Secular stagnation? Paul Sweezy in Australia

I have an article in Online Opinion on Labor’s post-election prospects although my comments applicable to the entire left including the Greens. One topic I touch is the implications of slower economic growth for politics. In recent weeks we have seen a revival of the ‘secular stagnation’ thesis that due to a shortage of investment opportunities capitalist economies have entered a phase of sluggish growth. The thesis goes back to the radical Keynesians of the 1940s and also Paul Sweezy. His 1942 Theory of Capitalist Development was a path breaking exposition of Marxian political economy. It introduced Bortkiewicz’s solution to ‘transformation problem’. Sweezy also proposed a coherent under consumptionist interpretation of Marx’s theory of crises that drew on the work of Otto Bauer. In Sweezy’s view secular stagnation would favour the cause of socialism. The stagnation of capitalism would contrast with the economic advances of a socialist bloc that Sweezy suggested was likely to include all of western Europe. This was a more sophisticated version of Stalin’s theory of socialism in one country. The problem with Sweezy’s analysis from an orthodox Marxist perspective is that it left open the possibility that governments could by Keynesian means fill the gap left by the failure of the private sector to invest. In 1964 Sweezy published Monopoly Capital co-authored by Paul Baran. This work shocked orthodox Marxists by arguing for the irrelevance of much of Marx’s microeconomic analysis and by largely writing off the American working class as a force for socialism. Baran & Sweezy admitted the theoretical possibility of a Keynesian solution to the problem of secular stagnation but argued American capitalists would never permit the state to intervene. The only safe form of public expenditure for capital was military expenditure. Here the analysis dovetailed with Baran’s own work on the political economy of development, the only road to development for the third world lay through socialism. The American military was engaged in futile struggle against an inexorable wave of third world revolutions. At the start of the book they quoted Franz Fanon on the United States as ‘a monster in which the taints, the sickness, and the inhumanity of Europe have grown to appalling dimensions’.   The Soviet Union by contrast demonstrated that it was ‘possible to use man’s mastery over the forces of nature to build a rational society satisfying the human needs of human beings’. The superiority of socialism was demonstrate by the large vocabulary of Soviet school readers and the triviality of the topics of American postgraduate theses in education. Monopoly Capital is a work of its time and so American in its anti-Americanism. It stands in that tradition of radicalism represented by the IWW, the W Z Foster wing of the Communist Party, the Weathermen etc. Sweezy’s later Maoist sympathies were consistent.

But was Sweezy correct in part? Are the obstacles to an escape from secular stagnation not economic but political? There’s another aspect in which he may be correct. In The Theory of Capitalist Development Sweezy was optimistic about the political implications of secular stagnation: it was seen as likely to shift public opinion to the left. In Monopoly Capital he is much more pessimistic hence the enthusiasm for the Soviet Union and third world revolution. Perhaps he was right, recessions encourage support for the radical right. As the pie shrinks employed voters from the cultural majority gaze with envy at immigrants and recipients of income support. In Britain public opinion has shifted rightward although as the incumbents in recession the Conservatives have lost support. In Greece despite the scale of the collapse the radical Syriza has only a very fragile poll lead over the incumbent conservative government, this is a fact more remarkable than the growth in support for fascist Golden Dawn, and as far as I know Golden Dawn offers no economic alternative, unlike the Nazis who had a well-developed interventionist alternative. Will slow economic growth shift Australian politics to the right and constrain a future Labor government? Sweezy’s 1960s pessimism may be vindicated even if his solutions were disastrous in practice.

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