The Twilight of Capitalism by Michael Harrington (Part II: The Future of Karl Marx or The Secret History of the Contemporary Crisis, Chapters 8 and 9)

Chapter 8 is a brief summary of what is coming. Simply put, it is an analysis of the welfare state with a Marxian twist – that it is a creature of capitalism, from aid to the poor to what Nader later called corporate socialism and libertarians call crony capitalism.  It shows how Marxian tools described in Part I can better understand what was happening in the 70s. Of course, he did not predict Reagan, who doubled down on the worst features of capitalism in the most reactionary of ways.  The American situation, which starts with the least adequate benefits and has only gotten worse with this time, will be the frame for Harrington’s analysis.

As in Part I, I summarize and add comments using 20-20 hindsight from the past 40 years. It is amazing when reading this how much I remember of those now halcyon times. In the 25th Anniversary Edition of Socialism: Its Past and Future, Harrington does describe life under Reagan, projecting a crisis in the 80s which Clinton prevented – although he was hardly anti-capitalist on the whole. That crisis came about in 2008 and sidetracked the promising presidency of Barack Obama – which led to a racist counter-revolution under Trump.  His efforts to reverse all of Obama’s actions, even those he would otherwise do himself, can only be explained by Trump’s hate for his predecessor.

Chapter 9, “Bourgeois Socialism” starts out with a delicious quote from the Manifesto which few read and that predicts social welfare system to “lessen social grievances” and prolong Capitalism, but may reduce, with administration improvement, “reduce the cost of bourgeois domination and reduce its public budget.” 

This sounds like what we now call social democracy and those improvements sound like a rather libertarian way to shift these costs to employers, as I have suggested.  These passages are not commonly known, and perhaps we should keep it that way, lest reactionaries call all social welfare Marxism instead of a Marxian prediction.  Of course, it may be that the outgoing Speaker of the House is aware and taking steps accordingly.  Still, there is no doubt that both social welfare and consumerism take enough pain away from Capitalism to preserve it, at least for now.

Welfare state thinking is said by mid-century economists to be present in the mixed economy of the post-industrial society by some mainstream economists. It also mirrors what is predicted in the Manifesto. Of course, they call this a revolution, but it is nothing of the kind. It merely gives capitalism a reprieve from revolution. It does not prevent it.

A detailed history of how this evolved from Bismarck to all of Europe in support of the European War (World War I), through the Great Depression and the State Capitalism of Hitler and Stalin, et al, the Great Patriotic War (which it was, even in America) and the post-war period, although the huge investment in armaments and the permanent military make the term quite ironic.

Hitler and Stalin were the least socialist of them all. Hitler was Potemkin Village socialism that led quickly to capitalist totalitarianism.  In the post-war and post-industrial world, it is amazing to see how the new capitalist ruling class is described technocratically. It almost reads like von Mises or Hayek. Funny how this all fits together (as in funny tragic).

Marx and Engels to Proudhon believed that cooperatives and small business might be provided by the government, leaving finance to large business. The Distributists may agree, but I believe we need to go after the big fish as well and replace the whole financial system with a self-funded cooperative one.

This gets us beyond the crony/social welfare capitalism that brought us both attempts to control inflation, interest rates and their relationship to the price of oil, which is examined in Chapter 10.  Housing is a particular example, where funds went more to the middle class exodus, supporting the racial status quo, then to the people who need it the most. The recent tax reform did little on this, making housing policy more favorable to the rich. The 1975 New York financial crisis was the natural outcome, when according to the New York Post, President Ford told New York to Fuck Off.

Food subsidies are the same way. They help large farmers, processors and grocery chain, but do nothing for the hungriest poor or small family operations (unless they sell lottery tickets and booze).  In recent history there is a new term for this: Food Dessert. This is the result of capitalist social welfare, not attempts to feed the poor.

In the 1970s, Harrington spoke of how the tax system favored capitalism.  He cites wealth distribution figures, which have only gotten worse since then, aided by capital gains tax cuts, which fuel asset inflation by do nothing for the economy.

After the  Reagan tax cuts (going the opposite direction from what Harrington would recommend – but very predictable using Marxian theory), the 1986 tax reform and the Bush adjustments, the tax system (including payroll taxes) was almost entirely proportional except for very low income families. Clinton offered a reprieve through higher tax cuts. Sadly, he eliminated Glass-Steagall, refused to regulate hedge funds and cut capital gains taxes. These cuts, plus the tax cuts by Bush, Jr., largely favoring investors, led us to the Great Recession of 2008.

Obama offered temporary remedies (they only lasted two years and gave nothing to underwater borrowers – just subsidies to the big banks), His improvement in health care (which was initially a Republican plan) gave all the capitalist sectors their share.  Medicare is secure so far, but conservative states, which have never been friendly to Medicaid, even as their populations need it the most, have for their own political reasons refused an expansion of Medicaid funds under Obamacare.

Trump’s latest tax cuts, which included attempts to cut social welfare to pay for a tax cut on the wealthy affirm Marxian predictions.  I will spare readers the details and say that reading this chapter is a worthwhile endeavor. It may add to the debate or it may give ammunition to the reactionaries. How and if we reveal this analysis is key to our future success.

Until the rich realize that their children and grandchildren will be liable paying off the debt crisis accumulated, mostly in Republican Administrations over the last four decades, nothing will change. The rich will get richer, although if the financial system does collapse due to such debt, the rich will lose the most on paper, but the working class and the underclass will have the monopoly on suffering.

Democratic Socialism provides a path to end today’s crony capitalist social welfare system it by transferring retirement payment to stock in the employing firm, as well as shifting social welfare costs for family support at bourgeois levels, health, education and poverty reduction to these firms as a way to decrease both bureaucratic dysfunction and the public budget, as Marx and Engels suggest, possibly through the imposition of a subtraction value added taxes with credits or offsets to do just that. I believe this is the main path to the revolution we have all been working towards, which is why social democracy is part of the title of my latest manifesto.