The Twilight of Capitalism by Michael Harrington (Part II: The Future of Karl Marx or The Secret History of the Contemporary Crisis, Chapter 12)

Chapter 12 examines “Some Dialectical Complications.” Is the welfare state simply a tool to pacify the masses or is it progress for the working class? Perhaps it is both.  It is an interesting argument, going back to the Poor Law in England and Speenhamland in the late eighteenth century. Ironically, Corey Robin cites the last in his analysis of The Reactionary Mind and how Burke and others responded to such experiments.  Social welfare continued progress in England, not necessarily in a straight line, but in fits and starts having to do with both stronger potential soldiers and compassionate impulses.

Until the Great Depression, there was no national social welfare tradition in the United States. When boom-bust cycles occurred, the only response was local. The union movement was rising and was not radicalized until the Depression, when workers wanted something done. Social Security was the main lasting result. It arguably saved Capitalism from itself, pacifying the working class which was looking more and more to Socialism.

World War II increased central planning in the western world and the Marshall Plan made it international, entirely for Cold War reasons.  It took twenty more years for Medicare and Medicaid to make the scene, when National Health Insurance in Britain appeared right after the war.

The United States was and is slower to adopt social welfare and is below other OECD nations unless you count American private health insurance, which is subsidized through both tax policy and Obamacare, which according to Bruce Bartlett, puts the US in the center of modern nations in regard to percentage of GDP. 

Coalition Democratic politics, which included Michael Harrington himself in his classic, The Other America, created the Great Society reforms. This coalition, especially the author, were no capitalist stooges.  Programs grew during the sixties. They did not result from the major urban race riots, but they were linked to them in the public mind.
Is, or rather was, the welfare state a capitalist endeavor?  Not directly, as Harrington points out, the welfare state makes the continuation of capitalism possible, but capitalism provides the jobs. It also provides the campaign funds, as recent evidence shows – and that fact is still prickly when dark money is examined and the reactionaries call foul, even though left wing dark money systems were also subjected to scrutiny.  Still, capitalists rely on government counter-cycle interventions.  New York in the 1970s and Flint, Michigan now, show how business does not want government to be too generous. 

The elections of Thatcher in the U.K. and Reagan in the U.S. definitely led to a change in tone on social welfare, and not a good one. The link between welfare and race led reactionaries to use racist code words in arguments on welfare reform, which was eventually signed by southern Democrat Bill Clinton. The American Public Welfare Association shed no tears when punishments for non-compliance were introduced or strengthened and the rolls shrunk, although disability rolls rose for the chronically poor.

Unions also took a hit, as in the United States when enforcement of labor rights declined dramatically from Reagan to Bush II.  Even public employee unions are targets of the reactionaries. Unions have lost their radical edge. Those that remain have CEO compensation packages that mirror their capitalist rivals. Capitalism has struck back, leading to the Bush tax cuts and the abuses of the 2000s and the Great Recession.

Many city and state retirement systems are were left scrambling after 2008, facing possible cutbacks in pension levels, most likely to create incentives to go to more lucrative defined contribution plans. Federal and corporate employees have already been victimized by this scam and future retirees who cannot afford to save millions of dollars will soon suffer for it. At least 2008 stopped talk of doing the same thing to Social Security, but capitalists are patient.

Capitalists get their money’s worth, as the 2008-2009 TARP bailouts show. Two auto companies were bailed out and any thought of transforming them into something more socialist was dropped in order to save member health and retirement benefits.
Liberal efforts to limit executive pay for bailout recipients did not have the intended effect of making more loans. Instead, loans were paid back faster and real relief abandoned until the market cleared out underwater borrowers most needful of assistance, including yours truly.  Meanwhile, CEO bonuses continue to rise. While most of the upper class used to live in fairly modest homes, the lead up to 2008 gave us the McMansion is some neighborhoods.

Often, capitalists use racist code words to get their candidates elected and their taxes cut for both themselves and their corporations. Soon after comes the push to pay for those cuts with cuts to entitlements. There are still those Randians, especially Speaker Paul Ryan, who would dismantle even middle class subsidies further. Luckily, they simply don’t have the votes, largely due to the unpopularity of Donald Trump.

Currently, most retirement plans can be called trust fund socialism. Workers have assets in pensions and retirement accounts and will be paid for the former because such pensions are insured. However, there is no management accountability to workers, while CEOs are insulated by both brokerages and corporate boards. Like the Soviet and Chinese systems, rising to power is about skill in politics, not performance. Trump is simply the grossest example of this.

In anticipation of impeachment, many are coming forward with options. We are still debating whether welfare must be tied to work and training (as opposed to higher education) and whether low wage work should be subsidized by the Earned Income Tax Credit. Is this a subsidy to capital or a victory for workers? 

What about raising the floor on Social Security contributions for workers (and lowering the ceiling) and taking the ceiling off of the employer contribution? Should the EITC be eliminated, with a higher child tax credit? Do we go from a payroll tax to a less regressive value added tax (VAT) or subtraction VAT, depending on whether or not it is tied to buying insured shares in the employing firm? Do we tie the employer contribution to income to avoid the smell of socialism or equally credit and distribute them, regardless of wage level?

The interesting question there is which is easier to pass and which is more Marxian?  Should Democratic Socialists take the easy route that keeps capitalism in the game or go after it directly? 

With the gains of the Sanders campaign, should we use that power to emulate European, especially Nordic, social democracy or can we go further by building employee ownership, occupying capitalism, which even in employee owned firms is largely hierarchical, and make a push for worker democracy over both production and consumption  (which then drives production decisions) and shifting tax funds from social welfare to increasing employee ownership?

Only we can answer how radical we want to be. The current dialectic is all about catching up. Can’t we do better?