The largest Tea Party organization in the U.S., Tea Party Patriots, recently celebrated its fifth anniversary with promises of redoubled efforts to balance the federal budget and pay down the national debt. Of course this would have the — presumably unintentional — effect of destroying capitalism as we know it.
Corporate capitalism, since it coalesced (with the help of an enormous amount of state intervention) as the basis of the U.S. national economy in the late 19th century, has been plagued with two chronic crisis tendencies: 1) Insufficient aggregate demand, resulting in idle production capacity, and 2) surplus investment capital without a profitable outlet.
Absent state intervention in the economy to conceal the falling rate of profit through expenditures to stimulate demand, direct government purchases of industrial output and the creation of new investment outlets, American corporate capitalism — and the world capitalist system with it — would have died of chronic Depression decades ago.
The only reason the Great Depression of the ’30s wasn’t the end of the system was that World War II temporarily relieved the problem of idle capacity and surplus capital by providing enormous new avenues for profitable investment (financed by government debt, of course) and blowing up most of the plant and equipment in the world outside the United States. In 1945 the U.S. emerged as the owner of the majority of industrial capacity in the world, with almost zero competition from the former industrial areas of Europe. And American industry itself had been massively modernized and retooled, with a majority of plant and equipment having been built since 1940 at taxpayer expense. The practical effect was to push the reset button, allowing a generation of prosperity with extremely mild business cycles, job security and rising wages.
But by around 1970 Europe and Japan had rebuilt their industrial bases, once again saturating the world with production capacity and a scarcity of investment outlets. Since then capitalism has resorted to one expedient after another to address these crises. From the ’80s on, the U.S. economy has been kept out of recession largely by enormous federal deficits that add a few hundred billion dollars a year to aggregate demand and prevent idle capacity and inventory gluts from getting out of hand. And the glut of surplus capital has found outlets in the FIRE (Finance, Insurance and Real Estate) economy that mushroomed in scale since the ’80s and in state-fostered speculative bubbles like the Dotcom Boom of the ’90s and the real estate boom of the early 2000s.
But one outlet for surplus capital that doesn’t get much attention is the U.S. government’s debt (See “Superfluous labor and state debt,” The Real Movement, March 10). The debt currently stands at around $17 trillion. And contrary to right-wing opinion, it isn’t crowding out private investment. As it is, businesses are refusing to expand capacity or hire workers because there’s not enough reliable demand for them to realize their investment. So that $17 trillion is in fact a mass of surplus capital that wouldn’t have had a profitable outlet; but thanks to the kindness of Uncle Sam, the holders of U.S. debt get a guaranteed — and tax free! — rate of return. It’s analogous to the function of farm price support subsidies, which amount to paying big landowners rent on the land they hold out of production.
The model of corporate capitalism that emerged in the late 19th century — which the state played a huge role in creating — has always been dependent on large-scale government intervention to make it profitable. The growth of big government, the welfare state, the military-industrial complex and deficit spending, far from being alien encroachments on a pristine “free market” system, are integral to the functioning and survival of the capitalist system as we know it.
The Tea Party project of balancing the budget and paying off the debt would have the effect of removing these essential government supports to a system that’s barely surviving even with them. It would reduce aggregate demand by $500 billion a year to an economy that’s only just staying afloat as it is. And it would dump $17 trillion in capital on an already glutted market, making the Great Depression look like — forgive me — a tea party.
What we have now is not a free market. It is a system structurally defined by massive collusion between capital and state, utterly dependent on ongoing state intervention for its survival. The Tea Party agenda would destroy the basis for capitalism’s survival. I’m not a Keynesian. I don’t want to save capitalism. What I want is a free market without special government privileges for big business and the wealthy. So if you Tea Party folks really want to destroy capitalism, all I can say is — welcome aboard, comrades!
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