Accumulation and Power: An Economic History of the United States. - book reviews

To determine the causes of the current socio-economic crisis of the United States and to draw appropriate political conclusions, it is essential to understand how the system evolved toward its present condition. Accumulation and Power helps provide this understanding by showing how the development of corporate enterprises and the corresponding emergence of a class structure composed primarily of capitalists and wage laborers caused fundamental metamorphoses in the processes of competition, aggregate-demand determination, and state policy making. Richard Du Boff demonstrates that although this transformation entailed an unprecedented development of productive capacity, the end result was a system in which the socially-rational utilization of this productive capacity conflicts with the overriding objective of the capitalist class: "to maintain control over the profit-making environment and to keep unwelcome incursions into it bottled up." (p. 125)

He starts by charting how even in the years before 1840, the U.S. economy began "to trace out sharper capitalist profiles," as competition among small businesses and commercial capitalists interacted with pre-existing inequalities in wealth to produce a growing "social distance between rich and poor ... [and] the first signs of a new class of wage-earners." (p. 16) Early economic growth was driven by spurts of exports, substitution of domestic manufactures for imports, rising farm productivity in the West, and a "commercial revolution" involving the "decline of the general merchant" in favor of specialized traders, shippers, and financial capitalists. Du Boff shows that this growth phase was accelerated by state governments' construction of harbors, canals, and roads, and by state sanctioning of legal "devices like the chartered corporation" which increased the financial resources available to commercial capitalists. The rate and sectoral pattern of development were also heavily influenced by political upheavals such as the French Revolution and Napoleonic wars (a boon to U.S. shipping and export interests) and the 1807 Embargo Act implemented by Jefferson in response to the British-French blockade (which encouraged import substitution in manufacturing).

In the 1840s capitalist development began to enter a more "revolutionary phase" in which "epoch-making innovations" such as the railroad, telegraph, and steam power created unprecedented opportunities for those with access to investible surplus to employ wage labor in order to make a profit. During this "Grand Traverse" of the U.S. economy there was also still ample room for capital accumulation to expand at the expense of its domestic non-capitalist environment. Hence "the economy's capacity for absorbing additional capital was very large compared to its ability to create and mobilize savings." (p. 42) New avenues arose for making financial profits by channeling personal and enterprise savings (both foreign and domestic) toward investing enterprises, and through the issuing and trading of financial assets in the emerging stock and bond markets.

Capitalist development thus entailed a fierce competitive struggle over access to "the newer positions of power created by the continual revolutionizing of society's means of production," a struggle resulting in "gross inequalities" in control over production and investment. (pp. 8-9) Crucial to this process were state policies such as open immigration (accommodating capitalist demands for an exploitable, ethnically-divided labor force) and the repeated deployment of armed forces to complete the suppression of indigenous Americans and to put down strikes. Du Boff demonstrates how the capitalists participating in this struggle often relied on weapons that fall outside the mainstream vision of competitive efficiency - including bribing competitors' employees to sabotage their operations, merging firms to take advantage of pure market power (even when this conflicted with productive and administrative efficiency), and unequal access to various state subsidies (including but not limited to tariff protection). The initial advantages gained in this warlike competition largely determined which capitalists were eventually to concentrate their power "in small numbers of very large business firms." (p. 9)

More fundamentally, the centralization of corporate capital in the late nineteenth century reflected the problem that the "forces of supply were now proving to be more powerful than those of demand." As the demands for investment funds associated with the initial build-up of capital goods, communications, and transport sectors tapered off, and as further increases in productive efficiency outstripped the growth of wage-based demand, the economy began to overaccumulate investible surplus. The widespread development of excess productive capacity was initially signalled by "price levels that fell nearly 30 percent between 1873 and 1896 and by three long business depressions" during the same period. (p. 47) The response of industrial capitalists, under the tutelage of investment bankers, was to experiment with various cartels, trusts, and mergers, the idea being that "if collective control over output and prices could be worked out, monopoly profits could be extracted from society on an ongoing basis." Centralization of capital reached a fever pitch after mid-1897 when a short-term cyclical recovery threw large volumes of business and personal savings into the securities markets, and "independent promoters exploited the changes in investor confidence" to unleash the Great Merger Movement of 1898-1902. (pp. 60-61)

Once centralization was underway, its rate, sectoral pattern, and mechanisms (cartels versus holding companies, for example) were greatly influenced by the ebb and flow of the government antitrust policies which it instigated. Corporate and financial consolidation entailed state measures "to try to rationalize the crisisprone economy and curb ruinous price competition" - such as the Interstate Commerce Act (1887), Federal Reserve Act (1913), and Federal Trade Commission Act (1914). (p. 151) Perhaps most important, in view of later developments, were the expanding international functions of the state. Prior to "the concurrent appearance of |big business' and the |age of imperialism'" the United States was still essentially a debtor economy which financed trade deficits in manufactured goods with raw material exports and foreign capital inflows. The development and consolidation of productive capacity in giant corporations transformed the nation into a leading manufacturing exporter and foreign investor. In this process "the behavior of U.S.-based business organizations in the international economy ... followed the same pattern evident in their domestic activities - a drive for control over the economic environment," and in the period leading up to First World War the "overriding goal of U.S. foreign policy was set-to maximize the power and profitability of American capitalism in the global economy." (pp. 142-143, p. 152)

The late nineteenth and early twentieth centuries were thus a period of transition from early capitalism to mature monopoly capitalism. This new regime did not eliminate overaccumulation, even though this tendency was no longer reflected so much in "price cutting and the demise of marginal firms." Rather, the standard corporate response to overaccumulation was now "to cut back production and investment but to hold the line on prices," leading to persistent excess capacity which in turn tended to dampen the incentive to expand the domestic capital stock. (p. 68) Corporations still competed via production innovations, but the associated replacement investments could be mostly financed out of depreciation funds.

Economic stagnation appeared shortly after the Great Merger Movement, as the "business component of gross private investment .... was flat from 1908 through 1921," despite the First World War recovery due to "the frantic demand for war supplies emanating from France and Britain." (p. 72) The investment boom after the First World War, led by "electrification and automobiles [which] provided the key investment outlets that ... overrode the depressive tendencies of the oligopolistic investment mode,' was marked by growing unutilized capacity in industry. (pp. 81-82) As further acceleration of exports became more difficult due to the intensified international competition and the instability of the 1920s, aggregate demand became increasingly dependent on incomes derived from speculation - especially real estate and the stock exchange (where a new merger wave, accommodated by the lax anti-trust policies of conservative Republican administrations, was taking place). With the inevitable collapse of the speculative bubble came the Great Depression, which definitively showed that the mature monopoly capitalist economy was now incapable of prolonged expansion without "increases in government support for the economy." Full recovery occurred only during the Second World War when military spending increased to 42 percent of GNP. (p. 91)

The "Great Postwar Boom" (1945-1972) was rooted in the new coalescence of military Keynesianism, the Cold War, and undisputed U.S. hegemony over the global capitalist system. Du Boff shows how military Keynesianism was basically chosen because it "possesses highly functional characteristics for American capitalism." Military spending guaranteed higher than average profits to "some of the largest firms in concentrated sectors of the economy [and did] not interfere with or saturate private demand". It provided hardware and manpower for the worldwide politico-military empire established by the United States after the Second World War - which also created lucrative opportunities to export weapons to client states. Of course, "[o] ther government programs would have been just as stimulative and infinitely more desirable for society as a whole," (pp. 118-119) and rising government spending for highways, education, and other civilian purposes also helped to maintain effective demand. But the impression one gets from Du Boff's detailed analysis is that: (1) such civilian programs primarily played a supportive role by socializing the infrastructure, labor-force training, and other costs entailed in the growth of decentralized suburbs and automobile use, i.e., the " |Los Angelizing' of the American economy;" (p. 102) (2) the rapid development of this "automobile-suburb symbiosis" during the Postwar Boom was itself highly dependent on the temporary symbiosis of military Keynesianism, undisputed U.S. hegemony (reflected in favorable terms of trade and the ability of the United States to finance its balance-of-payments deficits with its own currency under the Bretton Woods system), and the international investment boom unleashed by postwar European and Japanese reconstruction under U.S. dominance;(3) corporate capital only supported the state's social expenditures as long as they were not perceived as a "real or imagined threat to business freedom of action and profits," and this perception itself depended on the favorable international conditions associated with undisputed U.S. hegemony. (p. 130)

By the early 1970s this regime had already corroded its own pre-conditions. The late 1970s ushered in a new era dominated by the increasingly desperate efforts of corporate capital and the U.S. government to reassert full control over the domestic and international environment. Since the various contradictions produced by this capitalist reaction have been often analyzed by the editors of this Review, it is unnecessary to rehash them here. Suffice it to say that Du Boff convincingly shows the dependence of the weak cyclical recovery of the 1980s on an unprecedented expansion of private and public debt which can only be destabilizing in the long run. The results of deregulation, private and government attacks on organized labor, and the erosion of the U.S. welfare state (which was always minimal by developed country standards) "do nothing to dispel the view that the chronic problem of capitalism is insufficient private-sector aggregate demand to keep production and employment growing." (p. 139)

There is one extremely important area which Du Boff might have dealt with in more detail: the relations between the history of class conflict, the evolution of corporations' production and management structures, and the "considerable social stability" of U.S. capitalism in the post-Second World War era. (p. 185) To see this, it is necessary to retrace our steps to the crucial transition from early capitalism to mature monopoly capitalism in the late nineteenth and early twentieth centuries.

As Du Boff notes, the development of productive capacity during this period "was biased toward capital-using, labor-saving methods" (p. 31). Although this labor-saving bias was initially also encouraged by labor shortages, by the late twentieth century immigration and the ruin of numerous small businesses were providing an abundant exploitable labor force. Henceforth the main motivation for capital to mechanize production came from the "enormous power" to intensify the exploitation of workers' labor power that lay in the ability "to subdivide it into precise tasks, and to equip it with specific types of tools, machines, and factories." (p. 34) The problem here is that Du Boff basically treats this process as completely unproblematic, whereas in the real world it is always the object of continual class conflict in and over the workplace organization. This is not to deny that initial efforts to deskill and mechanize production were largely successful - due in large part to capital's ability "to orchestrate ethnic [and racial] differences among workers and to play off craft unions against "radicals.'" (p. 34) Rather, the point is that in order to draw useful political conclusions from U.S. economic history we need to grapple with the complex interactions between class conflict, overaccumulation, and the development of "[n]ew products, enlargement of markets, and changes in organization" in the corporate sector. (p. 172)

When capital was centralized in large-scale corporations, and corporate capitalists mechanized production to increase their control over the labor process, the economy became segmented between: (1) a capital-intensive, relatively high-wage, monopolistic industrial sector, and (2) a less capital-intensive, low-wage, price-competitive sector, primarily in services and smaller-scale manufacturing. This uneven development had several crucial, inter-connected effects. First, the number of relatively high-wage production workers in the corporate sector tended to stagnate. Second, uneven development created new divisions between the corporate- and competitive-sector elements of the working class. Third, under these conditions a "product cycle" of consumption emerged in which a new consumer good (or some newly-differentiated variant of an old product line) was first introduced to higher-income managers and salaried workers in the corporate sector (and also to professionals such as doctors, lawyers, etc.). It was then "trickled down," first to the relatively high-wage production workers in the corporate sector and then (to a lesser degree, if at all) to competitive-sector workers via advertising and "demonstration effects" after its production had become standardized.(1) Constant repetition of the cycle required an expanding corporate salariat employed in advertising, sales, and related functions, creating new working-class divisions within the corporate sector. Hence by the early twentieth century the system was already creating the foundations for its own legitimation via a highly-stratified structure of "mass consumption" involving tremendous amounts of economic waste and ecological damage.

This trickle down cycle and working class divisions were accentuated by two additional factors. First, corporate capitalists found that mechanization of production was not, by itself, sufficient to ensure full control over the enterprise. The new production technologies could not prevent workers from struggling against the dictation of work intensity by machines, especially since in highly-integrated factory processes a slowdown or stoppage in one section of the enterprise could immediately disrupt production in other sections. Moreover, the expanding ranks of advertising, sales, and other functionaries themselves called for supervision and control. Top corporate managers responded by installing hierarchical and bureaucratic control systems which greatly increased the number of supervisory personnel.(2) These hierarchical control systems accentuated working-class divisions, both directly (in production) and indirectly: by reinforcing the wasteful and divisive "trickle down" cycle of consumption and product differentiation.

The second factor that accentuated the uneven development and divisive character of monopoly capitalism in the United States was the historical defeat of the working class in the period extending from the militant upsurge of the CIO and New Deal reforms of the 1930s through the purging of radicals from unions, the Taft-Hartley Act, and the full incorporation of organized labor into a strictly subordinate position in the Democratic Party by the early 1950s. The end result of this phase in the U.S. class struggle was what Du Boff calls the "limited capital-labor accord, permitting annual pay and benefit increases for labor through wage-productivity agreements and commensurate increases in product prices by corporations." (p. 127) Essentially, under this "accord" the unions: (1) accepted corporate management's control over production and investment; (2) abided by the various restrictions on union organizing and strike activity embodied in the Taft-Hartley Act and other laws; (3) supported the bi-partisan imperialist foreign policies of the U.S. government (p. 127). With important exceptions (especially public-sector unions), AFL-CIO membership declined under this accord and remained encapsulated in the relatively high-wage corporate-sector production jobs. This tended to accentuate worker-divisions, especially since acceptance of management control over production and investment meant that the accord did nothing to challenge the divisive trickle down consumption cycle characteristic of mature monopoly capitalism.

In addition to providing an avenue toward the class content of overaccumulation, waste, and "high mass consumption [as] a great social stabilizer for advanced capitalism," the above analysis may lead to a less pessimistic view of the "prospects for basic changes in the corporate order [which] seem small" to Du Boff. (pp. 185-186) Let me quote from a passage by Stephen Hymer which appears to get to the heart of this issue:

The trickle-down system also has the advantage ... of reinforcing patterns of authority and control. [I]t helps keep workers on the treadmill by creating an illusion of upward mobility even though relative status remains unchanged. In each period subordinates achieve (in part) the consumption standards of their superiors in a previous period and are thus torn in two directions: If they look backward and compare their standards of living through time, things seem to be getting better; if they look upward they see that their relative position has not changed. They receive a consolation prize, as it were, which may serve to keep them going by softening the reality that in a competitive system, few succeed and many fail. It is little wonder then, that those at the top stress growth rather than equality as the welfare criterion for human relations.

Hymer's analysis suggests that the class-stratified, trickle down pattern of product differentiation and consumption can only act as a "social stabilizer" to the extent that the system actually enjoys more-or-less continuous growth in a long-run sense. In light of Du Boff's powerful analysis of the current capitalist impasse, the probability of a continued legitimation of the capitalist order along these lines seems quite low. Post-1989 developments have already verified Du Boff's prediction that "[i] n the absence of new autonomous investment demands or substantial increases in the wage share of national income, renewed stagnation will lie ahead." (p. 130) Monopoly capitalism seems to have run out of the sort of "epoch-making innovations" which could instigate a new wave of productive investment, and with the end of the Cold War a military build-up "on the scale of a Vietnam or a Korea no longer seems likely." Especially in the current era of capitalist reaction, significant increases in the wage share or in socially-productive government outlays "will not be placed on the political agenda of the two major parties" because this would conflict with the dictum that the "determinants of profit ... must be controlled or predominantly influenced by corporate capital." (pp. 125, pp. 185-186) With economic stagnation and intensified global competition, even the bigger corporations like IBM are finding it difficult to maintain the reward systems for salaried workers (guaranteed employment, upward mobility in the corporate ladder) that are important elements in bureaucratic control. The possibility of an erosion of working-class divisions may increase as more and more members of the corporate salariat find out what class they are really in.

Of course, in the absence of a resurgent working-class movement, stagnation and intensified competition may just as well cause people to seek individualistic solutions to their problems and to strive even harder for the increasingly scarce positions of material comfort (not to speak of human fulfillment) that the system is capable of producing. There will be no shortage of reactionary and neoliberal ideologies and politicians (reinforced by the capitalist media's incessant stream of distortions) to validate such behavior patterns. All the more reason for the left to emphasize that the real question facing the working class is that of socially-irrational competition under capitalist control versus collective-democratic control over the production and allocation of investible surplus in order to maintain and utilize productive capacity for the satisfaction of the individual and collective needs of the entire society - including a reversal of the ecological damage wrought by capital accumulation.

NOTES

(1.) Stephen Hymer, "The Multinational Corporation and the Law of Uneven Development," in The Multinational Corporation: A Radical Approach: Papers by Stephen Herbert Hymer, (New York: Cambridge University Press, 1979) p. 59. (2.) Richard Edwards, Contested Terrain: The Transformation of the Workplace in the Twentieth Century, (New York: Basic Books, 1979). (3.) Hymer, op. cit., p. 65.

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