By Tom Hickey
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Obituary: Arrested Development

This article is over 17 years, 9 months old
Tom Hickey examines the key works of veteran left wing economist Paul Sweezy.
Issue 284

Consider the position of socialists at the end of the Second World War. The Cold War between East and West was congealing. It would devour millions in its bloody consequences in the decades to follow, in Vietnam and Indonesia, in Hungary and Czechoslovakia, across Africa and in Latin America. This could be avoided, many believed, because the system of capital that would spawn this barbarism could not survive. But survive it did. Indeed it flourished, growing faster in the next two decades than at any time in its history hitherto. How was this to be understood?

It was into this debate that the work of Paul Sweezy intervened. Personally rich and privileged, son of the ruling class (his father was an executive of the J P Morgan bank in the US), and star graduate economics student of Harvard University’s Joseph Schumpeter, the most famous bourgeois economist of the early 20th century, Sweezy now set himself the task of explaining how the operation of a mature capitalist system differed from the processes characteristic of its youth.

In Monopoly Capital (1966), written with Paul Baran, he addressed the issue of how the system stabilised itself at this stage in its development, and how it postponed the onset of economic crisis. This new stage was one of ‘monopolisation’, characterised by the dominance of giant corporations which shared production and markets between them, rather than engaging in the cut-throat inter-firm rivalry that had been capitalism in its competitive stage in the early and mid-19th century.

Inspired by Marx’s analysis but diverging from it substantially, and redefining many of its concepts, Baran and Sweezy argued that, far from a declining rate of profit plaguing the system, there was now a tendency for the economic surplus to rise. Monopoly power enabled giant firms to control prices, and to squeeze surplus from other sectors of the economy and the underdeveloped countries. The problem for the system now was how to absorb this surplus. In an innovation and insight, the credit for whose discovery they shared with others (including Michael Kalecki and Michael Kidron), they argued that the solution was imperialism and its associated military spending. Government spending on armaments created the demand which prevented capitalism from slipping into depression.

Thus Baran and Sweezy had explained that capitalism had not overcome the contradictions that tended to drive the system to crisis but had, rather, attenuated that crisis through a mechanism which threatened humanity with extinction in an age of nuclear brinkmanship. The choice was between capitalism and survival. This was a powerful antidote to the bourgeois rhetoric of the day, and inspired a generation of students and activists.

Sweezy and Baran had developed an ‘underconsumptionist’ theory of crisis. This was in sharp contrast to Marx’s emphasis on the crisis of profitability as induced by the drive to accumulate capital, and its consequence – the displacement of labour by machinery. For Marx, that this would depress the overall rate of profit was an unavoidable consequence unless the rate of exploitation of workers could be increased indefinitely. In this revision of Marx, Sweezy was echoing the Keynesian account of systemic instability.

In The Theory of Capitalist Development (1942), he had provided two things. First was an impressive introduction to Marx’s economic analysis which remains in use today. Second was a critique of what he considered less than satisfactory in Marx’s analysis, most crucially the theory of the tendency for the rate of profit to fall. The war economy thesis did not depend, however, on this disagreement nor on Sweezy’s underconsumptionist reading of Marx.

Sweezy was also the co-founder and co-editor (with Leo Huberman, Harry Magdoff and others) for half a century of the Marxist journal Monthly Review. Here he continued the struggle to apply Marxism in an analysis of contemporary capitalism. This was a vision of capitalism perceived as founded and dependent on the neo-imperialism of the late 20th century.

It was this dependency model that inclined Sweezy and his associates to sympathise with Maoism and a Maoist strategy for world revolution – the progressive isolation of the metropolitan centres through Third World and peasant revolutions. It was a model blind to the degree to which advanced capitalist industry had progressively insulated itself from any substantive dependence on underdeveloped countries, either as markets for their products or as sources of raw materials.

The model excluded the possibility of independent centres of capital accumulation in poor countries. The rise of the Asian Tiger economies, of Brazil and Mexico, China and India, were an embarrassment to it. So too was the spread of neoliberalism as state policy in the 1980s. Not least of the problems for the journal was its compromises with Stalinism – its continued inclination to see the model for a transition to socialism as being offered by Mao’s China and Castro’s Cuba.

Despite such disagreements between socialists (or perhaps because of their value in clarifying issues) Sweezy’s death is to be registered and mourned by every anti-capitalist today. More than that, however, is the importance of celebrating his life and his work. Commencing with theoretical considerations in Marxism in the midst of the Great Depression, that work stretched through the bulk of the 20th century to a detailed consideration of the character and consequences of the world economic crisis of 1998-99.

Here was a comrade who committed himself to a better world, and who identified the drive to capital accumulation as the central impediment to its achievement. It was in large part due to the force of his argument that his mentor, Schumpeter, would conclude that the capitalist system was unlikely to survive in the long run, and that there was no reason why socialism should fail.


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