3. Myths and Reality of the Changes of Capitalism in 1914
Following the ICC, whose main elements Link takes up, the latter puts forward a series of changes that would have occurred in capitalism at the beginning of the 20th Century and that would validate the diagnosis of the entry of this system into its phase of obsolescence: the constitution of the world market; the advent of State Capitalism; indebtedness; military spending and wars before and after 1914. We will show in what way they are erroneous or irrelevant.
1. The Constitution of the World Market
Link mentions the constitution of the world market but without explaining to us how this opens the period of obsolescence of capitalism. (1) We will therefore wait for his explanation before discussing it in more detail. However, we will specify what is meant by ‘world market’ in order to respond to the confusion spread by the ICC on this question.
In fact, if we can speak of the constitution of a veritable world market, it is indeed at the beginning of the 21st Century, after three decades of globalization, but absolutely not in 1914 because, at that time, we are still very far from it for the following five reasons:
The turning point between the 19th and 20th Centuries corresponds to the completion of the colonial market, not the world market, which is quite different! And for good reason, this colonial market was not global as it is today: at the time, colonial markets were fragmented, reserved for their respective metropolises and protected by high customs barriers.
Moreover, during the interwar period, this colonial market sank into generalized protectionism. We are therefore still very far from a completed world market!
Then, with the decolonization following the Second World War, this market changed from being colonial to being neo-colonial, since access to it was still privileged for the former imperialist metropolises.
Moreover, this neo-colonial market is going to be dramatically reduced (by almost two thirds) as a result of: the constitution of the Eastern bloc, which is withdrawing behind its Iron Curtain; the isolation of China and India in “non-aligned” military-nationalist policies; and a whole series of Third World countries which follow the latter more or less radically for varying periods of time! (2) We are therefore still a long way from a world market that was completed during the Cold War!
Finally, this fragmented and very limited neo-colonial market during the Cold War will only become truly international after the globalization induced by the neo-liberal turn, combined with the return of China to the Western sphere of influence during the 1970s, then that of India in the 1990s, and finally, that of the countries of the former Soviet bloc in the 2000s after the lost decade of the 1990s (cf. Graph 2 below).
It is therefore profoundly erroneous to claim that the world market was completed by capitalism in 1914! Indeed, if a dozen or so Western powers did indeed dominate the planet in 1914, they had in no way spread capitalism everywhere or constituted a world market! And for good reason, if the wage-earning population reached more or less half of the active population in the colonial metropolises, it represented less than 10% on a global scale. The ICC is now obliged to acknowledge this halfheartedly following the expansion of capitalism in many emerging countries and the development of wage labor within them!
All this is well illustrated by the following graph (Graph 1) showing this geo-economic bi-polarization of the world into two large entities brought about by the industrial revolution: a small number of developed countries and a huge underdeveloped Third World whose income gaps only increased until the Second World War, to then stabilize until 1990 … which shows that, far from spreading over the entire planet, during the 19th Century and most of the 20th Century, capitalism was concentrated in a few imperialist metropolises, to which a few bridgeheads in the rest of the world were attached. It was only with the globalization brought about by the neoliberal turn that a real world market was created (Graph 2), that capitalism then spread furiously to a whole series of countries and that the income gaps between countries rapidly narrowed from the 1990s onward, as the graph below also shows!
All this is even better illustrated by the following graph (Graph 2), which measures the share of exports in total goods produced (GDP). This share is very small (barely 7%) until the middle of the 19th Century because countries develop behind strong protectionist barriers. It doubled during colonial capitalism, then fell dramatically during the interwar period and remained very low during the “Thirty Glorious Years” (1945 – 1975). It was not until 1975 that international trade exploded and that a veritable and interdependent world market was created with value producing chains spread across the whole planet. We are therefore a thousand miles from the legend conveyed by the ICC, and unfortunately taken up by Link, on the ‘constitution of the world market in 1914’.
2. The Advent of State Capitalism
Certainly, the phases of obsolescence of previous modes of production have seen a phenomenon of state hypertrophy in all areas of society, but this does not necessarily imply that every significant increase in the role of the state is a marker of a phase of decadence, proof of this must still be provided. Thus, to claim that all forms of state capitalism within capitalism would be a plaster on a wooden leg, a palliative for “each national capital, deprived of any basis for powerful development” (Platform of the ICC), in short, a stopgap measure to keep capitalism afloat, is a profound error.
It is true that fascist, Stalinist (in the former so-called “socialist” countries) or related state capitalisms (as in many Third World countries) could support this thesis. However, such examples were limited to particular phenomena specific to the 20th Century: (a) the transformation of the defeat of the revolutionary wave in 1917-23 into a Stalinist hydra in Russia; (b) the building of Nazi and Fascist regimes in Germany and Italy, which completed the defeat of large-scale social movements; and (c) the establishment of the Cold War after the Second World War, which polarized the world between an imperialist bloc that included all the developed countries and one that brought together some very fragile economies. It is in such a context that these examples could support the thesis of a “state capitalism as a marker of decadence” until the 1950s – 1970s. However, the subsequent evolution of capitalism did not confirm it, and this for eight essential reasons:
All of these poorly performing forms of state capitalism have progressively and virtually disappeared from the planet over time. More, after the Second World War, it was state capitalisms with mixed economies (Germany and Japan), nationalist-militarized (South Korea, Taiwan) and even certain Stalinist state capitalisms from the end of the 1970s, such as China, then Vietnam and Laos, that performed best in terms of economic growth!
The phenomenon of the emerging countries, which developed on the favor of the neo-liberal turn (1970s-80s), has definitively buried this theory, since a significant number of countries – to the point where they represent almost half of the world’s population – have experienced powerful economic developments on the initiative and under the direction of their States!
Even more devastating for the theses of the ICC, the cases of China, Vietnam and Laos disprove its other postulates, asserting that a political apparatus of the ‘Stalinist state capitalism’ type backed by the army would constitute proof of its structural weakness and that its operating logic and rigidity would make it unreformable, thus rendering its implosion inevitable. Indeed, these three countries have not imploded, they have reformed, but they have also experienced very high growth rates for nearly four decades, and even rates never seen in the history of capitalism since the end of the 1970s in China. (3)
There is also another legend peddled by the ICC, which consists in making people believe that State intervention in all areas of society is a characteristic of the twentieth century compared to the previous one, a legend unfortunately also taken up by Link (4) … whereas this State intervention was also very important in the nineteenth century. We will give five significant examples, but others could be invoked:
a) Thus, it suffices to read Marx and some good history books to realize that the creation of the proletariat was not spontaneous but that it took many laws and fierce interventions of the State to tear the peasants from the rural world in order to transform them into factory workers and to force them to remain in their state of over-exploited employees: private appropriation of the land in the countryside and suppression of the commons; prohibition to leave one’s job in the factory under penalty of judicial condemnation; introduction of a ‘livret d’ouvrier’ (“labor booklet”) controlling the workforce, etc. (5)
b) European imperialism, so characteristic of the 19th Century, was essentially carried out by States: colonialism was first and foremost the violent imposition of a State against other peoples or States.
c) If the English industrial revolution relied on small individual producers, for the following countries, the need to mobilize more important capital quickly made the banks intervene first (France, Belgium…), and then the States (Germany, Japan, Russia…), in order to guarantee the economic catching up of these countries.
d) Until the middle of the 19th Century, the economic development of the small number of future developed countries in Western Europe took place behind protectionist barriers erected by the States. As for the United States, this protectionism lasted until the First World War! In other words, the country that would become the worlds leading economic power developed behind state protectionism throughout the period preceding the First World War!
e) It is often forgotten that the public debt, which is said to be so characteristic of the 20th Century, was already very high in the 19th Century, as the following graph for the United Kingdom shows. In effect, we can see that the leading country of this period became so thanks to a staggering public debt which was spread over almost two centuries!
Theoretically, with regards to the writings of Marx and Engels in the ‘Anti-Dühring’, they never considered the development of state capitalism as a mark of the decadence of a mode of production. On the contrary, they repeatedly emphasized that this phenomenon represented progress in the centralization and development of the productive forces, that it was the ultimate form taken by capitalism on the threshold of socialist revolution: “At a further stage of evolution this form [i.e. joint-stock companies] also becomes insufficient: the official representative of capitalist society — the state — will ultimately have to undertake the direction of production. This necessity for conversion into state property is felt first in the great institutions for traffic and communication — the postal services, the telegraphs, the railways. (…) This solution can only consist in the practical recognition of the social nature of the modern forces of production, and therefore in conciliating the modes of production, appropriation, and exchange with the social character of the means of production. (…) By transforming the vast majority of the population more and more into proletarians, the capitalist mode of production creates the power which, under penalty of perishing, is forced to accomplish this upheaval. By pushing more and more for the transformation of the great social means of production into state property, it itself shows the way to accomplish this upheaval.” Theoretically, the canons of Marxism are thus a thousand miles away from this “theory” of the ICC according to which state capitalism would be only a plaster on a wooden leg, a palliative for “each national capital, deprived of any basis for a powerful development”.
Still on the theoretical level, to postulate that state capitalism is the expression of a capitalism that has entered into decadence is, in reality, only another version of the old antiphon of the dominant ideology, which makes the free market the essence of capitalism and state intervention its perversion. Nothing could be further from the truth, because, like money, capitalism has no smell: it doesn’t matter under which political regime it operates, as long as the latter guarantees the proper functioning of its profit pump! Indeed, capitalism has been associated with almost every political regime imaginable: slavery, monarchy or plutocracy during the industrial revolution, and fascism, Nazism, military-nationalism, democracies, petro-monarchy or Stalinism in the 20th Century.
Empirically, this thesis is totally invalidated. Indeed, if it is correct, we should see a good correlation between the weakness of the economy and the importance of the state in it. However, the exact opposite is true, as illustrated by the graph below: the more the State is economically present, the higher the GDP per capita! Once again, the reality of the facts is the opposite of the idealist postulates of the ICC:
Finally, let us emphasize the existence of a gaping contradiction between the ICC’’s position on state capitalism and its own foundational writings. Indeed, in its pamphlet on The Decadence of Capitalism, in an attempt to prove that the development of the productive forces has been held back, this organization compares actual world industrial production between 1946 and 1959 with the industrial production achieved if the growth rate calculated between 1939 and 1944 in the United States were applied, because, the ICC asserts, the latter growth rate “provides an appreciation of the technical capacities actually acquired by society”. Since the result estimated in this way is much higher, the ICC triumphantly concludes that there is a brake on the development of the productive forces! However, this growth rate obtained during the Second World War in the United States between 1939 and 1944 was achieved under the aegis of an almost absolute state capitalism and of a staggering military production (in 1944, almost half of the American GDP was due to this type of production). Therefore, if the ICC considers that this rate of growth “provides an appreciation of the technical capacities really acquired by society”, it should urgently revise its analyses on the ‘palliative – wooden leg’ character of state capitalism as well as on the unproductive character of armament, since this rate is obtained thanks to a hyper-militarized state capitalism!
Faced with the evidence of all these facts (and we could put forward many others), it would have been necessary to show political courage, to abandon this obsolete theory elaborated by the Communist Left of France (a theory well summarized in the article “The Evolution of Capitalism and the New Perspective” of its last review in 1952) (6) and to engage in a work of theoretical deepening, which has always been refused by an ICC preferring to drone on about its political ancestors, maintaining a corpus which has turned out to be ever more erroneous since the end of the Second World War!
Here again Link repeats a legend that the ICC has never bothered to prove: it claims that debt is characteristic of a decadent twentieth century in contrast to the healthy economic activity of ascendant capitalism in the nineteenth century. So let us look at the public debt of the two leading countries in the 19th and 20th Centuries: the United Kingdom and the United States.
Graph 3 above already shows us that this thesis is totally erroneous for the United Kingdom; more, the reality is even the exact opposite, since, compared to the average debt (70% of GDP, or 0.7 on this graph) over the whole period (1694-2018), public debt is much higher before 1914 than after! This conclusion is reinforced if we use an even more precise indicator, as in graph 5 below, namely the market value of public debt (what the State actually has to repay to its creditors):
If we now look at the debt service, i.e. the annual cost of the debt for public finances (interest paid to creditors compared to tax revenues), the conclusion is even clearer: the weight of the public debt was much greater before 1914 than after!
The same is true for the United States when we compare the U.S. national debt (what the U.S. government owes to its creditors) to government revenues (tax revenues). This ratio gives us the number of years it would take for the entire national debt to be repaid (provided that the US government stops borrowing and uses its revenues only to reduce the national debt). Once again, the ICC’s (and Link’s) thesis is in no way verified: the US public debt is just as high (or even slightly higher) during the so-called “ascending period before 1914” as (or than) during the so-called “decadent period after 1914”!
What about total debt? Since the state is not the only actor in the economy, we must also examine the debt of companies, finance, households and the country vis-à-vis other nations. Here, the calculations are more delicate because, while the data are well known for the British and American central banks (see previous graphs), they are less well known for all the other economic actors and, above all, they go back much further in time. Nevertheless, according to a study carried out by Deutsche Bank for a panel of 12 developed countries (USA, Canada, Japan, Australia, Germany, France, United Kingdom, Italy, Spain, Switzerland, Sweden and the Netherlands), no break can be identified before and after 1914 on the graph below. The ICC’s legend is therefore still not empirically validated!
4. The Wars before and after 1914
For the ICC (of which Link takes over the general idea without defending the whole of its argumentation) war in the 19th Century, “despite the calamities it brought with it, (…) was a moment in the progressive nature of capital”, whereas in the 20th Century, wars “are no longer moments in the expansion of the capitalist mode of production, but express the impossibility of its expansion.” (7) In reality, this “analysis” repeats the myth of the Pax Britannica from school textbooks and constitutes a real intellectual swindle full of omissions and a Eurocentric vision, as we shall expose with the help of the following six arguments:
Unfortunately for the ICC, capitalism in England does not date from the 19th Century but from the beginning of the 18th Century. (8) Why this omission? Quite simply because the 18th Century in England does not correspond at all to its ideological account: wars followed one another, all financed by an enormous public debt (Graph 3) which was also used to pay for important military expenses, as illustrated by the following graph (Graph 9). It is only after the defeat of Napoleon in 1815 that the United Kingdom established its domination until the return of tensions at the end of the 19th Century, but the whole of the previous century was dotted with long, costly and deadly wars. Therefore, to discuss only the nineteenth century in order to characterize the war in the ascending phase of capitalism is a dishonest trick that takes the readers for fools.
The ICC claims that wars during ascendant capitalism would be “limited to 2 or 3 generally bordering countries”, whereas in the 20th Century they are “wars generalized to the whole world.” Really? Let’s take the Seven Years’ War (1756-1763), it opposed two great coalitions that clashed on seas and lands in four continents: Europe, North America, Asia and Africa! (9) It killed more or less 700,000 soldiers and more than a million civilians! This is a far cry from wars “limited to 2 or 3 countries, generally bordering each other”!
Even if we consider only the 19th Century from 1815 to 1914, it takes a strong dose of blindness to defend such a “theory”. In reality, yesterday’s international scene was just as armed to the teeth as today’s is to the stars and cyberspace. Colonial wars and horrors were ruthless and the holocausts of Victorian England were as barbaric as recent genocides. While Engels already spoke of the Crimean and Civil Wars as “industries of slaughter” the ICC has the nerve to paint the nineteenth century in pink to better highlight the blackness of the twentieth century! This would be laughable if it did not concern tens of millions of corpses.
For once, let’s be kind and acknowledge that the ICC is right to underline the permanence of armed conflicts in the Third World after the peace regained in 1945 between the great powers. However, concerning the ascendancy of Capitalism, the ICC omits to tell us about the colonial wars and the massive genocides of the colonized populations. Why reason on an international scale by including the Third World in the assessment of wars in decadence and why exclude the colonial world in ascendancy in order to emphasize the peace in Europe between 1815 and 1914? Simply to make history fit its ideological discourse. The ICC would do well to educate itself by reading Mike Davis’ Late Victorian Holocausts and to stop propagating a Eurocentric vision of wars and massacres in the 19th Century that puts to shame the internationalism consubstantial to Marxism.
But there is worse, because this organization does not hesitate to pour in an abject cynicism when it presents wars in ascendancy as the price to pay for the development of capitalism, an evil for a good (“In this sense, despite the calamities it entails, war is a moment of the progressive nature of capital”), whereas wars would constitute an evil for an evil in decadence! Nothing could be further from the truth, these wars and colonial genocides have in no way developed capitalism in the world, but have created a Third World that will be deindustrialized, plundered and disarticulated at the cost of tens of millions of deaths, and whose incomes will diverge more and more from those of the developed countries until the current globalization (Graph 1)!
But it is not only on the level of facts that the ICC displays its duplicity, it is just as edifying on the theoretical level when it claims that wars in the twentieth century “ceased to be ‘national’ as in the nineteenth century and became imperialist”?! And weren’t all the colonial wars during the 19th Century imperialist? And wasn’t the carving up of the world between the great powers so imperialist that it took several international conferences between the sharks of the time (including the one in Berlin in 1884-85 for the division of Africa) to ease the tensions that risked breaking out into open war at any moment? All this is distressing and shames the Communist Left.
Unfortunately, we cannot here develop a history of the nature and place of war in the evolution of capitalism, but what we have already said about it shows that it has nothing to do with a so-called cleavage between before and after 1914.
5. Military Spending before and after 1914
Military expenditure is also used to try to validate the thesis that capitalism entered into decadence in 1914, with two arguments:
a) This expenditure would be typical of the 20th Century, whereas it would have been low before 1914; moreover, it would only increase today.
b) Military production would be unproductive for global capital and, in this sense, would participate in the slowing down and wasting of productive forces that are characteristic of the decadence of a mode of production.
Let us examine these two theses.
It is true that military expenditure is generally higher after than before the First World War, but this phenomenon is more related to the increasing complexity of armaments and this divide is not valid for all countries, as we have seen for the United Kingdom (Graph 3), a country which was nevertheless a leader in the 18th and 19th Centuries! As for current military expenditure, it has only decreased in relation to the increase in GDP since the 1950s, as shown in the following graph, both at world level and for the USA, which accounts for half of it:
What about the unproductive character of military production and thus its contribution to the slowing down of the growth of the productive forces characteristic of the decadence of a mode of production – and of capitalism since 1914, according to the ICC?
For the latter, if armaments are sometimes profitable for a particular country (in the case where one country sells its military production to another, for example), they are nevertheless unproductive at the level of global capital because they are not reused in the production cycle in the same way as other means of production or consumption: either the armaments are used and destroy productive forces, or they are not used and rust in sheds. In other words, the increase in military expenditure would constitute a brake on the development of the productive forces in the twentieth century: the growing weight of unproductive costs would slow down economic growth. Let us try to verify these assertions.
First, let us note that the ICC is not consistent with its own theory. Indeed, it itself stresses that its reasoning is only valid at the level of global capital, not of a particular national capital, and yet, when it tries to illustrate its theory, it relies on national capitals in particular! Thus, it claims that the better economic performance of Japan and Germany after 1945 can be explained by their demilitarization and low military expenditure, and that the lower economic growth of the USA, France and the UK can be explained by the excessive weight of this type of expenditure. However, according to its theory, exactly the opposite should be the case ! In fact, the USA, France and the UK export a large part of their arms production … which Germany and Japan are obliged to pay a high price for. Arms production should therefore be profitable for the first three countries and unfavorable for the next two! Understand who can!
But again, empirically, the correlation of the ICC is only true for Japan, which had low military expenditure and better overall economic growth after the Second World War, relative to its GDP. However, the opposite is true for Taiwan and South Korea, which have incurred enormous military expenditure while experiencing spectacular economic growth, as the following two graphs (Graphs 11 and 12) show. Moreover, how consistent is today’s ICC when it simultaneously states that China is spending heavily on the military while experiencing remarkable growth? In other words, there is no correlation between the weight of military spending and economic growth, as the ICC claims… but, as usual, without ever demonstrating it.
Next page: 4. What is the Horizon for Estimating
the Obsolescence of Capitalism?
1 “It is my view therefore that the changes that took place at the start of the 20th Century were about the completion of capitalism’s historic tasks of creating the world market and the domination of the capitalism class.” (Link)
2 These countries are: Cuba, Vietnam, Cambodia, Laos, North Korea, South Yemen, Syria, Iraq, Afghanistan, Egypt, Algeria, Libya, Somalia, Mali, Guinea, Ethiopia, Mozambique, Angola, Congo, Nicaragua.
3 One could very well argue that this political implosion within the former Eastern bloc is more the consequence of Perestroika than of the ‘rigidity’ of Stalinism. And for good reason, the choice in these three Asian countries to privilege growth through economic reforms, rather than political reforms as in the Eastern countries, will allow them to “buy the adhesion of the population” and stabilize their political regimes, whereas the loosening of the political stranglehold in the societies of the Soviet glacis, without bringing them a solution in terms of growth, will increase their instability. Ironically, the ICC – which claims to be Marxist – has not even been able to see that by emphasizing economic over political reform, the Chinese approach is more “Marxist” than Gorbachev’s Soviet approach!
4 Cf.: “…the emergence of state capitalism which ended the domination of the private capitalists of the 19th Century and introduced a new phase of economic and social control over the economy and classes in society…” (Link).
5 See Wikipedia: Employment record book.
6 Original title: L’évolution du capitalisme et la nouvelle perspective. Marco, Internationalisme n° 46, 1952.
7 International Review n°23 (1980), The proletarian struggle under decadence. [Extracts in Text Box no.1]
8 [A brief summary of the industrial revolution in 18th Century England can be read in Text Box no.2]
9 Great Britain and its allies (including Prussia, Portugal and the Iroquois Confederacy), on the one hand, opposed France allied with Austria, Spain, the Algonquian tribes, etc.