Peter Green Archive   |   ETOL Main Page

Peter Green

Nation-States and the World Economy

A Review of Nigel Harris’ Of Bread and Guns

(Spring 1983)

From International Socialism 2 : 19, Spring 1983, pp. 85–112.
Transcribed by Christian Høgsbjerg.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The world, as some people say, is getting smaller every day. The marvels of modern communications, supersonic aeroplanes and satellites, have diminished the geographical obstacle of distance. A century or so ago Jules Verne could hail the revolutionary transformation of time and space wrought by industrial capitalism, by having his hero Phineas Fogg travel ‘around the world in eighty days’. That as we now know was just the start.

Communications remain subordinate to the requirements of those with power and money. The financial markets of the world are now open twenty-four hours a day – with London, New York and Hong Kong between them embracing the different time-zones, so that at any second of the day someone somewhere is buying gold or selling pounds. Most of us, however, cannot even afford the cost of a Concorde flight to New York.

The whole system is still predicated on the labour of the world’s workers, those who produce the real wealth to which money is but a claim or token. The workers remain dispersed, isolated, seeing the world only through the distorted parochial prisms of national cultures’. We are, in Nigel Harris’s telling phrase, caught up in the preoccupations of our national villages, obsessed with the comings and goings of the local barons, or the vanities and rhetoric of the Parish council (for governments are, he argues, now little more than Parish councils’ in relation to the world economy).

But the parish councils are impotent, the national villages completely dependent upon the international division of labour, and vulnerable in consequence to the anarchic fluctuations of the world market. The barons themselves have little loyalty to the village, with their loot stashed away in a Swiss bank, always ready, like the Shah of Iran, to clear out should the workers get violent.

The world economy is more integrated today than most of us realise. The forces of production are now thoroughly internationalised, symbolised in the introduction of the ‘world car’ by General Motors – identical cars (apart from the trimmings) produced in locations across the globe, sourced with components from a dozen or so countries. Even the grand autarchies of Russia and China have become monuments to the impossibility of combining growth with isolation from the world market and are being drawn slowly but surely into deals with foreign capital, borrowing from the banks, and the specialised place in the global division of labour that all that entails.

Yet the world remains divided up into nations, with frontiers and barbed wire, passports and immigration controls, customs duties and 180 or so varieties of paper money. Nations are demarcated by states, which have carved up the whole world into often quite arbitrary patches of territory in the last couple of centuries (and now seem to be proceeding to the oceans and space). As Nigel Harris comments:

By now, the division of the globe is so all-embracing, the fences that divide each national garden built so high, that its sheer novelty in human history is no longer apparent (p. 24)

The world economy is also in crisis. The advent of stagnation can be traced back to the mounting tensions of the late 1960s, but the first sharp synchronised turn from boom to slump came in 1974. Since then temporary recoveries, even quite rapid bursts of growth in parts of the system, have simply faded away into even deeper slump. Whilst fluctuations in the overall level of activity continue the underlying crisis persists, resistant to all the exhortations and medicines that are thrown at it.

The crisis produces turmoil. Stagnation in aggregate indices of output conceals widely varying fortunes for different capitals, or industries, or countries. Capital chases the short-term gain across the world’s financial markets. Huge multinational corporations desperately rationalise operations, closing down unprofitable (but often still productive) plant, and relocating chunks of their activities in the cheap labour government subsidised zones of Mexico, Mauritius or South East Asia.

The crisis has provoked an accelerated movement of capital, a rapid growth in rates of ‘foreign’ investment, international bank lending. It has, in some respects, speeded up the integration of the world economy, which had already developed to such an extent in the long boom of the fifties and sixties.

Despite this, states remain jealous of their sovereignty, competing with each other for shares in world production and trade. In the face of the crisis they redouble their efforts to manage national economies, to command the waves which came thundering down upon them. In some cases, notably in the smaller less developed economies dependent upon one or two raw materials, at the mercy of world price fluctuations, the cause was hopeless -though that did not stop governments in places like Ghana and Jamaica trying. In others, notably in the larger Western industrial economies, the pretensions persist, although the reality gets

grimmer. The crisis has exposed the glaring contradiction generated by capitalism between the internationalisation of the forces of production, and the persistence of nation-states. It is a contradiction which contributes to the crisis itself, making the stagnation more protracted. The market limits the power of states. But states can intervene to prevent the crisis resolving itself through the classical mechanisms of slump.

It is this contradiction which is the central theme of Nigel Harris’s bold, ambitious, often brilliant work. It is impossible for me to adequately summarise the riches contained in Of Bread and Guns. Anyone who had heard Nigel Harris speak over the last few years will have some idea of what to expect: the magisterial command of his material; the incisive analysis of those bewildering events thrown up daily by the crisis; the demolition of the myths and rationalisations purveyed by politicians and the media; the passionate commitment to the struggle of the workers of the world which gives his whole work a vigour completely lacking in the dried up, turgid stuff which passes itself off as Marxism in academic textbooks today.

Not that it is always easy reading. The pages are packed with nuggets of information, complex arguments compressed into a few paragraphs. Whole books could easily have been made out of individual chapters. At times the argument becomes too allusive, even cryptic. Nigel’s reluctance to let theoretical complexities or technical jargon intrude upon the flow of his story is understandable. But it means that at times the assumptions upon which his assertions are based are not spelled out, or that the Marxism within which he is working is not clearly in view.

Nevertheless the book is beautifully written, full of compelling images and stunning factual illustrations. The pace and verve of the narrative are matched by the clarity of his occasional summaries of the argument. Of Bread and Guns is a work which will amply repay the effort it demands. Let me urge anyone who has not read it to do so, before bothering with this review. The book opens with a dense but imaginative attempt to reconstruct the arguments of the classical Marxist tradition particular he subjects to a withering exposé the mythology of national identity which pervades, sadly, so much of the thinking even of people on the left. Let me single out just one passage which says so much in just a few sentences:

When the British economy grows that is attributable to the wonderfulness of the British: when it declines, it is the result of the low cunning of foreigners – they work too hard, they cheat, they are too efficient, have low wages, and so on. The fact that the people who inhabit Japan or Germany or Hong Kong are chained to the same machine, running automatically at the same speed to produce an identical output is lost in a welter of moralising. (p. 12)

The book closes with the solution, which bewildered a hapless Guardian reviewer,

The reconstruction of the world system on the foundation of popular control, on the basis that those who labour shall hold the power to determine the system, that the needs of the majority shall govern growth and change in the world’s output. (p. 273)

This conclusion is neither glib nor strident. Socialism emerges as necessary but not inevitable, from an analysis guided by the maxim which introduces the final chapter, the requirement of ‘Pessimism of the intellect; optimism of the will’. The system has produced a rhythm of struggle as well as a rhythm of the trade cycle (although the two do not coincide in any simple fashion).

Though brief, the closing paragraphs of Of Bread and Guns are a stirring tribute to the indomitable currents of resistance amongst the oppressed and exploited of the world. They also contain a sober analysis of the way in which the power which workers can exercise has been dissipated in isolated struggles, disarmed by the absence of organisation and the ‘disintegration of a tradition of revolutionary socialist thought’. They reveal Nigel Harris who is himself a product of the best traditions of International Socialism.

The dominant focus of the book, however, is upon the objective rather than the subjective – upon the impersonal, anarchic workings of the system, rather than upon the ideologies (although these figure, usually as objects of ridicule, in passing) or the resistance. Some may criticise Nigel for this emphasis but I do not. It is necessary for us to be clear about what we are fighting, and to understand that capitalism is indeed a system, not reducible to the consciousness of individuals, or the whims and follies of its rulers.

The scope is vast and the themes are many. The contrast between the astonishing expansion of the productive capacity of the system in the years of the ‘Great Boom’, and the stagnation and waste or the decade of slump which has followed. The way in which capital has tried to shift the burden of the slump onto the working-class and compensate for declining profitability with cheap labour, whether it be in ‘export processing zones’ in selected parts of the ‘Third World’, or the recreation of sweatshops and a ‘black economy’ inside the West itself.

Indeed one of Nigel’s recurrent arguments is that in reality there is only one world – and it is becoming increasingly homogeneous. Rapid industrialisation in parts of the ‘Third World’, is matched by the re-emergence of sweated non-unionised labour on a huge scale in Italy, the creation of ‘free enterprise zones’ in Britain, or the use of illegal immigrants at minimal wages in American agriculture. As for the ‘socialist alternative’, the countries of Eastern Europe are subject to rampant corruption, waste, and burgeoning black markets. In the extreme case of Hungary there is a far-reaching attempt to integrate with the Western economies, with markets, private enterprise and profits all now in favour.

But all these themes are in a sense subordinate to the guiding theme which I have already mentioned – the contradiction between the internationalisation of capital, and the nationalism of states; or between the overwhelming power of the world market, and the attempts by states to control their own national economies. It is on this that I want to focus in the rest of this review.

In particular I want to stress the significance of Nigel Harris’s work as a reappraisal of a whole stream of thought in classical Marxism, and provide a detailed critical commentary on those parts of the argument which are not so satisfactory. There are difficulties in spelling out the issues here.

For one thing we are dealing with complex and interwoven tendencies. The world economy is neither static nor one-dimensional. It is not, for example, possible to construct simple quantitative indices, balancing up so much nationalisation or state intervention here, or so much internationalisation there. As Nigel himself emphasises, the divisions are blurred, the concepts necessarily fuzzy, and the statistics therefore often semi-fictional (see for example his comparison, on page 123, of attempts to distinguish the nationality of companies, with the Nazi attempt to distinguish between Jew and Aryan).

Attempts by states to impose restrictions on capital, or to control their national economies, themselves reinforce the internationalisation of capital. Banks move funds offshore to escape the controls. Japanese manufacturing companies invest in other countries to leap over the protectionist barriers of import control the world market forcing them to nationalise ailing companies, or to support the pursuit of foreign trade with export subsidies, tied aid projects, and diplomatic manoeuvrings.

There is a further difficulty. To make sense of the world we need a theory, a set of concepts, which enables us to construct relationships, to pick out what is significant, and guide us through the bewildering mass of information. But the concepts we possess, almost take for granted, are loaded with the residues of the past. That can be as true of Marxism as of other theories. We think and work with notions of British, or French or Russian capitalism or state capitalisms because those notions have guided us or our forebears effectively in the past. But if Nigel is right they are no longer adequate.

To counter what he sees as an obstacle to understanding Nigel has thrown his weight in the other direction. Of Bread and Guns is an outright challenge to the concepts with which so many of us have operated. But Nigel does not spend space or effort in clarifying his relationship to other species of Marxism, or on dissecting the theoretical tradition from which he himself comes. [1] Only in a short Appendix to chapter 7, The End of Capitalism in One Country, does he confront the issue head on.

Let me proceed then by trying to clarify what I consider to be the crux of the argument, by locating Nigel’s work in the context to which it belongs – the tradition of Lenin and Bukharin, Trotsky and Cliff.

State capitalism and the world economy

It was Marx in the Communist Manifesto who first emphasised that capitalism was creating a world economy. Capitalism itself emerged out of the rapid expansion of trade following the opening up of the East Indies (by European merchants) and the colonisation of the Americas. In turn in pursuit of expanding markets or new sources of raw materials the bourgeoisie conquers the world:

To the great chagrin of reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed not only at home but in every quarter of the globe ... In place of the old local and national seclusion and self-sufficiency we have intercourse in every direction, universal interdependence of nations. [2]

The argument provided the scientific justification for the insistence that ‘the working men have no country’, and for his final call to ‘Working Men of All Countries Unite’.

In his major economic work, Capital, however, Marx pays relatively little attention to the world market. This is partly a question of levels of abstraction – the argument is developed by dealing with the structure of capital or capital in general in abstraction from time and space. It is not, although many have interpreted it this way, because Marx sees capitalism as a matter of separate national modes of production, the external relations of which, their trade, are only a secondary matter. The outline of what was to have been the complete work shows that Marx intended to write a whole volume on the world market, and would then have dealt with particular national economies only in terms of their interrelationship within the total world system. [3]

That work unfortunately was not written and we are left with only fragments pointing to the emphasis Marx continued to place on the primacy of the world market. But the absence helped make possible the emergence of another current of ‘Marxism’, the current of Kautsky, and later of Stalin and the Communist Parties. This did theoretically confine capitalism within national boundaries, and therefore saw the nation state as capable of exercising control over its own particular capitalism regardless of what happened in the outside world.

This tradition of ‘socialism in one country’ (which, it is often forgotten, was common to both ‘social democracy’ and ‘Stalinism’, both sharing the same rotten nationalism and belief in the state that Marx hated) was of course rejected outright by Lenin and Trotsky. But as Nigel Harris has himself observed, if the debate was about ‘industrialisation in one country’ rather than ‘socialism’ there was a sense in which Trotsky could be seen as wrong and Stalin right. It was possible in the 1930s for the Russian state to deliver the goods, though at an enormous cost. It was possible then for a state to survive its isolation from the world economy, and still build up its industrial base. [4]

More generally, if at times Marx seems to see capitalism as simply dissolving national boundaries and undermining the basis for independent states, the events of the first half of the twentieth century showed that this was at best a partial analysis. The smooth flow of capital congealed into particular forms set by the imperialist states of the industrial core of the system and their colonial or subordinate extensions around the world. The epoch of imperialism described most notably by Bukharin and Lenin was an epoch in which there seemed to be a fusion of national capital (heavily concentrated by monopolies and the banks) and the state.

The events of the 1930s and the response to the devastating crisis of that period confirmed the validity of Bukharin’s analysis of a world divided up into competing state capitals. [5] The retreat into autarchy, of national isolation combined in some cases with formal or informal empires providing the necessary sources of raw materials and protected markets, characterised not just Russia but all the major Imperialist powers.

The situation was unstable, the carving up of the world uneven and a recurrent source of friction. Imperialist rivalries led inexorably to war. But war, or the threat of war, itself substituted for other forms of competition. Military competition also enforced a compulsion to accumulate, demanding the construction of heavy industry to ensure the means of survival and destruction. The competition between national state capitalisms acquired a logic, a dynamic, of its own.

The importance of this analysis for the theoretical tradition of the SWP will be familiar to many readers. It underpinned in particular Cliff’s analysis (in the 1940s) of Russia as state capitalist. Cliff showed that, although Russia was not integrated into the world market, it was part of a world system of competing military powers. It was not subject to the constraints of producing commodities for exchange, for sale on a competitive market. But it was subject to the constraints of the arms race, of having to accumulate and continually increase the pressure on its labour force for greater productivity, to keep up with its rivals.

But Cliff’s path-breaking analysis left open a number of questions. Was Russian state capitalism, and its East European extension, an exceptional development, or did it presage a world of state capitals of the same mould? Could Russia maintain its isolation from the world market, or would it eventually be drawn back in, compelled to share in the international division of labour? Could the Stalinist model of isolated national economic development be replicated in other economically backward countries? Was the state generally becoming the primary agent of accumulation, and what did this mean for the functioning of the world economy?

The influence of the tradition of Bukharin and Cliff, and a concern with the fundamental questions I have just outlined, are evident throughout Of Bread and Guns. It appears in particular in Nigel’s analysis of war and ‘guns’, one area in which states are evidently still paramount. Nigel has no time for those who perversely seek to rationalise away the Russian bombs and tanks in the curious belief that you have to take sides in the lunacies of the cold war. He exposes the absurdities of this world of competing states in which each one claims to possess the monopoly or right and virtue whilst piling up ever higher quantities of instruments which can destroy us all. He observes sardonically that:

Here the achievements seem to dwarf all others; indeed when included in the total picture of the world system, they become so impressive that we are tempted to conclude that the world system is first and foremost a collection of war-making states, a global system of production whose final achievement is auto-destruction. (p. 214)

Few people have done more to develop the theory of state capitalism than Nigel Harris himself. In a whole series of articles stretching back to the 1960s he has applied that analysis to the attempts by some ruling classes in less developed countries to follow the Russian path, to pursue their own route to national economic development. [6] In the unjustly neglected Mandate of Heaven: Marx and Mao in Modern China he anticipated some of the themes in Of Bread and Guns. [7] In Mandate of Heaven he exposes the bankruptcy of the Maoist model and the pressures forcing China into establishing links with the world economy. The Russian model, he convincingly shows was exceptional. The dependence of rapid economic growth on access to the international division of labour and the most advanced technology, have made it impossible to repeat for any sustained period of time, the rapid primitive accumulation of the Stalinist epoch in isolation from the world economy.

In Of Bread and Guns Nigel extends this analysis to the world economy in general, and to the already industrialised Western economies in particular. He notes the way in which the functions of the states have expanded remorselessly in those economies. He is fully aware of the attempts to extend the control of states over their national patches which characterised the heyday of Keynesian ideology and the ‘managed economy’. Yet, he argues:

The appearance of the steady growth of state power was a plausible one only from within a given country; outside, in the world system, the growth of the essentially private system (even if state-owned companies also operated there) was more impressive ... For capital, national loyalty was strictly contingent, a bargain based upon a profit rate which, although influenced by state behaviour and subsidies was ultimately not determined by it. Indeed the world system that stood revealed in the 1970s had a closer resemblance to the classical theory of a capitalist system than any that had existed before – a mass of competing units, none of which was large enough to influence the market’s outcome, and lacking official governance in the interests of all competitors.

But the ending of sustained growth, the growth of unemployment, revived the necessity of states to control more closely their domestic patches. The new structure, however, severely limited their capacity to do so; efforts to do so threatened to damage both the world system and thereby each ‘domestic economy’. The remedies of 1931 looked increasingly utopian: the state as an economic agency was becoming obsolescent, (pp. 67–68)

It is a powerful passage, in its conclusion a startling one. It is also a statement with a sharp political edge. If the remedies of 1931 are utopian, if states can no longer control their national economies, except through damaging the world economy as a whole, then the thinking of the reformist left is ‘utopian’ and ‘reactionary’ too. All the various Alternative Strategies, the elaborate plans, the proposals for import controls, fall apart, apart from other objections, because their basic assumption is invalid – that there is a self-contained national economy which can be planned and ‘protected’.

With that argument, with the central political thrust of Nigel’s work, I am in wholehearted agreement. But we need to be wary of the persuasive, almost rhetorical, force of the passage as a whole. Are states really more economically obsolescent for capital than in the past? (And what does the word ‘economic’ mean here?) If the remedies of 1931 are utopian we still have to consider why so many echoes of the responses of governments in the ’30s can be heard today. Was the 1930s or any other period of capitalism an age in which there was ‘official governance in the interests of all competitors’? If, as is certainly true, no single unit (be it state or corporation) can control the world market, what is the significance of the innumerable attempts to do so?

At times it seems as if Nigel is merely filling out and elaborating the argument put by Chris Harman in 1977 in his criticism of Mike Kidron. [8] Kidron had presented very sketchily a picture of a world divided up into self-contained state capitals – an attempt to generalise Cliff’s analysis of Russia to the world as a whole. Harman argued effectively that this ignored the other trend in the system – the internationalisation of capital. The system was thus characterised by two trends which were both contradictory and complementary – towards state capitalism with states seeking to exercise greater control over their respective national capitals – and towards an internationalisation of capital, the growth of multinationals and international banking, which undermined the effective power of states (especially the smaller or weaker states which constitute the great majority) over the market.

But Nigel Harris has, as I read him, gone further. In his stress on the power of the world market and the impotence of governments it is as if he has adopted the diametrically opposite position to Kidron – the world market is all, the states are obsolescent. More accurately, and fairly, summarised, his argument is that there is now a marked disjuncture between the interests of capital and the interests of states. For capital ‘national loyalty’ is ‘strictly contingent’. States by contrast are necessarily ‘national’, committed (although a particular ruler may not be) to a piece of territory, and its associated population, from which there is no escape.

Or as he puts it in his important appendix ‘The End of Capitalism in One Country’ (the title of which says it all really), Marxists since Lenin have assumed an identity of capital, in the sense of companies, and the state. The state was seen as representing a clearly identifiable national capital, pursuing and protecting its interests at home and abroad. Yet:

The state was indeed fashioned by capital to prosecute its interests. But the state is wedded to territory, to the maintenance of the physical means to control and extend its territorial power; companies are not ... However, the economic system is not governed by the arbitrary lines of national boundaries. The process of the accumulation of capital is constantly driven to internationalisation, towards forming the largest markets, serviced by the largest concentrations of capital ... Company behaviour ultimately depends upon an appraisal of world market advantages of different locations rather than some overriding nationality. For new investment, businessmen shop around between states just as they do between local authorities, seeking the best deal. The transfer of profits thus becomes the mechanism for the relocation of productive assets between different territories ... (pp. 231–34)

I have ignored the mass of supporting evidence Nigel accumulates in support of most of those propositions. I have also omitted the careful qualifications with which he surrounds the argument, in order to highlight the salient point.

The difference, at least of emphasis, between this and what might be called the ‘SWP tradition’, can be seen by comparing the above with some of the sections in Chris Harman’s recent article on the crisis. [9] There he refers to the state’s need to deal with multinationals and the international capital market, and the dependence by multinationals on their home bases, on support from state resources, and on state protection of their international operations (‘e.g. in trade negotiations, against threats from radical governments and so on’). Harman is certainly not arguing that states can control the market – but his repeated emphasis on a world of ‘competing state capitals’ (East and West) implies that it is still possible to associate states with particular blocs of national capital even if the distinctions are increasingly blurred by the internationalisation of capital.

I am not trying to create some spurious notion of a deep theoretical divide here. In part the difference is much more one of emphasis and formulation than of substance or implication. In part it is a matter of the way in which Nigel has thoroughly reworked the terms of the argument. He is not, emphatically not, simply counter-posing the power or autonomy of multinationals to the weakness of individual states. Many people, not least reformists such as Stuart Holland, have done that. [10]

Nigel’s argument about the ‘internationalisation’ of the system is much more thorough and far-reaching. It is a process which has occurred on several levels and penetrated deep into the heart of every domestic economy. It has involved an internationalisation of capital ownership, finance, and tax evasion as well as of production activities. It involves deals between independent companies as well as overseas investment (i.e. the deal between British Leyland and Honda as well as Ford producing in Britain or Peugeot taking over Talbot). It involves above all an accelerating integration of production through trade, corresponding to an increasingly specialised international division of labour. In every country both imports and exports have been growing, and the attention focused on the first invariably neglects the second. As he remarks very early on in the book:

Even the small manufacturing firm depends upon imports to produce. Intra-industry trade has been the core of the growth of world trade since the Second World War – that is trade between the same industry in different countries each producing specialised inputs to the other. The label ‘Made in X’ only indicates where the finished article last came from, not who made fundamental contributions to its making. (pp. 19–20)

All this is supported with an abundance of figures, examples, documented evidence, even some striking graphs. The case is overwhelming, and only those seeking desperately to defend their alternative strategies and schemes for import controls will bother to dispute it. But it leaves open the question of the continuing relationship between particular states and this increasingly internationalised capital.

Here Nigel’s argument becomes less satisfactory. In particular there are problems both with his analysis of ‘national rivalries’, of the competition between states, and with his analysis of the repercussions of state actions on the crisis.

States and national rivalries

The fundamental thesis of Of Bread and Guns is absolutely correct – that the world economy should not be seen just as the sum, the aggregate of a collection of self-contained national capitals, but as the totality within which all capitals struggle to survive. It conforms as I have suggested to a fundamental thesis of Marx himself. But, as the subsequent debates among Marxists have shown, that assertion does not by itself settle the question of precisely how national economies and states are connected within that totality.

It is also true that particular capitals need have no loyalty to any particular state – that they will use offshore tax havens, speculate on the currency markets, shift assets between countries, according to the demands of maximising their profitability. They may well have little concern for the impact such actions may have on the fortunes of a national economy, or the policies of a particular government (regardless of its political complexion, although obviously threats of nationalisation will tend to hasten their departure). But it does not follow that the dissociation of capital and nation-states has proceeded quite as far as Nigel sometimes suggests.

Let us examine first where these developments leave the states according to this account. Four types of state activity in particular are emphasised; though this is to over-schematise what Nigel says:

  1. All states have to provide the necessary infrastructure and supply of services. That includes a whole variety of physical resources, energy, roads, airports, and other means of communication. It also includes the provision of the appropriately skilled (and preferably docile) labour-power. These are simply minimal conditions, without which states will be unable to either develop their own economic base or attract international capital. ‘Large public sectors’ will, however, ‘root an important section of private capital’ (p. 233), especially in areas such as construction.
  2. The final point also applies to the ‘defence industries’ or the military sector, where, especially, but not exclusively, in the major industrial powers, some of the largest and most profitable companies are dependent upon orders from their ‘own’ government (see p. 224 for the United States example, and the point could equally well be made about Britain, France, South Africa or Israel). This, of course, connects with the point made earlier about the paramountcy of the state in war, and within the ‘military-industrial complex’.
  3. In response to the crisis states engage in ‘defensive action’ to protect particular sectors, to prop up bankrupt or declining sections of capital. This has involved a whole range of moves from outright nationalisation, to the formation of cartels (grouping all capitals in a particular industry) and rationalisation schemes (as in the recent case of government subsidised scrapping of foundries in Britain), to subsidies to private capital, and ‘protective’ import controls. But all of these, Nigel argues, are destructive or wasteful – draining resources away from the profitable sectors within the national economy, or damaging the level of world trade and thus the whole world economy (pp. 80–81).
  4. States engage in ‘competitive auctions’ (p. 108) to attract the favours of international capital. The bribes and carrots, ranging from tax concessions to huge investment subsidies, have indeed reached staggeringly absurd heights. Nigel has great fun with the example of the Fords engine plant in Bridgend, Wales, where the government ended up contributing £140 million or 78% of the total investment (p. 109). He could have cited many other examples, not least from the motor industry, where General Motors and Nissan have both trailed ‘investment plans’ around half the countries in Europe looking for the best deal. Just as region competes with region, or new town with inner city, within Britain, for new capital without adding anything to the aggregate amount of investment or jobs – so states are competing with each other for a limited pool of new investment by the multinationals. With the growing attractions of ‘export processing zones’ with tax concessions and cheap labour (pp. 147–149) in the less developed countries, even the strongest Western states can no longer afford to opt out of the game.

The argument is, it should be apparent, careful and subtle. It is also qualified in some significant (if rather parenthetical) remarks.

Nigel notes that capital in its productive form (when it is fixed or immobilised in buildings, plant, or offices) is necessarily tied to a piece of territory, and therefore to a particular state (p. 233). Financial or money capital is conversely free to move almost anywhere, and is correspondingly much more internationalised. It is a distinction he could have made more of, because it has definite consequences in a time of slump. For instance, one of his more striking examples of internationalisation is the Shah of Iran’s purchase of a large chunk of the shares of Krupps (p. 122). But, in the current crisis of the West German steel industry, it is the West German state which has intervened to reorganise the whole industry, including Krupps’ steel interests, into two major groups, as a condition of official aid. [11]

Nigel argues that over time ‘all old capital becomes new’ (p. 233) and refers to the ‘extreme’ example of microelectronics companies with high rates of turnover and a potential for shifting locations every five years. But it is an extreme case. Even British companies which are more internationalised than most, and have been shifting assets out of the country at a rate of £8–9 billion a year recently, still have the bulk of their admittedly crumbling assets inside the UK. [12] The point applies even more strongly to that other extremely internationalised sector of capital, American corporations.

In response to the slump some American multinationals have actually retreated back into their home base. Chrysler disposed of all its major foreign assets. International Harvesters is flogging off its truck and construction equipment plant in Europe. [13] Even Ford almost the archetypal multinational, has drained funds from overseas subsidiaries in a desperate attempt to sustain its American investment programme, and hang on to its ‘home market’. Nigel would reply, perhaps, that the United States is a ‘special case’ (p. 236) with the largest domestic market of all, and so it. But then so in a sense are they all special cases.

More generally, what is missing from Nigel’s account is the role of the state as itself an agent of accumulation not just the ‘state and capital’ but the ‘state as capital’. The absence is perhaps the more surprising as Nigel has himself elsewhere emphasised this function of the state especially in Less Developed Countries with a limited supply of private capital. Even in the more successful, the Newly Industrialising Countries, the glorified ‘free enterprise’ city states of Hong Kong and Singapore are the exception.

Otherwise, and notably in Brazil, South Korea, and Taiwan, the state has simultaneously opened up sectors of the economy to the multinationals, fostered its own private capitalist empires, and pumped funds into the heavy industrial sectors of the economy such as steel and shipbuilding. Nigel mentions the fact that Fortune’s list of the top 500 companies in the world now includes 33 registered in the Less Developed Countries (p. 129). He does not mention that the five largest of these are all state-owned petroleum companies. [14] In the West it seems, for the moment, as if the trend is the other way. In Britain profitable nationalised companies are being privatised. In both Britain and the United States, the rundown of public sector investment seems to be generating what Bukharin called ‘negative reproduction’ [15], a deterioration in the essential infrastructure of roads, sewers, railways and buildings. [16] But even here the state is still pumping funds into areas of new technology and research, as well as propping up old industries. The examples of France, Sweden, or West Germany with their ‘automation’ programmes show that the ‘retreat of the state’ is scarcely a general phenomenon.

Nigel, I suspect, would disagree with little of this. He does argue that the boundaries of public and private are ‘blurred and semi-fictional’ (p. 58). He would reply that, to grow and prosper, nationalised companies also have to become multinationals, to gain access to resources and markets on an international scale like their private rivals. So Renault takes over American Motors and the newly nationalised French electrical giant Thomson-Brandt bids for the ailing West German Grundig. Mitterrand, desperately coming to terms with the impossibility of ‘capitalism in one country’, calls for a united European alignment in electronics against the Americans and Japanese. In Britain British Leyland does deals with Honda (an event the significance of which we have perhaps not yet appreciated). There are even a small but growing number of East European multinationals (p. 130).

But it is also true that neither the extent of ‘public ownership’ nor level of state spending are reliable indices of the role of the state. Japan is the lowest of the industrial powers on both counts but it is also one of the most ‘national’ as Nigel observes (in the sense that despite extensive overseas investment in recent years the great bulk of Japanese capital remains firmly tied to Japan and closely integrated with the state). Yet for all his frequent references to this (pp. 126, 130 & 236–7) he never discusses it in any detail. In fact the fusion of Japanese national capital and its state (with extensive overlap between the oligarchs of the long-ruling Liberal Democratic Party and the business elite) remains intact. The role played by MITI (Ministry of Trade and Industry) in organising the rundown of ageing industries and the direction of resources into new industries with the best export potential, has been central to Japan’s exceptional growth. [17]

Again Nigel could reply that he is stressing the tendency, emphasising the primacy of the world market against all those who cling to the illusion of national economic independence, or the possibility of particular states expanding their economies in isolation from the rest. But if national economies have been in varying degrees integrated with the rest they have not been dissolved. They continue to be marked by their distinctive, historically bequeathed patterns of economic activity and combinations of productive sectors. It is still valid to talk about the distinctive problems and fortunes of British capitalism, even if it is increasingly wrong to identify those with the fortunes of much of British capital with its £60 billion worth of overseas assets (or 15% of the world’s stock of foreign direct investment compared to only 7% each for Japan and West Germany). [18]

The issue becomes significant when we try to explain the national rivalries which exploded in a spate of trade disputes and political tensions in the early 1980s. Nigel of course does not ignore these. He examines the import control question in some detail. It is worth examining his argument carefully because its basic political message that such controls are destructive and reactionary is so important. But there is a problem here. If capitalism is now so internationalised, if the autarchic responses of the 1930s are now ‘utopian’, that is simply not feasible, then why are the current trade disputes so intense and the scope of formal and informal import restrictions so extensive?

Nigel’s argument is, crudely, that import controls are now irrational and dangerous from the point of view of capital as well as workers. The argument is not simply about retaliation, about the drastic reduction in world trade caused by a spiralling trade war between the major imperialist powers which of course did occur in the 1930s. It is about the sheer degree of integration with imports and exports amounting (according to one somewhat misleading set of figures) to 80 and 72% respectively of domestic production of goods within Britain in 1979. [19] Those proportions he asserts nearly doubled in the 1970s in most Western economies. Moreover, imports are increasingly inputs into other industries. Keeping out cheaper coal pushes up the price of British cars and ships. The absurdity of it all appears in the complaints directed at each other by the heads of different British nationalised industries, and the inability of successive governments to do more than respond aimlessly to the conflicting pressures.

The argument is reinforced by the fact that trade is increasingly within multinational companies – that Ford the largest British car producer is also the largest importer of vehicles into Britain. Ford will call for a ban on Japanese imports – but it will not tolerate a ban on importing cars in general. All this explains why the moves towards protectionism have been limited – why despite the slump there has not been a repetition of the collapse of world trade of the 1930s – why despite the smoke and the heat many of the disputes have been patched up with unstable compromises and ‘voluntary restraint agreements’.

Nevertheless if world trade has not collapsed it has stopped growing. In a number of recent cases, severe balance of payments difficulties, a chronic shortage of foreign exchange, have forced debt-ridden states into devaluing their currencies and imposing strict controls on imports – squeezing out all but the most essential imports at enormous cost to their economies and the living standards of their workforce – Poland, Mexico, and Nigeria are only the most prominent examples. There has been an increase in barter deals (swopping goods for goods without the use of scarce foreign currency) often negotiated by governments – a device frequently used in Eastern Europe, and now being taken up by some oil exporters such as Iran and Indonesia. [20] That is a sign of a partial disintegration of world trading patterns into the pattern of bilateral deals between countries which characterised the 1930s.

The Western economies are in a rather different position. For them, import controls are a product not of the shortage of foreign currency but of the increasingly savage competition between states. Nigel quotes figures showing the rapid rise in the proportion of Managed’ imports – those subject to restrictions, informal and formal controls, or ‘agreements’ such as the restraint on imports of Japanese cars into Britain and the USA (p. 80). He refers to the range of sectors involved in trade disputes – steel, shipbuilding, clothing, footwear, cars, consumer electronics, and, as has been the case since the 1930s, food.

But his explanation of all this is weak and tenuous. He notes that ‘old capital endlessly pressured states to protect them against imports’ (p. 111) but this receives less emphasis than the split between the economic interests of capital and the political interests of the state. As he sees it:

It was the politics of import controls that were important, the constant emphasis that the state protected its citizens ... Endlessly the popular wisdom was inundated with the argument that, if local industry weakened this was the result not of the failures of local capital but of ‘unfair’ competition (p. 111)

The argument is part of his more general thesis that ‘the need for political stability collided with the economic needs of both national and international capitalism’ (p. 101). Now there is something in this. The ideology of ‘import controls’ is insidious, and does serve effectively to align workers with their own employers against workers elsewhere. But this does not adequately explain why states should undermine the interests of their own national capitalism – profits are rarely sacrificed for the sake of ideology. The mistake, and it has other implications which will be pursued in a moment, lies in simply counter-posing the economic and political – and thereby suggesting that the economic interests of capital are clear-cut and un-contradictory.

As Nigel’s own analysis of ‘food’ shows, the enormous scale of food subsidies, agricultural protection, and surpluses of Common Market butter, meat, and grain, are the result of the power exercised by the extremely well organised farming and ‘agribusiness’ lobbies. This is not a matter of peasants or small farmers, although their votes may be an important political factor. Of the 1979 Common Agricultural Policy budget, 35% went to the food processing companies, 48% to traders, and 14% to storage companies (p. 208). The spate of fishing and food wars in the last few years is the product of the power of these nationally or regionally organised agri-business sectors – it is the consumer, the working-class, which pays in higher food prices.

In some cases there is a marked conflict of interest between different sections of capital based within a country. The steel war is a good example, with conflicting pressures from the steel companies of Europe and America on the one hand and from the steel users and importers of the same countries on the other.

Of course, the retaliation problem remains, as it did in the 1930s. There are, as the ruling class is well aware, enormous dangers in import controls. That is one reason why there has been an increasing stress by Britain and France on imposing controls through the Common Market as a whole – although it is equally true that the fissures inside the EEC are severe, and that attempts to organise European wide cartels have been extremely precarious. It is also why many of the recent restrictions have been directed against Japan where the retaliation danger is seen as less of a problem. Moreover once trade wars start they get out of hand, and acquire a dynamic of their own like all wars. Move leads to countermove, retaliation to bitter response. The deepening of the slump, and pressure from particular sections of national industry, especially in weakening economies such as the United States, Britain and France, may yet have calamitous consequences for the system as a whole. [21]

None of this, of course, is meant as a defence of import controls. On the contrary, my argument is that Nigel’s emphasis on the internationalisation of capital leads him to dissociate the competition of states from the rivalry of nationally based capitals – and therefore to underestimate the dangers of a shift to protectionism.

In particular the decline of American hegemony over the Western bloc as a whole could yet mean a disintegration of the framework within which the internationalisation of capital occurred in the 1950s and 1960s. Of course that is only one side of the picture – the continued integration of capital, and the resistance of multinationals to protectionism in general is the other. But in this respect at least Nigel’s analysis leads to an understatement of the contradictory character of capitalism. This argument can be generalised. Nigel explicitly states that he is concerned to move away from interpretations of the crisis in terms of the rivalries of competing national capitalisms – to stress the contradiction between the internationalisation of capital itself and the system of competing states. Much of what he says is a continuing refutation of those who would reduce the crisis simply to the decline of American hegemony and the conflict of the major national powers [22] – as if an agreement between them could somehow resolve the crisis. But his emphasis may lead his readers into misinterpreting important aspects of the crisis.

Take, for example, Nigel’s discussion of the international monetary system and the role of the Euromarkets (markets which handle currencies outside of their country of origin, and beyond the control of national authorities and central banks such as the Bank of England). The issues here are difficult to summarise, and this is one of the areas in which the account in Of Bread and Guns is extremely condensed. To condense the matter even further, Nigel places a justifiable stress in analysing the long boom, and its end, on the relationship between the overwhelmingly dominant US economy (with some 50% of world industrial capacity at the end of World War 2) and the European and Japanese economies. The flow of dollars across the Atlantic from the late 1940s onwards was a necessary condition of the recovery of the European economies and sustained growth in the United States. The dollars (transmitted through Marshall aid, capital investment, and above all military spending) provided the necessary liquidity, the spare cash, with which the Europeans could purchase American capital goods (pp. 35–41).

But by the late 1960s the problem had reversed. Instead of a dollar shortage there was a dollar glut. The expanding trade surpluses of West Germany, France and Japan, combined with the continued effects of American overseas military spending and capital investment, meant that those countries were flooded with dollars. These they tended to place on the Euromarkets, the international financial markets whose growth accelerated. But this situation was unstable. The permanent threat of dollars being turned into gold or other currencies undermined the role of the dollar as the world currency – and led in 1973 to the collapse of the post-war international order of fixed exchange rates.

The existence of the Euromarkets undermined the American government’s control over its own currency. Since 1973 the operations of the financial markets, the unrestrained movements of short-term funds from one country and its currency to another in search of speculative gains has undermined the power of all governments. But the point is, as Nigel notes in passing that it was: ‘both the unbridled rivalries of the dominant powers and, even more important, the new giant, the uncontrolled Eurocurency market ...’ (p. 43) which created this instability. The ‘and even more’ here, however, is misplaced. The point may seem pedantic but it is crucial to understanding the markets. It was the interaction of the competition between states and the internationalisation of financial capital which was decisive. If the Euromarkets provided the necessary mechanism for undermining the dollar – it was the weakening of the competitive strength of the American economy relative to its West German and Japanese rivals which lay at the root of the matter. [23]

The continuing interest rate war between the rival Western economies reveals a comparable relationship. Governments are effectively competing with each other to attract the volatile sums of speculative funds floating around in the financial countries by pushing up interest rates on short-term assets such as Treasury Bills. Again it is not just a matter of the power of international capital vis a vis the national states – but of the articulation of the competition between states with the operations of the market. The difference between this and Nigel’s account is one of formulation perhaps rather than of substance. But the formulations are important to a clear understanding of the way the system is locked into stagnation.

To summarise my main criticism – in detaching the competition between states from the competition between private capitals (and it is true that the two are not identical) Nigel underestimates the significance of the economic rivalries between what are still identifiably distinct groupings of national capital.

On the other hand, Nigel is right to stress the differences between the current crisis and that of the 1930s. The integration of the different national economies has made a return to the protectionist blocs organised around the imperialist powers of that period impossible. Correspondingly the military integration of the Western bloc within NATO remains intact, if under increasing strain. It is simply absurd to put the rivalry between Japan and the United States today on the same plane as that of the 1930s – at a time when the United States is urging Japan to increase its military spending. The main ‘inter-imperialist’ divide is between the two superpowers, and their admittedly increasingly insubordinate associates. That is itself a proof of the very different structure of the world economy today.

States and the crisis

Perhaps the most important conclusion of all in Of Bread and Guns concerns the destructive impact of the actions of the states on the world economy – and the ways in which their attempts to maintain their own national power and shares of world productive capacity are reinforcing the stagnation of the system.

It is a conclusion with revolutionary political consequences – the attempts of reformists to use the state as a lever of expansion in one country are not only doomed to failure but are liable to make the crisis worse. Resolving the crisis demands not just the destruction of the state apparatus as Lenin argued, but an end to the whole system of competing nation-states.

However, Nigel scarcely differentiates at all between the various types of action taken by the states. The actions are all, it might appear from reading his account, equally destructive, and, if there is a difference, propping up and subsidising bankrupt sections of capital is even more destructive than letting them collapse. This is at best extremely misleading.

Part of the problem stems from Nigel’s reluctance to spell out his explanation of the roots of the crisis in any detail.

He repeatedly asserts that low rates of profit, and consequently stagnant or declining levels of investment, constitute the fundamental cause of the crisis. His underlying assumptions are thus explicitly Marxist. The chapter on slump and stagnation stresses the depth and intractability of the crisis, and effectively dismisses those who try to explain it away as a matter of accidents or temporary disorders. He shows how the build-up of productive capacity in the system during the Great Boom, led eventually to the chronic overproduction and absurdly wasteful excess capacity of the slump.

Much of this is extremely valuable and suggestive. His account of the ‘Permanent Arms Economies’ of the post-Second World War epoch shows how military expenditure could both contribute to the length and character of the boom, and add to the strains once the system had begun to enter into crisis. He takes us away from the crude ‘arms spending caused the boom, less arms spending caused the slump’ sort of idea which some critics wrongly attribute to the SWP.

On the other hand, some of his remarks are tantalisingly cryptic. His statement that ‘only religion has the capacity to explain events without examining them at all’ is an understandable sign of impatience with those Marxists who resort to a realm of abstractions and quotes from the hallowed texts without confronting the changes wrought by the dynamics of capital itself. But his subsequent comment that: ‘In any case in the real world it is extraordinarily difficult even to measure the world profit rate, so that it is no wonder that the theory has become almost as mystifying as events’ (p. 25) really should have been followed up in more detail. As it is, amidst a welter of statistics, there is virtually no attempt to analyse the evidence which is available (admittedly in an unsatisfactory ‘national’ format) on the decline of rates of return, especially on industrial capital. For a rigorous Marxist explanation of both the long boom and the crisis, readers will still have to turn to the articles by Chris Harman to which Nigel refers. [24]

I am not suggesting that Nigel should have given us yet another discussion of the theoretical arguments, or constructed another lifeless abstract model of how capitalism works. We have enough of those as it is, and most of them don’t take us any further than Marx himself. There is, though, a danger in divorcing an abstract explanation of the basic tendencies of capital from a location of those tendencies within the complex structure of the world economy today. The methodological importance of the Permanent Arms Economy was that it provided a bridge between the analysis of Marx and the real world of post-war capitalism. We still need to develop comparable ‘middle-range’ theories to explain, for example, the significance of the debt and the international banking crisis which Nigel has done so much to illuminate. [25]

These are matters of omission rather than error, and it is wrong to simply criticise a work of such scope for not being even longer.

Where the omission has serious effects is on the assessment of the impact of state intervention upon the slump. For Nigel fails to adequately explain what is distinctive about the current crisis compared to previous periods of capitalist crisis.

That is perhaps too strong. At one point Nigel provides a crucial summary of the nature of the crisis which is essentially the same as that of Chris Harman – both drawing upon the argument in Marx that slumps can prepare the ground for recovery if they are deep enough to restore the rate of profit:

However, slump could only have the effect of restoring the profit rate if labour costs were radically cut and capital values could be collapsed – through bankruptcies, the writing off of capital. There was some of both, but each competing national state endeavoured to protect its capacity for as long as possible, lest an upturn find it without the means to exploit a boom. No doubt there were also fears in government that their electorates would not accept, so soon after the rosy aspirations of the great boom and the myths of the managed economy, the required degree of pruning and unemployment. Thus the interests of the state collided with the interests of capital as an economic entity. Stagnation was the resulting compromise; investment stayed obstinately low.

The perspective is succinctly put. I agree with all of it except the formulation of the second to last sentence. But that unfortunately has wider implications.

The problem lies, once again, with this notion of ‘the interests of capital as an economic entity.’ I think I know what he means by it – that the survival and return to prosperity of the mass of capitals depend upon the slump effectively working its way through as in the past. The idea is that the interference of the state with the workings of the market delays, or frustrates, the ‘restructuring’ of capital and the ‘rejigging’ of the relationship of capital and labour (increasing the rate of exploitation).

But in focussing so much on the ‘obstructions’ and ‘damage’ inflicted by the states, Nigel is in danger of ignoring what the ‘monetarists’ and ‘free traders’ always forget – that the market is itself unstable and subject to periodic breakdowns; that the crisis could only restore the rate of profit at an enormous cost not just to workers but to large sections of capital; and that if the slump required to clean out the system today has to be much deeper and more devastating than anything we have so far experienced, there is also no guarantee that capitalism could get out again. Despite the scale of the 1930s slump it still took the stimulus of rearmament and war to pull the World economy out of it. Today capitalism could plunge so deep that h would get stuck at the bottom and either disintegrate amidst the destruction of nuclear war, or be strangled by its own labour-force first. It is the action of the major states in propping up their economies, their large companies and increasingly their banks, that is stopping that happening.

Nigel is quite right to stress that these actions by the individual states cannot produce an expansion, or return to sustained boom, but are prolonging the stagnation. He notes, as we saw, that the effect of propping up the old and inefficient capitals is to shift the burden onto the more profitable capitals – through subsidies which directly or indirectly drain resources away from the rest of the economy, and through restricting the markets potentially available to the company’s rivals. Thus Chrysler and British Leyland are propped up both at the expense of higher taxation in the rest of the national economy, and at the expense of Ford, General Motors, and all the other companies who could increase their share of the world car market if the weaker capitals were busted.

But that is only one side of the picture. In talking about the ‘economic interests of capital’ Nigel appears to suggest that those interests are not contradictory – or even that capital is a single homogeneous blob. I don’t think he really means that, but he fails to consider the repercussions which would result if the states all decided to let their unprofitable and subsidised capitals go under. This is not just a matter of the interests of the capitals directly affected. The collapse of British Leyland, British Steel, British Shipbuilders, Rolls Royce, British Rail, the National Coal Board would have extremely destructive repercussions throughout the whole British economy. The impact on all the other segments of capital tied in as components or material suppliers to those companies would probably bring most of them down as well. As unemployment soared towards the six million mark the effects of a lowering of overall demand on the economy would hit many other sections of capital -including capitals abroad seeking to export to the British market. If the government responded to its soaring social security bill by slashing that as well, it would force down wages, but the short term effect would accentuate the problem of declining demand.

To be a bit more technical for two paragraphs: Nigel fails to distinguish between the cost (or price) effects of subsidies on the national economy and the volume (or output) effects. In a full-employment economy (which is always assumed in the neo-classical models of perfectly competitive markets which are the basis of the right-wing attack on subsidies and defence of free trade) only the cost effects matter because all resources are fully utilised. Subsidies etc. then do simply redistribute resources from the profitable to the unprofitable.

But in a period of slump the volume effects (which arise from sustaining the overall level of demand and employment within the economy) may easily more than offset the increased costs which have to be borne by the more profitable capitals. [26] The point is reinforced (as Keynes replied to the ‘crowding out’ argument of his opponents) if subsidies and government spending are financed not out of taxes but out of borrowed ‘savings’ which would not otherwise be utilised for productive investment in the economy (though this may, especially in the current situation, push up interest rates).

This is not meant as a defence of Keynesianism in any of its many varieties. [27] It is meant as a warning against Marxists going so overboard in their criticisms of protectionism and state intervention that they end up sounding like rampant free traders – Marx would not have approved. Nigel is absolutely right to insist that states cannot generate sustained expansion in isolation or without an increase in the underlying rate of profit. But the alternatives before capitalism are not simply those of expansion or slump – they are those of permanent stagnation, with continuing fluctuations in the level of activity, or of a spiralling descent into chronic slump (probably bringing down the banking system at the same time).

In the previous section I argued that Nigel actually underestimated the contradictory character of the system because his analysis allowed insufficient room for the resurgence of protectionism. Here I am arguing that he overestimates the destructive impact of the states in the short-term, through failing to clearly acknowledge the way in which state intervention has continued to prop the system up, preventing an even deeper slump.

The argument did deal with the British economy in relative isolation from its rivals. It is precisely because that economy is so weak, so burdened by the dead weight of ageing or inefficient capital, and chronic overcapacity, that state intervention has been so extensive. It is also for that reason that the ‘monetarist experiment’ in Britain, the half-hearted attempt to abandon the subsidies and let the lame ducks go to the wall, has proved so devastating. But British capitalism is only an extreme instance of a general problem. Only the Japanese have been able to simultaneously savagely prune their old and excess capacity and sustain their overall level of activity – and that ‘miracle’ too is running into difficulty, pulled down by the rest (and growing protectionism).

Moreover, as Nigel’s analysis of the international banking system and the debt crisis lucidly shows – the effects of global monetarism, of ‘bankrupting’ the national economies which are debt-ridden and sunk in slump, are too horrific for either the banks, or the United States, or international institutions like the IMF, to contemplate. Here also the weak are being bailed out, the contradictions desperately patched over, with remedies which, in postponing the collapse, only aggravate the underlying causes of stagnation (pp. 117–122).

None of the criticisms I have made challenge the value of Nigel’s analysis of the debt crisis, or the many other themes I have scarcely touched on, or his fundamental conception of the primacy of the world economy and the impotence of states to master it or even their ‘own national patches within it’. Above all we must warmly welcome what is both a remarkable and path-breaking attempt to encompass world capitalism as a totality, and a powerful restatement of the political necessity of international socialism.

A few years ago I remember saying that what we needed was a new version of Bukharin’s Imperialism and the World Economy. I can think of no greater tribute than to say that Nigel Harris has provided us with one, and in the process challenged very effectively the idea that Bukharinism is still sufficient. Nigel Harris’s previous book The Mandate of Heaven: Marx and Mao in Modern China was generally ignored in political and academic circles, probably because it upset them all – the Maoists and the liberal China watchers, the Third Worldists and the Stalinists, the cold war hacks and the ivory towered scholars, the cooperative freaks, and the consciousness raisers. This book will upset them all too, but they’ll have difficulty in ignoring it. People are looking for an explanation and Penguin (let us bless the contradictions of the profit-motive) have put one on the shelves of W.H. Smiths.

Our task is to use this book as a weapon in our armoury. Everyone should read it. We need the theory – we need even more to destroy the system which Nigel Harris exposes as the vicious, crazy beast that it is.


All page references in the text are, of course, to Of Bread and Guns by Nigel Harris, published by Penguin, Harmondsworth, 1983.

1. Nigel does discuss the Marxist tradition in more detail in his review of Hilferding’s Finance Capital: The Road from 1910, in Economy and Society, Vol. II No. 3, August 1982; see also his much older Imperialism Today, in N. Harris and J. Palmer (eds.), World Crisis (Hutchinson 1971).

2. Marx, Manifesto of the Communist Party, in The Revolutions of 1848 (ed. D. Fernbach, Penguin), p. 71. First published 1848.

3. Marx’s scheme for the whole work is discussed in Rosdolsky, The Making of Marx’s Capital (Pluto 1977, chap. 2 passim). Important references to the world market created by capitalism can be found in Capital, Vol. 3, p. 266 and pp. 332–4 (Lawrence and Wishart edition 1972).

4. N. Harris, The Asian Boom Economies and the Impossibility of National Economic Development, in International Socialism (series 2), No. 3.

5. N. Bukharin, Imperialism and World Economy (Merlin 1972; first published 1917). See also C. Harman, The Crisis Last Time, in International Socialism (series 2,) No. 13, Summer 1981, for a discussion of the 1930s. The ‘later’ Bukharin is of course quite another matter.

6. See especially N. Harris, The Third World, in International Socialism (series 1), No. 42 – for a very succinct statement of his position in 1970.

7. N. Harris, The Mandate of Heaven: Marx and Mao in Modern China (Quartet 1978) – especially chapters 13, 17 and 18.

8. World Capitalism Today: A debateM. Kidron and C. Harman in International Socialism (series 1), No. 100 July 1977. This also contains World Crisis and the system by Nigel Harris in which he first broaches some of the ideas in Of Bread and Guns.

9. C. Harman State Capitalism, armaments and the general form of the current crisis, in International Socialism (Series 2), No. 16, Spring 1982. If I have singled this out it is because it is accessible and carefully and clearly written. More extreme portraits of the system as governed by the competition of state capitals can be found in the work of many other comrades including: C. Barker, P. Binns, A. Callinicos and M. Haynes – and indeed myself. What unites us it seems is that we were all bitten by the Bukharinite bug at an early age, as providing the general theory of which Cliff’s Russia (London 1964) was a special case.

10. S. Holland, The Socialist Challenge (Quartet 1975). Holland, the most influential Bennite theoretician, sees multinationals as the enemy to be tamed through planning agreements and nationalisation. There is an obvious contradiction between Holland’s stress on the power of multinationals and his belief that a determined left Labour government could control them. But the deeper problem is his illusion in the neutrality of the state and his identification of socialism with an extension of the state. As Nigel Harris so forcefully observes ‘Now it was not ordinary people who were to be liberated, but only the state.’ (p. 272 in Of Bread and Guns)

11. J. Buchan, The coming of the wise men, Financial Times, 28/1/83

12. For a thorough survey of the overseas assets of British capital see The Bank of England Quarterly Bulletin, June 1982.

13. R. Lambert, International Harvester’s Survival Plan, Financial Times, 3/11/82.

14. J. Dunning and R. Pearce, The World’s Largest Industrial Enterprises (Gower, 1981).

15. N. Bukharin, Economics of the Transformation Period (New York 1971; first published 1920), p. 46.

16. See for example Mike Simons on the Water Industry, Socialist Worker, 19/2/83.

17. See the account in C. Harman, op. cit.; J. Halliday, A Political History of Japanese Capitalism (Monthly Review 1975) and recent surveys in the Financial Times, 6/7/81 and 5/7/82.

18. Economist, 19/2/82 – Business Brief – which also strikingly confirms one of Nigel’s theses with its account of the opening up of ‘countries as diverse as Cuba, China and Portugal’ to multinational companies.

19. Misleading because they do not really compare like with like (i.e. imports of goods and services with production of goods alone). Official figures for 1981 show that all exports amounted to 26.6% of GDP and imports to 24.1%. But exports and imports of goods as a proportion of manufacturing production are much higher – in the area of 40% in Britain on one estimate, and rising steadily.

20. F. Gray, Why bad news for many is good news for some, Financial Times, 2/3/83.

21. See my Trade Wars in Socialist Review, 1982 : 4 Sept 15. But also see the critique of the notion of the formation of regional blocs in N. Harris, The State of the World Economy, in Socialist Review, No. 50, January 1983.

22. For example the work of R. Parboni, The Dollar and Its Rivals (New Left Books 1982). See also the criticism of such approaches in C. Harman, Theories of the Crisis, in International Socialism (series 2), No. 9, Summer 1980.

23. Nigel refers to an important work by F. Block, The Origins of International Economic Disorder (London 1977) which does deal in much more detail with the issues raised here. But Block’s own interpretation of events puts overwhelming emphasis on the undermining of US economic power by the faster growth of the European economies and Japan – and the consequent intensification of competition between them. C. Harman, State Capitalism ..., op. cit., locates this shifting balance of economic competitiveness in terms of the differences in levels of military spending

24. C. Harman in International Socialism (series 2), Nos. 9, 11, 13 and 16 – especially No. 11, Marx’s Theory of Crisis and Its Critics, and for further references.

25. C. Harman gives an excellent account of the contradictions of the post-war world economy in terms of the ‘Permanent Arms Economy’. But his discussion in International Socialism (series 2), No. 16, of the banking system, and significance of the growth of debt, is the weakest part of all his articles. He makes no attempt to tie this in to an explanation of the causes or consequences of inflation in particular. Nigel’s discussion of these areas has both called attention to their importance, and been consistently far-sighted about the accumulating contradictions which finally exploded in 1982. But he has not tied this in fully to the broader theory of crisis, nor in particular related it to Marx’s discussion of credit, interest and the banks in Capital, Vol. 3.

26. These arguments have also been used by sophisticated left Keynesians such as Kaldor and the Cambridge Economic Policy Group to justify import controls. But they still take no account of retaliation from other countries; nor of the impact on working class living standards, nor of the much more important causes of job losses with the ongoing displacement of workers by machines throughout the economy in the drive to push up productivity and improve competitiveness which they thoroughly endorse.

27. See my brief critical account of Keynesianism in Socialist Review, 1982, No. 2.

Peter Green Archive   |   ETOL Main Page

Last updated: 15 July 2022