Until his death in 1964, Paul Baran was virtually the only left-wing Marxist economist in the United States who held a full-time academic appointment. Since he was nothing if not outspoken in his beliefs, he was undoubtedly a trial for the authorities at Stanford, who, to their credit, resisted continual pressure from patriotic organizations to fire him. Somewhat less to their credit the university repeatedly passed over him for salary increases until finally the Economic Department protested in his behalf. Nevertheless when he died, people of many political opinions paid tribute to his personal courage and warmth as well as to his intellectual penetration.

Paul Sweezy, too, has suffered because of his Marxist ideas. Released from Harvard in 1942 under circumstances that aroused much resentment in the academic community, he was harassed during the McCarthy days by a zealous State district attorney whose efforts were finally curbed only by the United States Supreme Court. Since then he has been asked to teach only on rare occasions by a few audacious institutions including, I am happy to report, my own, and he has mainly devoted himself to publishing (with Leo Huberman) the left-wing Marxist magazine, The Monthly Review, together with books from the same press.

I mention these biographical details to provide a setting for a book that is so far from the run-of-the-mill of American social science as to require an introduction of this kind. Working in an isolation from the academic community which was partly enforced, and partly self-imposed, Baran and Sweezy have produced an appraisal of American society, at once bitter and perhaps embittered, that is totally at odds with the interpretation of American society we find in the books of most professors. This flavor of academic heresy is unusual only in America, however. If I judge correctly, the image of American society that arises from their pages approximates (and gives additional substance to) the way our society is seen and understood, not only in Russian and Chinese intellectual circles, but in many important centers of thought in Europe, Latin America, Africa, and Asia. If for no other reason, this fact should be sufficient to justify a careful study of this book.

BUT THERE IS ANOTHER REASON. I would also strongly urge every non-Marxian economist in America to study this book as a test of his own beliefs. This is not because I believe the Baran-Sweezy analysis to be essentially correct—indeed, as I hope to make clear, I think in important respects it is deeply flawed. It is, rather, that unlike most books we read, this one attacks prevailing beliefs at their roots. The book may arouse an emotional defensiveness in the reader, as it does in me, but at least it forces him to spell out his defense, rather than allowing him the complacency of unchallenged assumptions.

Baran’s and Sweezy’s book can be best considered, I think, in three ways: as a moral indictment, as an economic model, and as a theory of power. Of the three I find the first to be the most effective. This is not because the material is new—we are all familiar with the dreary statistics of poverty, misallocation of resources, aborted education, etc. What in most books, however, are only complaints, are in this book particulars of one central accusation: that the social order peculiar to capitalism is irrational. By this Baran and Sweezy mean that, at bottom, it is the institution of private property that inhibits, deflects, or simply defeats efforts to undo the social inequities we all learn to live with and not to think about.

This stress on the systemic roots of our failure to repair the slums, to relieve poverty, to improve our educational efforts, is something to be mulled over by those all-too-many social scientists who have ignored the most elementary social judgments in the name of “value-free” inquiry, or as theologians of pure competition. Unfortunately, I fear that Baran’s and Sweezy’s accusations will not be very effective with most of them. I think there is a core of important truth in their argument, but the authors push their claims too far—so far, in fact, that finally their indictment arouses skepticism rather than indignation.

In part this failure of persuasion lies in the avowedly exaggerated argument of the book. Every bit of available evidence is brought to bear against the system, but not a word is said in its defense. Nor are the charges scrutinized with anything like scholarly care. To take one instance that may stand for many, when I read (p. 364n.) of Leo Srole’s study showing a high incidence of mental disturbance in New York City, I want to know first whether there is any evidence that mental illness is increasing (I know of no studies proving this), and second, what a similar study would reveal in Calcutta, Paris, and Moscow. Until I know that, I cannot accept Srole’s study as “evidence” that the outlook for capitalism is “the spread of increasingly severe psychic disorders leading to the impairment and eventual breakdown of the system’s ability to function even on its own terms.”


The argument backfires for another reason. Whereas capitalism is portrayed as a system of class relations which does nothing but foist irrationality upon social action, socialism is pictured as the very paradigm of sweet reason. Thus, “Militarism and conquest are completely foreign to Marxist theory, and a socialist society contains no group or class which, like the big capitalists of the imperialist countries, stands to gain from a policy of subjugating other nations and peoples.” This after Hungary, and at a time when we face the threat of a major Russo-Chinese conflict!

BUT THE MAIN FAILURE of the moral indictment lies elsewhere in the author’s refusal to allow for any causes of social evil outside the realm of economic relations. Behind every instance of human weakness, indifference, or cruelty they show us the underlying cause to be the defense of class interests. In the end, this insistence, valid enough when thoughtfully applied, becomes invalid because it is indiscriminately used. Baran and Sweezy set out to demonstrate that capitalism is an irrational system because of the insurmountable barriers of property relations; they end up by proving that it is possible to be irrational even in the defense of such a proposition.

However much I share their concern for social morality, I suspect that the authors are more interested in their description of monopoly capitalism as a system. And this is indeed a provocative aspect of their book. For what they have presented is nothing less than a neo-Marxian theory of capitalism—a theory in which those time-honored categories of Marxian analysis, surplus value and the falling rate of profit, have been excluded and in which a new central tendency takes their place.

This central tendency they call the Law of Rising Surplus. By this the authors mean two somewhat different things. The first is that in an industrially progressive society there will be a steadily increasing capacity to produce more than is needed simply to sustain the working population at minimally acceptable levels and to replace wornout equipment. This concept in itself is not particularly different from our ordinary ideas of rising productivity, except that by focusing on the mass of available “surplus product,” we are forced to examine qualitatively as well as quantitatively the ends to which society applies its wealth. As Baran argued very brilliantly in a previous book, The Political Economy of Growth (Monthly Review Press), the nature and use of this surplus gives us profound insights into the values of a social order. In an appendix to the Baran-Sweezy book, Joseph D. Phillips estimates the amount of surplus in the United States in 1963 as $327,725,000,000, or 56 per cent of GNP. As to its application, we have but to look at Park Avenue—below 96th Street and above it.

BUT BARAN AND SWEEZY are more interested in a second use of the term surplus. To give a somewhat inexact parallel, the word is used as a kind of expanded version of “savings-and-investment,” referring to those particular flows of revenue and outlay characteristic of a capitalist economy. Surplus can then be looked at (as can savings) as the money accruing to various individuals or businesses in a capitalist economy, or (like investment) as those economic acts which constitute the “real” counterpart of these financial changes. Specifically, in the Baran-Sweezy model, surplus becomes on the one hand a series of gains, such as monopoly profits, excess depreciation, property income, etc., and on the other, a series of activities, namely investment, luxury consumption and capitalist waste into which those gains are absorbed.

Here the authors discover a deepseated problem. For they maintain that the amount of financial surplus will tend to grow, in large part because of an alleged tendency of corporate profits to rise, whereas the modes of expenditure available to mop up this surplus—the investment, waste, and luxury consumption needed to offset the rising stream of property and privileged income—will, for various reasons, lag behind. Indeed, Baran and Sweezy believe that a condition of chronic stagnation must therefore be the norm for a highly developed monopoly capitalism—a condition from which it has been rescued only by the fortuitous advent of epochal inventions (the steam engine, the railroad, and the automobile) and by the stimulating effects of wars.

These are interesting and potentially important propositions that deserve the careful attention of non-Marxian economists. I am myself not entirely easy with many of Baran’s and Sweezy’s definitions of “surplus,” in particular their treatment of taxes and their failure to include any wage or middle-class salary payments as part of surplus. In addition, I am not convinced of their argument that corporate profits tend to grow within the economy, since I believe they overlook the prevailing permissive corporate attitude toward wage raises, and ignore the possibility, recently raised by Victor Fuchs, that corporate output is a declining proportion of total national output.


Meanwhile, however, the Baran-Sweezy model brings us to the third, and in my view, the weakest aspect of the book. This is their theory of the structure and exercise of power within monopoly capitalism. For essentially their argument as to the inability of the system to absorb its surplus hinges on a political rather than an economic obstacle. This is the refusal of the ruling oligarchy to utilize the surplus for non-military purposes.

This is not a willful or a bitrary refusal. According to Baran and Sweezy, the ruling oligarchy is unable to pour the surplus of society into housing or education or other such things because expenditures for these purposes would jeopardize its economic and social interests. As they put it,

It would be possible to run through the gamut of civilian spending objects and show how in case after case the private interests of the oligarchy stand in stark opposition to the satisfaction of social needs. Real competition with private enterprise cannot be tolerated…undermining of class privileges or of the stability of the class structure must be resisted at any cost. And almost all types of civilian expenditure involve one or more of these threats.

WHAT IS WRONG with this assertion? To begin with, it treats the oligarchy as if it were a compact body of men who acted in concert with one will and one aim. Yet studies of the interests of the big corporations reveal profound divisions of interest among them. For example Victor Perlo has shown that the big companies divide into two groups, one that benefits from arms spending, and another, equally big, that suffers from it (Militarism and Industry, International Publishers, 1963). Similarly, I have written on the wide differences that characterize big business ideology, making it possible for Tom Watson, for example, to say things that would strangle Ralph Cordiner (The Business Establishment, John Wiley, 1964).

Second, Baran and Sweezy credit the oligarchy with immense operative power: “In constitutional theory the people exercise sovereign power; in actual practice a relatively small moneyed oligarchy rules supreme.” If this were true, one would ask why no Republican has been elected to the Presidency since Herbert Hoover, the sole exception being the “national” candidate, Eisenhower.

Finally, the oligarchy that emerges from the Baran-Sweezy analysis strikes me as a deceptive stereotype. There have been, I know, ruling classes so set in their ways, so blind to reality, that they have been unable to make those accommodations needed to assure their own survival: the French aristocracy comes to mind. But there have been other ruling classes—the English—who have managed their affairs very adroitly. Thus anyone in, say, 1750 who characterized the aristocracy as “incapable” of reconciling itself to the demands of the bourgeoisie would have obscured under this “class analysis” the very cultural and national traits that in the end spelled the all-important differences between the fate of the English and the French nobility.

This same objection must be brought to bear against Baran’s and Sweezy’s portrait of the capitalist class. Could not, after all, such a class learn to consume its surplus through public housing on the grand scale? Baran and Sweezy tell us flatly that it cannot: “Such planning and such action…will never be undertaken by a government run by and for the rich, as every capitalist government is and must be.” How, then, are we to explain the slum clearance programs in Sweden or Norway; the family allowances in Germany; the medical programs in England? If these kinds of remedial action are possible in America, what we need to understand are the reasons why capitalists here are different from those abroad. It is the principal defect of Baran’s and Sweezy’s analysis that they provide no means of answering this critical question.

THE REASON FOR this seriously distorted argument lies, I think, in a fatal Marxian predilection for “closed systems” of thought that can then proceed with a delicious inexorability to their assigned destinations. In such systems, it is very hard to incorporate models of thought of action that partake of uncertainty, indeterminateness, or changeability. As a result, beliefs and attitudes that are perfectly correct as first approximations of social behavior—such as the predisposition of the American government and business class to defend its system of privileges—are frozen in ways that leave no room for compromise, retreat, adaptation, or learning. No wonder, then, that the historic drama has so often defied Marxist predictions—the “hopeless” English Tories of the 1930s becoming the most enlightened Conservative party in Europe, the “militant” unionists of the New Deal becoming the fat cats of the 1960s, the “reactionary” middle class leading the revolutions of the underdeveloped world.

These failures of prediction—based, I believe, in large measure on an overly abstract conception of power and class—lead me to discount much of the future Baran and Sweezy envisage. At home they see a static monopoly capitalism, suffering from increasing psychic malaise, while abroad the champions of liberty and freedom rally mankind under the banners of national liberation. What they do not see are possibilities for a long-run emergence of rationality in America, as the new elites of science and social science gradually emerge; or the chances that retrograde movement may follow from the revolutionary tendencies of the underdeveloped world. I would agree with them that capitalism as a system of function and privilege will be and should be eventually replaced by a more rational system, and that revolutions will be needed in the underdeveloped world before those miserable peoples can achieve the national wil to make the enormous developmental effort required of them. But I am certain that the road to the future will not run as straight to heaven or hell as the one that Baran and Sweezy describe.

This Issue

May 26, 1966