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Capitalism & Socialism: Declining Returns

The Twilight of Capitalism

by Michael Harrington
Simon and Schuster, 446 pp., $10.95

The Unseen Revolution: How Pension Fund Socialism Came to America

by Peter F. Drucker
Harper & Row, 214 pp., $8.95

The Falling Share of Profits,”

by William D. Nordhaus. in Brookings Papers on Economic Activity, edited by Arthur M. Okun, by George L. Perry
The Brookings Institution, 282 pp., $7.00 (paper)

Equality and Efficiency: The Big Trade-off

by Arthur M. Okun
The Brookings Instituion, 124 pp., $2.95 (paper)

There is something in the American character,” said Jefferson to his daughter as she struggled with her studies, “that regards nothing as desperate.” Thus he observed, whether with irony or admiration is unclear, the essence of a religion that would later be called Americanism; a religion that finds nothing tragic in human endeavor, for which evil is always external, for which thoughts are the same as things, and which regards despair as the ultimate sin. So Jefferson anticipated our glory and our folly to the present day as President Carter promises a politics of love and justice, together with a balanced budget, full employment, and a chastened bureaucracy, while Americans by the millions trample the accelerators of their jumbo cars as if the fossilized forests had been as vast as their own zealous optimism.

Michael Harrington is a leading American socialist who shares this native optimism. Though he feels that capitalism has already settled into its grave, a second coming is on the way. “That human life will be radically transformed in the medium range of the future cannot be questioned any longer,” he writes with prophetic conviction. The only question left is whether this “collectivist society which is emerging even now [will] repress or liberate men and women.” To this discouraging question he supplies what he takes to be a hopeful answer. “If the spirit of the new Karl Marx [is] our companion in the struggle,” liberty will probably prevail.

What he means by the “new Karl Marx” is the subject of his current book, a book that has less to do with economics, as one might suppose from its title, than with theology. The premises of The Twilight of Capitalism are that Marx lives and that human freedom depends upon understanding his true gospel, a gospel much mangled by his vulgar apostates. “Before Marx can be restored to the future,” Harrington writes, “he must be rescued from a murky past.” The first half of his book he devotes to this project. These pages are in effect an anthology of Marxian writings in the form of a dialogue between Harrington and such contemporary Marxists as Louis Althusser, Jurgen Habermas, and Herbert Marcuse, among others, and their aim is to “rescue” Marx from the “murky past” of Stalinism and its vulgar materialism.

For readers who like to follow scholastic arguments over the meanings of disputed texts, these pages may have much to offer. But for readers interested, as Marx himself was, in the actual problems of contemporary capitalism—in the declining rate of profit, for example, or inflation, or in limited resources and the outlook for rational planning under such difficult circumstances as prevail in the industrial countries, whether capitalist or socialist, The Twilight of Capitalism offers little that is original.

The second half of his book Harrington calls “The Secret History of the Contemporary Crisis.” In these chapters he promises to show that modern capitalism “can be understood only [sic] in the light of the themes developed by Karl Marx in Das Kapital.” In fact, Harrington’s analysis in these chapters can be understood in the light of nothing more subtle than conventional left liberalism. “The energy crisis of the seventies,” for example, “resulted from a generation of government policy that followed or subsidized corporate priorities”; or “under welfare capitalism…the state socializes more and more capital costs, but the private sector continues to appropriate the profits.” It was hardly necessary for Harrington to have labored so over his Marxian texts in the first half of his book in order to show in the second that the Vanderbilts made off with the profits while the tax-payers paid for the railroads, just as the Vanderbilts’ descendants enjoy tax shelters while the rest of us pay for subsidized housing.

The Marx that Harrington invokes in Part I of his book is not, of course, the one whose bearded scowl hangs over the squares of Moscow and Peking. Nor is he the grim Marx who wrote in his Forward [as Harrington spells it] to the Critique of Political Economy that the “mode of production of material life determines the social, political and spiritual life process in general,” that consciousness—how people feel and act—is determined by material conditions and not the other way around. For Harrington, as for many other Western Marxists, this crude determinism greatly distorts what Marx in his later writings really meant or what modern liberal socialists would like him to have meant. It ignores, for example, the part that human will plays in determining events.

What Harrington prefers to this early Marxian formula is a Marxism in which causality is reciprocal, in which material and immaterial factors are related to one another “organically” in an “atmosphere” which “bathes but does not predetermine every relationship within it.” What it means for an atmosphere to bathe a relationship is unclear, though the distinction that Harrington seems to be making is analogous, in his view, to the difference between the rigidly determined universe of Newtonian mechanics in which each atom bends to a universal law—where everything is seen from a single point of view—and the indeterminate world of modern science, with its ambiguous quanta, its concern with paradigms and its principle of uncertainty: between a totalitarian universe and a liberal one or between the single-minded certainties of Stalin—“the supreme scientist who deciphered the inexorable laws of history”—and the dilemmas of the modern welfare state. “Einstein,” Harrington writes, “put the matter succinctly…. ‘It is,’ he said, ‘the theory which decides what we observe.’ ”

Though Harrington promises to show “that the successor to capitalism will be based on conscious economic planning…and that it could take the socialist form that Marx looked for,” his preference for uncertainty probably explains his reluctance in this book to connect his Marxist “paradigm” with socialist practice as it might be applied in the everyday world. He tells us nothing, for example, about how to legislate the redistribution of wealth within a democratic society or how to achieve working-class autonomy without alienating the flow of capital in the meantime or how to meet working-class demands when those demands have already been “bathed” by the capitalist “atmosphere.” A book on the decline of capitalism might have said more about what is actually happening in the world or how the collectivist society that Harrington foresees can accommodate liberty, to say nothing of its own material needs, no matter which version of Marx one reads.

Though Harrington finds many passages in Marx’s writings to support his “paradigm” of a new, relativistic, and “organic” Marx, a passage that seems to impress him more than almost any other comes not from Marx at all. “All social life is a fabric of tightly woven threads,” this passage begins. “The change of which the corporation is the driving force is a complex process in which many things are altered at the same time and in which cause becomes consequence and cause again. No description is uniquely correct; much depends on where one breaks into the matrix.”

According to Harrington, this is a “brilliant” statement of what Marx meant by causality, a pluralist outlook which allows for no single interpretation of the historical process and thus for no single interpreter. The passage is from J.K. Galbraith and it suggests what Harrington is trying to prove in this book: that his evangelical Marxism is consistent with democratic socialism. What Harrington fails to show, however, is that democratic socialism is consistent with the actual world of scarce resources, high unemployment, ardent nationalism, and concentrated economic power, or that collectivism, with or without the “new Marx,” is compatible with anything but despotism. He is content simply to assert that “the welfare state is an arena of struggle that is normally and systematically biased in favor of the powers that be, but in which gains can be made by the left…. The popular forces, if they are massively and effectively mobilized, can make incremental gains of considerable value.” This cheerful truism is Harrington’s thesis, an article of faith that belongs to the American tradition of left liberal populism far more than it does to Karl Marx.

Peter Drucker, whom Fortune has called a “writer of great brilliance,” and whose book on management is “momentous” according to Business Week, has written a new book in which he not only agrees with Harrington that socialism and democracy are compatible but that the United States has already become a socialist country. So congenial, in fact, is American democracy to Marxian socialism that this profound development has had only a “trivial” effect on the American system, so “trivial” that hardly anyone but Drucker himself has noticed this “Unseen Revolution.”

What he means is that by the end of 1974 about 30 percent of the stock market had been bought up by institutional investors on behalf of employees’ pension funds and that within a few years these funds will own more than half the shares in the American industrial economy. According to Drucker, “the means of production, that is the American economy (except for agriculture) is [sic] already being run for the benefit of the country’s employees.” This is something new indeed, but whether the result is socialism and whether the country’s employees are really the beneficiaries are assertions that Drucker doesn’t bother to prove and which he may not really believe.

What he does believe is that he has identified a greatly expanded American rentier class consisting of retired employees in whose interest he can once more defend American corporate practice as he has done in his many previous books on the subject. But this new rentier class is not quite so extensive as Drucker implies by his claim that “the means of production” are “already being run for the benefit of the country’s employees.” By 1973, according to Drucker’s own estimate, only some 50 million employees out of an employed work force of some 85 to 90 million belonged to pension funds. By 1985, Drucker thinks, about 65 million employees will be covered, but this will still leave between 20 and 25 million employees without pension benefits. What is worse, about 17 percent of employed workers are covered by union pension funds or by funds run by state and municipal governments, and these, in Drucker’s view, are “in deep trouble and both are badly in need of reform.” Worse yet, “one fifth to one quarter of the labor force members will [retire] with only social security. If they get any retirement income from other sources it will be too little to make any difference.”

In Drucker’s socialist America, those workers who had poorly paying jobs or were only intermittently employed—for example, a great many women—will barely subsist. Finally, about one tenth of those who reach retirement age will have “no benefits at all.” Welfare clients, self-employed craftsmen, small businessmen, artists who could not afford to provide for their own retirement will “get nothing or next to nothing.” For workers in these categories “pension fund socialism” will be quite indistinguishable from capitalism at its most brutal.

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