DEMOCRATIC SOCIALIST PERSPECTIVE

The postwar capitalist boom — in fact an expansion largely excluding the underdeveloped capitalist countries — was the product of conditions created by the Second World War and the long depression that preceded it. The working class in the imperialist countries had suffered numerous defeats in this period. The rise of fascism in Europe was the most severe of these setbacks, but throughout the imperialist countries there had been prolonged mass unemployment, attacks on working-class gains of the past, and savage cuts in living standards. Capital thus entered the postwar period enjoying a greatly increased rate of exploitation of labour, which was the basis for a substantial rise in the average rate of profit.

Ten years of economic stagnation, followed by the physical devastation of Europe and Asia in the war, had reopened capitalist markets for both consumer and producer goods. Massive military spending, particularly by the United States, provided a vast additional market, usually with guaranteed profits.

Within the imperialist camp the dominance of the United States (a dominance based as much on its huge internal market and intact industry as on its military strength) made the US dollar the relatively stable currency required for the expansion of international trade.

Finally, the moral and physical destruction of capital during the depression and in the war had sharply reduced the total of social capital on a world scale. The resultant decline in the average organic composition of capital led to a rise in the average rate of profit.

In these circumstances, technological innovations (often byproducts of wartime and Cold War military research) could easily be adopted by capitalist industry. The resulting rises in productivity increased relative surplus value even despite gradual rises in real wages, which in turn helped to strengthen capitalist ideological hegemony over the working class in the imperialist countries.

Technological progress also increased profit rates by reducing the value of raw materials in two ways: Through greater efficiency in the production of traditional raw materials, and by the replacement of natural raw materials with synthetics.

Increasing mechanisation of the production of raw materials initiated a process of partial industrialisation in a number of Third World countries. This, in turn, created markets for imperialist producer goods in these countries. However, by reducing the amount of immediate labour required, mechanisation began to undermine one of the main motives of imperialist investment in the Third World, namely low wages. As the cost of labour power became a smaller percentage of total costs in these industries and the required scale of fixed investment increased, wages became less important and political stability more important in imperialist calculations. Capital exports were therefore redirected to other imperialist countries.

Combined with the ongoing export of imperialist profits, this drying up of new capital investments prevented any generalised process of economic takeoff in the Third World. Even in the most fortunate of the neo-colonial economies (South Korea, Taiwan), the industrialisation that has occurred has been poorly integrated with the rest of the economy, while the profits it has generated have overwhelmingly been repatriated to the imperialist centres. Such distorted development does not generate a multiplier effect comparable to that which would follow similar investment in a developed country.

The great majority of Third World countries have not experienced industrialisation that would even reduce, let alone overcome, the vast difference in labour productivity between them and the imperialist countries. On the contrary, the productivity differential has increased, a process reflected in the worsening terms of trade for most Third World products and the increasing gulf between rich and poor nations. Some countries that borrowed heavily to purchase producer goods in the hope that these would bring development now face debts so massive that they will never be able to repay them.

These changing patterns of capital export during the 25-year postwar boom made transnational corporations an increasingly powerful sector of the world capitalist economy. With investments and production processes often scattered over dozens of countries, the transnational company gains insuperable advantages over less internationalised competitors through economies of scale, transfer pricing, knowledge of markets, access to credit and ability to circumvent national taxes, tariff policies and other forms of regulation.

The transnational monopolies' global reach makes them particularly well placed to reap the superprofits available from technological innovation. By their very nature, technological rents — a major source of superprofits in late monopoly capitalism — are transitory, lasting only so long as no significant percentage of the industry has caught up with the innovator. Through its presence in multiple national markets, the transnational can maximise the benefits of its own innovations and reduce, or share in, the rents of competitors.

The competition for superprofits between transnational monopolies largely accounts for the fact that their rise is accompanied by a growing tendency for innovation to become an end in itself. The competitive drive within earlier, laissez-faire capitalism was to revolutionise the means of production in order to produce commodities more cheaply. The same drive reappears in late monopoly capitalism as a compulsion to increasingly irrational innovation, in which new products become technologically obsolescent even before the demand for them has been met, or in which the new product is oversupplied from the very start because the market expects it to be superseded immediately by a further innovation. Shortages, superprofits and feverish expansion in particular branches of industry thus coexist with permanent overcapacity, declining profit rates and a tendency to overall stagnation.

Continuous technological innovation accentuates the parasitic character of monopoly capitalism. Increasing application of automated production techniques — aimed at lowering the costs of production by radically increasing labour productivity — reduces the place occupied by the direct producers in important branches of industry. At the same time there is a marked growth in the proportion of social capital and labour devoted to distribution and sales, with a massive growth in selling costs (advertising, unnecessary and extravagant packaging, etc.).

Under conditions of semi-abundance created by rising labour productivity, monopoly capitalist competition becomes increasingly directed into a struggle not for producing but for realising surplus value thus pushing the contradictions of capitalism to the point of absurdity. Instead of freely distributing the wealth created by the rise in labour productivity, instead of making it the foundation for a free development of the human being, late monopoly capitalism is forced to promote an artificial organisation of want amid material plenty through manipulative advertising aimed at the dishonest creation of a feeling of dissatisfaction among consumers. Instead of freeing people from the centuries-old obsession with securing the material necessities of life, semi-abundance under late monopoly capitalism results in the increasing enslavement of people to consumer products (moreover, products of mediocre quality and dubious use-value).

The rise of transnational monopolies as the dominant form of capitalist firm in the period of late monopoly capitalism is an expression of the fact that humanity's productive forces have developed to the point that they can no longer be used efficiently within the confines of a single nation-state, even a very large one. But because capitalism has not yet been overthrown in the imperialist countries, this outgrowing of the national state has led, paradoxically, to the concentration and centralisation of the powers of the imperialist state, and to an extension of its economic functions.

In the late monopoly capitalist period, the imperialist state has become an indispensable instrument for guaranteeing the profits of the monopolies. The shortening of the turnover time of fixed capital, the acceleration of technological innovation, and the enormous increase in the costs of major capital accumulation projects due to continuous technological innovation, increase the risks of any delay or failure in the recovery of profits from these projects. In these conditions, the realisation of profit by the monopolies — and not just the average profit, but the superprofits that they regard as their right — no longer depends on the mere working of the ``laws of the market.'' The capitalist state's economic policy must counteract these laws when their operation threatens the profits of the monopolies (for example, by imposing wage controls during periods of high or rising employment).

This intervention of the imperialist state into the capitalist economy gives rise to state monopoly capitalism, that is, capitalism characterised by close cooperation between the monopolies and the imperialist state. This close cooperation is not at all the result of the submission of monopoly capital to the state. On the contrary, it expresses the submission of the capitalist state to the monopolies, achieved largely by increasing fusion of the leading personnel of the state and the heads of the monopoly corporations.

This personal union is most fully expressed in the growth of state capitalist enterprises, that is, so-called public sector enterprises. While formally owned by the state, these enterprises are dominated by representatives of the private sector. Their boards of directors are made up largely of directors of private monopolies.

The role of government-run enterprises is to increase the rate of profit of the private monopolies by socialising and reducing the costs to these monopolies of the supply of electric power, rail freight, telecommunications, etc.

The nationalisation of unprofitable essential sectors of the economy serves the same end. This phenomenon often goes hand in hand with the privatisation of government enterprises made profitable through enormous capital investments by the state. In both cases it is a matter of nationalising the losses and subsidising the profits of the private monopolies.

Aside from direct and indirect subsidies to the monopolies and the use of state power to curtail independent organisation of the working class, imperialist state intervention in the period of late monopoly capitalism takes the form of manipulation of the economy in the interests of big capital. While the postwar boom lasted, there was a widespread misconception (widely accepted in the working class as well as elsewhere) that the boom was the result of wise policies on the part of governments, which had learned (from the British economist, John Maynard Keynes) how to even out the business cycle and suppress the other fundamental contradictions of capitalism. In reality, the most that capitalist economic nostrums could achieve — even in a period of expansion prepared by nearly two decades of depression, fascism and war — was to force the eruption of capitalism's contradictions into new forms.

In the 1950s and '60s, Keynesian policies did moderate recessions, which would in any case have been relatively mild even without intervention because of the underlying factors explained above. By creating artificial markets (directly through state orders, such as for military equipment, and/or indirectly through an increase in the supply of money or credit), the state made it possible for monopolised industries to go through the downturn without reducing prices. In weaker or more competitive branches, such artificial demand permitted the survival of companies that otherwise would have faced bankruptcy.

The cost of this, hidden at first, was permanent inflation. The longer the boom lasted and the more successful was state intervention in preventing major recessions, the more overproduction and overcapacity accumulated from one cycle to the next. At the same time, the increasing monopolisation of the capitalist economy made it easier for large corporations to absorb artificially increased purchasing power by raising prices instead of by increasing production. Larger and larger doses of money or credit became necessary to achieve even minimal anticyclical effects.

By the late 1960s, these contradictions had accumulated to the point that Keynesianism yielded only stagflation — the phenomenon of prices continuing to rise throughout a recession. The pace of inflation began to disrupt international trade, particularly after it forced the abandonment in 1971 of the postwar Bretton Woods agreement that had placed international finance on the gold exchange standard backed by the US dollar.

Fears of runaway inflation became a factor that led corporations to restrict investment and production. The arrival of the first postwar worldwide recession in 1974-75 announced the end of the long boom. Monopoly capitalism's accumulating contradictions, forced underground for a time, had resurfaced with a vengeance.