Chapter 4 - Crisis

Submitted by posi on October 10, 2010

The bubbling of the soup is not simply a timeless, continuing process. The whole structure of capitalist social relations (including the state) is inevitably subject to periodic crisis. Crisis is basically a period when the inner contradictions of capitalism make it necessary for the whole structure of class relations to be reorganised. The conflicts which are present all the time become much more intense, the bubbles in the cauldron acquire a new meaning and a new potential. That is why, if we are to have any perspective of change and if we are to be able to relate our own tussles to the general course of class struggle, we must have some idea of how we are situated in relation to the crisis of capitalism.

We know that the state is in upheaval, that the state is in crisis.

We know it from the interviews in the first chapter and we know it from our own experience and from what we can see around us. In the last few years the state has taken on the appearance of a battlefield, with cuts in state expenditure, struggles against the cuts, more and more strikes in the public sector, battles against 'scroungers', and sharpening conflicts between state workers and those who try to 'manage' them.

What is this crisis and why should it give us hope? The crisis is not just a crisis of the state but a crisis of capitalist society as a whole. It should give us hope because it shows so clearly what was so pompously and complacently denied throughout the 1950s and early 1960s: that capitalism is inherently unstable.

When we say that we are in the middle of a crisis of capitalism, we do not, unfortunately, mean that capitalism is on the verge of collapse. The last major crisis of world capitalism - in the early 1930s - looked to some as though it might be the final crisis of capitalism. But capitalism survived - it recovered its health, but only through inflicting enormous suffering on the working class, through the horrors of fascism and the slaughter of war.

That crisis (and this) is often referred to as an 'economic crisis'. The term is misleading, however as the example of the 1930s shows. The crisis has its roots in the immediate relations of production, but . . . its resolution requires the transformation of the whole complex of social relations.

Capitalist development is inevitably subject to crisis. There are times when it is easy for socialists to forget this. During the long period of post-war prosperity (at least it seemed long at the time), it was easy for socialists to accept the prevailing bourgeois wisdom, that Keynesian economic management had put an end to all crises, and that the way forward was through gradual reform. But now all that has changed: the self-satisfied platitudes of the bourgeoisie. Have been exposed and the crisis-ridden character of capitalism is plain for all to see. The crisis involves an attack on the working class, but it also gives us hope. The system is weak and cannot survive for ever.

Why is crisis inevitable?

Capitalism is an entire social structure based on the exploitation of one class by another. As we have seen, the capitalist class, by virtue of its control of the means of production, is able to compel the working class to work for it, and to take for itself, as profit, the surplus produced by the working class. The capitalist class rules by virtue of its control of capital, of the 'dead labour' of the workers. The means of production already produced by the workers themselves, are turned against the workers, to exploit them. As Marx put it:

Capital is dead labour, that, vampire-like only lives by sucking living labour, and lives the more, the more labour it sucks (Capital Vol. 1. p.233).

Capitalism is not unstable simply because any system of class domination is bound to be unstable. It is also unstable in another sense. A peculiarity of capital is that it can survive only by exploiting living labour, but its anarchic pursuit of surplus value forces it to drive living labour out of the process of production. In order to exploit their workers more, capitalists replace those workers by machines. Eventually, this leads to a situation in which the amount of surplus value produced by the workers falls in relation to the total amount of capital invested by the capitalists.

In other words, the antagonistic relation between capital and labour, which drives capital unceasingly to increase its exploitation, of labour, expresses itself paradoxically in a tendency for the rate of profit to fall. While each individual capital replaces its workers by, machinery to maximise its profits, the end result of the uncoordinated actions of competing capitals is to reduce the general rate of profit. Once profits begin to fall seriously, capitalists start to withdraw their capital from investment, unemployment goes up, wages fall and we have what is seen as a crisis. But the crisis does not simply appear out of the blue: it is merely the clearest expression of the antagonistic relations that are there all the time. The tendency of the rate of profit to fall is merely the economic expression of the social contradictions inherent in capitalist production. Those contradictions periodically become so acute as to interrupt the continuation of that production.

The crisis then is not simply an 'economic' crisis, but a crisis of an entire social structure. It is a crisis which can be resolved for capital only by restructuring those social relations, in such a way that profitable production is allowed to continue. At the most basic level, this drive for profitable production involves increasing the rate of exploitation, the elimination of inefficient businesses through bankruptcy or takeover and with it the destruction of large amounts of capital machinery. But pushing through these changes requires a major transformation of social relations. It involves, at the most basic level, prolonged struggles between capital and labour to get workers to accept new conditions of production, to accept mass redundancies, high unemployment and lower real wages. But this may involve in turn a whole process of negotiation with the trade unions, attempts to integrate the trade union leaders into the state, attempts to control dissent within the unions by means of the reform of industrial relations and so on. It may involve a restructuring of the state's social services as, on the one hand, concessions are given to the trade unions to get them to accept lower wages and redundancies, and, on the other, cuts are made to relieve the burden of taxation on capital. All this involves too a restructuring of family relations, as women are often the first to be made redundant, as the cuts in hospital and other social services throw back caring responsibilities on to the home, where they fall primarily on women as the increased stress and tension at work and out of work take their toll on our 'private' lives.

One need only think of the last major crisis of world capitalism to see that what is at issue goes far beyond the 'economic'. Two major factors contributed to the resolution of that crisis. The first was fascism. Fascism promoted the centralisation of capital, eliminated the less efficient capitals, strengthened the position of national capital on the world market and, above all, greatly increased the rate of exploitation by smashing the working class organisations and holding down wages. There was not, of course, a fascist takeover in all major capitalist countries, but the international movement of capital ensured that after the war all the, leading sectors of international capital benefited from the 'achievements' of fascism.

The second major factor which finally brought about the resolution of the crisis of the 1930s was the second world war. This too involved a major defeat for the working class. Not only were millions of workers slaughtered, but everywhere labour was regulated and wages held down. In addition the enormous destruction and depreciation of capital values during the war meant both that demand levels after the war were very much higher and that there was a new basis on which to begin accumulating capital.

The crisis of the 1930s was resolved, then, through a combination of fascism and war. Both of these involved enormous loss and suffering for the working class. But it would be wrong to think of this process in too simplistic a manner for, despite the very major defeats suffered by the working class in the period 1933-45, there were two important features which gave to the pattern of social relations established after the war the character of what many saw as a 'Golden Era'.

These two features were, first, the fact that the victory of the Allies was based on the close incorporation of the working class into the war effort. This involved a whole complex of institutional changes, concessions and promises of further concessions – laying the basis for what is sometimes referred to as 'the post-war settlement'. The second feature was that the unprecedented extent of the defeat of the working class internationally laid the basis for an unprecedented period of capitalist expansion after the war. So working class living standards were allowed to rise. It is in this context that the 'post-war settlement' and the pattern of social and political relations which it installed in Britain has to be understood. The pattern of relations established after the war is often referred to as Keynesianism. It is the contradictions of this pattern, of Keynesianism, which have now come to the fore in the present crisis.

Keynesianism and the present crisis

When we talk of the present crisis, we are not speaking simply of an 'economic recession', a 'downturn' in the economy which will soon be over, leaving everything as it was before. The crisis is a long drawn-out struggle to restructure the relations between capital and labour. As we have seen, the war established a certain compromise between the classes, a certain modus vivendi, or, since the rule of capital was not successfully challenged, what we can call a mode of domination. It is this mode of domination which is now breaking up and being replaced by another. So it is important to try to understand this process.

To some extent, the restructuring of relations between capital and labour has very little to do with the state. It takes place through redundancies, through intensifying the labour process to increase productivity, through inflation and bankruptcies etc. Nevertheless, the role of the state is very important, particularly in the present crisis. This is not because there is any smooth, inevitable trend towards the expansion of the state, but because the nature of the post-war settlement was such that it involved a high degree of state intervention.

As we have seen, the resolution of the last major crisis of capital through fascism and war led to the installation in Britain of a new mode of domination sometimes referred to as 'Keynesianism', based on a commitment to active state involvement in reconciling the conflicts between capital and labour. This involved two things. First, it involved granting material concessions to the working class such as the National Health Service, national insurance, council housing, and aid to industry to maintain employment. All this costs money, but the resolution of the crisis had laid the basis for the rapid expansion of capital internationally, so that the sharp growth in state expenditure was absorbed by capital without too much difficulty.

Secondly, and this was quite inseparable from the first aspect, the increase in state intervention involved a greatly increased role for the state in the reproduction of the social relations of capitalism, in the processing of social conflict into relatively harmless forms. Thus, more and more people were employed by the state. More and more people came into daily routine contact with the state.

What was involved, in Keynesianism then, was not simply the introduction of new policies but a major reorganisation of the way in which bourgeois political relations are shaped, a change in the way in which the working class is officially atomised and regrouped. Of great importance in this reorganisation is the changed role of the trade unions and the growing involvement of trade union leaders in the state's attempt to 'manage' capitalism. But the changed role of the trade unions is merely the core of a more general pattern of government based on trying to meet conflicting demands by incorporating the conflicting interests, by granting limited concessions rather than by seeking an outright confrontation.

The expansion of state expenditure and state activity implied in Keynesian strategy has created a framework in which 'interest groups' could flourish. Relations between these groups and the parts of the state apparatus with which they dealt have become increasingly close. Increasingly, political activity has come to be focused not through parties and parliamentary representatives, but through functionally defined interest groups which maintain direct relations with sections of the bureaucracy. Part of this general development is the tendency for the state apparatus both to deal with people through these pressure groups and to group people together on the basis of functional interests so defined.

Thus, for example, categories such as 'car owners' and 'council house tenants' come, with the expansion of state administration, to play a much more important part in the relations between the state and the classes of society. Also, the state relates to those functionally defined groups through the officially recognised representatives of their interests: the AA and RAC for car-owners, officially recognised tenants' associations for tenants.

A third aspect of the post-war pattern of social relations which is worth underlining is the enormous impact of the 'welfare' services on the way in which the state relates to people. The growth of the welfare state has meant the development of a much more direct relation between the state and members of the 'public'. What is significant is not just the closeness of this relation, but its establishment on an individual or, even more important, family basis. The welfare services imply recognition that the myth of individual responsibility has lost conviction and that family support structures have been broken down by the force of capitalist development. However it seeks to reinforce our existence as isolated individuals or isolated nuclear family structures, with all the implications for concepts of family responsibility and for the oppression of women that those structures imply.

The Beveridge Report of 1942, the report which officially laid the basis for the creation of the welfare state after the war, was very conscious of the importance of structuring the state action in this area in such a way as to strengthen the family and the position of women in the home. To take just one example:

The attitude of the housewife to gainful employment outside the home is not and should not be the same as that of the single woman. She has other duties . . . Taken as a whole, the Plan for Social Security puts a premium on marriage in place of penalising it . . . In the next thirty years housewives as Mothers have vital work to do in ensuring the adequate continuance of the British Race and of British ideals in the world (Beveridge Report, p. 52).

The family is at the core of the state to an extent that we rarely realise.

What these three examples illustrate is that the emergence of the Keynesian mode of domination involved in many different ways the development of new forms of struggle by the bourgeoisie, of new ways of dividing and atomising the working class. These forms of struggle, these new relations established between capital and labour are not only an indirect response to working class struggle, they also inevitably shape that struggle and call forth new forms of organisation, just as inevitably as, in a war, the development of new methods of warfare by one army imposes, willy nilly, new methods upon the other. One consequence of the neglect by marxist theory of the analysis of this historical development of everyday relations between the state and the working class is that there has been little attempt to understand these changes in organisational form.

It is a commonplace to say that Keynesianism is now in crisis.

From our perspective, two points are essential in considering this crisis. First, the crisis of Keynesianism is a crisis of capital. Secondly, if we think of Keynesianism not as a set of policies, but as a particular form of dominating, atomising, disarming the working class, then we must not think of the crisis as simply an attack on working class living standards (although this is important). The crisis is also a restructuring of the way in which class conflict is filtered and defined. We need to remember this if we are to develop appropriate ways of combatting the smothering of conflict which keeps capitalism alive.

The crisis dawned in Britain about 1960. During the 1950s the favourable conditions of accumulation established through the experience of fascism and war allowed the apparent reconciliation of conflicting 'interests' by relatively harmonious means and without any major disruption of the established pattern of social relations. From 1960 onwards the clear decline of profitability first in the British and then later in the decade in the world economy made the restructuring of the relations of production increasingly difficult. But at the same time the balance of class forces was such that a radical abandonment of the Keynesian mode of domination was impossible. The result has been a compromise: not a sharp abandonment of the Keynesian mode of domination but its gradual transformation. If originally Keynesianism involved the attempt to reconcile conflicting 'interests' through a combination of institutionalisation and concession, since 1960 the emphasis within this indissoluble combination has been increasingly placed upon institutionalisation with only minimal concession - necessarily so, given the imperatives of capital restructuring.

The compromise reached through this shift in the nature of Keynesianism has not been entirely satisfactory from the point of view of capital. Certainly, massive capital restructuring has taken place. Inefficient firms have gone bankrupt or been taken over by bigger firms: the number of company liquidations more than doubled between 1973 and 1975. The more successful firms have survived by 'rationalising' their workers into unemployment. The number of people unemployed has soared to its highest level since the 1930s. Real wages have been cut back to an unprecedented extent. As The Economist put it in September 1977:

The 7 per cent by which the past year's 10 per cent increase in earnings fell behind its 17 per cent increase in prices represents the biggest recorded fall in the average Briton's real disposable income for over a hundred years: worse than anything that happened in the 1930s (The Economist, 3 September 1977).

The cuts in planned expenditure made in three doses in 1976 were far greater than any cuts in state expenditure ever made previously. Women have been pushed back into the family; youth unemployment is worse than ever before; racial tension has grown as blacks are the first to suffer from the crisis and attempts have been made to aggravate divisions within the working class.

All this is not negligible. But it is not enough for capital. The necessity of continuing to appease conflicting interests has prevented restructuring from taking place quickly or radically enough. Hence the chronic crisis of British capitalism and hence the continuing pressure for an outright abandonment of the Keynesian mode of domination.

The transformation of the Keynesian mode of domination has also involved major changes in the institutional organisation of the state apparatus, towards what is sometimes called 'corporatism'. We find it helpful to think of these changes as coming in two phases. The first phase from the early 1960s onwards saw a considerable expansion and fragmentation of the state apparatus. The interest groups (including, first and foremost, the trade unions acting in this capacity) which had flourished in the climate of expanding state activity in the 1950s have become increasingly incorporated within the state apparatus itself, finding an established place on a host of state bodies, national and local. This has necessarily led to a fragmentation or disaggregation of the state apparatus itself. This is expressed, for example, in the enormous growth of semi-state bodies and 'quangos' at national and local level, often without any clearly defined relation to central state authority. A second consequence is the tendency for class conflict to be displaced. What was formerly expressed as conflict between trade unions and employers, for example, is now fragmented being expressed partly in conflicts between representatives and represented (union leaders and members). Arguably, the end result of this displacement is that conflict, instead of being more easily controlled, is in fact less easy to control: hence the instability of the 'corporatist' strategy, so evident in the last months of the Labour government.

Associated with these institutional changes after 1960 has been the increasing emphasis on management techniques within the state apparatus. It seems to us that this development, which has been an integral part of all recent institutional reforms of the state should be seen, not just as part of a general trend towards centralisation but, on the contrary, as counterpart of the general disaggregation of the state apparatus. It results not only from a concern to minimise expenditure and maximise output, and not only from the increased importance of close contact between state and companies, but also from a need to impose uniform patterns of behaviour on an increasingly fragmented state structure. That the development of new techniques of control within the state apparatus• has important implications for state workers is obvious.

Challenging capital

However, the institutional changes were not capable of containing the social tensions engendered by the developing crisis. The never-had-it-so-good facade of the fifties began to crack. Anxieties about the rate of growth of public spending and the poor performance of British capital were beginning to be voiced. Strikes again began to disrupt the industrial 'peace' of the post-war period. The significant thing about the struggles of this decade, however, was that they were not limited/to trade union or party activity around economic demands, but began to directly challenge capital's social relations.

The early/sixties saw an outbreak of activity which directly challenged the authority of the law. The Campaign for Nuclear Disarmament must have been one of the biggest campaigns of civil disobedience the western world has ever seen. Later in the decade, protests against the American presence in Vietnam continued to embody this approach to mass action.

As the post war dream of classless garden cities began to fade, the legitimacy of local electoral democracy was put increasingly in question. The wholesale destruction of many inner city areas to make way for tower blocks which people did not want to live in was met with resistance. Tactics included locking councillors into the Council Chamber and lying down in front of bulldozers. Squatters found one partial solution to the housing crisis by occupying empty property. The effect was not only to challenge the way houses were being kept empty while people were homeless, but the idea of private property itself. Squatting also gave many people the physical space to explore collective alternatives to the family, with widespread reverberations. How often have Social Security officers despaired of finding a 'head of household'!

Groups of people who had never come into contact with the labour movement began their own struggles. In 1968 students revolted against the power structure of higher education. They questioned its content and form, rejecting the view that they should passively accept education based on assumptions which reflect the status quo. Often their action involved not only refusing to attend lectures but organising their own collective self-education. Black workers, finding that they had come to Britain to do the lowest paid jobs, also began to resist. They made it clear that they did not want to live in the worst housing and be treated as a scapegoat for the problems caused by capital from unemployment to the 'urban crisis'. Shortly after 'race riots' had marked black people's intention to start fighting back, women began to indicate that an offensive against women's oppression was also in the offing. While women at Fords went on strike for equal pay, women elsewhere were for the first time beginning to assert their right to meet together without men to develop a collective understanding of their oppression.

Industrial struggles also began to take a form which went outside of the traditional forms of struggle of the labour movement, making a far-reaching challenge to capital. Factory closures in the early 1970s met with widespread resistance and a spate of work-ins and occupations. Workers at Upper Clyde Shipbuilders, for instance, took over and ran their own shipyard for nearly a year. Such actions directly confronted the way in which the restructuring of capital takes place at the expense of workers' livelihoods. They were also significant because they asserted that workers have the power and the organisation to take control of their own affairs.

What was important about all these struggles was that in one way or another they not only challenged the economic consequences of capital's exploitation of labour, but the very forms of social organisation which are necessary to maintain this relationship of exploitation.

We see the second phase of institutional change (in the early 1970s) as being associated with the attempt to reassert bourgeois social relations on a more secure basis. The partial failure of the more aggressive strategy pursued by capital in the late 1960s and early 1970s led to a certain regrouping of capital's forces which involved, among other things, a reinforcement of the earlier trends mentioned above and the emergence of two new (and in our view complementary) trends: the development of community' as a political category and the strengthening of the repressive apparatus.

Partly in direct response to the unrest of the late 1960s and early 1970s, partly in fear of the possible social consequences of widespread long-term and especially youth unemployment, partly to bolster up the system of representative democracy so obviously bypassed by much of the institutional development in the 1960s, there developed in the early-to-mid 1970s a whole range of new institutions, varying widely from one to another, but all organised around the key concepts of 'community', 'participation', 'direct democracy': community development projects, community health councils, neighbourhood councils, liaison committees with tenants' associations, parent teacher associations, community advice centres, law centres, and planning workshops. The use of a national referendum too is a related development designed to establish a new pattern of relations between the state and the individual, a more direct relation which, like community bodies, bypasses the party as an organisational medium. The ambiguity of the term 'community' (which may refer either to the already organised 'joiners' of society or to an attempt to involve the 'non-joiners') is reflected in that complementary development, the well-documented rise in the overtly repressive strength of the state.

The new attack

The expansion of the state, and especially of the welfare state, since the war has been very much a two-sided process. It has brought material benefits for the working class, but at the same time it has meant a far-reaching penetration of social relations by the state form - it has pushed the oppression and fragmentation implicit in state organisation deep into the texture of society. Over this period (and especially in the last ten years), the state has been remarkably effective in maintaining social stability. At the same time, however, this has been at the cost of delaying the restructuring of social relations which is vital for the future of British capital. And so the pressures have gradually mounted for a radical break with the state-sponsored compromise of the past 35 years.

The outcome of these pressures has been a concerted attack on many of those aspects of the Welfare State which had seemed such a firmly established part of modern capitalism. This attack, begun under the Labour government, is now being pursued with great vigour by the Tories. It involves not just a quantitative reduction in state expenditure but an attack on the whole structure of class compromise and its institutional framework - an attempt to reshape the links between trade unions and the state, to abandon forms of regional and industrial aid designed to pacify certain parts of the country, to abolish many of the semi-state bodies promoted in the early '70s to foster 'community participation'. Many of the people we spoke to in the earlier section of this pamphlet and many of the positions socialists drifted into in the late '60s and early '70s are particularly vulnerable.

An attack on the capitalist state by the Tories, the most outspoken friends of capitalism? There is nothing paradoxical about that. Their attack on the state has been selective. An administration that gives generous wage increases to army and police cannot be suspected of intending to dismantle the state. Capital is being forced by its own contradictions to reorganise the way in which it rules us, to shift from one foot to the other.

But what should our attitude be? Our services and our jobs are being cut or threatened. State workers are at the heart of the class struggle in a way that they have rarely been before. This is reflected in their growing militancy. But how should this widespread anger be directed?

Of course we must defend our jobs and our services. Bu t there is a great danger that in defending ourselves, we will see only one side of the state and forget the other. In our haste to defend our benefits and our jobs, it is easy to lose sight of the oppressive relations in which they enmesh us. In the struggle against the capitalists' attack on the capitalist state, it may seem tactically necessary to paint an unambiguously good picture of the state, to present the Welfare State as a great achievement of the working class, even as a step towards socialism. This is very dangerous. First, because it causes socialism and socialist struggle to fall into understandably bad repute in the working class. Secondly, because it loses an opportunity to pose an alternative to the Labour-Tory, 'more State'/'less State' pendulum, which keeps British capital so secure. Thirdly, because it is unconvincing: people know the state is oppressive and they are not prepared to fight to defend it, as we have seen both in the cuts campaigns and in the recent election.

We must remember that the attack on the state is not only an attack on the working class but also a change in certain forms of domination and control by the ruling class. It involves a slight withdrawal of the tentacles that strangle our struggles and squeeze us into certain shapes. If the expansion of the state was important in ensuring political stability, then it is clear that its contraction involves certain risks for capital. That is what we must try to exploit. Part of exploiting these weaknesses must be the attempt to develop ways of organising which will pose an alternative to the capitalist state. This is what we shall explore in the next two chapters.