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# Zombie Capitalism Global Crisis and the Relevance of Marx

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The other advanced capitalisms

The picture so far has been of the US economy in the post-war boom. It was responsible for approaching half of total world output at the end of the war, and its dynamic determined to a great extent what happened elsewhere. But the big European economies, with substantial but lower levels of arms spending, showed many of the same features. In Britain and to a lesser extent France, great investments in arms industries had the effect of drawing the rest of the economy forward, counteracting some of the pressures for the organic composition to rise and the rate of profit to fall, and permitting continual economic expansion-all without resort to Keynesian measures.

In Germany armaments were less important. But the role of the government remained important. One Marxist account tells how:

far more than in any other capitalist country the bourgeoisie in the Federal Republic made use of the state apparatuses and the monetary and fiscal system to force capital accumulation by means of favourable depreciation rates, credits for reconstruction at favourable rates of interest and finance for investment. All this took place in contradiction to the official neoliberal economic theory . . . 33

In Japan state capitalism advanced further in its influence over civilian industry than almost anywhere else in the Western world-despite a low level of direct state ownership. The state and the largest private firms worked together to ensure that that portion of the national income that had gone into arms before 1945 now went into productive investment:

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The motive force for rapid growth was fixed investment in plant and equipment. Private fixed investment grew from 7.8 percent of GNP in 1 946 to 21.9 percent in 1961 .34

When imported raw materials were in short supply in the late 1940s and the 1950s the government took charge of their allocation to industries it thought would best contribute to the growth of the economy, to the building up of key industries like coal mining, iron and steel and the expansion of exports.

The Ministry of International Trade and Industry (MITI) issued "guidelines" to industry which it ignored at its peril. The giant firms that had accepted the dictates of the war economy before August 1945 as essential to military expansion now accepted the dictates of MITI as essential to peaceful economic expansion:

Japanese entrepreneurs are vigorous in investing. They will not confine their fixed investment within the limit of gross profits or internal accumulation, unlike the case of entrepreneurs in other advanced countries. Even if the fixed investment is over and above their gross profits, the enterprise will undertake investment so long as bank finance is available.35

In other words, the heads of big business and the state worked together to ensure the growth of Japanese national capitalism by mobilising the whole mass of surplus value and directing it towards "strategic" sectors, regardless of considerations of short-term profitability. What other state capitals did with military considerations uppermost, Japanese state capitalism did in the interests of overseas market competition. Exports played a very important role in driving the economy forwards. And that meant that Japanese growth was ultimately dependent on the US arms economy. As Robert Brenner shows in a highly empirical study:

German and Japanese manufacturers derived much of their dynamism by means of appropriating large segments of the fast-growing world market from the US and UK, while beginning to invade the US domestic market. This redistribution of market share-the filling of orders (demand) by German and Japanese manufacturers that had formerly been supplied by US producers-gave a powerful boost to their investment and output.36

The Long Boom

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It was not "social compromise" and the "welfare state" that produced the long boom and the "golden age". Rather they were all by-products of militarised state capitalism. Prosperity rested on the cone of the H-bomb.37

Labour power in the Great Boom

Throughout the first post-war decades unemployment was at levels known previously only during brief boom periods. In the US unemployment was less than 3 percent in the early 1950s; in Britain it hovered between 1 .5 and 2 percent; in West Germany a high level of unemployment caused by the economic dislocation of the early post-war years fell to 4 percent in 1 957 and a mere 1 percent in 1960.

So the problem for industrialised capitalist states was not coping with unemployment, but its opposite-ensuring that employment grew at sufficient speed to feed capital's seemingly insatiable appetite for labour power. The US employed workforce rose by 60 percent between 1940 and 1970. Such expansion demanded completely new supplies of labour power. Whether politicians and government administrators liked it or not, the state could not leave supplying the key raw material for economic or military competition, labour, to the vagaries of a "free" labour market. The state had to supplement-and even partially supplant-the wages system with services and subsidies provided by itself on a much greater scale than previously.

One answer to the shortage of labour power lay in reducing the agricultural workforce still more, with state-sponsored amalgamations of small farms-an approach followed in much of Western Europe. Another lay in encouraging massive emigration of people from less developed countries to the cities of the industrial countries (from Turkey, Eastern and Southern Europe to Germany; from Yugoslavia, Portugal, Spain and Algeria to France; from the West Indies and the Indian subcontinent to Britain; from Puerto Rico to the US). A third solution-again adopted almost everywhere-was the drawing of married women into paid employment. Yet each of the ways of enlarging the labour force created new problems for capital and the state.

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Squeezing labour from agriculture could work only if resources were put into agriculture in order to increase its productivity. This could be very expensive. But the alternative was that the provision of food for the growing urban population and raw materials for industry would suffer, creating working class discontent and bottlenecks in accumulation. And eventually there was little in the way of spare labour power left in the countryside to provide for the needs of industry as the peasantry shrank in numbers.

Migration from the Third World was a very cheap way of getting labour power. The advanced country had to bear none of the costs of rearing and educating this part of its labour force-effectively, it was getting a subsidy from the immigrant workers' country of origin.38 The new workforce was usually younger than the "native" workforce, and demanded less in the way of health care, old age pensions and so on. And its members were usually more prepared to tolerate low wages, harsh working conditions, rigid discipline and so on-in short, to be super-exploited. The pool from which this new labour came was potentially limitless.

Yet there were practical limits. As migrant workers became accustomed to living and working in their new home, they demanded conditions closer to those of established workers; they wanted decent accommodation and welfare benefits. The state had either to increase its expenditure on these things-or to see growing social tensions that could lead to either intensified class struggles (to a considerable extent the revolt in France in 1968 was a revolt of such new workers) or to "racial" clashes between old established and newer workers. Unable to afford the social expenditure needed to head off such sources of social instability-and eager to deflect discontent away from itself-the state usually reacted by imposing controls on further immigration.

The wholesale entry of married women into the workforce also demanded a certain level of investment by the state. Means had to be found to ensure that it did not lead to the neglect of child rearing-the socialisation of the next generation of workers-or a breakdown in the provision of food, shelter and clothing for the male workforce. Many of these means could be provided, at relatively low cost, with the application of new technology. The refrigerator, washing machine and vacuum cleaner, the replacement of the coal fire by electricity, gas or oil heating, the popularisation of frozen foods, the spread of fast food outlets, even the television set-all had the effect of reducing the amount of effort needed to ensure the reproduction of both present and future labour power. And they usually cost not a penny to the state or capital, being paid for by the family out of the enlarged income it received as the wife took up paid employment. Caring for young children while both their parents worked created greater difficulties, since the provision of nursery facilities could be costly for the state-even if these costs too could often be recouped from the wage of the working wife.

The Long Boom

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So all the methods of expanding the labour force could work, up to a certain point-but beyond that they tended to imply quite considerable overhead costs. Welfare costs could be borne while the system was expanding rapidly. The "insurance" principle ensured, as we saw in Chapter Five, that some sections of the working class paid for welfare provision to other sections. The extra cost amounted to only 2 or 3 percent of GNP in Western Europe, while in the US the state made a small surplus. 39 But the costs would become a burden once the Great Boom collapsed.

There was another solution available to the labour shortage. But it was even more expensive. It was to increase state expenditure on the reproduction of the labour force, so as to increase the average level of skill. In all the advanced countries there was a considerable increase in educational expenditures during the Great Boom-particularly in the upper grades of secondary education and in higher education.40

Finally, there was a third area of expansion of state expenditures designed to increase productivity-expenditures designed to provide a feeling of security for employed workers. Into this category fell old age pensions and unemployment benefits. As James O'Connor noted, "The primary purpose is to create a sense of economic security within the ranks of employed workers and thereby raise morale and reinforce discipline".41 Hence in many countries in the late 1960s wage-related unemployment benefits and redundancy payments were introduced. They were the other side of the "shake-out" of labour from older industries.

This "socialisation" of labour costs had some important consequences for the system as a whole. Under conditions of acute labour shortage, the national capitalist state had to tend and care for labour power as well as exploit it if productivity was to match international levels. But this meant that workers had some possibilities of being able to sustain themselves without selling their labour power. There was a partial negation of the character of free labour-but only a partial negation, since the state applied all sorts of pressures to keep people in the labour market.

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Yet even this limited "negation" of the free labour market was a burden that put up the overheads of each national capital. As such they exerted a downward pressure on the rate of return on the total national investment. For a long period this did not seem to matter. Other factors were at work protecting the rate of profit. But once the upward dynamic of the boom began to weaken, the costs of welfare became a crucial problem. The two functions-of increasing productivity and buying consent-were no longer complementary. Capital had to try to reduce the cost of maintaining and increasing productivity, even if doing so upset its old mechanisms for keeping control over the working class. This was to be an important factor shaping class struggle once the long boom faltered.

The Eastern bloc

The Western economies and Japan were not the only ones to achieve rapid growth rates during the post-war decades. So too did the USSR and the countries it dominated in Eastern Europe. Soviet electricity output grew by 500 percent between 1950 and 1966, steel output by just under 250 percent, oil output by 600 percent, tractor output by 200 percent, fabric output by 100 percent, shoe output by 100 percent, the housing stock by 100 percent.42 By the mid-1970s the same consumer goods which had transformed people's lives in Western Europe and North America-the television set, the refrigerator, the washing machine-were also making their appearance in Soviet and East European homes, even if more slowly.43 Since the collapse of the Eastern bloc in 1 989-91 it has usually been forgotten that in the 1950s and 1960s even by many Western opponents of the USSR took it for granted that its growth rate was higher than regimes elsewhere in the world had achieved. A trenchant critic of the system, Alec Nove could write, "The success of the Soviet Union . . . in making itself the world's second industrial and military power is indisputable" . 44

But simply growing fast did not overcome the external pressures for more growth, since even after decades of industrialisation the

The Long Boom

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Soviet economy was still less than half the size of its then main military competitor, the US. Indeed, in some ways the pressures grew greater. At the beginning of industrialisation, there were enormous reserves of labour that could be released for industry from agriculture. That meant it was not of any great concern to those at the top of the bureaucracy if much of this labour was used wastefully. It started to matter as the countryside began to empty of young men-leaving much of the agricultural production needed to feed the cities to be done by diminishing numbers of ageing people. The slave labour camps were run down soon after Stalin's death in 1 953, in part for political reasons but also to release inefficient slave labour for efficient exploitation as wage labour. It was an indication that the phase of "primitive accumulation" was at an end. There was recurrent talk within official circles from that time onwards about economic "reform". During one such phase, in 1970, the leader Leonid Brezhnev spelt out the rationale:

Comrade Brezhnev dwelt on the question of the economic competition between the two world systems. "This competition takes different forms," he said. "In many cases we are coping successfully with the task of overtaking and outdistancing the capitalist countries in the production of certain types of output . . . but the fundamental question is not only how much you produce but also at what cost, with what outlays of labour . . . It is in this field that the centre of gravity between the two systems lies in our time" .45

This was the same logic of competitive accumulation that operated on the sometimes huge state sector of the Western industrial capitalisms-or, for that matter, on the giant corporations described by Galbraith. The organisation of production inside the USSR might involve the putting together of different use values (so much labour, so many physically distinct raw materials, such and such a particular sort of machine) to produce further use values. But what mattered to the ruling bureaucracy was how these use values measured up to the similar conglomerations of use values produced inside the great corporations of the West. And that meant comparing the amounts of labour used in the USSR to the labour used in the Western corporations. Or, to put it in Marx's terms, production within the USSR was subject to the law of value operating on the global scale.46

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One of the illusions created by the rapid non-stop growth of the USSR was that it proceeded smoothly and rationally according to the various Five Year Plans, in contrast with the ups and downs in the West. But the relentless drive to accumulate had as a necessary by-product disorganisation, chaos and waste in whole areas of production. At the beginning of every "plan" vast new industrial projects would begin to be constructed. But after a while it would become clear that they could not all be finished. Some (usually catering for people's consumption needs) would be "frozen", while the resources for them were diverted elsewhere (to the production of means of production). This meant a continual chopping and changing of the goods resources were expected to produce; sudden pressure on people to produce more of one product and less of another; concealment by people at every level in the production process of the resources at their disposal in case they were suddenly pressed to produce more; massive amounts of waste as some of the things contained in the plans were produced, but not other things necessary for their use (such as the case in the 1 980s when vast amounts of fertiliser were wasted because one of the frozen projects was the building of the factory to provide the bags for packing the fertiliser). 47

Since the collapse of the Soviet Union it has become habitual on both the left and the right to blame all this simply on bureaucratic irrationality, without acknowledging its similarity to the irrationality of the managerial despotism within Western enterprises-and the common roots of both in the subordination of human labour to competitive accumulation, that is, to the self-expansion of capital. Yet it was possible to trace each of the forms of irrationality within the Soviet economy back to overinvestment-just as it is with managerial irrationality within Western corporations.

There was not only waste in the Soviet-type economies. There was also unevenness in growth over time, as in the West. Studies in the 1960s, mainly by Eastern European economists, revealed the presence of cyclical ups and downs in economies modelled on the USSR. The Czechoslovaks Josef Goldman and Karel Korba told in 1968 how:

Analysis of the dynamics of industrial production in Czechoslovakia, the German Democratic Republic and Hungary supplies an interesting picture. The rate of growth shows relatively regular fluctuations . . . These fluctuations are even more pronounced if analysis is confined to producer goods.48

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The Yugoslav Branko Horvat was able to publish a book called Business Cycles in Yugoslavia49 which pointed out that even before the market reforms of 1968 the Yugoslav economy was "significantly more unstable" than ten other economies that were cited, "including the United States" . A Western academic showed that such unevenness was already visible in the Soviet Union from the time of the first Five Year plan onwards.50

The pattern of unevenness showed great similarities with the Western capitalist states during the long boom. Its origin lay in the dynamics of competitive accumulation. As we saw in Chapter Three, at a certain point in any boom the competitive drive of capitalists to invest leads to a drying up of existing supplies of raw materials, labour and loanable capital (ie non-invested surplus value). The prices of all these things-commodity prices, money wages and interest rates-begin to rise until the least profitable firms suddenly find they are operating at a loss. Some go out of business. Others survive, but only by abandoning planned investments and closing down factories. Their actions in turn destroy markets for other capitals, forcing them to abandon investments and close down factories. The "excess demand" of the boom gives rise to the overproduction of the slump. The secret of the Western long boom of the 1940s, 1 950s and 1960s lay in the way the national state could reduce the pressures leading to over-accumulation (by diverting a portion of capital into non-productive military channels); take direct action to try to maintain a high rate of exploitation (through wage controls); intervene to slow down the boom before it led key firms to become unprofitable; and maintain a minimum guaranteed level of demand through military orders. The state monopoly capitalist arms economy was not able to do away with the cyclical pattern of capitalist accumulation. Specifically, it could not stop competitive pressures causing capitalists to tend to expand production during upturns in the economy on a scale which exceeded the available resources. But it was able to prevent such spells of "over-accumulation" leading to slumps of the pre-Second World War sort.

Something of the same pattern existed in the Soviet-type economies. Bottlenecks arose throughout the economy, threatening the closure of vast sectors of production through shortages of inputs. Output never rose nearly as rapidly as planned. The monetary funds paid out by enterprises for materials and labour exceeded the output of the economy, giving rise to inflationary pressures which found direct expression as price rises or "hidden" expression as acute shortages of goods in the shops.

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Left to itself, over-rapid accumulation by certain key enterprises would soon have absorbed the resources many enterprises depended on to keep operating at existing levels, leading to the wholesale closure of their plants and the destruction of the markets for the output of other enterprises. It would have become a crisis of overproduction of commodities. But as in the West in the long boom, the state stepped in to try and pre-empt this by "cooling down" the economy. It ordered enterprises to "freeze" certain investments and to divert resources to others. This involved factories suddenly switching from one sort of output to another. The myth of the pre-planning of production gave way to the reality of after the event, "a posteriori" , allocation, with a repeated shifting of inputs and outputs. One plan target which always suffered in the process was that for consumer goods production. The result was to increase still further the discrepancy between the funds laid out by enterprises on wages and the goods available for these wages to buy-to increase open or hidden inflation.

Deep social and political crises in 1953 (East Germany), 1956 (Poland and Hungary), 1968 (Czechoslovakia) and 1970-71 (Poland again) showed how the tensions this produced could find sudden expression. But so long as it was possible to restore growth rates, the tensions could be reduced, usually by a combination of repression on the one hand and concessions over living standards on the other. Such remedies hid temporarily the underlying pressures towards crisis

Those who failed to analyse the system in terms of competitive accumulation failed to see this. This was true of the Western procapitalist theorists of "totalitarianism". One can search their writings of the 1 950s and 1 960s in vain for some hints that Russian type systems contained inbuilt economic contradictions. It was also true of most of those who saw them as some sort of socialist or workers' states. They were continually over-optimistic about the economic prospects-in their own way mirroring the illusions of the Western Keynesians.

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