In the face of what may be the greatest crisis of capitalism since the Great Depression, governments all over the world are being forced to bail out capitalist enterprises and extend state control over the production and distribution of commodities. Market forces have failed to cope with the economic turmoil triggered by the coronavirus pandemic and the Russia-Saudi oil price war, and so state ownership of major industries becomes the next step—Spain, for example, has nationalized all its private hospitals and healthcare providers. Voices both from the left and the right argue that this new wave of state intervention in the economy is socialistic. However, it would be erroneous to identify a few instances of planned production with socialism, a system in which the working class holds political power and the entire productive forces of society are put into motion according to a centralized plan, in order to meet the needs of the entire population.
State intervention in the economy can minimize some of the worst excesses of the capitalist system, but it can do nothing to transform the fundamental production relation of capitalism: the separation of workers from the means of production. We must not be fooled by false analyses that paper over the real essence of government reforms; the result of these nationalizing measures will be the strengthening and extension of state monopoly capitalism.
The state must take extraordinary measures like these in times of crisis, for two fundamental reasons:
- To protect profits and rescue the capitalist system from total collapse.
- To pacify the mass of working people by incorporating popular demands through temporary reforms (stimulus packages, state-managed production of goods, tax relief, financial aid to the unemployed, etc.).
The basis of state monopoly capitalism is the concentration of capital within the hands of a small number of massive monopoly enterprises. At the top are the finance monopolies, which control major banks and multiple branches of industry. In the United States, for example, the total assets of JP Morgan Chase amounted to $2.8 trillion in 2018, the equivalent of two-thirds of all government spending for that fiscal year. The largest shareholder in Chase, the Vanguard Group, manages over $5.3 trillion in assets. The second-largest shareholder, BlackRock, holds $6.3 trillion in assets. Vanguard and BlackRock are also the two largest investors in the largest US manufacturing company, Exxon Mobil. As for the second-largest manufacturer, Apple, the top two shareholders are, again, Vanguard and BlackRock. Finally, the two largest shareholders in the largest US communications company, Verizon, are…no surprise, Vanguard and BlackRock. In 2008, BlackRock was tapped by the US government to manage the asset portfolios of Bear Stearns and AIG, both of which had been bailed out after the financial crisis. Today, the state is enlisting its “services” once again to oversee the Fed’s purchase of market assets in an attempt to stabilize the bond market. According to the Financial Times, “the exigencies of fighting COVID-19 trumped any potential conflicts of interest.” It would be naïve, however, to believe that the world’s largest asset management firm would not take advantage of its favorable position, as it has in the past—in 2008, BlackRock managed about $1.3 trillion in assets, meaning that it has increased its holdings fivefold in only 12 years.
The interests of monopoly groups dominate the social and economic life of imperialist countries like the US, including the policies of political parties and the state. The domination of the state by monopoly capital is reflected in the interpenetration of monopoly groups and the US government. Take Jim Millstein, who oversaw the Wall Street bailout after 2008 through the Troubled Asset Relief Program. Before that, he was a banker at Lazard, the world’s largest independent investment bank. After working for the state for two years, Millstein went on to form his own financial advisory firm. Among other engagements, he was involved in the restructuring of Puerto Rico’s debt.
The revolving door between monopoly enterprises and the state, however, is only the most glaring manifestation of state monopoly capitalism. Fundamentally, there are two main ways in which the state participates in economic activity in the service of finance capital:
- State ownership of enterprises. In 2008, for example, the US government gave General Motors about $50 billion in loans, in return for a 60% stake in the company. Four years later, the government unloaded its GM stock at a $10 billion loss.
- State intervention in economic life. One example of this is monetary policy, which involves action by central banks to ensure the continued circulation of capital, such as setting low interest rates to encourage borrowing.
Both forms are intensified in times of crisis, when the anarchy of capitalist production becomes most destructive. In an attempt to resolve the crisis, the state will resort to central planning and control of economic activity where necessary.
In response to the widespread shortages of drug and medical supplies on the frontlines of the coronavirus pandemic, Democrats and Republicans alike are currently advocating another form of state intervention: the direct control of production and distribution. New York’s Governor Cuomo, a prominent supporter of these measures, is calling for Trump to make full use of the Defense Production Act. In a national emergency, this federal law allows the president and Congress to force capitalists to manufacture certain kinds of goods, requisition property, fix wages and prices, force settlements of labor disputes, and control credit. Trump has invoked the DPA but remains evasive about actually using it, to the dismay of state and local officials who are forced to compete on the market for scarce resources as the coronavirus pandemic intensifies.
Shortages of ventilators, personal protective equipment, and the medications used to treat COVID-19 are ravaging hospitals across the country. In these dire conditions, the very same politicians who mere weeks ago were decrying social wage programs and the intervention of the state in the economy are now demanding that the state extend its influence and power over production. Compelled to reverse their former positions, they justify this about-face by declaring that we are now on a war footing and must do whatever is necessary to save lives and stabilize the economy. They attempt to assuage the anger of sick, unemployed, and precarious Americans by assuring us that we are “all in this together,” workers and capitalists alike. They point to historical examples of “responsible government action” like the New Deal and the Marshall Plan, but they cannot explain why these emergency measures and reforms have not prevented capitalist crises from returning, again and again and again…
The hypocrisy of politicians is further revealed in the stimulus bill passed by the senate on March 25th, which dwarfs the $800 billion stimulus passed in response to the 2008 financial crisis. Cost estimates range from $2 to $6 trillion, making it in either case the largest relief package in the history of the country. The 619-page bill contains a wide array of provisions, but most fall under one of three categories: aid to large and monopoly capitals, aid to small and medium capitals, and aid to the working class, especially those unemployed as a result of the pandemic. The aid granted to monopoly capital is practically unlimited. The aid to small and medium businesses, while substantial, will certainly not be enough to prevent mass failures of enterprises in the coming depression. As these smaller capitals go under, the bigger capitals will gobble up the scraps, resulting in the further concentration of capital in the hands of a few monopolies. In sharp contrast, the aid granted to the working masses—those who suffer the most from the threat and reality of sickness, starvation, and death as a result of this crisis—is piecemeal, inconsistent, and insufficient.
Disregarding the current health crisis, wages are already so low in this country that many workers cannot sustain themselves without working multiple jobs. Millions of families live paycheck to paycheck, with barely enough savings to last a month of unemployment. In the case of sudden illness, accident, disability, or eviction, their lives are immediately plunged into chaos and uncertainty. But capitalists rely on waged labor for profits, so they must guarantee some minor level of stability to the working class. Even in the best of conditions, unemployment insurance is therefore a necessary safety net imposed upon the state by the conditions of workers in capitalist society.
However, the level of stability afforded by unemployment insurance is completely insufficient from the perspective of working people. The recent stimulus package, for example, offers expanded unemployment benefits (limited to unemployment as a direct result of the coronavirus pandemic) for just four months, in the face of an economic crisis and high rates of unemployment that will certainly last much longer. The progressive demand in this situation should be for unemployment insurance that (1) provides for workers in all cases of incapacity and unemployment—not just those related to the coronavirus; (2) applies to all workers; (3) is equal to a worker’s full wages and sufficient to provide for their family as well; and (4) is paid for by the capitalist class, not by taxes on working people.
In the end, this bill cannot stop the impending economic depression and its inevitable devastation. At best, it may restrict some of its worst excesses. As we argued in a previous post, capitalist crises erupt periodically as a result of the nature of the system itself. Crises such as this one therefore cannot be overcome within the framework of capitalism. This fact reveals the hypocrisy of the “left” wing of the bourgeoisie, which is trying to posture itself as a friend of the people. The Democrats dragged their feet over the Senate bill, saying that it was too generous to big business and didn’t do enough for workers and small businesses. They won some nominal improvements (for example, unemployment insurance will now be supplemented by the federal government for four months instead of three; how generous!) but they had no objection to massive subsidies to large corporations, paid for by taxes on working people.
Although the Democratic and Republican senators may have differed over specific aspects of the bill, they were united around a common goal: to protect the interests of the ruling class. The political contradictions between the “conservatives” and the “liberals” can be attributed to different methods, not different goals. The bottom line is that they must recoup the losses suffered by capital as a result of the economic downturn and ensure the recovery of profitability. At the same time, they must forestall mass revolts by offering partial reforms to the working class, trying to keep people focused on their individual, rather than collective, interests. Their piecemeal unemployment insurance and half-hearted eviction moratoriums might postpone starvation and homelessness for some, but these reforms cannot fundamentally alter the conditions of workers. In the end, the measures taken by the state will mainly benefit big businesses and their shareholders while prolonging the misery and exploitation of the masses.