Marx valued private property in the hands of truly private individuals, e.g. peasants or artisans. Capitalism inevitably wants to do away with this.
I met Steven Colatrella some months ago when he commented on one of my posts here to mention that he had read Politics and War. He recognized our similarities. He is thirteen years my junior and has had a similarly checkered academic career. Born in the New York area to a working class family, he was trained as a sociologist but now seems to see himself as a political scientist. He teaches at the University of Padua in Italy. He also happens to be a baseball fan. He has done me the honor of reading several of my books, which we have corresponded about, and I decided to read one of his, a series of lectures that he gave about five years ago called Looking into the Abyss: The US and Europe Beyond Capitalism. It is a demanding, highly theoretical work, using classic Marxist texts, including Das Kapital, to try to understand what has happened to our world in the last eighty years or so. Rather than try to recapitulate its main points, I am going to talk about what I have learned from it.
The tremendous insight from which so much can follow with which the book begins is a definition of capitalism. For him, as for Marx apparently, it is not simply a system of private property or private enterprise. The ideal type of capitalism, if you will, is a system in which holders of capital care about only one thing: finding the maximum available return for their money, wherever it may be and whatever it costs. This definition--whose understanding has become crucial in the last forty years or so--suggests that the great corporations of mid-twentieth century like General Motors, US Steel, General Mills, Alcoa, and the rest, were not purely capitalist, because they pursued wealth within a relatively narrow framework involving the production of one or a number of closely related products. That meant, I feel certain, that their return on their investment was subject to very significant market fluctuations and that they might have to increase or decrease their production according to circumstances. It left plenty of room for technological innovation and increased productivity that could increase their profits. It occurred to me as I read that we desperately need a word for that particular form of industrial capitalism, or for any kind of economic entity that focus on providing a particular good or service, especially for mass consumption. If we had such a term we might start thinking about how to promote more of it, and less of the pure capitalism which now rules our world. We managed that from the 1930s into the 1970s with high marginal tax rates and a lot of strict rules, both domestic and international, about the movement of capital. Colatrella didn't try to come up with one, though, and I feel at a loss myself. It's out there somewhere, I have no doubt.
The pure capitalism that Marx defined now rules our world. That is no accident: it is the shareholder capitalism that was so influentially defined by Milton Friedman in my youth. It is the capitalism practiced by the megabanks and hedge funds that dominate our economy, and it has taken over, in two senses, or elite educational system. To take the most salient example: Harvard University on the one hand places its record-setting $60 billion endowment in the hands of hedge fund managers now so that they can use it for the sole purpose of maximizing profits--not Harvard's profits, but their own. They have accounting tricks to inflate the impact of their management beyond its real benefit to the university, which is why they stopped beating the S & P index after the financial crash of 2008, and still don't. And not coincidentally, the main educational function of Harvard College--and Harvard Business School and Harvard Law School as well--is to channel the smartest, most industrious young people in the world into high finance and into big tech, where more than half the graduating class goes every year. Harvard, which in earlier incarnations trained clergymen, or teachers, or lawyers and doctors, now depends upon huge annual contributions to pay its enormous administrative staff, and those contributions come from the same huge financial institutions that the graduating class staffs. Harvard is part of the team, and assigns correspondingly little value to really outstanding intellectual work, particularly in the humanities, in its faculty or among its students.
It is these pure capitalists, of course, who re-oriented the US economy beginning in the 1970s, abandoning domestic industries because their products could be produced more cheaply and with higher profits overseas. And some people noted at the time that many steel companies, for instance, were still making money when they were shut down--but their shareholders could make more money doing something else with their money, so they had to die, with horrifying effects on their communities that persist to this day. Jack Welch became the new hero of the US economy by turning GE from a manufacturing giant into a new financial services company, to the acclaim of our economic press. A recent book, once reviewed here, showed how even Boeing, one of the gems of US manufacturing, began to value its stock price more than its engineers, with truly disastrous results. The investors in companies now insist on steadily increasing earnings reports, undermining a key manufacturing principle: that there are times when you have to spend more money now, on new equipment or designs for instance, to make more money later. And that is not all. The financial crisis of 2008 occurred because thousands of bright young highly educated professionals used their ingenuity to devise new financial instruments that, as it turned out, served no useful purpose except to inflate their bonuses and their companies' profits. AIG literally wrote insurance policies on the whole economy. When it crashed, they could not of course pay off, but the government--a loyal ally of pure capitalism at least since Reagan, without a break--stepped in to bail them out with the help of the Federal Reserve, which demonstrated unprecedented largesse to prevent the kind of rethinking that the nation went through after 1929. And the reach of mobile capital continues to increase, as private equity buys up whole health care complexes, nursing homes, and medical practices, all with disastrous results for medical personnel and patients--for everyone, in short, except itself.
Meanwhile, things have changed just as dramatically in Europe. The catastrophe of the Second World War had led to a new economic ethos based on higher wages, high marginal tax rates (as in the US), and social welfare programs. Having seen how economic collapse led to Fascism between the wars, two generations of Europeans were determined not to allow anything similar to happen again. They built the European Union for similar reasons--but now its role has changed. Colatrella stresses that the European Central Bank and the unelected commission of the EU have now become equally strong allies of pure international capitalism--what he calls "mobile capital"--and thus reacted to the crash with austerity requirements that have slowed economic growth and threaten social benefits. European governments have not been able to cope with the impact of de-industrialization and mass immigration, with the result that political instability has become their hallmark, and right wing parties now have the largest followings of any political party in several major countries--not a majority, but a plurality nonetheless. The same political impact of the triumph of pure capitalism has elected Donald Trump twice here in the United States. (It is a sad feature of Looking Over the Abyss, written in the very early 2020s, that its author repeatedly refers to the Trump era as a thing of the past.)
Colatrella spends a good chunk of the book trying to put contemporary social classes into a Marxist framework. This analysis isn't easy going, but makes some very important points. In the US, which he obviously follows very closely from across the ocean, he notes the rise of the educated professional class that has also been the focus of books like The Meritocracy Trap and We Have Never Been Woke, both reviewed here. He regards them as the servant of the pure capitalists; I think that is a half truth. This class, now the backbone of the Democratic Party, has its own world view and its own interests. As Daniel Markovits in The Meritocracy Trap argued, it has been very good at structuring our institutions to benefit itself. It has little or no sympathy for the traditional working class, which is why the majority of that working class now votes Republican while the professional class votes Democratic. In a long chapter, Colatrella argues that the Green New Deal could be the key slogan of our era, partly because it might unite those two classes if it could be designed clearly to benefit the working class. This turned out to be harder than he might have thought under the Biden interregnum. That administration promoted electric vehicles against the opposition of the UAW, which knows that those vehicles don't require as much labor to make. The professional class also dislikes and has put up guardrails against big infrastructure projects that disrupt communities, such as the California high speed rail project. It has resisted attempts to deal with our tremendous housing crisis here in the Boston area and elsewhere. And now, of course, under the second Trump administration, all Biden's efforts to promote green energy have given way to new efforts to promote fossil fuel.
Until we got to know each other I don't think Colatrella had encountered Strauss and Howe and their crisis theory. That theory provides, of course, one way to understand how new generations have destroyed the great postwar political and economic system in Europe and the United States. It predicted a great crisis that is far advanced in the United States and just hitting its climax, I think, in Europe, where Marie LePen may very well become the President of France next year. I am afraid that pure capitalist institutions--which I think now include big tech, which didn't loom as large five years ago as they do now--have become too powerful to overcome. The business press now reports that the massive investments in AI and data centers don't seem likely to pay off, and could trigger a new crisis which in theory could put revolutionary new ideas on the table, but that one may simply lead to more bailouts. Meanwhile, the next two years may see an even bigger breakdown in the US political system, as well as in Europe. Colatrella is a kind of activist academic who felt he must try to point the way to a better future. I have given up on that. The world, I think, does need both of our types. I'm very glad to have encountered him.
