Primer Red (Part 6): Late Capitalism

Primer Red (Part 6): Late Capitalism

For previous editions of Primer Red, on dialectical materialism, alienation, class, value, and praxis, see here.

Capitalism developed in stages, and “late capitalism” is capitalism’s overtime—its extra innings.

Find a troubling story about some boss’s creative way to take advantage of his workers, about some desperate family go-funding money to pay for basic human needs, or some nightmarish product, and you can find a comment underneath it: “Late capitalism.”

The way you hear “late capitalism,” used, it’s basically interchangeable with “nasty social rot.” That’s basically right, but it’s useful to understand what exactly “late capitalism” refers to in its Marxist sense. By doing so we can know what to expect next and what to do about it.

“Late capitalism,” both in its original meaning when the idea was developed in the 1960s and ‘70s and as it is used today describes capitalism that is “late” in the sense that it is spilling over its time. It’s capitalism that has begun to cannibalize itself in order to survive. It is a social system that has fully “industrialized” and “commodified” human life, so that everything has become “pay to play,” and so we are all more in debt and more insecure than is sustainable, or to put it another way, in a way that cannot survive because it cannot reproduce itself, since it is consuming itself. This is why stories about “late capitalism” are grotesque stories of needless suffering next to grotesque stories of obscene wealth; stories of dazzling technology next to stories of crumbling basic human needs.

Capitalism is usually discussed as having developed in stages. For a capitalist society to develop, there has to be capital—there has to be an immense excess of value that can be reinvested in productive enterprises. For capital to come into being, there have to be large enough numbers of workers who produce things—commodities—and large enough numbers of people to purchase them. That obviously can’t happen all at once. A phase of “primitive accumulation,” when capital first begins to organize, and creates a working class through the destruction of old ways of production is necessary first. This gives way to a phase of intense competition between small and mid-sized firms, that is relatively “free,” meaning workers and the state haven’t developed the systems to regulate capital yet. The nature of capitalist competition weeds out the smaller firms over time, and the need for new markets and ever-cheaper labor and resources then results in monopoly capitalism, when international firms arise and entire industries come to be dominated by fewer and fewer firms—and competition for colonial possessions and imperial domination of developing societies becomes more intense.

Because historically the period of monopoly capitalism happened at the same time as the rise of socialist revolution and socialist economies, some Marxists beginning in the 1940s and ‘50s speculated that capitalism was in a phase of contradiction it couldn’t escape. But, after the Second World War, despite strong trade unions, mixed economies with state planning all throughout the West, and comparatively heavy regulation of the economy, capitalism didn’t collapse. In fact, it seemed to get more entrenched.

After the Second World War, even the most capitalistic of societies—the U.S., the United Kingdom, Western Europe and Japan—gave up on pre-war “liberal” capitalism and pursued “planning,” what later came to be known as “mixed economies.” “Planning” referred to heavy state intervention in the economy—massive public spending financed by high taxes to make sure national economies stayed competitive and employment and wages stayed high enough that the social decay that led to the Second World War wouldn’t be repeated. In what is now considered the “Golden Age” of capitalism, from 1945 to 1970, economic planning and heavy intervention in the economy, once considered a sinister invention of the socialist countries, became widely accepted as necessary to maintain social order.

At first, Marxists thought that this level of planning and intervention spelled eventual doom for capitalism, because the capitalist class was losing their grip on the political order as economic planning became institutionalized and that planning proved capable of creating an immense amount of wealth. The capitalist class began suffering from an increasing “profit squeeze” as workers and the public captured more and more of the value they produced, both through wages and public spending. Capital found it harder and harder to reproduce itself at the same time as immense wealth was being created—enough wealth in fact that the needs of much humanity could be met through simple redistribution. If capital could not reproduce itself through capturing profits, capitalism would simply cease to be. The end, it seemed, was nigh.

By the 1970s, foreign competition became more intense as countries finally fully emerged from the effects of the Second World War and anti-colonial struggles. The U.S. was no longer able to underpin the world financial system with its gold reserves, and the result was inflation. U.S. workers, buoyed by large-scale collective bargaining agreements (union contracts) in major industries and an immense level of public sector employment, kept their wage and benefit demands high despite creeping-up unemployment. The maturation of developing countries raised the cost of raw materials, and in the case of the international oil cartel OPEC, caused severe price shock. The political necessity of keeping unemployment low and for increasing social spending to address roiling demands to end social inequality and environmental degradation simply made it impossible for capitalists to capture enough profit to reproduce themselves.

So beginning in the late 1960s and accelerating in the 1970s, capital waged a counter-offensive to save private profit and private control of production. Instead of collapsing in an orderly fashion, capitalism went into overtime by assaulting worker self-organization, privatizing what had been publicly controlled, and undoing the social policies that ate into profits—those programs funded by direct taxation and regulations that cost firms money to implement, like environmental safeguards. Critically, because big companies can more easily amass profits than small ones, antitrust laws were gutted to allow for massive levels of concentration in industries, often with profits guaranteed by public subsidies. To buy itself time, in other words, capitalism began trying to suck profit out of every possible area of human existence, funding it at the expense of the public, while undercutting the social fabric that encouraged collective action.

This phase is “late” in the sense that it is delayed rather than recent. This wasn’t a new phase, like the progress from primitive accumulation to laissez faire to monopoly capitalism and imperialism. Instead, it was just ripping the system apart to grab up as much as possible as quickly as possible, to allow for massive profits to be gained by hook and crook.

This is why when the examples of the social rot of “late capitalism” (or “neoliberalism”) often seem so vicious. Late capitalism addressed the “profit squeeze” by transferring wealth and power from the people to private individuals, especially large firms, which, again, are best adapted to ensure large profits. The process of “wealth transfer” isn’t just transactional—it’s violent. The only way to wrench what someone has and give it to someone else is through the use of power, and in late capitalism, it requires using power against the less powerful on behalf of the powerful.

In this stage of capitalism, the economy becomes more “financialized” meaning dominated by the financial sector. This immense concentration in turn results in “industrialization” (mechanized production, including of services) and commodification (pay-to-play) becoming more generalized as capital seeks more and more places to invest. In other words, a smaller number of financial firms come to dominate how and what is produced, and impose market-pricing on the stuff of life—from healthcare to education to childcare. The market has to invade every aspect of human interaction, because profit has to be extracted everywhere.

Beginning in the 1980s in particular, as public financing of public goods evaporated with slashed taxes, states began to move toward “debt financing”—going to bond markets and related schemes to fund government. In other words, governments had to entice private funding of public goods through subsidies and tax incentives. Low taxes paid predominately by the small number of individuals and firms with immense incomes required policy that favored those individuals and firms. Cities, states, and entire nations became more and more susceptible to capital strikes and capital flights—the constant threat that unfriendly policies (raised minimum wages, head-taxes, etc.) would cause companies or rich residents to pick up and leave. This was a way to keep capital in the hands of the bourgeoisie and tie economic growth to private profit, while constraining how public policy is made. To cut costs and make more private capital available, states also began mass privatization of public services and deregulation of industry and finance. States also began to crack down on labor power which had kept wealth from concentrating in the hands of firms; this was an obstacle to private development.

From the period of the 1970s to the present, what the public had built into common ownership—not just physical things like roads or water pipes but services, like education—became subject to the ability of the public to borrow from private creditors (for example, bond holders). The state was starved of revenue, infrastructure and public goods with it, and the public became increasingly dependent on borrowing. This explosion of borrowing in turn helped fund “financialization” of the economy, as cities and states became major debtors pumping money into financial firms.

Formerly public or publicly subsidized goods like transportation, housing, and education became more “commodified,” or pay-to-play, at the same time that labor lost bargaining power and private or household debt also exploded. This is a hallmark of financialization. Ever increasing “debt-to-equity” ratios, meaning the balance between your assets and cash and what you owe to creditors, are a universal feature of late capitalism. The looseness of credit resulted in an explosion of household debt. At the same time, small farms and small businesses that weren’t being bought up or wiped out by larger, more efficient companies had to borrow to compete. This happened at all levels of society. So much economic policy happening at the hands of an ever-smaller number of capitalists resulted in constantly inflating and bursting bubbles, with the public lacking the social power to punish the people responsible and comprehensively change the system.

The pattern also happens on the international level. After the Second World War, but accelerating in the 1970s, the external debt of “third world” or developing countries increased dramatically, from $609 billion in 1980 to $2.4 trillion in 2001. As large international firms needed to find new profit in developing economies, entities like the International Monetary Fund (IMF) began pressuring countries to make it easier for capital to cross borders—in other words, to allow foreign investment into their markets without regulation. This began in earnest in the 1980s as a way to keep profits high while keeping prices low. This was necessary because in the U.S. in particular, household income was not increasing. So things had to be produced cheaply. The economies of these developing countries were treated like casinos, and when speculators overheated their markets, there were catastrophic failures, culminating in catastrophes in Mexico in 1994 and in Russia, Brazil, and throughout Asia in 1997–98.

This death spiral for society was capitalism’s saving throw. This is capitalism’s “overtime”—thus “late capitalism.” Everybody but the people at the very top are more and more precarious and insecure, which results in poorer planning and more of this sort of panicked, short-term decision-making. This keeps everyone from households to small businesses to local governments in a cycle of dependence on large firms, which can extract more and more profit from them.

Let’s go from international economies to our individual lives. Where once someone could choose a career “path” with a relatively predictable course, job tenure has become ever shorter, as people lost job protections and a safety net that gave them bargaining power, and firms became more likely to be bought out or to collapse. Advancement and security became less a matter of being consistently productive, and more a matter of becoming a valuable, flexible “package” (or “brand”) of a person. Social insurance, such as welfare, health care for all, reliable transit, social housing, etc., that provided some basic predictability in the worst-case scenarios having completely disappeared, our ability to survive in society at all turns entirely on being “employable” and “flexible”—in other words, in order to survive, individuals in late capitalism have to completely transform into commodities themselves.

Human life in capitalism’s extra innings depends completely on our value to an ever-smaller number of capitalists in pursuit of ever-greater profit, which is the only way for capitalism to survive into the future.

Works Consulted, Further Reading

Harvey, David The Limits to Capital

Various, Urbanization and Urban Planning in Capitalist Society

Hackworth, Jason The Neoliberal City

Marx, Karl Grundrisse

Haroutunian, Harry Marx After Marx

Wallulis, Jerald The New Insecurity: The End of the Standard and Family

Hobsbawm, Eric The Age of Extremes, 1914-1991

Gordon, Robert The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War

Cavanagh, John and Mander, Jerry “World Bank and IMF Turn Poor Third World Countries in Loan Addicts”

Pollin, Robert Contours of Descent