Looking back on 2022, one thing has become clear, and that’s a sharp turn taken by leading capitalist states. They worked to force up interest rates in response to the inflationary upsurge since 2021. One question this shift has raised is the role played by the capitalist state today.
The Covid-19 pandemic has seen an intensification of the trend since the 2007-09 financial crisis for states to intervene massively in markets. The obvious explanation is that deepening instability means that capitalist economic structures will need more and more to be propped up by state intervention.
But two noted Marxists, Dylan Riley and Robert Brenner, deny this in an article in the latest issue of the journal New Left Review. It follows an article by Brenner early in the pandemic. The title “Escalating Plunder” summed up his argument.
In response to the lockdowns, The US central bank, Federal Reserve Board and Congress adopted measures to prop up prices and incomes. Brenner dismissed this as simply an attempt to transfer wealth upwards to the bosses of the big corporations and their allies.
At the end of the article Brenner promised a “second part” that would set “these trends in their historical and global context” and explore “their sources”. The new article with Riley seems to be a step towards fulfilling this promise.
Its premiss is correct. Advanced capitalism is suffering from what Brenner earlier called the “long downturn”—slow growth caused by the low level of profitability in manufacturing industry.
The result, Riley and Brenner now argue, is “the rise of a new regime of accumulation” which they call political capitalism. “Under political capitalism, raw political power, rather than productive investment, is the key determinant of the rate of return.”
They aren’t just saying politics serves capital. They are saying that influencing politics—for example, by investing in lobbying governments—increasingly determines capital’s profitability.
They even compare this with precapitalist forms of class society. “The dramatic intensification of lobbying could be understood as a form of ‘political accumulation’, different of course from its feudal forebear, but nonetheless highly distinctive,” they say.
But, as another Marxist economist, Tim Barker, has pointed out, “every single item in the Riley/Brenner laundry list of new forms of political extraction—tax breaks, the privatisation of public assets at bargain-basement prices, low interest rates, stock market booms with irrational consequences, massive state spending aimed directly at private industry—existed at different points in the 1945-1973 ‘golden age’.”
This is when the rate of profit was much higher. States have always played a formative role in capitalist economic relations. They facilitate the exploitation of workers and help their firms compete against their rivals.
Of course, when states intervene in the economy, they materially benefit specific groups of capitalists. In March 2020 the US Federal Reserve responded to the panic sweeping through the money markets by buying up government and corporate bonds on a huge scale.
This certainly facilitated what Brenner calls the “upward distribution of wealth.” It benefitted the already ultra-rich holders of financial assets whose prices soared thanks to this programme.
But one of the main changes capitalism has experienced in recent decades is that investment and trade increasingly tend to be financed by borrowing in global money markets. Leading government bonds are used as collateral for these loans. The Fed and other central banks boosted their bond buying to ensure these crucial markets kept working.
Interventions can be contradictory. When the central banks more recently reversed this policy and pushed up interest rates, they created huge problems for some sectors, notably pension funds. But this policy turn was driven by the need to defend profits by forcing up unemployment and thereby undermining workers’ ability to defend their wages against inflation.
Capitalism remains a global system of competitive accumulation. It imposes its imperative demands on all state managers, however corrupt or deluded they may be.
Crises are on the horizon