How Did Capitalists Get So Rich?: On the Marriage Between Capitalism and Government

By James Leach

It is difficult to know what to say to the smug self-satisfaction of the business class who gaze upon the enormous wealth of their country, and then pat their back for the capitalist utopia they have built. In critical analyses of capitalism, considerable weight is put on examining the contradictions in the modes of exchange, the formation of crises, and the tension between labour and capital. But I want to address how capitalism developed, and how the considerable wealth of developed nations was produced, as well as how it became so acutely concentrated within a few pockets. As Marx asks in Wages, Prices and Profit, "how does this strange phenomenon arise, that we find on the market a set of buyers, possessed of land, machinery, raw material, and the means of subsistence… and on the other hand, a set of sellers who have nothing to sell except their labouring power, their working arms and brains?"

"Primitive Accumulation": Enclosures and Erasing the Commons

There is no concrete date which we can mark as the first day of capitalism, or the last day of feudalism, since its development was somewhat gradual. The results of the English Revolution in the seventeenth century, for example, saw movements away from feudal society and towards capitalist society, but it was not until two centuries later, during the Industrial Revolution, where capitalism truly flourished. However, a significant policy which marked a shift towards the dominance of private property is the agricultural enclosures. This involved the fencing of farmland into private property, mostly within the hands of large, propertied landowners. Before this, agricultural labourers either worked on common land within their village, or they were peasants working for a local lord. A portion of the labourer's produce would be seized by the lord as a tax and the labourers would then sell what was left in local markets. Enclosures saw the new dominance of wage labour, the separation of agricultural workers between themselves and their means of production, the formation of the first labour market, and of the first proletariat.

Before enclosures, common land was able to significantly rival wage labour. Jane Humphries essay Enclosures, Common Rights, and Women, published in the Journal of Economic History, explores the results of enclosures, as well as the significance of common land. Humphries finds that the family possession of a single cow on common land could "remain significant compared with landowner's wages" and on an annual basis "the comparison would probably be even more favourable to cowkeeping." Keeping cows communally also had other benefits. The by-product of rearing cows was goods such as skim-milk, which provided a 'gratifying addition to the monotonous diet of the adult farm workers', and was crucial to the healthy development of the labourer's children. However, after enclosures, due to high rents and resistance from farmers, common cowkeeping virtually vanished, and labourers could not often afford to buy milk.

Now that the efficiency of "communing" has been briefly established, to what extent did this communal lifestyle exist? Peter Linebaugh's exceptional text Stop, Thief! The Commons, Enclosures and Resistance is instrumental in answering these questions. Linebaugh documents the work of the seventeenth century statistician Gregory King, who estimated that were was "twenty million acres and pasture, meadow, forest, heath, moor, mountain, and barren land in a country of thirty-seven million acres', Linebaugh continues to say that 'even if common rights were exercised in only half of these, it means that in 1688 one quarter of the total area of England and Wales was common land.' Such an enormous measure of common land would have been extremely valuable to agricultural workers. Naturally, enclosures reversed this. 'Between 1725 and 1825 nearly four thousand enclosure acts appropriated more than six million areas of land… to the politically dominant land owners.' It does not take a genius to work out the effects on the newly formed working class. Reliance on Poor Relief went up, there was a poverty crisis in the eighteenth century, and as Greek economist Yanis Varoufakis simply puts: 'More than 70 percent of the peasants were thrown out of their houses and off their ancestral lands. It was devastating, brutal, cruel and… highly effective.' E.P Thompson called enclosures a plain case of class robbery.

It is difficult, however, to drill into the minds of a global population that they do not own much besides their labour power. The Indonesian novelist Promoedya Ananta Toer reported on the response from native Indonesians to enclosures in his memoirs: 'The native people had no word for "fence"- the concept was completely foreign to their culture. They didn't recognise such manmade limitations on land-use rights.' How could such a disaster for the global population not be overthrown immediately? Unfortunately, the rich and powerful have 'experts in legitimation', to use Antonio Gramsci's words. Garret Hardin's text The Tragedy of the Commons sought to justify enclosures. Hardin's thesis appears rational. He suggests that the commoners, in their simultaneous desire to profit as much as possible from the land, and the un-fettered access to land, would bring 'ruin to all.' Hardin's misanthropy is de-bunked with plain historical fact by Linebaugh: '… the commons is always governed… [an] officer elected by the commoners will impound that cow, or will fine that greedy shepherd who puts more than his share onto the commons.'

Imperialism

The consequences of imperialism are, and always have been, deeply lodged within the cognitive dissonance of the body politic. For example, it takes the most basic logic to recognise that capitalism developed alongside Transatlantic slavery, and it takes little extra effort to make the connection between them, yet this line of reasoning is often left un-pursued.

Pre- Civil War America is often seen as split between the free-market north and the plantation complex of the south. They were, however, inextricably linked. Forbes, a popular and prestigious business magazine, ran an interesting article on the subject, in relation to Sven Beckert's book Slavery's Capitalism: A New History of American Economic Development. It turns out, in contrast to popular fantasy, that the capitalists of the American north were crucial in keeping slavery alive, and, of course, it was crucial to their development. The slave economy effected the north with 'plenty of merchants in New York City, Boston and elsewhere helping to organize the trade of slave-grown agricultural commodities…' The slave production of cotton 'offered a reason for entrepreneurs and investors to build manufactories… thereby connecting… Industrial Revolution to the advancing plantation frontier…' The latter point is particularly poignant. The Industrial Revolution ushered capitalism into a golden age where it could stand with two feet on a fertile ground of free trade accompanied with low tariffs (a subject which I will later address). The swollen shadow which shades the conscience of capitalism, of course, is the fact that it required the possession of human beings to help stimulate its progression. This can not be understated, since, for the first six decades of the 19th Century, raw cotton amounted to more than half of the nation's exports.

It would be tough to go through the entire history of modern imperialism to weigh its effects and thus measure the arms which propped up capitalist development, because there are simply too many cases. But it is worth addressing the very land that is now the 'United States of America'. It goes without saying that before European colonists arrived, there was a Native population who organised themselves locally and communally. It also goes without saying that this way of life has been mostly exterminated with state violence and the commodification of land. In 1845, California was part of Mexico. How did this change? Imperialism. Back in those days, the mainstream press could be more honest about the practices of the state. An article by the Washington Union said: 'Let the measure of annexation be accomplished… For who can arrest the torrent that will pour onward to the Wes? The road to California will be open to us.' In the 19th Century, the establishment did not have to wax lyrical with tales of 'democracy'. There is surely no questioning that such actions are inhuman; they create 'the wretched of the earth', to use Franz Fanon's turn of phrase. But what is the motive? It is rare for humans to be motivated by sheer violence. There must be a reward to legitimize violence. In the case of the United States' invasion of Mexico in 1847, the reward was the rich natural resources of California. Historian Howard Zinn, in his seminal text A People's History of the United States, quotes the Illinois State Register in 1846:

Shall this garden of beauty be suffered to lie dormant in its wild and useless luxuriance?... myriads of enterprising Americans would flock to its riches and inviting prairie's; the hum of Anglo-American industry would be heard in its valleys; cities would rise upon its plains and sea-coast, and the resources and wealth of the nation be increased in an incalculable degree.

This quote goes some way to explain how much the expansionist ethic of the American government meant to slave-owning economy of the south.

We need not go as far back as the 19th Century to look for examples of state force providing for the economy of a nation state. War has always been profitable. The neo-imperial oil wars of the 20 th and 21st Century have meant that the U.S and Britain have had cheap access to oil. Given that state force has brought this about, it has nothing to do with free trade.

Anything but Free Trade, In the Name of Capitalism

If we only pay attention to the dictates of Milton Friedman, Friedrich Hayek and other free-market enthusiasts, we can be easily fooled that (with a few nuances), the un-rivalled wealth of the modern superpowers is owed to its policies of free markets and trade. If we look at economic history plainly, however, we find remarkably different results. Ha- Joon- Chang's tour-de-force Kicking Away the Ladder: Development Strategy in Historical Perspective , is a good place to start in studying what policies truly led to economic development.

Chang begins by invoking Friedrich List, the 19th Century German economist who fathered the 'infant industry promotion' theory, which proposed that budding industries require state protection from competitive markets which were dominated by experienced and long-standing manufacturing countries. List, in his albeit tediously named 'The National System of Political Economy' is important. He finds that Britain was 'the first country to perfect the art of infant industry promotion' because

[the monarchies of Britain] perceived that their newly established native manufactures could never hope to succeed in free competition with the old and long-established manufactures of foreigners… Hence, they sought, by a system of restrictions, privileges, and encouragements, to transplant to their native soil the wealth, the talents, and the spirit of enterprise of foreigners.

Chang then systematically goes through the historical development of almost every highly-developed nation, starting with Britain, 'the intellectual fountain of the modern laissez-faire doctrines…' The fourteenth century monarch Edward III is known for being the Brit to first actively start developing British wool production. His tactic was to ban imports of raw wool, centralise its trade and bring in Flemish weavers (he also only worse English cloth, to set an example). Naturally, through the most anti- free trade policies possible, Britain became the dominant exporter of wool. It was a hundred years after Henry VIII's import substitution policies of 1489 that Britain decided to be competitive in a market, which consequently drove the industries of the previously dominant Low Countries into the ground.

As already stated, the Industrial Revolution formed the blueprint for un-fettered capitalism. But how was this blueprint written? Britain had 'very high tariffs on manufacturing products as late as the 1820's, some two generations after the start of its Industrial Revolution, and when it was significantly ahead of its competitor nations in technological terms.' As well as tariff protection, Britain felt that for its businesses to develop, it needed to ban the imports of superior products from the colonies, in order for its own industries to remain economically viable. In 1700, for example, Britain banned the import of Indian cotton products, leading to the decline of the Indian cotton industry. It was then totally destroyed by the 'ending of the East India Company's monopoly in international trade in 1813.' Clearly, the economic supremacy of Britain in the 19th Century was not predicated on free trade. There was, however, developing pressure from the business community for free trade, once they had acquired enough wealth from protectionist policies to be competitive in global markets. By the 1850's, considerable steps (such as the eradication of tariffs) set in motion a liberalised capitalist economy. This did not last long. 'By the 1880's, some hard-pressed British manufacturers were asking for protection.' However, the true move away from free trade occurred in 1932, when the manufacturing advantage of Germany of the USA demanded protectionism from Britain.

Conclusion

What can be seen is that there have been gigantic impediments to true laissez-faire economics. These impediments have taken numerous forms: violence, colonialism, protectionism etc. Today, the impediments are slightly different. Enormous taxpayer subsidies to the corporate sector, for example, turn free-markets from fact into fantasy. The state ghosted every step capitalism took; their relationship is fascinating. Capitalism and the state are the main actors in a Sophoclean tragedy in which capitalism cannot function with or without the state. On the one hand, capitalism has considerably relied on the state for the conditions of its development, may that be enclosures, access to the captive markets of colonies, tariff protection, or plain violence to silence the rebelling masses. On the other hand, centralised government can be a leech on the efficiency of business. It has the cheek to demand

for taxes, and occasionally it represents 'we the people', and the interests of 'the people' are at odds with the interests of the capitalists. The government is often accused of being a threat to the freedom of the capitalist class, but history has shown that the latter needs the former to protect its interests. It is within this tragic comedy that we have lived since the origin of capitalism, and that we continue to live in today.

Calibrating the Capitalist State in the Neoliberal Era: Equilibrium, Superstructure, and the Pull Towards a Corporate-Fascistic Model

By Colin Jenkins

The following is Part one of a multi-part series, "Applying Poulantzas," which analyzes the work of Greek Marxist political sociologist, Nicos Poulantzas, and applies it to the unique political and economic structures found under neoliberalism and post-industrial capitalism.

Since the capitalist formation of relations between what is perceived as the 'public sector' and the 'private sector,' traditional nation-states and their governing bodies have played a major role as facilitators of the economic system at-large. This became a necessary supplemental component as localized economies, which were dominated by agrarian/plantation life, gave way to industrialization and subsequent mass migration into urban centers, thus introducing new industrial economies based in the manufacturing/production process. With the advent of wage labor came predictable outcomes of capital accumulation and a perpetually increasing polarization between the owning class and working class. And with this growing inequality came the notions of worker collectivization and unionism which, absent any equalizing measures taken by the State, were the only sources of hope for workers who quickly found themselves, their livelihood, and their family's well-being at the mercy of a rapidly fluctuating and exploitative labor market. Work was often hard to come by and, when it was available, the wages "earned" were barely enough to cover basic necessities like food, clothing and shelter - provisions which had long been commodified to create expanding avenues of profit for the owning class.

The inherent instabilities created by this economic system — a system that exists for the sole purpose of creating or maintaining individual/personal wealth (as opposed to preserving collective/societal wealth) — require components that act solely as stabilizers. Despite its shunning, the existence of society — or "the aggregate of people living together in a more or less ordered community" — not only remains, but actually serves as the casing for which this system must rely on, or more aptly, capitalize from within. And because of this reliance, the instabilities and contradictions that simultaneously represent natural byproducts and threats become common growths as the result of a counterintuitive and inhumane arrangement, and must be kept in check through a delicate (though not necessarily intricate) balancing act.

In order to "balance" competing interests - in this case the "dominant" and "dominated" classes - the political sphere, a major element of the State apparatus, assumes a vital role. As such, Nicos Poulantzas, building upon earlier theoretical contributions from the likes of Antonio Gramsci, details the dynamic process whereas the state serves as a facilitator to the unstable equilibrium that is produced by the internally antagonistic capitalist system. Ultimately, through this act of facilitating, the state (by deploying its political power) negotiates a perpetual series of "compromises" in the form of economic "sacrifices" which are accepted as a necessity by the dominant classes; and which are precisely aimed at creating a limited equilibrium that ensures a minimal degree of social stability (maintained by the political superstructure) atop the inherently asymmetrical economic base.

Poulantzas explains:

"…political power is thus apparently founded on an unstable equilibrium of compromise. These terms should be understood as follows: 1) Compromise: in the sense that this power corresponds to a hegemonic class domination and can take into account the economic interests of certain dominated classes even where those could be contrary to the short-term economic interests of the dominant classes, without this affecting the configuration of political interests; 2) Equilibrium: in the sense that while these economic 'sacrifices' are real and so provide the ground for an equilibrium, they do not as such challenge the political power which sets precise limits to this equilibrium; and 3) Unstable: in the sense that these limits of the equilibrium are set by the political conjuncture." [1]

Gramsci tells us, "The life of the state is conceived of as a continuous process of formation and superseding of unstable equilibria… between the interests of the fundamental group and those of the subordinate groups - equilibria in which the interests of the dominant group prevail, but only up to a certain point, i.e. stopping short of narrowly corporate interest."[2] In other words, as the capitalist system naturally bends toward a corporate-fascistic state of being through the simultaneous developments of capital accumulation and mass alienation - thus forming structures of domination that extend from the economic base and into the political, social, and cultural realms - there develops a need to stabilize the fragile nature (in the sense that such imbalance is a constant threat to the societal structure at-large) of this system.

The need to maintain this equilibrium exists as long as a wholly functioning society is requisite for capitalist expansion - or, as long as worker-consumers represent viable targets of exploitation. In Political Powers and Social Classes, Poulantzas identifies certain measures that represent embedded concessions on the part of the owning class, carried out by the state apparatus through a systematic process that is relatively fluid and effortless (though, as Poulantzas points out, competing interests exist even within this elite bureaucracy). In recognizing the function of the state and its role atop the capitalist formation of relations, Poulantzas explains, "The notion of the general interest of the 'people', an ideological notion covering an institutional operation of the capitalist state, expresses a real fact: namely that this state, by its very structure, gives to the economic interests of certain dominated classes guarantees which may even be contrary to the short-term economic interests of the dominant classes, but which are compatible with their political interests and their hegemonic domination."[3]

Political systems based on grand "democratic" narratives like "representative democracy" and "republicanism," as well as Rousseau's "social contract," are ideal enablers for this societal arrangement. This is the very reason why liberalism and the modern adaptation of the "liberal politician" play such a crucial role in their opposition to the proto-fascist nature of "conservatism." Their superficially adversarial relationship represents the ultimate stabilizer as its reach is limited to the confines of the political superstructure. And, because it deals primarily with "social issues" (including passive measures of economic redistribution), it is ultimately relegated to directing the aforementioned "compromises" of the dominant class. It does not and can not transform the economic base (the capitalist hierarchy) as these compromises, while representing "real economic sacrifices" that are necessary to provide the ground for equilibrium, "do not as such challenge the political power which sets precise limits to this equilibrium."

"Democratic" systems which involve periodic elections of "representatives" to "public" office accomplish two important tasks in this regard. First, they create a façade of civil empowerment - a form of political compromise which gives the dominated classes the appearance of choice vis-a-vis universal suffrage. Second, they create a political sphere that, while completely fused with the long-term interests of the dominant classes (through its sole purpose as a facilitator), operates as a separate entity existing outside the economic base - a separation that is, as Poulantzas explains, both an exclusive and necessary element to the capitalist system. It reminds us of John Dewey's claim that, "As long as politics is the shadow cast on society by big business, the attenuation of the shadow will not change the substance." In the US, the two-party political system has proven extremely effective in this regard. Aside from differences on social issues like abortion and gay marriage, as well as socioeconomic issues like unemployment insurance and public assistance, both parties ultimately embrace capitalist/corporatist interests in that they both serve as facilitators for the dominant classes: The Republican Party in its role as forerunner, pushing the limits of the capitalist model to the brink of fascism; and the Democratic Party in its role as governor, providing intermittent degrees of slack and pull against this inevitable move towards a "corporate-fascistic state of being."

The distinction made between 'the political' and 'the economic' is important to consider, though these boundaries have seemingly blurred in the age of neoliberalism and the intensification of the merger between "public" and "private." And while Poulantzas insists this separation is inherent and theoretically unbreakable, he (along with Gramsci) may have underestimated the extent to which compromises may be reined in without destabilizing the equilibrium beyond repair. During the neoliberal era, there have been many developments which have pushed this long-standing balance to the verge of "narrow corporatism" and beyond, including factors related to technology and government surviellance, growth in the banking industry, the development of corporate media and intricate propaganda, financialization's role in supplementing monopoly capitalism, and the maturation of the international economic system and all of its mediating components, to name a few; but that discussion is for another place and time.

For the purpose of this analysis, we are focused on national electoral politics and political parties, and the specific role they play in maintaining the status quo - in this case, not only the capitalist hierarchy, but also the stage of monopoly capitalism which has come to fruition over the past few decades. The distinction between base and superstructure allows us to see how the political apparatus, through the actions of political parties, exists solely as a tool for the "power bloc." Furthermore, it allows us to divert from reductionist theories which attempt to highlight a singular cause, and move towards a more nuanced critique of the capitalist state, especially in the "pluralist" form that we see in the US and other "western democracies."

"As far as the terrain of political domination is concerned, this is also occupied not by one single class or class fraction, but by several dominant classes and fractions," explains Poulantzas. "These classes and fractions form a specific alliance on this terrain, the power bloc, generally functioning under the leadership of one of the dominant classes or fractions, the hegemonic class or fraction."[4] In this instance, even with a government that includes separate branches - legislative, executive, and judicial - and represents several interests, as in Robert A. Dahl's "polyarchy," the state still exists and operates on the foundation of a capitalist system that creates its own hierarchy. The members of this "political terrain" are not necessarily synchronized with one another when it comes to geography, special interests, localized interests, and priorities when maintaining the equilibrium, and they don't have to be. Despite these various pieces which make up the power bloc, in its own formation the base forces the political "superstructure" to adjust accordingly. This is why modern practices like "blanket financing" of political campaigns, which consists of corporations or private interests providing monetary support to opposing candidates and political parties in a particular election, have become so prevalent. Politicians, despite what their personal beliefs or aspirations may be, are put into power by the very hierarchy that depends on the economic base. Their positions of power cater to and are reliant on not only the power bloc which put them there, but the maintenance of the very system that allows them to stay there. Therefore, while they may possess some leeway in terms of pushing superficial agendas, their ability to do so is granted by the hierarchy extending from the economic base. Ultimately, in order to maintain its own existence, the political apparatus must protect the base - and is essentially designed (or is ever-evolving) to do so despite its "relative autonomy" which is "inscribed in the very structure of the capitalist state."

According to Poulantzas, by recognizing both the autonomy of the "state machine" as well as the existence of a "power bloc" which mimics society's pluralist form, it will "enable us to establish theoretically, and to examine concretely, the way in which the relative autonomy of the capitalist state develops and functions with respect to the particular economic-corporate interests of this or that fraction of the power bloc, in such a way that the state always guards the general political interests of this bloc - which certainly does not occur merely as a result of the state's and the bureaucracy's own rationalizing will."[5] This understanding includes "firmly grasping the fact than an institution (the state) that is destined to reproduce class divisions cannot really be a monolithic, fissureless bloc, but is itself, by virtue of its very structure (the state is a relation), divided."[6] Poulantzas continues:

The various organs and branches of the state (ministries and government offices, executive and parliament, central administration and local and regional authorities, army, judiciary, etc.) reveal major contradictions among themselves, each of them frequently constituting the seat and the representative - in short, the crystallization - of this or that fraction of the power bloc, this or that specific and competing interest. In this context, the process by whereby the general political interest of the power bloc is established, and whereby the state intervenes to ensure the reproduction of the overall system, may well, at a certain level, appear chaotic and contradictory, as a 'resultant' of these inter-organ and inter-branch contradictions.[7]

This "division," and these "contradictions," were never more evident than with President Dwight Eisenhower's 1961 farewell address and sobering warning against the rising "military industrial complex," which publicly displayed a major fission within the power bloc. According to Poulantzas, this splitting is irrelevant in the capitalist scheme of things because it remains, by design, autonomous from the base; and, therefore, will naturally work itself out to accommodate that base, whether through conscious coordination or through inherent process. In the age of neoliberalism and monopoly capitalism, the state has become highly concentrated out of necessity. In this sense, C. Wright Mills' assessment rings true:

As each of these domains becomes enlarged and centralized, the consequences of its activities become greater, and its traffic with the others increases. The decisions of a handful of corporations bear upon military and political as well as upon economic developments around the world. The decisions of the military establishment rest upon and grievously affect political life as well as the very level of economic activity. The decisions made within the political domain determine economic activities and military programs. There is no longer, on the one hand, an economy, and, on the other hand, a political order containing a military establishment unimportant to politics and to money-making. There is a political economy linked, in a thousand ways, with military institutions and decisions. [8]

This intertwined political economy exists within the superstructure. It's increased centralization, coordination, and synchronization over the past half-century has undoubtedly pushed the US government to the brink of a "corporate-fascistic state of being." In this development, the equilibrium has never been more delicate and fragile. The two-party system, thriving from the pluralist nature of both the electorate and power bloc, has proven efficient in carrying out trivial "concessions" that give "the economic interests of certain dominated classes guarantees which may even be contrary to the short-term economic interests of the dominant classes, but which are compatible with their political interests and their hegemonic domination."[9] The expansion of domestic militarization and the intensification of "austerity measures" have introduced a degree of "corporate-fascistic" torque unseen before from within a mature capitalist state. How far these embedded "compromises may be reined in without destabilizing the equilibrium beyond repair" remains to be seen.

References

[1] Poulantzas, Nicos (Timothy O'Hagan translating). Political Power and Social Classes. Verso, 1975, p. 192.

[2] Gramsci, Antonio. Prison Notebooks, p. 182.

[3] Poulantzas, Political Power and Social Classes, p. 191.

[4] Poulantzas, Nicos. Classes in Contemporary Capitalism (Translated from French version by David Fernbach). Verso, 1978, p. 93.

[5] The Poulantzas Reader: Marxism, Law and the State. Verso Books: London/New York, 2008, p. 284.

[6] Ibid, p. 285.

[7] Ibid, p. 285.

[8] C. Wright Mills. The Power Elite, New Edition. Oxford University Press: 2000, p. 76.

[9] Poulantzas, Political Power and Social Classes, p. 191