Volume Two
Modern States
Capitalism
Capitalism is a politically-loaded word understood differently by the various shades of economists, political thinkers and historians, {1} but is broadly taken as an economic system stressing capital accumulation, competitive markets and wage labour in which trade, industry, and the means of production are privately owned and operated for profit. {2} Some forms or aspects of capitalism were present in many societies, of course, but capitalism gradually replaced feudalism and through trade, colonialism and empire-building became the dominant world system, evolving into globalisation and largely displacing centrally-planned economies, though some governmental planning and/or control is still found in 'mixed economies'.
Neoclassical economists champion the market. Keynesians stress the need for government regulation to prevent monopolies and to soften the effects of boom and bust cycles. Marxists speak of class warfare and exploitation of labour. {2}
Historians often stress the social aspects — An 'economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labour' - quotes Braudel, {3} who extends capitalism back to the 15th century, showing the importance of trade, finance and state legislation in the trans-national nature of capitalism, which long preceded today's globalisation and multinational corporations. {4} Indeed there was a progressive shift of economic centre from Venice in the 15th century, to Holland in the 17th century, to England in the 18th and 19th centuries, and then to America from the 1930s. Each centre shifts the pattern, concentrating financial services in the capital city and drawing goods, services and wealth from the surrounding global area. Competition is the essence of capitalism, and results in exploitation if the peripheral areas lack bargaining power — e.g. Vietnamese electronic goods, Bangladeshi textiles and Chinese assembly plants today.
Orthodox economists believe the inequality of the capitalist system evolved naturally from the market economy of the Middle Ages. By the 12th century many agricultural areas of Europe had passed the stage of self-sufficiency, and peasants came into town regularly to sell their excess produce, and sometimes to purchase goods that the skilled crafts turned out within the safety of the city walls. With that division of labour came the interdependence of town and country, each relying on the other, though the town rapidly gained ascendancy. Towns became cities, increasingly important when adorned by Church and the seats of government, extensive markets and flourishing guilds, the workshops and the soldiery we see in Renaissance Italy. Life in the country changed slowly, if at all, but the great cities became competing states with a patrician class imposing rules on the merchant and labouring classes. Sienna vied with Florence, extracting what it could from the lands, trades and manufactures it owned. Venice outdid them all. Wars, so constant a feature of Renaissance city life, were ferocious, and not always local.
Coins need metals, and the larger mines supplying those metals were capital intensive. Shafts had to be sunk, the ore dug out, the metals extracted, refined to an acceptable purity, and the metal transported to market — a long process that clearly needed advance funding and an efficient inter-linkage of labour, expertise, markets and finance, i.e. the capitalist system in embryo. Banks were often involved at every stage.
The revival of German mining of gold, silver, copper, tin, cobalt and iron in the 1470s stimulated metallurgical improvements and a larger scale of working to hoist the ores and drain water from the workings — which Agricola illustrated — but equally important was the stimulus the mining provided to other industries in the region (metal working, leather trade, paper production, armaments, etc.), to improved means of transport, and the extension of credit networks. {5} There were 50 crafts guilds in the Lübic of 1946, 42 in Cologne and 28 in Frankfurt-am-Main. Antwerp's pre-eminence was challenged as Venice opened more contacts for the silver she needed to trade for Levant gold. {5} Many German miners originally belonged to guilds, but gradually sunk to being poorly-paid wage earners as the mines became less profitable. Later, in the 15th and 16th century, there were rough mining camps in the Alps, Carpathians and Erz Gebirge, where the miners were at least their own masters, but the output was small.
Marxist historians generally recognize four phases in capitalism. The first, mercantilism, ending in the eighteenth century, sees the rise of large plantations, workshops and mines. The second, competitive capitalism, originates in the Industrial Revolution, beginning with textile factories and then moving into large-scale industries, transport and communications. In both these earlier phases the business is owned and managed by hard-working and forward-looking entrepreneurs, but this changes eventually to control by financial interests: banks and shareholders. The third phase, monopoly or corporate capitalism, spanning the last quarter of the nineteenth century and much of the twentieth century, is marked by the concentration of capital, and the rise of big corporations that cooperate rather than compete in arriving at output, prices and investment decisions — across the country and, increasingly, internationally. The final phase is monopoly capitalism on a global scale, tending to an over-accumulation of capital, and investment in more profitable financial markets rather than in industrial plant. {6}
Marxist feminists stress the unsung role played by women in the process, and the resistance by feudal and more communal societies to land enclosure and waged employment — in which coinage and banking obviously played a key role. Throughout the Middle Ages there were repeated uprisings and attempts to create more equitable societies, many of them religious or utopian, but all put down with great savagery. Capitalism did not arise naturally, therefore, but was imposed, often by the merchant classes allying themselves with the church and powerful nobles. {7}
The gold and especially silver that came flooding into Europe from the New World after 1540 was extracted by slave labour, and miners working the gold alluvials of Minas Gerais and Goyaz were little better off. What money these Brazilian miners could earn was soon gambled away in neighbouring flesh-pots. Even the owners of the colossal Potosi operations high up in the Andes, which at its production peak employed over 100,000 labourers in the most wretched conditions, rarely had much to show for their efforts. The setting was bleak and unfriendly. Everything had to be carried in by mule train, and was exorbitantly costly. As is seen generally in these early forms of capitalism, it was the merchants who consistently made a good living by advancing minted coin, rations and the mercury needed to extract the silver. {8} Indeed a pattern was established that still prevails today: control by finance in the world's capitals, a range of salaried professionals who make the system work, and the periphery areas that supply raw materials or basic products with low-paid labour.
Though capitalism eventually transformed the world, making Britain and then America the global economic power, the increased prosperity of western nations came at a great social cost, as it still does in third world countries following IMF and World Bank dictates. If the poor in England suffered continual hardship and injustice, {9} far worse was the American scene — the African slave trade, {9, 10} holocaust of native peoples {11} and the destruction of an amazingly rich habitat. {12}
Philosophic Background
Capitalism became an article of faith among successful business people, but thoughtful political economists — across the political spectrum — also recognized the dangers:
'Their claims were many and diverse: that the familial hearth was being invaded by the forces of commerce; that civic virtue was disappearing; that the willingness to defer gratification upon which capitalism depends was in decline; that individualism and selfishness were destroying any sense of collective purpose; that work was losing its meaning; that men and women were besotted by consumer goods they did not need; that the international market was destroying historical cultures leaving only a colorless syncretism or hedonistic nihilism; that the spread of market values was eroding the very traditions and institutions on which capitalism depended; that the technological limits of growth had been reached; that the rich were getting richer while the poor were getting poorer — that for all these reasons and more, capitalism was in crisis.' {13}
Far more than is generally realized, the arguments for and against capitalism have been extensively debated in three centuries of European thought. Though his own business activities were often deplorable, Voltaire (1694-1778) did much to make trade respectable. Commerce encouraged men of widely different faiths and political opinions to cooperate peacefully for the good of all, and the merchant was more conducive of public virtue than kings, courtiers, prelates and generals. Adam Smith (1723-90) detailed the advantages of free markets, whose 'invisible hand' (through multiple divisions of labour impossible to entirely follow or legislate for) led self-interest to produce efficiently what was most needed by society — a society that nonetheless required wise government with social cohesion, equitable laws and the protection of property. {14}
Justus Möser (1720-94) was an early critic of what is now known as 'globalisation'. Rather than facilitating diversity in goods and customs, the market destroyed local cultures. Standardized laws in Europe — needed if the merchant was not to simply move to the most advantageous countries for his particular trade — meant doing away with local laws and customs that gave countries their individual well-being. Honour, property, livelihood and political participation were intertwined in Europe, and their weakening must also weaken the status quo. Sweeping rationalisation, however worthy, overlooked how people actually conducted and saw themselves. A person's status, largely hereditary, depended not only on his occupation, but his sense of who he was, his duties and obligations. In Osnabrück, where Möser spent his life, the town council comprised merchants, lawyers, clergymen and government officials. Guilds controlled a wide variety of skills and trades. Nobles could not engage in trade but lived on their rural estates, drawing their income from feudal dues from serfs and independent peasants, both of whom were largely self-supporting. All that was threatened by the merchant class who encouraged a taste for fashions and unnecessary luxuries. Because status was essentially based on land-owning — from nobles, who governed their estates, to serfs, who were tied to the soil — wage labour was a particular threat to Osnabrück Every year saw 6,000 peasants leave the bishopric for work in nearby Holland, and their wages helped many marry at 20 rather than the customary 30, so leaving them exposed to the whims of a changing labour market. Many lived on the edge of subsistence, and only harsh laws would keep them from thievery and begging. Osnabrück also had its cottage industries, notably linen weaving and dyeing, and the wages of this winter work again caused distortions in the social order. {14}
Edmund Burke (1729-97) also sought to conserve society, but his England was already highly trade-orientated and dominated by a commercially-minded landed gentry. Throughout his life he championed the profit motive, but also campaigned against intellectuals with an exaggerated conception of reason, and against money men unrestrained by legal or cultural responsibilities. Burke was an Irish intellectual who, through patronage, entered and greatly influenced Parliament, which he saw as a deliberative body not representing constituents but governing for the country as a whole. His speeches, carefully drafted, were delivered in the House, and then published to influence public opinion further. His main targets were an abstract reason shorn of social context (which led to 'the Fairy Ground of Philosophy') and financiers in the City of London who made money to the exclusion of all else, i.e. were socially irresponsible. Burke believed in the free market, and fought against all restraints, even those intended to provide relief for the poor, against profiteering, for example, and international trade restrictions. Prices should be negotiated between employers and the employed, for example, and not set by well-meaning but uninformed justices of the peace, who generally made matters worse. No doubt the poor envied and resented the rich, but acted against their own interests in overturning societies that accumulated needful capital and made everyone richer. His greatest invective was reserved for the British East India Company, which ruled large areas of the subcontinent, exercised a monopoly on its trade, and purchased blatant influence in Parliament. In a similar vein was his great polemic of 1790, 'Reflections of the Revolution in France', which charged lawyers and speculators with promoting abstract principle to destroy the social fabric of the country and expropriate church property. The cold calculations that made for success in finance were disastrous for government. The protection of property was an important function of a state, and the new French government should be a balance of the new and old. Otherwise (as Burke correctly predicted) the government would lack authority and, failing to raise taxes, would quickly descend to anarchy — leading to the massive use of force and eventually military rule. Almost everything that makes life worthwhile, he argued, is a result of society, its inherited codes, knowledge and institutions. 'The restraints on men, as well as their liberties, are to be reckoned among their rights.' Culture is then a means of sublimation, diverting the passions to more elevated goals, and creating restrictions on the expression of domination and self-gratification. Society is not a contract between its members, moreover, but an inherited complex of duties and obligations. {14}
Far from being a pure theoretician, Georg Wilhelm Friedrich Hegel (1770-1823) was a practical philosopher, educator and administrator, taking a key role in the modernized Prussian state created after its defeat by Napoleon in 1806. Hegel accepted Burke's conservatism, but examined more closely the institutions needed for an ethically-ordered society. How is the natural self transformed by historically-developed social and political structures through which the cultural norms are conveyed to individuals and internalised by them? What was the ethical order that created our habitual dispositions to act well towards one another, so that duties coincided with feelings? Unlike the Romantics, Hegel did not view duties and obligations as limitations on the real self, but as a means of giving the turbulent inner life a rewarding sense of direction. He welcomed the bourgeois society where everyone is treated as self-sufficient individuals but that society also included property rights, the market, the judiciary and police to enforce the law. The rights to control one's own person and property are essential, but they are not innate, but grew from evolving cultural understandings. State administration requires taxes, but no citizen pays taxes willingly, i.e. naturally. Private property allows for the expression of individual preferences and personalities, but the term 'private' also implies that no one has rights over other peoples' property. That was the merit of the modern age: rulers could not confiscate property or exact arbitrary taxes. The market was a social institution, and because an individual's need can only be met through the work of others, the individual must orientate himself towards others and make his actions consonant with their needs. Beyond supplying basic wants — food, housing and clothing — the market created products answering to man's imagination and historical evaluation. This ever-increasing refinement of wants was open-ended, and ever evolving. Entrepreneurs were a major force in expanding the imagined wants of consumers: the market not only satisfied wants but created them too. The search for markets to meet products in oversupply led to ventures abroad. {14}
Karl Marx (1818-83) is the best-known critic of the market, which he based on ethical considerations. {14} Marx rejected Hegel's view of mediating institutions, and envisaged a society in which money making and religious and national differences were all abolished. When an academic career seemed untenable, Marx turned to journalism, which enabled him to travel and see society as it really was. He was horrified. Capitalism was built on avarice and selfishness. Competition set everyone against everyone else, and society was a fraternity of thieves. Prices were continuously fluctuating because supply and demand also fluctuated, turning everyone into speculators who profited by betting on the misfortunes of others. Markets, even the stock market, were war by other means. Capitalism came down to mindless production governed by the chance nature of supply and demand: the two rarely came into balance, spelling frequent ruin for entrepreneurs and misery for workers. The repetitious, culturally benumbing nature that the division of labour called for — so compendiously championed by Adam Smith and others — in fact alienated man from his better self. As the successful bought up the less successful, the rich grew richer, the poor grew poorer and the middle class faced extinction. { {14}
Money made from money, however indirectly, was usury, which Marx stigmatised as 'vampirism'. Labour alone mattered, and the quantity of labour accounted for economic value. Profit was surplus value, the difference between selling prices and wages paid, and was therefore 'exploitation'. Of course the factory owner also had other costs to meet: rent — interest on money borrowed, payment for machinery and raw materials — but these were all the result of past labour, what Marx called 'congealed' or 'dead labour'. But as companies reduce costs by investing in more capital-intensive machinery, they employ correspondingly fewer workers — indeed must to remain competitive and avoid being bankrupted or swallowed up by more profitable concerns. More workers are thrown out of work, and wages inevitably decline with the labour surplus. Marx documented in horrifying detail the wretched lives of the industrial workers in England, though it was not always a balanced picture. Real wages of factory workers rose 17% between 1850 and 1865, for example, and hours worked continued to fall. However hard the immediate prospects were for factory workers — and they were exceptionally hard — Marx's theory of labour blinded him to the long- term prospects. {30} Throughout Europe, in fact, 'marginalist' economists like Menger, Jevons and Walras attacked the very foundations of his theory (though marginalism has its own problems), and Marx himself in his expanding 'Capital' never quite answered his critics. Advancing technology in fact opened up new industries — chemical, electrical, communications — which employed more workers rather than fewer, and increased demand for better skills and further education. {14}
Rather than group contemporary society into two classes à la Marx — business owners versus workers — German political economists of the later 19th century examined how capitalism worked in practice. German society in the last two decades before W.W.I. had grown enormously complicated and prosperous. Helped by state-funded universities and research institutes, German production had increased six-fold between 1871 and 1914 (Britain only two-fold), and these vast, competitive enterprises had been achieved by mergers, vertical integration and diversification into new products. Division of labour extended into management itself as owner-managed companies became large bureaucracies of skilled administrators. Railroads, mines, steelworks and industrial plant had capital requirements far beyond what was possible with share-owning partnerships, moreover, and joint-stock companies became the rule. By the 1890s, Germany had important commodity exchanges for grain, flour, coffee, cotton and sugar, and the country was importing bread, meat and sugar from Australia and the America at prices European suppliers couldn't match. Commodity futures could also be traded, providing more financial stability, and the practice of arbitrage (buying at one place to sell for a profit at another) was becoming common. The fortunes made in this way were naturally resented by the land-owning and working classes, but Max Weber (1864-1920) argued that the future lay in more of such enterprise. The 1896 controls and restrictions Act (later repealed) were unhelpful, and to call stock exchanges (where 2 million of Germany's 50 million citizens held shares) a modern example of usury was antiquated nonsense. {14}
Georg Simmel's (1858-1918) 'The Philosophy of Money' argued that the abstract nature of modern money in fact created an extended web of social and commercial interests, achieving 'what usually only love can do: the divination of the innermost wishes of others, even before he himself becomes aware of them. Antagonistic tensions with his competitor sharpens the businessman's sensitivity to the tendencies of the public, even to the point of clairvoyance, responding to future changes in the public's taste, fashions, interests . . ' Everyone became conscious of everyone else, but the bonds of occupation and social class were loosened because the individual played a role in multiple and overlapping circles — cultural, social, commercial, scientific, religious and so on, all infinitely subdivided and so impossible to dominate. Indeed the modern citizen was spoilt for choice. Money, moreover, had a 'surplus value', representing not only what is bought with it, but what could be bought. Nonetheless, as Matthew Arnold in Britain had argued, acquisition of money was still only a means to an end, certainly not a sensible end in itself. {14}
In contrast, Werner Sombart (1863-1941) viewed modern capitalism with despair. It destroyed the soul, robbed men of inner peace, soiled their relationship to nature and to the religious faiths of their fathers. In this he saw the hand of Jews with their egoism, self-interest and capacity for abstraction. By these wholly false accusations he prepared the way for Nazi anti-Semitism, itself fuelled by the preponderance of Jews in the leading professions of Weimar Germany {14}
Nonetheless, In their different ways, Weber, Simmel and Sombart all welcomed W.W.I, which they saw as a 'spiritual turning point', where individual doubts and interests were subsumed in duties to the fatherland. Equally dramatic was the effect of German defeat, of course, when capitalism was largely abandoned, and the country fragmented into extreme versions of left- and right-wing politics. In his 'History and Class Consciousness' (1923), Georg Lukács reversed the claims of Marxism to be a strictly scientific analysis of social and economic change, recasting it as a fundamentally different and irreconcilable worldview. Even if Marx's predictions were false, Marxism would still be a valid perspective on life and culture, and should support the doctrine of Socialist Realism in the Soviet Union. {30} Modern life no longer formed a 'totality', and a meaningful existence was impossible in what had become a self-made prison more than a home. Throughout his life, Lukács espoused Marxism in place of the emptiness and moral inadequacy of capitalism, however illogical that position might be, or the reality of life inside the Soviet Union. Workers under capitalism became a mechanical part of the system, unable to see its evils and too willing to compromise their rights for small improvements in pay and conditions. Only thorough and steadfast rejection would serve. From the beginning, he hated the war, which only demonstrated the fundamental inhumanity of nationalism and capitalism. Enraged by four years of senseless slaughter, soldiers and workers had set up revolutionary councils in the major cities of central Europe — Vienna, Berlin, Hamburg, Munich and Budapest — and though they were ultimately unsuccessful in challenging the Social Democrats, Lukács sympathized with their movements, joining the Hungarian communists, and editing their paper. An uncompromising egalitarianism was imposed on Hungary by the Béla Kun government, and after the 'red terror' (which drastically reduced productivity and alienated everyone) came the repressive 'white terror', which obligedLukács to leave Hungary for Vienna. Thereafter, Lukács went to Berlin, Moscow and finally back to Hungary, where he became the leading exponent of Marxist thought and a major figure in the Hungarian uprising. {14}
The same retreat from reason marks the writings of Hans Freyer, but here the flight was towards the political right. Freyer was neither an anti-Semite nor a racist, but came to see the National Socialists as an escape from the dead end of capitalism (as did many intellectuals, including Heidegger, who distrusted language complicit with the social order). In his student years, Freyer identified with the youth movement, which had thrown off materialistic values, looked for a revitalising relationship with country life, and yearned for a deep community of purpose that was missing from Wilhelmine Germany. For Freyer, the war was an unusually uplifting experience. He emerged a hero, and in later years looked fondly back on his years of command and camaraderie, where he served the people en mass (the Volk). He returned to university life, holding Germany's first chair of sociology at Leipzig in 1925, and writing memorably for a wider audience. Like Hegel, Freyer believed that all human communities, values and natures are products of history, but that history now, he felt, no longer had discernable direction or purpose. There were many such Volks, and none was superior to others because no independent standards existed. But to be born into a particular Volk was nonetheless to be elevated into a consciously affirmed fate, which in turn bestowed purpose on a selfish and otherwise aimless capitalist society. Those Volks coalesced into a resurgent 'total state', a Germany that would wipe out W.W.I defeat and its imposed reparations and trade treaties. That Germany would be all-powerful, a closed, self-sufficient and self-affirming community, and would not avoid war. So Freyer came to advocate the fascist state, to support the rise of Hitler whose autocratic methods cut unemployment and made Germany the first economic power of Europe again. After W.W.II, a deradicalised Freyer rethought his political outlook, but he never embraced capitalism. Institutions were now to provide meaning and purpose, including those of the family, religious traditions and the professions. {14}
Joseph Schumpeter (1883-1950) began his teaching career in the final years of the Austrian-Hungarian Empire. Like many in upper-class circles, he was attracted to the Nietzschean idea that social development depend on the exceptional individual — the far-sighted, strong-willed and original entrepreneur who will not be understood by the dullard majority, and will inevitably suffer their resentment. Schumpeter taught at the universities of Czernowitz, Graz, and Bonn, served briefly as Minister of Finance in the Austrian government in 1919, and joined the faculty of Harvard University in 1932, teaching there till 1950. He left a Europe falling to socialist ideas and governments, and came to an America in the throes of the Great Depression. Yet capitalism was dynamic, thought Schumpeter, not something resulting from inevitable, abstract laws but created by individuals with a 'will to power'. True leadership demanded not only energy, intelligence and vision, but the ability to inspire, manage and lead men. Socialism was irrational, and could only be seen as a religion. Where was the incentive to strive without vast profits falling to the successful and destitution hounding the unsuccessful entrepreneur? Deprived of property to call their own, or any incentive for social or material betterment, citizens would not maintain the previous production levels, and some coercion would doubtless become necessary. {14}
Nonetheless, socialism might well happen: confiscation and redistribution of consumer goods had an irresistible attraction to the disadvantaged, and more so to intellectuals without practical experience of life. Being concerned with power and status, intellectuals — and here Schumpeter included all who earned their living by thinking: teachers, those over-educated for modest jobs, journalists and moulders of public opinion — might well use the rational enquiry that capitalism encourages to undermine what had been extraordinarily successful. US agricultural output had increased by 50% between 1900 and 1926, and industrial output by 400%. Where the rural worker had languished in poverty, the urban worker could afford canned foods, washing machines, refrigerators, telephones, radios and even motorcars. Thanks to contraception, upwardly mobile families had sensibly limited their offspring, and spent their earnings on educating them better. True, that prosperity had vanished in the Great Depression, triggered by the October 1929 Stock Exchange crash, but reflecting the reduced buying power of farmers, and the interlinked banking scandals that spread their damage round the world. In Germany, unemployment rose from 4.4 million in 1930 to 5.6 million at the end of 1931. Even in America, unemployment reached levels of 10 million, or nearly 1 in 5. Many blamed the devious selfishness of banks, with which Roosevelt concurred, capitalising on public disaffection to introduce the New Deal, a popular but unsuccessful set of policies. He increased taxes on the rich, and put a surtax on undistributed corporation profits, which was counterproductive. Business cycles were inevitable, and discouraging investment with high taxes only delayed recovery. Through his influential 'Capitalism, Socialism, and Democracy' of 1942, Schumpeter looked to a bright future for capitalism, which would rise to its challenges and find new ways of exploiting new resources. Though this would happen (Schumpeter was proved abundantly right, of course: people's lives did improved markedly on both sides of the Atlantic from the 60s) capitalism could well perish of its own success, giving way to some form of public control or socialism. As companies became larger and more complex, the dynamic owner-manager would also give way to armies of managers and the internal politics of bureaucrats, none of whom would be more than wage-slaves to the comfortable status quo. {14}
John Maynard Keynes (1883-1946) believed the state should be the employer of last resort. His was the most influential economics in the 1930-70 period because Keynes gave economics a high moral purpose and advocated measures that politicians could profitably use. As the Great Depression only too plainly showed, markets were not self-correcting, and during long slumps the state should find work for the unemployed. Their wages would pay taxes and increase consumer demand, thus encouraging businesses to invest again and take on more people. Though that case was argued in his 'The General Theory of Employment, Interest and Money', Keynes was not always clear or consistent. Anticipating Modern Money Theory, he suggested that wage reduction would not reduce unemployment, which was best tackled by increasing government spending (even on projects that gave minimal returns) and running a budget deficit. He was optimistic about capitalism, but hoped it would give rise, in a few generations, to more sensible lives — which he modelled on Bloomsbury Society: an active interest in the arts, cultivated friendship and public service (not unlike the scholar-administrators of imperial China, incidentally). Simmel's view that money had a surplus value he called the 'marginal propensity to save', linked it to usury and thought it primarily responsible for the Great Depression. {14}
Keynes' vision was vindicated by events. Post-war European countries became as prosperous as America had been before the Depression. College education exploded, and new technologies and materials of every sort were the result of free trade, free capital movements and stable currencies. The market ruled, but it was a market guided by governments where corporations compromised with trade unions to ensure affluence for all. {14}
Like Lukács, Herbert Marcuse (1898-1979: 41.4) was radicalised by W.W.I., but his ideas found their seedbed in the west. Marcuse was a socialist sympathizer in the Weimar Republic, but he neither joined the Socialist Democratic Party or the Communist Party, disdaining the last for its authoritarian Stalinist organization. Instead he worked for the Institute of Social Research in Frankfurt, where he studied the policies of the National Socialist regime. Most observers stressed its repressive nature, but Marcuse was struck by how enthusiastically people embraced the Nazi party and its policies — it advocated premarital sex, a cult of nudity in art and entertainment, more tolerance for illegitimate children and their mothers, and less emphasis on the family for protection, nurture and education. Marcuse continued studying the phenomenon when the Institute moved to America, and his services were sought by the government. The Nazis, he thought, had liberated individuals from social restraints, but also encouraged expression of more sinister instincts. {14}
Marcuse left government service after W.W.II, and taught at Brandeis University from 1954 to 1965, and then at the University of California at San Diego to 1969, when the publication of his 'One-Dimensional Man' made him the darling of the New Left. Though better jobs and material improvements had prevented the proletariat uprising — as Marcuse suggested in his 'Eros and Civilisation' of 1955 — the larger dimensions of life were unfulfilled by capitalism. In the psychoanalytical language of the time, he explained that man's necessary erotic energy had been reduced to genital sexuality, leaving the rest of the body available for the unpleasant task of earning a living. Certainly there were compensations, but work for many was meaningless, and what should have been a serious drive for change was blunted and diverted by advertising and mass entertainment. The great artists and thinkers of the past were studied as never before, but their challenge was absorbed and neutralized in a welfare state. Even the Soviet Union and communism was a threat largely manufactured to sell the American dream. Indeed his 'One-Dimensional Man' saw western society as under slavery to materialist and stultifying concepts, and the book soon became the bible of hippy drop-outs, students demonstrating against the Vietnam War, and socialist movements in France and Germany. Marcuse's astonishing influence waned after America's withdrawal from Vietnam, but continued quietly among younger academics, who saw politics everywhere and disputed the university ideal of disinterestedness. The anti-capitalist strain further ramified into new fields: radical critical theory, feminism and colonial studies. Thence it spread to modern management manuals that advocated creative and self-organising work groups in place of the older authoritarian and hierarchical structures. {14}
Friedrich August von Hayek (1899-1992) came of age in the anti-capitalist cultures of a 1920s Vienna menaced by both communism and fascism. Though he published his most seminal work in the 1930-70 period when living under western governments that regarded increased social planning was both desirable and inevitable, it was from his native Austria and to two decades of life in Britain, that Hayek drew his outlook and theories. The 1944 'The Road to Serfdom' defended individual freedom against 'collectivism' of all persuasions. With his comrade in arms, Milton Freeman, his was the most important influence on the Neoliberalism movement of the 1970-90 period, but he also concluded that modern liberal societies must be bound together by more than shared cultural commitments: democracy could be a potent threat to social well-being. {14}
Capitalist economies were resourceful and dynamic in the way central planning could never be. Certainly capitalism was unfair: a large number of men worked for a talented few in what they did not want to do — work harder, change their habits and think beyond the immediate present. Prices did not reflect certain knowledge, but were the subjective evaluations of informed individuals. Markets were based on self-interest, but that interest could be altruistic or selfish. Adam Smith's conception of freedom was too narrow: freedom is the state where everyone uses their knowledge for their own best purposes. Restrictions arose inevitably, and there was no economic realm distinct from those of politics, religion and culture. Nor could government planning avoid impinging on and restricting those freedoms, however well intentioned. Except perhaps in time of war, the state had no overall or moral purpose: it was simply a piece of utilitarian machinery intended to help individuals develop their gifts, ambitions and personalities for themselves {14}
Heretical and alarming as these thoughts seemed in the 1960s, they became orthodoxy as stagflation afflicted western democracies with rising inflation and declining output. Keynesian policies no longer seemed to work, and taxpayers began to mutiny at high levels of government spending. Strikes swept Ronald Reagan to power in the USA and Margaret Thatcher to Conservative victory in Britain. Entrepreneurship was again encouraged. The state enterprises were reined back, and trade union power curbed. Tariffs were reduced to encourage international trade. The Soviet Union dissolved when no longer held together by military repression: the truth of the socialist system, its falsification of output statistics and lack of incentive, could no longer be hidden. {14}
As {13} many have noted, academic thought has little influence on the political scene, and what was illuminating, subtle and qualified in books and articles is commonly flattened into simplistic slogans for everyday use. We live today in societies under many tensions, pulled conflicting ways by our jobs, professions or trade unions, our religions, political beliefs, family needs, and personal aspirations. None of the thinkers summarized here, even the most enthusiastic champions of capitalism, viewed the market as other than a social institution representing ethical, cultural and political needs, and therefore quite unlike the mantras repeated by the business press.