Home > political-economy > Theories of the Current Crisis: John O’Connor, Neoliberalism and the Long Painful Death of the Nation State

Theories of the Current Crisis: John O’Connor, Neoliberalism and the Long Painful Death of the Nation State

February 25, 2012 Leave a comment Go to comments

The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over.

Frederick Engels, Socialism: Utopian and Scientific

I am now reading John O’Connor’s “Marxism and the Three Movements of Neoliberalism” (PDF)

O’Connor proposes what he calls a “Marxian conceptual and empirical framework for understanding the disparate research on neoliberalism”. As with Saad-Filho’s work, John O’Connor’s is deeply flawed and is not in any fashion based on Marx’s theory of the Capitalist mode of production. Rather than an exercise in historical materialist analysis, O’Connor serves up a rehash of progressive nostalgia for a mythical pre-1970s Keynesian social compact, combined with a laundry list of ideological and policy crimes by the Neoliberal world order. We end with no more understanding of this thing, Neoliberalism, within the context of history, than we did at the beginning. O’Connor fails the essential test of the historical materialist critique of the capitalist mode of production.

If Neoliberalism is simply an ideological, policy, or governance construct, why is this construct the necessary form of ideology, policy and governance at this stage of development of the mode of production?

Fascism and the Myth of Keynesian Social Accommodation

For some strange reason, O’Connor arbitrarily begins his narrative in 1950 — completely bypassing a decade of depression ending in world war . He wants us to ignore this catastrophe and the war of redivision of the planet that ended in the destruction of much of Europe and Japan — 80 million dead and the productive capacity of Europe and Japan laying in ruins. He also wants us to ignore the rise of the fascist state and the debasement of currency that made that war possible. This allows him to portray the period roughly from 1950 to 1974 as a “Golden Age of Capitalism” following Glyn and Hosbawm.

Completely ignoring the fact that Europe and Japan lay in ruins at the end of the war — and, therefore, that any measure of post-war expansion begins from a base determined by this previous horrific loss of productive capacity — O’Connor tells us the “post-war economic boom was exceptional in capitalist history for its explosive growth, high profits, technological innovation, and reliance on government policy.” This last thing “reliance on government policy” is the kicker, because O’Connor is now going to use it as a crutch to get him to 1974. The “Golden Age” was made possible by two things: class accommodation at home and state involvement in the accumulation process. We don’t get any critical look at this so-called class accommodation nor state involvement in the accumulation process. In fact, both are filler material, placed there solely to let O’Connor to segue into the “crisis” of 1974-82. With this filler material O’Connor can stuff in the typical myth-story about a “Golden Age”” which he finds already present in our national political discourse.

Gone is the Great Depression, the debasement of the currency and the rise of the fascist state, the catastrophic wars of the 30s and 40s, US aggression in Korea, and a series of other police actions and coups, the red scare, the arms race, the Suez incident, Vietnam and the horrors of the United States’ Southeast Asian murderous rampage. What was blood red in reality, becomes a hazy faint shade of pink in O’Connor’s make-believe world of “I Love Lucy”. At some point, someone is going to have to call Marxists out on their patriarchal, racist, elitist, Anglocentric, rewrite of history. Frankly, the shit is just fucking unnerving — there was no “Golden Age” of capitalism! For John O’Connor, Saad-Filho, Richard Wolff and the rest of the Marxist Academy to continue referring to this myth is just bizarre!

The period under question begins not in 1950, but in 1929 with the collapse of capitalism world-wide, from which capitalism never recovered. Rather, all industrial states stepped in as the national capitalist and immediately imposed a continuous wage reduction regime across the board on their respective working classes in a ruthless act of class warfare. Then each fascist state turned on its neighbors and slaughtered everyone they could get their hands on in an orgy of bloodletting. It wasn’t enough to kill them — NO! — they then leveled their cities, destroyed their  factories and productive capacity, and stole their resources to starve them out.

You want to see the “Golden Age” of Keyesianism — just look at World War II. Thanks to Lord Keynes the United States was able to devote 40% of its GDP to slaughter and pillage, and still have “economic growth”. In the United States alone 1500 factories were built from scratch to murder strangers — not feed them and ourselves. Sixteen million men were withdrawn from all productive labor and sent to murder, fully outfitted and fed by American industry — the same American industry which, just months earlier, could neither hire nor feed them — that’s your fucking Keynesian “Golden Age”, bitches.

The insult to the 100 million dead in two global wars of redivision cannot be worst than out of the mouth of a Marxist who states, as John O’Connor does, “the USA and Britain took steps to ensure that a stable liberal world order was recreated”.

The Second Great Depression

Having used this “Golden Age” of capitalism as a crutch to get him to 1974, O’Connor misses the beginning of the crisis in the 1960s. Had he done the least bit of analysis on the period 1929 to 1950 he might have noticed a little event called debasement of the currency. With this debasement, and the devaluation of wages by 70% that accompanied it, American capitalism went through an expansion phase. That expansion was not just fueled by the devaluation of wages, but also the war expenditures of World War II and the absorption of a hefty section of post-war Europe and Japan into the newly emerging fascist American Empire. This expansion phase comes to a head not in 1974, but in the mid-sixties with the collapse of the London gold pool in 1968 (pdf) , which facilitated manipulation of gold bullion price and allowed the US to share in the extraction of surplus value wrung from the European and Japan working classes — the so-called “exorbitant privilege”, a term coined by the French. (Of course, since Marxists are MARXist in name only, they have ignored the implications of the French critique.)

The crisis begins in the mid-sixties with a run on US gold reserves, and culminates in the collapse of Bretton Woods, and the end of dollar convertibility for settling international obligations. But this is just its superficial expression — what really happened is that the new productive capacity of Europe and Japan came online. For a period this overaccumulation was disguised by the murderous war on Vietnam and the swelling of American domestic spending to stem protests. But all of this comes to a head with the opening moments of the Second Great Depression of the 20th Century — the Great Stagflation. This depression triggers the collapse of Bretton Woods and the end of dollar convertibility by the Nixon administration. And it occurs not in 1974 but years earlier, although the actual expression of this crisis in unemployment is itself triggered by the massive inflation that occurs as Washington tries desperately to spend its way out of the contraction. Those of a certain age will remember Nixon declaring fatuously, “I am now a Keynesian in economics”.

The attempt to slow the contraction by a massive expansion of government spending ultimately fails and the Federal Reserve has to choke off credit in the midst of a depression to slow the inflation of prices. Nixon is gone, Gerald Ford is running around handing out “Whip Inflation Now” (WIN) buttons, and the Fed is trying to douse inflation with unemployment. None of this has any effect on the depression, however, which continues unabated for the next five or six years  — in other words Keynesian economic policy is overcome by the growing productive capacity of society and the dissolution of nation-state economic management begins.

Only at this point do we finally reach O’Connor’s dating of the initial emergence of what eventually becomes neoliberalism — the crisis has, by this time, gone on for nearly a decade.

Neoliberalism and the Demise of the Nation State

The easiest way to understand neoliberalism is to understand exactly what the fascist state accomplished that can now only be accomplished by its demise. The success of the fascist states rested on what O’Connor terms a “distinct structural, institutional, and class foundation.”

This state led monopoly capitalism, as described by Fine and Harris (1979), was marked by the socialization of economic activity, in which the state took an active role in the accumulation process. Economic socialization helped offset the unproductive costs of accumulation and the reproduction of the labor force (Gough and Eisenschitz 1996). Through a wide variety of non-market mechanisms, the state balanced the social nature of production with the private appropriation of capital.

Okay, I admit I haven’t a clue what this means — so I am going to parse it.

“State led monopoly capitalism” appears to be some sort of a distinction from the state-as-capitalist — a concept that is apparently alien to Marxists. What role does the state play in this “state led monopoly capitalism” – clearly it is not the capitalist, so is it leading the capitalists? So how is it leading them? And to where? Well, it appears to be leading them toward some “socialization of economic activity” — which is clearly not socialism, but “socialization”. Which is to say, the capitalist accumulation process, having grown beyond the control of various forms of private management, must at some point fall under the direct management of the state. How does this work? Well, the state takes “an active role in the accumulation process”.

Okay, now I am stumped. What exactly is “an active role in the accumulation process”?

O’Connor tells us that it “helped offset the unproductive costs of accumulation and the reproduction of the labor force”. So what are these unproductive costs of accumulation and the reproduction of the labor force? Clearly by “the reproduction of the labor force” O’Connor can only mean wages and (perhaps) a meager provision of public education and a national health system. Can the state add to wages, educate, or cure illness? Not likely, since it is a bloated parasite on society, it can’t even put a chicken in a single pot. Since the state creates nothing, and produces nothing, it can only “offset … the reproduction of the labor force” by driving wages down. Perhaps I got this wrong; perhaps the state can magically whip up a subsidy for wages by creating food, clothing, and shelter out of nothing. I am not as educated as fucking Marxists Academics, but it seems to me all O’Connor is suggesting is that the state devalues labor power!

Of course, I could be wrong. Maybe Obama is feeding the working class from that victory garden over at the White House.

And what are the “unproductive costs of accumulation”? How does the fascist state “offset” these costs pray tell me? Frankly, I have never heard of the term “unproductive costs of accumulation” before I read this paper — the term appears nowhere in Marx. Nowhere in three fucking volumes of Capital does Marx ever mention an animal going by the name of “unproductive costs of accumulation”. Even if we assume the state plays some role in offsetting these mysterious costs, there are only two classes for the distribution of the social product of labor: workers and capitalists. If the state is “offsetting the unproductive costs of accumulation” for the capitalists, it has to be taking it from the working class.

So when I parse O’Connor’s argument, “Economic socialization helped offset the unproductive costs of accumulation and the reproduction of the labor force”, I only get two things out of it: “devaluation of the wages of the working class” and “more devaluation of the wages of the working class”. Since I am not a Marxist, you probably can understand why I come to that ‘absurd’ conclusion. If I were a Marxist, I could invent another phantom source of value for the state to redistribute as wages and profits.

Once we get past the silliness about the Keynesian “Golden Age” of capitalism, it is clear neoliberalism is not in the least a switch from social accommodation between capital and wage labor to coercive competition as O”Connor argues, but simply an intensification of systematic impoverishment of wage labor, for which Keynesian state policy was, by the 1960s and 1970s, insufficient to realize. This does not in the least require any modification of Marx’s labor theory of value, nor any special explanations. It simply requires us to grasp national capitals behave just like privately owned capitals, but with grim consequences for both national sovereignty and national fiscal/monetary policy. Which means these national capitals, although for a time appearing quite permanent features of economic analysis, were always transitory and subject to the very same laws as determine the capitalist mode of production generally: equalization of the rate of profit, concentration and centralization of capital, overaccumulation, falling rate and mass of profit, a growing superfluity of capital, a growing mass of workers who fill the ranks of the industrial reserve, etc.

What is distinct about these national capitals, however, is the constitution of purely national political class struggles. The political contest between any class of wage laborers and their national capital is fought out within the context of a nation-state form that is rapidly approaching extinction. Already countries very close to the core of Europe have been stripped of their national sovereignty, not to mention peripheral nations. And the more these nations lose their sovereignty, the more indifferent they become to both their domestic working class and domestic capitalist class.

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  1. February 25, 2012 at 8:24 pm

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