and th e
n ex t c h a p te r, to th e o r ie s which p r e d ic t th e in e v ita b le
p a ssin g of c a p ita lis m by t h e o r i s t s f r ie n d ly to th e c a p i t a l i s t
system .
Y este rd ay , th e t h e o r i s t s who h o ld to the view s we now
ta k e up prob ab ly would have h eld to th e th e o ry of th e perma
nence of c a p ita lis m . Today th e y r e g r e t f u l l y claim t h a t the
view o f c a p i t a l i s t permanence is u n ten ab le and th a t i t must
be r e je c t e d . A growing body of c a p i t a l i s t t h e o r i s t s and
a d h e re n ts a re coming to ac cep t t h i s p o in t of view .
The Success D o c trin e . The sch o o l o f econom ists under
review in t h i s c h a p te r openly avows th e u ltim a te p a ssin g of
the c a p i t a l i s t system , but not f o r th e reaso n s given by
M arxian s o c i a l i s t s and o th er a n t i - c a p i t a l i s t s . C a p ita lism
i s n o t doomed by i t s own innear c o n tr a d ic tio n s , antag o n ism s,
te n d e n c ie s t o s ta g n a tio n , or a lle g e d e v i l s . I t i s j u s t th e
152
o p p o s ite . C a p ita lism i s doomed p re c is e ly because i t i s so
v ery s u c c e s s fu l as an engine o f economic developm ent and
p ro g re s s .
In f a c t , th e e v i l s , c o n tr a d ic tio n s , and f a i l u r e s of
th e c a p i t a l i s t system have been over-em phasized, i f they
r e a l l y e x is t a t a l l , t h i s group arg u es. The h is to r y of
c a p i t a l i s t developm ent h as been one of amazing acco m p lish
m ents and achievem ents, ex p an sio n , and grow th. That the
h is to r y o f the system has been studded w ith tem porary
breakdowns alo n g the way m erely se rv e s to em phasize th e
o u ts ta n d in g f a c t th a t th e engine has been going a t breakneck
speed, r i s i n g to ev er g re a te r re c o rd s of outp u t and p ro g re s s ,
But t h i s i s no p le a to save th e system , the su ccess
t h e o r i s t s ad m it. In d eed , c a p ita lis m i s beyond sa v in g ; i t i s
a lre a d y condemned. I t i s condemned fo r the v ery re aso n s
t h a t made i t so s u c c e s s f u l. And fo r th e se same re a s o n s , th e
advent o f so c ia lism i s a s s u re d .
However, t h i s judgment does n o t mean t h a t the pro
p o n en ts o f th e su c c e ss th e s is wish to see th e system pass
in to some form of c o lle c tiv is m . 2?hese men a re n o t s o c i a l i s t s .
Most are c o n s e rv a tiv e s , perhaps even " r e a c ti o n a r ie s .” Some
a re l i b e r a l s , o th e rs a re i n d u s t r i a l i s t s ; some are j u s t p la in
/
" o b je c tiv e s c h o la rs " who a re "v o id ” (an im p o s s ib ility ? ) o f
any p o litic o -e c o n o m ic ta g s , i t i s claim ed . Be t h a t a s i t
may, th o se who a c c e p t t h i s d o c trin e a re grouped around Joseph
153
A. Schumpeter o f H arvard U n iv e rs ity , a c c e p tin g w ith v ary in g
deg rees o f agreem ent the n o n -s u rv iv a l th e s is s e t f o r th in
h is now famous work, C a p ita lis m , S o c ia lism and Democracy.1
T his book by Schum peter had im m ediate, w ide-spread
s u c c e s s . A grow ing number o f fo llo w e rs , d e s e r tin g the
t h e s i s o f c a p i t a l i s t perm anence, began to quote the book
in s u b s ta n tia tio n o f th e argument th a t "S o c ia lism i s in e v
i t a b l e , but not f o r th e re aso n s Marx g av e ." The th e s is
provided a handy a l t e r n a ti v e th e o ry to th e M arxian d o c trin e
o f c a p i t a l i s t doom, one more e a s ily accep ted by many acade
m ic ia n s. Ai a n a ly s is of the th e s is s e t f o r th in th a t book,
r e l a t i n g to th e q u e s tio n o f c a p i t a l i s t s u r v iv a l, w ill be th e
s u b je c t o f t h i s c h a p te r. Here i s Schum peter*s own s t a t e
ment o f th e t h e s i s :
Can c a p ita lis m su rv iv e ? No. I do n o t th in k i t
can . . . .
The t h e s i s I s h a l l endeavor to e s t a b l i s h i s th a t
th e a c tu a l and p ro sp e c tiv e perform ance of the c a p i t a l i s t
system i s such as to n eg a tiv e the id ea of i t s b re a k in g
down under th e w eig h t o f economic f a i l u r e , b u t th a t
i t s v ery su cc ess underm ines the s o c ia l i n s t i t u t i o n s
which p r o te c t i t , and " in e v ita b ly " c re a te s c o n d itio n s
in w hich i t w i l l n o t be ab le to liv e and "which s tro n g ly
p o in t to s o c ia lis m as th e h e ir a p p a re n t. My f i n a l cex
c lu s io n th e re fo re does n o t d i f f e r , however much my
argum ent may, from th a t o f most s o c i a l i s t w r ite r s and
1 . P u b lish ed by H arper & B ro s ., New Y rk and London;
f i r s t e d itio n , 1942; second e d itio n , 1947.
154
in p a r tic u la r from th a t of a l l M a rx is ts .
But in o rd e r to a c c e p t i t one does n o t need to be
a s o c i a l i s t . P ro g n o sis does n o t im ply anything about th e
d e s i r a b i l i t y o f th e course o f e v e n ts t h a t one p r e d ic ts .
I f a d o c to r p r e d ic ts th a t h is p a tie n t may d ie p re s e n t
l y , t h i s does not mean t h a t he d e s ir e s i t . One may h a te
s o c ia lis m o r a t le a s t look upon i t w ith co o l c r itic is m ,
and y e t fo rse e I t s a d v e n t. Many c o n s e rv a tiv e s did
and d o .2
O rg a n iz a tio n of the t h e s i s . Schumpeter begins w ith
an a tta c k on th e v a rio u s th e o r ie s of c a p i t a l i s t f a il u r e s
and then d e a ls w ith th e th e s i s t h a t c a p ita lis m w ill f a i l as
a r e s u l t of i t s own s u c c e s s e s . Seven c h a p te rs are devoted to
th e f i r s t p a r t (C h ap ters V th ro u g h X I). H is main ta s k s a re
to prove th a t c a p ita lis m i s s u c c e s s fu l, t h a t i t was resp o n
s ib le fo r th e economic achievem ents o f the p a s t fo u r c e n tu r ie s ,
and t h a t a s a p ro c e ss of "C re a tiv e D e s tru c tio n ," i t c o n tin u e s
to be a machine of economic p ro g re s s , th e achievem ents of
which can be p ro je c te d fo r sometime In to th e f u tu r e .
The second p a rt c o n s is ts o f th re e c h a p te rs , th e s u b je c t
of which i s in d ic a te d by the t i t l e s , "C rum bling W a lls,"
"Growing H o s t i l i t y ," and "D ecom position." In th e s e c h a p te rs ,
Schum peter d e s c rib e s hhe f a c to r s and fo rc e s w hich condemn
th e c a p i t a l i s t system to e x tin c tio n . The fo rc e s are in
h e re n t in the c a p i t a l i s t p ro c e s s , the r e s u l t of th e very
su cc esses o f th e system .
Tl Ib id . , se cond ed i t io n . p. 61.
155
I . DYNAMICS OF CAPITALIST SUCCESS
Some c r i t e r i a o f s u c c e ss. S ince th e atm osphere of*
h o s t i l i t y tow ards the c a p i t a l i s t system i s growing ap ace,
i t i s w e ll to guard a g a in s t a too-sw eeping condem nation o f
c a p ita lis m by k eep in g in mind some c r i t e r i a fo r ju d g in g th e
a c tu a l su ccess or f a i l u r e of th e system .
Schumpeter l i s t s , among o th e r s , fiv e t e s t s o f economic
perform ance. The f i r s t t e s t o f perform ance i s th a t o f t o t a l
o u tp u t and i t s grow th; a second i s th a t t h i s o u tp u t does n o t
sim ply grow, b u t th a t i t comes w ith in the reach o f lower
economic c la s s e s ; th e system p ro v id e s a p o l i t i c a l mechanism
and th e means fo r ac h ie v in g s o c ia l l e g i s l a t io n and reform ;
a fo u rth i s th e p o s s i b i li t y held out by c a p i t a l i s t e v o lu tio n
fo r th e case of the aged, th e s ic k , and f o r e d u c a tio n , hy
g ie n e , and so on. L a s tly , th e re i s th e q u e stio n o f unemploy
m ent, which i t s e l f i s in d ic a tiv e o f p ro g re ss and growth
r a th e r th an being an e y i l in i t s e l f , th e e v ils o f which can
now be m itig a te d .
On th e b a s is of p a s t perform ance c a p ita lis m h as shown
a c a p a c ity to grow, and to expand o u tp u t a t a r a te o f two p er
ce n t per y e a r, as a lo n g -ru n a v e rag e. Schumpeter p ro je c ts
t h i s r a te o f growth of t o t a l o u tp u t in to th e f u tu r e , to 1978.
W hether he i s j u s t i f i e d in doing t h i s , he d is c u s s e s l a t e r .
Now allo w in g fo r a p o p u la tio n o f 160,000,000 in the U nited
156
S ta te s in 1978, or f i f t y y e a rs a f t e r 1928, th e average in
come per head d u rin g th a t i n te r v a l would in c re a s e to a l i t t l e
more th an double i t s 1928 amount. T his was about #650 in
term s o f 1928 p u rc h asin g power.
Thus by 1978, income p er head would be a t about #1,300
a t 1928 p u rch asin g power, i f Schum peter i s j u s t i f i e d in p ro
j e c tin g the h i s t o r i c a l tr e n d . In o th e r w ords, the r e a l in
come per c a p ita would be doubled. Thus, i f c a p ita lis m
i
re p e a te d i t s p a s t perform ance fo r a n o th e r h a lf- c e n tu ry , begin
n in g as o f 1928, t h i s would do away w ith an y th in g t h a t by
p re se n t sta n d a rd s could now be c a lle d p o v e rty , even in the
lo w est s t r a t a o f th e p o p u la tio n . F u rth erm o re, Schumpeter
b e lie v e s t h a t in s te a d of th e ric h g e ttin g r ic h e r and the poor
p o o re r, th e poor a c tu a lly a re g e ttin g r ic h e r as a r e s u l t o f
th e developm ent o f mass p ro d u c tio n , cheap com m odities designed
to reach th e working c la s s e s , and the grow ing amount o f l e i
su re which comes w ith s h o rte r h o u rs o f work, th e growth of
p e rso n a l s e r v ic e s , and so on.
A lso, under c a p ita lis m , achievem ent c o n s is ts n o t mere
ly in p ro v id in g more h o s ie ry f o r queens b u t in b rin g in g them
in c re a s in g ly w ith in the reach of f a c to r y g i r l s . The c a p i
t a l i s t p ro c e ss, d e c la re s Schum peter, i s a s e r ie s of re v o lu
t io n s , re sh a p in g the s tr u c tu r e o f p ro d u c tio n by new methods
such as m echanized f a c t o r i e s , e l e c t r i f i e d f a c t o r i e s , and
chem ical s y n th e s is ; w ith new com m odities, new so u rce s o f
157
su p p ly , new tra d e ro u te s and m ark e ts, and so on. Each o f
th e se re v o lu tio n s r e s u l t in an avalanche of consumers* goods
which "perm anently deepen and widen" th e stream o f r e a l in
come going to th e m asses.
As tra d e and in d u s try p ro g re s s , the c a p i t a l i s t p e r
formance i t s e l f makes p o s s ib le a b etterm en t of liv in g con
d itio n s fo r th e p eo p le, who a re provided w ith th e means and
th e p o l i t i c a l v o litio n to i n s t i t u t e s o c ia l l e g i s l a t io n and
refo rm . These l e g i s l a t i v e m easures a l l presuppose p re v io u s
c a p i t a l i s t su c c e ss, and much of th e s o c ia l l e g i s l a t i o n only
develo p s and g e n e ra liz e s what had o r ig in a lly been i n i t i a t e d
by th e c a p i t a l i s t stra tu m i t s e l f . Hence, reform i s n o t aimed
a g a in s t c a p ita lis m and i t s f a i l u r e s as some may b e lie v e ; i t
i s a p ro c e ss whereby th e m asses are a b le to p a r tic ip a te more
and more in th e te c h n o lo g ic a l developm ent and su c c e sse s o f
th e system .
Unemployment p la y s a sm all ro le in Schum peter*s a n a l
y s i s . He does n o t b e lie v e i t to be "among th o se e v ils w hich,
lik e p o v e rty , c a p i t a l i s t e v o lu tio n could ever e lim in a te ."3
He d e n ie s , however, th a t unemployment has a tendency to grow
in th e lo n g run under c a p ita lis m . But w hether l a s t i n g ,
g e ttin g worse o r g e ttin g b e t t e r , unemployment i s alw ays a
sco u rg e. The r e a l trag ed y i s n o t enumployment per s e , however,
3. Ibid.. p. 69.
158
but "unemployment p lu s the im p o s s ib ility of providing ade
q u ately fo r the unemployed w ithout im pairing the co n d itio n s
of fu rth e r economic development*. . . " 4 C ap italism i s now in a
p o s itio n to provide the unemployed w ith c e r ta in b asic needs
to h elp them over the roughest sp o ts.
P la u sib le c a p ita lis m . But can c a p ita lis m re p e a t i t s
p a st performance during the next t h i r t y or f o r ty years? To
argue th a t i t may, Schumpeter must e s ta b lis h a r e la tio n be
tween the c a p i t a l i s t order and th e observed ra te of in crease
%
in o u tp u t. This tak es him through a long d isc u ssio n of
a n a ly tic models, the conclusion being th a t ev ery th in g one
concedes to the c a p ita lism of p e rfe c t com petition must also
be conceded to even a g re a te r degree to big business, cap i
ta lis m .
Secondly, he has to show th a t the r e la tio n between
the system and the r a te o f in cre ase of output was a c tu a lly
due to the system and not to p a r tic u la r ly fa v o rab le co n d itio n s
e x is tin g o u tsid e th e system . The f u r th e r qu estio n then a r i s e s ,
as to whether th ere i s any reason why c a p ita lism should f a i l ,
sometime during the n ex t t h i r t y or f o r ty y e a rs, to go on work
in g as in the p a s t.
As to the r e la tio n between the c a p i t a l i s t ord er and the
r is i n g ra te of growth of o u tp u t, Schumpeter review s the
Ibid.. p. jo.
159
stream of economic d o c trin e . C la s s ic a l economic th eo ry
held th a t th e p r o f i t motive was c o m p a t i b l e with maximum o u t
p u t. Each man being l e f t to pursue h is own best i n t e r e s t ,
w ithout o u tsid e in te rfe re n c e , would ca rry out production to
the maximum. With each pursuing h is own in d iv id u a l i n t e r e s t s ,
th en , the maximum s a tis f a c tio n or w elfare would come to the
community. The p r o f it motive was motive enough f o r th e system
to expand of and by i t s e l f , thereby e s ta b lis h in g the r e la tio n
between the c a p i t a l i s t order and the in c re a sin g r a te of growth
of o u tp u t.
L a te r, c l a s s ic a l th e o ry was m odified by A lfred Mar
s h a ll and Knut W ick sell, S t i l l , th ey h eld th a t under p e rfe c t
com petition, th e p r o f i t in t e r e s t of the producer ten d s to
maximize production, th u s m aintaining the lin k between o u t
put and c a p ita lis m . But th e ir systems opened up the p o s s i
b i l i t i e s of a n o th e r, and perhaps more g en eral ca se, or what
has come to be known as M onopolistic C om petition.
Under co n d itio n s o f m onopolistic and im perfect competi
tio n , which dom inates the r e a l economy, i t can be questioned
whether th e p r o f i t motive leads to th e m axim ization of pro
d u ctio n , or whether i t le a d s in stead to p o lic ie s o f r e s t r i c t i o n ,
w aste, and in d eterm in aten e ss. Schumpeter must deny t h i s or
i t may be argued th a t c a p ita lism , ra th e r th an being compatible
w ith maximizing production and the s o c ia l w e lfare, r e s u l t s
160
in r e s tr ic tio n is m and th a t i t expands not due to any inner
fo rce b u t, i f a t a l l , due to fa c to rs ou tside th e system .
Schumpeter’s re p ly i s an e la b o ra te r a tio n a l iz a ti o n o f, and
defense of (apology fo r) m onopolistic p ra c tic e s and p o lic ie s .
C reativ e D e stru c tio n . M onopolistic com petition may
be in te rp re te d in two ways, in order to show th a t c a p i t a l i s t
r e a l i t y i s unfavorable to maximum performance in p ro d u ctio n ,
Schumpeter co n tin u es.
F i r s t , i t may be argued th a t c a p i t a l i s t r e a l i t y has
always been unfavorable, t h a t production has always been
sabatoged by the managers, as f o r example Yeblen has a s s e r t
ed. Or second, i t may be argued t h a t c a p ita lism in i t s youth
(under co n d itio n s approaching pure com petition) favored maxi
mum production but th a t the l a t e r growth of monopoly rev ersed
the tendency by k i l l i n g com petition. Schumpeter r e je c ts
both arguments, s p e c if ic a l ly re p u d ia tin g th a t th e re has ever
been pure or p e rfe c t com petition, and th a t, th e re fo re , the
second argument f a l l s .
Schumpeter then d e fin e s c a p ita lism as an e v o lu tio n a ry
p ro c ess. "C ap italism , th en , i s by n atu re a form or method
of economic ehange and n ot only never i s but never can be
s ta tio n a r y ," he w r i t e s .5 This i s due not m erely to changes
o u tsid e the system , nor to a quasi-autom atic in crease in popu
Ibid., p. & 2 .
161
l a t i o n , c a p ita l, o r monetary v a g a rie s , a s o th er th e o rie s
have h e ld . "The fundam ental impulse t h a t s e ts and keeps th e
c a p i t a l i s t engine in motion comes from the new consumers*
goods, the new methods of production or tra n s p o r ta tio n , Jfche
new m arkets, the new forms of i n d u s t r i a l o rg a n iz atio n th a t
c a p i t a l i s t e n te r p ris e c r e a te s . "6 Thus i s i l l u s t r a t e d a pro
cess of in d u s tr ia l m utation th a t " in c e s s a n tly re v o lu tio n iz e s
the economic s tru c tu re from w ith in , in c e s sa n tly d e stro y in g
the old one, in c e s s a n tly c re a tin g the new one. This process
o f C reative D estru c tio n is th e e s s e n t i a l f a c t a to u t c a p ita lis m ." ?
Hence, the system can never be s ta tio n a ry ; i t i s by nature a
form or method of economic change.
Two conclusions emerge from t h i s d e f in itio n of c a p i
ta lis m . H irs t, we must never look a t th e system in a point
of tim e, a s a s ta tio n a r y system. The system does not e x i s t
as th e " s ta tio n a ry s t a t e . " C apitalism is a pro cess, dynamic
by n a tu re , and can be understood only as a p ro c ess.
Second, sin ce i t i s a p rocess, th e a n a ly s is of any
p a r tic u la r p a rt may e l a r i f y d e t a i l s of p a r tic u la r mechanisms
but i t i s in co n clu siv e beyond t h a t . The problem u su ally
v is u a liz e d is how c a p ita lis m ad m in isters e x is tin g s tr u c tu r e s ,
whereas the re le v a n t problem i s how i t c re a te s and d estro y s
S ~ , Ib id . . p. 83.
7*. I b i d ., p. 83.
162
them, Schumpeter arg u es.
The P e re n n ia l G ale. In the long ru n , the c a p i t a l i s t
system is su b jected to a p e re n n ia l gale of new ev en ts, the
impact of which changes or d e stro y s th e e x is tin g s tr u c tu r e s .
Viewed in t h i s lig h t c e rta in so -c a lle d " e v ils " take on a "new
look" and perhaps tu rn out to be b e n e fic e n t.
For example, r e s t r i c t i v e (m onopolistic) p r a c tic e s ac
quire a new sig n ific a n c e in th is p e re n n ia l g a le , Schumpeter
p lead s. These m onopolistic p ra c tic e s "steady the s h ip ," so
to speak, in th e gale of d i f f i c u l t i e s which b e se t th e dy
namic economy. NRA, AAA, and oth er governmental p ro je c ts of
t h i s s o rt i l l u s t r a t e the widespread acceptance o f th e p rin
c ip le or r e s tr ic tio n is m by p o l i t i c i a n s , sp e c ia l (vested)
i n t e r e s t groups, and the g en eral public a lik e .
As p ra c tic e d by p riv a te firm s, anfl looked a t ex v is u ,
some of these m onopolistic p ra c tic e s may seem p re d ato ry ,
Schumpeter is w illin g to adm it. But a s "a process of c re a tiv e
d e s tru c tio n ," they are "o ften unavoidable in c id e n ts ," which
p ro te c t ra th e r than impede, he arg u es. Thus the long-run
view throws a d if f e r e n t l i g h t on th e se s h o rt-ru n stratagem s
of b u sin e ss, stratagem s deemed n ecessary by the c a p i t a l i s t s
and o th e rs to weather the p e re n n ia l g a le .
Viewed in t h i s l i g h t , why not drop the term "monopo
l i s t i c , " which has "bad" p o l i t i c a l co n n o tatio n s and " l i t t l e "
163
economic meanifcg, Schumpeter p lead s. The term i s d esig n ated
to in c ite the masses and s t i r up embers b e tte r l e f t to smoth
e r . A much more p a la ta b le term (or "w easle-w ord," as th e
s o c i a l i s t w rite rs would d e c la re ) would be "b usiness s tr a te g y ."
"B usiness stra te g y " sounds ever so much b e tte r than "monopo
l i s t i c p r a c tic e s ."
A ll new in d u s trie s and re o rg a n iz a tio n s are aggressors
by n a tu re and w ield the r e a l ly e f fe c tiv e weapon of competi
tio n . But "business s tra te g y " d ic ta te s temporary p o lic ie s
of r e s tr ic tio n is m , u n t i l th ey can get on t h e i r f e e t . And
lik e w ise , old in d u s tr ie s must t r y to p ro te c t them selves
from sudden crashes by "b u sin ess s tra te g y " i . e . , m onopolistic
p r a c t ic e s .
In f a c t , th e re is n o t a general case fo r in d iscrim
in a te tr u s t- b u s tin g from SchumpeterT s view point, or fo r th e
p ro sec u tio n of e v e ry th in g th a t q u a lif ie s as a r e s t r a i n t of
tra d e . Rigid p r ic e s , d e fin e d as being le s s s e n s itiv e to
changes in supply and demand than would be the case under
p e rfe c t com petition, are p a r t o f business s tra te g y aimed a t
avoiding sea so n a l, random, and c y c lic a l f lu c tu a tio n s in
p r ic e s . This s tra te g y involves moving slowly by d is c re te
ste p s and keeping a p ric e u n t i l new, r e l a t i v e l y durable con
to u rs emerge in to view. Indeed, p e rfe c t f l e x i b i l i t y of
p ric e s , on a u n iv e rsa l s c a le , might in depression fu rth e r
164
u n s ta b iliz e the system , ra th e r than s t a b il iz e i t . But a l l
t h i s i s in the sh o rt run, anyway.
In the long h a u l, r e s t r i c t i o n i s t p o lic ie s take on a
d if f e r e n t view, and are seen a s tem porary stratagem s to even
out the flows of development and to prevent shipwrecks on
the th re a te n in g seas of the p e re n n ia l g a le . In th e long
view, business cannot and does not m aintain e x is tin g values
a t the expense of in v en tio n s and p ro g re ss, Schumpeter arg u es,
but m erely in tro d u ces in v en tio n s i n t e l l i g e n t l y , when the time
i s rip e f o r them; and progress comes about with le s s d is tu r b
ances. Temporary monopoly p o s itio n s , while in e v ita b le in the
s h o rt-ru n , as business s tra te g y to w eather the g a le , d isap p ear
in th e long p u l l .
Thus, Schumpeter in r e a l i t y gives a c r itic is m of th e
old id eas of p e rfe c t and pure co m p etitio n , which he says
never e x is te d anyway, and s u b s titu te s a long-run " r e a l i s t i c "
view, in a process of c re a tiv e d e s tru c tio n . He f e e l s th a t
t h i s i s th e b e st method of com batting the s o c i a l i s t case
a g a in st c a p ita lism and securing acceptance of h is a lte r n a
tiv e prognosis of the passing of c a p ita lis m . He urges th a t
what had been conceded to the c a p ita lism o f p e rfe c t competi
tio n be conceded now to the c a p ita lism of big business and
monopoly. He p o in ts to th e s tr ik in g performance in th e d ev el
opment of output and claims th a t the c a p i t a l i s t arrangem ent
was favorable to producing i t . C ap italism i s su c c e ssfu l; and
165
i t i s not the case t h a t is was su c c e ssfu l under co n d itio n s
of pure com petition and only l a t e r ran in to d i f f i c u l t i e s ,
w ith the development of big b u sin e ss. Quite th e c o n tra ry .
I t is b ig -b u sin e ss , m onopolistic c a p ita lism which is so
s u c c e ss fu l, and so f a r and away su p e rio r to what fre e compe
t i t i o n could provide.
Environm ental in flu e n c e s? But perhaps fa c to rs outside
the system i t s e l f were r e a lly re sp o n sib le fo r the growth
in o u tp u t, and not the c a p i t a l i s t system i t s e l f ? I f th is i s
so, then the c a p i t a l i s t system i t s e l f cannot claim the bene
f i t s provided, and i t must meet d e fe a t w ith a growth of ad
verse environm ental c o n d itio n s. Schumpeter th e re fo re r e je c ts
id eas th a t o u tsid e f a c to r s were re sp o n sib le fo r the growth
o f o u tp u t. This re je c tio n i s provided in an a n a ly s is of the
fiv e c h ie f circum stances o u tsid e the system which, according
to many economists ( s o c i a l i s t s and K eynesians, f o r example)
were r e a l l y re sp o n sib le for the achievements of c a p ita lis m .
These fiv e f a c to r s are (1) governmental a c tio n , (2) gold, (3)
p opulation growth, (4 ) new land s and ( 5 ) te c h n o lo g ic a l pro
g re ss .
Schumpeter r e je c t s th e f i r s t th re e f a c to r s summarily,
and w hile adm itting t h a t the l a s t two were of the g re a te s t
im portance, they were such because they o ffe red v a st oppor
t u n i t i e s fo r development. A ll th a t any economic system can
166
do i s develop the e x is tin g o p p o rtu n itie s open to i t , and on
th is sc o re , th e n , c a p ita lis m did an o u tstan d in g job, sp u rrin g
te c h n o lo g ic a l prog ress and not vice v e rsa .
But the qu estio n a r is e s , can c a p ita lis m ’ s achievem ents
in re sp e c t to opening o f new lands and sp u rrin g tech n o lo g ical
progress he rep eated ? Can th e engine run f o r another t h i r t y
or f o r ty years as s u c c e s s fu lly as i t did d uring the p ast
fo rty ?
This r a is e s th e whole question of v a n ish in g investm ent
o p p o rtu n itie s , th e sta g n a tio n th eo ry . S u ffic e i t here to
p o in t out th a t Schumpeter f e e ls th a t the fo rc e s and mechanisms
described in th e s ta g n a tio n th eo ry , are n o t the ones to s t r e s s
in con sid erin g those fo rc e s tending towards the passing of
c a p ita lis m . He f e e l s t h e i r ro le w ill be unim portant during
the next f o r ty y e a rs, during which c a p ita lism w ill pass on
out of e x iste n c e even though i t does not s u ffe r sta g n a tio n or
m a tu rity . Investm ent o p p o rtu n itie s a re open f o r c a p i t a l i s t
progress a t l e a s t fo r a much lo n g er tim e th an c a p ita lis m can
e x i s t , because c a p ita lism w i l l pass due to other re aso n s, and
in s p ite of the o p p o rtu n itie s open to i t f o r v a s t development
o f T eso u rces.
C a p ita li s t c i v i l i z a t i o n . Before p assin g on to the
fa c to rs lead in g to the d e s tru c tio n of the system , a few p assin g ,
4
words about th e achievem ents of the c a p i t a l i s t system in the
167
c u ltu r a l fie ld are in s e rte d by Schumpeter, in tr i b u te to the
doomed but s t i l l m agnificent system.
R isin g c a p ita lis m , Schumpeter a s s e r t s , produced th e men
t a l a tt i tu d e of modern scien c e, the men w ith the necessary
c h a ra c te r, and the m a te ria l means of p ro g re ss. C apitalism (
developed th a t a ttitu d e which c o n s is ts in asking c e r ta in
qu estio n s and going about answering them in a c e rta in way,
which we c a ll s c i e n t i f i c , Schumpeter says. I t ra tio n a liz e d
i t s own methods, e x a ltin g th e monetary u n it and the h o s t-
p r o f i t c a lc u la tio n , and invented th e dou ble-entry bookkeeping
system . The p r o f it motive was no le s s or no more grabbing
th an serfdom; c a p ita lis m m erely ra tio n a liz e d tbe process of
p r o f i t making.
What were some of th e achievem ents of t h i s system th a t
produced the modern mechanized p la n t from which such v ast
volumes of output pour, the m asterp ieces of technology, and
the science of modern b u sin ess o rg a n iz a tio n , but which are
now doomed to e x tin c tio n ? F i r s t , of course, was the growth
of the r a ti o n a l science and i t s a p p lic a tio n s , such as a i r
p lan es, ra d io s , e tc . Second, the a r t and s ty le of l i f e of
modern c u ltu re and c i v i l iz a t io n are d i s t i n c t l y a bourgeois
c o n trib u tio n . T hird, the in d iv id u a lis t democracy and i t s
s o c ia l l e g i s l a t io n (and a l l e ls e th a t surrounds the Gladson-
tia n l i b e r a l tr a d i t io n ) are products of c a p i t a l i s t c u ltu re and
c i v i l i z a t i o n .
168
C ap italism , Schumpeter sen tim e n ta lly co n tin u es, is
r a t i o n a l i s t i c and a n ti- h e r o ic , and the c a p i t a l i s t s , Marx
n o tw ith stan d in g , hate and d espise war. The more com pletely
c a p i t a l i s t th e s tru c tu re and a ttitu d e of the n a tio n , th e
more p a c if i s t i t i s :
The bourgeois a t t i tu d e to th e m ilita r y (stan d in g arm ies),
the s p i r i t in which and th e methods by which bourgeois
s o c ie tie s wage war, and the re a d in e ss w ith which, in any
se rio u s case of prolonged w arfare, they submit to non
bourgeois ru le are conclusive in them selves. The M arxist
theory th a t im perialism i s the l a s t stage of c a p i t a l i s t
ev o lu tio n th e re fo re f a i l s q u ite irre s p e c tiv e of purely
economic objection.**
A ll t h i s i s not said in defense of c a p ita lis m , Schum
p e te r i n s i s t s . No defense of c a p ita lism w ill be of any a v a il.
Value judgments about th e c a p i t a l i s t performance a re , indeed,
of l i t t l e in te r e s t a f t e r a l l . Mankind is not fre e to choose;
i t is a lre a d y too la t e fo r t h a t . Things economic and s o c ia l
move of th e i r own momentum. They are moving now. C apitalism
i s doomed and the advent of so c ia lism is a ssu re d .
Thus Schumpeter bases h is stand on the argument t h a t
c a p ita lism i s a harmonious system, and th a t even the w orst of
m onopolistic and r e s t r i c t i v e p ra c tic e s are com patible w ith
t h i s concept of harmony i f viewed in the long ru n . Because
c a p ita lism i s a closed system , w ithout need for o u tle ts fo r
i t s su rp lu s, or new la n d s, t e r r i t o r i e s , and peoples t o e x p lo it,
§ T Ibid.. p. 129.
169
Schumpeter can r e je c t th e s o c i a l i s t , i n s t i t u t i o n a l i s t , Hob-
sonian, and Keynesian c r itiq u e s . How then i s c a p ita lis m to
pass? To t h i s question Schumpeter now tu r n s .
I I . THE DEATH KNELL
In th re e ch ap ters Schumpeter sounds the death k n e ll
of the system he has p ra is e d . A ll about him he sees the w alls
of c a p i t a l i s t c i v i l i z a t i o n crum bling. Even in sid e th ese w alls
tre a c h e ry breeds apace; there i s a growing h o s t i l i t y
a g a in s t the dying o rd e r. F in a lly , decom position s e ts in ;
th e c a p i t a l i s t o rd e r, the economic base of a l l the achieve
ments o f our modern world c i v i l i z a t i o n , is d e stro y e d .
Crumbling W alls. The main bulwarks of the system
a re crum bling.
F i r s t , th e re i s the obsolescence of the e n tre p re
n e u r ia l fu n c tio n . C a p ita lis t e n te r p r is e , by i t s own ach iev e
m ents, tends to autom atize pro g ress and th ereb y tends to
make i t s e l f su p e rflu o u s.
C ap italism begins to break to p ie c e s under th e p re
ssure o f i t s own su c c e sse s. For p ro g re ss d ep e rso n alizes th e
system and pro g ress i t s e l f becomes dep erso n alized , au tom atic.
The e n tre p re n e u r, h i s t o r i c a l l y th e engineer of c a p i t a l i s t
change, growth, p ro cess, and p ro g re ss, i s elim inated and
i s gone. No longer does the e n tre p ren eu r reform or re v o l-
170
as he did in the p a s t. In d iv id u a l p e rs o n a lity and w i l l
power count f o r le s s th an in the p a s t. In ste a d of th e e n tr e
preneur we have the h ire d manager of the b ig c o rp o ra tio n ,
who works f o r a sa la ry r a th e r than pursuing a p r o f it and
who sy stem atizes and stan d ard iz es r i s k s , in v en tio n , and
p ro g re ss.
This new s t a t e o f a f f a i r s a f f e c ts the e n tir e bour
geois stratu m .
In the second p la c e , the c a p it a l i s t process i t s e l f
a ls o d estro y s the p ro te c tin g s t r a t a o f bourgeois s o c ie ty .
G a p ita lis m emerged by destroying feudalism . But
according to Schumpeter i t produced an "am phibial s o c ia l
s t r u c tu r e ♦" The old order became the to o l of the new. The
a r i s t o c r a t i c element continued to r u l e , even down to the
very end of th e period o f " v i t a l and i n t a c t ” c a p ita lis m .
I t did so by making i t s e l f re p re s e n ta tiv e o f bourgeois
i n t e r e s t s .
But c a p ita lis m destroyed t h i s p ro te c tiv e stratu m by
wiping out i t s economic b a se . This occurred although th e
bourgeois c la s s was poorly equipped to face th e problem s,
domestic and fo re ig n , w ith which i t must now d i r e c t l y (Seal.
"In breaking down th e p r e - c a p i t a l i s t framework of s o c ie ty ,
c a p ita lism thus broke not only b a r r ie r s th a t impeded i t s
pro g ress but a lso f ly in g b u ttre s s e s th a t prevented i t s
c o lla p s e ."
171
T h ird ly , proceeding sim ultaneously was th e d e s tru c
tio n of th e i n s t i t u t i o n a l framework of c a p i t a l i s t r e l a t i o n s .
The g ia n t u n it o f c o n tro l, the r e s u l t of c a p it a l i s t
te c h n o lo g ic a l p ro g re ss, i s ousting the bourgeoisie from
i t s fu n c tio n . I t a lso a tta c k s the stan d in g ground of the
sm all producer. E xecutives and managers begin to develop
the s a la r ie d psychology and p o in t o f view, th e employee
a t t i t u d e . They look forward t o r e t i r i n g w ith big pen sio ns,
fo r example, a t the stockholders* expense.
The la rg e stockholders are a t le a s t one remove from
both the fu n c tio n s and a t t i t u d e s o f owners, w hile the sm all
sto ck h o ld ers consider the e n te r p r is e as only an i n s i g n i f i
cant source o f income and th ey , a t b e s t, provide only a
nuisance value.
IPreedam of c o n tra c t i s in th e same b o at. The c o lle c
tiv e la b o r c o n tra ct re p la c e s the in d iv id u a l freedom of in
d iv id u a l b a rg a in in g . 2?hus the c a p it a l i s t process pushes
in to th e background a l l those i n s t i t u t i o n s th a t are designed
to express the needs and ways o f the t r u l y " p riv a te ” e n t e r
p r i s e .
Growing h o s t i l i t y . The s o c ia l atmosphere of c a p it a l
ism i s so charged w ith h o s t i l i t y , Schumpeter c o n tin u e s,
th a t even th e M arxist ex p lan atio n i s inadequate w ith re s p e c t
to i t .
172
In th e f i r s t p la c e , the c r i t i c a l , r a t i o n a l i s t a t t i
tude developed by c a p ita lism does n o t stop a t a tta c k in g the
enemies of c a p ita lism . I t goes on to a tta e k p riv a te p ro
p e rty i t s e l f , and the whole bourgeois scheme of th in g s .
The bourgeois f o r tr e s s becomes p o l i t i c a l l y d e fe n s e le s s . I t
might tr y f o r awhile to buy o ff the agg resso rs but sooner or
l a t e r t h i s w ill f a i l , 3?he booty i s r i c h , and can be had by
mere grabbing: so why shouldn’ t the ag g resso rs tak e a l l ? 9
The c a p i t a l i s t h im self, th in k in g th a t he is doing h i s
duty by the other c la s s e s , may wonder why he needs any
p ro te c tin g s t r a t a a t a l l , Schumpeter co n tin u es. C an't a
'rp e rfe e tly good case" be made out f o r th e c a p i t a l i s t 's sy s
tem? I t can, Schumpeter say s, but t h i s i s a l l beside the
p o in t, fo r four c h ie f reasons,
F i r s t , a p o l i t i c a l a tta c k does n o t r e s t n e c e s s a rily
on any r e a l g riev an ce, nor can i t be met e f f e c tiv e ly by any
r a tio n a l argument.
Second, people can understand the indictm ent e a sie r
than they can understand even th e sim p le st case f o r c a p it a l
ism. "People a t la rg e would have to be possessed of an
in s ig h t and a power of a n a ly s is which are a lto g e th e r beyond
The breakdown of a l l moral r e s t r a i n t s to the
"greed m otive" in men, so th a t "grabbing" or taking what one
did not h im self work fo r i s m orally and s o c ia lly appro
ved, i s a key id ea in the th e o ry o f c a p i t a l i s t d e c lin e to
be developed in the next chapter.
173
them ."*^ Some econom ists can not even grasp the case fo r
c a p ita lis m , Schumpeter d e c la re s . More im portant, however,
c a p i t a l i s t performance stan d s out in th e long period and the
case fo r c a p ita lism must he based on lo n g -ru n c o n sid e ra tio n s.
In the s h o rt-ru n , p r o f its and in e f f ic ie n c ie s dominate the
p ic tu r e . And people liv e in the short ru n .
T hird, people l i v e from day-to-day and t h e i r a t t i
tudes a re dominated by th e d a ily tro u b le s and e x p e c ta tio n s
of tro u b le everyone has to s tru g g le a g a in s t in a s o c ia l
system—the f r i c t i o n s and disappointm ents of everyday l i f e .
T his makes people em otionally opposed to the system .
F ourth, se c u la r improvement i s taken fo r granted , and
t h i s coupled w ith in d iv id u a l in s e c u r ity i n the sh o rt-ru n
i s a c u te ly re se n te d and i s , o f course, nthe b est re c ip e ”
fo r breeding s o c ia l u n re s t.
But h o s t i l i t y toward the system could not be main
tain ed u n less i t were in the in te r e s t of some group to work
i t up, organize i t , nurse i t , voice i t , lead I t . This
group i s the " s o c ia liz in g fo rc e , or the main force tending
towards the d e s tru c tio n of the system .
And i s th i s fo rc e K arl M arx's p r o l e t a r i a t , V eblen's
te c h n ic ia n s , Burnham1s managers, E ld rid g e 's consumers? Ho.
The " s o c ia liz in g fo rc e ” loose in the system , according to
ICU Schumpeter, op. c i t . , p . 144.
174
to Schumpeter, i s the i n t e l l e c t u a l group* C ap italism pro
duces a c la s s of i n t e l le c t u a l s whose c h ie f duty i s c ritic is m ^
i t produces the co n d itio n s to be c r it ic i s e d ; and i t educates
and su b sid iz e s a v ested i n t e r e s t in s o c ia l u n r e s t.
Schumpeter la y s much emphasis upon the sociology
o f the i n t e l l e c t u a l .
I n t e l l e c t u a ls do n o t form a s o c ia l c la s s in th e
economic sen se, a s do workers, s e r f s , sla v e s, and so f o r th .
Nor do th e y come from. the same c la s s ; i n t e l le c t u a l s h a i l
from a l l corners of the c la s s and s o c ia l world. Furtherm ore,
a g re a t p a r t o f t h e i r a c t i v i t i e s c o n s is t in f ig h tin g each
other and in "forming spearheads" of c la ss in te r e s t s not
t h e i r own. But they come to g e th e r as a group vshose main
ta sk i s to c r i t i c i s e , probe, and expose. In doing so th ey
wield the power o f the spoken word, yet they do n o t have
any d i r e c t r e s p o n s ib ility for p r a c t ic a l a f f a i r s .
C ap italism did not develop the i n t e l le c t u a l (the mon
a s t e r ie s did t h a t ) , but c a p ita lis m ”l e t him lo o s e ,” gave him
a p r in tin g p re s s , cheap paper, and a wide m arket in which
to operate f r e e ly . Before he had been tie d to the in d iv i
dual p atro n ; c a p ita lism freed him from th e p a tro n . The
i n t e l le c t u a l s e t to work on public opinion, turned h is pen
and re search a g a in st anything and ev ery th in g t h a t , put in
a cheap pam phlet, would s e l l .
In e v ita b ly , h is a tta c k s turned upon th e e v ils of the
175
system , the pomp and luxury of th e w ealthy, upon th e a c t
i v i t i e s o f the p o l i ti c i a n , and upon th e system i t s e l f . 4-11
the power o f organized government could not stop him, as th e
cases of V o lta ire and John Wilkes amply dem onstrate. The
more e f f e c tiv e h is b arb s, the more lu rid h is exposures, th e
more popular and pow erful the i n t e l le c tu a l became and the
more immune from the wrath o f the government. Nothing,
Schumpeter a s s e r t s , can b rin g th e i n t e l l e c t u a l to h e e l in
th e c a p i t a l i s t o rd e r:
In c a p i t a l i s t s o c ie t y .. .any a tta c k on the i n t e l l e c
tu a ls must run up ag a in st th e p riv a te f o r tr e s s e s of
bourgeois b u siness which, or some of whiGh, w ill s h e lte r
the q u arry .
Moreover such an a tta c k must proceed according to
bourgeois p rin c ip le s o f l e g is la tiv e and a d m in istra tiv e
p ra c tic e which no doubt may be s tre tc h e d and bent bu t
w ill checkmate p ro sec u tio n beyond a c e r ta in p o ih t. Law
l e s s v io len ce the bourgeois stratu m may accept or even
applaud when thoroughly roused or frig h te n e d , b u t only
tem p o rarily . In a p u re ly bourgeois regime lik e th a t of
Louis P h ilip p e , tro o p s may f i r e on s t r i k e r s , but th e
p o lice cannot round up i n t e l l e c t u a l s or must re le a s e
them fo rth w ith ; otherw ise the bourgeois stratum , however
s tro n g ly disapproving some o f th e ir d o in g s, w ill r a l l y
behind them because the freedom i t disapproves cannot
be crushed w ithout a lso crushing the freedom i t approves. 11
Add to th is th e in c re a sin g means, the r i s i n g standard
of liv in g of the m asses, the spreading o f ed u catio n , the
cheapening of books and newspapers, ra d io , and te le v is io n ,
and we complete the p ic tu r e . The tendency i s toward the
1 1 . Ibid., p.350.
176
complete removal o f a l l r e s t r a i n t s on the i n t e l l e c t u a l 's
freedom.
The vigorous expansion o f education and f a c i l i t i e s f o r
higher education becomes in e v ita b le in la te r sta g e s of
c a p i t a l i s t developm ent. This development in c re a se s th e
siz e of the i n t e l l e c t u a l s t r a t a , which r e s u l ts i n t h e i r
over-supply in the market and s e c tio n a l unemployment. I t
a lso c re a te s w orsening co n d itio n s of employment, and
employment in substandard work or a t wages below those
paid to manual w orkers o f many g rades.
Furtherm ore, edu cation in c re a se s the unem ployability
of a p a r ti c u l a r ly d isc o n c e rtin g ty p e, who f a i l s to fin d
p ro fe s s io n a l work a lto g e th e r and must take manual or fa c to ry
work, fo r which th e in d iv id u a l i s tem peram entally and psy
c h o lo g ic a lly u n f itte d .
These groups o f i n t e l l e c t u a l s , unemployed or m i s f i t ,
tu rn t h e i r high-pwwered s k i l l s and techniques a g a in s t the
system which does not provide f o r them. The danger i s th a t
th e se groups w i l l develop the p r o le ta r ia n hue. This
theory o f in c re a sin g h o s t i l i t y acco u n ts, th en , fo r th e
growth in the h o s t i l i t y , in the c o n d itio n s, the men, and
th e means fo r such a growth.
Of course, i n t e l l e c t u a l h o s t i l i t y must be d if f e r e n
tia t e d from general h o s t i l i t y by the wide masses o f the
people, Schumpeter ag rees; but th e i n t e l le c t u a l stim u la te s ,
177
e n e rg iz e s, v e rb a liz e s , and org an izes the m a te ria l of* d isco n
t e n t . He a tta c h e s h im self to the lab o r movement and other
groups which provide m a te ria l fo r s t i r r i n g up tr o u b le . The
i n t e l l e c t u a l , not the w orker, ra d ic a liz e d and r a tio n a liz e d
the la b o r movement. The i n t e l l e c t u a l group is not in th e
fo r e f r o n t, but dominates the p o l i t i c a l p a rty n e v e rth e le ss ,
through s ta f f in g bureaus, w ritin g p a rty speeches, serv in g as
s e c r e ta r ie s and a d v is e rs , e t c . , and im presses i t s m e n ta lity
on almost ev ery th in g th a t i s being done.
^ h is group a lso dominates a d m in istra tiv e p ra c tic e .
In doing so, i t begins to impede the fu n ctio n s of the system,
towards which so much h o s t i l i t y i s developing.
Becompostion. f i n a l l y , the bourgeois m otivation i s
being destro y ed , not only by fo rc e s e x te rn a l to th e bourgeois
mind, but by i n te r n a l cau ses.
One of th ese causes i s what Schumpeter dubs the Evap
o ra tio n of the Substance o f P ro p erty . The modern business man
is not th e en trep ren eu r but th e ex ecu tiv e. He develops
th e psycholgoy o f th e s a la r ie d employee working fo r stock
h o ld e rs .
Second* the bourgeois fam ily i s d is in te g r a tin g .
This s ig n if ic a n t fa c t i s f u l ly discussed by Schumpeter. The
old country house i s gone. Gone a ls o are the la rg e fa m ilie s
and th e old fam ily l i f e . Parenthood means le s s and l e s s .
17 S
F am ily l i f e becomes a p a rtm e n ta llz e d . Furtherm ore, th e
bourgeois p aren ts would ra th e r have le s s c h ild re n and more
o f the a lte r n a tiv e com forts, freedom s, and o p p o rtu n itie s
to enjoy them selves.
A ll o f th e se changes in the bourgeois fam ily le a d s
to a d if f e r e n t hind of homo economleas. w ith vast s ig n i
fican ce fo r the c a p i t a l i s t economic system . The m otiv atio n
of th e old type bou rg eo isie was t o accum ulate. The old type
business man worked, not ju s t fo r p r o f i t , but fo r p r o f it
to in v e s t. He wanted to b u ild up a fortun e fo r h is fa m ily .
But w ith the d e c lin e of the fam ily and i t s im portance as
a s o c ia l i n s t i t u t i o n of the old ty p e , accum ulation i s
becoming le s s and le s s the m otive. Indeed, th e new type
bourgeoisie accep ts a n ti-s a v in g th e o r ie s . The modern
businessman l e t s h is enemies educate him. He absorbs the
slogans o f cu rre n t ra d ic a lism , e s p e c ia lly th e new-fangled
spending th e o r ie s . He ta lk s and pleads when facin g a
d ir e c t a tta c k , or h ire s people to do i t fo r him. He s n a t
ches a t every chance of compromise.
Thus th e economic process th a t undermines the p o si
t io n o f the b o u rg eo isie by d ecreasin g the importance
o f th e fu n c tio n s of en tre p ren u ers and c a p i t a l i s t s , by
breaking up p ro te c tiv e s tr a ta and i n s t i t u t i o n s , by
c re a tin g an atmosphere o f h o s t i l i t y , a ls o decomposes
the motor fo rc e s of c a p ita lism from w ith in . Nothing
e ls e shows so w e ll t h a t th e c a p i t a l i s t order not only
r e s t s on props made o f e x t r a - c a p i t a l i s t m a te ria l but
also d e riv e s i t s energy from e x t r a - c a p i t a l i s t p a tte rn s
179
of behavior w&ich a t th e same time i t i s bound to
d e stro y , 12
I I I SU M M A R Y
In summary, Schumpeter r a is e s the question o f how
h i s th eo ry compares w ith th a t o f K a rl Marx—the a re a s of
agreement among them. On se v e ra l p o in ts , Marx and Schumpeter
are in p r e tty s u b s ta n tia l agreem ent.
In the f i r s t p la c e , both re v e a l th e ex isten ce of a
tendency tcward th e s e lf - d e s tr u c tio n o f the c a p i t a l i s t
system , due to fo rc e s in h e re n t in the system o r i t s immed
ia te environm ent.
In the second p la c e , th is tendency toward s e l f - d e s
tr u c tio n i s accompanied by a tendency toward th e r e ta r d a
tio n o f economic p ro g ress in the l a t e r stag es of the system ,
t h a t i s , in th e l a t e r t r a n s i t i o n phazes. This tendency
toward a moribund period has been o u tlin e d in the sectio n
above.
T hird, tra n sfo rm a tio n of the system i s a more c o rre c t
te rm 'th a n d e s tru c tio n , fo r both Marx and Schumpeter see the
emergence of a new system o f economic r e la t i o n s , so c ia lism ,
f o u r th , Schumpeter s t a t e s , "we can also agree w ith
him (Marx) in lin k in g the p a r tic u la r so c ia l tra n sfo rm a tio n
1 2 . Ibid.. p. 161-62.
180
th a t goes on under our eyes w ith an economic process as i t s
prime m over.n13
But i f Marx and Schumpeter agree in t h e i r conclu
sio n s , they each a rriv e d at the conclusions along d i f f e r
en t p a th s. For Schumpeter, c a p ita lism w i l l be destroyed
as a r e s u l t of i t s own dynamic success in re v o lu tio n iz in g
the techniques o f p ro d u ctio n , expanding o u tp u t, and in c re a s
ing the m a te ria l w elfare o f s o c ie ty . T h erefo re, he vehement
ly r e je c ts th e Marxian a n a ly s is to th e e f f e c t th a t c a p ita l
ism w ill pass because i t f e t t e r s production and i s shot
through w ith e v i l s , antagonism s, c o n tra d ic tio n s , and
f a i l u r e s .
But fo r both, in the f i n a l a n a ly s is , d e c la re s Schum
p e te r , a l l i t comes to i s th i s :
Itfhat our a n a ly s is , i f eo rrect, disproves i s a f t e r
a l l of secondary im portance, however e s s e n tia l the r o le
may be which i t p lay s in the s o c i a l i s t cred o . In the
end, th e re i s not so much d iffe re n c e as one might
th in k between saying t h a t the decay o f c a p ita lism
i s due to i t s success and saying t h a t i t is due to
i t s f a il u r e s .
The im poftaht th in g i s t h a t econom ists should
r e a liz e th a t the p assin g of c a p ita lism is assu re d . The
only controversy today i s what ex p lan atio n s of th e in ev -
T T . I b i d . . p. 162.
14* I b i d . . p . 162.
181
i ta b le p assin g o f c a p ita lis m are in most r e a l i s t i c a g re e
ment w ith the f a c t s of the d e c lin e and tran sfo rm atio n of
the economic system , as t h i s phenomenon i s occurring in
the r e a l world today*
CHAPTER V I
A PSYCHOL OGTCAL-INST ITUTIONAL APPROACH
In t h i s chapter we deal w ith th e second " c a p i ta l is t "
th e o ry which p re d ic ts the ev entu al p assin g of c a p ita lis m .
While i t r e j e c t s the s o c i a l i s t view of the e v ils and con
tr a d ic tio n s of the system as cau sal f a c to r s in the p a ssin g , 1
as w e ll as concepts o f m a tu rity , the theory now under con
s id e ra tio n does bear some r e la tio n s h ip to the success th e
o ry , a t l e a s t in s p i r i t .
I . AH ELEM ENTAL EXPLANATION
While i t appears probable t h a t many people b eliev e
t h a t the ex p lan atio n fo r th e passing of c a p ita lis m i s to
be found in f a c to r s other th an those s tre s s e d by th e th e o r
ie s tr e a te d in the preceding c h a p te rs, and p a r tic u la r ly
in fa c to rs which we may c la s s if y as being p sycho lo gical or
i n s t i t u t i o n a l in n a tu re , such an ex p lan a tio n in sy ste m a tic a lly
developed form does n ot seem to have appeared in p r i n t .
T herefore, in t h i s c h a p te r, we propose a framework
s u f f ic ie n t a s a method of e x p o sitio n of the n e c e ssa ry fa c
to r s in v o lv ed . T his framework i s based on notes taken from
T . I t stressfiefig d if f e r e n t e v ils and c o n tra d ic tio n s
from those of Marxian th e o ry , p a r tic u la r ly th o se rooted in
human n a tu re .
183
D r, C. W. PJielpsf le c tu r e s and d isc u ssio n s over a p e rio d o f
th re e years in the economics department a t the U n iv ersity of
Southern C a lifo rn ia , and upon conferences w ith Dr* P helps,
The th eo ry to be d esc rib ed i s undoubtedly not to be
regarded as " o r ig in a l” (we are o fte n reminded t h a t " th e re i s
nothing new under the sun” ) o r as p e c u lia r to any one th in k
e r , Very l ik e ly the g en eral lin e of argument w i l l be found
by the conservative re ad er to r e f l e c t p r e tty much what he,
h im se lf, has been th in k in g about the fu tu re of c a p ita lis m . 2
But what the present w rite r (who i s n o t a conservative) has
done, has been to e la b o ra te and se t fo rth in h is own way
(as follow s) the o u tlin e of the th eo ry suggested by Dr.
P helps; and what Dr. Phelps did was to pu t to g e th e r the
v a rio u s concepts involved in.-a c e r ta in way, and to tag; the
_ 3
theory w ith a name, The In s titu tio n a l-P s y c h o lo g ic a l Theory.
Such a th eo ry i s suggested by Dr. Phelps for sev eral
reaso n s. F i r s t of a l l , a more elem en tal ex p lan atio n of why
c a p ita lism cannot su rv iv e, s ta te d in term s of b asic psycho
lo g ic a l d riv e s o f people w ith in the i n s t i t u t i o n a l framework
of modern s o c ie ty , is in the d ire c tio n of d ea lin g w ith u l t i -
2. For example, one o f th e members of th e committee
who re ad the p re lim in ary d r a f t of t h i s th e s is , Dr. Roy L.
G aris, s ta te d th a t he has been th in k in g along th ese general
lin e s fo r some tim e.
3* See C. T A T . P helps, O u tlin e o f Applied Economics
(Los Angeles: U n iv ersity o f Southern C a lifo rn ia P re s s , 1948)
P. 137*
184
m ates—w ith th e deepest u n d erly in g , ra th e r than secondary,
causes.
Second, i t i s in lin e w ith the p rin c ip le of economy
in s c i e n t i f i c th e o riz in g , i . e . . the u t i l i z a t i o n of the few
e s t p o s sib le assum ptions in a r r iv in g a t an adequate explana
tio n of phenomena.
Third^, such a th e o ry i s not co n tin g en t on many f a c to r s
basic t o other th e o r ie s —f a c to r s unacceptable t o many -w ho
b eliev e th a t the advent of so c ia lism or c o lle c tiv is m i s
c e r ta in . For example, one may accept th e 15§ychological-
I n s t i t u t i o n a l th e o ry w ithout b e lie v in g in the n e c e s s ity of
the coming of a m ature or stagnant economy to b rin g about
the dow nfall of c a p ita lis m . The economic system could go
r i g h t on booming along, a t high le v e l production and employ
ment, and s t i l l c a p ita lis m would p a ss , according to the th eo ry
to be examined* Nor is the th e o ry contingent upon any
p a r tic u la r mode o f p ro d u ctio n . I t does n o t depend on any
d o ctrin e o f in c re a s in g m isery, on c o n c e n tra tio n or c e n tr a l
iz a tio n o f c a p ita l, on an oppressive s t a t e , im perialism , or
any o f the other th e o r e tic a l c o n tra p tio n s of c a ta stro p h ic
or v io le n t re v o lu tio n . 2?his i s a " c o n s e rv a tiv e 's theory"
of th e re v o lu tio n a ry tra n sfo rm a tio n .
How, th e n , i s t h i s th e o ry , now to be examined, r e l a
ted to th e th e o rie s a lre a d y discussed? I t i s not presented
as sim ply an a lte r n a tiv e th eo ry , but as a th e o ry of b a sic
185
fo rc e s to which the other th e o rie s are (to the e x te n t of
t h e i r "sound” d o c trin e s) regarded as supplem ents, according
to D r. P h elp s, **Along w ith t h e i r p a te n tly f a lla c io u s th e se s
and t h e i r unsupported d o c trin e s , the th e o rie s tr e a te d in
previous ch ap ters contain a number of obviously sound doc
t r i n e s and h i s t o r i c a l l y v e r if ie d ten d en c ie s—a l l o f which,
however, c o n s titu te supplem entary e la b o ra tio n s (ra th e r than
a lte r n a tiv e s ) t o the b a sic e x p lan a tio n o ffered by th e
P s y c h o lo g ic a l-In s titu tio n a l Theory" Dr. Phelps claim s. L et
us now tu rn to an exam ination o f th ese claim s, to th e th eo ry
i t s e l f .
One im portant i n s t i t u t i o n i s in d isp en sab le fo r the
b rin g in g about of c a p ita lis m ’ s d o w n fall, under the Psycho
l o g i c a l - I n s t i t u t i o n a l th e o ry . There must be a p o l i t i c a l
s tr u c tu r e o f the dem ocratic ty p e . This democracy must be
based on u n iv e rs a l (or widespread) su ffra g e . For example,
su ffra g e must not be lim ite d to p ro p e rty owners, who of
course, would not vote them selves out of economic e x is te n c e .
Furtherm ore, th e l e g i s l a t o r s and the executive must be e le c
ted by m a jo rity v o te . Free e le c tio n s (absence of coercion
to prevent mass v o tin g or re b e llio n ) are n ecessary to b rin g
about c o lle c tiv is m . The masses must be able to vote in
t h e i r own le a d e rs , who w ill enact l e g i s l a t io n to g ra d u a lly
c o lle c tiv iz e s o c ie ty . ^
In view of th e f a c t th a t such a p o l i t i c a l stru c tu re
186
has e x is te d in the U nited S ta te s fo r more than a c e n tu ry , one
i s amazed th a t the m asses haven’t a lre a d y ta k e n over long
ago, c o n sid e rin g t h a t th e booty i s so r i c h . S ince th e booty
can be had fo r th e a sk in g (or the v o tin g ) , why h asn ’t i t
been tak en ? Our th e o ry must e x p la in why c a p ita lis m did n o t
pass long ago in the U nited S ta te s , soon a f te r the vote was
given to th e m asses.
I I . THE DRIVING MOTIVES
Given a dem ocratic p o l i t i c a l s tr u c tu r e , how w i l l men
a c t?
The p sy c h o lo g ic a l b a s is . The th e o ry under c o n sid e r
a tio n depends in th e f i r s t p lace on a p sy c h o lo g ic a l ex p lan a
t i o n o f man a s s u b je c t to in n e r m otiv es o r d riv e s which spur
to a c tio n .
One need n o t, however, be a "bundle o f i n s t in c ts " man
to a c c e p t th e e x p la n a tio n o ffe re d . In s p i r i t w ith John B.
W atson, th e famous b e h a v io r is t,4- Floyd H. A l l p o r t , ^ and
o th e r modern p s y c h o lo g is ts , we may b o i l down th e l i s t o f
d riv e s or " p re -p o te n t re f le x e s " to th e v e ry minimum which
C f. R obert S . Woodworth, Contem porary S chools o f
Psychology (New York: Ronald P re s s , 1936) p . 7 3 -6 .
5. Floyd H. AJLlport, Social Psychology (N ew York:
Haughton M ifflin Co., 1924).
i s s u f f ic ie n t to e x p la in human m o tiv a tio n . In d eed , we are
in te r e s te d in a narrow er l i s t s t i l l , b ein g concerned o nly
w ith those m otives a p p e rta in in g to th e economic problem ,
or more s p e c if ic a l ly , w ith t h a t minimum group of "prim ary
d r iv e s ” s u f f i c i e n t to e x p la in th e p a ssin g o f th e c a p it a l
i s t system .
I t is c l e a r , we th in k , t h a t su ch a p ro ced u re f in d s
much su p p o rt among v a rio u s sch o o ls of modern psychology:
The human b ein g has in h e r ite d a number o f p re p o te n t
r e f le x e s w hich are fundam ental not only in t h e i r o r i
g in a l p o ten cy , b u t in th e c o n tro l w hich th e y e x e rt over
h a b it fo rm a tio n throughout l i f e . U ltim a te ly , as w e ll
as g e n e tic a lly , th e y a r e p re p o te n t. Most o f th e se
r e f le x e s are f u n c tio n a l a t b i r t h , one, th e s e n s itiv e
zone r e f le x , ap p ears in e a r ly in fa n c y ; w hile th e se x -
a c t l v i t i e s alo n e re q u ire a c o n sid e ra b le p erio d fo r th e
developm ent o f the s tr u c tu r e s concerned*o
For J l l p o r t , th e re are s ix o f th e se p re p o te n t re fle x e s !
s t a r t i n g and w ithdraw ing (fo r exam ple, from loud n o is e s or
p in -p ric k s d u rin g in fa n c y ), r e je c t in g , s tr u g g lin g , hunger
r e a c tio n s , s e n s itiv e zone r e a c tio n s , and sex r e a c tio n s .
F u rth erm o re, th e s e b asic d riv e s are s u b je c t to en
v iro n m en tal m o d ific a tio n . By grow th, developm ent, educa
t i o n , and tr a in in g and s o c ia l c o n tro l, the p re p o te n t r e
f le x e s undergo a f f e r e n t and e f f e r e n t m o d ific a tio n in th e way
th a t an example a few p arag rap h s l a t e r on w i l l in d ic a te . By
~S ~ . I b id .. p .T §7
188
a f f e r e n t m o d ific a tio n , tlie re i s an e x te n sio n o f th e range
and com plexity o f th e s tim u li capable of e x c itin g a r e
sponse, A ffe re n t m o d ific a tio n r e f in e s and s p e c ia liz e s the
response i t s e l f —and i t i s because o f th e c h a ra c te r o f some
o f th e se re sp o n se s t h a t we fin d such w ords as " g re e d ,”
"e n v y ,” o r "e n lig h te n e d s e l f - i n t e r e s t " used to d e sc rib e
th e fundam ental m otives and the r e a c tio n s th em selv es.
E ffe re n t m o d ific a tio n i s e s ta b lis h e d th ro u g h a p ro c ess o f
s e le c tio n and f ix a tio n o f su c c e ssfu l movements and re sp o n se s
(la r g e ly determ ined by i n s t i t u t i o n s in s o c ie ty ) in to h a b its
and th o u g h t fo rm a tio n .
Should we adopt A l l p o r t 's l i s t o f p re p o te n t r e f le x e s ,
fo r th e purpose of throw ing l i g h t on th e p sy c h o lo g ic a l
b a s is o f the p re s e n t th e o ry of c a p i t a l i s t d e c lin e , we would
be in te r e s te d in c e r ta in o f th e r e f le x e s and t h e i r m o d ifi
c a tio n s as p ro v id in g th e " b a s ic d riv e s " s u f f i c ie n t to
e x p la in why c a p ita lis m cannot s u rv iv e .
These " b a s ic d r iv e s ," in h e re n t in human n atu re i t s e l f ,
a re what D r. P helps term s greed (in c lu d in g th e craving fo r
re c o g n itio n and power, an example o r m o d ific a tio n of th e
s e n s itiv e zone r e f le x combined w ith th e hunger r e f l e x ) , envy
(o fte n accom panied by h a te and c lo s e ly a s s o c ia te d w ith th e
greed d r iv e ) , f e a r (a s s o c ia te d w ith th e in b o rn s ta r ti n g and
w ithdraw ing r e f l e x ) , and w i11-to-pow er (a s s o c ia te d w ith th e
in b o rn r e je c t i n g and s tru g g lin g r e f le x e s , o r , according to
189
a n o th e r sch o o l o f psychology, i t s e l f a fundam ental human mot
iv e f o r c e ) . As w ill be se e n , th e s e inborn d riv e s o f human
n a tu re have trem endous economic fo rc e and form th e psycho
l o g ic a l b a s is (alo n g w ith a n o t n e c e s s a r ily in h e re n t or
u n a lte r a b le p s y c h o lo g ic a l f a c to r , namely ig n o ran ce) fo r
th e p re s e n t th e o ry o f th e p a ssin g o f c a p ita lis m .
B efore e n te r in g in to a d e s c r ip tio n o f th e d r iv e s of
g re ed , envy, f e a r , and w i11-to-pow er, however, i t should be
s ta te d th a t such a th e o ry i s n e ith e r " u n s c ie n tif ic ” nor a
d i s t o r t io n o f human n a tu re .
As fo r s c ie n c e , a few words about the se m a n tic s o f
g re ed , envy, e t c . , may be in o rd e r. These d riv e s a re lin k e d
( in a way d e s c rib e d above) w ith th e p re p o te n t r e f l e x e s .
They a re mere names g iv en to the m o d ific a tio n s o f th e p re
p o te n t r e f le x e s w ith which we must d e a l in th e economics o f
c a p i t a l i s t s u r v iv a l. The d riv e s in q u e stio n m ight j u s t as
w e ll have been term ed " s e l f - i n t e r e s t , " "c ra v in g f o r reco g
n i t i o n ," " d e s ire fo r s e c u r i ty ," e t c . What i s " s e l f - i n t e r
e s t" i f i t is not sim ply a " n ic e " word fo r g reed ? And
what i s g re e d , i f i t i s n o t our p re p o te n t hunger and sen
s i t i v e zone r e f le x e s shorn o f s o c ia liz e d e f f e r e n t m o d ifi
c a tio n s ? Thus, fo r th e purposes of t h i s t h e s i s , th e ite m s
g re e d , envy, e t c . , meet a l l the s c i e n t i f i c req u irem en ts
n e c e ssa ry f o r th e e x p o s itio n o f th e fo rc e s in v o lv e d , acco rd
in g to D r. Phelps* th e o ry .
190
As fo r f in d in g s , modern psychology h o ld s f i r s t th a t th e
human in f a n t i s amoral* He i s n ’t bom w ith s o c ia l and noble,,
e tc * , m o tiv e s. R a th e r, he i s greedy and w ants to s e iz e and
gobble e v e ry th in g w ith in re a c h . F u rth e r, th e a d u lt i s
more "n o b le” o r " s o c ia lly minded” th a n th e baby only in s o fa r
as h is environm ent, e d u c a tio n , t r a i n i n g , e t c . , has m odified
h is in n a te d riv e s *
X n other words, what goodness and/or morality
characterizes hum an beings are simply the result of relig
ious, educational, and family training, i . e . . social m od
ifica tio n . This a b ility of environment to modify and to
channel the innate drives is admitted by the present theory
of cap italist decline for, as w ill be shown later, the
theory indeed holds that certain institutions have modified
innate drives for the social good, but that these in stitu
tions are now changing so that they exercise less and less
of their former restraining functions.
A llp o rt in d ic a te s how h is s o -c a lle d p re p o te n t r e f le x
e s a re m odified by environm ent. For exam ple, the s tru g g lin g
r e f le x n o tic e d in in f a n ts d ev elo p s on a h ig h e r a f f e r e n t
le v e l in to economic s tru g g le and in th e w ill-to -p o w e r. H is
t o r i c a l l y , th e e a r l i e s t a f f e r e n t m o d ific a tio n , bach in
b arb aro u s tim e s , was fo r th e in d iv id u a l t o k i l l h is compe
t i t o r fo r sc a rc e means o f liv e lih o o d , th u s se c u rin g th e
needed food o r s h e lte r fo r h im s e lf.
191
L a te r , men le a rn e d to su b m it, th ro u g h s o c ia l c o n tro l
and e a rly t r a i n i n g , to " r u le s o f th e game." Under t h i s l a t e r
regim e, "a g g re ssiv e p h y s ic a l combat i s d isco u ra g ed and s e l f -
c o n tro l i s in c u lc a te d ;
The f i e r y Scotsman in Mr. J . M. B a rrie !3 The L i t t l e
M in is te r had been tr a in e d , when in c ite d to w ra th , to
re p e a t f u r io u s ly th e books o f th e Old Testam ent b e fo re
a c tin g upon h is a n g e r. A fte r t h i s perform ance, h i s
r e a c tio n was more l i k e l y to be one of rig h te o u s remon
s tra n c e than o f h o m icid e.7
A ccording to A llp o r t, in d iv id u a l S e lf - c o n tr o l i s based
on two a n ta g o n is tic r e f le x e s : (1) resp o n se o f cru sh in g th e
ag en t which th w a rts our a c t i v i t i e s , and (2) th e h a b it o f
su b m ittin g t o s o c ia l c o n tro l or s a n c tio n . The developm ent
o f s e lf - c o n t r o l r e s u l t s in new and h ig h ly d is c rim in a tin g
re s p o n s e s . In s p i r i t w ith th e o p tim is tic econom ics of
harmony A llp o rt d e c la re s :
A f i n a l common p a th i s chosen w hich se rv e s both th e
p re p o te n t needs of th e in d iv id u a l and th e i n t e r e s t s of
s o c ie ty . A r e s o lu tio n , fo r exam ple, i s a ffo rd e d by
f a i r c o m p e titio n and r i v a l r y , which p ro v id e a su c c e ss
f u l o u tle t fo r th e response o f s tru g g le a g a in s t lim i
t a t i o n o f th e v i t a l p r o c e s s e s * ...8
I t i s p r e c is e ly the breakdown o f t h i s harm onious
7 . I b i d . . p . 6o>
8 . I b i d . , p . 60.
192
s i tu a tio n , due to th e w eakening and changing o f such i n s t i
tu tio n s as " f a i r co m p etitio n " w hich i s le a d in g to th e p assin g
o f th e c a p i t a l i s t system , acco rd in g to th e p re s e n t th e o ry .
W e now tu r n to a d e s c r ip tio n o f th o se " in n a te d riv e s "
s u f f i c ie n t fo r our p re se n t th e o ry o f th e p a ssin g o f c a p ita l
ism . W ithout becoming involved in th e sem antic problem ,
we w i l l term th e s e d riv e s , lin k e d w ith fundam ental human
n a tu re , th e d r iv e s o f g re ed , envy, w ill-to -p o w e r, and fear*
They develop as m o d ific a tio n s o f such p re p o te n t re f le x e s as
s tru g g lin g , hunger r e a c tio n s , s e n s itiv e zone r e a c tio n s ,
sex r e a c tio n s , e t c . As fo r the w i11-to -p o w e r, i t i s a
concept r e a l l y r e fin e d l a t e r , by an o th er sch o o l o f psychol
o g is t s , and i s held by t h i s sc h o o l to be fundam ental to
human n a tu re .^
G reed. This t r a i t i s reg ard ed as b a sic i n human n a tu re ,
and one which w i l l e x is t under any ty p e o f economic system ,
even in an economy w ith o u t a s c a r c ity o f f a c to r s and re so u r
c e s . I t m o tiv a te s men to economic a c t i v i t y as w e ll as to
a n t i - s o c i a l a c t i v i t y . Sometimes i t i s d re sse d up w ith a
h ig h -so u n d in g p h ra se , Such a s " s e l f - i n t e r e s t " or " e n lig h te n
ed s e l f - i n t e r e s t " but i t rem ains alw ays a b a sic d riv e ,
ac co rd in g t o D r. Phelps*
9* C f ., A lfre d A d le r, Problem s o f N eu ro sis {Cosmo
p o lita n Book C o rp ., 1930).
193
The Hew York Times o f June 7* 1949* c a rrie d a r e p o rt
from th e board of d ir e c to r s o f th e Mother Church, th e F i r s t
Church o f C h r is t, S c i e n t i s t , w hich i l l u s t r a t e s our p o in t:
I t must be p la in enough (d e c la re d the Church) t h a t
s e lf is h n e s s i s the r o o t of the w orld*s tro u b le s to d a y —
s e lf is h n e s s w hich p u ts one*s own i n t e r e s t s , or the
i n t e r e s t s o f o n e’ s group or n a tio n , as he conceives
them , above th e i n t e r e s t s o f th e r e s t o f mankind*
The greed d riv e may be d e fin e d a s th e in s a tia b le
d e s ir e for g a in , in th e form o f w e a lth , p o s itio n , power,
p r e s tig e , r e c o g n itio n , l e i s u r e , e tc * I n t e l l e c t u a l s who are
so c o n tin u o u sly busy condemning, and sn e e rin g a t , th e greed
o f b u sin e ss men f o r p r o f i t s a re ty p i c a l ly ju s t a s greedy
fo r r e c o g n itio n , power, and p re s tig e fo r th em selv es, Dr*
P h elp s s t a t e s , in o rd e r to em phasize th e u n iv e r s a lity o f
the d riv e in a l l groups*
The g reed d riv e may e x p la in , a ls o , why men s t r i v e to
secu re g r e a te r w ealth th a n t h e i r a s s o c ia te s , le a d in g to
economic a c t i v i t y . I t is p a r tic u la r ly ap p aren t w herever
re so u rc e s a re s c a rc e , and where th o se who secure w e a lth
can th e re b y a tta in s e c u r ity , d i s t i n c t i o n , and w e ll-b e in g
w hile th o se who f a i l to se c u re i t m ust s u f f e r in p r e s tig e ,
and perhaps even i n h e a lth and w e ll-b e in g . I t would p e r
s i s t , even i f re s o u rc e s were abundant, in th e crav in g f o r
power, d i s t i n c t i o n , e tc . H isto ry in th e U nited S ta te s h as
shown how n aiv e i t would be to assume t h a t people become
194
l e s s greedy by g e ttin g , o r by being g iv en , m ore. P a ra p h ra s
ing the C racker Jack slo g a n , "th e more they g e t, th e more
th e y want*"
The inborn " p le a s a n t zone re a c tio n s " ap p aren t in th e
in f a n t, are co n d itio n ed by i n s t i t u t i o n s so th a t the c h ild
and a d u lt becomes greedy fo r re c o g n itio n of h is own im
p o rta n c e .
Envy. The c lo se r e la tio n o f envy o r je a lo u s ly w ith
greed i s a p p a re n t. Envy depends upon one’ s r e la ti o n to
o th e rs , and i s a r e la tiv e m a tte r. The c h ild or a d u lt may
be envious o f one person and n o t o f a n o th e r. Itfhile envy,
or je a lo u s ly w i ll e x is t under any s o c ie ty , i t w i ll be chan
n e liz e d along v a rio u s p a th s . Men w i l l be envious or j e a l
ous o f o th e rs n o t only in re g a rd to w e a lth , but a ls o in
re g a rd to o f f i c i a l p o s itio n , h o n o rs, and so on. 4 S w ith
g re e d , envy can be e ith e r c o n s tru c tiv e or d e s tr u c tiv e ,
depending upon the circu m stan ces; i t can le a d e ith e r t o
h ig h e r form s of economic and s o c ia l a c t i v i t y or to a n t i
s o c ia l a c t i v i t y .
W ill-to-pow er.. The w ill-to -p o w e r d riv e i s a s s o c ia te d
w ith o th e r b a s ic f a c to r s such a s greed and envy. A dler
re g a rd s i t a s an in n a te d riv e fo r dom inance, in h e re n t i n
ev ery human b e in g , and a s such i t may be e ith e r c o n s tru c tiv e
or d e s tr u c tiv e .
195
Now each o f th e s e d riv e s re e n fo rc e s e ^ ia o th e r . Snvy
may be d e fin e d ; o f co u rse, a s a d e s ire fo r som ething p o ss
essed by a n o th e r, e s p e c ia lly i f i t g iv e s s u p e r io r ity , p re s
t i g e , or w e a lth , ^hus, envy i s c lo s e ly a s s o c ia te d w ith the
greed d riv e and w ith th e w ill-to -p o w e r. Not only i s man
greedy, and d e s iro u s o f g a th e rin g to h im se lf s c a rc e , p re
cio u s u t i l i t i e s ; n o t o n ly i s he en v io u s o f those w h > p o ssess
th e se u t i l i t i e s and s u p e r io r ity ; b u t he has a w ill-to -p o w e r,
or th e d e s ire to achieve dominance and to be en v ied .
F e a r. 1?he f e a r d riv e is n e g a tiv e i n c h a ra c te r b u t
o fte n g iv e s r i s e to p o s itiv e a c t i v i t y a s do g re e d , envy, and
w ill-to -p o w e r. The in h e re n t f e a r r e f l e x (ap p aren t in th e
in f a n t a s f e a r o f f a l l i n g and o f loud n o is e s ) becomes con
d itio n e d th ro u g h exp erien ce to a tta c h to v a rio u s phenomena,
e . g . » economic in s e c u r ity , e t c . The ifear r e a c tio n changes
as i n s t i t u t i o n s change. For exam ple, f e a r a s s o c ia te d w ith
economic in s e c u r ity in e a rly -American c a p ita lis m drove th e
in d iv id u a l to economic a c t i v i t y (w ork), th e re b y in c re a s in g
th e t o t a l amount o f goods. % is same f e a r in l a t e r d ay s,
ac co rd in g to D r. P h e lp s, d riv e s th e in d iv id u a l to p o l i t i c a l
a c t i v i t y , i . e . , u sin g th e v o te to get a share o f h is n eig h
bors* g o o d s.10
10. And to g e t a s t i l l b ig g er s h a re , as the greed
d riv e i s superim posed on th e fe a r d r iv e , D r. P helps would ad d .
196
This point was recently illustrated by an editorial
in Life Magazine (June 6 , 1949) entitled "They Y /ant Security.
But Som e Risk-takers Are Needed." The 1949 college graduate,
Life declares:
...doesn ’t want risk, he doesn’t want to be an individual
enterpriser. Fortune interprets this to mean that he has
turned his back on the American dream. Perhaps only the
content of the dream has changed, but certainly there has
been a change.
. . . i t w ill not be easy for the U.S. enterprise system to
renew it s e lf periodically i f so m any of it s recruits are
dead set against starting their ow n business. Secondly,
a generation that is growingly hipped on security is in
a poor psychological position to survive the shocks that
are an inevitable part of lif e , no matter what is done to
insure everybody against a ll conceivable contingencies.
A s Bertrand Russell has observed, the most insecure peo
ple on earth are those w ho are forever playing it safe.
The Maginot Line mentality lacks adaptability and re
sourcefulness in peace no less than in war.
Ignorance. This la st factor is not an inherent or un
changeable psychological factor, but, as Dr. Phelps believes,
must be included in the theory in order to explain a great
deal of hum an activity in connection with the passing of capi
talism. But it is different from the previously mentioned
factors in that it m ay possibly be more easily changed. S t ill,
the problem of economic illitera cy is so monumental that it
is doubtful that i t can be altered in time to have any effect
as a delaying force in the social transformation.
O f course, it does li t t l e good to refer to the number
of persons with an I.Q,. of below, say 9 0 , since I.Q. is de-
197
fined in terms of a normal distribution curve, and approxi
mately sixteen per cent of the population f a ll in the range
below 90. But of great significance is the fact that in t e lli
gence tests reveal continuous gradations of capacity and w e
are confronted with disquietingly large numbers fa llin g with
in a range that w e have been used to thinking of as subnormal.
These do not have the a b ility to learn to participate effect
ively in a market economy.
In addition to the problem of lack of capacity is the
problem of ignorance, indicated by the widespread acceptance
of such notions as the idea that the rich can be despoiled
to any degree without despoiling the poor. Ignorance of the
economic facts of life by those who would maintain capitalism
is the ignorance with which w e are concerned in th is chapter.
This economic illite r a c y as to the necessity of pro
f it s in any system and especially as to the use to which pro
f it s are put in modern capitalism; ignorance in regard to
corporations and business policies; ignorance as to the long
term result of immediate policies carried on by such groups
as the A.E. of L., farm organizations, trade associations,
business monopolies, various p olitician s, business m en and
w om en and even consumers— a ll of which m ay be p olicies highly
inimical to capitalism, which a ll of these organizations and
individuals probably support and wish to save. Ignorance is
198
one o f th e causes o f p o lic ie s which undermine th e e s s e n tia l
r e q u is ite s of c a p ita lis m , D r. P helps a s s e rts *
Summary, The r e la tio n s h ip o f th e p sy c h o lo g ic a l fa c
to r s to th e economic environm ent may be e it h e r as fo rc e s o f
p ro g re ss or fo rc e s of d e s tr u c tio n . To be fo rc e s of p ro g re ss
( f o r c a p ita lis m ), how ever, they must occur w ith in a c e r ta in
h i s t o r i c a l framework o f i n s t i t u t i o n s (to be d iscu ssed l a t e r )
which c a n a liz e them in to c o n s tru c tiv e (fo r c a p ita lis m ) c h a n n e ls.
W ith the breakdown o r tra n s fo rm a tio n o f t h i s framework, th e y
become fo rc e s of d e s tr u c tio n , in im ic a l to th e w orking o f th e
c a p i t a l i s t system .
Of co u rse , even w ith the breakdown o f th e old fram e
work, th e fo rc e s s t i l l m ight be c a n a liz e d by the developm ent
o f c e r ta in i n s t i t u t i o n s in to h arm less c h a n n e ls, but D r.
P helps b e lie v e s i t i s a lre a d y too l a t e fo r th i s to o cc u r.
He f e e ls th a t any s o c ia l m o d ific a tio n o f th e e x p re ssio n o f
th e se d riv e s cannot now come f a s t enough to a v e rt the p a ssin g
d f c a p ita lis m .
I t m ight be argued t h a t , a f t e r a l l , people are to o in
t e l l i g e n t to a c t in the way d e sc rib e d above, i . e . , th a t d e s
p ite w idespread ig n o ran ce, th ey have sense enough to r e a liz e
t h a t i f everybody grabbed, a l l would be s o re ly worse o f f —
and th e re fo re , because o f e n lig h te n e d s e l f - i n t e r e s t , they
»
w il l r e s t r a i n t h e i r envy, g re ed , w ill-to -p o w e r, and so f o r th .
199
This reasoning fa ils on at least three counts.
In the fir st place, i t is not a ease of everybody
deciding to grab; this is not a necessary condition. It is
a case of a large group robbing a small group, or even, try
ing to rob the rest of the community, which cannot strike
back* A minority group can cooperate with other minority groups
to rob those w ho can't be expected to strike back. In fact,
is this not the psychological basis for pressure groups?
For example, the Fortune survey of Fortune Magazine
(March, 1947) indicates som e of th is psychology. Pointing
out that most Americans are now in favor of a m inim um wage
law (and forty-eight per cent of them believe Social Secur
ity should be extended to m ore groups) Fortune (p. 18) states:
"In the occupational breakdown, the only group not overwhelm
ingly in favor of a m inim um wage are parity- protected farm
owners (forty-eight per cent for, forty-six against), whose
workers regret that they are not included in present le g is
la tio n .”
Secondly, i t m ay be the case of a group knowing that
i f everybody grabbed, a ll in general ( i.e ., society as a whole)
would be worse o ff, but th is might be offset for the group
in question i f this group strikes or grabs faster and gets a
j
larger share of the smaller pie. Also the predatory group
thinks the economy really can stand its raiding, after a ll.
200
There a re thousands o f exam ples o f t h i s type of a c t i v i t y , in
our economy, ra n g in g from t a r i f f s to v a rio u s k in d s of s u b s i
d ie s and union p o l ic i e s .
T h ird , one may c o n sid e r th e case s im ila r to W. H.
C ham berlin’ s s e l l e r s lid in g down th e dd* curve to D D * under
c o n d itio n s o f m o n o p o listic c o m p e titio n .”^^- T his i s th e case
where each firm sees a s i tu a t io n w here, by low ering p ric e a
l i t t l e and in c re a s in g o u tp u t, i t can g e t a g r e a te r share of
th e p ie , a l l th in g s rem aining eq u a l; b u t i t s co m p etito rs a ls o
*
see th a t s itu a tio n and a l l tend to a c t in the same way. The
r e s u l t i s th a t th ey a l l end up w ith low er p ric e s and p r o f i t s ,
y e t each one was a c tin g i n t e l l i g e n t l y . The g e n e ra l re a so n in g
h ere i s a p p lic a b le to p re ssu re -g ro u p governm ent, s u b s id ie s ,
and m o n o p o listic a c t i v i t i e s , but w ith o u t th e s o c ia l b e n e f its
which would r e s u l t from th e Cham berlin exam ple.
I I I . THE INSTITUTIONAL FR A M E W O R K
Im portance o f th e fram ew ork. Now i t i s ex ceed in g ly
im p o rtan t fo r c a p ita lis m th a t th e se b a s ic d riv e s o f in d iv id
u a ls be channelized in to ’’p ro p e r” d ir e c tio n s by an i n s t i t u
t i o n a l fram ework. P ro p e rly c o n tro lle d , people are a b le to
give vent to g re e d , envy, and w ill-to -p o w e r by p u rsu in g the
g ain m otive ac co rd in g to c o n s tru c tiv e ’’r u le s o f the gam e.”
11. W.H. C ham berlin, Theory o f M o n o p o listic Competi
tio n (Cambridge: H arvard U n iv e rs ity P re s s , 1946) p . 8 9 f f .
201
In so f a r as people rem ain w ith in the r u le s o f the game, th e
c a p i t a l i s t system can work and a c t i v i t y i s regarded a s soc
i a l l y u s e fu l and c o n s tru c tiv e .
As a m a tte r o f f a c t , the i n s t i t u t i o n s o f p riv a te p ro
p e rty and c a p ita lis m may he regarded as having been s o c ia lly
u s e fu l fo r th e very reaso n t h a t they allow ed th e f u l l play
o f th ese p o te n ti a l ly d e s tru c tiv e d riv e s along h a rm le ss, in
f a c t , u s e f u l, l i n e s . For exam ple, Lord Keynes has s a id :
...d a n g e ro u s human p r o c l i v i t i e s can be ca n a liz e d in to
co m p arativ ely harm less ch an n els by the e x iste n c e o f oppor
t u n i t i e s fo r money-making and p riv a te w ea lth , w hich, i f
th ey cannot be s a t i s f i e d in t h i s way, may fin d th e ir o u t
l e t in c r u e lty , the re c k le s s p u r s u it of p e rso n a l power
and a u th o r ity , and o th e r form s of se lf-a g g ra n d iz e m e n t.
I t i s b e tte r t h a t a man should ty ra n n iz e over h is bank b a l
ance th a n over h is f e llo w - c itiz e n s ; and w h ils t th e form er
i s som etimes denounced as being b u t a means to the l a t t e r ,
sometimes a t l e a s t i t i s an a l t e r n a t i v e . . . . ^
Ma.jor i n s t i t u t i o n s . H is to r ic a lly the m ajor i n s t i t u
tio n s in America which have served to hold in check th e po
t e n t i a l l y dangerous ( i . e . , dangerous to c a p ita lis m ) in h e re n t
d riv in g m otives o f human n a tu re have been r e lig io n , m oral
cod es, the fa m ily , and the co m p etitiv e system e s ta b lis h e d and
m ain tain ed by the s t a t e . So long a s th ese i n s t i t u t i o n s work
ed e f f i c i e n t l y , in th e old way ( th a t i s to say, as th e y did
d u rin g most of the 19th c e n tu r y ), the d riv in g m otives were
n o t o n ly rendered h a rm le ss, b u t served a c o n s tru c tiv e , p ro -
John M aynard Keynes, The General Theory of Employ
ment, P. 374. -------
202
g re s s iv e p u rp o se. W e tu r n to a c lo s e r exam ination o f th ese
i n s t i t u t i o n s .
R e lig io n . T his i n s t i t u t i o n i s ex em p lified by th e v a r
io u s churches and denom inations, th e e s ta b lis h e d r e lig i o n s ,
and e s p e c ia lly th e old fu n d a m e n ta list d o c tr in e , whose ro le
and fo rc e in American h is to r y i s seldom f u l l y a p p re c ia te d .
R e lig io n , of c o u rse , has played a fundam ental r o le in
world h is to r y . As A lfre d M arsh all has commented, "th e two
g re a t form ing ag e n c ie s of the w o rld ’ s h is to r y have been th e
r e lig io u s and the e c o n o m i c . H e sa id t h a t , w hile the m i li
ta r y or a r t i s t i c s p i r i t has now and then been f o r aw ile p re
dom inate, th e r e lig io u s and economic in flu e n c e s "have no
where been d isp la c e d from the f r o n t rank even fo r a tim e; and
th ey have n e a rly alw ays been more im p o rtan t than a l l o th e rs
put to g e th e r ." Of th e two, r e lig io n has g e n e ra lly been most
in te n s e , even i f the economic fo rc e s proved more fundam ental
in th e long ru n . R e lig io n has been a pow erful fo rc e c o n tr o ll
in g and c h a n n e liz in g the d riv in g m otives o f men.
In Am erica, r e lig io n , and e s p e c ia lly the P r o te s ta n t
ch u rch es, played a fundam ental economic r o l e , in th e sense
t h a t th ey formed a pow erful bulw ark fo r c a p i t a l i s t i n s t i t u
tio n s . ^n h is adm irable work on th e ro le of th e P ro te s ta n t
13. Alfred Marshall, Principles of Economics (London:
MacMillan Co., 1920) eighth edition, p. 17
203
Churches in industrial America, Henry F. M ay points out that
religion dominated economic science up until just recently.1^
Most of the early institutions of higher education were
church dominated and most college presidents were active
churchmen* It was these churchmen who elevated p o litica l
economy to a place in college curricula, and most of the
early economists were churchmen (some being the college presi
dents themselves) w ho regarded economic law as eternal, God-
given universal law on the sam e level and of the sam e charact
er as eternal moral and religious law. A nd the laws or prin
ciples of p o litica l economy expounded were those of a capi
ta lis tic economy. ”The laws of p o litica l economy, as taught
in clerical texts, were not only compatible with natural re
ligion , they were almost a part of i t . ”15
The economic doctrines taught by clerical professors
constituted part of a general view of a world regulated
by Divine Law, m uch of i t codified and easily comprehen
sib le. 16
In another place, M ay continues:
The religious press took a strong stand for a ”sound”
currency, which seemed to the clerical ed ito r s...a matter
*— H.F. M ay, Protestant Churches and Industrial Ameri.
ca (New York: Harper & Bros., 1949XT--------------------------
Ibid.. p. 1 4 .
16. Ibid., p. 21.
204
of com m on honesty.. . .A.H. Strong, president of Rochester
Theological Seminary, proclaimed the sam e w ell-tried be
lie f: "I know of no better proof of the divine origin
of Christianity than th is, that her laws are l i t t l e by
l i t t l e found to be the laws of nature. . . .This I believe
to be already true of P o litical Economy." ..•
Perhaps the most influential American economist (of
the period 1860-1875) was Arthur Latham Perry, a minis
te r ^ son and a str ic t adherent of the doctrines of W ay-
land and Bowen. Like his predecessors, Perry identi
fied "the fundamental laws of society" with "the foot
steps of providential intelligence." These laws m ade it
particularly plain that concerted action to raise wages
was immoral and useless, since i t could only act to
lessen the wage-fund.17
This alliance between capitalism and religion was pow
erful enough to check working class radicalism, which was for
ced to take an an ti-clerical position. Strikes brought forth
the most bitter clerical attacks, and the immorality of attemp
ting to combine to overcome the eternal laws of economics and
nature (the law of supply and dem and and laissez-faire) was
continuously asserted.
In short, religion was particularly effective in hold
ing in check, according to Dr. Phelps, men’s greed, envy, and
will-to-power so long, at lea st, as m en believed in the Ten
Com m andm ents combined with the h e ll’s fire and brimstone
doctrine, and ever-lasting torture. M en’s old fear that sin
would bring them straight to a real and horrible h e ll, which
was at least as bad and probably worse than any of the most
W . Ibid.. p. 44-5
205
brazen rumors going around about i t , was a more effective
check than is commonly realized by most people, w ho today
have become sophisticated in their concepts of the Devil and
his domain.
M oral and e th ic a l co d es. M oral and e t h i c a l codes,
u s u a lly a s s o c ia te d w ith r e lig io n but h i s t o r i c a l l y and lo g i
c a lly in d ep en d en t, a ls o have seryed to hold men’s greed in
check.
Some men, a ce n tu ry ago, m ight n o t have b eliev ed in
th e old fu n d a m e n ta list r e lig io n , but th e y did b e lie v e in a
m oral o r e t h ic a l code o f what was r ig h t and wrong, according
to D r. P h e lp s. The hold of th e se fo rc e s on men’ s m inds,
a t t i t u d e s , and a c tio n s continued to be an e f f e c tiv e check on
men’ s greed even a f t e r the d e c lin e , b eginning o nly a few de
cades ago, of th e old fu n d a m e n ta list h e l l ’s - f i r e r e lig i o n .
These codes are s t i l l very stro n g to d a y , which may
account fo r th e f a c t th a t we have (a lth o u g h we ad m itte d ly
need more) so few p o lic e s ta lk in g th e s t r e e t s . I t i s n o t
th e presence o f p o li c e ,'n o r any lo n g er of a fu n d a m e n ta list
b e l i e f in h e l l , th a t p re v e n ts most people from ta k in g what
th ey w ant. I f th e m oral codes o f th e community should break
down, n o t enough p o lic e could p o ssib le be r a l l i e d to p rev en t
th e lo o tin g o f c o u n te rs o r even th e o ccu p atio n o f f a c to r ie s
and b u ild in g such as th e empty houses sta n d in g vacant fo r
206
s p e c u la tiv e s e l li n g p r ic e s d u rin g p e rio d s of extrem e hous
in g s h o rta g e s . Why i s i t th a t people do n o t grab ( d ir e c tly
or by means of le g i s l a t io n ) what th ey want or need from
t h e i r more fo rtu n a te n eig h b o rs? D r. p h elp s says i t . i s fu n
d am en tally due to th e p e rs is te n c e o f m oral and e t h i c a l codes
or b e l i e f s in r ig h t and w rong.
I t used to be th a t men would n o t a c c e p t c h a r ity —
a sense o f shame would p re v en t them from ta k in g government
or p u b lic a s s is ta n c e — because o f a m oral b e li e f th a t every
man should work hard and provide fo r h im se lf and prove th a t
he was a man.
The fa m ily . The fa m ily has been a g re a t m odifying
fo rc e on men, bending th e in d iv id u a l to a s o c ia lly - u s e f u l
1 8
d ir e c tio n . Combined w ith r e li g i o n and moral and e t h i c a l
codes, and a c tin g as the e d u c a to r, th e fa m ily has been th e
b a s ic o rg an ized u n it o f s o c ie ty , and o f c a p i t a l i s t s o c ie ty
in p a r t i c u l a r . I t has been so im p o rtan t th a t the m otive to
economic a c t i v i t y has h i s t o r i c a l l y been re g ard ed as man*s
d e s ir e to accum ulate c a p it a l and w ealth fo r h is fa m ily r a th e r
th a n t o s a t i s f y h is own in d iv id u a l w an ts, u n le ss in d e e d ,
he used th e fa m ily as a stom ping ground fo r a s s e r tin g h is
dominance and a p p a re lle d h is fa m ily to g iv e conspicuous
evidence o f h i s own p o s itio n and pow er.
18. O f. C hapter V above, fo r Schum peter*s view s on
th e d is in te g r a tio n o f th e b o u rg eo is fa m ily .
207
N e v e rth e le s s , th e fa m ily h a s been a s tro n g in flu e n c e
in lim itin g and c o n tr o llin g th e most d e s tr u c tiv e a s p e c ts o f
the b a s ic d riv e s which we a re c o n sid e rin g in t h i s th e o ry .
A lso , a s Schumpeter has p o in ted o u t, a s th e fa m ily h as de
c lin e d in im portance d u rin g re c e n t d ec ad es, i t h as become
l e s s o f a d riv e to get men to work and a c h ie v e .
While th e i n s t i t u t i o n o f e d u c a tio n c e n te red m ainly
in th e home, i t was supplem ented w ith form al e d u c a tio n , and
in the p a s t b o th o f th e s e branches o f th e o ld American
e d u c a tio n a l i n s t i t u t i o n played a dom inant r o le in te a c h in g
m oral co d es.
The fa m ily co n sid ered i t s e l f d i r e c tl y re s p o n s ib le
f o r th e m oral and e t h i c a l in s tr u c tio n o f youth r i g h t up
u n t i l th e youth l e f t home to s t a r t h is own fa m ily . Large
fa m ilie s were ru le d by s t r i c t concepts of what i s r i g h t
and wrong, and o f co n cep ts o f j u s t re g ard fo r th e r i g h t s and
p r iv ile g e s of o th e r s . Today, th e c h ild is committed to
th e se c u la r a u th o r itie s when he a r riv e s a t the age of s i x ,
and the fa m ily proceeds to tu r n th e r e s p o n s i b i l i ty over to
th e p u b lic school te a c h e r who more g e n e ra lly th a n n o t, i s
in a d e q u a te ly tr a in e d fo r i t h im se lf, or who has gone in to
th e classroom in s e a rc h o f a p la c e to a s s e r t h is a g g re ssio n
and dom inance, to quench h is own th d itst fo r power and lu s t
fo r do m in atio n .
S e c u la r ed u c atio n h a s undergone a fundam ental change.
208
In tli© old d ays, th e i n s t i t u t i o n s of h ig h e r le a rn in g were
dom inated by th e o le rg y , and even in th e p u b lic sc h o o ls, o f
a l l g ra d e s, d a ily B ib le re a d in g and p ra y er were re q u ir e d .
Also th e sch o o l t e x t s , such a s McGuffey*s R eaders were as
much concerned w ith g e ttin g a c ro s s m oral p rin c ip le s as they
were w ith e n tic in g th e youth to le a rn t o re a d . Hew con
c e p ts have come in to vogue sin c e th a t d ay , n e e d le ss to r e
p o r t . B ible re a d in g and p ray er have been e lim in a te d by the
S ta te from p u b lic s c h o o ls . P ro g re ssiv e ed u c atio n h o ld s
th a t th e sch o o l c h ild must n o t be re p re s s e d b u t be allow ed
to do w hatever he w ants to do. The e n t i r e atm osphere and
a t ti tu d e h as changed.
C o m p etitio n . The co m p etitiv e system provided a fram e
work fo r th e au to m atic and im personal c o n tro l o f men*s eco
nomic a c t i v i t i e s , ac co rd in g t o the P s y c h o lo g ic a l- I n s titu tio n
a l th e o ry . So lo n g as t h i s system worked e f f i c i e n t l y , and
men were k e p t s u b je c t to i t , the working out o f th e fo rc e s
s e t in m otion by our b a s ic d riv e s , could only end up in
m axim izing th e w e lfa re of th e community. A ccording to
Adam Sm ith*s famous p aragraph:
As ev ery in d iv id u a l, th e r e f o r e , endeavours a s much
as he can b oth to employ h is c a p ita l in th e support of
dom estic in d u s tr y , and so to d ir e c t th a t in d u s try th a t
i t s produce may be o f th e g re a te s t v a lu e ; ev ery in d i
v id u a l n e c e s s a r ily 'labo.ursB to re n d e r th e annual re v e -
nue o f the s o c ie ty a s g re a t as he c a n . He g e n e ra lly ,
in d eed , n e ith e r in te n d s to promote th e p u b lic i n t e r e s t ,
209
nor knows how much he is prom oting it* By p r e f e r r in g
th e su p p o rt o f dom estic to t h a t o f fo re ig n in d u s try
in such a manner as i t s produce may be o f th e g r e a te s t
v a lu e , he in te n d s only h is own g a in , and he i s in t h i s ,
as in many o ther c a s e s , le d by an in v is ib le hand to
prom ote an end w hich was n o t p a r t o f h i s in te n tio n *
Nor i s i t alw ays th e worse f o r th e s o c ie ty t h a t i t was
n o t p a r t o f i t . By p u rsu in g h is own i n t e r e s t he f r e
q u e n tly prom otes t h a t o f th e s o c ie ty more e f f e c tu a l l y
th a n when he r e a l l y in te n d s to promote i t . 1?
The m achinery o f th e co m p etitiv e system gave e v e ry
body a chance to e x p ress h is g re e d in seek in g p e rso n a l g a in ,
and th e end r e s u l t was t o promote the maximum h ap p in ess
and w e ll-b e in g of a ll* But th e i n s t i t u t i o n s o f r e li g i o n ,
m o ral, and e t h i c a l codes, and th e fa m ily , provided th e main
fo rc e s p re v e n tin g men from d e s tro y in g th e c o m p etitiv e mech
anism i t s e l f * J u s t as w ith in th e d em o cratic p o l i t i c a l fram e
w ork, a g re a t d e a l of in d iv id u a l r e s p o n s i b i li ty was abso
l u t e l y n ec essary t o the e f f e c tiv e working out o f th e com
p e t i t i v e system .
Greed and envy and w ill-to -p o w e r drove a man t o be
a c q u is itiv e —to want t o g e t f o r h im se lf and fa m ily —b u t
c o m p e titio n , provided and p ro te c te d by the le g a l franew ork
s e t up by the s t a t e , and h is conscience (in flu e n c e d by r e l i
gio u s and m oral and e t h i c a l co d e s), fo rc e d him to produce
in s te a d of m erely grab the p ro p e rty of o th ers*
19* Adam Sm ith, The W ealth o f N ations (Modern L ib ra ry
e d itio n , New York) p . 423•
IV . THE B R E A K D O W N
210
W ithin th e p a s t s e v e ra l d ec ad es, however, th e s e r e
s tr a in in g i n s t i t u t i o n s o f r e li g i o n , e t h i c s , th e home, and
c o m p e titio n , hegan to change. As c o n tro ls w hich had been
re s p o n s ib le fo r h a rn e ssin g m an's b a s ic d riv e s fo r th e su ccess
f u l o p e ra tio n o f a c a p i t a l i s t system , th e y began t o weaken.
The unharnessed m otives now became d e s tr u c tiv e fo rc e s in
r e la ti o n to th e fo u n d a tio n s o f c a p ita lis m , and in t h e i r tu r n
re a c te d to f a c i l i t a t e th e tra n s fo rm a tio n o f th e i n s t i t u t i o n s
w hich had been h o ld in g them in check. W ith ev ery weakening
o f th e old i n s t i t u t i o n s , th e p sy c h o lo g ic a l m otives o f greed,
envy, and w ill-to -p o w e r led to even f u r th e r weakening of
th e s e i n s t i t u t i o n s as c o n tro l f a c t o r s . The c h ie f f a c to r s
in th e tra n s fo rm a tio n a re noiit t o be t r e a te d .
E nvironm ental f a c t o r s . The c h ie f of th e environm ental
f a c to r s i s th e p a ssin g o f th e p h y s ic a l f r o n t i e r . In the o ld
d ay s, i f any man became d i s s a t i s f i e d w ith h is economic and
s o c ia l l o t , he could move to th e f r o n t ie r and f o r a r i d i
c u lo u sly low p r ic e , became a " c a p i t a l i s t " h im s e lf, i . e . .
ach iev e ow nership o f 160 a c re s and s t a r t fa rm in g . The man
knew t h i s and, e q u a lly im p o rtan t, he r e a liz e d t h a t h is
n eig h b o rs knew i t . There was l i t t l e ten d en cy , th e r e f o r e ,
a c c o rd in g to Dr. P h e lp s, fo r him to t r y to g e t som ething
fo r n o th in g in the form o f h an d o u ts, or s u b s id ie s , from h is
211
n e ig h b o rs.
Nor were th e re any f a s t s o c ia l c la s s e s out on th e f r o n
t i e r . The In d ia n s , th e v ir g in s o i l s , and rugged c o u n try s id e s ,
and the h a rd sh ip s were s o c ia lly e q u a liz in g f a c to r s .
People were im p a tie n t w ith th e d is c o n te n te d so long
as o p p o rtu n ity so o b v io u sly e x is te d on th e b o rd e rs; so th a t
w h ile a few o f th e d is c o n te n te d may have re s o r te d to more
v io le n t (even bomb-throwing} a c t i v i t i e s th an th ey do to d ay ,
th e y by no means had such a p a tie n t p u b lic . With th e p a ssin g
o f th e p h y s ic a l f r o n t i e r , th e e a s ily a p p a re n t o u tle ts fo r
escape were c lo s e d ; and a l l th e a g g re ssio n , th e envy and
g re e d , t h a t had been sp en t f ig h tin g In d ia n s , g rab b in g new
la n d s , and e x p lo itin g f o r e s ts and m ines, tu rn ed inward
upon s o c ie ty .
Growth o f modem e d u c a tio n . As men*s sta n d a rd s of
l i f e im proved, a s p ro d u c tio n and o rg a n iz a tio n expanded a p a c e ,
as the r a ti o n a l and s c i e n t i f i c s p i r i t grew , ed u catio n was
encouraged by the S ta te and more and more people became able
to g e t a t l e a s t an elem entary e d u c a tio n .
Thus, th e im p o rtan t fu n c tio n o f e d u c a tio n was la r g e ly
taken, away from th e fa m ily and th e home. C hild ren were ta k e n
from t h e i r m others and p u t in to th e hands o f " s o c ia lly con
s c io u s ," p ro fe s s io n a l sc h o o l te a c h e r s . As a F reu d ian m ight
sa y , many o f th e s e p ro fe s s io n a l te a c h e rs e n tered e d u c a tio n
212
in o rd e r to g e t power over and dom inate a classroom f u l l
of c h ild re n , in o rd er to give v en t to t h e i r f r u s t r a t io n s
and s o c ia l antagonism s th ro u g h a l l s o r ts o f h ig h ly r a ti o n
a liz e d s o c ia l t h e o r ie s .
E d u catio n developed a v a s t a b i l i t y in th e m asses to
read and w r ite —and more im p o rta n t, to q u e stio n th e b e l i e f s ,
r e lig i o u s , m o ral, e t c . , o f th e ir p re d e c e s s o rs . New M easand
concepts of l i f e were brought w ith in th e common h o riz o n .
But more s e r io u s ly , w ith th e expansion o f e d u c a tio n
came th e grow th and expansion of scien ce w hich was to have
an im portant e f f e c t on th e i n s t i t u t i o n o f fu n d a m e n ta list
r e lig io n , ^o summarize, e d u c a tio n was a fo rc e which played
a la rg e r ro le in b re ak in g down old id e a s which h eld greed
and envy in check ra th e r th a n a fo rc e which i t s e l f c o n tro lle d
th e se fo rc e s o f d e s tr u c tio n .
Development o f a d e m o c r a tic - p o litic a l s t r u c t u r e . A lso ,
th ro u g h o u t th e n in e te e n th c e n tu ry , th e re was a ste a d y ex
te n s io n o f th e fra n c h is e and expansion o f dem ocracy. W ith
mass ed u catio n and th e cheap newspaper and pam phlet, th e pub
l i c became p rey to a g it a t o r s and d is g ru n tle d i n t e l l e c t u a l s ,
who began to d efin e the i n t e r e s t s of th e m asses in term s
o th er than th o se w hich r a tio n a liz e d th e n e c e s s ity o f keep
in g w ith in the r u le s o f th e co m p etitiv e game.
Men were to ld th ey could t.ax th e r ic h and su b sid iz e
th e poor; t h a t th e y should se c u re any kind of s o c ia l l e g i s
213
lation they wanted, frcan m inim um wa^s to m axim um hours.
They were told that by organizing trade unions they could
create obstacles in the labor market to the advantage of
skilled workers or other groups, and ’ ’get more” than ifehey
could through the competitive game. They were told that
they could have a ll, just by using the newly w on franchise
and voting in the right people.
U n til 1932, however, th e people o f America alw ays
voted in to h ig h o f f ic e devoted fo llo w e rs o f orthodox c l a s s
i c a l lib e r a lis m . T his was due c h ie f ly to th e f a c t th a t
p o litic a l* p a r tie s were in th e hands o f ’’th e r ig h t p e o p le ,”
and th e ’ ’r ig h t c a n d id a te s ” were alw ays s e le c te d and p re se n
te d to th e v o te r s . I t was n o t u n t i l F ra n k lin R oosevelt
(who was thought to b e ” sound" when nom inated) was e le c te d
t h a t th e re ig n o f ’ ’sound” men came to an end.
The ro le o f demagogues has become ever more im por
ta n t in modern p o l i t i c s , m oreover, a s w itn e ss ev e n ts sin c e
th e f i r s t w orld w ar, in both Europe and A m erica, having
secured o f f ic e , th e se men, im pelled by g re e d , attem p t to
keep in power a t any c o s t, Sometimes th ey have n o t tu rn ed
to open t e r r o r and d ic ta to r s h ip , b u t o fte n th ey have, as
i n many European and L a tin American c o u n trie s . At o th e r
tim e s th ey have been a b le to use governm ental and o th er
funds to o rg an ize th e mass v o te .
Breakdown of r e l i g i o n * But so long as the fundamen
t a l i s t r e l i g i o u s te a c h in g s and m oral codes remained i n t a c t ,
n o t much headway could be made along the road to d e s tro y
in g the co m p etitiv e system by those who wanted to grab a l l .
People were s t i l l to o ’'m oral1 1 and to o ’’h o n e s t , 1 1 as Dr.
P h elp s would sa y . But the growth of e d u c a tio n and the r i s e
of sc ie n c e was d e s tin e d to doom th e old fu n d a m e n ta list r e
l i g i o n .
The old h e l l ’s f i r e and brim stone r e l i g i o n was doom
ed; the people who " b e lie v e d in th e l i t e r a l i n t e r p r e t a t i o n
of every word in the B ib le ’’ were due f o r some h ard shocks
and f i n a l d i s c r e d i t i n g . Nor was t h i s so long ago. The
Scopes e v o lu tio n t r i a l in Dayton, Tennessee, in 1925, in v o l
v in g C larence Darrow and W illiam Jen n in g s Bryan, marked a
g r e a t m ile sto n e on th e way to a com pletely " l i b e r a l i z e d ”
r e l i g i o n . And w ith the breakdown of the id e a t h a t a man
would go to h e l l and e v e r l a s t i n g t o r t u r e i f he committed
a s i n , te m p ta tio n took on a r o s i e r hue. Things t h a t could
be had sim ply f o r the ta k in g were grabbed. ° n ly the p o lic e
man now blocked th e way, and he began to sid e w ith the
grabbing m asses, or so th e p re se n t th e o ry goes.
T his i s n o t to in d ic a te t h a t today the old fo rc e o f
r e l i g i o n has e n t i r e l y v an ish ed . Dr. P h elp s and h i s school
do no t b e lie v e th a t i t i s gone. To th e c o n tra ry , they
p o in t out th a t th e re a re n o t enough policem en today to p ro -
215
t e c t even a f r a c tio n o f p riv a te p ro p e rty , should th e old
m o ral, r e lig i o u s , and e th ic a l codes c o lla p s e com pletely;
in d eed , i t is amazing t o what e x te n t people a re s t i l l bound
by a m oral code t h a t p re v e n ts them from ta k in g e v e ry th in g
in s i g h t .20
But th e p ro c ess of d is in te g r a tio n o f our m oral and
r e lig io u s codes i s s t i l l in f u l l sw ing, and D r. P helps does
n o t b e lie v e th e tre n d can be checked in tim e t o save cap
i t a lis m . There a re no fo rc e s in s ig h t capable o f even
a r r e s tin g the tr e n d .
Henry F . May p re s e n ts some v alu ab le evidence o f th e
d r i f t in r e lig io u s th in k in g on economic s u b je c ts during th e
21
period 1828 to 1895- As l a te as 1876, he w r ite s , P ro te s
ta n tism was a m assiv e, "alm o st unbroken f r o n t ” in th e
d efense o f th e s o c ia l s ta tu s quo, i . e . . o f c a p ita lis m . The
r a ilr o a d s t r i k e s of 1877 were g re e te d by a unanimous P ro
t e s t a n t p re s s in the most h o s t ile te rm s. Some o f th e p re ss
advocated th e m assacre o f th e workmen who s tru c k in p ro
t e s t to heavy wage c u ts of th a t y e a r. A ccording to May:
The Independent (a Hew York r e lig io u s w eekly) a s s e r te d
20. A ccording to D r. P h e lp s, th e code to d ay w ith r e
gard to p ro p e rty i s app ro x im ately as fo llo w s: I t i s s t i l l
n o t m oral to ta k e your neighbor*s p ro p e rty p r iv a te ly , but to
ta k e i t by l e g i s l a t i o n i s m oral i f your g ro u p sis e i t h e r in th e
m a jo rity o r i s an im p o rtan t a g g re g a tio n o f v o te r s .
2 1 . Op. c i t .
216
t h a t , one© la b o re rs s ta r t e d to coerce o th e rs in to s to p
ping work, "th e n th e q u e stio n ce a se s to be one o f allow
ab le c o n f lic t between c a p ita l and la b o r , and i n s t a n t ly
becomes an is s u e betw een law and anarch y . L ab o rers a re
th en c rim in a ls in in te n t and c rim in a ls i n f a c t . They
a re r i o t e r s and p u b lic enem ies, and worse th an w ild
b e a s ts tu rn ed lo o se upon s o c i e t y . . . . "
The C o n g re g a tio n a l!st (B oston r e lig io u s w e e k ly ) ...
l ik e the In d ep en d en t. . . c a lle d f o r d r a s tic m easures;
"B ring on th e tro o p s —th e armed p o lic e — in overwhelming
num bers. B ring o u t th e G a tlin g guns. L et th e re be no
fo o lin g w ith blank c a r tr id g e s . But l e t th e mob know,
everyw here, t h a t fo r i t to stan d one moment a f te r i t
has been o rd ered by p ro p er a u th o r itie s to d is p e rs e ,
w i l l be to be sh o t down in i t s tr a c k s ...A l i t t l e o f the
v ig o r o f th e f i r s t Napoleon i s th e th in g we now n e e d " ....
Tiie C h ris tia n Union (New York w eek ly ), l a t e r to be
come th e main organ o f m oderate s o c ia l C h r is tia n ity ,
agreed th a t " th e re a re tim es when mercy i s a m ista k e ,
and t h i s i s one o f them ," and appealed to th e stan d ard
economic dogmas; " I f th e train m en knew a l i t t l e more
o f p o l i t i c a l economy th e y would n o t f a l l so easy a p rey
to men who never earn a d o lla r o f wages by good s o lid
w o rk ...." 2 2
Henry Ward Beechs^ th e most famous m in is te r o f h is
day p e rh a p s, "whose la rg e s a la r y and s t i l l more handsome
r o y a lt i e s and new spaper revenues enabled him to in d u lg e h is
ex u b eran t t a s t e s f o r d riv in g fin e h o rse s and c a rry in g hand
f u ls o f uncut gems in h is p o c k e ts ," 23 i S quoted by May as
denouncing th e r a i l w orkers fo r n o t b earin g t h e i r p o v erty
more nobly:
2 2 . I b i d . . p . 9 2 -3 .
23. I b i d ., p . 94.
217
I t i s sa id (preached Beecher) t h a t a d o lla r a day i s
n o t enough f o r a w ife and fiv e or s ix c h ild re n * Wo, n o t
i f th e man smokes or d rin k s b e e r ...B u t i s n o t a d o lla r
a day enough to buy bread w ith ? Water c o s ts n o th in g s
and a man who cannot liv e on bread i s n o t f i t to l i v e .
What i s the use o f a c i v i l iz a t i o n th a t sim ply makes
men incom petent to liv e under the c o n d itio n s which
e x i s t . . .? 2^
But by th e end of th e f i r s t g re a t la b o r tro u b le s o f
1877, 1886, and 1892-94, th e c l e r i c a l opponents o f organ
ized la b o r , though s t i l l overw helm ingly dom inant in the
r e lig io u s p r e s s , had fo rsa k e n the sw eeping condem nations
of e a r l i e r c le rg y , were being com pelled to re c o g n iz e h h a t
c a p ita lis m was not as p e rfe c t as e a r lie r assum ed, and ware
q u a lify in g th e i r c r itic is m o f tr a d e union o b je c tiv e s ( i f n o t
t h e i r methods} acco rd in g to May.
S t i l l , th e C h r is tia n Advocate (Hew York M ethodist
w eekly) could defend C arnegie S te e l C o rp o ra tio n in i t s use
o f two b o atlo ad s o f armed P in k e rto n d e te c tiv e s to a s s a u lt
th e s t r i k e r s in th e J u ly 5, 1892, m assacre:
The C h ris tia n A dvocate was shocked by the th e o ry th a t
th e company had an o b lig a tio n to co n fe r w ith i t s employ
e e s : "Extend th e r ig h ts of the s ta te to th e com pelling
o f men or c o rp o ra tio n s to confer w ith r e p r e s e n ta tiv e s
o f la b o r,_ a n d you have despotism o r B ellam yism f o r th
w i t h " . . . . 25
How much d i f f e r e n t th e f e e lin g of the church toward
24. I b i d . . p . 94*
25. I b i d . , p . 105.
2 IS
governm ental in te rv e n tio n in th e economy and even toward
s o c ia lis m i s today i s d em o n strated , fo r exam ple, by th e r e
s o lu tio n of th e World C ouncil of Churches m eeting in A m ster
dam in 194S. At th is m eetin g , World P ro te s ta n tis m condemned
b o th Communism and C a p ita lism , and only through fe v e ris h
S ta te D epartm ent in te r v e n tio n d id th e church m odify t h i s to
" l a i s s e z - f a i r e c a p ita lism * " May*a e x c e lle n t booh i s a m ar
v elo u s h is to r y of th e change of a t t i t u d e in American r e l i
g io u s c i r c l e s . How f a r we have come i s a tte s te d to by the
words o f a L ife Magazine (A p ril 18, 1949) e d i t o r i a l :
The g r e a te s t th r e a t to our c i v i l iz a t i o n comes from
w ith in th a t c i v i l i z a t i o n i t s e l f : our $64 euphemism fo r
i t i s secu larism * A much b lu n te r word i s g o d lessn ess*
Our c i v i l i z a t i o n , fo r a l l i t s churches and a l l i t s
ch u rch g o ers, i s p red o m in ately s s e c u la r , g o d le ss c i v i l
iz a t io n .
In t h i s q u o ta tio n , L ife was e x p re ssin g agreem ent w ith
th e id e a th a t lib e r a lis m and t r a d it io n a l eo n se rv a tiv ism based
t h e i r c o n v ic tio n on B ib lic a l te a c h in g s and C h ris tia n t r a d i
t i o n , in which b o th are firm ly ro o te d .
The pow erful C a th o lic Chruch» how ever, rem ains a t r u e
enemy o f so c ia lis m . In a speech May 9 , 1949, Pope P iu s
s t i l l pleaded fo r "a p u b lic s t a t u t e founded upon th e commun
i t y o f r e s p o n s ib ility " between la b o r and c a p ita l, acco rd in g
to an A sso ciate d P re s s d is p a tc h . The Pope pleaded fo r elim
in a tio n o f m utual su sp ic io n by w orkers and em ployers. How
219
e v e r, th e Pope s ig n if ic a n tly went on to quote an e n c y c lic a l:
For th e moment th e fa v o r goes in p re fe re n c e to s ta tis m
and n a tio n a liz a tio n of e n te r p r is e s . I t cannot be doubted
t h a t the church, to o —w ith in c e rta in j u s t lim its --a d m its
s ta tis m and judges th a t one can le g itim a te ly re se rv e
to the p u b lic powers c e r ta in c a te g o rie s o f p r o p e r tie s ,
th o se t h a t have such power t h a t th e y could n o t, w ithout
danger to th e common good, be l e f t in p riv a te h an d s.
Breakdown in m oral co d es. S im ila rly , th e re has been
o ccu rin g a w eakening in th e n a tio n * s moral and e t h ic a l codes.
These codes (which a re s e p a ra te from fu n d a m e n ta list r e l i
gion) used to make a man ashamed to accep t c h a r ity , go to
th e poor h o u se , and th e l i k e •
The n in e te e n th c e n tu ry American would work h is f in g e r s
to the bone or * * s ta r v e ” ra th e r th an a c c e p t c h a r ity or hand
o u ts , e ith e r p r iv a te or p u b lic . He used to o p e ra te under
th e slo g an th a t he wanted to ”be a man and p u ll h is f u l l
w eight in th e b o a t.” But th e s e concepts a ls o have been
b re ak in g down, e s p e c ia lly w ith th e government e n te rin g th e
f i e l d o f s o c ia l s e c u r ity , ueemployment in su ra n c e , r e l i e f ,
and th e l i k e , and e d u c a tin g th e people to th e e f f e c t t h a t
th e s e payments a re n o t c h a r ity b u t payments due them , or
owed them , by t h e i r fe llo w man.
While i t may be argued, and indeed the government
te a c h e s , th a t the v a rio u s s o c ia l in su ran c e d ev ice s a re
in s u ra n c e . p aid fo r by the person who draws the b e n e f its
220
(a lo n g w it h a s u b s ta n tia l c o n trib u tio n fo rced from M s em-
p lo y e r) and to which he i s f u lly e n t i t l e d , s t i l l i t te a c h e s
a dependence upon government and in c re a s e s demands fo r more
s t a t e in te r v e n tio n to p ro te c t a g a in s t d a rk , o r ra in y days,
vrlmh. men used to p re p a re f o r by s e t t in g a sid e a modest
sa v in g .
S t i l l more i n t e r e s ti n g , how ever, a s in d ic a tiv e of
th e breakdown o f m oral codes, acco rd in g to D r. P h e lp s, i s
the " in c re a s in g in cid en ce o f frau d and i r r e s p o n s i b i li ty " on
th e p a r t of claim an ts and re c e iv e rs o f unemployment com
p e n s a tio n , r e l i e f , and o th er governm ent "h a n d o u ts."
I h i s breakdown in m oral codes i s em phasized in a
book by P au l McGuire, The r e 1s Freedom f o r th e B rave, acco rd
in g to a review of i t in L ife Magazine (March 21, 1949),
which s a id ;
The W estern com m unities, a s Mr. McGuire p o in ts o u t,
were founded on th e id e a t h a t th e re i s a n a tu n a l m oral •
law upon which a l l c i v i l laws must le a n i f they are to
have le g itim a te s a n c tio n i n th e minds o f m e n ....
2h Mr. M cGuire’s s o c ia l p o li ty , th e v o lu n ta ry a s s
o c ia tio n of fre e in d iv id u a ls is the p ro p er co u n terp o ise
to s t a t e a c tio n . Every tim e a group o f people under
ta k e s to so lv e a problem o r meet an em ergency w ith o u t
running to th e s ta te fo r money, i t means th a t in d iv i
d u al m oral r e s p o n s ib ility i s in th e a sc e n d a n t. C o u n ta ri-
2 T . The argument i s tr u e o nly in th e case o f the Old
Age and S u rv iv o rs ’ In s u ra n c e . Those who en jo y th e b e n e f its
o f payments from Old Age pensions, Aid to D ependent C h ild re n ,
R e lie f , and Workmen’ s Compensation In su ra n c e , do n o t pay th e
premiums o r c o s ts of th e se program s.
221
w ise when we leav e i t up to the s ta te to do good by-
fo rc e of ta x a tio n , we a re dodging our own in d iv id u a l
r e s p o n s ib ility f o r the c o n d itio n of th e community.
Summary. r fhe e x te n t to which th e tra n s fo rm a tio n has
o ccurred i s more com plete th a n most p e o p le , im agine, ac c o rd
in g to D r. P h e lp s. The ad v an tag es of b e a tin g the r u le s o f
th e game, e s p e c ia lly the r u le s o f th e c o m p etitiv e game f o r
m erly p ro te c te d by r e lig io u s and e th i c a l b e l i e f s , a re every
where ap p aren t in th e w idespread grow th o f m onopolies, p re
ssu re groups, and so f o r th .
The s u b je c t of th e se p re ssu re groups ha^-se been in
v e s tig a te d , among o th e r s , by S tu a r t Chase in h is Democracy
Under P re s s u re . In th e p o l i t i c a l f i e ld we fin d th a t today we
have a government of s p e c ia l i n t e r e s t g ro u p s, each tr y in g t o
g e t som ething fo r n o th in g . B ig B u sin ess, Big A g ric u ltu re ,
B ig Labor a re the th re e m ain o ffe n d e rs , b u t many o th e rs (th e
aged, th e v e te ra n s , th e te n a n ts , th e la n d lo rd s , e t c . ) have
t h e i r lo b b ie s b u s ily a t w ork, 52 weeks out o f the y e a r. Some
groups want high t a r i f f s , o th e rs want law t a r i f l f s . Some want
one s p e c ia l law, a n o th e r w ants a s p e c ia l commission. And
everybody w ants a su b sid y .
IF CURRENT ATTITUDES
The tra n sfo rm a tio n of th e r e s tr a in in g i n s t i t u t i o n s
r e s u l t s in a s o c ia l atm osphere which sooner or l a t e r w ill
p rev en t th e c a p i t a l i s t system from fu n c tio n in g * l e t us now
analyse th e e x te n t to which c u rre n t a t t i t u d e s a re c o n tro lle d
by th e t raiisfoim ed i n s t i t u t i o n s and the f lo u r is h in g o f g re e d ,
envy, and w ill-to -p o w e r* ^ o st p ro b ab ly , th e system w ill
p ass in to some form of c o lle c tiv is m before i t a c tu a lly
re a c h e s th e c o n d itio n where i t can no lo n g er fu n c tio n , i .e * .
a c o n d itio n of c a ta s tr o p h ic breakdown.
Re .le c tio n of c a p i t a l i s t id e a ls . The problem is to
d isc o v e r th e degree to vhich the p u b lic has r e je c t e d , in
f a c t and in t h e i r a t t i t u d e s , the co m p etitiv e mechanism and
o th e r c a p i t a l i s t i d e a l s . To w hat e x te n t are man, through
g re ed , envy, and w ill-to -p o w e r, w illin g to r e j e c t the cap
i t a l i s t system o r to p re v en t i t frmm fu n c tio n in g by s t r i v i n g
f o r m o n o p o listic and p o l i t i c a l ad v an tag e.
In th is r e s p e c t, as w e ll a s in re fe re n c e to o th er
q u e stio n s in t h i s s e c tio n , we have only the tim e to in d i
c a te th e main problem s and some o f th e so u rces o f d a ta .
W e can n o t, in a s h o rt c h a p te r, develop more than th e o u tlin e
o f th e P s y c h o lo g ic a l- I n s titu tio n a l th eo ry and in d ic a te some
o f th e evidence su p p o rtin g i t .
W e have a lre a d y noted the change in a t ti tu d e o f the
church, o f r e lig io u s and m oral le a d e rs . From a day when
most r e lig io u s le a d e rs reg ard ed n a tu r a l economic law as
d iv in e , and th e re fo re m o rally wrong to i n t e r f e r e , through
223
s t a te in te rv e n tio n o r com bination, w ith the harm onious work
ing out of economic f o r c e s , th e re has been an alm ost com plete
s h i f t in opinion* In te rv e n tio n today i s reg ard ed a s a b so
l u te ly e s s e n t i a l , a t l e a s t in soma r e s p e c ts , even by the
C a th o lic C h u rc h , and dem ocratic s o c ia lis m i s th e r e a l and
overwhelming p re fe re n c e of w orld P ro te sta n tism * Laiss.ez
f a i r e , or th e old tim e p o lic y of l e t t i n g " d iv in e ” economic
law work i t s e l f out under c a p ita lis m f re e o f in te r f e r e n c e
by s t a t e or com bination, i s today co n sid ered d i s t i n c t l y
v ic io u s .
Econom ists lik e w ise n ote th e changing p u b lic a t t i
tu d e s and the growth of h o s t i l i t y tow ard fundam ental cap
i t a l i s t id e a ls and i n s t i t u t i o n s . This fa c t i s nowhere b e t te r
dem onstrated th an in th e w r i t o f orthodox l i b e r a l econ
o m ists th em selv es.
For exam ple, F r ie d r ic h von Hayek, in the opening pages
o f h is famous book, Road to Serfdom , see s in th e a ttitu d e s
o f people in England and -America th e same e v o lu tio n away
from th e id e a ls of economic in d iv id u a lism w hich, in Germany,
le d to the r i s e o f fa s c is m .2* ^ He see s in th e demands fo r
p ric e c o n tr o l, r a tio n in g , and o th e r governm ental i n t e r
fe re n c e s more th a n a s u p e r f ic ia l s im ila r ity between E n g lis h ,
27. H rie d ric h von Hayek, Road to Serfdom (C hicago:
Chicago U n iv e rsity P r e s s , 1944)*
224
A m erican, and p r e - H itle r German th o u g h t. For Hayek, fa sc ism
lik e so c ia lis m i s a form of c o lle c tiv is m .
P ro fe sso r John Jew kes, w r itin g in 1948, echoes Hayek
in h is commentary on the E n g lish Labor Government e x p e ri
ment :
E v ery th in g t h a t I have to say h e r e , and indeed much
more i s to be found in P ro fe s so r Hayek*s m a ste rly Road
to Serfdom . Every p la n n e r who b e lie v e s in re a so n as the
guide in s o c ia l o rg a n iz a tio n , should read and re -re a d
th a t book now and h o n e s tly ask h im se lf w hether ev en ts
are or are n o t fo llo w in g th e course a g a in s t which P ro
fe s s o r Hayek warned us th re e y e a rs a g o .2®
w
O ther econom ists are le s s concerned w ith th e d r i f t
w hich Hayek and Jewkes f e a r ; in d eed , some welcome, b u t would
d ir e c t i t (a f a c t o f much im portance f o r th e P sy c h o lo g ic a l-
I n s t i t u t i o n a l th e o ry ) . For exam ple, J . M. C la rk , fo llo w in g
up h is A lte rn a tiv e to S e rf dean w ith a new book, Guide p o sts
in Time o f Change, ask s w hether we r e a l l y want to go b ack to
sm a ll-s c a le e n te r p r is e , to a u n io n le ss la b o r m arket, e t c . ,
and to re fu s e to a c c e p t s o c ia l e v o lu tio n * And what does
a c c e p tin g e v o lu tio n —a s i t i s d ev elo p in g to d ay —e x a c tly
mean?
I t means (w rite s C lark) a "mixed sy stem ," w ith a
g rad u al change in th e p ro p o rtio n s o f the m ix tu re , u n t i l
—i f p riv a te e n te r p r is e i s to give way to c o lle c tiv is m —
th e p u b lic s e c to r m ight be in a p o s itio n to ta k e over
2$. John Jew kes, O rdeal by P lan n in g (London: M acm illan
C o., 1948) p . i x .
225
the m ajor economic fu n c tio n s w ith o u t s h o c k .
But i f t h i s change i s not to shock C la rk , i t must
come (and w i ll come) in the d is ta n t f u tu r e , and w i ll depend
upon the " s t r a te g ic d e c is io n ” o f the p e o p le . T his popular
" s t r a t e g i c d e c is io n " w ill occur only i f job o p p o rtu n itie s
a v a ila b le in th e meantime under c a p ita lis m f a i l to s a ti s f y
th e p eo p le. Hence, the more in te r v e n tio n to p ro v id e jo b s,
th e f a r th e r th e day o f th e advent of s o c ia lis m . This
amounts to th e g ra d u a l tra n sfo rm a tio n o f the system , however,
and to th e e u th a n a sia o f c a p i t a l i s t id e a s .
M oreover, according to D r. P h e lp s, the p ro v isio n o f
jo b o p p o rtu n itie s w il l n o t so lv e th e problem which (unrecog
n ized by most " li b e r a ls " ) has s h if te d from needs to g re e d s .
The sim ple f a c t today i s , a s P ro fe sso r C alv in Hoover has
p o in ted o u t, t h a t th e t o t a l demands of our p re s s u re groups
are g re a te r th a n can be s a t i s f i e d by a fu ll-em ploym ent
economy.
A ttitu d e s o f b u s in e ss men, b u sin e ss men today are a s
u n w illin g as church men and most econom ists to a c c e p t the
old c a p i t a l i s t t e n e t s . G e n e ra lly , th e y are w illin g to f ig h t
only to p r o te c t t h e i r own p a r tic u la r b u sin e sse s from the
29"! John M. C lark , Guide p o sts in Time of Change
(New York: H arper B ro s ., 1949) p . 64.
226
in ro a d s of n a tio n a liz a tio n , s o c ia liz a tio n , or r e g u la tio n ,
ac co rd in g to Dr* P helps*
The modern b u sin e ss man has n e ith e r th e tim e , th e
money, n o r th e in c lin a tio n to f ig h t a g a in s t th e e x te n sio n
o f governm ental r e g u la tio n and s o c ia liz a tio n in o th e r lin e s
n o t d ir e c tl y connected w ith h i s own b u s in e s s . As a m a tte r —
of f a c t , he i s ev er w illin g to s a c r if ic e th e o th er fe llo w ,
an o th er l in e o f b u s in e s s , to the b u re a u c ra tic w olves, hoping
th e re b y t o s a t i s f y th e pack*s g reedy hunger fo r r e g u la tio n
and c o n tro l, and to keep the pack o f f h im se lf.
In d eed , businessm en today a re more and more ready to
promote s o c ia liz a tio n and r e g u la tio n , by s te p s , in f i e l d s
where i t w i l l r e s u l t in adv an tag es to t h e i r own s e l f i s h
i n t e r e s t s , ^hey w ant low er f r e i g h t r a t e s , low er e l e c t r i c
power r a t e s , lower w ater r a t e s , and so on and so f o r t h ,
f o r th e m se lv e s. A ll th e evidence c ite d by Seba E ld rid g e
and h i s Lawrence group p ro v id e s us h e re , ex c ep t th a t w here
a s E ld rid g e * s th e o ry i s based on th e n o tio n o f consumers*
n ee d s, D r. Phelps* th e o ry i s based on g re e d s, a more r e a l
i s t i c concept in view o f developne n ts sin c e th e E ld rid g e
stu d y , acco rd in g to D r. P h e lp s.
In f a c t , th e re has been a s h i f t in the b a s is o f
government in te rv e n tio n from needs to g re e d s , a s h i f t in
a c tu a l h i s t o r i c a l developm ent from needs to g re e d s. The.
q u e stio n is w hether i t i s a c tu a l needs , (and some needs fo r
227
which p eo p le a re w illin g to pay fo r can be s a t i s f i e d b e tte r
by c o lle c tiv e e n te r p r is e ) or r a th e r g re ed s ( s a tis f y in g needs
by g e ttin g som ething fo r n o th in g —or a t th e expense o f one’ s
n eig h b o rs) which e x p la in th e p re se n t c o l l e c t i v i s t tren d *
C e rta in ly , D r. P h elp s a s s e r t s , g reed s p lu s needs are n e c e ss
a ry t o a com plete e x p la n a tio n —needs would e x p la in only a
sm a lle r degree o f t h i s tre n d tow ard c o lle c tiv iz a tio n * Most
s t a te and n a tio n a l program s a re packed w ith numerous examples
o f g re ed s superim posed on n eed s.
T h eo ries w hich claim th a t the cause o f c o l le c t iv i z a
t i o n i s sim ply consumer o r p u b lic ’’i n t e r e s t s ” are to o sim ple
fo r D r. P h e lp s , ^he use o f th e word ’’i n t e r e s t s ” a p p a re n tly
im p lie s t h a t consumer o r p u b lic p re s s u re s a re to be i n t e r
p re te d a s la u d a b le alw ays, w hereas th ey may mask d e s ire s to
e x p lo it o th ers* I t i s n o t only in the " i n t e r e s t s ” of a
person or group to a t t a i n i t s "needs” b u t to g e t a s u rp lu s ,
to o , i f p o s s ib le ; and here " i n t e r e s t s ” and "needs" ta k e on
th e meaning o f g re e d , e x p lo ita tio n , rofebery, a n d /o r p lu n d e r.
When b u sin e ss men want cheaper f r e i g h t r a t e s , low er
e l e c t r i c power r a t e s , low er r a t e s on w ater; cheaper s t e e l ,
cheaper c o a l, cheaper m a te ria ls ; and when th e y are v i l l i n g
to l e t th e s e s u p p lie rs be re g u la te d , n a tio n a liz e d , or so
c ia liz e d in o rd er t o a t t a i n cheaper s u p p lie s or co m p etitiv e
advantage— t h i s i s n o t sim ply a m a tte r of " i n t e r e s t s ." I t
i s "ro b b ery " and "p lu n d er" o f th e o th e r fe llo w o u t o f (n o t
228
e n lig h te n e d s e l f - i n t e r e s t ) b u t sh eer g re ed . While t h i s p lu n
der of p riv a te a re a s by government i s going on, b u sin e ss men
may g iv e much li p - s e r v ic e to denouncing " so c ia lism ” in gen
e r a l , but those not a ffe c te d by th e p re d a to ry government
w ill o f f e r no r e a l r e s is ta n c e f D r. P h elp s a s s e r t s .
P u b lic o p in io n in t r a n s i t i o n . The e x te n t o f the
growing p u b lic h o s t i l i t y to b u sin e ss i n t e r e s t s , the p u b lic
clamor fo r s o c ia liz a tio n of and re g u la tio n o f c e r ta in th in g s ,
i s to d ay cap ab le of some m easurem ent a s a r e s u l t o f p u b lic
opinion p o l ls .
The evidence g a th e re d by th e s e p o lls in d ic a te s th e
growing h o s t i l i t y o f the p u b lic tow ards th o se s o c ia l v a lu e s
on which c a p ita lis m depends. For exam ple, th e p o lls in d i
c a te how th e p u b lic ’ s a t t i tu d e has changed tow ard funda
m en tals o f c a p ita lis m such a s o th e r p e o p le ’ s p ro p e rty , in d
iv id u a l i n i t i a t i v e (han d o u ts, e t c .) , th e t h r o t t l i n g o f com
p e t i t i o n , the p ro g re s s iv e income ta x , who (governm ent or
p riv a te in d u s try ) should be re sp o n s ib le fo r p u llin g th e
co u n try out o f b u sin e ss d e p re ssio n s o r so lv in g such b a sic
economic problem s as the unemployment problem .
One of th e most illu m in a tin g o f such p u b lic o p in io n
p o lls has been conducted' by Elmo Roper fo r For tune M agazine.
In 1940 and a g a in in 1947, F o rtu n e c a rrie d what i t c a lle d
"A s e l f - P o r t r a i t of th e American P e o p le ." T his f e a tu r e com-
229
p ared th e s h i f t of o p in io n among Americans w ith re g a rd to
fundam ental c a p i t a l i s t id e a ls durin g t h a t p e rio d o f tim e .
Most s t a r t l i n g , p e rh a p s, i s th e f a c t th a t in l i g h t
of the a t t i t u d e s expressed by Am ericans toward s p e c if ic
p o li c ie s , th ey s t i l l claim to su p p o rt c a p ita lis m . The
c o n tra s t i s s ta te d by F o rtu n e :
Ig n o rin g th e f a c t t h a t many n a tio n s of th e w orld seem
to be tu rn in g t h e i r backs on th e c a p i t a l i s t system , t.the'
American o f 1947—lik e the American o f 1940— a ffirm s
th a t he is an economic i n d i v i d u a l . . , .
(However) th e 1947 p o r t r a i t shows t h a t the tren d to
ward m inim izing in d iv id u a l f in a n c ia l r i s k and tow ard
the b e l ie f th a t th e government should assume re s p o n s i
b i l i t y fo r i t s c it iz e n s in tim e o f need is found among
a l l c la s s e s of s o c ie ty . And oddly enough, th e g r e a t e s t
per centagew ise change i n th e s e a tt i tu d e s i s shown by
th e p ro sp ero u s.™
The survey re v e a le d th a t f o r ty - e ig h t p e r ce n t of the
Am erican people b eliev e th a t more people should be covered
by S o c ia l S e c u r ity . "A m ericans o f every c la s s have came to
b e lie v e t h a t i t i s the d uty o f th e government to p rovide
s e c u r ity fo r i t s p e o p le .**31
M oreover, seventy per ce n t b e lie v e (in c o n tra s t w ith
th e e a r ly churchmen) in a minimum wage. B e lie v e rs in a
30* F ortune M agazine. March 1947* P* 5.
31. I b id . , 5.
230
minimum, wage in e lu d e s ix ty - f iv e per cen t o f the R ep u b lican s.
D esp ite th e high ta x r a te s in h e r ite d from th e w ar, f o r ty -
fiv e per c e n t o f the people would have reduced income ta x e s
only a very l i t t l e , tw e n ty -six per cen t would have l e f t
the r a t e s a lo n e , and one stu b b o rn per cent were fo r r a is in g
them .
V. S U M M A R Y A N D EVALUATION
Thus th e mass o f men no lo n g e r have th e k ind of m orals
re q u ire d to m a in ta in a c a p i t a l i s t sy stem . They need a s tro n g
r e lig io n or m oral code i f th ey w ish to keep a fre e e n te r
p r is e system . W ithout r e s tr a in in g m orals or r e li g io n , men
a re to o greedy and f u l l o f envy to p la y th e game a c c o rd in g
to the n ec essary r u le s . Today, th e re i s alw ays to o much
to be gained by b reak in g the r u l e s , l i t t l e i f an y th in g to
lo se i f men or groups do v io la te the m oral and e th ic a l
codes n e c e ssa ry to m ain tain c a p ita lis m .
T his requirem ent o f a s tro n g r e lig io u s or m oral code
fo r th e p re s e rv a tio n of c a p ita lis m a p p lie s p a r tic u la r ly to
th e mass o f the v o te r s . I t may be arg u ed , f o r exam ple,
th a t businessm en have become more m oral and e th ic a l sin ce
th e days o f th e robber b a ro n s. With the passage o f tim e ,
i t m ight be arg u ed , th ey have becane more imbued w ith the
id e a o f a s o c ia l r e s p o n s ib ility .
Or i t may, on th e c o n tra ry , be argued th a t b u sin ess
231
men were never m oral and e t h i c a l i n th e i r b u sin e ss l i v e and'
a c t i v i t i e s , and th a t w ith th e grow th and developm ent of
c a p ita lis m , b u sin e ss e n te r p r is e s became more and more a c q u i
s i t i v e and u n e th ic a l i n th e ir o p e ra tio n s .
But e ith e r o f th e se argum ents would be b esid e th e
p o in t becau se, r e g a rd le s s o f how the c a se may be or may have
been w ith landow ners, c a p i t a l i s t s , and e n tre p re n e u rs ,
what m a tte rs i s the r e lig io u s and m oral codes of th e v o tin g
m asses. For exam ple, even when b u sin ess le a d e rs were " s in
n e r s ,” r e lig io n serv ed a s the "opiatd* o f th e p e o p le , and
today even i f th e le a d e rs are " s a in t s ," th e r e lig io u s or
m oral code h eld by the v o tin g m asses i s th e d eterm in in g
f a c to r , according to Dr* P helps*
The s ig n if ic a n t developm ent, th e r e f o r e , i s t h a t th e
mass o f th e v o te rs have begun to shake o ff th e m oral and
e t h i c a l t r a d i t i o n s , n e c e ssa ry fo r th e fu n c tio n in g o f cap
i ta l is m , and t h a t in c re a s in g ly b u s in e s s men, fa rm e rs, and
w ork ers, tu rn to monopoly and r e s tr ic tio n is m .
The freedom in c a p ita lis m , the la c k o f r e s t r a i n t on
th e in d iv id u a l in re g a rd to the p u r s u it and a c q u is itio n o f
w e a lth , re q u ir e s an in n e r sense o f r e s p o n s ib ility t h a t in
th e p a s t was provided by r e lig io u s and e t h i c a l te a c h in g s .
When t h i s sense o f in d iv id u a l r e s p o n s ib ility break s down in
any s o c ie ty , then r e s p o n s ib ility must be enfo rced by the
S t a t e . For exam ple, i f unions do n o t fo llo w a "re sp o n -
232
s ib le wag© p o lic y ,” th e n th e s ta te i s in e v ita b ly le d t o en
croach upon th e freedom of unions and f i x wages i t s e l f .
The p o l i t i c i a n s a re to o d ish o n e st or too weak to
c a rry out a p o lic y which would save th e c a p i t a l i s t system .
They a re in th e c o n tro l o f s e l f - i n t e r e s t g ro u p s. They do -
n o t re p re s e n t the people a s a w hole, or th e i n t e r e s t s of th e
economy as a w hole; in s te a d , th ey re p re s e n t a d i s t r i c t , or
a group, w hich helped e l e c t them , ^hey a re ”b u tte r men"
o r ”o leo m en," " s ilv e r men" or "union men," and th e country
be damned. S tu a r t Chase*s in v e s tig a tio n o f democracy
"under p re ssu re " i l l u s t r a t e s th e grow th o f p re ssu re group
c o n tr o l.
There a re la b o r r e p r e s e n ta tiv e s , farm, r e p r e s e n ta tiv e s ,
ea sy money and hard money r e p r e s e n ta tiv e s , c o rp o ra tio n men,
r e a l e s ta te men, in s h o rt s p e c ia l i n t e r e s t men e le c te d to
congress by t h e i r own c liq u e s o r d i s t r i c t s . And th o se who
a re n e u tr a l are preyed upon by th e lo b b ie s . S p e c ia l
i n t e r e s t s , under th e d riv e s o f greed and envy, are ta k in g
over th e governm ent. "11 t h i s c r e a te s a p o l i t i c a l , s o c ia l,
and economic atm osphere which p re v e n ts the o rd e rly w orking
o f th e c a p i t a l i s t system .
B ertrand de Jo u v en e l, in a new book review ed by the
Ju n e, 1949, Economic C ouncil Review o f Books. h a s t h i s to
32, P ublished m onthly by N a tio n a l Economic C o u n cil,
I n c ., T Jtica, New York.
233
say:
" I f , th e r e f o r e , s e c tio n a l i n t e r e s t s know how to o r
gan ize them selves and can but a c q u ire th e a r t o f c r e a tin g
movements o f o p in io n , they can en slav e Power, th ey can
degrade i t , th e y can even se iz e i t , to use i t to t h e i r
own advantage and b e n e fit them selves a t the expense
o f o th e r groups o r o f s o c ie ty as a whole*
"They make the p a r tic ip a n ts i n Power th e ir s la v e s
when th e y e x a c t ffeom them , a t e le c tio n tim e s , p re c is e
p led g es in fa v o u r o f p a r tic u la r groups; th ey degrade
Power when th e y fo rc e i t to r e t r e a t b efo re a we11- o r
c h e s tra te d p re s s campaign; l a s t l y , th e y se iz e i t when th e y
sweep a p a rty in to power which i s th e e x p re ssio n and
in stru m en t of t h e i r p a r tic u la r n eed s.
" In o th e r w ords, p a r tic u la r i n t e r e s t s , h aving been
d ep riv ed o f a l l means o f d efen ce, have been d riv en to
an o ffe n siv e a c t i v i t y w hich r e s u l t s in t h e i r o p p re ssio n
o f o th e r i n t e r e s t s ; th e s e in t h e i r tu r n a re th ere b y
stim u la te d to s to p , push, o r conquer Power by s im ila r
m ethods. A u th o rity then becomes n o th in g b e t t e r th a n
a s ta k e , and lo s e s a l l s t a b i l i t y and r e s p e c t. The
c h a ra c te rs o f th o se who e x e rc is e i t become in c re a s in g ly
debased, u n t i l in th e end th e P alace o f Command g e ts a
te n a n t who d ec id e s n o t to l e t h im se lf be d riv en out:
the t y r a n t . "32
P ille d w ith envy, th e p u b lic e x p re sse s i t s h o s t i l i t y
to the b u sin e ss community, o r v a rio u s s e c tio n s o f the bus
in e s s community in a v a r ie ty o f ways*
The p u b lic may want excess p r o f i t s ta x e s , governm ent
a l r e g u la tio n or c o n tro l of c e r ta in in d u s tr ie s or l i n e s o f
b u sin e ss; or i t may want anti-m onopoly d riv e s which are
more " a n ti-b u s in e s s " th an t r u l y anti-m onopoly in c h a ra c te r .
33. Quoted from Jo u v en e l, Gn Power (New York: V iking
P re s s , 1949)•
234
Tiie p u b lic may want to ta x one group to b rin g i t to h e e l,
re g u la te an o th er fo r the greedy advantage of y e t a n o th e r.
Of co u rse, some want com plete s o c ia liz a tio n o u t o f h o s t i l i t y
to th e b u sin e ss community, perhaps because th e y are not
s a t i s f i e d w ith t h e i r own sh a re of th e n a tio n a l d iv id e n d .
Out o f greed (n o t r e a l l y out o f mere need alo n e) the
p u b lic w ants r e n t c o n tro ls and p r ic e c o n tro ls , government
s u b s id ie s , p en sio n s, unemployment com pensation, r e l i e f bene
f i t s , t a r i f f s , e t c . I t w ants a low r a t e o f i n t e r e s t and easy
money, governm ental s u b s id iz a tio n o f a g r ic u ltu r e , in d u s try ,
and s e r v ic e s , and so f o r t h . ’’D ebauching th e cu rren cy ” i s
a fa m ilia r weapon advocated by s o c i a l i s t s and communists as
a method o f h am strin g in g and d is r u p tin g th e economy. Such
p re s s u re s lead to continuous i n f l a t i o n and c o n fisc a to ry
ta x a tio n , two o u tsta n d in g weapons fo r the d e s tru c tio n of the
c a p i t a l i s t system , acco rd in g to D r. Phelps* th e o ry .
A ll t h i s le a d s to th e e v e n tu a l im p o s s ib ility of th e
w orking o f c a p ita lis m and to i t s ev e n tu a l p assin g in to some
one ty |ie o r an o th er of c o lle c tiv is m , a s a r e s u l t fundamen
t a l l y o f sim ple g re e d , envy, and w ill-to -p o w e r, im p ro p erly
c o n tro lle d .
T h is th e o ry th e n , i s in sh arp c o n tra s t to th e th eo ry
o f a mature economy. C a p ita lism can p ass even w ith o u t
fo rc e s in i t le a d in g to economic m a tu rity and s ta g n a tio n .
I t can f a i l because o f b a s ic human d r iv e s . Nor i s th ere any
235
need fo r the e la b o ra tio n o f a “success theory** such a s
Schum peter d eveloped. Of co u rse, the fo rc e s a t work in th is
th e o ry have no r e la tio n w hatever w ith M arxian f a c t o r s . I t
i s a com plete th e o ry in i t s e l f and e x p la in s th e phenomena
a d e q u a te ly , D r. P helps claim s, In a more elem en tal way.
CHAPTER V II
W O R L D IN TRANSITION
W ill th e c a p i t a l i s t system d e c lin e and pass? The
answer i s e m p h a tic a lly in th e a ffirm a tiv e * S o c ia l re v o lu tio n
a lre a d y has en g u lfed th e w o rld , which i s in f u l l t r a n s i t i o n
from c a p ita lis m to some new type o f s o c ia l o rd e r. In f a c t ,
th e t r a n s i t i o n a lre a d y h as been com pleted in v a s t a re a s of
Europe and A sia , where c a p ita lis m (and th e s o -c a lle d c a p i
t a l i s t w orld im p e r ia lis t system ) i s r a p id ly d is in te g r a tin g ,
d e c lin in g , and passing*
T his t r a n s i t i o n must be e x p la in e d . The th e o rie s
review ed in th e p re ced in g c h a p te rs have been developed as
e x p la n a tio n s o f th e w orld-w ide phenomena o f c a p i t a l i s t
d e c lin e . The most im p o rtan t o f th e th e o r ie s o ffe re d in
e x p la n a tio n o f th e d e c lin e and p a ssin g of c a p ita lis m have
been p re se n te d here as (1) th e M arxian and neo-M arxian
th e o r ie s ; (2) th e g ra d u a lis t s o c i a l i s t and n o n - s o c ia lis t
th e o rie s o f T h o rste in V eblen, lames Burnham, Seba E ld rid g e
and h is Lawrence group, and th e F ab ia n s; (3) th e sta g n a
t i o n i s t th e o ry o f th e Keynes-Hansen sch o o l and i t s c r itic is m
(4) th e S uccess t h e s i s o f Joseph Schum peter, and (5) the
P s y c h o lo g ic a l- I n s titu tio n a l th eo ry o f Dr* C. W. P h e lp s.
The q u e stio n a r is e s as to w hich o f th e se th e o r ie s
has th e b e s t claim to v a i l i d i t y , i . e . . which o f f e r s th e
237
most a c c e p ta b le e x p la n a tio n o f the f a c to r s involved in th e
d e c lin e and p a ssin g o f c a p ita lis m .
Some th e o r ie s , fo r example th e M arxian and Fabian
p ro g n o s tic a tio n s , may have ( l e t i t be supposed) th e le a s t
claim to v a l i d i ty (alth o u g h i t i s our view t h a t th ese two
th e o r ie s have the most claim to v a l i d i t y ) . Y et, assuming
th e y have l i t t l e c o r re c tn e s s , th e y maybe so i n f l u e n t i a l
among th e m asses as to serv e a s th e n e c e ssa ry id e o lo g ic a l
and o rg an izin g fo rc e s e f f e c tiv e enough to b rin g about the
a c tu a l d e c lin e and p assin g of c a p ita lis m . In flu e n c e a s w e ll
as v a l i d i t y i s a m ajor f a c to r in any e v a lu a tio n o f a p a r t i
c u la r th e o ry of c a p i t a l i s t developm ent.
C ritic is m s o f th e s e th e o r ie s o f c a p i t a l i s t d e c lin e
a ls o m ust be tak en in to account b efo re any f i n a l judgments
a re passed as to vahich th eo ry i s th e most v a li d , th e most
r e a l i s t i c , o r th e b e s t e x p la n a tio n o f the fo rc e s in v o lv ed .
Of c o u rse , n o t one o f th e th e o rie s review ed i s a
com plete e x p la n a tio n o f a l l the fo rc e s involved in the
d e c lin e and p a ssin g o f c a p ita lis m . However, each makes
v a lu a b le c o n trib u tio n s to an u n d erstan d in g o f the t o t a l
problem . Each d ev elo p s one s id e , one group o f f a c t o r s ,
one a sp e c t of th e problem o f c a p i t a l i s t d e c lin e . And i f
u n d ersta n d in g of a l l the f a c to r s involved in th e d e c lin e
and p a ssin g o f c a p ita lis m i s th e g o a l, a l l th e o r ie s m ust be
accepted as m aking, in t h e i r own r ig h t and a lo n g w ith t h e i r
238
e r r o r s , v a lu a b le c o n trib u tio n s to th e o v e r a ll view .
I . CAPITALISM IS PASSING
The world c a p i t a l i s t s y s te m --lik e th e evening sun
dropping below th e h o riz o n — i s d isa p p e a rin g from th e s ta g e
o f h is to r y , i t s s h o rt epoch a l l but gone. Because t h i s
p assin g i s a lre a d y w e ll under way, th e th e o r ie s review ed in
the p re c e d in g pages a re o f moment and im portance. This
se c tio n w i l l be devoted to a b r ie f survey o f th e world in
t r a n s i t i o n .
The t r a n s i t i o n i s most* a p p a re n t when view ing c a p ita lis m
as a w orld-system . One need m ention only S oviet R u ssia and
E ngland, th e two g re a t w orld c e n te rs o f a l t e r n a ti v e sy stem s,
from which a n t i - c a p i t a l i s t power is sp re a d in g out in a l l
d ir e c tio n s .
The most commanding c e n te r, from th e s ta n d p o in t of
a n t i - c a p i t a l i s t pow er, i s th e S o v iet Union. I t i s sp re a d in g
i t s power out in a l l d ir e c tio n s , w iping o u t c a p ita lis m (and
c a p i t a l i s t im p erialism ) in th e B a ltic s , th e B alkans, and in
th e F ar E a s t. Note th e number of fo rm e rly c a p i t a l i s t coun
t r i e s —and c a p i t a l i s t - i m p e r i a l i s t a re a s —w hich, sin c e th e
end o f World 7/ar I I , have passed o u t o f th e c a p i t a l i s t
aren a due to S o v ie t power. Examples a re Y ugoslavia, Rou-
m ania, Hungary, C zechoslovakia, and P oland, n o t to m ention
M anchuria and C hina, and a h o st o f o th er a r e a s .
239
To say th a t the S o v iet Union and her grow ing number
of s a t e l l i t e s a re a n t i - c a p i t a l i s t ( t h a t i s to say, t h a t
c a p ita lis m i s p a ss in g in th o se a re a s under S o v ie t domina
tio n ) i s not to maJce a judgment t h a t s o c ia lis m has a r r iv e d ,
o f c o u rse . There i s v io le n t disagreem ent a s to w hether th e
S o v iet Union i s a s o c i a l i s t c o u n try , or a new form b e s t
d e s c rib e d , p e rh a p s, as Red E ascism .
I t i s s u f f i c ie n t here to n o te th a t c a p ita lis m i s
p a ssin g in th o se a re a s which have come under S o v iet domina
tio n ; th e ow nership and c o n tro l of the re so u rc e s and i n s t r u
ments o f p ro d u c tio n are p a ssin g (o r have passed) out o f the
hands o f p riv a te c a p i t a l i s t s and in to the hands of c o lle c tiv e
and sta g e a g e n c ie s.
An a lte r n a tiv e system to S o v ie t t o t a l i t a r i a n i s m i s
th e dem ocratic so c ia lis m d ev elo p in g in E ngland. In England
c a p ita lis m i s p a ssin g in a way d i f f e r e n t th an i t passed
in R u ssia , or i s p a ssin g in th e S o v ie t s a t e l l i t e s , and
under d i f f e r e n t c o n d itio n s . England i s not th e o n ly coun
t r y ex p erim en tin g in dem ocratic s o c ia lis m as an a lt e r n a tiv e
to b o th c a p ita lis m and communism. But England h as become
th e w o rld c e n te r of t h i s a lte r n a tiv e way to the d e c lin e and
p a ssin g o f c a p ita lis m . As E ra n c is W illiam s w r ite s :
S o c i a li s t p o li c i e s , i t i s t r u e , have been follow ed
and are s t i l l being follow ed by Labour governm ents in
some o th e r c o u n trie s : in A u s tra lia and New Zealand and
in th e S candinavian c o u n trie s , fo r exam ple. But th ese
240
a re c o u n trie s of sm all p o p u la tio n s . There experim ents
a re on a la b o ra to ry s c a le . They a re v alu ab le and i n t e r
e s tin g to w atch, but because of th e ir sm all s iz e and
s p e c ia l circu m stan ces th e y do n o t and cannot have the
world s ig n ific a n c e th a t the B r i tis h experim ent h a s.
Ihe s ta k e s a re not h ig h enough. But in B r ita in th ey
a re as h igh a s th e y could co n ceiv ab ly b e . I f the
experim ent su cceed s, th e rew ards w ill be enormous in
te r n s of human w e ll-b e in g and n a tio n a l power. I f i t
f a i l s , the consequences may be m e a s u re le s s .I
S o cialism in B r ita in i s b ein g tr ie d ( t h a t i s to say ,
c a p ita lis m i s p assin g ) in an in d u s tr i a lly advanced co u n try
" in which every s k i l l o f fin a n c e , o f commerce, and o f manu
f a c tu r e open to th e c a p i t a l i s t has been f r e e ly employed fo r
g e n e ra tio n s * " 2 M oreover, th e liv in g stan d ard s in B r ita in
are among th e h ig h e st in th e w orld; p o l i t i c a l dem ocracy,
d e s p ite an alm ost incom prehensible c la s s s tr u c tu r e , h as been
ch e rish ed and developed; and p e rso n a l l i b e r t y and r i g h t s of
th e in d iv id u a l a g a in s t th e s ta te have been c o n s ta n tly de
fended and extended.
Of c o u rse , in both B r ita in and R ussia the o f f i c i a l
p o lic ie s o f th e governm ents are. openly designed to f a c i l i
t a t e the p assin g o f c a p ita lis m and to ex ten d the a r e a s of
s o c ia lis m . But th e se governm ents m erely p ro v id e the ( a l t e r
n a te ) form s through which fundam ental s o c ia l re v o lu tio n
1 . P ra n c is W illiam s, S o c ia lis t B r ita in (New York:
The V iking P re s s , 1949), p . 7*
2 * I b id ., p . 7 .
241
i s proeeding to e lim in a te c a p ita lis m . Taking the case o f
B r ita in , W illiam s w r ite s :
To u n d erstan d th e c h a ra c te r o f the B r itis h re v o lu tio n
one must understand not o nly i t s le a d e rs b u t th e fo rc e s
from which th ey draw t h e i r p o l i t i c a l s tr e n g th , th e back
ground and t r a d i t i o n th a t have shaped th e ir a t t i tu d e s ,
th e mood and c h a ra c te r of the people th ey le a d , and th e
p o l i t i c a l and economic circu m stan ces to which th ey must
a d ju s t them selves and w hich d efin e th e area w ith in which
th ey must o p e ra te . I t i s n o t, I th in k , tr u e t h a t , a s
E ngels s t a t e s , " in e v e ry h i s t o r i c a l epoch th e p re v a ilin g
mode o f economic p ro d u c tio n and exchange and th e s o c ia l
o rg a n iz a tio n n e c e s s a r ily fo llo w in g from i t form the
b a s is from w hich i s b u i l t up and from which alone can be
ex p lain ed th e p o l i t i c a l and i n t e l l e c t u a l h is to r y of th a t
ep o ch ." N e v e rth e le s s , i t i s c e r ta in ly th e case th a t
a l l p o l i t i c a l p o lic y has to ta k e economic f a c to r s in to
a c c o u n t. I t i s co n tin u o u sly shaped by them .
T his i s tr u e o f th e B r itis h s o c i a l i s t ex p erim en t.
I t s p a tte r n has been and w ill co n tin u e to be d eterm in ed
la r g e ly by economic c o n d itio n s . M oreover, i t i s tru e
i n th e s t i l l more fundam ental sense th a t th e re v o lu tio n
th ro u g h which B r ita in i s now p a ssin g , and which i s
much wider even than the s o c i a l i s t ex p erim en t, was p ro
duced by an economic and s o c ia l s it u a tio n which made
fa r-re a c h in g ad ju stm en t and w ide-ranging experim ent a l -
ism in e v ita b le . Mr. A tlee and h is co lle a g u e s a re th e
a d m in is tra to rs o f a re v o lu tio n , not i t s c r e a to r s .
So much i s t h i s th e case th a t I b e lie v e i t to be tru e
th a t even i f they w ere to lo s e power th e p a tte r n o f
change would p e r s i s t , alth o u g h i t s tempo m ight a l t e r .
For th e change has n o t been imposed upon th e B r itis h
people by th e Labour p a r ty , i t has been imposed upon
them by circ u m stan c es, a f a c t t a c i t l y recognized in
p a r t even by th e C onservative p a rty in i t s I n d u s tr ia l
C h arter of 1947.3
In c o u n trie s o u tsid e th e se two world c e n te rs o f a n t i -
IF l Ibid.. p. 8-9.
242
c a p i t a l i s t power ( th a t i s , o u ts id e th e S o v iet and B r itis h
o r b i t s ) , where th e governm ents i n power are devoted to th e
p rin c ip le s o f c a p ita lis m , a s tro n g case can be made fo r
th e o b lite r a tio n o f c a p ita lis m w ith in , sa y , th e n ex t 10 y e a rs .
C oncessions a re b ein g made to a growing popular h o s t i l i t y to
th e t r a d i t i o n a l c a p i t a l i s t m ethods of s o lv in g th e problem s
and d i f f i c u l t i e s o f c a p ita lis m . New ways are being sought
to d e a l w ith such problem s a s b u sin e ss c y c le s , unemploy
m ent, and economic s ta g n a tio n , fo r exam ple. A reas of p u b lic
i n i t i a t i v e and economic d e c is io n a re being expanded. 1’ c rc e s
a re developing w ith th e open in te n tio n of e lim in a tin g
c a p ita lis m , and so o n . . . .
T his i s th e world in t r a n s i t i o n which th e varL ous
th e o rie s of c a p i t a l i s t d e c lin e review ed in the p reced in g
c h a p te rs a tte m p t to e x p la in .
I I THE VEHICLES O F CAPITALIST DECLINE
Do the th e o r ie s of c a p i t a l i s t d e c lin e f i t th e f a c ts
of th e world in t r a n s i t i o n ?
V arious v e h ic le s o f d e c lin e . Each th e o ry o f d e c lin e
claim s to p ro v id e th e b e st e x p la n a tio n o f c a p ita lis m ’ s d em ise.
Each claim s t h a t one s o c ia l c la s s or f a c to r i s the c h ie f
v e h ic le o f c a p i t a l i s t d e c lin e and p a s s in g . These " s o c ia l
iz in g fo rc e s ” or " d riv in g fo rc e s ” o f s o c ia l tra n s fo rm a tio n ,
can be l i s t e d fo r eommon-sense e v a lu a tio n and com parison.
243
For K arl Marx, th e p r o l e t a r ia t i s th e o nly re v o lu tio n
a ry c la s s —i t alo n e is th e s o c ia liz in g fo r c e , th e "o n ly
fo rc e " capable o f overthrow ing th e dominance of c a p ita l*
F or S t a lin , the c h ie f fo rc e to d ay in th e p iece -m eal
p a ssin g o f c a p ita lis m i s (not th e p r o l e t a r i a t , c a rry in g out
a s tru g g le a g a in st i t s " o n n a tio n a l b o u rg e o isie " b u t) the
S o v ie t S ta te .
For Thor s t e i n V eblen, th e te c h n ic ia n i s th e o nly
fo rc e capable o f e n g in e e rin g the new o rd e r.
For Burnham, th e wave of th e fu tu re i s being guided
by th e m an ag erial c la s s .
For the Lawrence group, th e "consum ers i n t e r e s t ”
i s th e s o c ia liz in g fo r c e .
For th e F a b ia n s, th e m iddle c la s s e s and th e s o c ia l
co n scio u sn ess a re appealed t o .
F or Joseph Schum peter, th e i n t e l l e c t u a l i s th e sub
v e rs iv e f a c to r s h ie f ly re sp o n sib le fo r prom oting th e p a s s
in g o f c a p ita lis m .
For D r. C. W. P h e lp s, b a s ic p sy c h o lo g ic a l d riv e s
ro o te d in human n a tu re and no lo n g e r c o n tro lle d by p re v io u s
ly p o te n t i n s t i t u t i o n s males c a p ita lis m more and more im
p o s s ib le , le a d in g in e v ita b ly to i t s p a s s in g .
The K eynesians, of co u rse, d e s ire to "save" c a p i t a l
ism , but th e ir p o lic ie s r e s u l t , acco rd in g to th e orthodox
l i b e r a l c r i t i c s o f K eynesianism , in "c reep in g s o c ia lis m ."
2 4 ^ -
F or th e orthodox l i b e r a l c r i t i c s , i t i s th e K eynesian i n t e l l
e c tu a l who f ig u r e s as the " s o c ia liz in g fa c to r* "
The above l i s t ex h au sts th e s o c ia liz in g fo rc e s r e
viewed in th e p reced in g p a g e s. The q u e stio n now a r i s e s as
to w hether any one of them i s adequate to e x p la in th e
d e c lin e and p a ssin g of c a p ita lis m , a s t h i s p ro c e ss i s a c tu a lly
going on today in th e w orld o f t r a n s i t i o n .
Summary. Some of the q u e stio n s a r is in g from the
above l i s t of " s o c ia liz in g fo rc e s " fo llo w .
Can any one o f th e fo rc e s l i s t e d above e x p la in f u l l y
the d e c lin e o f c a p ita lis m in a p a r tic u la r country? Can any
one f a c to r e x p la in th e p a ssin g of c a p ita lis m in th e world
as a vitiole, i . e . . as a "w o rld -sy stem ," r a th e r th an in a
p a r tic u la r country?
I s th e p r o l e t a r i a t p la y in g th e le a d in g ro le in th e
w orld to d a y , o r i s i t th e coasum er, th e S o v ie t S ta te , th e
te c h n ic ia n , th e i n t e l l e c t u a l , th e m anager, e t c . , in so f a r
as the d e c lin e and p assin g o f c a p ita lis m i s concerned?
Which th e o ry a p p lie s to New Z ealand, which to th e U nited
S ta te s , to P o lan d , to C hina, to E ngland, to L a tv ia ?
Which o f th e fo rc e s named above—the te c h n ic ia n ,
th e i n t e l l e c t u a l , e t c . —p la y s th e so le r o le in e x p la in in g
the d e c lin e o f c a p ita lism ? Or which f a c to r i s b asic to
th e o th e rs ? Which o f them are b e tte r s u ite d as supplem entary
f a c to rs ?
245
I I I . CRITICISMS O F TH E THEORIES
N ature o f c r i t i c i s m s . Eaoii of th e th e o r ie s review ed
in th e p receding c h a p te rs i s s u b je c t to thorough c r itic is m .
In d eed , a v a s t l i t e r a t u r e has grown up based on th e c r itic is m
o f most o f th e s e th e o r ie s , e s p e c ia lly th e c r itic is m o f th e
M arxian d o c tr in e s .
In th e p re ced in g c h a p te rs , only th o se c r i t i c a l
rem arks which could not be saved fo r t h i s s e c tio n w ere made
i n re fe re n c e to th e th e o rie s rev iew ed . An organized e v a l
u a tio n was p u rp o se fu lly delayed u n t i l a f te r a l l th e a l t e r
n a tiv e th e o r ie s were p re s e n te d . 2?his p rocedure was j u s t if ie d
by th e fundam ental n a tu re of the c r itic is m s o f th e v a rio u s
e x p la n a tio n s o f c a p i t a l i s t decom position.
B a s c ia lly , c r itic is m of th e th e o rie s o f c a p i t a l i s t
d e c lin e stem s from two s o u rc e s . A ll th e th e o r ie s are sub
je c t to c r itic is m from th o se t h e o r i s t s who b e lie v e in th e
th e o ry o f the permanence of c a p ita lis m . For exam ple, David
McG* W right opens h is essa y on the p ro sp e c ts fo r c a p i t a l i s t
permanence w ith the fo llo w in g q u o ta tio n from T. B. M acaulay:
"We cannot a b s o lu te ly prove t h a t th o se are in e r r o r
who t e l l us th a t s o c ie ty has reached a tu rn in g -p o in t,
th a t we have seen our b e s t d ays. But so sa id a l l who
came b efo re u s , and w ith ju s t as much ap p a ren t reason."**'
4 l Quoted in David McC. W right, "The P ro sp e c ts fo r
C a p italism ^ ” an essay in A Survey of Contemporary Econom ics,
Howard S . ^ l l i s , e d ito r ( P h i l .: The B la k isto n C o . , 1948), an
246
W right proceeds t o ex p ress h is e n th u s ia s tic b e li e f in
c a p ita lis m ’ s p ro s p e c ts , b u t adm its th a t c a p ita lis m ’s f u t u r e
depends on c e r ta in th in g s :
The q u e stio n o f the c a p i t a l i s t fu tu re seems th e re fo re
to r e s t upon acceptance of the fo llo w in g c o n c lu sio n s:
(1) W e must secure r e la tiv e s t a b i l i t y . (2) W e cannot
a t t a i n ccm plete s t a b i l i t y and keep a system which i s
e i t h e r te c h n o lo g ic a lly p ro g re ssiv e or p o l i t i c a l l y demo
c r a t i c . (3) W e must re co g n ize " s e c u r ity sa b o ta g e ,"
w hatever i t s l a b e l . (4) W e must allo w an adequate in
c e n tiv e to the e n tre p re n e u r. C a p ita lism can be s t a b i l
iz e d f a r beyond anyth in g th a t h as been done so f a r .
B ut, a s Lord B everidge amply d e m o n stra te s, we cannot
give n in e ty -se v e n per c e n t s e c u r ity and keep any gen
u in e approach to our p re se n t sy ste m .5
The second source o f c r iti c is m o f the th e o r ie s o f
c a p i t a l i s t d e c lin e i s found in the v ario u s a lte r n a tiv e th e
o rie s o f d e c lin e . Each th e o ry of d e c lin e im p lie s t h a t a l l
o f th e a lt e r n a ti v e e x p la n a tio n s a re wrong to some d e g re e .
Each claim s t h a t i t s own e x p la n a tio n i s c o r r e c t. The main
li n e s o f c r it ic is m fo llo w the c h ie f d iv is io n s o r sc h o o ls.
Those th e o r ie s of d e c lin e which can p r e d ic t only
dism al r e s u l ts fo llo w in g th e c o lla p s e of c a p ita lis m , c r i t i
c ise th e o th er th e o rie s fo r em phasizing th e e v i l s , c o n tra
d ic tio n s , and f a i l u r e s o f c a p ita lis m . According to both
American Economic A sso c ia tio n p u b lic a tio n , p . 449. Macaulay
i s quoted from h is "S outhey’ s C o llo q u ie s ," in h is M isc e lla n
eous Works (London, 1875).
5* I b id .. p . 471.
247
Schum peter and P h e lp s, fo r exam ple, c a p ita lis m i s not a f a i l
u re , but i s p assin g e ith e r because i t i s so su c c e ssfu l or
because men are n o t m oral and i n t e l l i g e n t enough to support
a p riv a te e n te r p r is e m arket economy. Thus, a l l th e o rie s
which se e c a p i t a l i s t d e c lin e r e s u ltin g from c a p i t a l i s t
f a ilu r e are f a lla c io u s th e o r ie s . N eedless to day, th e
re v e rs e a ls o hold t u r e , w ith th e a n t i - c a p i t a l i s t th e o r i s ts
c r i t i c i s i n g th e su ccess and P s y c h o lo g ic a l- I n s titu tio n a l
th e o r ie s fo r much th e o pposite re a s o n s.
.Among th e e s s e n tia lly a n t i - c a p i t a l i s t th e o rie s of
th e d e c lin e a fu rio u s b a t t l e rag es around the q u estio n of
w hether c a p ita lis m can pass g ra d u a lly and by p arliam en ta ry
m ethods, or w hether i t w i l l p ass o nly through c a ta s tro p h e ,
through v io le n t s o c ia l re v o lu tio n , accompanied by "th e
smashing of the s ta te m achinery," and th e e s ta b lish m e n t
i n i t s p lace (acco rd in g to th e S t a l i n i s t wing) o f a S o v iet
S ta te , under Moscow d ir e c tio n and tu to ra g e , w ith s u f f ic ie n t
( t o t a l i t a r i a n ) powers to " liq u id a te " th e rem nants o f th e
decaying o rd e r.
Thus, th e n a tu re of th e c r itic is m s of th e th e o r ie s
p re se n ted i s to be found in th e a l te r n a tiv e views o f, f i r s t ,
w hether or not c a p ita lis m w ill p a ss, and second, o f how i t
w ill p a ss , i f i t i s to do so . These a lte r n a tiv e c o n stru c
tio n s (and c o n s tru c tiv e p ro p o sa ls) a r e , n a tu r a lly , th e most
im p o rtan t c r itic is m s o f each o th e r. When viewed in survey
248
fa s h io n , th e s tre n g th s and w eaknesses o f each th e o ry are
re v e a le d in a common-sense way of p r a c tic a l im portance.
Such a survey perm its any i n t e l l i g e n t re a d e r, not acq u ain ted
w ith th e econom ics, psychology, and o th e r re fin e m e n ts which
u n d erly and su p p o rts th e main c o n te n tio n s o f each th e o ry ,
to a r r iv e a t an op in io n s u f f i c ie n t to su p p o rt i n t e l le g e n t,
p r a c t i a l l p o l i t i c a l a c t i v i t y .
The c r itio is m o f Marx, None o f th e famous d o c trin e s
o f K a rl Marx have escaped th e m ost thorough c r itic is m .
Volumes a re w r itte n every y ear to d is p ro v e , over and over
a g a in , a l l the m ain c o n te n tio n s o f the M arxian system .
The c r itic is m a tta c k s a l i k e , th e p h ilo so p h y , th e
th eo ry o f h i s to r y , and th e econom ies of Marx,
A ccording to th e M arxian p h ilo so p h y , no th in g i s p e r
m anent, e v e ry th in g i s t r a n s i t i o n a l , and the key to under
stan d in g is the d isco v ery o f th e "law s of developm ent” or
of p ro cesses* F urtherm ore, the m a te ria l world i s prim ary,
th e m ental world b u t a r e f l e c t i o n of the r e a l world and
th e re fo re secondary. Thus, Marx i s c r i t i c i s e d by th e id e a l
i s t s a s b ein g an a t h i e s t and by th e "m etap h y sician s" and
m eohanical m a t e r i a l i s t s as being a "m ystic" bound by "th e
d i a l e c t i c ," M arx's b e li e f in the " d i a l e c t ic p ro cess o f
developm ent" i s h e ld to be too r i g i d and to c o n ta in a
"m y stic a l e le m e n t," Whether or n o t one ag re e s w ith t h i s
2 4 9
c r itic is m depends s t r i c t l y on one*s p h ilo s o p h ic a l and method
o lo g ic a l p o in t o f view .
A pplied to th e th e o ry o f h is to r y , Marxes philosophy
h o ld s t h a t h is to r y i s a p ro c e s s , th a t a l l s o c ia l forms and
s tr u c tu r e s a r e tr a n s ito r y and never perm anent, and th a t
h is to r y develops out of c o n f lic t (th e absence o f c o n f lic t
i s th e s t a t i c or s ta tio n a r y s t a t e ) , th e se c o n f lic ts a r is in g
out of th e m a te ria l b a s is o f s o c ie ty , Thus, c o n f lic tin g
i n t e r e s t s among s o c ia l c la s s e s , based in th e m a te ria l fo rc e s
(o r economics) o f p ro d u c tio n , s e t up a chain o f re a c tio n s
or s tru g g le s among g ro u p s, -which is, h i s t o r y . C ap italism
i s a tem porary, t r a n s i t i o n a l form , w ith n o th in g perm anent
about i t . The o b je c t i s t o d isco v er th e law s o f th e develop
ment of c a p ita lis m , the main fo rc e s which a s s u re i t s tem
p o ra ry c h a ra c te r, th e b a s is o f th e c o n f lic tin g i n t e r e s t s
which d e sc rib e tbe n a tu re o f th e c a p i t a l i s t d i a l e c t i c (or
p r o c e s s ) •
C a p ita lism i s s u b je c t to c la ss s tr u g g le , le a d in g to
i t s in e v ita b le d e c lin e , ac co rd in g to Marx, and the key
c la s s (th e o n ly re v o lu tio n a ry c la s s ) i s th e p r o l e t a r i a t .
The r o le o f th e p r o l e t a r i a t i s fundam ental.
Marx*s e n tir e economic system i s b u i l t around t h e
ro le of th e p r o l e t a r i a t , and the fo rc e s which b rin g t h i s
' c la s s in to c o n f lic t w ith c a p i t a l i s t i n t e r e s t s (o r r e la ti o n s ) ,
le a d in g to s o c ia l change. In the f i r s t p la c e , th e p ro le -
250
\
t a r i a t i s e x p lo ite d by the c a p i t a l i s t c la s s , and th u s has a
d ir e c t i n t e r e s t in overthrow ing c a p ita lis m .
S econdly, th e p r o l e t a r i a t i s growing in num bers,
i t s power alw ays expanding, w hereas i t s o p p o sitio n i s d e c lin
in g in numbers and lo s in g i t s a l l i e s in th e g re a t s tr u g g le
between th e two camps, th e p r o l e t a r ia t and th e b o u rg e o isie*
T h ird , th e p r o l e t a r i a t i s su b je c te d to w orsening
c o n d itio n s (th e d o c trin e o f in c re a s in g m is e ry ), which spur
i t to r e v o l t .
T his system has been s u b je c t to c r itic is m and a tta c k
a l l along th e l i n e . Some hold t h a t the c la s s s tr u c tu r e Marx
d e s c rib e s i s n o t the m o tiv a tin g in flu e n c e ; th a t o ccu p atio n
a l i n t e r e s t s have g r e a te r in flu e n c e , fo r exam ple, on s o c ia l
developm ent th a n does ow nership i n t e r e s t s . O thers see an
a f f i n i t y o f i n t e r e s t s among c a p i t a l i s t s and w o rk ers, a t
l e a s t among c a p i t a l i s t s and the most h ig h ly org an ized and
p o l i t i c a l l y conscious w orkers*
The id e a th a t th e p r o l e t a r ia t i s grow ing in numbers
*
a lso i s s u b je c t to much a tta c k and c r i t i c i s m . For exam ple,
i t i s argued t h a t w hile the number o f w orkers a re in c r e a s
in g , th ey a re not in c re a s in g a t the r a t e , and w ith th e same
s ig n if ic a n c e , as Marx p re d ic te d . The p ro cess o f concen
t r a t i o n and c e n tr a liz a tio n o f c a p it a l , w hich e x p ro p ria te s
th e sm all b u sin ess man and th in s th e hanks of th e b o u rg eo is
ie h as not worked out in the manner fo reseen * A new m iddle
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c la s s has developed which has tak en most o f th e elem en ts Marx
th o u g h t would be forced in to th e p r o l e t a r i a t , and t h i s m iddle
c la s s h as i n t e r e s t s c o n tra ry to th o se o f th e p r o l e t a r i a t .
In a d d itio n , a lth o u g h c o n c e n tra tio n and c e n tr a liz a tio n has
proceeded, th e r e has n o t been a d im in ish in g in the number
of sm all b u s in e s s e s , sm all fa rm e rs, and so on, on th e sc a le
expected by Marx and E n g e ls.
The most t e l l i n g a tta c k has been on th e d o c trin e o f
in c re a s in g m isery . But th is d o c trin e i s s u b je c t to m o d ifi
c a tio n , and i t i s s u f f i c ie n t {for most s o c i a l i s t s ) t h a t
tem porary w orsening o f th e c o n d itio n s of th e m asses could
le a d to a r i s e in re v o lu tio n a ry a c t i v i t y . A sev ere d e fe a t
in w ar, an economic c r i s i s w ith mass unemployment, prolonged
economic s ta g n a tio n —any o f th e s e causes o f a "tem porary”
w orsening o f th e c o n d itio n s of the m asses may meet th e
req u irem en ts o f, and be in the s p i r i t o f, Marx*s d o * trin e
o f in c re a s in g m isery , which was th e tr ig g e r to se t o f f the
re v o lu tio n a ry sp a rk .
Thus, alth o u g h liv in g sta n d a rd s m ight r i s e a b s o lu te ly
i n a co u n try lik e th e U nited S ta te s (a lth o u g h n o t r e l a t i v e l y
to o th e r c la s s e s ) , and alth o u g h th e w orkers may be m a te r ia l
ly b e t t e r o f f in advanced c o u n trie s (a lth o u g h worse o f f in
backward a re a s as a r e s u l t o f c a p i t a l i s t e x p lo ita tio n and
th e w iping out o f th e t r a d i t i o n a l t r i b a l or n a tio n a l way o f
l i f e ) , th e w orkers could s t i l l be sp u rre d to r e v o lt by tern-
252
p o rary c o n d itio n s o f in c re a s in g "m ise ry .1 *
Yet i t must be ad m itted th a t t h i s hind o f " in c re a s in g
m isery" i s c e r ta in ly n o t th e hind c o n fid e n tly p re d ic te d by
Marx in h i s d o c trin e o f in c re a s in g m isery . S u ffe rin g s have
come to th is world on a s c a le , and o f a c h a ra c te r, t h a t K arl
Marx could never have p re d ic te d . These s u ffe rin g s are
th e in e v ita b le r e s u l t o f th e w orld-w ide wars and f e a r s of
war th a t have haunted t h i s cen tu ry as never b efo re in h is to r y .
Nor could Marx have p re d ic te d th e r i s e o f th e new b arb arism
o f th e tw e n tie th c e n tu ry , w hich can be tra c e d d i r e c t l y to
th e i n s t a b i l i t y in th e s o c ia l and economic r e la tio n s o f
c a p ita lis m and th e n a t i o n a l - s t a te system d u rin g th e p erio d
o f c a p i t a l i s t d e c lin e . T his new b arb arism i s a s so c ia te d
w ith th e t o t a l i t a r i a n s t a t e , th e fo rc e d la b o r system s adopted
by i t , and i t s m ethods o f p o l i t i c a l c o n tr o l. The war devas
ta te d c o u n trie s a re g u tte r s o f m isery , s u f f e r in g , p o v e rty ,
and d i s t r e s s beyond th e com prehension of anyone who has
n o t seen w ith h is own e y e s .
Marx*s th e o ry o f e x p lo ita tio n i s based on th e la b o r
th eo ry o f v a lu e . The im portance o f th e la b o r th e o ry i s
th a t i t p ro v id es th e b a s is fo r th e d o c trin e o f su rp lu s
v a lu e , which h o ld s t h a t the w orking c la s s e s a re th e c h ie f
v ic tim s o f c a p i t a l i s t e x p lo ita tio n , and th a t one c la s s ,
the b o u rg e o is ie , i s th e c h ie f b e n e fa c to r of th e system o f
e x p lo ita tio n . T his d o c trin e , th e r e f o r e , p i t s th e w orkers
253
d i r e c tly a g a in s t th e c a p i t a l i s t s . The w orkers have th e
main i n t e r e s t in changing th e c a p i t a l i s t s ta te o f a f f a i r s ,
w hereas the c a p i t a l i s t s have the main i n t e r e s t in m a in ta in
in g th e system o f e x p lo ita tio n . Not the consum ers, th e n ,
nor th e m anagers, nor th e i n t e l l e c t u a l s , but th e w orkers
a re "th e only re v o lu tio n a ry c la s s ," acco rd in g to Marx,
I f th e la b o r th e o ry o f v alue f a l l s , th en th e th e o ry
o f su rp lu s v alu e (and th e th eo ry of c a p i t a l i s t e x p lo ita tio n )
f a l l s , and Marx’ s economic system , b u i l t up to s u b s ta n tia te
and bulwark h is 'tf e o r y o f s o c ia l change, must be e ith e r
r e je c te d or r e v is e d .
The th eo ry o f v a lu e and th eo ry o f wages o u tlin e d by
Marx has been c r i t i c i s e d by o th er sch o o ls of econom ics. The
c h ie f c r itic is m s today come from the c u rre n t supply-and-
demand sc h o o ls, w hich a s s e r t th a t M arx’ s th e o ry o f v alu e
and wages overlooks th e demand sid e and does n o t in clu d e
a l l c o st f a c to r s ( f o r exam ple, i n t e r e s t i s reg ard ed as a
c o st by th e c r i t i c s o f M arx), Value i s determ ined by
supply and demand, not by s o c ia lly n e c e ssa ry la b o r tim e;
and th e wages o f la b o r a re determ ined by supply and demand,
n o t by th e s o c ia lly n e c e ssa ry c o s ts o f re p ro d u cin g th e
ra c e of w ork ers, For Marx, su rp lu s v alue a r is e s because
la b o r, paid a t i t s v a lu e , can produce more th an i t s v a lu e ,
and t h i s s u rp lu s value i s a p p ro p ria te d by th e c a p i t a l i s t .
254
For the n e o - c la s s ic a ls , t h i s i s im p o ssib le s in c e , so lon g a s
a dime could be made by h irin g a w o rk er, more w orkers would
be h ire d up to th e p o in t where the m arginal w orker is paid
th e same wage he p ro d u ces, and f u r th e r , a s more and more
w orkers are h ire d , th e h ig h e r are th e wages th a t would have
to be p a id .
The M arxian th e o ry and i t s c r itic is m amounts to a
c la sh between two opposed economic system s ( i f we a re con
s id e rin g o n ly th e n e o - c la s s ic a l c r itic is m o f M arx), and
space h ere i s too s h o rt to go fu rth e r in to th e m e rits o f
e ith e r th e c r i t i c i s m o r th e r e p li e s to i t .
However, i t may be sa id t h a t probably th e g r e a te s t
s in g le ap p eal o f M arxian economic th eo ry to th e m asses was
based on a m isu n d erstan d in g . r ^he m asses th o u g h t (and s t i l l
th in k ) th a t su rp lu s value ( r e n t , i n t e r e s t , and p r o f i t s )
could be paid o u t as an a d d itio n to c u rre n t wages i f c a p it a l
ism were e lim in a te d , not r e a liz in g t h a t under any system
p a rt o f the "p ro d u ct o f la b o r" must go fo r new p la n t and
equipm ent and th e re fo re cannot go to s w e ll c u rre n t w ages.
G ra d u a lis t th e o r ie s . The c h ie f c r itic is m o f the
g ra d u a lis t th e o rie s i s t h a t th e y f a i l to give an im p o rtan t
p la c e , in t h e i r t h e o r e tic a l s tr u c tu r e , to th e p o s s ib ility
o f c a ta s tro p h ic developm ent and change. I t i s n o t t h a t th e
g r a d u a lis ts do n o t re c o g n iz e the p o s s i b i li t y o f v io le n t
r e v o lu tio n . Such re v o lu tio n s occur a l l too f r e q u e n tly . But
255
th e p o s s i b i li t y o f c a p ita lis m p a ssin g by re v o lu tio n i s n o t
g iv en a s ig n if ic a n t p lace in g ra d u a lis t th e o ry .
When th e p o s s i b i li t y o f c a ta s tro p h ic change i s over
looked, in th e t h e o r e ti c a l s tr u c tu r e o f s o c i a l i s t th e o ry ,
p r a c tic a l p o lic y , s tr a te g y and t a c t i c s , and th e o rg a n iz a tio n
and tr a in in g of p o l i t i c a l p a r ti e s s u f f e r .
By f a il i n g to ta ke in to account th e p o s s i b i l i t y o f
re v o lu tio n a ry developm ent, a r i s i n g out o f th e p re ssu re s o f
th e w orld im p e r ia lis t and n a tio n a l c a p i t a l i s t system s (and
to d ay , the communist sy ste m s), the g ra d u a lis t th e o r ie s ,
in e f f e c t , serve to deny th a t such developm ents can and do
o c c u r, as fo r exam ple, in B u ssia , C hina, and C zechoslovakia,
This c r it ic i s m , howeVer, i s n o t q u ite f a i r to T h o rste in
B eb len . W ith V eblen, re v o lu tio n can occur ( a t le a s t in h is
E ngineers and th e P ric e S ystem ), but th ey w ill a l l f a i r
u n le ss th e y win th e su p p o rt o f th e te c h n ic ia n s in advanced
i n d u s t r i a l s t a t e s . R ev o lu tio n i s an advanced te c h n o lo g ic a l
s o c ie ty i s im potent u n le ss th e re v o lu tio n a ry m asses can put
th e in d u s t r i a l system in to immediate o p e ra tio n . Thus th e y
cannot do w ith o u t th e te c h n ic ia n s , And w ithout the te c h
n ic ia n s , the " te s te d Interests** w i l l continue to r u le and
f i n a l l y w ill r e s to r e c a p ita lis m , acco rd in g to iVeblen. And
the re v o lu tio n a ry m asses cannot win the te c h n ic ia n s , " ju s t
y e t."
In th e lo n g er view , V eblen*s economics i s based on
256
th e slow g ra d u al e v o lu tio n of i n s t i t u t i o n s , and where th a t
e v o lu tio n i s going to ta k e u s , nobody knows.
As to fo rc e s m o tiv a tin g the p a ssin g of c a p ita lis m ,
both V eblen’ s and James Burnham’s th e o r ie s have a ttr a c te d
l i t t l e a t t e n t i o n , ^ h is i s tfeecause no evidence i s a v a ila b le
to s u b s ta n tia te th e c o n te n tio n s th a t e ith e r the te c h n ic ia n s
o r th e m anagers are th e b a s ic m o tiv a tin g fo rc e s te n d in g
to b rin g c a p ita lis m to a c lo s e . And alth o u g h i t i s tru e
th a t th e re i s a s o c ie ty c a lle d th e T ech n o crats, which aims
a t th e d e s tru c tio n o f th e m arket economy, t h i s group d en ie s
any connection w ith V eblen.
As fo r the F abian th e o ry , which a p p e a ls to the m iddle
c la s s e s and to th e s o c ia l co n scio u sn ess, the c h ie f c r itic is m
i s t h a t th e F ab ian s f a ile d to p la c e enough em phasis upon
th e ro le of th e working c la s s e s . Much has been done by
l a t e r F ab ian s to c o r re c t t h i s f a i l u r e , though t h e i r ro le in
h e lp in g to e s t a b li s h th e Labour p a r ty , b u t n o t enough y e t
has been done th e o r e tic a lly to take in to account th e p o ss
i b i l i t y o f c a ta s tro p h ic developm ent under c e r ta in co n d itio n s*
IV CONTRIBUTIONS O F S C H U M PS TER A N D PHELPS
Role o f th e se th e o rie s* The th e o rie s of c a p i t a l i s t
d e c lin e c o n stru c te d by P ro fe s so rs Schum peter and P helps
p la y two s ig n if ic a n t ro le s*
In th e f i r s t p la c e , th e se th e o r ie s are a re p e titio n —
257
o f th e old th e o ry o f th e permanence o f c a p ita lis m by two
le a d in g c o n se rv a tiv e econom ists, who b eliev e th a t c a p ita lis m
—d e s p ite i t s i n d u s tr i a l e f f ic ie n c y and h u m an itarian d i r e c t
io n — i s doomed to e x tin c tio n , A growing number o f conserva
tiv e and " c a p i t a l i s t ” econom ists a re coming around to th e
p o in ts o f view ex p ressed by P ro fe s s o rs Schumpeter and P h e lp s.
Second, th e two th e o r ie s now under c o n s id e ra tio n are
p resen ted as a l t e r n a tiv e e x p la n a tio n s to th o se th e o rie s
w hich reg ard c a p ita lis m as e v i l , f u l l o f c o n tra d ic tio n s , and
antagonism s, and as having a c o n s is te n tly bad reco rd o f
w aste and f a i l u r e , ^he b e s t way o f a tta c k in g th o se a n t i
c a p i t a l i s t th e o rie s whose purpose i s to d is c r e d it c a p ita lis m
and c re a te popular h o s t i l i t y a g a in s t the system , i s t o p re
s e n t an a lte r n a tiv e view o f c a p i t a l i s t d e c lin e which empha
s iz e s th e good f e a tu r e s of c a p ita lis m as opposed to th e
e v il s o f human n a tu re . Schumpeter and P h elp s have a rriv e d
upon the sce n e, not to bury c a p ita lis m but to p ra is e i t ,
i f such a tw is t to a t r i t e old phrase i s p e rm is s ib le .
C o n trib u tio n s . N e v e rth e le ss, both th e th eo ry of
c a p i t a l i s t Success and the P s y c h o lo g ic a l-In s titu tio n a l th eo ry
have made s ig n if ic a n t c o n trib u tio n s to th e scien ce o f s o c ia l
re o rg a n iz a tio n .
‘ ^he c h ie f c o n trib u tio n o f th e Success th e o ry i s
Schum peter’ s e la b o ra tio n of th e r o le o f the i n t e l l e c t u a l as
a fo rc e making fo r s o c ia l change ( th a t i s , as th e " s o c ia l-
2 58
izing forceT t bringing about the passing of capitalism).
Few w ill agree that the intellectu al is the main
force bringing about the decline of capitalism; and certainly,
the intellectuals are as numerous on the side of free enter
prise, at least in America, as they are on the side of so
cia l criticism of the capitalist system. But s t i l l , the
role of the intellectual in society, as the most effective
instrument of criticism and organization of sentiment
against the old order, must be admitted. A nd certainly,
so cialist movements should m ake every effort to win to their
side the young students and intellectuals of the nation, and
so cia lists -should never underestimate or understate the sig
nificance of the role of the intellectual as an organizer,
agitator, and propagandist.
The role of the intellectual in the post-war era is
m ore important than at an time in American history. T he
United States government is undertaking the education of
millions of veterans, for w hom there probably w ill not be
ample job opportunities, that is , at wages which w ill be
acceptable to young m en and w om en w ho have invested four or
more years of their liv es in training at institutions of
higher learning.
Hundreds of thousands of engineers, architects, chem
is t s , m en and w om en whose productive power w ill have become
tremendous, w ill probably not be able to find satisfactory
259
jo b s in which th e f u l l use o f t h e i r p ro d u ctiv e t a l e n t s and
c a p a c itie s w ill be u t i l i z e d and t h e ir c rav in g f o r re c o g n itio n ,
o r d i s t in c ti o n s a t i s f i e d . And i f unemployment o c c u rs, fo r
prolonged p e rio d , on anywhere n e a r th e scale of th e ftwen
t i e s , tro u b le i s in the o ffin g .
f o r th e se h ig h ly tra in e d young people w ill demand
th a t th e ir s e r v ic e s be used fo r th e good of th e c o u n try .
And th e y w i l l be p s y c h o lo g ic a lly in cap ab le o f le a n in g on
sh o v els on some W PA p r o je c t. The g re a t danger i s t h a t th ey
w ill tu r n to some t o t a l i t a r i a n movement, to some type o f
demagogue who w i ll promise to make p ro d u ctiv e use of th e ir
t a l e n t s . The e n g in e e rs, whose god i s " e f f ic ie n c y ,” may be
tem pted in tim es o f unemployment to place t h e i r f a i t h in
th e " e f f ic ie n c y of d ic ta to r s h ip ," a slogan made so famous
by th e N a z is.
C e rta in ly men cannot be won f o r democracy i f i t p e r
m its an economic system th a t w astes m en's liv e s and t r a i n
in g and p ro d u c tiv e know-how, and re n d e rs them im potent
w hile f a c to r ie s stan d id le o r run a t s ix ty per cent or
l e s s o f c a p a c ity .
O th e re c o n trib u tio n s . The c h ie f c o n trib u tio n o f th e
P s h c h o lo g ic a l- I n s titu tio n a l th eo ry i s th a t i t c a ll s a t t
e n tio n to th e ro le of r e lig io u s and m oral i n s t i t u t i o n s in
ch an n elin g fundam ental human d riv e s in a way t h a t h a s, in
260
the past, permitted capitalism to grow and develop in a
way compatible with the general welfare of the community
but has begun, in recent years, to f a il.
The psychological and institutional approach shows
the necessity of a certain type of moral code for the
maintenance of capitalism. It indicates the importance of
studying the effect of changing institutions on the Meolog-
ical framework of capitalism. Without a certain moral code
capitalism cannot survive. This is because a certain moral
and religious outlook is essential to channel those basic
hum an drives which motivate economic a citiv ity in an indi
vidualist economy. These drives must be directed by cer
tain institutions in a market economy, especially by a com
petitive mechanism, into proper channels, or else they
become destructive forces.
Basic to both theories—both Schumpeter's and Phelps'
—is the breakdown of the bourgeois family. Schumpeter had
already developed this aspect of the two theories (although
in an incomplete way), in a masterly analysis of the effect
of the breakdown on capitalist accumulation. T he change
taking place in the bourgeois family, converting it into
an "apartmentalized" and small unit, changes the basic
motivation to economic activity in a capitalist society and
is a heavy attack on the Marxian theory of capitalist moti
vation.
261
According to Marx, the basic motive compelling the
economic acitivty under capitalism is tne capitalist drive
to accumulate. A capitalist does not want merely to m ake
a profit—be must accumulate, accumulate, accumulate. But
with, the change of character of the bourgeois family, the
capitalist no longer has the urge he used to have to
accumulate, according to Schumpeter. A nd while there m ay
s t i l l be plenty of room for argument as to whether the
cap ita list's urge to accumulate is based so largely on the
family, Schumpeter's argument carries considerable force.
Criticism. But i f Schumpeter and Phelps m ake sub
stantial contributions to the theory of capitalist decline,
they do not escape thorough criticism .
Bor one thing, the theory of cap italist economic
harmony is unrealistic and fa ils to accord with the facts.
Schumpeter recognizes this when he urges that the sam e e r e -.
dit be granted to big business capitalism as was granted
to the models of purely competitive capitalism (a system
that never did ex ist). In the long-run, big business
capitalism is as compatible with the m axim um welfare,
despite the theories of monopolistic competition, as was
atomistic capitalism, Schumpeter asserts. But this argu
ment amounts to an apology of monopolistic restrictionism
that very few economists or others wj.ll accept now—an argu
ment that indeed m ay become less strongly convincing even to
262
the conservative economists as monopolistis restrictions of
a ll sorts multiply in tJie future.
- Furthermore, nothing is to be gained by denying that
capitalism suffers m any e v ils, antagonisms, and contradic
tions, and that its failures have had very serious effects
on the com m on people of the world. Nor is anything to be
gained by denying that these people, suffering from capital'
ist failu res, are a force in the decline of capitalism.
People do not support policies tending to destroy capital
ism solely because they are ignorant, greedy, or immoral,
but because they fear the system which cannot solve the
unemployment problem in the short run (and people live in
the short run), and which causes conflicts of interest,
inequality of opportunity and of income^distribution, and
other e v ils, sonetimes including wars.
Most people, not orthodox lib erals, also w ill dis
pute the assumptions underlying the economics of the two
theories, the success and the Psychological-Institutional
the or ie s .
V. T H E E S J Y M E S IA N R E V O L U T IO N
But perhaps capitalism can be saved?
Confronted with mass unemployment and the continuing
ev ils associated with the unequal distribution of income,
capitalist theorists during the ‘th irties sought a way out
263
will eh would preserve the main institutions of capitalism.
M any economists, however, cam e to believe that capitalism
could not be saved unless an entirely new approach to the
problems of the economy was devised.
The Keynesians held that capitalism could be saved
only by rejecting traditional policies and instituting a
drastic new approach, based on direct governmental inter
vention to assure investment, sta b ility , and fu ll employment.
Capitalist e v ils. T he two main e v ils of capitalism
which must be overcome, i f the system is to be saved, are,
according to Keynes, unemployment and inequality in income
distribution.
Income inequality can be reduced by several methods.
Taxation policy to reduce inequality,is advisable. T he
most important stroke aimed at inequality, however, is the
euthanasia of the rentier. But the question is raised as
to how m uch inequality in income is necessary to maintain
capitalism. Could not Keynes attack on inequality result,
it s e lf , in the passing of capitalism? Dr. Phelps writes:
Even by the time Keynes wrote there had already
occurred too great a reduction in inequality {through
taxation) to permit the saving of capitalism. Taxation
alone, by socializing income (i . e . , increasing the
proportion of the total income spent collectively] is
sufficient to replace capitalism by cojhleetivism.o
6 . C. W . Phelps, unpublished Outlines on Keynes.
264
T h e ^ above quotation could be rephrased, of course, in
terms of Marxian economics, w hiiish likewise holds that the
capitalist dynamic is based on inequality in income d istr i
bution, and that every equalizing tendency (such as trade
union pressure or even competitive pressure during boom
times to increase the workers share at the expense of profit}
is resolved through a c r isis. Equality of income distribution,
even on the modest scale advocated by Keynes, is incompatible
with capitalism—both as a process and as a system of social
relations—according to.both Marxian and neo-classical
economics.
Turning to another p r ® fc ;]L e m , w e also find that according
to the critics of Keynes, the long-run implications of fun
employment policy amount to collectivism .
Through taxation, restrictions of various kinds, and
other a ctiv ities necessary to maintain fu ll employment, and
through policies to satisfy the pressure groups which keep
it in power, the government makes i t impossible for private
enterprise to continue, according to the anti-Keynesians.
W hat are som e of the controls which lead to collec
tivism under the Keynesian theory, according to the ortho
dox liberals? These have been sum m ed up recently by Dr.
P h e l p s .7 M rst, the central controls required to adjust
consumption to investment contradicts capitalism. In order
7. Ibid 7
265
to control the propensity to consume, Keynes must manipu
late taxation, fix the rate of interest, provide subsidies,
and institute other policies striking at the heart of the
free market system* In order to contol the inducement to
invest, Keynes must tamper with the mouey supply, manipu
late the rates of interest, and socialize investment*
Indeed, Dr. Phelps asserts that Keynes has let the
Pabian theory in through the back door. Controls are as
good as outright socialization, Dr. Phelps argues, and as
effective in destroying capitalism, ^furthermore, Keynes’
theory permits socialism to com e gradually, "creepingly.”
While so cia lists would disagree that Keynes has
’ ’let socialism in the back door” they are not so critica l
of efforts to control capitalism, as are the orthodox lib
erals. It is better that m en should have shovels to lean
on, on som e gigantic governmental ’ ’m ade work” project,
than to starve in idleness, i f the factories remained closed
because the absentee owners cannot m ake a p rofit.
Historic functions of Keynesianism. The orthodox
liberals continue their attack by asserting that, given the
nature of the present powerful pressure groups in the United
States (’ ’deliberately built up by the federal government
since 1933”^}, some sort of collectivism is inevitable.
-s# ibid"
266
Phelps asserts that the historic function of Keynes
ianism is to provide a peaceful way of making the transition
by the use of methods fitted to the American character, i . e . ,
by the use of money and government spending instead of
bullets and violent revolution.
As for the technique of the transition, according
to Dr. Phelps, it should be realized that the primary goal
of the administration which happens to be in power is to
keep it s e lf in power. T o .do th is, the administration builds
up and must cater to powerful pressure groups in order to
get their votes. T he satisfying of these pressure groups
requires a taxation and interventionist policy which grad
ually undermines private enterprise so that the s teps
in the development proceeds as follows.
P irst, to hamper operation of the system (consciously
or unconsciously; intentionally or unintentionally) through
taxation, restrictionism, subsidies, e tc ., so that private
enterprise cannot perfomm its functions satisfactorily.
Second, to cry out that private enterprise does not
work!
Third, to now claim that the government must take
over to save the situation.
These steps apply not only to Keynesians, but comprise
the strategy of a ll the so-called reformers and ndo-gooders,u
according to Dr. Phelps. There are m any examples of this
267
formula for achieving the transition. The railroads are a
prime example in the United States. The formula usually
follows the pattern of granting subsidies which causes m ore
and more overproduction and results in even more restriction
ism. This results in the further stiflin g of the system,
greater demands for more subsidies to maintain high prices,
resulting in even more overproduction and so on in an ever
mounting vicious circle.
Full employment and capitalism. S ocialists, and es
pecially Marxists, would, of course, question the ability
of capitalist policy to provide fu ll employment. This notion
that permanent fu ll employment is achievable under capital
ism contradicts the wage theory of M arx and the idea of an
industrial reserve army. Temporarily, of course, fu ll em
ployment is possible under capitalism, according to Marx.
In the long-run, however, capitalism is incompatible
with fu ll employment as a permanent policy, M arx holds.
Capitalism is essentially so unstable that permanent fu ll
employment, even under fascist organization and control, would
break down. The only possible way by which fu ll employment
can be maintained would be under a program of gradual so cia li
zation of marginal firms and industries, socialization of
investment, and fin ally the socialization of the commanding
heights of the economy. But this contradicts capitalism and
268
is in reality, a gradualist approach to socialization and
supports the orthocox liberal contention that Kenyes’ policy,
to be successful, leads to creeping socialism.
This criticism of Keynes—that fu ll employment policy
is contradictory to capitalism—can be justified on the' basis
of both Marxian and non-Marxian systems of economics. T he
idea that fu ll employment can be maintained under capitalism
not only contradicts Marxian theory but also the neo-classical
economics of other so cia list economists.
VI E P IL O G U E : T H E C A S E F O R S O C IA L IS M
The future order. While the purpose of this thesis
has been to develop the forces at work in the capitalist
economy, or in its immediate environment, making inevitable
the decline and passing of capitalism, the question arises
as to what is to follow—what is to take the place of the
private enterprise system.
A complete answer to this question would take us
beyond the scope of this tiaesis. But w e m ay assert that
the future order w ill be som e form of socialism.
This opinion, that socialism w ill dominate the next
stage of history, is shared by practically a ll authorities
on social reorganization, including capitalist theorists
like Professor Schumpeter. Karl M arx convincingly showed
269
th a t s o c ia liz e d p ro p e rty i s th e lo g ic a l su ccesso r o f p riv a te
p ro p e rty under c o n d itio n s o f s o c ia liz e d p ro d u c tio n , in a way
n o t s e rio u s ly d isp u te d by econom ists today
T h erefo re , the o b je c t in th ese concluding pages i s n o t
to e s ta b lis h w ith c e r ta in ty th a t s o c ia lis m i s in e v ita b ly th e
next sta g e of h is to r y , which we tak e fo r g ra n te d , but to
make c le a r the danger t h a t some form o f t o t a l i t a r i a n s o c ia l
ism may win th e day u n le ss th e cause of dem ocratic s o c ia l
ism i s stro n g ly prom oted.
The p ro s p e c ts . What are th e p ro sp e c ts w ith re g ard to
th e p a ssin g of c a p ita lis m and the advent of so c ia lism in th e
U nited S ta te s ? A s tro n g c a se , indeed, can be b u i l t t o sup
p o rt th e co n ten tio n th a t s o c ia lis m w ill come in America
w ith in th e n ex t te n or f i f t e e n y e a rs. Such a t r a n s it i o n has
come t o be expected by a growing number o f econom ists, a s
w e ll as p o l i t i c i a n s , b u sin e ss men, la b o r le a d e rs , e tc .
Nor would such a t r a n s i t io n , w ith in th e n ex t few y e a rs ,
shock th e American sense of s o c ia l p r o p r ie ty . V io len ce, of
c o u rse , would be r e je c te d , even i f used by a s u b s ta n tia l
m in o rity , except under the most p re ssin g c irc u m stan c es. But
a p e a c e fu l, g ra d u a lis t t r a n s i ti o n , making use of p a rlia m e n t-
Wl 3 ? ''or Marx, th e b a s ic c o n tra d ic tio n o f c a p ita lis m
i s the fa c t of s o c ia liz e d p ro d u ctio n ( i . e . , fa c to ry p ro d u ct
io n and s p e c ia liz a tio n of la b o r) and p riv a te a p p ro p ria tio n .
The c o n tra d ic tio n fo r Marx could be re so lv e d only by s o c ia l
iz in g a p p ro p ria tio n . (Cf. Chapter I I ab o v e).
270
a ry m achinery, would be accepted by most Americans, who have
been m e n ta lly and. m o ra lly prepared fo r such a t r a n s i t i o n by
a whole s e r i e s of p rece d en ts and ev en ts d u rin g the p a s t two
decades.
Examples o f f a c t o r s p re p a rin g Americans fo r s o c ia lis m
a re many. One could l i s t the Truman a d m in i s t r a t i o n 's w el
fa re program among th ese p re c e d e n ts , a l l types o f "new d e a l ”
and " f a i r d e a l ” governm ental in te r v e n tio n s in the economy,
the changing m oral and r e l i g i o u s codes of the community in
re s p e c t to " in te r v e n tio n is m ” and la b o r r i g h t s , ” th e growing
h o s t i l i t y to c a p ita lis m , and the long reco rd of s o c i a l i s t
a g i t a t i o n and e d u c a tio n .
E vents in B r i t a i n , where s o c i a l i z a t i o n i s proceeding,
a ls o have a pow erful e f f e c t on American thought ( i t i s said
th a t America la g s twenty y ears behind B r i t a i n in r e s p e c t to
p o l i t i c a l and s o c ia l though, a fa b le u n s c i e n t i f i c enough
to dem onstrate the m oral a u th o r ity of B r i t a i n , even today,
w ith r e s p e c t to American o p in io n ). A n t i - c a p i t a l i s t propa
ganda coming from the S o v iet a re a s a ls o adds to the g e n e ra l
su s p ic io n and h o s t i l i t y toward the men and i n t e r e s t s re sp o n
s ib le fo r guiding, the American p ro d u c tiv e engine.
The t r a n s i t i o n . I f America i s a t the th re sh o ld o f a
new s o c i a l o rd e r, the q u e s tio n a r i s e s a s to how the t r a n s i
tio n i s l i k e l y . t o o c c u r.
271
The p ro sp e c ts today are th a t the t r a n s i t i o n w i l l be
p e a c e fu l and g ra d u a l, c a rrie d through by p a rlia m e n ta ry
m ethods, a c a ta s tr o p h ic or v io le n t overthrow appearing to
be out of the q u e s tio n . I f the t r a n s i t i o n occurs w ith in the
next ten or f i f t e e n y e a r s —and t h i s p ro sp ec t i s no t a t a l l
u n lik e ly , as we have in d ic a t e d — i t w i l l probably be through
g r a d u a l i s t methods, on th e B r i t i s h m odel.
Dr. C. W. Phelps b e lie v e s th a t th e t r a n s i t i o n can be
c a rrie d p r e t t y f a r through a government spending program and
f u l l employment p o lic y on the k ey n esia n nsave c a p ita lis m 1 1
model. C onsiderable fo rc e i s given to t h i s l a s t view, i n c i
d e n t a ll y , from re c e n t p ro p o sals by A lvin Hansen, who has
come to reco g n ize the f a c t t h a t t r a d i t i o n a l f u l l employment
p o lic y must be supplem ented, i f i t i s to be e f f e c t i v e , by
a p o lic y of s o c i a l i z i n g durable consumers* goods i n d u s t r i e s :
Such o u tla y s (fo r a comprehensive and v arie d long-
range p u b lic c o n s tru c tio n and development program) can
be w ise ly implemented n o t m erely in p u b lic works, improve
m ents, and development p r o j e c t s , but a lso in lo w -co st
housing and, indeed, in o ther k in d s of durable consumers’
goods. The l a s t Item in p a r t i c u l a r has been explored a t
some le n g th in th e postwar programs of G reat B r i t a i n , the
B r i t i s h Empire c o u n trie s , and the S candinavian c o u n t r i e s . &
Heed fo r a Labor p a r t y . However, th e re i s noth in g to
support th e view th a t s o c ia lis m w i l l ju s t ”g ra d u a lly e v o lv e 1 1
" S T I A lvin Hansen, Monetary Theory and F is c a l P o lic y
(New York: McGraw-Hill Book Co., 1949) p. 181.
272
through, h a lf - h e a r te d m easures to "make c a p ita lis m w ork.”
For so c ia lism to come, i t must be co n scio u sly adopted by a
p o l i t i c a l movement capable of e f f e c t i n g the t r a n s i t i o n . S o c ia l
i z a t i o n must be the g o a l, as opposed to th e goal of reform
ing the present system to such an e x te n t to "make c a p ita lis m
■work.”
T h e refo re , the t r a n s i t i o n to s o c ia lis m in America is
c o n tin g en t upon th e development o f an American Labor p a r ty
w ith a s o c i a l i s t o r i e n t a t i o n . Buch a p arty 'w o u ld be b ased,
p robably on the model of the B r i t i s h Labour p a r ty , and would
take a s o c i a l i s t p o s it io n . To be e f f e c t i v e , i t would have
to be a f e d e r a tio n of tra d e unions, consumers’ o r g a n iz a tio n s ,
farm groups, and v a rio u s dem ocratic s o c i a l i s t o r g a n iz a tio n s .
Such a p o l i t i c a l c o a l i t i o n has been delayed as a r e
s u l t of a d iv is io n o f o pinion in la b o r ranks as to th e p o s s i
b i l i t y of ” c a p tu rin g ” the Democratic p a r ty , as w e ll as the
old G-ompeimpolicy of " e le c tin g f rie n d s and d e f e a tin g en e m ie s.”
The hope of c a p tu rin g the Democratic p a r ty had become so dim
a f t e r World War I I , th a t c o n sid e ra b le sentim ent e x is te d to
form a Third P a rty . T his sentim ent was e x p lo ite d by Henry
W allace to s t a r t h is own p a r ty , a c o a l i t i o n of ’’l i b e r a l ”
c a p i t a l i s t groups w ith th e Communist p a r ty , which served two
c h ie f purposes: (1} to d iv id e l i b e r a l and p ro g re ssiv e f o rc e s
f o r th e purpose o f d e f e a tin g Truman, and (2) to provide a
273
l i n k between working c la s s sentim ent fo r a s o c i a l i s t t h ir d
p a r ty and s o - c a lle d " p r o g re s s iv e ” c a p ita lis m . The W allace-
Communist c o a lit io n was a p a r ty of "compromise," which the
Communists e v a s iv e ly termed a " p e o p le 's " p a r ty , in an e f f o r t
to hide i t s o p p o r tu n is t, d i v i s i v e , and compromising c h a r a c te r .
I t had the immediate e f f e c t of d r iv in g the tra d e unions back
in to a c o a lit io n w ith the Democrats and the dropping, by
the unions, o f a l l p la n s to c re a te a genuine t h i r d p a r ty a t
t h a t tim e.
The Wallace-Communist p a rty of compromise had been
th oroughly exposed as a c a p i t a l i s t - S t a l i n i s t c o a l i t i o n by
1949, however. As a r e s u l t , a Labor p a r ty was c a lle d fo r
by the 1949 convention o f the U nited Automobile Workers, C .I .O .,
which had been le a d in g the b a t t l e on the tra d e union fro n t
a g a in s t the ro le o f th e Wallace-Communist p a r ty , which was
seeking to t i e the growing number o f s o c ia lis t-m in d e d work
e rs to a " p ro g re s s iv e " c a p i t a l i s t o r i e n t a t i o n .
The p ro sp ec ts f o r a s o c i a l i s t o r ie n ta te d Labor p a rty
in America improves w ith each blunder made by the Truman Ad
m i n i s t r a t i o n , w ith each f a i l u r e of the Congress to d e a l ade
q u a te ly w ith the tra d e unions* needs, and w ith the growing
in d ic a tio n s of a d ep re ssio n in the n a t io n a l economy.
Forces in the t r a n s i t i o n . Thus, the advent of s o c i a l
ism in America depends upon the d is p o s itio n and o rg a n iz a tio n
274
o f, f i r s t and fo re m o st, tiie working c la s s e s o f p e o p le . The
working people must be the base fo r any thorough-going s o c ia l
r e o r g a n iz a tio n in American today. T h ese•c la s s e s have the
most to g ain from s o c ia lis m , and th e l e a s t to lo se as a r e
s u l t of a p e a c e fu l, dem ocratic t r a n s i t i o n . On the o th e r hand,
th e se c la s s e s s u f f e r most from th e v i c i s s i t u d e s of a market
economy, from the unemployment which accompanies b u sin ess
cy cles and economic s ta g n a tio n , from the high p r ic e s of p r i
v ate monopoly, and a l l o f th e other s o - c a lle d e v i l s and con
t r a d i c t i o n s of a c a p i t a l i s t i c s o c ie ty .
However, the appeal should n o t overlook the r o le of
o th e r f o r c e s in the d e c lin e and p assin g of c a p ita lis m . The
appeal should be to awaken th e s o c i a l consciousness o f th e
g e n e ra l p u b lic , to dram atize the s o c i a l c o sts of m a in ta in in g
a d e c lin in g economic system and th e s o c ia l b e n e f its and gains
to be had from a new, v ig o ro u s, and ascending economic system,
s o c ia lis m . Nor Bhould the appeal overlook the i n t e r e s t s o f
s p e c ia l groups.
The th e o rie s reviewed in the preceding c h a p te rs have
developed th e unique r o l e s of c e r t a i n of these s p e c ia l s o c i a l
groups in th e d e c lin e of c a p ita lis m , and how each of th e se
c la s s e s or f o rc e s c o n f l i c t w ith the c a p i t a l i s t mode of p ro
d u c tio n . The te c h n ic ia n s have n o th in g to lo se through the
p a ssin g of c a p ita lis m ; th e managers have e v e ry th in g to g a in .
275
Consumers and m iddle c la s s e s have a growing number of i n t e r
e s t s and needs which th e p r iv a te e n t e r p r is e system i s incap
ab le of s a t i s f y i n g . The i n t e l l e c t u a l s can be expected to
in t e n s i f y th e i r h o s t i l i t y toward c a p ita lis m as i t s d ec lin e
and p assin g becomes more and more obvious. None of th e se
fo rc e s tending to b rin g about the d e c lin e of c a p ita lis m can
be overlooked.
P ro p e rly organized and d ir e c te d , the f o rc e s we have
reviewed are capable, in c o o p era tio n , to e f f e c t a speedy,
p e a c e fu l t r a n s i t i o n to so c ia lism , by use o f p a rlia m e n tary
procedure. But we must n o t overlook th e p o s s i b i l i t y o f the
r e v o lu tio n a ry overthrow of c a p ita lis m , even in a country w ith
the long dem ocratic t r a d i t i o n s of th e U nited S t a t e s .
A v i o l e n t , re v o lu tio n a ry overthrow in America could
come through th e development of a re v o lu tio n a r y s i t u a t i o n as
defined in Chapter I I above, which depends (not upon some
m in o rity p o l i t i c a l group but} upon o b je c tiv e co n d itio n s a r i s
in g out o f a s o c i a l , economic, and p o l i t i c a l breakdown or
c r i s i s . Such a c r i s i s would develop out o f c o n d itio n s th a t
would have to be o b je c ti v e ly analysed a t th e time of t h e i r
o c c u rre n c e .
I t i s p o s s ib le , however, t o f o r e t e l l to some ex te n t
how such a re v o lu tio n a r y s i t u a t i o n might develop in America.
I t could develop out of the i n t e r n a l c o n tra d ic tio n s and an
276
tagonism s of the American c a p i t a l i s t economy, which i s very
u n s ta b le . Should another g re a t d ep ressio n occur, on the
s c a le of th e 1929 c ra sh , i t i s d o u b tfu l t h a t c a p ita lis m could
su rv iv e i t . Economic s ta g n a tio n , w ith i t s m illio n s of unem
ployed, is c o n tra d ic to r y to sta b le s o c ia l order and p e a c e fu l
development.
R evolution a lso could (and p o s s ib ly would) develop out
o f a t h i r d world war. The e x te r n a l r e l a t i o n s of the U nited
S t a t e s —which now i s the avowed le a d e r of th e world c a p i t a l i s t
i m p e r i a l i s t system —are e s s e n t i a l l y u n s ta b le , b e in g based on
e x p l o itin g backward are a s and r e s o u r c e s , and on grabbing the
hog’ s share of world tra d e and investm ent o u t l e t s . When one
adds to t h i s the c o n f l i c t between the S o v iet and the c a p i
t a l i s t - i m p e r i a l i s t sp h eres, the p ro sp ec ts of p e a c e fu l develop
ment in the world look dim indeed.
P e a c e fu l, g r a d u a l i s t , and dem ocratic t r a n s i t i o n to
s o c ia lis m depend fra n k ly on p ro s p e c ts f o r peace and p le n ty .
P ro sp e c ts o f war and economic c o n f l i c t and s ta g n a tio n bode
e v i l and forewarn o f v i o l e n t e ru p tio n s and c a ta s tr o p h ic s o c ia l
change.
Meaning of s o c i a l r e v o l u t i o n . R evolution i s not to
be confused, of course, w ith th e se iz u re o f power through
th e v io le n t a c tio n o f a m in o rity group. Yiewed p ro p e rly ,
th e re is no t r e a l c o n tra d ic tio n between gradualism and rev o -
277 .
l u t i o n , only a sem antic one.
Gradualism fo cu se s a t t e n t i o n on the y e a rs re q u ire d to
complete a s o c i a l r e v o lu ti o n , once i t has begun. R evolution
fo cu ses a t t e n t i o n on the long period o f development up t o ,
and p re p a r a tio n f o r , the years of a c tu a l t r a n s i t i o n . Thus,
from the g r a d u a lis t view, th e t r a n s i t i o n i s regarded a s a
long pro cess o f s e v e r a l y e a rs . (In B r i t a i n , the re v o lu tio n may
take te n y e a rs , or f i f t e e n y e a r s , to complete*) From the
re v o lu tio n a r y view, th e se te n or f i f t e e n years are regarded
” as a day” in the lo n g e r p ro cess of the r i s e , d e c lin e , and
f i n a l t r a n s i t i o n of one s o c i a l order in to a n o th e r. (In S o v ie t
R ussia, s o c i a l i z a t i o n did not begin on a r e a l sc ale u n t i l the
f i r s t Five Year p la y , and was not complete u n t i l the xaiddle
’ t h i r t i e s , th e t r a n s i t i o n r e q u ir in g , according to S t a l i n him
s e l f , a perio d o f b e t t e r than f i f t e e n y e a r s ) . ^ Thus, th o r
ough-going s o c ia l r e v o lu tio n , r e s u l t i n g in a complete t r a n s
form ation of the old s o c i a l and economic r e l a t i o n s , r e q u ir e s
about the same amount of tim e, whether i t occurs in ’’re v o lu -
tio n a r y ” R u ssia or in ’’e v o lu tio n a ry ” B r ita in .* ^
The h i s t o r i c c o n f l i c t between g r a d u a l i s t s and re v o lu
t i o n a r i e s tu r n s , how ever, on t h e i r r e s p e c tiv e a t t i t u d e s t o -
11. Of. Chapter I above, p. 25-26.
12. Cf. F ra n c is W illia m s’ vie?/s, above, p. 241
278
ward th e p o s s i b i l i t y of e f f e c t i n g th e t r a n s i t i o n th ro u g h ex
i s t i n g p a rlia m e n ta ry 'p ro c e d u re , i . e . , w hether or n o t th e e x
i s t i n g s t a t e machinery "must be sm ashed.”
On t h i s p o in t, th e re i s no doubt th a t i f a government
re fu s e s to meet th e req u irem e n ts of h i s t o r y and provide fo r -
p e a c e fu l s o c ia l change, v io len ce w i l l r e s u l t . R ussia had
such a r i g i d government under th e C zar. Adequate channels
were n o t a v a ila b le to e f f e c t th e s o c ia l r e v o lu tio n which had
ripened in R ussia ( j u s t as s o c i a l r e v o lu tio n had ripened in
France in th e e ig h te e n th c e n tu r y ) . R ev o lu tio n ary upheaval was
th e r e fo r e in e v ita b le in R u ssia . Any time a government chokes
o f f the channels fo r thorough-going s o c ia l change, r e v o lu tio n
a ry upheaval i s both i n e v i t a b l e and j u s t i f i e d . Lenin would
have been r id ic u l o u s had he urged " p e a c e fu l” or g radual
s o c ia l change in R u ssia a f t e r 1900; the r e v o lu tio n would have
passed him by.
Many a re a s in the world today (perhaps in c lu d in g the
U .S.S.R. h e r s e l f ) are in the same s i t u a t i o n as was R ussia
in 1900. In t o t a l i t a r i a n c o u n tr ie s , v io le n t overthrow i s
th e only way o u t, unless th e le a d e r s them selves i n s t i t u t e
the fundam ental s o c ia l changes re q u ire d to s a t i s f y th e needs
of the p e o p le s. But d i c t a t o r s h i p s cannot s a t i s f a c t o r i l y
c a rry out a r e a l r e v o lu tio n . D ic ta to r s h ip s c o n tra d ic t th e
dem ocratic sid e o f tru e r e v o lu tio n s , which avow as t h e i r ob-
• 279
j e c t the e x te n sio n of freedom and g r e a t e r e q u a lity to the peo
p l e s . In c o lo n ia l a r e a s , dominated by fo re ig n powers, only
wideapread wars f o r c o lo n ia l independence appear capable of
re sc u in g the p eo p les, although B r i t a i n i s showing the way to
a p e a c e fu l s o lu tio n o f the im p e rial and c o lo n ia l problem,
through a number o f s i g n i f i c a n t p re c e d e n ts , as for example,
the case of I n d ia .
Role of the S o v iet S t a t e . The g re a t danger to the
world today i s , of co u rse, t h a t c a p ita lis m w i l l pass ac co rd - -
ing to the S t a l i n i s t form ula. I t i s im p o ssib le to deny th a t
c a p ita lis m w i l l p a ss as S t a l i n p r e d i c t s . The fo rc e o f S ta
l i n ' s argument i s based on the Red Army and S o v iet m ight, and
he can dem onstrate the " c o r r e c t n e s s ” of h is " lih e " by such
examples -as L a tv ia , L ith u a n ia , h a l f of. F in la n d , Poland, e t c . ,
e t c . , e t c .
S t a l i n b ases h i s th eo ry of c a p i t a l i s t d e c lin e on h is
view o f th e world i m p e r i a l i s t system and i t s c o n f l i c t w ith
the S o v iet system.
During the period of the " g e n e ral c r i s i s of c a p i t a l
ism "— the period brought in to e x is te n c e , according to S t a l i n ,
w ith the c re a tio n of th e Soviet S t a t e — a l l th e antagonism s
and c o n tra d ic tio n s o f c a p ita lis m and the w o rld -im p e r ia lis t
system are i n t e n s i f i e d .
280
(1} Tiie i n t e r n a l c la s s struggle-, ra g in g between p ro
l e t a r i a t and b o u rg e o isie , i s i n t e n s i f i e d .
(2) The im p e r i a li s t s tr u g g le among the g r e a t powers
i s i n t e n s i f i e d .
(3) The stru g g le between the advanced and the back
ward c o u n trie s i s i n t e n s i f i e d .
(4) But th e th r e e above-mentioned f a c t o r s are su p p le
mentary to , and a l l i e s o f, the main s tr u g g le developing be- '
tween the S o v iet c e n te r and the " i m p e r i a l i s t ” c e n te r , and
the " h is to r y of the world p r o l e t a r i a n re v o lu tio n i s th e h i s
to r y of th e s tru g g le between t h e S o v iet and i m p e r i a l i s t f o -
e i i . " 1 ^
As c a p ita lis m p asses piecem eal, fo rm erly c a p i t a l i s t
c o u n trie s a tta c h them selves to the S o v ie t c e n te r, which de
velops and grows in s tr e n g t h . The S o v ie t S ta te becomes the
c h ie f s o c i a l i z i n g fo rce (or fo rc e m o tiv a tin g th e d e c lin e of
the w o r l d - c a p i t a l i s t system ). I t f in d s a l l i e s in the c o n tra
d i c t i o n s of c a p ita lis m , and the i n t e n s i f i c a t i o n of the c la s s
and i n t e r - c a p i t a l i s t , p a t i o h a l i s t , and c o lo n ia l r i v a l r i e s
which rend th e im p e r i a l i s t s e c to r .
But sin c e the S o v iet Union i s th e main in stru m e n t
b rin g in g about the dow nfall of c a p ita lis m , i t is the duty o f
M arxists in o th e r c o u n trie s to base t h e i r p o l i t i c a l a c t i v i -
T J ~ , Of". Chapter I I above, p a r t i c u l a r l y p. 75 ff#
281
t i e s on the needs and i n t e r e s t s o f the S o v iet S t a t e , r a th e r
th an on the i n t e r e s t s o f t h e i r own working c l a s s e s . S t a l i n i s t ,
p a r t i e s th e r e f o r e are in stru m e n ts of S o v ie t fo re ig n p o lic y .
T his i a only l o g i c a l , since the main force b rin g in g about soc
ia lis m is not the p r o l e t a r i a t s tr u g g lin g a g a in s t th e bourgeoi
s ie on th e n a tio n a l l e v e l , but the S o v iet S ta te s tr u g g lin g
a g a in s t im p e rialism on the w o rld -le v e l. The i n t e r n a l c la s s
s tru g g le i s now merely the a l l y of th e S o v ie t S ta te which
i s conducting the r e a l l y s i g n i f i c a n t s tru g g le on the w orld-
l e v e l a g a in s t th e world im p e r i a l i s t system, which i s x^assing
p ie ce-m e al, c o u n try -b y -c o u n try .
I t i s tr u e , of co u rse, t h a t the p o lic y of i n t e r n a t i o n a l
communism, c a rry in g out a s tr a g g l e on th e w o r ld -le v e l, clash e s
w ith the i n t e r e s t s of working c la s s e s on the "lo w e r," i . e . ,
the n a t io n a l l e v e l s . This c o n f l i c t of i n t e r e s t s i s amply
dem onstrated by the c la s h between S o v iet and German (by way
o f example) working c la s s i n t e r e s t s w ith re g ard to the Ruhr
i n d u s t r i a l d i s t r i c t , S o v iet r e p a r a t io n s , M arshall plan a id ,
e t c .
S o v iet p o lic y based on S t a l i n ’ s view of the piecem eal
p a s s in g of c a p ita lis m .has met with asto u n d in g s u c c e s s . Coun
t r y a f t e r country has f a l l e n under S o v iet dom ination, due to
th e use o f Communist p a r t i e s and th e Red Army and w ith the
,ample co o p eratio n of c a p i t a l i s t i n s t a b i l i t y .
282
Indeed, the r e a l and g r e a t e s t s ig n ific a n c e of the
N orth A tla n tic P act i s th a t i t compels the S o v iet Union to
undertake a t o t a l r e v i s i o n of i t s European s t r a t e g y , s in c e ,
so f a r a s Europe i s concerned, the p iece-m eal th eo ry of
c a p i t a l i s t d e c lin e i s rendered im p o s sib le , a t l e a s t so
long as the A tla n tic community can ho ld to g e th e r . C a p ita l
i s t i n s t a b i l i t y , r e s u l t i n g in n a t io n a l c o n f l i c t s , and d i
plom atic and p o l i t i c a l c r i s e s , are the g r e a t e s t t h r e a t to
the u n ity of w estern Europe, a f a c t emphasized by the
European s o c i a l i s t s .
In the long ru n , w estern European u n ity and s t a b i l i t y
(so n ec essary to p rese rv e peace and n a t i o n a l independence
o f the people o f t h a t area) can be achieved only on the
b a s is o f dem ocratic s o c ia lis m . So long a s c a p ita lis m e x i s t s
i n Europe, the N orth A tla n tic P a c t can be only a m a k e -sh ift
s u b s t i t u t e f o r r e a l u n ity , as s ta b le only a s the n a t i o n a l -
s t a t e system , based on d iv e rg e n t c a p i t a l i s t i n t e r e s t s , w i l l
p e rm it. In th e long ru n , S t a l i n can c o n fid e n tly ex p e ct,
th e w estern "powers” w i l l s t a r t f i g h t i n g among them selves
f o r com petitive economic advantage (a s tru g g le a t f i r s t
ta k in g th e forms o f t a r i f f s , government-backed m onopolies,
ex p o rt-im p o rt r e g u l a t i o n s , e c t . , e t c . ) and w i l l end up
d is u n ite d and ( i f w ith o u t wars) f a i r p rey for th e p ie c e
meal form ula. Only dem ocratic s o c ia lis m i s m edicine enough
to c o r r e c t the n a t i o n a l - s t a t e co m p etitiv e d is e a s e , and
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se c u re th e u n ity o f i n t e r e s t s and purpose n e c e ss a ry to p r e
serve p r o s p e r ity , peace, and freedom in Europe.
Mature of S o v iet im p e ria lism . F o rtu n a te ly f o r the
w orld, the s i t u a t i o n fo r the dem ocratic a re a s i s not so bad
as S t a l i n p ic tu re s * For w h ile the c a p i t a l i s t a re a s are
s u b je c t to c o h tr a d ic tio n s and antagonism s which le a d to
s o c i a l upheaval, th e S o v ie t a re a s a re no more s t a b l e , and
t h i s S o v iet i n s t a b i l i t y w i l l s e rv e , more and more as time
goes on, as an e f f e c t i v e a l l y of ascendant dem ocratic
s o c ia lis m in the w est.
S o v ie t i n s t a b i l i t y a r i s e s , w ith Marxian i n e v i t a b i l i t y ,
out of the e x p l o i t a t i v e c h a ra c te r of th e S o v iet economy,
and th e S o v ie t i m p e r i a l i s t system . Even S t a l i n cannot e s
cape the c o n tr a d ic tio n s which a r i s e out of any (according
to Marx) e x p l o ita tiv e system.
The e x p l o ita tiv e c h a ra c te r of th e s o v ie t i n t e r n a l
economy i s found in i t s a u t h o r i t a r i a n , t o t a l i t a r i a n , p a t e r
n a l i s t i c p o l i t i c a l system , which m a in tain s and p r o t e c t s
a p r iv ile g e d b u re a u c ra tic (and m anagerial) c la s s based on
a b r u t a l system of fo rc e d la b o r. The p a r ty h ie ra rc h y in
S o v ie t R ussia l i v e s in a manner and s t y l e , compared w ith
the m asses, no t surpassed by any r u l i n g c la s s anywhere, and
i t r u le s in a manner and s t y l e ( t h a t i s , i t p r o t e c t s i t s
ac c e ss to p r iv ile g e , lu x u ry , and power) q u ite unique among
284
r u l i n g c la s s e s anywhere o u tsid e the worse f a s c i s t n a t io n s .
The sensor and the tommy-gunner have re p la c e d th e hammer
and s ic k le as the i n t e r n a t i o n a l symbols of v i c t o r i o u s
communism.
T his s t a t e of a f f a i r s —an oppressed working c l a s s ,
ru le d by ce n so r, tommy-gunner, s e c r e t p o lic e , c o n tro lle d
tra d e union, a m o n o litic p a r ty , and a l l the other ty p ic a l
r e p re s s iv e i n s t u t u t i o n s such as c o n c e n tra tio n camps, slave
la b o r gangs, p r is o n s , e t c . , on which i s based the p r i v i l
eged p o s it io n o f th e h ie ra rc h y o o f managers and p a rty b u r
e a u c r a ts —a l l t h i s i s incom patible w ith s o c ia l s t a b i l i t y ,
^hese c o n tra d ic tio n s le a d as in e v ita b ly to r e v o lu tio n a ry
upheaval as do c o n tra d ic tio n s based on c a p i t a l i s t e x p lo i
t a t i o n .
I t i s lik e w ise w ith in the S o v ie t im p e r i a l i s t system .
The system o f s a t e l l i t e s t a t e s — the ” tommy-gun dem ocracies”
— s e t up under S o v ie t hegemony i n Europe, i s e s s e n t i a l l y as
u n s ta b le as i t s Siamese tw in , c a p i t a l i s t im p e ria lism , ‘ ^ h is
i s because the e n t i r e economic and p o l i t i c a l l i v e s o f the
S o v ie t s a t e l l i t e s a re fo rced in to a mold to serv e Moscow
i n t e r e s t s .
T his e x p l o i t a t i v e c h a ra c te r of the S o v ie t im p e ria l
i s t system condemns i t to a l l the in h e re n t c o n tr a d ic tio n s
and'antagonism s which Marx b eliev e d would make c o n f l i c t , •
s tr u g g le , and r e v o lu tio n a r y upheaval i n e v i t a b l e . The main
285
,f a c t o r s le a d in g to i n s t a b i l i t y w ith in the S o v iet im p e r i a l i s t
system are much the same as those fehich e x i s t in the c a p i t a l
i s t i m p e r i a l i s t system .
In the S o v ie t dominated r e g io n s , e s p e c i a lly those won
a s a r e s u l t of World War II> the in v a d e rs have engaged in
w holesale plunder of th e c a p i t a l and movable w e a lth . What
could not be boxed up and c a rte d o f f , l i k e the n a t u r a l
re s o u rc e s , the p o p u la tio n s, and m in e ra ls , e t c . , the S o v ie ts
have ravaged through the s t r i c t l y c a p i t a l i s t device of
the S o v ie t c o rp o ra tio n , Vt/hich e x p l o ite d the dominated
reg io n s on th e t r i e d and tr u e p r i n c i p l e s o f c o lo n ia l "sto c k
com panies." In r e g io n s dominated by other a l l i e s , and from
which th e Red Army and th e S oviet c o lo n ia l a d m in is tra tio n
i s excluded, a p o lic y o f r e p a r a t io n s i s i n s i s t e d upon.
Over i t s v a s t c o lo n ia l p o s s e s s io n s , the S o v ie ts
Union has se t up c o lo n ia l a d m in is tra tio n s based on the
"Q u islin g system ." These p o s s e s s io n s a r e organized in to the
S o v iet economy c h i e f ly as bases of raw m a te r ia l s . A mer
c a n t i l i s t c o lo n ia l p o lic y i s c a r r ie d on in r e s p e c t to tr a d e ,
and so on*.
Thus, in a d d itio n to c l a s s s tr u g g le developing
w ith in the S oviet Union, we f i n d c o n tra d ic tio n s developing
between the S o v ie t Union and i t s c o lo n ia l a r e a s . But worse
s t i l l , th e re i s the growing t h r e a t t h a t the Q u islin g s them
s e lv e s w i l l conspire to r e v o l t a g a in st t h e i r Kremlin "bene
286
f a c t o r s . ” Tills r e v o lt a r i s e s because the Q u is lin g s , once in
power in a n a t i o n a l s t a t e , no longer need the K rem lin, and,
m oreover, the p o l i c i e s c a rr ie d on by the R ussian communists
in "d ev elo p in g th e s tr u g g le ” between the Soviet and c a p i t a l
i s t im p e r i a l i s t sp h e res, comes in to v i o l e n t c o n f l i c t w ith
the b e s t i n t e r e s t s of the Q u islin g s.
The world s i t u a t i o n looks much d i f f e r e n t to the men
i n the K rem lin— sa fe in s id e a v a s t t e r r i t o r y p r o te c te d now
by ma.ny b u ffe r s t a t e s — th a n i t does from B elgrade, for
example. And S o v iet p o lic y designed to i n t e n s i f y th e s t r u
ggle between the S o v ie ts and o th e r s t a t e s could be d is a s tr o u s
to Y ugoslavia, bu t mean n o th in g more th a n the lo s s of a
s a t e l l i t e to the s t r a t e g i s t s in Moscow.
I t is th e r e f o r e in e v ita b le t h a t communist le a d e r s
in the s a t e l l i t e s w i l l become more and more u n w illin g to
je o p a rd iz e t h e i r power, or ac ce p t a c o lo n ia l s t a t u s (p e r
haps as a raw m a te r ia l base fo r S o v iet in d u s try ) to s a t i s f y
the s tr a te g y of the R ussian b o ls h e v ik s .
Ror example, th e re is no longer any need f o r T ito
to ta k e o rd e rs from Moscow. He i s no longer dependent on
th e S o v ie ts to fin a n c e and s t a f f h i s movement, to under-
w irte h i s p a rty a p p a ra tu s . The Communist p a r ty of Yugo
s l a v i a today can base i t s power d i r e c t l y on n a t i o n a l power.
I t can itax the Yugoslav p eople. I t can conscrppt an army
—a n a t i o n a l army—and base i t on the re s o u rc e s and in d u s try
287
o f th e e n t i r e co u n try . Ho, Yugoslav communists no lo n g er need
R ussia.
And why, moreover, should Yugoslav communists je o
p a rd is e t h e i r power i n a bad game o f power p o l i t i c s played
from Moscow by men who are u n w illin g to gamble more than
a s a t e l l i t e or two in the game? Why should Red Y ugoslavia •
become a c o lo n ia l, raw m a te r ia l base fo r the S o v ie ts , when
i t can b u ild up i t s own in d u s try , transform i t s own economy,
and secure i t s own p o s i t i o n and p r e s tig e as the major pcwer
in the Balkans?
Thus, w hile th e -world may be transform ed as S t a l i n
p r e d i c t s , i t i s j u s t as l i k e l y t h a t i t w ill no t b e, i f
such a tra n s fo rm a tio n depends on any f o rc e s o th er than the
Red Army. In f a c t , i t i s j u s t as l i k e l y t h a t th e Red Army
and the Soviet Union w i l l bog down in the m ire o f e x p lo i
t a t i o n and c o n tr a d ic tio n s e x i s t i n g and d ev e lo p in g behind
the " ir o n c u r t a i n . ”
Summary. How the world w i l l a c t u a l l y go depends,
in the f i n a l a n a l y s i s , upon the i n t e l l i g e n c e o f men f r e e
to weigh the a l t e r n a t i v e s * The g re a t need o f the hour is
fo r men, p a r t i c u l a r l y in America, to open t h e i r eyes to
the f a c t th a t the ffg re a t world c r i s i s ” which we (and
e s p e c i a l l y our co lleg e p re s id e n ts ) are always t a lk in g
about, i s in f a c t a thorough-going world-wide s o c i a l r e v o l
288
u tio n , alre a d y in f u l l t r a n s i t i o n , and in many oases alm ost
com pleted. The w orld c a p i t a l i s t system i s i n f u l l d e c lin e .
Once t h i s f a c t i s recognized and openly ad m itte d ,
the decks w i l l be c le a r for a thorough d is c u s s io n , on a
co n scio u s, d ir e c te d l e v e l , of th e a l t e r n a t i v e s . Such a
d is c u s s io n i s i n p ro g re ss today in B r i t a i n , where a l l th e
b est s c h o la r s — co n serv ativ e and s o c i a l i s t a U k e —have turned
t h e i r a t t e n t i o n to the p r a c t i c a l problem s, those of e f f e c t i n g
an i n t e l l i g e n t t r a n s i t i o n and those o f c o n s tru c tin g an e f f i
c i e n t and w ell-w orking s o c i a l i s t economy. These a re th e
r e a l problems we in America should be fa c in g to d a y . To
c a tch up w ith the Yrorld in t r a n s i t i o n , we in America must
pass on from th e problem o f c a p i t a l i s t d e c lin e , to the
problems of the t r a n s i t i o n and the problems o f c o n s tru c tin g
models fo r a s o c i a l i s t economy.
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S fc u & S ffE fty o f S o u t n a r n Californio U fc lriiW

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Core Title Theories of the passing of capitalism

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