Last Tuesday’s vote to recall (or not) Wisconsin governor Scott Walker is just the latest illustration of a positive feedback loop we’ve been in for some time.
Capitalism — the 500-year-old historic system of political economy we actually live under — had heavily depended on the state since the beginning. It was founded on expropriation of peasant land and military conquest of free cities in the original European homelands of capitalism, and expanded through land expropriation and enslavement of peoples around the world. Industrial capitalism was founded, in Britain, on Enclosures and the imposition of totalitarian social controls on the working class. Modern American corporate capitalism was created by the industrial policy of the American state from the Civil War on.
The current model of global neoliberal capitalism is enabled by a legal framework pushed through under Clinton in the 1990s: NAFTA, the Uruguay Round, the WIPO Copyright Treaty, TRIPS, the Digital Millennium Copyright Act, and the Telecommunications Act. This last upward ratcheting of state intervention led to an explosion of corporate profits. Corporate management and the rentier classes have found it a profitable investment to secure the state policies they need to become even more wealthy.
Which takes us back to that positive feedback loop. To repeat, the wealth of the ruling class is derived from rents enforced by the state. And they use part of that wealth to tighten their control of the state, which further increases their state-enabled rents, and so on.
The state has always been “the executive committee of the ruling class.” But in many times and places, it’s had the autonomy to promote the long-term interests of the ruling class as a whole, and the long-term stability of the system, even if it meant lowering short-term profits or the profitability of particular economic sectors.
One function of the state, when it functions ideally on behalf of the ruling class as a whole, is to overcome prisoners’ dilemmas in which individual capitalist rapacity undermines the sustainability of capitalism as a whole. A good example was the Ten-Hour Day legislation in Britain, as described by Marx:
“These acts curb the passion of capital for a limitless draining of labour power, by forcibly limiting the working day by state regulations, made by a state that is ruled by capitalist and landlord. … [T]he limiting of factory labour was dictated by the same necessity which spread guano over the English fields.”
The problem is, as capitalist control of the state becomes increasingly direct and day-to-day, the more state policy approaches the character of strip-mining or slash-and-burn agriculture: Maximizing short-term profitability at the risk of destabilization. And that’s what we’ve been seeing in recent years: The most reckless and rapacious wing of corporate capital has politically defeated the more “progressive” wing, thrown off all self-control, and begun milking the system for all it can get. As privilege leads to more money to more privilege to more money, ad nauseam, the system takes on the character of a runaway machine without a governor.
The good news is, all this means corporate capitalism is unsustainable. The reason for the shift from the “progressive” model of New Deal or Consensus Capitalism to the more exploitative neoliberal model is that the older model failed. It was only able to save corporate capitalism from the Depression in the first place because FDR, Hitler and Churchill “solved” the problem of excess production capacity by blowing up most of it.
FDR and Truman built a permanent war economy that persists to this day for occupying much of the surplus capacity that remained. But even so, Japan and Europe rebuilt their productive capacity by 1970. Since then corporate capital has become increasingly dependent on state-subsidized export of capital, depression of wages, increasingly draconian “intellectual property” law, ever-larger bubbles in the FIRE economy, ever-larger military budgets, and other similar expedients, to remain nominally profitable.
It’s now reached the point where it can only remain profitable by abandoning even the pretense of democracy and asserting naked control of the political system, as demonstrated in the recent ALEC scandal and Tuesday’s vote in Wisconsin. The plutocracy is transforming the American political system into an undisguised banana republic on the model of the Marianas Islands under Abramoff and Delay. Michigan’s undertaken the kind of kleptocratic looting associated with Boris Yeltsin, forcing municipalities into receivership and giving away tax-funded infrastructure to crony capitalists.
So at the very time corporate capital is most dependent on the state for subsidies and to suppress competing self-organized economic models, and the state itself is being bankrupted by these demands, the system is stripping itself of the legitimizing veil that has heretofore secured public compliance. This won’t end well for them.