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Michael Kidron

Maginot Marxism:
Mandel’s Economics

(1969)

From International Socialism (1st series), No.36, April/May 1969, pp.33-36.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

Mandel’s Economics [1] is a Marxist failure. It is unsure of the central capitalist dynamic. It evades the essentials of the system as it operates today. It is more concerned with defending Marx’s categories of analysis than with applying them. In consequence, it does little damage to the system intellectually or, by derivation, in practice.
 

1. The central dynamic

If capitalism is peculiar among class societies, it is not because a surplus product is systematically pumped from the mass of producers – this happens in any class society – nor because a small section of society, the ruling class – organizes that pumping and benefits from it – that too happens in any class society – but because there is no central, public arrangement to ensure that the process will go on in an orderly, continuous and predictable way. Key choices about the deployment of resources are left to individual capitals, big and small, public and private.

Within nation states the doctrine of ultra vires holds, permitting individual capitals to do anything not expressly forbidden by laws whose scope and content they themselves determine to a large extent. Beyond, in the world shared between national capitals or the states with which they are more or less identified, positive constraints scarcely exist. Not even the largest state is coextensive with the system, so there are no overriding institutions that can make binding decisions for it. Yet a sort of order emerges from the chaos.

That it does so is because the behaviour of individual capitals is narrowly determined by the competition between them. Simply in order to exist over any length of time each capital must grow as fast as it possibly can, by reinvesting the major part of its share of surplus-value (accumulation) or by absorbing and taking over other, less successful capitals (concentration), or by doing both. If an individual capital did not grow, it would ultimately be unable to afford the rationalization and innovation with which to meet those that did, or unable to ride as successfully the sudden changes in market conditions which are part of the system. For an individual capital growth is the ultimate compulsion.

Growth does not come about automatically. Since capital is not a being but a systematic relationship between beings, somebody has to decide to make growth happen, to devote the freely-disposable resources as they become available to investment rather than consumption. That somebody, whether an individual or a group, must be able to measure its performance against very clear criteria. It must also be very strongly motivated to make the right decisions, for primordial Adam has still not been gorged, not even by affluent late capitalism.

The precise forms these criteria and incentives take are unimportant. Historically the former have been as different as the amount of money profits and the volume of gross physical output; and the latter as different as material privilege or superior status at one end of the spectrum, and material loss or physical punishment at the other. What is important is that the criteria measure consistently the contribution of an individual, or group’s, decisions to the growth of any single capital; and that the incentives elicit as consistently the decisions that promote such growth.

This distinction between the behaviour of capital and the social and psychological mechanisms which ensure that behaviour, between the rules and the players of the game as it were, is obscured. It is nonetheless real, and of prime importance analytically. For the behaviour of capital – its blind unconcerted compulsion to grow – derives directly from the central peculiarity of the system – its fragmentation into more or less autonomous competing units – while the mechanisms whereby the ruling class organizes itself to promote that behaviour do not. These are common to all class societies.

The distinction does not exist for Mandel. On one page he concedes “the accumulation of capital” as “the great driving force of capitalist society”. [2] On, another it is “the capitalists’ thirst for profit” [3] and on yet another money is “the initial and final form of capital, towards which the whole of economic activity is directed”. [4]
 

2. The essential model

The primacy of growth is essential to Marx’s model of the system at work. Each capital is driven to jack up productivity by coupling its workers with more, and more costly, machinery, while simultaneously trying to hold down wages. As this rationalization spreads, labour power becomes a smaller component of total capital (the ‘organic composition of capital’ rises) and smaller even in absolute terms (the ‘reserve army of labour’ grows); the value added in production and surplus value become smaller in relation to total investment; and so the average rate of profit falls. Booms become progressively less profitable and shorter; slumps more lasting and severe. Stagnation threatens and the system becomes increasingly restrictive.

The model is a closed system, in which all output flows back as inputs in the form of investment goods or of wage goods. There are no leaks.

Yet in principle a leak could insulate the compulsion to grow from its most important consequences. If ‘labour-intensive’ goods were systematically drawn off, the overall organic composition of capital would rise faster than in a closed system. However, if ‘capital-intensive’ goods were drawn off, the rise would be slower and – depending on the volume and composition of the leak – could even stop or be reversed. In such a case there would be no decline in the average rate of profit, no reason to expect increasingly severe slumps, and so on.

Capitalism has never formed a closed system in practice. Wars and slumps have destroyed immense quantities of output. Capital exports have diverted and frozen other quantities for long stretches of time.

A lot has, since World War II, filtered out in the production of arms. Each of these leaks has acted to slow the rise in the overall organic composition and the fall in the rate of profit. But since their size and composition have been spontaneously arrived at and not tailored to attaining these results their impact at any given time has been unpredictable except in broadest outline.
 

3. The historical perspective

Arms production has clearly provided the largest and most effective normal drain since the second world war. Being a ‘capital-intensive’ drain it will have had a restraining effect on the tendency of the organic composition to rise. Without peparating out the organic composition of the arms-producing industries and firms from that of the non-arms-producing ones and then carrying the exercise through all the backward linkages to their suppliers, their suppliers’ suppliers and so on – an exercise which has yet to be undertaken – there is no way of measuring the effect directly, but it must have been considerable. For the expected immediate consequence of a rising organic composition, namely a fall in the average rate of profit, has not occurred. If United States figures are any guide, the rate of profit has kept more or less level for the entire post-war period, as the accompanying table shows.

There having been no long-term slide in profit rates, there has also not been a series of ever-deepening slumps or signs of growing restrictiveness. In fact output has seldom fallen from one year to the next since the war and then never by more than 2 per cent, and the tendency throughout the system has been generally away from inconvertibility, tariff barriers, resale price maintenance and so on. Nor has there been a steady increase in unemployment. Despite the evidence that has accumulated this last year or so of growing instability, the system has been kept open.

Mandel will have none of this. He does not so much as hint at the stringency of Marx’s assumptions or at the extreme abstraction and simplicity of Capital’s theoretical construct. Marx said, therefore it must be. Models turn into the real thing; and the real thing becomes as simple as the model.

We are told, quite rightly, that “increasing organic composition of capital ... is the basic tendency of the capitalist mode of production”. [5]. But then tendency is assumed to be fact and the next tendency in Marx’s logical sequence – that of the average rate of profit to fall – is quickly tagged on as fact too: one table shows it to have dropped by two-fifths between 1889 and 1919 [6]; another that net accumulation of capital fell catastrophically between the 1860s and the 1930s [7]; and two others that, depreciation has claimed more and more of gross output between the 1880s and the 1920s and between the 1880s and the 1940s (to 1948). [8] Since nothing beyond the forties could sustain Mandel’s thesis, the facts are suspended then.

On to “the inevitable slump”. Since the key fact here – the mildness of post-war recessions – is too public and obtrusive to be suppressed, it is conceded and even explained. [9] But, incredibly, it is not allowed to affect the larger analysis: the elusive inevitability is still announced at regular intervals [10]; slumps still punctuate a trend towards stagnation. [11] The uncomfortable fact is, attached, not incorporated.

The same is true of the drive to restrictiveness, immobility and decay. One by one they come: the “absence of fresh fields for investment” [12] (as if interest rates were not constantly pressing upwards to attract scarce money capital, or were not now at a historically high level); the decline in trade relative to production [13] (as if trade in manufactures has not gone up at twice the rate of output since 1948) [14]; the growth in the rentier class [15] (as if it has not been nearly euthanased since World War II by the combination of high profit retentions and high personal taxation); the march of cartellization in Britain [16] (as if competition for and from world markets were not increasing, or Resale Price Maintenance were still with us). There is even the quaint assertion, based on a crude misunderstanding of what insurance is about, that “the chief preoccupation (of the capitalist regime) has become security, that is, conservation, and is no longer expansion”. [17]

But since this sort of statement and others about “monopoly capitalism” limiting and fettering “the development of the productive forces” look hairless even to Mandel, we are given a sop: it “does not mean that world production, or even that of the leading countries, sinks into stagnation; but it falls even further short of the possibilities offered by modern techniques”. [18]

But once again, the admission is not allowed to affect the argument. The magpie goes gathering on, and we are left wondering what to make of non-stagnating stagnation, slumpless slumps and similar Mandelania.
 

4. State Capitalism

Nothing in Stalinist (including post-Stalin) Russia defies analysis in terms of Marx’s model. The process of pumping our surpluses from the mass of producers is as vulnerable in Russia to wild and random encroachments from other capitals as it is anywhere else. The people, that organize and benefit from it, are under as oppressive a compulsion to fast economic growth as is any similarly placed class elsewhere. They need to be as clearly motivated to ensure growth as their counterparts abroad; and if their criterion of success has been the volume of gross physical output rather than money profits, the distinction is one of detail not essence – output has served the bureaucracy perfectly well as a success indicator, at least until very recently.

Some of these signals do get through. Mandel does concede that the deployment of resources in Russia is determined by its competitive relations with the outside world. As he puts it:

International competition with capitalist economy also necessitated an increased shift of emphasis to the quality of products, the productivity of labour and the rationalization of investment, the volume of which moreover necessitated the maintenance of a high rate of growth even on the purely quantitative plane. [19]

He even recognizes that with an “excessive rate of accumulation” “the bureaucracy becomes the regulator and chief (sic) director of accumulation” [20], that the “central political, economic and military administration” has exclusive “controlling power over the social surplus product” [21], and that the “Soviet leaders” “deliberately chose to base themselves on the interests of privileged minorities rather than those of the mass of the workers, in order to give the necessary impetus to industrialization”. [22]

Typically, none of this means anything in terms of the analysis as a whole. Within fourteen pages of reading that “international competition” determines the “emphasis ... on quality ... productivity ... rationalization ... high rate of growth”, determines in other words the content of the Plans, we are told that on the contrary, “Soviet planning ... is real planning, insofar as the totality of industrial means of production is in the hands of the state, which can thus centrally decide the level and rate of growth of production and accumulation”. [23] In even less space we make the transition from a bureaucracy organized as “regulator and... director of accumulation”, which is nothing if not a productive role, to a bureaucracy whose key characteristic is “bourgeois norms of distribution”.

Part of this sloppiness derives from Mandel’s original confusion about capitalism. Part from his determination to cast Russia as a ‘transitional’ society, neither capitalist nor yet socialist, a “contradictory combination of a non-capitalist mode of production and a still basically bourgeois mode of distribution”. [24]

Russia is not capitalist, he writes, because the bureaucrat is not “subject to the tyranny of profit” [25], (true, the tyranny is of plan fulfilment); because there is no tendency for the rate of profit to fall (untrue, the tendency is there but checked as in the West); because there is no internal competition nor unimpeded operation of the law of value (true, nor is there – by definition – within any single capital); no flow of capital from low-productivity to high-productivity sectors (untrue, how else do the planners ensure growth); little exporting of capital to backward countries (true, but there is little of that from the West too); no overproduction (untrue, Mandel himself draws attention to the billions of rubles of unsold retail stocks of unwanted, socially unnecessary consumer goods [26]); no bourgeoisie (true, but a bureaucracy with – remember – “controlling power over the social surplus product”); no free contractual relations between (less true as economic reform embraces a growing part of industry); no crisis (true, hut not highly significant given the situation in the West). And so on.

But Russia is not socialist either: there is “extensive social inequality, bureaucratic privilege, lack of self-determination for the producers, etc.” [27] For, you see, “the Bolshevik Party did not understand in good time the seriousness of this problem (of bureaucratic management), despite the many warnings sounded by Lenin and by the Left Opposition”! [28]

So Russia is transitional. But what is a transitional society in Mandel’s context other than a verbal convenience? Is such a form possible between capitalism and socialism? True, there have been transitional societies in the past. For centuries after the Renaissance individual capitals were growing within feudal society. gathering economic power, weakening the host, becoming more able and willing to seize political power. They could do so because the dynamic of capitalism – accumulation – does not and never did require centralized control over the whole of society in order to function. It is a dynamic that operates within autonomous units, small or large, and for that reason it could coexist with the localism, the traditionalism and subsistence-orientation of feudalism.

But socialism is a total system. It cannot grow piecemeal within the interstices of a capitalist society. How does workers’ control of production coexist with control by a ruling class when the means of production in dispute are one and the same? How does self-determination and consumer sovereignty (‘production for use’) coexist with the external compulsion and blind accumulation that results from capitalist dispersal? There may be room for transitional forms in distribution, but at the level of production and control over production the only possible transition is a sudden, revolutionary one.
 

5. The politics of confusion

It is useless to look for independent or critical thinking in Mandel. Nowhere in the two volumes is there a sense of fresh exploration or the feel that capitalism is posing old problems in new ways, and that the explanations need to be worked afresh out of the loose body of analysis written in the Marxist tradition. On the contrary, doctrine is first, its use secondary: “we seek to show”, he announces in his Introduction, “that it is possible, on the basis of the scientific data of contemporary science, to reconstitute the whole economic system of Karl Marx”. [29] And in his final chapter we find him still waving the truncheons of uncritical orthodoxy: “Marxism rejects ... it readily admits ... Marxism explains”. [30]

Here at least Mandel is consistent. In the defense of othodoxy the medium becomes the message. Since facts are to be paraded as so many defense witnesses rather than used to explain what is actually happening, only the most docile, old and used ones are selected. Since precision might entail a critical inspection of the doctrine, it is drowned in irrelevant detail. And since there are other Marxists who do better as critics of the system, because they think rather than intone, they are swept under the text into a footnote and their ideas passed over. [31]

Vagueness and sloppiness swamp everything: parallel to that bureaucracy which is only the “chief (sic) director of accumulation” there is a working class whose “conquest of power” and whose “socialization of the major means of production and exchange ... fail of their purpose to some extent (sic) if they are not accompanied by radical changes in the atmosphere (sic) in the enterprise”. [32] Crude philosophical idealism suffuses every thought, whether it is about the individual unconscious still harbouring “echoes from the primitive communist past” of 7,000 years ago, or about the amazing triumph of disembodied Marxist theory “capable of inspiring, and not unsuccessfully, the economic policy of states both large and small”. [33]

Behind it all lies a confusion between social power and its packaging, between control and its forms. It is a congenial confusion for Mandel because it allows him to practise his unique fugitive accent – the easy shift from urban workers, to ‘third world’ peasants, to students as the revolutionary focus; the rapid transitions from reforms to ‘structural reforms’ to direct action as the current tactic; the indiscriminate loving-up to the only fixtures in his political world – the dissident and not so dissident bureaucracies of both Social-Democracy and Stalinism.

In the realm of theory it places him plumb in the centre of “the school of ‘vulgar’ economics – a school characterized by the abandonment of all attempts to systematize and synethesize”. [34]

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Notes

1. Ernest Mandel, Marxist Economic Theory, translated front the French by Brian Pearce, London: Merlin Press, 1968, two volumes 4 gns.

2. ibid., p.706 (emphasis in the original).

3. “... the totality of production ... is urged onward only by the capitalists’ thirst for profit. The private form of appropriation makes profit the only aim and driving force of production” (p.171); “Profit remains the purpose and driving force of capitalist production” (p.561); and so on.

4. ibid., pp.568-9.

5. ibid., p.166.

6. ibid.

7. ibid.

8. ibid., p.167.

9. ibid., pp.529-34.

10. See pages 168, 171, 346, 437, 529 for a fair sample.

11. ibid., p.531.

12. ibid., pp.511, 520-1.

13. ibid., pp.488, 489.

14. Alfred Maizels, Industrial Growth and World Trade, Cambridge University Press, 1963, p.80.

15. Mandel, op. cit., pp.436-7.

16. ibid., p.492.

17. ibid., p.516.

18. ibid., pp.437, 437n.

19. ibid., p.575.

20. ibid., p.584.

21. ibid., p.631.

22. ibid., p.592.

23. ibid., p.561.

24. ibid., p.565.

25. ibid., p.561.

26. ibid., pp.571-2.

27. ibid., p.564.

28. ibid., pp.572-3.

29. ibid., p.17.

30. ibid., p.726.

31. Three out of a “number of sociologists (sic!) who try to make use of the Marxist method of analysis” are mentioned by name in a footnote to The Social Character of the Soviet Economy, a key section (p.560). The one whose ideas on the subject are most developed and who has succeeded in implanting them in an active, revolutionary organisation – Tony Cliff – is not mentioned in the extensive Bibliography nor referred to in the Index. The one whose ideas are of an earlier vintage and less commanding, but who can still claim something of an organised following in Italy – Amadeo Bordiga – makes the Index but not the Bibliography. And the third – D. Danin – with few, and reactionary, ideas and no following – makes both.

32. ibid., p.643.

33. ibid., p.13.

34. ibid., p.707.

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Last updated on 19.10.2006