The state in capitalist crisis (part one) posted by Richard Seymour

In trying to think through the changes that we're going through, that are being imposed on us, we constantly find we have to account for the state's role in managing and mediating the crisis and the forms it takes. For what is happening now, unmistakeably, is the re-organization of the state's presence directly in productive relations; its provision of investment conditions; its socialization of the costs of investment; and its disciplinary apparatuses.  In the terms used in a previous essay, it is a process of state re-formation, given the name of 'austerity' because of its implications for popular constituencies historically benefiting from the welfare state.  And I wanted to know whether it was possible to say anything general about this subject; that is to say, whether there are principles governing marxist research into the role of capitalist states in specific crises that are distinct from those governing marxist research into capitalist states tout court.  This is the first in a series of posts trying to work out what these might be.

Before proceeding with this, I want to point out that the return of 'the state' (or a theoretical concern with the state), however tentative at the moment, is the result of two developments: first, the anticapitalist movement and it sequel in the Occupy movement; second, the aggressive assertion of imperialism and thus the re-emergence of anti-imperialist critique during the last decade.  This means that the discussion of capitalist state in crisis must be a strategic one, conducted with a view to confronting the state as a factor in our struggles over the social product.  But it also means that we cannot begin to discuss the reorganization and fiscal down-sizing of welfare states without situating them in relation to the imperialist chain, and the patterns of exploitation of the dominated societies.  To put it simply; the politics of austerity cannot be decoupled from the question of inter-imperialist rivalry between the US, EU and China, and their competitive alliances in the Middle East, and sub-saharan Africa.  And since I intend to focus on austerity in the UK, its unique position as an 'Atlanticist' EU member, the once favoured 'link' between the US and Europe, must play a role here.  Both of these issues will be raised in more detail in future posts.

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First, I think it's important to say that while austerity has as its primary justification the imperative of reducing public spending, cutting the deficit and thus maintaining the fiscal 'credibility' of the British state with financial markets, and while suppressing the growth of the state budget is a real institutional commitment, the policies introduced under its rubric are much broader than those which could plausibly be related to cutting spending.  Whether it is cuts to the minimum wage, the introduction of private provision in the NHS and schools, or changes in the tax structure to benefit the wealthy, these are policies whose overall thrust is unlikely to increase revenues to the Treasury.  In fact, as regards the changes to public services, the involvement of private companies such as Virgin, as well as the wasteful 'markets' imposed on providers, will probably drive up costs and lead to further fiscal crises.  No one is suggesting that the state will stop collecting the taxes to fund core services such as pensions, healthcare and education.  And even if they are under-funded, and the provision is rationed in ways that favour residents of relatively wealthy, middle class areas, it is highly unlikely that the costs will stop increasing.

This isn't to say that the welfare system isn't being pared down drastically, with lamentable results for millions.  But I think it is best, following Claus Offe, to characterise welfare state capitalism as a form of crisis management: or, more accurately, a crisis-ridden form of crisis management.  And despite its limitations, capitalism cannot simply wish away this form of intervention.  The fact is that, just as in the most controversial reforms being undertaken the state isn't so much withdrawing from the provision of public services as out-sourcing and marketising it, so in general the state isn't so much cutting its costs as shifting them around.  No doubt there is an aim to suppress costs, and this commitment is institutionalized in various ways, but I would be surprised if the capitalist state in the UK cost much less in 2022, as a proportion of GDP, than it has over the last two decades.  In the period from 1987-2007, during which there was only one recession of medium severity, public spending was generally kept at or below 40% of GDP, a feat last accomplished during the high growth years of the 1950s.  In a period of sustained crisis, this becomes extremely difficult because not only is growth depressed and social overheads inflated, but the relative costs of investment are higher, and the capitalist class constantly needs incentives from the state to put its money into circulation.  Even once the crisis recedes and a period of relative capitalist dynamism resumes, this particular neoliberal format of capitalist dependency on the state will continue to drive up costs.

Relatedly, it would be mistaken to conclude that what is happening is a de-regulation of capitalism; it is a re-regulation.  This is true not only in the sense that even supposedly privatized utilities quickly accumulate a plethora of regulations and government interventions just to prevent the most egregious abuses and keep the system basically functional, but above all in the sense that the state's regulative powers are becoming all the more necessary to capitalism in a period of organic crisis, even as their limits are disclosed.  For example, it is a well-known factoid that the number of financial regulations in the neoliberal period, and particularly after the repeal of Glass-Steagall, actually increased dramatically; because the financiers had more freedom did not mean that they were less regulated.  The regulatory structure was simply reformed to increase their powers; this only appears to be a contradiction in terms if you assume that real freedom is 'negative freedom'.

So what is happening under the rubric of austerity is neither simply cost-cutting nor de-regulation, nor any kind of withdrawal of the state from 'the economy'.  Rather, the combined effect of the measures will be to shift the balance of power between classes, as condensed in the institutional ensemble of the state, in such a way as to fundamentally enhance the advantage of capital, with the rationale being a 'growth model' in which such policies are said to improve the wealth of the whole society through a temporary tightening of the belt.    The logic is clear, for example, from Vince Cable's argument for freezing the minimum wage for under 21s: lower wages equals (more profitable investment therefore) more growth and more jobs.

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One of the arguments we have made against austerity is that the fiscal crisis isn't really real: the debt can be paid off through growth, which won't be assisted by austerity politics.  And in a sense, this is true.  The idea that the UK is in a situation like Greece, held over a barrel by bankers, the IMF and EU finance ministers, is palpably absurd.  The UK's debt situation is far from unmanageable in either historical or comparative terms.  Further, the UK ruling class has sufficient clout that were it, through the state, to embark on an alternative growth pact for one reason or another, few international creditors would be seriously alarmed.  Actually, given the way speculators and lenders are responding to austerity programmes once they are imposed, a stimulus-based strategy might actually endow them with more of that fabled 'confidence'.

But there is nonetheless a 'rational kernel' in the notion of a fiscal crisis.  The capitalist welfare state, even in the neoliberal period, demonstrates a tendency (note, tendency) to exceed in expenditures what it is able to collect in taxation.  The reasons for this can be enumerated thus: i) the periodic crises of accumulation, which not only reduce tax receipts in the short-term but result in pressure from business, on pain of investment strike, to reduce taxes on profits and investment; ii) the pressure from popular constituencies for services and provisions, based on expectations raised by the welfare state itself, which acts as a limiting factor on any fiscal cut-backs that state personnel are able to make; iii) the tendency for long-term regulative and growth strategies coordinated through the state (and here I don't mean just the 'Fordist' corporatist strategies deployed in the post-war era) to fail in the context of unplanned, competitive and exploitative production relations.  The latter results not just in sectoral imbalances within 'the economy', but more importantly sustained sectional struggles within the capitalist class, and class struggles over the social product which always upset any long-term calculations, and make it impossible for a capitalist state to impose a rational, planned growth strategy even through its considerable leverage as a factor in production.

The attempt to get this tendency under control has been an institutionalised commitment of capitalist states throughout the neoliberal era.  In the United Kingdom, this has taken the form of constant class struggles with public sector workers to facilitate down-sizing, as well as the embedding of policies such as 'Compulsory Competitive Tendering' based on the orthodoxy of public choice economics, which holds that bureaucratic budget-maximising is responsible for spending increases.  It has also, due to the first factor mentioned above, resulted in a shift of the structure of taxation so that employers pay less, and workers more, toward the 'social overheads' of capital - that is, the reproduction of labour power in its complex forms, as well as of the growing 'reserve army' of labour.  With the increase in VAT and various indirect taxes, and the cuts in corporation tax and other taxes on profits, this trend is being amplified.

More broadly, the suppression of public spending, as an element in the austerity formula developed in West Germany, has been institutionalised in the EU since the Treaty of European Union, and certainly since the Stability and Growth Pact in 1997.  How well has this gone?  Well, the Pact ruled that member states should have a public deficit at no higher than 3% of GDP.  Prior to the crisis, this was achieved by most member states, barring 'periphery' economies like Hungary, Greece and Portugal.  We have seen that, despite being 'peripheral', such economies can nonetheless can have disproportionate significance, condensing all the weaknesses and instabilities of the system in one 'weak link'.  At the moment, however, the problem is far more general: across the Eurozone at the moment, the public deficit is more than twice the permitted level.  And the Merkozy axis aims to drive this back down by forcing punitive austerity measures on the weakest economies.

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But there is another aspect of the transformation we are witnessing, and here we have to return to the commodification of health, education, and social security.  The state is not just a political factor in the capitalist mode of production, securing the 'general conditions' for the reproduction of capitalism but otherwise abstaining from direct involvement in 'the economy'.  In several respects, even if not in its totality, it acts as a capitalist.

The capitalist state doesn't only reproduce the capital-labour relation externally in relation to its action (infrastructural investment, social outlays), but also internally, through its exploitation of waged labour in nationalized or semi-nationalized industries.  Whether it is in the direct ownership of post, banking, or railway companies, or in the heavily subsidised, incentivized and bailed out industries such as cars, energy, armaments and, of course, finance, the state is involved not just in appropriating surplus value through fiat, the better to invest it for the 'general good', nor just in realizing surplus value or redistributing it but, in a number of key instances, extracting surplus value.  It is true that, in the neoliberal period, the British capitalist state has taken the lead in withdrawing from the direct or complete ownership of productive industry, but it has still been involved in putting part of the total surplus value back into circulation as capital in various industries.  And even where it doesn't directly extract surplus value, it is involved in the realization of surplus value generated by productive labour, just as capital-intensive industries are.

What appears to be happening with the re-commodification of core services is that the government is giving capital-intensive industry sectors that work in the orbit of the national state - those involved in financial and other services particularly - the option of realizing a considerable share of the surplus value produced across the economy.  This sort of action can temporarily act as a spur to investment, in a way that benefits the politically powerful sectors of capital, but it also contributes to solving the underlying crisis of profitability to the extent that the spread of 'market conditions', the erosion of 'spaces of resistance' in the welfare state, and the suppression of wages that it allows affects the general balance between capital and labour to the former's benefit.

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Some general features of austerity, then:

1) the state is not withdrawing from 'the economy' - it is never absent from 'the economy' - but changing its mode of presence in productive relations.

2) the state's cost-cutting commitments are subordinate to its crisis-management commitments, the former tending to be defeated by the latter due to the growing relative costs of investment and the long-term tendency toward crisis.

3) state institutions act within a context of a class struggle between labour and capital, and as such their policymaking must respect the relative strengths of each (hence, the state acts as the material condensation of the balance of class forces), but the state also has a form-determined selectivity in favour of the capitalist class.  These factors determine the form that crisis management takes.

4)  nonetheless, the state acts not on behalf of capital 'in general', but in the interests of hegemonic fractions of capital, and any charge that state managers are behaving 'ideologically' and 'non-pragmatically' must be understood in those terms.

5) the relationship between the state and the social formation that it regulates and reconstitutes is permanently characterised by dysfunction and disequilibrium. This is not to take the absolutist position that there is in essence no distinction between 'Keynesian' and neoliberal remedies.  The fact that 'Keynesian' solutions based on demand management and state investment, cannot resolve the crisis in the long term doesn't mean that they cannot play a role in abating the most egregious features of the crisis.  But the fact is that 'Keynesian' welfare and nationalization policies, by raising expectations of the state, and by empowering resistances, can only in the long run deepen the dysfunctions of capitalism.  As such, they make most sense in the context of a 'transitional' approach, of which more will be said in future posts.

These are not quite the theoretical principles that I sought at the beginning of the post, but rather theoretically informed descriptions.  But in future posts, we can deepen these observations by drawing more on Offe's analysis of the 'contradictions of the welfare state', and the 'crisis of crisis management'.

Labels: austerity, british state, capitalist crisis, capitalist state, class struggle, marxism, neoliberalism, public spending, welfare