6. What are the Real Changes in 1914?
The diagnosis that the obsolescence of capitalism began at the time of the First World War constituted the most relevant framework for understanding the world until the Second World War. However, the subsequent evolution of capitalism has progressively invalidated it. It is therefore necessary to rethink it by removing the distorting glasses of the ‘ascendant pre-1914’ and the ‘decadent post-1914’. However, this does not detract from the pivotal role of this period in the evolution of capitalism, but we need to understand this role in another context. This is what Link asks us to expose: “I note that C.Mcl. accepts this was a period of significant change but I have not seen an analysis of this nor of what period we have seen during the 20th Century and would be interested to hear this”. As this question is very broad, as we have already dealt with it in other works and as we will develop it in detail in another contribution, we will be brief and affirmative.
6.1 A Capitalism at the Rhythm of its Productive Orders
As Marx wrote in the first pages of the Communist Manifesto: “The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society.” (1) Indeed, from the daily wage by the job to the monthly wage indexed on prices, passing by the piecework wage, the wage-earning system – this fundamental social relation of capitalism – has been considerably transformed over time. Therefore, contrary to a widespread opinion, capitalism does not function identically throughout its existence. Certainly, its objective is always the same – to make enough profit – but the way in which it is achieved evolves greatly over time and across the world. Thus, we can identify four major successive productive orders with significantly different logics (savage, colonial, conventional and neoliberal capitalism), to which we must add the Stalinist regimes of Russian and Chinese inspiration. We began to present them in No. 5 of our journal Controversies (2), while relying on a more general analysis covering 250 years of the history of capitalism. (3) We therefore refer the reader to these two works for more details. However, we present here, very briefly and in an affirmative way, the main features for the period we are dealing with, while adding certain elements that will be the subject of further elaboration in the near future.
6.2 The Impasse of Colonial Capitalism:
The ‘Thirty Disastrous Years’ (1914 – 1945)
The First World War signaled the exhaustion of the colonial production order that had been deployed with force during the last third of the 19th Century and the beginning of the 20th Century. Although Germany became the leading economic power on the continent at the beginning of the 20th Century, it had very few colonies, most of which were taken over by England and France. However, the German economy had an imperative need to export its production, as the following graph clearly indicates:
Germany therefore began building a merchant and military fleet, rearming and opening hostilities in an attempt to re-share the markets to its advantage. The price of its defeat was immense. In addition to the fact that the flame of the revolution almost overthrew its power, this country lost one fifth of its territory, one quarter of its agricultural production, one third of its coal mines, 80% of its iron production and the totality of its colonies and its merchant fleet, not to mention all the war reparations demanded by the victors! The outbreak of the Second World War is therefore inevitable, but not because the world would have entered into an infernal and decadent cycle of “Wars and Revolutions” as postulated by the Communist International or of “Crisis-War-Reconstruction-…” as stated by the ICC, (4) but simply as the product of the imperialist stakes reached by the productive order of colonial capitalism.
6.3 The Rise of Working-Class Wage Earners in a Polarized Society
The era of the First World War was the culmination of a society that went from being agricultural to being predominantly wage-earning in the developed countries, with one third of the active population employed in large industrial enterprises such as the metallurgy, steel, shipbuilding and coal-mining industries (Graph 31). Moreover, these employees organized themselves into increasingly strong unions (Graph 35) and became politicized under the influence of a second, Marxist international, despite the reformist disease that was eating away at it. Finally, society was perceived as very iniquitous because it was strongly polarized between a tiny minority of very rich people and an immense majority of indigents (Graphs 33, 34 and 37). Such a configuration, so favorable to the emergence of a socialist revolution as described by Marx, will not be encountered thereafter. From this point of view, in the dozen or so developed countries, capitalism had reached the maturity to move to socialism. However, this is only valid for the developed countries because, if colonial capitalism controls the whole planet, it is still very far from having spread! Confiscating the industrial revolution for themselves alone, the colonial metropolises will destroy any possibility of emergence elsewhere in the world. The geo-economic bipolarization of the world reached a peak during the interwar period. (5)
6.4 The Revolutionary Wave in 1917 – 1923
It was in this context that a great revolutionary wave broke out at the end of the war (Graph 32), that is to say, a context in which wage earners were numerous, concentrated, and living in a society with glaring injustices, injustices exacerbated by extreme misery and the atrocities of the war. Unfortunately, these attempts to seize power by wage earners failed because of: (a) the betrayal of its trade union and social-democratic organizations, which sealed the sacred union with the bourgeoisie; (b) the conditions of the military defeat, which did not favor the generalization of the revolution to the whole of Europe and the world; and (c) the immaturity of the young communist movement, which in this context emerged with difficulty. Nevertheless, the multiplicity of social revolts and their radical nature made the bourgeoisie aware of the ‘proletarian danger’.
6.5 The Ideological Control of the Working Class
It is to face this danger that the bourgeoisie will buy social peace:
By granting a whole series of economic and political reforms that it had always refused to grant: universal suffrage, wage increases and a significant reduction in working hours (Graph 37), the granting of an indirect wage (Graph 36), etc.
By institutionalizing the trade unions and the social-democratic parties in its political apparatus (and later the Stalinist parties), and by creating new ones in order to multiply the divisions, the bourgeoisie gives itself the means to control its class enemy. Hated, fought or corrupted in the 19th Century, the unions are given the role of negotiator of the price and conditions of labor power and become the privileged social interlocutors of the social landscape during the 20th Century (Graph 35).
By creating an important middle class (Graph 34), the bourgeoisie stabilizes its political and social power: what the upper bourgeoisie “loses” in wealth (Graph 33), it will gain in political stability.
All these concessions are financed by a strong increase and progressiveness of taxation (of income, wealth and inheritance) which strongly reduces the share of the upper bourgeoisie in the total wealth (Graph 33) to the benefit of the creation of a large middle class (Graph 34). Thus, the share of the top 1% is shrinking: from 70% to 17% in the United Kingdom and from 40% to 20% in the USA… (Graph 33).
The purchase of this social peace by the bourgeoisie will have a double counterpart:
The denial of revolutionary objectives on the part of the former organizations of the workers’ movement.
The institutionalization of workers’ solidarity, that is, the institutionalization of all the instruments of social solidarity that the proletariat had worked hard to set up in its struggles and over which it had control (strike funds, solidarity funds, unemployment funds, etc.). In other words, by transferring to the state the instruments of workers’ solidarity, the dominant ensure: on the one hand, that the state appears as a “social state” representing the whole of society and less as an instrument of domination, and, on the other hand, as these social concessions represent large financial amounts, the dominant ensure that they are in the hands of the state and managed by it rather than in the hands of the dominated. Thus, by integrating the organizations and instruments of wage-earner solidarity into the state, the overthrow of the latter loses legitimacy.
6.6 Real Reforms and Decrease of the Exploitation Rate
This wage-dominated capitalism, a good third of which was concentrated in large industrial enterprises such as car manufacturing, ports and shipyards, metallurgy, steel and coal mining, etc., lasted until the 1970s (Graph 31). This led to a high level of social conflict, which is well illustrated in Graph 32, with the exception of the low point at the end of the 1920s and 1930s, which was caused by the defeat of the revolutionary wave, the establishment of the iron curtain of fascism and Stalinism, and the rise in unemployment following the 1929 crisis.
This pressure from wage earners – de facto or potential – forces the bourgeoisie:
to grant concessions to avoid their revolt (Graphs 36, 37 and 38);
to effectively manage them to avoid a repeat of the 1917–23 revolutionary wave (Graph 35);
to create a vast middle class playing a buffer role to stabilize the social, political and electoral body (Graph 34).
It is this context of strong social pressure from the end of World War I to the 1970s that explains the concessions granted by the dominant class to wage earners: real wage increases far more considerable than the timid increases of the end of the 19th Century (Graph 37); significant reductions in working hours, far more important than the timid decreases in the 19th Century (Graph 37); the granting of numerous benefits that did not exist in the 19th Century: unemployment, pensions, health care… (Graph 36). All this leads to a fall in the rate of surplus value from 1917 to the mid-1970s and to a “less unjust” society (Graphs 20, 33, 36, 37 and 38).
In other words, contrary to what Link and the ICC (6) believe, the rate of exploitation did not increase after 1914 but decreased (Graph 20), because the change at the beginning of the 20th Century was above all social and political. This change was momentarily masked by the impasse of colonial capitalism in Europe during the Thirty Disastrous Years, which reinforced the conviction that capitalism had indeed entered into decadence. Thus, at the beginning of the 1950s, almost all Marxists believed that a new economic crisis and a Third World War would break out: “The disappearance of extra-capitalist markets leads to a permanent crisis of capitalism (…) …it can no longer expand its production. This is a striking confirmation of Rosa Luxemburg’s theory: the shrinking of extra-capitalist markets leads to a saturation of the capitalist market itself. (…) In fact, the colonies have ceased to represent an extra-capitalist market for the metropolis, they have become new capitalist countries. They therefore lose their character as outlets. (…) the prospect of war … is coming to an end. We live in a state of imminent war…” (7) Yet three to four decades of strong growth in the Triad will unfold! This error of perspective will be reiterated by these same Marxists thirty years later by stating the inevitability of the Third World War for the bourgeoisie: “…the bourgeoisie has discovered in a muffled but painful way that there is no solution to the crisis. Recognizing the impasse, there is nothing left but a leap in the dark. And for the bourgeoisie a leap in the dark is war. (…) Today with the total failure of the economy, the bourgeoisie is slowly realizing its true situation and is acting on it.” (8) … while the world was embarking on three to four decades of very strong growth in the emerging countries!
From then on, what went bankrupt in 1914 was not capitalism entering into historical decadence, but the productive order of colonial capitalism, a productive order that would only really be overcome after the Second World War with the widespread adoption of a conventioned capitalism in all developed countries. If the Thirty Disastrous Years in Europe (1914-1945) bring a lot of water to the mill of the “theory of decadence in 1914”, it will only be momentary because more than three quarters of a century of development of the productive forces thereafter (1945-2022) forces us to reconsider the question and to consider the Thirty Disastrous Years as a mire of Eurasian capitalism in the contradictions of the productive order of colonial capitalism, contradictions that are only overcome after the 2nd World War.
6.7 The Advent of a Conventioned Capitalism
The deployment of a conventioned capitalism in the United States with the New Deal, in Europe and in Japan after the Second World War, did not make imperialist stakes and the geopolitical bipolarization of the planet disappear, on the contrary, but these stakes are now part of a logic that is very different from colonial capitalism. So, these stakes are no longer the sharing of an imperial cake for access to colonial markets but for access to raw materials and geostrategic zones within the framework of the Cold War. In fact, conventioned capitalism functions according to a self-centered logic where, for the first time in the history of capitalism, real wages increase in parallel with productivity gains (See Graph 40), and sometimes even more rapidly, which explains the decrease in the rate of surplus value. Henceforth, insofar as demand increases in parallel with supply, globally and in the mean term, capitalism no longer has the same imperative need to export because it develops above all locally. This is well illustrated by Graph 2, where we see that the share of exports on the world market in the total wealth produced was ridiculously low during the whole of the Glorious Thirty Years: 6%, i.e. barely higher than during the interwar period, and even lower than during the industrial revolution!
Therefore, to postulate in 1978-1979 that all the economic conditions for the outbreak of a 3rd World War were met because the markets were saturated and all the recovery policies had failed, as stated in the “theory” of the “Historical Course” of the ICC, was completely ridiculous! In fact, for this organization, world capital and each nation were on the starting blocks to fight and steal the markets of its neighbors … but it is neither “a war for the markets”, nor “the crisis of saturation of the markets” that prevented the world exports from tripling after 1975 (Graph 2)! it is simply the continuation of the course of capital accumulation within the framework of the functioning of its neoliberal productive order.
6.8 Neo-liberal Globalization and the Emerging Countries
Faced with a dramatic fall in its productivity gains, its rate of accumulation, its growth and its profit rate during the 1970s (see Graph 39), capitalism opted for a recovery of the latter through a compression of the wage share (Graph 19) according to Helmut Schmidt’s famous formula: “Today’s profits make tomorrow’s investments and the jobs of the day after tomorrow…”, the flagship slogan of neo-liberal macroeconomics or trickle-down theory.
The result was a return to the traditional functioning of capitalism, where productivity gains increased more rapidly than real wages (Graph 40), which explains the explosion of international trade after the end of the conventioned capitalism of the Thirty Glorious Years (Graph 2).
The advent of this neoliberal productive order, which is terribly regressive for wage earners in developed countries, did not fall from the sky. It was made possible by deindustrialization, which reduced the weight of the wage-earners within the working class concentrated in manufacturing industries (Graph 31), and by the fall in social conflicts, which decreased by a factor of ten from the middle of the 1970s onward (Graph 32), consecutive to the rise in unemployment since 1974 (Graph 41). This rise in unemployment induced a paralysis of the social body and a massive retreat of the class struggle. It is this decline in social pressure that allows the bourgeoisie to establish this new productive order. This order establishes a race for the lowest wage and thus drives globalization through relocation and the export of capital. Globalization is thus the consequence of the logics introduced by the neoliberal productive order and not the primary cause of wage austerity, even if, in a second stage, this globalization accentuates the neoliberal regressive policy for wage earners.
All these data in the times of retreat of the class struggle underline the accuracy of Link’s criticism of those who trace it to the consequences of the implosion of the Soviet bloc in 1989. This thesis defended by the ICC is formally contradicted by the facts which show us that the decline of the class struggle dates back to some fifteen years earlier. In 1989, the index of social conflictuality in the developed countries was already at its lowest, down by a factor of ten (Graph 32)!
Next page: 7. Conclusion
1 Manifesto of the Communist Party (1848) Ch. I: Bourgeois and Proletarians. English by S. Moore and F. Engels, 1888.
2 Controverses No. 5, May 2018. Its integral translation can be found at ‘A Free Retriever’s Digest’: The Dilemma’s of Capitalism apropos of ‘Trump’ and ‘Brexit’ – Crisis – Conflicts – Struggles – Populism (November 22, 2018).
3 Capitalisme & Crises Économiques: 250 ans de capitalisme – §1 à §3. Idem: 250 years of modern Capitalism: A reconstruction of its dynamics (translation completed in November 2020).
4 A “theory” that this organization abandoned a short time ago, so anachronistic had it become!
5 For more details we refer the reader to the aforementioned work on 250 years of modern capitalism (see footnote 3) and to the very good doctoral thesis of Jean Batou (1990) on the forgotten industrializations in what will later become the Third World: Egypt, Paraguay, India… The latter thesis has remained unpublished but has been well summarized by Odile Castel in her work ‘L’histoire des faits économiques’ (Sirey, 1998).
6 «This is the reality of the whole of the 20th Century where capitalism has intensified the exploitation of the working class in an incredible manner: ”It is necessary to note that, despite a certain fall in relation to the last century, the present rate of profit has remained at around 10% – a level that is essentially due to the formidable increase in the rate of exploitation suffered by the workers: for the same working day of 10 hours; if the workers of the 19th Century worked 5 hours for himself and 5 for the capitalist (figures frequently reported by Marx) today the worker works 1 hour for himself and 9 for the boss.” (The crisis, are we heading for a new 1929? , which appeared in Révolution Internationale old series nrs. 6 and 7).» (Correspondence on Crisis Theories and Decadence, Part 1: Our reply, Adalen, in: International Review no. 105, 2nd quarter 2001).
7 Internationalisme, organ of the Gauche Communiste de France, no. 46 (Summer 1952), Marco: L’évolution du capitalisme et la nouvelle perspective.
8 International Review no. 20, 1st quarter 1980, The 80s: years of truth.