Later capitalism

Posted in martin's blog on Mon, 05/01/2015 - 12:03,

A discussion of Ernest Mandel's 1975 book Late Capitalism

A "magnum opus"

All too often we produce only a pastiche of the recent past when we try to map the future, or even the present. One conclusion is that our ability to predict is limited; another, that we should at least learn from the mistakes of previous pastiches.

Dissecting Ernest Mandel's large book Late Capitalism is useful for that reason. In a flurry of Marxist economic writing in the 1970s, it was the only attempt at a comprehensive synthesis. It was very influential; and very influenced too, in the sense that Mandel explicitly essayed a multi-factor account of capitalist economic fluctuations, and integrated or partially integrated ideas from a wide range of other left-wing writers.

The book was written in 1970-2, published in German in 1972, and published in English (a revised version) in 1975. It was published in French in 1976 (with a different title, The Third Age of Capitalism); reprinted in French in 1996 and in English in 1999. In 1978, Mandel was invited to give lectures on the basis of the book at Cambridge University. Those lectures were published as a book, Long Waves of Capitalist Development, in 1980. Another version of Long Waves was published in 1995, just before Mandel died, with three updating texts from him added. A yet-further-expanded version was published in French in 2014 (Les Ondes Longues du développement capitaliste), with contemporary assessments by Mandel's co-thinkers Daniel Bensaid, Francisco Louca, and Michel Husson. The book was discussed in some detail in a 1999 memorial volume edited by Gilbert Achcar, The Legacy of Ernest Mandel.

An index of the fact that Mandel's effort represented the better, not the worse, end of would-be Marxist economic analysis in its time is the space which Mandel gave in the book to arguing that capitalism still had its characteristic contradictions (against soft-leftists who thought they now had an indefinitely-stable "managed" society) and, on the other hand, to remonstrating that empirical investigation was necessary and the forces of production had not in fact stagnated (against the Healyite and Lambertist strands of would-be Trotskyism). He also gave space to tackling the then widely-circulated Stalinist theory of "state monopoly capitalism", used to underpin their announced tactic of "anti-monopoly alliance"; as Mandel noted, there it was "a question of an ideological operation rather than a simple theoretical error" (p.513: all page numbers refer to LC, 1975 edition, unless otherwise stated).

Gilbert Achcar marvelled at the "gigantic effort" of research which Mandel had already made for his Marxist Economic Theory, and the further work done for Late Capitalism, which Mandel would "consider his magnum opus" (Legacy, pp.5-6). Mandel worked hard, and with a formidable capacity to absorb writings in several languages: the book cites, mentions, or briefly discusses many authors.

Unlike some other would-be Trotskyists, Mandel wanted to register the realities of capitalist growth. He wanted to reaffirm its eventual fragility. And he wanted a theoretical frame with some elasticity and scope. As he wrote in Late Capitalism (p.34), he wanted to escape the constraints imposed on Marxist discussion of the development and crises of capitalism by the fact that it had "been dominated for more than half a century by every author's attempt to reduce this problem to a single factor" (disproportion, underconsumption, competition, tendency of the rate of profit to fall...) He wanted an approach which took account of several relatively "autonomous variables" (p.39).

The ambition was reasonable, and gave him a framework wide enough for a more comprehensive survey of how capitalism was developing than any other Marxist attempted. He tried to move beyond a pamphleteering statement of a single hypothesis about a central trend (in his case, the "long-wave" thesis) to a rounded account of a complex and diverse system. He wrote some fine pages (pp.393, 502, 505, etc.) denouncing the marketisation of everyday experience in late capitalism, the cult of "compulsive striving for success", the promotion of consumer credit, and the "re-privatisation of the recreational sphere of the working class", reminding us that when some writers today describe such things as the novelty of recent years, what they are referring to is much older. He coupled it with a well-written critique of "pseudo-ascetic" and romantic rejections of "consumer society".

Long waves

As the title of his follow-up lectures and book signals, Mandel's main thesis was that capitalist development moves in "long waves".

He described four upwaves (p.130ff), and proclaimed a new downwave which would run from 1966-7 to "198?" (p.143).

1793-1825 - machine industry, but with handmade machines

1848-73 - transition to machine-made (steam-powered) machines

1894-1913 - transition to electric motors

1945 (or 1940 in USA)-1966-7 - "the electronic and nuclear age" (p.119)

This general idea was not new. "Long waves" had been discussed by many other writers, most influentially the conservative economist Josef Schumpeter in his books Business Cycles (1939). Schumpeter wrote that: "analysis of... long waves in economic activity... reveals the nature and mechanism of the capitalist process better than anything else. Each of them consists of an 'industrial revolution' and the absorption of its effects... the rise of such a long wave toward the end of the 1780s, its culmination around 1800... This was the Industrial Revolution dear to the heart of textbook writers. Upon its heels, however, came another such revolution producing another long wave that rose in the forties, culminated just before 1857 and ebbed away to 1897, to be followed in turn by the one that reached its peak about 1911 and is now [1942] in the act of ebbing away". (Capitalism, Socialism, and Democracy, 1942).

As Mandel's summary timeline indicated, he retained Schumpeter's linking of the waves with "industrial revolutions". He claimed that his "specific contribution" was "to relate the diverse combinations of factors that may influence the rate of profit... to the inner logic of the process of long-term accumulation and valorisation of capital, based upon spurts of radical renewal or reproduction of fundamental technology" (p.145: emphasis added).

Mandel's theory of "long waves" was asymmetric. The start of a long upwave required a three-part "systemic shock" (OL p.167): a raised rate of exploitation, allowing raised profits; a "pool of idle [money] capital" ready to invest; and a technological revolution, opening the way for investment in new technologies. There was no general trend guaranteeing that those three circumstances will come to coincide at regular intervals. There was no dynamic inherent in downwaves which will generate those circumstances sooner or later. In contrast, Mandel indicated that every long upwave would be inherently self-exhausting.

In 1940-5 a raised rate of exploitation had been established by fascism and war. Mandel identified the characteristic new technologies of the upwave as nuclear power and automation. "The cumulative long-term results of fascism (of counter-revolution) and the war" created the "shock" necessary to start an upwave. (OL p.215).

Mandel did not discuss in detail the "pool of idle [money] capital". In fact, shortage of credit was a big problem for German capitalists in rebuilding industry in the late 1940s and into the early 1950s: see Rebuilding Germany: The Creation of the Social Market Economy, 1945-1957, by James C.Van Hook. Marshall Aid and official policies of state investment and "financial repression" (holding down interest rates) made good the gap, but then the question is more to explain how capitalist governments did and could pursue such policies than to explain the expansion by a prior "pool of idle capital".

A pre-statement and a restatement

In his previous large book (Marxist Economic Theory: French edition 1962, English edition 1968) Mandel had, on his own later account, failed to "treat in a systematic way the problem of the sharp rise in the rate of growth of the capitalist economy after world war II..."

He excused himself: "The reason for this... lies simply in the fact that most of Marxist Economic Theory was written in the late fifties... when many of the postwar trends were not yet clear". (The Inconsistencies of State Capitalism, IMG pamphlet, 1969)

Mandel had instead made do with generalities about "the epoch of capitalist decline". Seventeen years since the end of the war were too short a time for Mandel to re-evaluate his 1940s diagnosis of hopeless economic decline for capitalism, which he insisted on, at that time, against a good few other writers in the Trotskyist spectrum.

Just a couple of years after the publication of Marxist Economic Theory were long enough for Mandel to feel obliged to reassess. In the 1960s, he wrote: "from the point of view of trade cycle history, we were obviously faced [in the 1960s] with a new 'Kondratieff', or long-wave movement... The theory of the long history of capitalism was first developed by the Russian economist N.D. Kondratieff and Josef Schumpeter integrated it into his own explanation...

"Today, it appears that, contrary to what most economists – Marxists and non-Marxists alike – were thinking in the late thirties and the early forties, after a Kondratieff wave of long-term stagnation which started in 1913 and lasted till 1939, world capitalism entered in 1940 on a new long wave of accelerated growth, which will probably last till the second half of the sixties". (The Economics of Neo-Capitalism, Socialist Register 1964. Mandel argued a similar view in his Introduction to Marxist Theory, first published in 1964, based on talks delivered in 1963, and still in print).

At that point Mandel presented his long-wave idea as similar to Schumpeter's. "In Schumpeter's trade cycle theory, long-term waves of more rapid expansion are explained basically by a rapid succession of technological innovations, which tend to appear 'in bunches'. This same explanation seems sufficient to account for the long-term wave of accelerated growth which world capitalism witnessed since the beginning of World War II".

In his later versions, Mandel claimed to present, distinctively, "the Marxist interpretation" of long waves (1980 book), or at least "an attempt at a Marxist explanation" (German book, 1972), "a Marxist view" (lectures) or "a Marxist interpretation" (1995 and 2014 reprintings). Those who had "interpreted" his idea as a "technological explication" of long waves had misunderstood (LW, p.9, p.24). His theory was "essentially based on the long-term movements of the rate of profit which determine, in the last analysis, the slower or faster rhythms of the accumulation of capital" (OL, p.17).

The implication, though not the clear statement, was that a sudden shock raising the rate of exploitation did not require some special technological conditions to initiate an upwave, but that the general nature of capitalism implied that, given the prospects of greater gain, capitalists would always find new technologies.

Here Mandel wanted to distance himself from Schumpeter: maybe, however, he just brought himself closer to Schumpeter's concept of "creative destruction", only in a Marxist idiom: destruction of workers' conditions would create raised profit rates and thus an upwave.

The downwave

In Mandel's theory, the downwaves are organic. In some passages he indicted the inherent limits of automation: when automation reduced the workforce below a certain point, there would no longer be enough productive workers to produce adequate profits.

In other passages, and in contrast, Mandel depicted the expansion eventually eroding the "reserve army of labour" and generating a decline in the rate of exploitation (LC, p.179). It is unclear why at that point the counter-tendencies discussed by Marx in chapter 25 of Capital volume 1 - accelerated technical innovation and slower growth, reconstituting the "reserve army of labour" - should not operate; but Mandel's identification of the long upwaves with "spurts of radical renewal... of productive technology" suggested indicting exhaustion of the current wave of new technology.

Fundamentally, however, "the unavoidable long-term results of accelerated economic growth [would be] a long-term decline in the average rate of profit". The "internal logic of capitalist laws of motion can explain... the transition from an expansionist long wave to a stagnating long wave [though] itd cannot explain the turn from the latter to the former (LW, p.21).

Like many other Marxist writers, Mandel worked with a scheme of capitalist economy being regulated by the rate of profit; of it being chronically, habitually, pulled down towards stagnation by a tendency of the rate of profit to fall; and its specific character in each period or area, as against other periods of areas, being defined by the secondary "fixes" which win reprieves from that tendency.

The underpinning tendency, for Mandel (in Late Capitalism, but not mentioned in The Economics of Neo-Capitalism) was an increased organic composition of capital (ratio of value c of machinery and material inputs to value v advanced for labour-power) and therefore a tendency of the rate of profit to fall (because surplus value s can rise only limitedly in proportion to v, and therefore must tend to fall relative to the faster-growing c).

The tendency, or alleged tendency, of the rate of profit to fall loomed large in Marxist economic debate in the 1970s, and not just with Mandel. As the US hit its first financial crisis since World War 2, in 1966, and the capitalist world saw its first general recessions, in 1969-71 and 1973-5, researchers discovered that profit rates had been falling in the richer countries since about the mid 60s, and that the capital-output ratio (the best proxy in official statistics for the ratio of outlay on means of production to outlay on labour power) had risen. It needed research, because official economic statistics, often ample on other variables, gave little attention to profit rates.

In my view, that discovery gave a tangential and (in my view) unsound argument of Marx's an undue and distorting prominence which it had never had before in Marxist discourse. Whether I'm right about that is not, however, pivotal in discussing Mandel. In the texts I am discussing, the "tendency of the rate of profit to fall" functioned only as a way of saying that capitalism tended organically towards downwave. Mandel made no attempt to construct long time-series of profit rates. (In Ondes Longues, p.162, he borrowed a graph of a profit rate from Gerard Dumenil and Dominique Levy. Apparently of some average profit rate in the USA, though he didn't specify that, still less say exactly which average: graphs without scales or without precise indication of what was being graphed were common in Mandel's work).

A wave? Really?

Marxist and non-Marxist economists agree that there is a roughly regular "business cycle" in capitalism. Marx estimated the average length of the cycle at ten years, and linked that span with the average life of industrial equipment; but the link is very loose, and in his 1886 preface to the English translation of Capital Engels speculated that the regularity might have broken down altogether. In modern times, the US National Bureau of Economic Research reckons the trough-to-trough lengths of cycles over the last half-century to have varied between 128 months and 28 months.

In Late Capitalism, like Schumpeter's similar scheme, Mandel "emphasised" (his word) "that these 'long waves' do not possess the same built-in periodicity as the classical cycles in the capitalist mode of production". He specifically rejected arguments linking the length of the waves to the life-span of large, long-lived investments (buildings, roads, bridges, railways, tunnels, etc.) (p.139).

Yet his timeline in Late Capitalism presented the long waves as much more regular than the short-term business cycle: 1793-1825-1848-1873-1894-1913-1945-1966... He was confident enough about the regularity to predict a new upwave for "198?"

By 1980 he had reconsidered. He wrote that a new upwave from the early 1990s was theoretically possible. In fact it was unlikely because the necessary "shock" would call for such large preconditions: chronic mass unemployment, a leap forward in industrialisation of the ex-colonial world or integration of Russia and China into the capitalist world market, and "terrorist dictatorships" in the richer capitalist countries (LW pp.107-115).

Despite the fact that a number of those large preconditions have developed, Mandel continued until he died to see a new upwave as distant. His co-thinkers writing in the 1999 book The Legacy of Ernest Mandel and in the 2014 volume take the same view, though Michel Husson in the 2014 volume suggests that an upwave may be under way in the global South.

The "asymmetric" formulation of Mandel's long wave theory - downwaves inexorable, upwaves dependent on extra-economic shocks - maybe permits that approach. By the same token it raises questions whether this is really a wave theory at all.

Why should there be any regular pattern at all in the "shocks" producing upwaves? Why should the interruptions in the supposed constant underlying drift towards stagnation (tendency of the rate of profit to decline) take only the form of huge shocks every 50-plus years or so? Why couldn't the tendency of the rate of profit to fall be offset for a fairly long period by a gradual, not all-in-one-shock, increase in the rate of exploitation? (Don't several Marxists argue, in fact, that exactly that happened between about 1982 and 2008?) Or why couldn't a series of smaller shocks be recognised? Why would a 1980s or 1990s upwave require so much bigger a shock than 1793, 1848, or 1894? Why couldn't the development also be inflected by shocks speeding or deepening downwaves?

In fact, does a shock increase in the rate of exploitation (rather than a gradual one, coming with expanded relative surplus value) necessarily promote a boom? Real wages fell sharply in Britain in the early 1920s, and even more sharply in Germany (Feinstein, National Income, Expenditure and Output of the United Kingdom, 1855–1965; Broadberry and Burhop, Real Wages and Labor Productivity in Britain and Germany, 1871–1938, Journal of Economic History, 70 (2), 2010). That did not open the way to booms: the increase in the rate of exploitation came together with capitalist disorder which prevented the capitalists taking much advantage of it.

As Mandel added qualifications to his long wave idea, to make it supposedly more "the Marxist interpretation", in fact he converted it from a theory of a wave pattern into more like an after-the-fact description of there having been some fairly long periods in which capitalism thrived, relatively speaking, despite short-term troubles, and others when capitalist growth had been more depressed. And not even a good description.

"Predicting" the past?

Mandel often congratulated himself, after the event, on having been "almost the only person to predict, in the middle of the 1960s, that the long period of expansion would lead to a new long period of depression" (in his 1964 article The Economics of Neo-Capitalism). There really was little room for congratulation. The 1964 article had nothing more than the standard Marxist warning that capitalist prosperity can never continue forever. It included no detailed argument, let alone about the falling profit rates subsequently said to have brought the downwave.

That Mandel's book failed to predict the future does not necessarily disqualify it. Marx himself never tried to predict the future economic trajectory of capitalism except in the broadest terms. When Engels published later editions and volumes of Capital after Marx's death, he confessed himself puzzled by the latest developments of capitalism, and unable to offer more than tentative suggestions about their origins and future. No writer on economic matters, Marxist or bourgeois, has ever been able to predict developments in any consistent and even quarter-detailed way. Mandel, however, did worse: he failed on "predicting" even the present or the past (as he was writing), i.e. giving an accurate narrative of that present and past, and a coherent one which would enable us to separate fundamental trends from more superficial and temporary ones within the vast complexity of development.

In 1964 Mandel expected the next downwave to start in the late 1960s. By 1972 he thought he could date it precisely as having started in 1966-7. By the 1990s he was dating the upwave from 1948 (not 1945) to 1973 (not 1966-7) (OL, p.212, 215). It was not just that he couldn't predict when upwaves and downwaves would happen: even in hindsight he was unsure by a margin of several years about when they had happened.

In Late Capitalism Mandel identified the characteristic new technologies of the 1945-66 upwave as nuclear power and automation. By 1980 he had faded out nuclear power. In 1995, in Ondes Longues, he identified the "third technological revolution" with "semi-automated systems based on the massive use of microelectronics", but then wrote that the high growth rates of that upwaves had been driven mostly by construction (not at all automated) and the car industry (which started using microelectronics on a large scale only from the 1980s).

Nuclear power was ballyhooed as the wave of the future in the 1950s, but commercial development did not start until 1956, virtually stalled for decades after the Three Mile Island accident in 1979, and is only recently and tentatively restarting. Automation was more widely discussed in the 1950s than now - the word entered common usage in the late 1940s - but on Mandel's own account only started to enter industry in the 1950s (in the USA: it was later elsewhere, p.175, p.194).

It has developed on a really large scale in what, in Mandel's scheme, is the continuing "downwave" following 1966-7. In 1970 about 200 industrial robots were being used in the USA, and very few elsewhere; by the end of 2013, about one and a half million industrial robots were being used world-wide (R M Cyert and D C Mowery, The Impact of Technological Change, p.275; World Robotics - Industrial Robots 2014, Executive Summary, p.15).

The IBM System/360 range of computers, the first used on a wide scale in industry, was introduced in 1964. But these were huge and very expensive machines, requiring special rooms and feeding by punched cards, used mostly for calculation-intensive research or such purposes as payroll. The widespread use of microelectronics in machine tools, vehicles, phones, and so on, and in portable and individually-usable computers, and the widespread control of production processes through those smaller and nimbler computers, has come only since the 1970s and 80s, during a "downwave".

Or even describing accurately?

The orthodox economic measure of "joint factor productivity" is, very roughly, a measure of how new equipment boosts output more than just in proportion to its sheer bulk. Only very roughly: but there is no other statistical measure. In the USA, the chief centre of technical innovations, that measure rose in 1950-73 much more slowly in than in 1938-50, and not much faster than in 1913-29 (Angus Maddison, Dynamic Forces in Capitalist Development, p.71).

If we try to identify the most important moves anecdotally and descriptively (railways, electricity, internal combustion engine, etc.), then we face further problems. Capitalist growth always means transformation of technologies, but a lot of capitalist growth in "long waves" of relative prosperity may be the cumulatively-drastic incremental development of technologies already established (production of cars and domestic hardware, and construction, in the 1950s and 60s); conversely, important new technologies may first spread during "downwaves" (electric power in the "Great Depression" of the late 19th century; assembly-line production, the chemical industry, and domestic hardware such as radios, fridges, vacuum cleaners, washing machines, and TVs in the 1930s and 40s).

If we maintain that a surge of technical innovation is central to dynamising capital, but its effects show themselves only with delay (as the technology spreads, its use is refined and linked with other technologies, and so on), then – so long as we are unable to quantify that delay – we introduce a large measure of arbitrariness into the argument. Any capitalist upswing can be put down to the "delayed" effects of whatever seems to be the most recent big technical innovation, any stagnation to the claim that current technical innovation is not yet mature enough, or too mature, to yield results.

The sequence of events does not fit the wave theory. If Mandel is right, then long upwaves start with a bang (the shock which raises the rate of exploitation, etc.) and end with a whimper (exhausted by the tendency of the rate of profit to fall). It is the contrary pattern to the shorter waves of the business cycle, which start with a whimper, as capital reorganises in depression and begins to advance again, and ends with a bang (the crisis).

Sometimes Mandel wrote of "long-term upsurges in the average rate of profit" (LW p.12), suggesting that the "shock" which started an upwave would set in train a multiplier effect (advances in a central technology bringing along re-equipment in related sectors, and so on) raising profit rates further, for a good while, from the after-effects. Mostly, however, he wrote of "sudden increase", "abrupt rise", "sudden upsurges", one-off "significant increase", "sudden sharp upturn", "sudden long-term upsurges" (LC p.115 and again 341, 116, 557; LW p. 20, 15, 30) - a sudden move the effects of which would stick to keep the average rate of profit elevated, across short-term cycles, "lastingly", for many years though not forever (OL p.162).

The history does not fit that pattern. In the USA, which was the main driving force in the early years of the boom of the 1950s and 60s, there really had been no great "shock" increasing the rate of exploitation. In the 1930s unions were not crushed, but grew strong in basic industry for the first time. Real after-tax wages fell in wartime, but were back to 1939 levels by 1948 (Pecuniary Incentives to Work in the United States during World War II, Casey B. Mulligan, Journal of Political Economy 106 (5), October 1998). The Taft-Hartley Act of 1947 restricted union action, but through to the late 1970s the ratio of top-of-the-bottom-20% household income to bottom-of-the-top-5% remained lower (less unequal) than in 1948.

In Germany, Nazism, war, and post-war devastation did reduce workers to poverty after 1945. The same was true, though less so, in France and Italy. But the immediate result was not at all a surge of capitalists, encouraged by new high profit rates, installing shiny new technologies.

In Germany, for example: "Volkswagen was the only automobile factory in Germany which was still able to operate at all, despite damage..." It looked likely to be dismantled and shipped abroad for reparations (the western Allies stripped German industry too, though not nearly as much as the USSR in the east), and was saved only by a young British army major, Ivan Hirst, who "adopted" the factory, persuaded his superiors to let it to supply the British occupation with vehicles, and effectively managed it until 1949.

He was helped by the fact that Ford and the British car magnate Rootes thought Volkswagen not worth the trouble to strip. "Buildings had been destroyed or damaged, machinery broken. The equipment needed to remove the debris was lacking... There was a shortage of workers [in wartime the factory had run largely on forced labour], food, housing and work materials". Hirst had to haggle to get the most basic supplies. (Ralf Richter, Ivan Hirst: British Officer and Manager of Volkswagen’s Postwar Recovery, 2013).

Overall economic progress in Germany, France, and Italy was shaky until 1947, or really until the Korean war boom of 1950-3, which quickly doubled German exports. Probably many capitalists made fat profits in 1945-7, but it was by securing favours and contracts amidst the devastation rather than by high technology.

Mandel's pastiche did not really fit, and, for all his erudition, he proceeded by slippery redefinition rather than by trying to make an initial approximation more precise. Disconcertingly, almost all Mandel's citations of economic statistics in Late Capitalism were not extracts from the long runs produced by official statistical agencies, though those were already plentiful by the time he wrote, but selected pickings from other authors who had already selected from and processed the official statistics. Often he asserted a long-term trend by quoting only an illustrative or anecdotal number; often he asserted a long-term trend without any statistical documentation at all. For example, he gave no hard facts for investments in nuclear power or in automation and electronics.

The wave and the epoch

Mandel's theory was a pastiche of some trends in the 1960s, and a pastiche adjusted and trimmed with more eye to cutting the right figure for his readers than to probing uncomfortably for truth.

Mandel's shifting summary descriptions - from "epoch of capitalist decline" (1962) to "neo-capitalism" (1963-8) to "late capitalism" (1972 onwards) - tracked his environment. In those late 1950s, the Communist Parties dominated the European left. They still (though less so since their crisis of 1956) sometimes deployed some of the revolutionary-sounding language which they'd adopted as the Cold War developed, and they still "officially" insisted that West European capitalism was constantly making the working class poorer and poorer. Mandel's comrades sought to operate politically in milieus dominated by those Communist Parties, and did not want to appear more "optimistic for capitalism" than the Communist Party leaders.

By the 1960s, the confidence, cohesion, verbal revolutionism, and "pessimism for capitalism" of the Communist Parties was diminished. Mandel and his comrades worked at promoting a policy of "structural reforms" (which they thought of as an adaptation of the Trotskyist idea of "transitional demands") in left social-democratic milieus. By the early 1970s, things had changed again. A new generation, politicised around 1968, dominated a new radical left, and almost-unanimously saw the economic disturbances of 1969-71 and 1973-5 as signifying the end of the capitalist upswing of the 50s and 60s (now registered as uncontested fact). Mandel and his comrades had veered to ultra-left tactics. Mandel was trying to suit his economic writing to his audience.

When Mandel used the term "neo-capitalism", he referred to it as a phase of capitalist prosperity (built, in his accounts of that period, largely on the expansionary influences of permanently high military spending) which allowed (only for a while, of course) for bourgeois welfare and slump-suppressing policies.

In the introduction to Late Capitalism, he admitted that the term "late capitalism" was "unsatisfactory", but wrote: "its superiority over the term 'neo-capitalism' is obvious, given the ambiguity of the latter, which can be interpreted to imply either a radical continuity or discontinuity with traditional capitalism". He offered no explanation of why he had used the "inferior" and "ambiguous" term for several years, but now he was using a better one. The best-known user before Mandel of the term "late capitalism" was the Frankfurt School writer Theodor Adorno, who in 1969 had counterposed it as a description of those days to the term "industrial society" (Adorno, Gesellschaftstheorie und Kulturkritik, p.158). "Neo-capitalism" was a term of wider use in the 1960s, for example in Time magazine of 30 October 1964: "'What we have created,' says Emilio Pucci, the Florentine fashion marquis who also sits in the Italian Parliament, 'is neocapitalism'."

"Late capitalism" was not quite just a replacement for "neo-capitalism". It described an epoch covering not just the upwave, the period previously called neo-capitalism, but also the downwave then just starting.

In Late Capitalism Mandel wrote that "the characteristics of the imperialist epoch enumerated by Lenin remain fully valid for late capitalism", and that broadly speaking we were still in "the epoch of capitalist decline". Probably those words were just "cover", pieties to deflect criticism from then-fairly-vigorous would-be Trotskyist groups (Healyites, Lambertist) who would denounce him as "revisionist" if he wrote any different.

In the book published in homage to Mandel by his co-thinkers after his death in 1995, the editor, Gilbert Achcar, wrote unequivocally that: "He [Mandel] came to believe that capitalism had entered a new, third historical phase after the Second World War (after the classic and imperialist phases)" (Legacy, p.5). It was the "third age" of capitalism (as the title of the French edition of Late Capitalism had it).

The epoch

The term "neo-capitalism" was coined to describe a phase in which capitalism was (to a degree, and for a limited time) dynamic, elastic, and capable of assuaging some of its characteristic hurts. In French, however, "third age" means not just a third in succession, but old age. The title for the French edition of 1976 focused attention on the downwave, not the upwave, and was angled for readers who would think that world crises like the one in 1973-5 showed capitalism running out of rope.

This was a time when Mandel and his co-thinkers excitedly claimed that "dual power" was likely soon across western Europe (Mandel, Revolutionary Strategy in Europe, New Left Review 100). In his 1980 book Long Waves, Mandel had suggested that "long waves" in class struggle correlated with economic long waves, and printed a graph (p.50) of a European "class-struggle curve" which zoomed smoothly upwards from 1949, had already by 1959 outstripped the level of 1919 (let alone 1917), and by the mid-70s had gone far higher than ever before. (No scale for his measure of class struggle, no indication of how compiled, incomprehensible scale for dates... A version of the graph was reproduced in the 2014 version of the book, p.183, now with a scale on the vertical axis, but no hint of what the numbers on the scale represented.)

No wonder Gilbert Achcar, writing the introduction to the 1999 Legacy book, felt obliged gently to chide Mandel's "weaknesses... noticeable above all in excessive optimism or defensiveness".

Yet, even if the scheme of waves was unsound, even if the assessment of the downwave was skewed by those "weaknesses", still maybe Mandel's analysis of the whole epoch since World War 2 could yield insightful "prediction" of the past and of the times in which he was writing. Let us see.

For Mandel, the chief long-term trend of capitalist economy was, as we've seen, increasing composition of capital (c/v) and decreasing profit rates, and the story of each period centred round the special "fixes" offsetting the general trend in that period.

Unusually he assumed not only a general trend of c/v to rise, but that c/v is more or less uniformly higher in technically more-advanced sectors with higher productivity, and that the higher c/v would tend to reduce the profit rate in those sectors. Usually Marxists reckon that the market equalisation of rates of profit will mean that higher c/v affects profit rates only over time in the whole economy, rather than sector-to-sector at a given time.

Further, he argued that "the process of extended reproduction is determined by the quest for surplus-profits" (p.77, emphasis added), and that "technological rents" could bring a higher average rate of profit by bringing super-profits for technologically-advanced firms. Usually in Marxist discussion rents are held to be a portion of surplus-value. Thus from the point of view of profits they are a deduction rather than an addition, though over time technological rents can segue into increased relative surplus-value.

Thus, despite the fact that the wave theory centred on general shock increases in the rate of exploitation producing general increases in the rate of profit, outside the particular chapters on wave theory in Late Capitalism Mandel's focus was often on "the quest for surplus-profits" (emphasis added) by particular sectors of capital.

In that, he was probably influenced by the Communist Party writers who indicted capitalism above all for the surplus-profits gained by monopoly capital as distinct from other capital, and the "dependency theorists", who indicted it above all for the surplus-profits gained by extraction from the colonial and ex-colonial world.


Imperialism figured in Late Capitalism primarily in terms of that "quest for surplus-profits". Mandel started the book by describing imperialism and unequal exchange as a source of "surplus profits" for the big metropolitan corporations. "Surplus-profit can only be achieved at the expense of [not just workers but also] less productive countries, regions, and branches of production" (p.102). Mandel explicitly endorsed and repeated the arguments of "dependency theorists" such as Paul Baran and Andre Gunder Frank. For Frank, the economic drain from the "periphery" to the "centre" had been a constant since the 16th century, and consequently the early-20th-century Marxists' identification of "imperialism" as a new stage developing around the end of the 19th century was an erroneous overestimation of secondary factors.

Mandel tried to square his theoretical accounts by arguing that the drain, and consequent exacerbation of inequality between "periphery" and "centre", was "qualitatively increased" by the turn to systematic export of capital from metropolis to periphery, identified as a new development in the late 19th century by Lenin and indeed by almost all pre-1914 Marxists.

Mandel argued that the export brought development only in enclaves closely tied to and feeding into the metropolises, and went together with consolidation of old landowning classes elsewhere in the "periphery" and consequent inhibition of the growth of small enterprise and of the internal market. Thus, in his view, imperialism had been since the late 19th century and continued as a system which "prevents the universalisation of the capitalist mode of production" to the Third World but had not been such a big block before that. Industrialisation was impossible in the ex-colonial world except by socialist revolution (p.376); in fact, the ex-colonial world was not really ex-colonial, but still (so he asserted, as if it were obvious) "colonial and semi-colonial". "Sub-imperialism" had already been identified as a factor by some Latin American Marxists at the time of Mandel's writing, but he wrote that their theories were not "correct" and could not become correct as long as Brazil or Iran, for example, remained capitalist (p.374-5).

All this, he said, in words which read today startlingly, is "the chief cause of the permanent pre-revolutionary crisis in the dependent countries for over half a century" (p.61). Other passages made clear that by "pre-revolutionary" he means pre-socialist-revolutionary. And that concluded the book's discussion of the "Third World".

Mandel was right to indict the broad picture of colonial rule creating huge inequality between metropolis and colonies, and post-colonial structures of power making it hard for ex-colonies to start reducing that inequality. But how could systematic export of capital fail to create some capitalist development (however unequal, however patchy, however torturing, etc.) in the places where it was exported to?

In every detail his account was false. The UK increased the inequality (proportion of GDPs, according to Maddison) between itself and India by a bigger factor between 1700 and 1820 (from 0.12 to 0.33) than between 1820 and 1870 (from 0.33 to 0.74), and a bigger factor 1820-1870 than 1870-1913 (0.74 to 1.10). It increased the GDP ratio between itself and Latin America from 1.69 in 1700 to 2.43 in 1820 and 3.67 in 1870, but then that ratio declined in 1870-1913 to 1.86.

The classic pioneering study of the New International Division of Labour - the rise of centres of manufacturing export in the ex-colonial world - Die neue internationale Arbeitsteilung, by Folker Fröbel, Jurgen Heinrichs, and Otto Kreye - would be published only a few years after Mandel's book, in 1977. Mandel's contribution to the understanding of this new trend, already incipient, was to try to "prove", "theoretically", that it was impossible.

Mandel's book was not unusual among studies of world capitalism in focusing on the big advanced capitalist economies, the USA, Western Europe, and Japan. It was unusual in the odd way it brought the rest of the world onto the theoretical stage and quickly pigeonholed it as a sort of "noises off" while the drama played out among the big boys. Both in upwave and in downwave the ex-colonial world played only a passive part in capitalist development. It figured only as a factor of hopeless permanent stagnation, or of occasional (but, implicitly, imperfect and not world-changing) socialist-revolutionary eruptions. Those socialist-revolutionary eruptions, oddly, would be driven not by the development of modern working classes in those countries, but because of the alleged impossibility of such working-class development.

The Stalinist world was a passive factor because it was primarily interested in maintaining the international status quo: such conservative behaviour was typical of what (startlingly to a reader in 2016) he called "privileged sections of the working class... [such as] the communist bureaucracies in the East" (emphasis added).

Statisation of capitalism and globalisation of finance

"Economic programming", boasted of by the Gaullist government in France in the 1960s, and clumsily attempted by the 1964-70 Labour government, which published a five-year economic National Plan in 1965, turned out to be only a bourgeois fad of the 1960s, with little real weight. Yet, after showing that this could not be real socialist planning, Mandel predicted that such "programming" was a structural imperative of late capitalism, apparently both in upwave and in downwave. It displaced what had been the role of high finance in classical imperialism (p.245, p.555).

Mandel not only failed to predict, but excluded even as a possibility, what actually happened in the 1980s. Within a few years after Mandel published Late Capitalism, global high finance would begin its dizzy expansion, and bourgeois governments would mostly declare planning for an integrated national industrial complex to be hopeless and anachronistic. Soon analysts would be publishing books such as The End of Organised Capitalism (Lash and Urry, 1987). Harvey's The Condition of Post-Modernity (1990) would identify the turning-point from bourgeois-ideological "modernism" to anti-programming "post-modernism" as 1972. The term "post-modernism" itself would first spread widely in the very year of the English edition of Late Capitalism, 1975.

Paradoxically, the most celebrated Marxist writer on post-modernism, Fredric Jameson, would describe it as "the cultural logic of late capitalism", explicitly referring to Mandel's economic analysis but in fact seeing "late capitalism" as characterised by such things as "the new international division of labour... a vertiginous new dynamic in international banking and the stock exchanges... gentrification... a world capitalist system fundamentally distinct from the older imperialism" (Postmodernism, or the cultural logic of late capitalism, p.xix). Mandel had insisted that the structurally-imprinted dominant ideology of late capitalism was "organised capitalism", "belief in the omnipotence of technology", "generalised proclamation of the advantages of organisation" (pp.500, 501). Only after the event (LW p.97ff) did he write that in its downwave late capitalism would foster "skepticism, irrationality, and mysticism".

Mandel noted that the "multinational corporations urgently need the formation of an internationally-organised money market" (p.470) and that "the pressure of an international capital and money market adequate to the needs of the increasing internationalisation of capital must collide with economic programming on the national level" (p.342). Reasons to foresee, at least, as a possibility, the great increase, in extent, speed, and power, of global financial markets from the early 1980s? In fact he ruled out any possibility of continuing US hegemony, and an increasingly all-pervading and open capitalist world market (pp.331ff). He predicted a rise of inter-imperialist rivalries, protectionism, and economic "statism" as the only real possibility (p.484). However, unlike his co-thinkers who would later argue for British withdrawal from the EU, he argued for an "independent... stance of the working class towards all variants... a European federal state as a new imperialist super-power or a continuation of the plethora of small European states" (p.341).

Oddly, since the US had abandoned the link between the dollar and gold, and forever, in 1971-3, Mandel insisted that money could only be gold-based (another way of ruling out the fluid and fast-moving global financial markets of the last three decades). He was surprisingly dismissive of Keynesian theories and policies, apparently equating Keynesian policies with loose-money policies (i.e. making no distinction between the authorities pumping up credit by monetary means, and public works), and dismissing Keynesian ideas about liquidity preference out of hand (pp.442, 454).

Bourgeois democracy

In the 1940s, as late as an article in Fourth International of April 1949, Mandel had insisted - against Trotskyists arguing that, at least, a "democratic interlude" was developing - that "the characteristic form of the state in our time [is] the totalitarian state within whose framework the police dictatorship (open, as under fascism, or thinly veiled, as [in] the regimes now being established in several Western European countries) corresponds to the extreme concentration of economic and state power and to the permanent crisis of the regime".

To be sure, West Germany would not be allowed democratic elections until August 1949. Seizure of west German industrial equipment by the western Allies had diminished, but would not cease until 1951. In France, de Gaulle, after resigning as president in 1947, led a potentially-fascistic far-right party, the RPF, with half a million members; it would get 22% of the vote in 1951 parliamentary elections, and not decline until 1953.

By 1975, however, almost all West European countries had bourgeois-democratic regimes with a stability previously seen only in a few countries such as Britain. Even Greece, where a military junta which had seized power in 1967, had seen parliamentary rule and civil liberties restored in 1974.

There was and is much to indict in the shallowness and bureaucratisation of that bourgeois "pluto-democracy". But the picture of the future which Mandel painted in 1975 ruled out, even as possibility, what actually happened over the following decades: the extension of bourgeois democracy to Spain, Portugal, Turkey, Eastern Europe, and almost all of Latin America, simultaneously with an even more marked bureaucratisation and hollowing-out.

Mandel insisted that an intensification of the "strong state" would come with the increased inter-imperialist rivalries which he predicted (p.498). The term "strong state" was used by De Gaulle, who had been president of France between a "soft" military coup in 1958 and 1969, to describe what he wanted to build, and also by De Gaulle's left-wing opponents to describe his authoritarian and only semi-parliamentary regime. Mandel used it without further clarification, apparently to mean a drift to something close to military dictatorship.

In 1975, Mandel described the time after the end of World War 2 as one of exceptional weakness of labour movements (thus enabling an exceptional rate of exploitation, a much-boosted rate of profit, and the start of the upwave). His book predicted that the bourgeois democracy whose development after 1945 it took as a given fact would soon be stifled by "strong states", even though it considered "the present socio-political world conjuncture" as "basically unpropitious to capital" (p.333). So bourgeois democracy emerges, under capitalism, when the working class is least able to fight for it, and declines when it is most able to do so?

Mandel's explanation for that paradox was in fact that the driving force for bourgeois democracy in western Europe was... the Stalinist states, and their pressure on the West. The bourgeoisie had made "the experiment of an 'idyllic detente' in social tensions" because of "the challenge which the totality of anti-capitalist forces have hurled at world capitalism".

"Service industries"

The expansion of the "service" sector is now characteristic of a big range of economies, way beyond the most advanced ones: 51% of GDP in China, for example (Financial Times, 6 December 2015).

Mandel registered the "services" expansion which had already happened in western Europe and the USA, but did not see it as an avenue for real expansion of capital. Instead, he described it as a sort of aberration generated by "the availability of large quantities of capital which can no longer be valorised in industry proper" and by "over-capitalisation, or non-invested surplus capitals, set in motion by the secular fall of the rate of profit" (pp.389, 387). So capital developed in service industries only because it found itself unable to do so in "proper" industries? And it was a sort of pseudo-development?

He discussed the expansion of public health, education, and welfare services much less than he should have done in light of the importance to the working class of our initial winning of those services and our more recent defence of them against attack merits. With a markedly narrow definition of productive labour, he saw most employment defined as "services" as unproductive (of surplus value). Mandel was able to cite from some of Marx's never-pulled-together writings on unproductive labour to support his view, but in my view a more rational reading of Marx would give greater credence to passages such as: "That surplus value has to express itself in a material product is a crude view which still occurs in Adam Smith. Actors are productive workers, not in so far as they produce a play, but so far as they increase their employer's wealth..." (Grundrisse, p.328).

Critical analysis vs ventriloquism

To repeat: no-one did better in the way of a synthesising account of world capitalism. And yet, when in 1999 the respect-worthy journal Historical Materialism ran a symposium on a new (this time less ambitious) attempt at a synthesising account, Robert Brenner's Global Turbulence, many of the critical commentators, including insightful ones, presented themselves as defenders of "the Marxist" or "Marx's" theory, as if such a thing existed in the ether and their own writing (even when manifestly original) were merely ventriloquism for it. And many criticised Brenner not so much for analytical mistakes as for uncongenial conclusions, as if the primary test of scientific research should be how good a pose it allows the researcher to strike before her or his audience, rather than truth. The most important lesson from the failures of Mandel's "magnum opus" is the need for a culture, among Marxists and socialists, of critical openness and recognition of fallibility in discussion of such issues as economic theory.

Marxist Theory and History

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