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From International Socialism, No.33, Summer 1968, p.38
Transcribed & marked up by Einde O’Callaghan for ETOL.
Western Capitalism Since the War
Michael Kidron
Weidenfeld and Nicolson, 36s
Michael Kidron’s book is an important contribution to the understanding of what appears to us all as an ever-deepening crisis. He suggests that the permanent threat of overproduction in capitalism may be close to being realised. The arms sector, which has been the principle offset to this threat since 1945 and which has been the profound cause of the high growth rates, the full employment and the post-war stability of Western capitalism, is now diminishing in importance. He traces in his last chapter the effects which the consequent crisis is already having on working-class organisation and consciousness. The thesis, in short, is that our current crisis is a major rather than a minor one, a crisis which threatens capitalism itself. The opposition to the system, Kidron suggests, will be based on the working class, operating initially through grass-roots industrial movements rather than the centralised traditional institutions of the labour movement. Clearly these arguments are of central significance for active socialists. The very fact that a set of priorities for political action are implicit in this theory of the Western crisis, and that this set of priorities is in some senses different from those suggested by other contemporary analyses, only serves to underline the importance of the theoretical debate, and the fact that the urgent need for socialist activity at the moment should not lead us to foreclose on the question of the forms which that activity should take.
The centrepiece of Kidron’s argument is Chapter 3 on An Arms Economy. For Lenin it was the possibility of overseas imperialist expansion for private capital which served to sustain the capitalist rate of profit. For Kidron this role has been taken on by the permanent arms budget. Arms expenditure has provided an outlet for the capitalist surplus. The necessary money is raised through a tax on private capital which would otherwise have been productively invested. Instead the surplus is spent on a fast-wasting end-product, which is, at least in a formal sense, a luxury good. For it never re-enters the other non-luxury sectors of the economy either as an instrument of production or as a means of subsistence. Finally, international political rivalry ensures that the stabilising influence of the arms budget is spread throughout the international system. ‘The very existence of national military machines of the current size, however happened upon, both increases the chance of stability and compels other states to adopt a definite type of response and behaviour which requires no policing by some overall authority’ (p.49).
This is the first part of the argument. Arms expenditure has been the central stabiliser of post-war capitalist economies, not planning as suggested in the Shonfield/Galbraith thesis, nor exports in the style of Beckerman, nor the international spread of innovation as put forward by, among others, the Harvard Business School group working under Vernon. According to Kidron, planning, trade and innovation are not autonomous, but derivative from the workings of the arms economy. Two points need to be made here. Firstly, Kidron does not explain how certain economies with a small arms expenditure do not suffer from overproduction: Denmark’s military expenditure is only 3 per cent of her GDP, and Norway’s only 12 per cent of her gross domestic fixed capital formation. The respective figures for the US are 10 per cent and 60 per cent. Clearly the explanation needs to be sought in the central role of the major arms economies (notably the US, the UK and France) in maintaining demand in the international market. This explanation needs to be made, and it suggests that our concern must be with the international capitalist system rather than with comparable national capitalisms. Only if we see how the elements of the international system are inter-related can we understand how and when subordinate parts of the system will be affected by crises emanating from the dominant nodes.
Secondly, there are dangers, I think, in the theoretical approach which seeks single ‘reprievers’ of capitalism. This approach is epitomised in the traditional discussion of imperialism, which is latched on very much as an annex to the analysis of capitalism, rather than the total theoretical system being reconstructed to take account of the new phenomena. If we view capitalism as a structured system, where there is a flexibility within certain limits, and where the total effect of the change in one structure on the rest of the system depends partly on the timing of this change, we are then able to assess in a continuous rather than a binary all-or-nothing way how far-reaching any change such as Kidron describes will in fact be. There is a danger of a certain irreversible linearity in Kidron’s argument: that if planning and innovation are predicated upon arms expenditure, then the dwindling of arms expenditure thereby suggests a dwindling o? planning and innovation. This cannot be inferred but must be shown to be true. Kidron does not fully convince one that if the role of arms expenditure declines some other off-setting structure will not move in to take its place.
Here we come to the second major part of the argument. If arms expenditure has played this central role, and if it does appear now to be declining, are there substitutes for the ‘off-setting’ function? Kidron considers three possible alternatives: a) reduced real wages; b) public expenditure; c) innovation.
The first alternative does not appear to be on for Britain at least. In spite of the system’s attempt to control the working man’s motivation as well as his actions, and in spite of the explicit attempt to reduce real wages currently, the tradition of labour militancy suggests that the average rate of profit cannot be kept up in this way over any long period. Certainly all socialists should be committed to resisting such attempts.
As far as public expenditure is concerned, Kidron argues that too much productive investment is ruled out because of opposition by private competitors on the one hand and on the other the threat of an ever-falling rate of marginal productivity throughout the economy. ‘Too much productive expenditure on the part of the state would both upset the balance between individual capitals and accentuate the system’s bias towards over-production’ (p.46). The second point is the important one, and it holds given certain classical assumptions, notably that of given tastes. Turning from productive to non-productive public expenditure, Kidron suggests that this is ruled out because of international competition. Any country committed to full employment through ‘luxury’ hole-filling public works would almost certainly suffer ‘a degree of inflation that would prise the single economy out of world markets’ (p.48). This part of the argument seems insubstantially based. It assumes that liberal international trade and payments policies are maintained. Yet with the threat of a significant crisis, these policies have been the first to go. Indeed exchange controls and import quotas seem very much on the cards in Britain in the next few years, quite apart from the growing strength of the dirigiste lobby in the US.
Nor does the argument against the third possible substitute, innovation, appear to hold up. Certainly military outlays constitute a high proportion of expenditure on R & D in a number of countries (52 per cent in the US, 39 per cent in the UK, 30 per cent in France). But for Germany the figure is only 15 per cent, and for others still less. Were military outlays to diminish internationally, there would still be economic pressure for innovation – particularly in the field of new product creation. It is here that the question of a set of given tastes subject to saturation comes in. This is a classical assumption. But what we in fact find is that the levels of demand for products are raised at what would otherwise be saturation points (two car families, built-in obsolescence and so on) and new products are created or old ones refurbished with partial innovations (colour TV and electric portable typewriters for example). Therefore, both certain forms of public expenditure and the potential of non-military innovation offer some alternative to arms expenditure as an offset to overproduction. One should add others, notably the opening up of the Eastern European market, and the continued expansion overseas of the giant corporations.
East-West trade on its own would not for some time yet constitute a sustained off-setting factor, though by 1966 exports to the East were running at some 10½ per cent of total world exports. Overseas expansion on the other hand still maintains a considerable importance. Kidron discusses the growth of international firms in relation to rising prices, but he does not relate this to the problem of overproduction. Nevertheless, as he himself has shown elsewhere, there still appear to be considerable outlets for profitable foreign investment and for countervailing rationalisation and concentration by the threatened national capitals.
Kidron’s thesis of a major crisis through overproduction therefore seems to me far from proved, particularly as arms expenditure is likely to decline gradually rather than rapidly, and will consequently give the system some lee-way for ‘re-orientation.’ This does not invalidate much of what he has to say in the second part of the book on the impact of the crisis. But it does break the link between our current experience of the system and the forecast that these very experiences are the opening chords of a major crisis.
Indeed, Kidron at times seems himself uncertain of this connection. He makes frequent use of the subjunctive and conditional tenses, as well as employing a number of chemical images. He talks of the ‘potent alchemy’ when the room for compromise narrows at the workplace forcing workplace committees out into general political involvement (p.140); of the ‘violently unstable mixture when politics and economics are fused’ (p.122); and the ‘explosive mixture’ when rising prices and international integration come together (pp.73-4). Yet in spite of this uncertainty he finished the book by making explicit what was implicit in the continuing argument:
‘For as the instabilities of the arms economy ... develop and place increasing strains on established society, and as that society responds with increasing centralisation, the decline of the traditional restraints on workers’ action might become crucial. For these are circumstances in which the fragments of direct reformist activity tend to fuse and in which mass reformism of this son is liable to be suffused with revolutionary purpose.’ (pp.147-8)
If one cannot accept Kidron’s central connection, the very fact that he insists that connections must be made throws the ball back to those who deny the thesis of a major crisis. This is one of the reasons why political activists and political economists should read this book. But it should also be read for the analysis of the more immediate features of the current crisis which we are already experiencing. The chapter on Workers is particularly valuable and suggests forms for socialist action which if not sufficient on their own, are certainly necessary if the left is to be successfully united.
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