Modern capitalism full transcript

Issue: 162

Michael Kidron

Introduction, by John Rudge

Mike Kidron (1930-2003) was a towering figure in the history of the International Socialist tradition.1 When Mike died in 2003, Alex Callinicos wrote that he “made an enormous contribution to the Socialist Workers Party’s development during the early years of our tradition”.2 Ian Birchall reminisced that “all of us who learned some of our Marxism from Mike Kidron will continue to be indebted to him”3 and Chris Harman described him as “probably the most important Marxist economist of his generation”.4

Kidron was, however, not only an economist. He was an activist, a theoretician, a teacher, a mentor and much more. His most important theoretical development may have been the “Permanent Arms Economy” (PAE)—one of the intellectual bedrocks of the IS tradition—but his work extended so much further than this. His output over almost a quarter of a century was varied, original, challenging and often provocative. Nowhere was this more true than in Mike’s contribution to the International Socialism journal’s 100th issue (of the first series) in July 1977.

That issue of the journal had a focus on “the tasks of theory today”. It started from a presumption that IS theory had, in the past, met the demands placed upon it as “an analysis of contemporary capitalism in terms of its impact on working class consciousness”.5 But it also expressed a new realisation that by 1977 the boom years of the post-war period were behind us, and the world of the late 1970s presented new problems. In short, SWP theory needed updating.

One primary area of analysis needing attention was the party’s understanding of the economic crisis; another was its understanding of the role of the state in contemporary capitalism. Callinicos, as the managing editor of the journal, explained these twin challenges thus: “We need to decipher the dynamics of the crisis, just as we did those of the boom. There are a number of trends the crisis has brought into sharp relief. One is the tendency for the state and private capital to fuse into a single national capital”.6

Kidron was asked to write an article and he took on the challenge with gusto in a short essay titled “Two Insights Don’t Make a Theory”.7 History seems to remember the essay primarily for Mike refuting his own theory that the “Permanent Arms Economy” could explain the post-war boom. In fact, in the article, Mike describes that aspect as “the second string”. The article’s first purpose was to push forward the IS understanding of its theory of state capitalism and to make it relevant to new times and new places. In particular, Mike stated that a trend towards “state capitalism” becoming a predominant form of society was far advanced, not only in the eastern bloc, but also across the West.

To the SWP, Mike’s contribution was certainly “original, challenging and provocative”. Callinicos tells me that:

There was no prior discussion with Mike about the content of the article, which was indeed a bolt from the blue. My reaction was to consult Chris Harman and we quickly agreed we would publish the article but with a reply from Chris. I actually wrote a bit of Chris’s reply, on the differences between productive and unproductive capital—Chris wasn’t entirely happy with my formulations (I was fresh from writing the main draft of my thesis on Capital), but he went along with them.8

In Chris Harman’s reply titled “Better a Valid Insight Than a Wrong Theory”, he summarised his view of Mike’s piece in one sentence: “As usual, Mike Kidron’s article combines three things—immensely useful insights into the development of capitalism; a way of presenting these insights which is abstract in the extreme and which obscures much of what is said; and practical conclusions that do not by any means follow from the analysis and which, if taken seriously, could be very dangerous”.9

I do not intend forensically to analyse each contribution here. They are both available online in the Marxist Internet Archive. However, the Kidron-Harman exchange was conceived as an important SWP debate. The two contributions were published together under the title of “World Capitalism Today”. As Callinicos wrote:

Michael Kidron in his article in this issue argues that this tendency [for the state and private capital to fuse into a single national capital] necessitates a radical rethinking of some of the central concepts of Marxist political economy as well as the theory of the permanent arms economy and the political strategy developed from it. Some of his conclusions are controversial—for example, he now claims that the permanent arms economy cannot explain the post-war boom. Chris Harman’s reply challenges these conclusions and the analysis from which they are drawn.

Even if we share Harman’s disagreements with Kidron, it is clear that the trend towards state capitalism even in the Western capitalist bloc has many implications—for example, for explaining the mechanisms underlying the endemic inflation that has accompanied the crisis, and for the theory of productive and unproductive labour, which Marx developed on the assumption that productive capital was almost wholly private capital. These and other questions need to be explored in future issues of this journal.


Today the prospects for building a revolutionary workers’ party in Britain are better than they have been for half a century. Unless theory relates itself to the problems of building such a party it condemns itself either to sterility or to the academicism and eclecticism of so many left journals today.

Nonetheless, theory cannot develop without critical and open debate. The exchange between Kidron and Harman in the present issue is an example.10

Without doubt, Mike’s article and Chris’s reply did resonate in a host of other discussions. However, for many readers today, particularly those from the post-Margaret Thatcher era, the idea of a “Western” state capitalism to the degree Mike was talking about might seem outlandish—but 1977 was a different time.

If you are a reader of International Socialism today, you might be interested in why the current (second) series of the journal was established. The introductory editorial to the first issue in July 1978 tells us that:

There are at least two main areas of Marxist theory where we lack, and urgently need, adequate answers. These are (a) the implications for the critique of political economy of the enormous growth of the state in the West, and (b) the role of the family, women’s oppression and domestic labour in the reproduction of the capitalist system as a whole…

On the question of the role of the state, we publish an article by Colin Barker, “The State as Capital”.11 Along with a number of recent German theorists, he attacks those like [Ralph] Miliband and [Nicos] Poulantzas who pose the existence of the state outside the framework of a critique of the political economy of capitalism itself. But unlike the German school, he goes on to argue that the state sector is not limited to the reproduction of the general conditions for capitalist production, but can, and increasingly does, take on the role of directly productive capital. Again, the importance of this question, both in terms of providing the necessary underpinning for debates that took place in the first series of International Socialism (such as the debate between Harman and Kidron in IS 100 on the “Arms Economy and State Capitalism”), and also for providing the tools to understand the state in Western capitalism today, cannot be overestimated.12

Regrettably, in terms of ongoing debate, what was not appreciated in July 1977 was that Kidron’s contribution was, to all intents and purposes, his last active, organisational engagement with the SWP. One consequence of this was that there would be no continuing debate on Kidron’s new ideas that involved Mike Kidron himself.

This is where this current piece of work comes in. Over his long period of activity in the IS tradition Kidron will have spoken at hundreds of meetings—but, as far as I know, only these two lectures have been captured on tape.13 What is more, they are Mike speaking at the Marxism Festival in July 1977, around the same time as his contribution appeared in the 100th issue of the journal. Even more saliently, they are Mike speaking on the subjects of “Modern Capitalism” and “The Crisis”. Up until now, all we have had to go on regarding Mike’s new ideas in 1977 were his 4-page International Socialism article, which he said himself had: “A lot missing even in the abstract model I have pictured”. Now, at last, we have him delivering, in his own words, some meat to put on the bones.

What does some of that meat tell us? First of all, it is worth clarifying that you will not find anything new on Kidron’s controversial backtracking from his theory of the Permanent Arms Economy. To follow that you will need to refer to the Kidron-Harman debate in International Socialism. Over the course of the full three hours of Mike’s two lectures, all he has to say on PAE is: “I do not want to enter into an argument about the Permanent Arms Economy—which I have always felt a bit abstruse, has always been worrying me—but now I think I have got it.”

Of course, Kidron was not the only person to feel that PAE was abstruse, difficult to understand. Its interpretation, even within IS, was not monolithic. In the “Introduction” to his essay “Some Notes on Capital and the State”, Colin Barker agreed:

We have been identified with the theory of the “permanent arms economy”, which theory I think we have left scandalously underdeveloped and unclear. In the contributions to recent discussion by both Mike Kidron and Chris Harman in International Socialism issue 100 I detect clear signs of unease about this theory, and I want to suggest that this unease is very proper. Not because massive arms spending in the post-1945 world has not had very significant effects on the form and length of the long boom, but because we placed too much weight on that one factor, and did not properly theorise its relation to other very important developments. In a sense, we either theorised badly, in a more or less Keynesian mode, or we did not ask exactly what it was we were trying to explain with the “arms economy” analysis. The “arms economy” theory demanded that we consider a number of general theoretical problems, about capitalist crisis, about productive and unproductive labour, about the role of the capitalist nation-state in capitalist reproduction, about the place of “luxury” production, which we either ignored or actually got wrong.14

So, if we do not learn much extra on PAE, what can we learn from Mike’s two lectures? What are the positives? What are the negatives?

Very much on the positive side are some of his insights into the changed nature of capitalist crisis. In 2019 we are still living with the effects of the crisis that started in 2008. That is much longer than the traditional trade cycle of old. But that we would see prolonged crises like this was something that Mike suggested. He also talked extensively of how, in the changed conditions he saw, the system could not, effectively, get rid of its “dead wood”—the traditional method of the weaker capitalists going to the wall in order that the stronger capitalists could survive and then grow. No-one who has read a newspaper or journal over the last decade can have escaped one of the most-used words—“zombie”. We have had “zombie capitalism”, “zombie banks”, “zombie corporations” and “zombie firms”, to name just a few. What it meant in each case was that entities were living on, artificially being kept afloat well past a time when, in previous crises, they would have gone to the wall. They might have been “too big to fail” or failure might have been politically inconvenient—a host of reasons—but again it is something that Mike highlights. A third item that struck me was his description of the interweaving of the state and the banks and the ability for central banks to print money in order to prime the system. He could never have imagined Quantitative Easing, but, to contend with the current crisis, the British state has literally printed £435 billion of new money since 2016!

Some of what Mike said regarding the crisis was not terrifically controversial, even in 1977. Much was right. His major contention that there was no current answer to the crisis for the capitalists was not. Mike was, however, right in another area, where he was running against the SWP stream. Ian Birchall gives this interesting comment:

When Mike notes that “throughout the world, crisis or no crisis, the political tendency is towards a sort of social democratic centre or the liberal centre” and argues that there “are special reasons for the Chile experience”, he was right and Cliff and the rest of us were wrong. Throughout 1974 and 1975 Cliff insisted that the choices for Portugal were socialist revolution or a Chile-style solution. But a couple of months ago I was at a meeting of ex-IS comrades who had been in Portugal in 1975 and one recounted that Kidron had come to Portugal in 1975 and prophesied that there would be a social-democratic solution.15

Mike’s analysis rewards reading and re-reading. There is a lot of good stuff there. Turning to modern capitalism and Mike’s views on the transition to “state capitalism” as the dominant form. This was contentious in the extreme in 1977. With the passing of time it has, in large parts, been found wanting. However, there is an important point of clarification that we learn from the lectures—the fact that, in Mike’s view, state capitalism is not something that fully existed. It was a tendency that had been, and still was, ongoing. Mike explains in his second lecture that:

When I talk about state capitalism, I am not talking about something that happened Tuesday, when we had the first lecture. I am not speaking about something that is fully developed, fully rounded out, some sort of a pure model. I am talking about a tendency. A tendency which had its greatest lunge forward, the crucial lunge, the dialectical leap, in the period of the Second World War and immediately thereafter. It was with that peacetime adjustment to the destruction of the Second World War—the changes caused by the Second World War… So what I am saying is that there is a historic continuum. That within that historic continuum, there are leaps, there are changes, that we have to take account of. The changes that occur affect every aspect of the capitalist system.

Notwithstanding this, the very thought that state capitalism in the West had reached the stage that Mike suggested found no support within the SWP. The views of Harman and Callinicos from 1977 are on record. Here is how Callinicos describes it today:

What was controversial was (i) the projected triumph of state capitalism, where Mike was completely and damagingly wrong: Chris Harman was far nearer to the mark in developing a framework in which partially contradictory tendencies towards internationalisation and statisation co-exist (this is what I was defending in my own intervention)—this allowed us to accommodate Mike’s valid points (important against the kind of argument Nigel Harris later developed) while recognising the power of the tendency towards what we’d now call globalisation; (ii) he simultaneously underestimates workers’ strength (then at its peak) and argues that capital can’t diminish it. This partly because of mistake (i)—coming were Thatcherism and the Third World debt crisis, which imposed the imperatives of globalised finance (anticipated by Chris in his reply), helping to force the restructuring of production that was made possible by, but also facilitated, all the defeats workers have suffered in the North. But it is also because Mike seems already in 1977 to have been developing the idea that we find much more developed in the piece John Rees published in 2002 that capitalist development depends on free resources and that these are running out.16 He underestimated capital’s room for manoeuvre; this is important because the same idea is popular today, eg in the work of Jason W Moore.17

Another area of Kidron’s argument that provoked significant criticism was his seeming to downplay work in the trade unions. Birchall focuses on this aspect and refers to Tony Cliff as being “shocked”.18 The lectures do, at least, give a slightly more nuanced view. Mike specifically says that the SWP should still be active in the unions. Importantly, he goes on to say that fighting there purely on the questions of wages and conditions is no longer sufficient—one needs to fight in the unions and the Rank and File groups on a broader range of issues that impact members. It was a point that the Cuban Marxist Sam Farber had made in a report he completed on his visit to IS in 1973. Interestingly, Kidron was one of only half a dozen people in the UK who received Sam’s report.19 This wider activity is precisely the “political trade unionism” that the SWP espouses today.

Even so, it is hard not to conclude that the historic continuum has, since 1977, been moving in a direction that Mike did not foresee. Thatcher and her frontal assault on the trade unions, globalisation, neoliberalism, privatisation, the move of social democracy ever further towards the centre ground, state emasculation of trade unions via restrictive legislation, the gig economy and the change in the nature of work are all aspects that have, indeed, changed the capitalist system—but not always in Mike’s expected direction.

All that said, we should not throw the baby out with the bathwater. Globalisation and a form of state capitalism are certainly not incompatible. As Harman argues in his 2009 book Zombie Capitalism: Global Crisis and the Relevance of Marx:

All the advanced capitalist states still maintain historically very high levels of state expenditure, only surpassed historically during the time of total war. And although business often complains about the level of taxation, it never seriously suggests going back to the level of expenditure of a century ago. The reason is that capitals today, far from not needing states, require them as much as—if not more than—ever before.

They need them first because the continued concentration of capitals, in particular geographical locations, necessitates facilities that are not automatically provided by the operation of the market: police, judicial systems; a framework to limit the defrauding of some capitals by others; at least minimal regulation of the credit system; the provision of a more or less stable currency. Along with these they also need some of the functions fulfilled by the state during the period of the state-directed economy: regulation of the labour market; ensuring the reproduction of the next generation of labour power; the provision of an infrastructure for transport, communication, water and power; the supply of military contracts. Even the big multinationals, with half or more of their production and sales located abroad, still rely for much of their basic profitability on their operations in their home base, and therefore on what a state can provide for them.

The overall conclusion has to be that corporations, whether multinational or other, do not regard a state that will defend their interests as an afterthought based on nostalgia for the past, but an urgent necessity flowing from their present-day competitive situation.

The successor to the state capitalism of the mid-20th century has not been some non-state capitalism but rather a system in which capitals rely on “their” state as much as ever, but try to spread out beyond it to form links with capitals tied to other states. In the process, the system as a whole has become more chaotic.20

Whatever one thinks, one could never say that the state capitalist element of Mike’s argument is of no value just because it did not come to pass. As Harman wrote, it contains, “immensely useful insights into the development of capitalism”.

The debate at Marxism 1977 was itself, I think, also extremely important. Callinicos has a section in his 1982 book Is There a Future for Marxism? called “The Theory of State Capitalism”, part of which, in my eyes at least, leans heavily on some of what Kidron had to say at Marxism. In fact, I could not help noticing that on page 211 of the book, Alex gives us a re-run of the “billiard balls colliding” simile that he used in his own contribution to the debate in Mike’s first lecture.


We have discussed whether Mike was right or wrong. It is an important question, but not the only question. I personally believe that a Marxist theory is not a destination—it is a bus stop on the way to somewhere else—and I think Mike would have agreed with me. Take these three extracts from the start, the middle and the end of Mike’s 1977 essay:

It is thirty years since Cliff set out the state capitalist analysis which has been the main theoretical nutrient of International Socialism, its forerunners and its heirs. In these thirty years capitalism has re-modelled itself so radically that only the freest and most daring imagination of the time could have sensed what was to emerge…

In its day, to depict Russia and the eastern bloc countries as state capitalist was a profound insight, of critical importance to IS and to the revolutionary left at large. But the analysis was never a general theory. It was incapable of incorporating “state capitalism” into a broader picture of capitalism as it was evolving, incapable too of itself evolving to take account of the changing structure of capitalism…

In retrospect there were a disturbing number of loose ends left by IS’s originally illuminating but unconnected insights into contemporary capitalism. They need not remain loose ends. They can be woven into a general theory; and they need to be. For without theory no organisation can do more than ride the tides of working class consciousness, which might be exhilarating as sport but is irrelevant as revolutionary politics”.

To continue with the analogy, we might say that Mike got on the bus and it moved forward one stop. Harman, Barker, Callinicos and others climbed aboard for the onward journey—but, unfortunately, Mike got off. Had Mike stayed aboard the “SWP bus”, it would only have been a matter of time before his active mind and practical instinct saw the need to move forward once again.

When he died, Mike left behind an unpublished manuscript that he had been working on for some years. A small extract was published in International Socialism in 2002 in which he had formulated a new understanding. He described the “market system” as having a second phase which he called its “middle, national economy or state capitalist phase” and he continued by saying that this second phase had reached its limits “in the third (and fourth) quarters of the last century”.22 He had, indeed, already moved on, developing and building on his theory.

Over the years, Harman and Kidron had huge areas of agreement—Chris always made it clear how much he learned from Mike. However, they also had a whole number of differences. It is therefore appropriate to leave the last word to Chris, who wrote: “About the importance of Mike’s contributions to Marxist theory we never had any doubt. No adequate analysis of world capitalism in the 21st century can succeed without building on them”.23

Modern capitalism
The transcript of a talk given by Michael Kidron and of the discussion that followed on Tuesday 5 July 1977, the first of two sessions that he gave in the “Capitalism and Crisis” course at Marxism 1977.

Comrades. I do not know how many of you have been on the Grunwick’s picket line. You might have noticed, or rather, some people might have noticed, that it is not a normal sort of strike in the sense that there is a body of workers who are confronting an employer and they are slugging it out between them, with only a distant interest on the part of other workers and on the part of the employer’s supporters. There is much more involved. There is something happening in the street. And there is also something happening in the corridors of power.

Those that are on the picket line will obviously find as an interesting thing what is happening and the tactics that are adopted there; but as interesting at least, is why it is that it became a strike of significance to a large body of workers, and of sufficient significance to have turned into a political football.

There is no need to go into the details. What can be said fairly simply, is that the strike relates to government labour policy. It relates to the relationship between the state and the trade unions. It is a test of whether the trade union bureaucrats are getting some sort of payoff for their support of the Social Contract and Labour government economic policy generally. It is therefore seen also as a test for a vast body of workers, a test of their influence over the course of events. It is, therefore, quite an important strike, and it raises a number of questions that I feel we have not looked at sufficiently closely in the recent past.

Questions like, how integrated the trade union machine is in the state? How different or similar is the capitalism we live in now to the capitalism of, say, 40 or 50 years ago? Has there been a significant qualitative change in the political environment in which we live? And, I will try to show that there has been a significant political change, and I hope to do it very simply. I will go from one sector of our activity to another, and one sector of our enemy’s activity to another, and try to compare them with the image that we have of those sectors, and the image we have had for a long time. I want to see whether the reality, or, as I see the reality, is similar to that image, or is it slightly different?

The working class and the reproduction of labour power

One starts off with the workers—and there is one thing that we can say that no-one is going to disagree with. That the workers are the dispossessed, they are members of the working class insofar as they work for capital, producing a surplus for capital. No-one is going to argue about that. We might, however, start arguing about who are members of the working class.

Up until recently, there might have been a reason to differentiate between two sorts of workers; those who were members of the working class, creating a surplus for the capitalists and those who were members of the workforce who did not necessarily directly or indirectly create a surplus for the capitalist.

In previous periods, it is very difficult to say when the transition came because the transition has been a very gradual thing, you could say that the reproduction of the workforce or the reproduction of the working class was something that capitalism enjoyed. But it was something that capital itself did not engage in. It happened out there. In recent capitalist countries it was fairly simple. It happened in the peasant sector—workers were created, they were shunted into the town. I am exaggerating—obviously—after the first generation of workers, there was also a creation, a reproduction of labour power in the towns. But there was always a very large stream of workers coming in from the countryside into the towns. People who were not workers in their origins, people who were sustained initially in their early growth and socialisation period by the peasant sector. Forget about the definition of the peasant sector—the key thing about it is that capital itself did not invest. It was not required to create the workers that emanated from the peasant sector. That still goes on to a certain degree, but much more of the labour force is now a settled labour force worldwide.

The working class, those people that directly or indirectly create surplus for capital, those workers are a fixed population, and a very small proportion of them are coming in from outside the system. So what has happened is, to put it very crudely, and it is something that obviously needs a lot of discussion to refine, that capital itself has found it necessary to create the working class, to renew the working class and especially to renew a working class that is of the technical level that is required for capitalist production today.

I do not want to enter into arguments about the degradation of labour in modern capitalism.24 There is a lot of degradation that goes on in the sense that skills are being lost, but there are a lot of other skills—social skills, skills that you do not actually associate with any particular job—that are necessary for modern capitalism. A British worker that cannot read is somebody that cannot actually work, cannot produce the surplus that capital requires. An American worker that cannot drive is somebody that capital can hardly use.

So not only is there a demographic aspect to this, there is also the “what is exploitable material” from the capitalist point of view. And so capitalism—or rather, capitals—has found it more and more necessary to involve itself in this reproduction of an exploitable labour force.

It started well back in the last century with the early Education Acts of the 1860s, 1870s—I do not remember exactly when. It has been increasing decade by decade in the spread of welfarism—but since the war it has really taken off. Since the war with a commitment that we might think is a purely ideological commitment, but actually it is a real commitment on their part to a welfare state that signifies their involvement or the necessity that they have to be involved, in the reproduction of labour.

What that means is that now there is a vast body of workers who are engaged as workers relating to capital, because it is in capital’s interest that they relate to capital. A vast body of workers who are reproducing labour power, reproducing the working class.

I do not know how many they are. Using the very crude statistics from the breakdown of the labour force you find that, in the category called “Community, Welfare and Personal Services”, there are something like six and a bit million people on the payroll. A few generations back they numbered very few. A few generations before that, and there are not that many generations in the history of capitalism, they would not be considered members of the working class.

What I am saying is that given the decline of labour as a free supply from outside the capitalist system, given the necessity for capital to invest in the creation of an exploitable labour force, in the creation of the working class, given that situation, capital has found it necessary to employ, to bring into the working class, a huge number of people. Millions in Britain, millions elsewhere in the centres of the capitalist system.

The process I am sure will go on. There are still large numbers of people, perhaps six or seven million in this country, who are doing the same job, but are not considered members of the working class, except through marriage.

I have no doubt—well let me say that I do have doubt, but it is possible—that wages will be paid for housework at one point or another. It is in the logic of the extension of capital to the investment in labour power. As soon as housewives or mothers are paid wages for housework, once again we have a vast formal extension of the working class.

At the moment I would include them as active members of the working class relating to capital that needs their services, even though capital is, as yet, not paying for it. So what has happened is that the working class has increased in size. Equally important, the working class has increased its size as a proportion of the workforce, which is always the vast majority of humanity.

And one other thing has happened which is important. It is that the new workers, and really I should expect that they constitute more than half of the working class, are engaged in a job, which is qualitatively different from the job that the working class has traditionally been engaged in. That is they are creating, dealing with, inculcating a view, socialising, restraining, structuring, God knows what, they are doing things to people, to other members of the working class—and this, of course, leads to a fairly different approach to work.

It is all very well in the traditional manual trades to say, if you can get away with it, just splash some paint over the crack and see whether it can get through the inspection. Who the hell cares about the product of your labour, or about the purpose of your labour, or who anyway is responsible to the activity that goes on in the name of production? Now, it is very difficult to come up to an old woman who has broken her hip and is sitting in a hospital and for one nurse to say to the other, “just do a paint job on her, forget about the hip”. Something changes when the object of your labour is your class, when, even if it is not your class, it just happens to be a human being. Something changes in your attitude to the work.

The traditional attitude which we have always upheld, of aggressive ­irresponsibility, of alienation upheld as something to be desired towards the forms of work, how you go about it, about the product of work, that is extremely difficult to pursue in that vast sector which covers the renewal of labour power.

So one of the accompaniments of the extension of the working class has also been a fuzziness in the traditional view of work that workers have upheld. I am saying here that it is difficult to avoid taking issue with the aims and the content of the work that we do.

A subaltern trade union bureaucracy

Now, obviously, if the working class has changed in its size, its composition and its attitudes, then the next thing to look at is the trade union movement. Here there are lots of things that have happened, certainly since the war. We know that the trade unions have increased their size and coverage incredibly since the war. We know that they are still expanding fairly fast and expanding in the white collar sectors of workers. White collar sectors are particularly the ones that I have singled out as sectors that are new or that are most representative of the tendency in this new stage of capitalism.

Even in a period of mounting unemployment, the number of members of the trade union movement is growing and that is a considerable achievement in terms of the coverage of workers. But the actual coverage by the trade unions of the working class is less than it was before, because the working class itself has grown so rapidly since the war. So although it seems that the trade unions have grown, they have become weaker than they were 40 years ago, at least numerically.

There is another thing that has happened that seems very significant. We have always said that the trade union bureaucracy, as individuals, use their position in society as the straddlers between two contending classes to force their way into the ruling class. Force their way either as members, in other words, to be incorporated into the bourgeoisie in one way or another, or certainly force their way in psychologically—they actually belong, they feel that it is right that capitalism go on. They feel that their job is to temper the aspirations and the violence of their members and it has always been true. Nothing has changed in their approach, either to workers or to capital. They have always used workers to feather their own nests. They have always served capital as a restrainer of the workers.

However, something different has been happening since the war. Before then it was only on the rarest of occasions, in times of crisis, that the trade union bureaucracy had been called in as part of the policy-making mechanisms of capitalism. It is only since the war that it has become normal for them to act as part of the policy-making mechanisms of capital.

Now, whether you see it in the association of the Jack Joneses and so on, with the various forms of wage control, whether it is called Social Contract or whatever—or whether you see it in this slow-moving towards some sort of trade union participation in the running of industry.25 Whether it is through some sort of emasculated version of the Bullock proposals—or whether it is through some other mechanism which is bound to be suggested as a compromise solution to the contending interests in Bullock.26 However you see it, there is a very marked shift towards the integration of the trade union bureaucracy. I am not talking about integration of the trade unionists. Their relationship to the trade union bureaucracy is what it always has been, or possibly it is more distrustful now than it has been in the past. There has always been a sort of ambivalent relationship—that we need the structure of organisation in order to confront capital—but at the same time we distrust the people who keep that structure going.

The workers’ attitude to the trade unions has not changed. The position of the trade union bureaucrats within the larger society has. I think it has changed qualitatively since the war. It is now expected, it is part of the normal running of the system, that the trade union leadership be in constant communion and almost constant communication with the people who run government, and through them the people who run business as a whole.

So a) the trade unions are weaker in terms of coverage, although formally they seem to be growing and getting stronger in terms of coverage and b) they are stronger, or rather the bureaucrats are stronger, in terms of their being part and parcel of the governing or, as Harold Wilson would put it, the governance of the country. There is also a third thing that has changed in the nature of trade unionism since the war. That is their increasingly narrow relationship to capital.

In the grand old days of independent trade unionism, although there were very many trade unions that were plant-wide or company-wide, there were also very many trade unions that were larger than company-wide that confronted competing bosses with one trade union will or with one organisation of workers. They did not do it very well. But, at least in principle, that was the strength of the trade unions, that the solidarity of their members stretched beyond the actual capital that they were employed by. They covered more than one capital. Now, the tendency is for the trade unions to become national organisations, but for capital to become international, or rather for capitalism to be international.

Even, as you are going to hear me say later, countries are becoming single capitals. I am also going to say that the internationalisation of capital is not as pronounced as it might be thought to be if one looks at the multinational corporation and so on.

In spite of the seeming internationalisation of capital, what has tended to happen is that the trade unions have organised more and more on the basis of the national sphere of operation, not on the basis of international action. Now, there are international actions. I do not want to deny that there is a sense in which some trade unions are moving along the funnels provided by the multinational corporation, which we will come to later.

There is a sense in which nationally there is competition between trade unions, but the broad direction has been for the trade unions to become larger and larger and more and more organised to confront national capital in single confrontations, whether they are national bargaining units, whether they are strikes that have a national amplitude. Whatever it is, it is within the country that the trade unions confront capital. And if, as I shall be saying later, capital itself has become nationalised in the sense that we are talking about a world of state capitals. What really has happened is that the spread of the trade unions between capitals, the confrontation between a single trade union and many competing capitals has changed. That the single capital confronts the single trade union. At the best of times the single capital confronts more than one trade union, at the worst of times the advantage that trade unions had before of having a wider organisation, a more centralised organisation than the bosses—that advantage has also gone since the war, or is on the way to disappearing.

I think the new period that I am talking about is weakening the trade union structure and weakening the effect of activity within that trade union structure. I am not saying that we should not be active in the trade union structure, obviously not. It is just that the relation of forces has changed. The trade unions cover less of the working class. The trade union leadership is more integrated into the control of the country, integrated with capital. The trade unions themselves, because they operate on a national scale and capital now operates on a national scale, have lost a measure of their bargaining power as against individual capitals—because they only relate to an individual capital.

A world of state capitals

Who have they lost the power to? It is not as if business, seen as private firms, has gained tremendously from the loss of trade union power. I suppose that we might say, much as we say it of trade unions, that there has been an integration between business and the state, as pronounced as the integration between the trade union bureaucracy and the state.

Now, I do not think I really need to speak about that at length. We know that there is explicit planning and implicit planning. We know that it is impossible for a large firm to set up any sort of operation without getting a multitude of government permissions and so on. We know that the state is increasing its activity as a producer. We know that it increases its activities as a producer not only by taking over lame ducks, but also by investing in new industries. Whether they are the plutonium monsters of the power stations or whether it is in some other area—whatever it is, there is a growing integration between the state and private industry. It also does not mean that there is not a great deal of conflict, and really heated conflict, between different sections of the private capitalist class.

Obviously those that can measure up to international competition feel the necessity of support by the state to be less crucial than those that cannot do so. Take a company like ICI. It has people sitting on more than 200 government committees on a permanent basis. It never makes a move without having some sort of backing from the state. At the same time ICI, in general terms, objects and propagandises against the increasing role of the state, against the increasing control exercised by the state over its operations—because ICI feels that it can confront the German chemical plants in Europe and the American chemical plants in the States. It is a world company that uses its base in Britain, but actually it does not require to be guarded at every point in its empire by Britain.

But take another company like Leyland. If the British state did not exist, Leyland would not at the moment exist. Over here you have the entire spectrum of the private sector. Obviously, Leyland and ICI will have different policies. Different policies about tariffs, they will have different policies about taxation, different policies about Europe, they will have different policies about almost everything. The key thing is that, in general, throughout this post-war period, the integration with the state for the whole lot of them, even those that find it awkward, find it to a certain extent distasteful, even those have become more and more integrated with government than was normal before the war.

Let us move on to the state. I do not need to say that it has not changed its basic function of suppressing the workers, oppressing the peasants, where the peasants still exist, of being a tool of the ruling class. However, it certainly has become more than that. One of the key functions that it has lost, certainly since the war, and it was in the process of losing before then, was the function of knocking the capitalist’s heads together. The function of adjudicating between individual capitals. Now it lays down the law. Now it sets the terms of operation of the various parts of the national capital. But if what I have been saying is true, that the private business has become increasingly a branch of a single state capital, the state which represents that state capital has only one capital to deal with.

Of course, that capital has conflicts, in every organisation there are conflicts between different departments. In even minute organisations with half a dozen people working, there are conflicts between different interest groups. But they do not amount to the competition, the normal relationship between independent, autonomous and yet interdependent capitals. That has moved away from the national arena. Now, of course, there are foreign capitals that operate in the national arena. There are national capitals, parts of national capital, that operate abroad. But one of the distinguishing features of the state, the state that used to be called the liberal state, the feature which was to act as an objective judge between the claims of the different capitals that were operating within the national terrain—that feature is much less than it was and, in principle, does not exist in the new situation.

What that means is that there has been a fairly important change in the relations of the individual with what we used to call civil rights and the state. Civil rights, the rights of the individual in the bourgeois state, grew up in the era of competition between capitals. If no capital actually was king in one area, if they contended for the market in the national state and, if these contenders were equal in the eyes of the law, and equal in the eyes of the state, there was a certain amount of room for individual rights and liberties to grow. And behind those individual rights and liberties, there was also room for the growth of trade union rights and trade union liberties. Now, if it is true that capital is coalescing into single state capitals, and I am not only talking about Britain, I am talking about it worldwide, it is also true that the liberal virtues of bourgeois capitalism, of private capitalism, are losing their material base. And not only are the liberal virtues losing their material base but also the basis for trade union rights is being undermined as well.

So the state is changing its nature, and, in fact, we are reaching a period of the organisation of capitalism which is much more a pure capitalism than it has ever been before. There is no body, no institution, larger than the individual capital. If the individual capital now is more or less a state capital, that capital has now captured the state. There is no overarching state that can make decisions as between the different capitals worldwide. In other words, there is no monopoly of the armed power outside of the capital itself. There is no control over some fundamental mechanisms like the financial mechanism, outside of the capital itself. Capital has become so big, has become so incorporated, has so absorbed into itself not only the state, but also the monopoly of armed force of the state and the monetary mechanisms that the state used to preside over.

So we have changed. We have moved from the state that was slightly distant from capital, to a state that is part of capital. We have also lost many of the functions of the state. The functions that related to the area of competition between capitals. And capital, of course, has also changed. It is now forced to undertake many activities that it did not undertake before. I have mentioned the most important, the reproduction of labour power. It is forced also to take over the production of waste, which it did not have to do in the past, because it could always expel the waste producing functions to the non-capitalist, or the imperfectly capitalist parts of the economy.

Capital is now forced to arm itself. Capital is now forced to integrate workers into the system in a way that it did not do before. Things have changed. The capital we are dealing with is a different kind of animal. It is still a surplus producing animal, it is still a competitive animal, it is still a ruthless animal, it is still everything that you can say about it. But it is now much more representative of all the actions within society than it has ever been before. It has become society. Whereas before it was part of a section that you can say, this is the capitalist section, this is the non-capitalist section. And finally, the system itself has changed. Capitalism has changed. There are no outside institutions. There is no outside.

If you look at the world, you see there are strong capitals, weak capitals, accumulating capitals, broken-back capitals, capitals that have a future in the world market and capitals that do not have a future in the world market. You have got every variety of the fauna of capital. The world is now carved up into independent states. Those independent states either represent functioning capitals or they represent capitals that would like to be functioning capitals. There is no outside and no third persons in the system. It is a total system. It is also a dangerous system, because each capital is armed.

But it has problems which are peculiar to it. One of the problems I will be dealing with on Thursday, and that is the problem of annihilating capital. In the old system it was very simple. There was a boom and a slump, and during the slump you got shot of all the inefficient capitals. Thus, during the next boom, there were fewer of them, they were stronger, etc, etc. It was fine. It was a way of cleansing the system, of centralising capital, that did not create too many difficulties.

Now, with every capital armed, with capitals really covering whole states, the problem for the system is a fantastic problem. How the hell to get rid of the unproductive bits? How to get rid of those that cannot make it in the world market? How to centralise capital? It is a big problem and it is a problem that I do not think they are going to solve. But it is a problem of the state capitalist system.

What I am saying is that we are in a new era and we have been in the new era for some time—only we are afraid to recognise these things. It is so much more comfortable to sit with your back towards the engine and let the driver get on with it. To look at the course of history passing and argue about whether that tree is relevant to that landscape, or that building really fits. You can become really very erudite about the Russian Revolution and you actually do not notice that the guy is racing you into a nuclear power station and we are all going to blow up as a result, because that is his business. We are specialists in the past.

Now I am saying that we have not given up the past. The past is still with us. There are still workers and they are exploited and there are still capitalists and they exploit. There is a lot that is recognisable, but there is also quite a lot that is new. Whether what is new is the new size, composition and consciousness of the working class. Whether what is new is the increasing limitations being placed on the trade union movement. Whether what is new is the disappearance of the private sector into a joint state-private sector called a state capital. Whether what is new is the development of a new stage in capitalism called the state capitalist stage. All of those things seem to be new.

But they are not the only things that are new—and that is what needs real discussion, because we have not recognised these new things systematically. Of course, every time we are engaged in some sort of activity we come up against the new feature and, of course, we adapt to the new feature in a very empirical way. Obviously, we recruit white collar workers. Obviously, with the growth of the women’s movement we become conscious of the women as members of the working class. Obviously we react. We are not dumb, we are not insensitive, but we have not actually grasped the new situation theoretically. And because we have not grasped the new situation theoretically, we are also I think, liable to make fairly fundamental mistakes in our political practice.

Questions, contributions, discussions from the audience

Anon: What is the evidence for saying that the state no longer acts as an adjudicator between capitals given the role of, for example, the Monopolies Commission or the Takeover Panel?

MK: In the question asking for evidence for saying that the state has lost its adjudicating functions the example was given of the Monopolies Commission. I will take that example.

There has been a shift in the type of activity and the type of proposal that the Monopolies Commission has been giving, not only in Britain, but also in other countries where similar organisations exist within the branches of government.

Now, whereas those organisations were at one time really active in preventing the growth of monopoly, now you find those organisations taking the national interest into account. In other words, they allow through, not in a very systematic way because they are still tied up with a private enterprise kind of ideology, but increasingly they take the national interest into account in this sense. That they allow through very large mergers. Mergers that destroy competition within the country from other national producers in order to enable the country—British National Capital—to confront foreign producers at home and abroad. In other words, if you really look at that detail, and I realise that the word “evidence” comes up a lot, that if you are really looking for evidence, then you must look at the evidence and the evidence is that the Monopolies Commission is more and more favouring monopolisation, so long as they are British controlled firms and using monopolisation as one of the weapons against foreign multinationals operating here or as one of the weapons of the conquest of space in the home areas of the foreign multinationals.

Duncan Hallas: Michael, can you comment on these two propositions please? First, that the most striking feature of the world economy over the last five or six years has been, on the one hand, the extraordinary acceleration of inflation on the world scale and its persistence. Secondly, the faltering of growth. I would like to invite you to indicate how these relatively new features fit into your analysis, given the fact that most of the things you have been describing are, in fact, processes that have been going on over a very much longer period.

MK: How does inflation on the world scale and the faltering of growth fit into the analysis? Very simply, Duncan.

In the private capitalist system there was an outside agent which controlled the supply of money and no capitalist could do anything about it if the bank did not agree—and the bank was not controlled by the capitalists. Ultimately the state more or less controlled the bank, with obvious differences in different periods of time and with different strengths of control by the state, etc. But there was an outside agency and now it is as if [tape is temporarily interrupted]. I would say that the reason for the worldwide inflation is that it is built into the restructuring of the world economy into a state capitalist economy. That each capital now controls the emission of money supply and there are no disciplines, except the discipline of experience but that takes a long time.27

There is also the faltering of growth. I do not want to enter into an argument about the Permanent Arms Economy—which I have always felt a bit abstruse, has always been worrying me—but now I think I have got it.

Leaving that aside, given the analysis that I am presenting here, the growth fits into it very easily and also the faltering of growth fits into it very easily. The growth fits into it very easily in this sense. The forming of a state capitalist system meant a huge rationalisation of the state capitals themselves. It meant a great freeing of rural labour into urban areas. It meant a certain amount of investment to meet those new workers, but nothing like the social investment that had gone on for the previous generation of workers. There was also great saving in the increasing planning within society, within each capital, in the sense that duplication was to some extent eliminated. Whether it was the reorganisation of the textile industry, the modernisation of the textile industry, the reorganisation of the motor industry or the machine tool industry—just think of any industry that has been reorganised by the state. Sometimes it has worked, sometimes it has not.

The key thing is that the building of a state capital has not only led to a great shift in the labour force to more productive occupations—I do not want to say that the others were not productive—from a capitalist point they were—but also in the elimination of a great deal of duplication in production and in the overheads and also a rationalisation of the economy. That released the productive forces, but now it has been done. The restructuring is over, well more or less over.

I am not saying that there will not be a new industry like nuclear power. I am not saying that they will not cut dead wood. That ultimately the new Mini will be on the scrapheap. All those things are possible. But the fundamental restructurings have taken place and we have got to the period when there are no new productive forces to release. They have reached the end of the denial of social overheads for the new workers. The towns are bursting at the seams. The public transport systems are smashed up. The health systems are smashed up. They cannot cope with any more new people. There is also a limit to the amount of new people that they can get because they lead to all sorts of other problems. Not only the problems of resentment because of the lowering of the average social overhead—but also other problems, political problems and so on. They have done the rationalisation as far as they can do the rationalisation—you know, the big rationalisations that took place immediately after the war. They have cut out a lot of the duplication. There is still more to go, but they have cut a lot out.

I do not think they can find new productive powers. That is why the growth has ended. The growth started because the new structure of capitalism released new productive powers. The growth stopped because the structure was in place. Now we have reached the period, and you will be able to quote it better than me Duncan, where the relations of production of an organisation of society form fetters on the productive forces. I think that is the explanation.

Anon: Can you say something more about the importance of multinationals, because they seem to be much more powerful than some of the smaller states in the world?

MK: Yes, of course, multinational corporations are more powerful. A couple of weeks ago I was doing an exercise looking down the Fortune 500 of the top American manufacturing corporations and listing the number of countries whose gross national product is smaller than the turnover of those corporations. Coca-Cola was I think 159th in the list and there were approximately 59 countries that had a gross national product less than the turnover of Coca-Cola.

There are lovely figures like that which you can use to show that this is true. But so what? All you are saying is that there are companies that operate worldwide. We all know the Coca-Cola is an American company operating worldwide because the company itself or that technology, or that kind of organisation, whatever it is, needs a larger market than even the United States can supply. And because it needs a larger market than the United States can supply, it makes agreements with other countries to operate in their territory. In other words, the nature of the world markets changes as well. The world market is not something out there, you know, outside of the national territory. The world market is something inside of somebody else’s national territory.

Pepsi Cola made an agreement with the Russians to get into the Russian home market to make Pepsi Cola. Clearly in order for them to do that, the Russians must have been offered some sort of concessions inside the American home market. There has been a deal and the nature of the deal, or rather, the accumulation of those deals, the total dealing, that forms the world market. That is what the world market is about. It is not a neutral little island called Atlantis, that we all bring our little things to—Pluto Press brings its parcel of books to Atlantis Island and says right that is the market, everything else is non-market. No, the market is in the agreements between the different state capitals to allow sales in those places. So the multinational corporation you can just consider to be the extension, the foreign productive arm, of American state capital. The Moscow Narodny Bank is the foreign, unproductive arm, of Russian state capital.

When the Poles and the West Germans combined to set up a machine tools plant in India, as they have, then you know that multinational organisation is a form of collaboration to create and sell in another market. Part of the worldwide marketing operations, only the marketing operation has changed. Now, instead of making it at home and selling abroad, it is cheaper, easier and more rational for them to make it abroad and sell it abroad. There is nothing very new about it—just the form of activity is different.

Anon [Chris Harman?]: What is your evidence that the proportion of the working class unionised is smaller today than it was in the 1920s? Secondly, what is your evidence that the strength of that unionised working class is less today than it was in the 1920s?

MK: What evidence have I got to say that the unions form a smaller proportion of the working class?

Now it really depends on two things. One of them, the figures. We now know that about 40 percent of people receiving wages and salaries in this country are in the unions. It is a huge proportion worldwide. There are places like the States which are at 16 or 17 percent, places like France with about 26 or something percent. I think that Britain is fairly high, except for the Scandinavian countries and perhaps Australia—I am not sure—but it is fairly high. But still, it is 40 percent. The working class has doubled since the 1920s. In the rest of the world it has more than doubled. Certainly in Europe the number of workers that have come into paid occupations since the war is something like 60 or 70 million. I have not got the exact figure, but it is a huge number like that. So as a general phenomenon, simply on those figures of those paid wages and salaries and the proportion of union members, I would say that in spite of the excellent record of the British trade unions, it has gone down. But that is only one element.

The second one is that I was very careful to define the working class right at the beginning. I said that there are millions of people, because of the changed structure of capital, who are now incorporated because of their relationship to capital, into the working class, that do not even receive a wage. If you accept these as members of the working class—and I know people like the old definitions, but I also know that there is a danger in these old definitions, because they do obscure reality. The reality that I have tried to show is that capital’s structure has changed in such a way that not only do they have to employ people that they would never have employed before for the new function that they have to undertake, but they also have to use them in a more systematic way than they ever did before. That is why the welfare system is so closely integrated into the family. It means that the size and the definition of the working class has to reflect that.

Taking the two things together, you will see that the number of unionised workers is smaller as a proportion of workers than before.

The strength of the unionised working class less than 1920? That I did not say. I said that the strength of the trade unions, or the strength of the bureaucrats, is less. I did say that because the unions confront a national capital rather than confront a number of capitals, that in principle they are less powerful than they were. I did not say that the unionised members are less powerful because it depends very much on other factors also. Not only the numbers of them that are organised, but also the level of consciousness, the level of feeling of security, the level of fight—that is all something that I did not deal with.

Anon: What qualitative differences are there between unions in services and in the productive industries?

MK: First of all, I take great exception to calling service industries, non-productive industries. Productive or unproductive depends on your relationship to capital. The whole point of what I said so lengthily, and probably so boringly, at the beginning was that because capital has to undertake the reproduction of labour in a way that it did not have to undertake it before, it is bringing more and more of the workforce into relationship with it, and turning therefore more and more workers into productive workers.

Now, the differences are less in the trade unions than in the kind of work. The trade unions themselves reflect the kind of work very imperfectly. So if, in fact, the teacher has to deal with the content of the curriculum, has to deal with the development of the pupil, and obviously there are some teachers that just produce the goods in lectures and then those teachers that are much more integrated into development—it can depend on the age group, on how alienated the teachers feel and also with how organised they are in things like Rank and File.28 But there is a qualitative difference in the job of turning a lathe or turning a person—a fundamental difference. The trade unions as they are structured do not reflect that fundamental difference because the trade unions in the new areas, the public services, the things that you call unproductive, they are built on the model of the traditional trade unions. They deal with wages and salaries, they are not structured around the content of the job.

I think that some of the tension between members and trade union structures derives from this. That the trade union does not answer some of the fundamental problems that the members do confront. I know that this is an area where there has been a great deal of debate in some of the Rank and File organisations—about how you deal with trade union issues. Do you deal with trade union issues purely on a wages or conditions level? Or do you deal with them where it seems that you need to deal with them, on something else as well. So although the trade unions themselves are not very different, their membership confronts different kinds of problems, and the trade unions will weaken unless they reflect that—and I do not think they will reflect that.

Anon: Can you say something about the transition from one system of capitalism to the other?

MK: How does one explain the fact that everything that I have said seems to indicate that there should be a smooth transition from the current mixed system of private and public towards a total state capitalism?

Here recently we have the banks against nationalisation, we have had advertising by the ship repairers against nationalisation. I noticed this week in the Economist that one of the leading articles is talking about a solution to the problems of chaos in the nationalised industry through the re-privatisation of the nationalised industries and so on. Obviously there is no easy solution for any capital. They are in class conflict, they are in conflict amongst themselves. There are always different options. If they were to look at the nationalised industries at the moment they would say, “My good God, how inefficient.” The nationalised industry wallahs look at the private sector and say, “My good God, how inefficient because they are so small”. Obviously, there are different interests at work. The private sector sustains a much larger middle class than the public sector. The public sector sustains a much larger petty bourgeoisie, as it were, than the private sector. Those that are going to be slaughtered by nationalisation, the private sector, are going to object thoroughly. They are getting to object in such a way that it appears to be a political objection, an objection in principle.

Actually, it is an objection about the tactics to adopt, on two levels. One level is will British capital as such be able to belt foreign capital? Now, what will strengthen it the best? The nationalisation of this or that industry, the concentration of this or that industry, the thinning of this or that industry, the annihilation of this or that industry.

That is one set of problems. And I have no doubt that you can imagine that as the problems are large that the debates also pretty heavy. There is another set of problems. Who is going to suffer personally from the solution that is adopted? You can imagine also that those who are going to be annihilated as a result of the reorganisation are going to squeal like hell. So even though the banks object to a certain policy it does not mean to say that there is not going to be some sort of progress as a result of reaction to crisis.

Look, nobody ten years ago would have said that the British motor car industry would be a nationalised industry. It was faced with complete collapse. They had to decide. The only rational decision was for them to nationalise it. Nobody ten years ago would have said that what is called Rolls Royce, the premier aero engine factory, would be a chunk of the nationalised industry. They made a balls-up with some new technology that they adopted. They had to be bailed out—it became nationalised as a result of crisis. Nobody would have thought that the state would increase its participation in British Petroleum from 51 percent to 67 percent and then have to hand it back again—except as a result of crisis. But British Petroleum was in crisis.

What I am saying is not that there is a rational person sitting in the middle called Tony Benn, saying, “Fellow directors of Great Britain Limited, I think the best thing to do for all of us is to centralise all our operations in one large operation.” Nobody is saying that. But what I am saying is that unless they do it, they will find that they are increasingly faced with the kind of crisis that British Leyland was faced with. Ultimately they would have to bring in the doctor and if that doctor happens to be Benn, even though he is now right on the outskirts, it will probably be the only thing they can think of at the time.29

Colin Barker: You are wrong about Britain and the trade union figures. The fact is that the trade union coverage of the occupied labour force is rising to very nearly 50 percent and has risen since 1964 which are the figures you are probably relying on.

If you are going to use your second criterion which is the wider definition of the workforce you also need to expand your definition of trade unions as well.

I do not want to comment on your generally rotten method, other than to say that it seems to me a continuation of 19th century evolutionism. You divide the world into two parts—before and after. Everything is either before or after and there is no sense of contradiction in your account.

That apart, we need to talk about what is new and one thing we should note about the new is about politics. The extent to which what you might call use value politics has become very much more important, and not only in Britain. Questions about nuclear power, the content of teaching and education, the whole questions about the hospital and other kinds of welfare services, which are political questions. Now the Lucas aerospace counter-plan, because shop stewards are similarly just producing a counter-plan that they want to print for every one of their workers. The question of aircraft like Concorde or airports. The question of ecology. All of these things are much more important political issues in contemporary capitalism than they were across the boundary line into your past. In the 19th century it was issues like public health and the adulteration of bread, use value questions, but they were clearly much less important politically and much less critical for capital, than they are in the second half of the 20th century.

In a sense, what you are talking about is, in fact, the process of the socialisation of production in capitalism and also questions about the quality of production and of productive activity in society becoming very much more political.

Anon: First of all, you talk about inflation and say there is no outside body to now discipline individual capitals. The fact that this helps build inflation into the state. Now that does not hold on the world level. You have these capitals competing against each other and one of the problems for many countries is they have a relationship with the IMF which is very strong on discipline. Even relatively powerful countries like our own can be disciplined. It is not so that you have the freedom of action that you suggest in this particular area.

The other thing I was unhappy about was your idea of the world markets. What may be true of a comparison between the USA and the USSR is not true of a comparison between the USA and Lesotho or countries like that. About 70 percent or 80 percent of the countries of the world have a balance of payments problem which is precisely because there is an unequal relationship between these. They are not in an equal bargaining position and I do not think your way of looking at it actually shows these contradictions that arise.

Alex Callinicos: Unlike Colin Barker I do want to take up Mike’s rotten method. I think it is really quite fundamental.

What Mike is saying is that what we are moving towards is a situation in which there is a world of fully integrated state capitals. That is to say a situation in which in each country there is a self-contained single state capital which is in control of the situation within that country and which relates, he does not say on equal terms, because that will show some of the problems in his argument, with the other state capitals.

All our objections, about the multinationals, about the Monopolies Commission, about goodness knows what else, our claims for evidence and things like that, simply reflect the fact that the situation is not perfectly realised. It is only something we are moving towards, this situation of fully integrated state capitals, and there are all these leftovers which we hold on to in our old fashioned way. All the things we love, all the things we used to say, all the things that Mike actually used to say.

What I really want to object to is the idea that there is this ­homogenous, straightforward trend towards a world of self-contained state capitals bumping against each other like a lot of billiard balls. The objection about the multinationals is not a simple empirical thing about unrealised trends. It is actually fundamental to how the world economy operates today—that side by side with the trend towards state capitalism is the trend towards the ­internationalisation of production. That is not something that you should simply toss aside. Mike is right to say that the trend to the internationalisation of production takes place within the context of the national state. That all the multinationals have their own home bases. That all of them need their own national states to back them up in situations of crisis. All that is of course true.

But at the same time, once one says that the trend is also towards the internationalisation of production, that overturns any idea that we are moving towards a straightforward world of state capital. What it means is that the criteria of whether or not you are going to end up on top in the game of competition between individual national capitals is going to be dependent on your ability to operate, not as a state capital within one single national unit, but as an international capital. It is not simply a question of the relationship between the US and Lesotho, it is a question of the relationship between the US and the other major advanced capitalist countries. The pecking order within those countries is going to be determined by the relationship, by their ability to operate as international capitals to attain dominance on an international scale.

What that means is the picture, even within the British economy where you can point to British Leyland as the sign of a trend towards state capitalism, is much more complicated because, at the same time that we had the array of agreements to prop up British Leyland, we have had the same array deployed to prop up Chrysler. Chrysler is a component of a multinational American corporation. That is not just some frictional picture we can leave out of the big picture. That reflects the fact that the American capital is a much bigger, much stronger, much more efficient international capital than British capital and therefore is able to disorganise and disintegrate the emerging British state capitalism and actually exploit the trends toward state capitalism within the British economy to its own benefit.

Highlighting that trend towards the internationalisation of production means that Mike’s picture is fundamentally very, very, one-sided. I think that there are fantastic insights contained within it, and I hope that those will come up more in the discussion of the crisis in Thursday’s lecture. However, I think simply to adopt what he has to say about state capitalism in a straightforward way leads to a completely distorted picture of the way in which the world economy is developing.

Anon: I am very much in favour of looking forward not backwards—but you must not forget there are dangers in being long-sighted, as well as dangers in being short-sighted. The danger of being long-sighted is that if you do not look at your feet you can get your boots in a mess! In Mike’s attempt to look so far into the distance I think he actually ignores the real concrete problems that present themselves.

To me it is most horrifically clear that his analysis of trade unionism is not a new position. It was a position that was first developed around 1916 by people who have a similar global view to that which he has. It was not true in 1916—it was a long way in the distance then—and it is still a long way in the distance now.

It really amounts to saying this. Because the trade union bureaucracy is on the same basis nationally as capitals and therefore the trade union bureaucracy cannot confront the roots of capitalist exploitation, therefore we have to radically rethink the traditional Marxist and Leninist position on work in the trade union movement. What a load of nonsense for a number of reasons.

Firstly, the reason why the trade bureaucracy is so integrated into the state is not a sign of the weakness of trade unionism, it is a sign of the strength of trade unionism. The fact is, there was much more of a monopolisation of capital in 1933 than there was in 1916. In 1933 the trade unions were much less integrated into the state than they had been in 1916, because capital succeeded in this country in giving them a bloody nose, in humiliating the unions. There was therefore less need of integration with them. The degree of integration and scale of integration of the trade union bureaucracy with the state over the last 30 years is because of the massive increase in the strength of trade unions.

You cannot argue against it by saying we are now including in the working class people who Marxists 50 years ago did not include in the working class. Because if we now include housewives in the working class, housewives reproduced labour 50 years ago. If we now include teachers, teachers reproduced labour 50 years ago. The fact is, the people who worked in the munitions factory in the First World War could read and write and that was a precondition of working in the munitions factory.

There were many other features, there were more housewives, nevertheless you cannot introduce this argument into the fact that the trade unions are immeasurably stronger and that is precisely why we have integration of the trade unions into the state. That does not mean there is a limitation to trade unionism. What it actually means is that trade unionism, in a period of crisis, raises political questions much more sharply than it did in the past. That is precisely why the trade union leaders are frightened of confronting the national capitals. It is not because they are weak vis-a-vis the national capital. It is because it becomes more and more difficult for them to confront them in a reformist sense.

Take the case of Italy. The capitulation of the Italian Communist Party to Italian capital is not a result of the fact that there is no way in which you can oppose from inside Italy, which is anti-capitalist, without being contained in the system, because in Italy there is a huge chunk of the economy that is very backward, very parasitic, very wasteful. Things the Italian Communist Party will preach on about it at great length—but they cannot confront that without confronting the whole future of Italian capitalism. Therefore they are driven to reformism.

There is nothing in the situation between the rank and file inside those unions that have to be driven to reformism. In the present period the crisis inside the unions, work in the unions, activity in the unions, is much more important, more significant for revolutionaries than it was 40 or 50 years ago.

I think what Mike has come up with is looking so far into the distance that he has been blinded by the sun and he actually does not see the problem that concretely faces revolutionaries.

Sybil Cock: It is useful to criticise the traditionalism in the organisation and what Colin was saying about the politics of use values is a good way of posing it. I think it is absolutely true in terms of nuclear power and the content of education and other things like that we really do not know what we are doing. We can at least talk about it now.

The thing I really object to, in the way you were posing it, is this stages thing—the past into the future. It is a gradual development—people were talking about this five or ten years ago.

But what I really want to ask is in relation to your article in the IS journal. You make some remarks at the end about the political consequences of our analysis being wrong. I would really like to know what you mean by this in practice.

Anon: One point following from the internationalisation of capital.

It would seem that the trade union movement, in combating this internationalisation of capital, has come up with considerable difficulties. I refer to the possibility of getting agreement amongst various countries to implement the TUAC document which was put out by the Trade Union Advisory Committee to the OECD.30 Not that this means a great deal, but I feel that the case of Chrysler and the case of Ford, although the threat was not actually implemented, is an interesting point because you have a situation where you have got the internationalisation of capital where decisions are being made, if you like for the motor car industry in say Detroit, whereas individual trade unions have to operate on a national basis. Apart from international trade secretariats, which I do not think have developed to any great extent, I think this points to a weakening of the trade union response internationally to the internationalisation of capital. I think this is an important point and I wonder what direction you think this will go.

MK: There is quite a lot here. On Colin’s point that 50 percent of the workforce are unionised I do not understand. As far as I know, of the 25.5 million people who are working, there are 11 million people, these are probably 1971 figures, so by now up to 12 million people in trade unions. And so 50 percent sounds more like 40 percent to me but that obviously is not something for discussion. That is something for both of us to race away to the library.31

The crisis
The second of the two talks that Michael Kidron gave in the “Capitalism and Crisis” course at Marxism 1977, on Thursday 7 July.

A couple of days ago, we were talking about the larger picture. What I was saying then was perhaps a bit unpopular—that some of us now recognise that we are in a different stage of the development of capitalism than perhaps we thought we were last week.

This stage is perhaps even more different than to the previous stage, monopoly capitalism, than monopoly capitalism was different to the capitalism of free enterprise and perfect competition. Perhaps there was never a real stage of free enterprise and perfect competition. Perhaps there was never a stage of pure monopoly capitalism. Perhaps there is not now a stage of pure state capitalism. But in the same sense that there was always differentiation between monopoly capitalism and free enterprise, I think we now can dare to differentiate between the stage of state capitalism and of monopoly capitalism—and actually structure our thinking and, as a result of different structured thinking, also, our practice rather differently to what we have done hitherto.

So now, I will be less all-embracing. I will try to show how the understanding of the crisis is different in the two models; the model of capitalism prior to state capitalism and the model of state capitalism.

Before I go on, I want to say one thing. When I talk about state capitalism, I am not talking about something that happened Tuesday, when we had the first lecture. I am not speaking about something that is fully developed, fully rounded out, some sort of a pure model. I am talking about a tendency. A tendency which had its greatest lunge forward, the crucial lunge, the dialectical leap, in the period of the Second World War and immediately thereafter. It was with that peace time adjustment to the destruction of the Second World War—the changes caused by the Second World War.

Of course, the Second World War itself was solution, or part solution, to the crisis of the major depression of the inter-war period. That in itself was some sort of reflection of the First World War, which in itself was the reflection of the development of monopoly capitalism worldwide. So what I am saying is that there is a historic continuum. That within that historic continuum there are leaps, there are changes, that we have to take account of. The changes that occur affect every aspect of the capitalist system.

One aspect is the crisis. There is a traditional view of what the crisis is about—how it occurs.

Let us take the two separate models.

Firstly, the model of competitive capitalism. There we could say that it was quite normal for a crisis to occur every so often. It was a moment in the normal trade cycle of booms and slumps. It was a fairly useful moment in the cycle of booms and slumps, in this sense. That the booms and the slumps themselves reflected the dance between accumulation and resources in the system. At one period, at one level of production, resources were relatively plentiful. When I say resources, I am looking at it from a capitalist point of view. In other words, when a worker walks into the factory, it is not a worker walking into a factory, it is a resource being part of an input into production. When raw materials come, they are not iron, steel or whatever it is. It is a resource being an input into production.

As far as the capitalist is concerned, as far as the system is concerned, it is quite useful to be in a situation that the resources are slightly more plentiful than is created by accumulation, by the wish to expand. Not a personal wish, not something that on certain days of the week, the capitalists think collectively, “oh, this is expansion day”! And on other days of the week, “this is contraction day”. It is always expansion day as far as they are concerned. But expansion only insofar as it is an expansion of profits. And it is only an expansion of profits insofar as there is something to put into production to create those profits—labour power, and also the tools, the machinery and the materials that labour power actually uses.

Under some circumstances, when expansion gets underway too far, or too vigorously, you run out of resources, the cost of those resources rises and the ability to make profits falls. So the cycle itself reflected that. In some periods, they could expand because the resources were available—labour and other resources. In other periods, they could not expand. In fact, they contracted, because the price for the inputs rose above what was profitable, given the market that was available.

The crisis was a moment in that cycle. The crisis told us that accumulation could not continue on the former basis. That accumulation, that the profitability of production, was being undermined by the change in the price relationship between inputs and outputs, between the productive factors that the capitalist was using and the commodities that the capitalist was selling.

During the crisis there is a different relationship in power between workers and capitalists. That on the rise, with more employment, more security in jobs, the ability to change jobs and to sell your labour power at a higher price, the workers grew stronger and stronger. Thus, the crisis was not only a moment in the life of the capitalist class, but it was also a moment in the life of the working class. If the crisis occurred at the point of greatest strength of the workers, at the point where capitalism is weakest—it was at the crisis point that we often had the confrontations that the socialist movement has lived on as the confrontations that might show the transition to a new society.

But it was only one moment in the cycle. It had a peculiar financial, monetary aspect, that changing relationship between accumulation and resources. Expansion by the capitalists did not happen by chance. Expansion came about because they had the resources. Somebody gave the capitalist the resources to expand.

Obviously, at least in the model of private capitalism, one says that every capitalist invests everything that he gets in profits into the expansion of the business. There is very little waste. In fact, at the beginning of the system, the capitalist was even personally very abstemious. They starved their wives and kids, and occasionally themselves, in order to put every penny into the business to expand, because only by expansion could they survive the competition of other capitalists that were expanding at that rate, or perhaps even at a greater rate. Nobody quite knew how fast they were expanding or how fast the enemy was expanding. Whatever it is, you had to invest to the maximum.

Now, if that is the case, real expansion can only come about by somebody else giving the resources for that expansion. This somebody else was always the banks. It worked very simply—that the capitalist in order to expand, particularly in order to grow by leaps, to grow from one kind of operation to another kind of operation, to install new machinery, or a new branch, or a new something—a thing that you could not do by accretion, by incremental bits. Only the bank could finance that kind of growth.

It was a very simple process. The capitalist came to the bank and said, “you know my record; you know that I am not a thief; you know that all my plans have always worked out; you know, that I am a very profitable business”. “Anyway, why not take a risk”—and the bank would say, “Okay, I know all this. I will take a risk. Here is a million pounds”. The million pounds is simply the ability to draw loans on the bank. It is called an overdraft. It is called a bank loan. It is called investment in industry. It is called faith in the country. It does not matter what it is called. Basically, the bank sat back and made some money. Made some money in the real sense that everybody, following the granting of the loan of a million quid, would accept the cheques from the capitalist, particularly if they knew that he had just come back from the bank and was quite willing to sign the cheques. Everybody would accept the cheques—they were money.

They were money, however, without the creation of an objective co-relative—something out there that reflected that money. When the bank gives you a million pounds, it does not mean that there is another million pounds worth of steel sitting outside in the yards, another million pounds worth of railway carriages waiting to be used, another million pounds worth of eager workers desperate to get into the factory.

It means that this capitalist has been selected from the other capitalists, by the grant of a loan, to wield more pull, more purchasing power, within a given market context, within a given supply of resources. In other words, what the capitalist has gained through the loan is a share of resources, a share of the surplus that is created in the whole of society that was larger than the share he had through his own profitable operations. That is quite significant, because it means that this capitalist can then pull in resources from other capitalists by offering a slightly higher price for them, in case the resources did not want to come naturally.

Of course, the other capitalists got very annoyed with this process. So, they also went to the bank and they said, “Look, our business is being ruined. There is this guy around the corner doing marvelously. He is expanding, and I cannot afford to expand. I will not be able to pay back the previous loans that I have got unless I can meet him in competition. You are in for a penny, you are in for a pound, cough up”. Or they might say, “the prices that we budgeted our operations upon in the past are changing, and we will not to be able to stick to the plan that you agreed when we came to you for financing before—unless you increase your involvement by offering me a million pounds as well”.

So it goes from one to the other. That an expansion anywhere in the system leads to an expansion elsewhere in the system, because it is a competitive system. At the same time the expansion itself is fueled by this “funny money”. In other words, money that does not reflect an increase in real resources. It merely reflects an increase in the number of claims on the real resources. You can see how this works, how it works in the larger picture, that the amount of money in the system, which remember is poured into the system through the banking system, which is not controlled by the individual capitalists. They go to the banks cap in hand, they put on their best suits, they polish up their accents, they join clubs in order to meet bankers. They go to this financial institution in order to be selected as the people that can increase their claims on the total amount of resources that exist.

Now, I am not saying that the amount of resource is fixed. Obviously, if there is more activity which is fueled by new finance—more people are employed, more mines are dug, more railway carriages carry the ores from the mines to the smelters etc, etc. So long as there are resources free to be employed, then the infusion of new money, new claims on those resources, will create new employment. This was the cardinal truth, the great insight, now that “insight” is a political word. It is the great insight of Keynesianism—that by juggling around with the monetary situation, you can also affect the real situation.

But that is true only insofar as there are free resources. After a time you utilise everything that there is available. After a time you come to a position where you cannot increase the amount of coal dug by any other means except by making a new mine. That might take 10 years—you get a real bottleneck. After a time, you get to the point where you cannot find new workers at the Labour Exchange—you actually have to wait for a new generation, or you have to conquer new territory, or bring them in from Turkey and Barbados, or whatever it is. It is very difficult to expand beyond a certain employment in any given society—or you have to drag them out from the kitchens and put them in the factories. That creates other problems which are dealt with elsewhere.

Whatever it is, the important things so far about the crisis or about the cycle of which the crisis was one bit, is that the crisis was only the transition from expansion to contraction in the traditional cycle. That the traditional cycle itself was fueled by the expansion of the money supply. Also, that the money supply came from outside of the contending capitalists. It came from the financial system.

There are a couple of other things that have to be said about the crisis and the cycle. That the fueling of expansion through the monetary system led ultimately, when they ran out of resources, to the rise in prices. When you cannot bring in new workers, you have got to pay the workers that you have got more. Simple as that—it is not a complex thing

During the inflationary period of the cycle, a shift in power, and a shift in income towards workers, because they are the scarce resource as far as the capitalist is concerned—scarcer than most in the period of one cycle—during that period when workers get stronger, when inflation rises, when some raw materials run out, etc, the whole price situation changes. There are some capitalists that are doing worse than others. Perhaps because they are more labour intensive they suffer most from the workers’ pressure. Perhaps because they are more raw materials intensive, then they suffer worse from the lack of oil, or the lack of iron or whatever it is. For one reason or another, some make it, and some do not.

The ones that do not make it are then put on the carpet by banks. The bank says, “okay, you expected to pay the loan that we offered you three years back on the 25 December this year. We see from your previous annual report that you are not going to find it very easy to do. What are you going to do about it?” Either the capitalist leaves the country very fast, or the capitalist begs, gets down to his knees, and says, “please offer me a bigger loan”. In which case the bank then looks at all the capitalists that he has got in front of him on the computer and says, “no kiddo, you are not going to make it and, so that I do not sink with you, I am going to force you to repay your loan. If you do not repay your loan we are going to foreclose”. When the capitalist says, “you cannot, it is my life’s work. What will my children think of me?” He replies: “Well, you know there is a function for the banker. The banker is not cruel for no reason at all. The banker is the representative of the health of the society, because it is necessary for capitalism that some capitals go bankrupt. By forcing some capitals to go bankrupt, we are releasing the resources for those capitalists that actually have made it. We are allowing the biggest, the best, the most profitable, the most technologically inventive, the most ruthless, the most imaginative, the most this, that and the other capitalists to expand at the expense of the dead wood, the laggards, the sleepers”. You just have to read the Financial Times every day to get all the names for the one kind of capitalists and all the names for the other kind of capitalists!

The bank has an almost religious conviction in the cruelty with which they face the capitalists that cannot make it. They say: “Yes, it hurts me. It would be terrible not to see you at the club this Saturday, because we will not be able to pay the fees. It breaks my heart. Nevertheless, I have to drive you into the ground for the good of the system, because by destroying you, we have released resources. Released resources means reducing prices, the inflationary pressure which comes as a result of more money, but a fixed quantity of resources, will ease. We are shifting your resources indirectly, but we hope effectively, from the laggards, the backward ones, to the technologically more advanced ones and therefore changing the whole nature of the system. Seeing that it remains a revolutionary system and anchors those traditional people who are most in favour of the revolutionising of the system because that is where they make their money, because they are always funding that revolutionary process. Generally we are keeping the thing healthy by controlling the population of capitals. By being the eugenicists of the system”.

Now, it is so beautiful as described. It is so effective. It is so rational. It is such a marvelous system that we actually ought to worship it slightly. That is, of course, if you are not working for it, but you are part of the operations of the higher echelons of the system. You can understand why the bourgeois economists have always not only described and analysed it, but also fallen in love with what they are describing and analysing. It seems so perfect. Everything, without anybody intending anything, falls into place. There is material progress, expansion, increasing wealth. Those that are good are rewarded, those that are not good are destroyed. There is drama. There is confrontation. It is marvelous.

Unfortunately, it also leads to its own destruction in one way. I am not talking about the destruction that comes out of the intervention of workers. I am talking about the destruction that comes out of the centralisation of capital. That, after a time, the banks have done their business from cycle to cycle to cycle. They have backed the winning horses. The winning horses have become big fat carthorses. They have ceased racing because they are becoming so, so large. They are kept alive and kept going more and more. You get to the situation where it becomes a bit difficult to force them into the knacker’s yard, because there are very few horses left. In other words, capital becomes so centralised that something changes in the institutional framework of the system.

This is where we look at the same cycle from the point of view of state capitalism.

Let us look at the assumptions of the private capitalist system. One, that there is a distinction, there is a clear division, between the function of the banker and the function of the capitalist. That is the first overwhelming thing. We look at the world around us and we see—not really. There is no clear distinction between the one and the other. That, as we spoke about it a couple of days ago, individual capitals have become so large that we can talk seriously about there being national capitals. All the so called competing capitals, those that belong to that nation, are competing, but not competing in the market, they are competing for influence within a state bureaucracy, or competing for influence as part of the collectivised capitalist class in that country.

So part of that is also the banking mechanism. It does not surprise anybody that not only are the banks completely nationalised in countries like those of Eastern Europe, China, Cuba and so—but even in many Western European countries, the banks are nationalised. In other words, you take a country like Austria, you take a country like France, and even here, they are talking about the nationalisation of the banks. I do not suppose anybody here really feels that it is either impossible, or if it were impossible and they did it, a revolutionary situation would be created. We just think, well okay, so they have taken the banks over. They took over the Bank of England, they take over the four big clearing banks, they leave the merchant banks alone and then as the clearing banks get more involved in merchant banking they will take over the merchant banks. Nobody really feels that this is going to be a crucial decision on the part of the system.

Why? Because capital is now nationwide, and finance is now nationwide. There is a fusion between industrial capital and all the other bits of capital and finance capital. Given that, something therefore has changed. Whereas before the capitalists used to be selected by the banks for favour, for advance, they were rationed in the resources they could claim out of the system that were not really theirs. Now there is no real rationing mechanism; basically capital controls finance.

It is almost as if SW Litho use the press to print money to pay the comrades working in the press. It is almost like that. That capital nationwide has got the banks nationwide who can create as much money as capital wants. There are problems in it, but that is the fundamental situation.

I am not saying that there is no real finance, no real discipline, in the worldwide system. There is, but it is very marginal.

Whereas before, in the mid-19th century, no capitalist in Britain could print his own money. All money was external to the capitalist sector. All of it was, absolutely every bit of it was external to the capitalist sector. Now, there is some money that is external to the capitals themselves. It is called foreign exchange banking, it is called perhaps the euro-dollar market, it is called the gold reserves held by central banks. However, as a proportion of world money, all of that, however large it might seem, is minute. It might be important, but it is certainly not as important as external money was to the capitalists in the last century.

So that is the first thing that has changed. The distinction between producers and suppliers of goods and services, and the suppliers of finance has rather taken a knock in the state capitalist system.

Then there is another element which relates to this and which we discussed to some extent a couple of days ago. That is the distinction between the state and capital. Whereas before, the banks’ ultimate support, ultimate stanchion, was the state which was independent of every single capital. I am not saying that the state was not influenced by big capitals, that under certain circumstances, the state did not serve the private interests of a single capital as against the general interest. But it was more or less, particularly in the larger countries, independent of individual capitals, and more or less the support of the banking system.

Now, that has also gone. The state is merged with capital in the same way as the supply of finance is merged with the supply of goods and services.

This leaves the system without an external disciplining force. Of course, there is the International Monetary Fund that the British government calls in and says, tell us to do such and such. That does exist. It is also true that the International Monetary Fund acts as a discipline in a country like, say, Peru, where yesterday the IMF delegation left after two weeks haggling with the Peruvian government. But it has not got the same power, the same ability to impose a solution on the individual state capitals as the bank had, and behind the bank, the police and power of the state.

If that does not exist anymore, because if Peru does not want to do what the IMF wants, the IMF can only tell its members, look, I advise you not to lend them any more money, or we advise you to blockade the Peruvian economy in such and such a way. In other words, it can work through trying to influence, rather than sending in an IMF gunboat shooting the opposite of loans.

Right. So we come to the basic problem of the system. That it has no mechanism to clean out its dead wood. It has no mechanism to lighten the load. It is weak in controlling the population of capitals. It is weak in controlling the claims to resources by individual capitals. What actually is the case is that by the system losing a state which is larger, more powerful, than the individual capitals, it has lost most of the mechanisms to discipline the individual capitals. The only discipline is the discipline of the markets. The only discipline is the self-interest of each individual capital. That is why we have reached a situation in which inflation is more or less endemic—because nobody can really prevent it.

Now we are talking about the future great success in controlling inflation as bringing it down from 17 percent to 10 percent per year. Our grandfathers would have been appalled at the idea of a 10 percent per year increase in prices. Nobody now talks about the reduction in prices, nobody talks about the gradual falling prices that took place throughout the 19th century as productivity increased, etc, etc. It is beyond us. The only thing that can be hoped for is, perhaps, a reduction in the rate of increase in prices.

So it has lost its discipline as a system, or rather its external disciplines. It can only live by self-discipline, and by the interaction of the individual capitals themselves. It is a system in which there is no force that can reduce the number of capitals, and therefore a system in which there is no force which can release resources to those capitals that are more successful, or rather, it cannot do so in a clear way, a fundamental way, a way that releases resources very rapidly, which would then reduce prices and so on.

So, it is a system in which the crisis is a much longer-term thing than in the old system. It is a system in which the crisis is not a moment in the trade cycle, but could be a fairly long-term part, with the trade cycle rather subdued. In which we might expect a very long period of what could even be called relative stagnation, with fairly high unemployment, with an inability really to control the cause of crisis, with increasing pressure on them to solve the crisis through enhanced competition.

So far I have been speaking about the system as a whole. Let us now see what it looks like from the point of view of the individual capital, the individual country.

How do we get rid of unemployment? All sorts of things have been suggested. The most glorious is the French suggestion of paying every migrant worker the equivalent of £2,500 in order to run them out of the country. Here is a present, take it home! They have not had many takers. It is pretty obvious that they would not have many takers: a) because people have sunk roots in the country and b) because £2,500 is not going to last very long in the countries that they have come from. If there is unemployment in France, by God, there is unemployment in the countries they have come from. You cannot really build an independent life with your £2,500. Also, the migration of labour itself is part of the commerce between the different state capitals. In other words, it is not as if the Algerian or the Moroccan comes to France freely. It is that his move to France is part of an arrangement between the Algerian and Moroccan governments and the French government. In other words, there is a certain commercial relationship in the supply of labour power, which was not there before. In the private capitalist system the migration of labour was a free thing. In the state capitalist system, with passports every two yards, with governments arranging for foreign currency to be transferred from one place to another, with countries like Mozambique, still living on the gold that is supplied by South Africa for the labour that is supplied by Mozambique—these things are not matters of chance, not the spontaneous events in a market. They are part of a commercial deal between the recipient government and the exporting government, and so it complicates matters.

Not only do the people not want to go back, but also it could rather upset the larger relationship between the two state capitals that are in contact with one another.

So how do they do it? How do they get rid of the sore, which could be a political nightmare for them? Presumably by the expansion of their particular bit of the state capitalist world. By the expansion of their particular capital. How do they do that? You cannot easily. I am not saying it is impossible, certainly temporarily, it is possible. But you cannot easily put up barriers to the products of other capitals in your home market. You look at the Financial Times today. In the first half of the year, 43 percent of cars sold in this country are imports. It seems reasonable to suppose, 43 percent, that could almost double the market for British Leyland. We would solve this terrible stone that the system has hanging around its neck and that is sinking it. British Leyland could become a very profitable concern—if we can only stop these cars coming in. The Americans are saying Japanese steel should stop coming in. They also say that Brazilian shoes should not come in. Everybody is saying that Hong Kong textiles should not come in, etc, etc.

However, it is very difficult in the world that we know now. In the days of imperialism, it was fairly easy. When Japan started rearing its ugly commercial head and flooded India and Africa with knick-knacks, cotton textiles and other cheap goods, it was quite simple for British capital to say, we are putting a quota on Japanese goods. We are doing it because there are vast markets in the colonial territories, which we can yet develop through the export of British goods. Because there was a society out there that could be smashed up, pulped and turned into a part of capitalist society. They did not do it very successfully, but at least in principle, that was an option that was open to them. That vast territory, the territory was not all capitalised. It was not all a market. It could be made into a market, and it could be made into a market if the others were kept out. It was a choice between who was going to make the new market.

Now it is rather different. There is not that much of a new market knocking about. The British home market is the German export market. The British export market is the German home market. If you are going to put up tariffs, if you are going to stop German goods coming into Britain, they can easily retaliate and say, British goods should not go into Germany. In other words, protection is much less of a solution than it was in the previous stages of capitalism—because now there is no external market that is not somebody’s home market. Whereas then, there was, for long periods, a market external to British capitalism that was not somebody else’s internal market.

So what else can they do? State capitalism has rather changed the ability to expand into the space of somebody else, because there is no space that does not belong to somebody else. We cannot simply expand. They can adopt a price-cutting mechanism. Devaluation is what it is called. Now that we are talking about state capitals, we are talking about goods being joint products. In other words, that the whole of the output of the country can be seen really as one product and you cannot really allocate very easily the price of that product to it or the cost of the product to it. You have got a system in which price competition is really competitive devaluation.

Other people can also devalue competitively. If you are a large importer, by devaluing competitively, you come up against the resistance of your working class, and the working class is something that is fairly fixed and has roots. It can fight. We will come to that in couple of minutes.

There are problems about devaluing: a) You are not alone in the world. In other words, there are no external agencies that say, you can devalue, but you cannot. There is no such thing as a world government that makes these decisions. The decisions are always the decisions of the individual capitals and b) that one of the consequences of state capitalism as a world integrated market, is that you are importing as well as exporting. You are becoming as much dependent on your imports as you are on your exports—and that a great part of your imports form the standard of living of your workers. Competitive devaluation is something that hits at workers so hard that they do resist. A mere 5 percent cut in the standard of living over the last year has led even the Transport and General Workers’ Union to oppose any more. You can imagine what it would be like if devaluation went on regularly as the price cutting mechanism.

Of course, they can do other things. They can shift, or they think they can shift, workers from unproductive to productive work. In other words, to increase their productivity without increasing their wages—because workers do get wages even when they are doing unproductive work. But here there are also a couple of problems. One of them is, how do you differentiate between productive and unproductive work when you are a capitalist? Let us take an extreme example from an area some of you might not think is productive at all. From the capitalist’s point of view, there is a difference between a nurse looking after a worker and a nurse looking after an old age pensioner. What mechanism has the capitalist got to come to the nurse and say “the worker—see that he’s happy. The OAP do not worry. In winter keep the hospital wards where the workers are warm, reduce the temperature in the OAP wards. We will call it hypothermia, because it sounds scientific—but actually we are murdering them”. What mechanism has the system got for a thing like that? It has not got one. It cannot, because it has to work through members of the working class—it has to work through the nurses. How are you going to say to garbage collectors in the street, “collect garbage well here, let it rot there”? You do it to some extent because in working class areas garbage is collected, say once a week, occasionally if there is some trouble, once every two weeks. In middle class areas twice a week, and if there is trouble, three times a week. The key thing is that it is difficult to institute these things, because workers are connected with one another, and they do tumble to the fact that there is a difference in the operating instructions, and they might not accept the difference in the operating instructions.

So, it is very difficult. They do not quite know what is productive and what is not productive. Finally, they are hamstrung by their own ideology, in the sense that they define certain things as productive which are not, like advertising expenditure, but they do not define other things as productive which are, like housework. If they really cut the welfare services to the family, they would be in more trouble, but they cannot face it, because they are tied to a peculiar sort view of what is productive and what is not unproductive. A rather dead view.

So what can they do? I am going through the list trying to find how we can make a single capital profitable compared to the others. There is also, I suppose, rationalisation. They can make larger and larger units, which will therefore be more productive. However, it is not always true that larger and larger units are more productive. They are subject to greater and greater strains, greater and greater sabotage. Sabotage by the workers. There is a great new economic and engineering science where you fix it so that the production programmes of individual factories are so tied in with one another that, as the flow comes out of one factory, it becomes the input into another factory. Then they find that they are totally dependent on three forklift drivers who can go on strike and smash them for months! It is so tied and so tight a system that they cannot do it.

So there are limits to rationalisation. Also, there are limits to the managerial and administrative structures that they can bring to bear on that kind of rationalisation. As it becomes more complex, as the size grows larger, you have to suck more and more people into the administrative structure. The result of that is those administrators tend to become slightly more proletarianised, slightly more bolshie, slightly more unproductive from a capitalist point of view. So there are limits here as well.

There is also the limit in resources. In order to build new competitive structures, you have to be able to supply the investment. In other words, you have to find the resources to do so. One of the results of the destruction of a banking system is that most of these resources have to come from internal resources within the country itself. That means that you have to destroy smaller industries in order to build the bigger industries. It means that you have to come to agreements with foreign governments to allow the export of the product of the new industries. You have a problem of arranging with foreign capitals for mutual benefit. If you are getting some part of the mutual benefit, you have got to give some part of the mutual benefit. If you are finding a foreign market, you have got to open your own market. So there again it is a problem. Expansion becomes an increasing problem.

I suppose they could try to smash their workforce at home. It has always been an option for capital. Less of an option now than it ever was, and this relates to something we were discussing a couple of days ago. I suppose they could approach it gently. They could institute welfare cuts. They could say to their workers yes, welfare is an unproductive way of spending money. Welfare is government money and everything that government does is, according to ruling ideology, unproductive. A ruling ideology which, I am afraid, many Marxists have fallen into accepting—that government activity is, almost by definition, unproductive. Therefore, let’s cut welfare, let’s really get the thing going, let’s take away the £20 per head of population that comes from government.

There is a really fundamental problem. It is that the nature of the working class has changed, from being a relatively renewable resource, to being a fairly fixed thing. Fixed in its size and also fixed in the range of skills that is required from workers. It is very difficult to see how capital can break its working class and also continue in production. I am not altogether clear in my own mind how these two things relate. We all know that the workers are stronger now than they have been in many periods in the past. It’s a feeling that you get. You feel that, for example, even the most extreme government in power is thrust towards the middle ground and you know that is not as a result of them working it out. It is as a result of pressure, and the accumulation of pressures makes the fact that Heath was destroyed by the miners not so extraordinary.32 The fact that throughout the world, crisis or no crisis, the political tendency is towards a sort of social democratic centre or the liberal centre, and I am not making too much of a distinction between them. That in a period of tremendous crisis for the system, the biggest crisis really since the 1930s, there has not been a real shove towards the right. In fact, the right has rather collapsed over this period. Whether it is in Greece, or Portugal or Spain—I am not saying that Spain does not have a right-wing government—but it is not as right-wing as it was. Somehow you get the feeling that they are enclosed. They cannot really move. But it is not only because of the confidence that has been bred in the working class over the last 30 years of high boom and high employment and so on—because that can also disappear. There is something larger than that. I know that it is somehow related to the fact that the working class is now a fixed quantity, a fixed resource. It is not something that can be renewed very easily. It is something that cannot be got rid of very easily.

You can imagine Enoch Powell sending a few million people back to the villages or towns of their previous country. You can see that is at least feasible in imagination. I do not think it is feasible in practical politics. What is not feasible is to send the German workers back to the German villages because the villages do not exist any longer, to send the British workers back to the British villages, or to send the French workers back to the French villages, where they are not a charge on the state, where they can be turned into peasants once again—feeding themselves, almost completely taken out of the money economy, and therefore also taken out of the welfare strain on the capitalist system.

Something has changed and because of that change, somehow workers have more power within the system than they had before. Whether they know of that power, whether they are conscious of it, or whether it is described properly or not, I do not know.

In fact, no working class has been smashed in recent years, except for one place, and that is Chile. There are special reasons for the Chile experience. Certainly nowhere else has the working class been smashed. It is not as if there have not been confrontations and it is not as if they have not had the opportunity.

The Polish working class is still alive and kicking and kicking fairly hard. The whole East European working class seems to be alive and kicking, and kicking very hard. Nothing has happened in the West that actually has shown us that they can do it. So what I am saying is that they are finding it difficult. That within the state capitalist system, there are reasons to believe that the system is much more tightly controlled, much more brittle, much more inflexible than was private capitalism.

So you just have to take something else. In the old days, it was possible to conquer resources. You had a good army and you sent them abroad. You usually sent them to those that you could conquer most easily—colonial or semi-colonial countries. You could actually get what you needed, you could expand. If you could not do it economically, you could do militarily. Usually you did both. Now there is a thing called the balance of terror, and it is a little more difficult to go swashbuckling abroad and get what you cannot get through the market.

It going to be even more difficult in the future. Until very recently, in order to be a member of this balance of terror, you perhaps had to spend $120 million on a B-1 bomber. Now you only have to spend $200,000 on a cruise missile—obviously I am impacting the future on to the present. But what I am saying is that such a great effort has gone into the mechanics of the strategic confrontations that it is becoming cheaper and cheaper for the state capitals to join the nuclear club and the nuclear delivery club. It is becoming therefore a much more dangerous world. Therefore, the constraints on the individual capitals are becoming greater.

So what have they really got? I am fairly desperate to see what they can do in order to break out of the crisis. I have said that the important conditions for the renewal of the cycle that existed in the private capitalist system do not exist anymore. I have said, okay, forget about the system, what can an individual capital do in order to break out of that particular crisis? You find no, they are put into a corner by their own workers. They are put into the corner by the fact that their relations with capital are relations that are not mediated by some larger institution, by some world state. They cannot use force because they are all armed. They are really stuck. There is no way that I can see, not by the traditional means of bankruptcy or destroying another capital in order to release the resources for those that survive or by expanding competitively and so you draw in the resources that you require and let them die gently—even if they will still litter the United Nations. They will be less and less important as economic factors. I cannot see what they can do.

Of course, they can sit on an oil gusher. It is quite a useful thing to have an oil well at the bottom of your garden. British capital is thinking that this is the salvation. Who knows? For the moment it seems wonderful for them, but I have not noticed that it has alleviated very much of the crisis up to now. Gas was supposed to do that a couple of years ago, but we still had the crisis. Now oil is supposed to do it. Anyway, who knows that oil is going to be such a successful thing. If it can solve Britain’s problem then it can solve everybody else’s problem. Everybody can find a gusher. I do not know whether you follow these things, but three months ago, the Mexicans had oil reserves of 11 billion barrels. That is nothing—everybody has got 11 billion barrels. Then they had to go to the States for a foreign loan and suddenly they had proven reserves of 63 billion barrels! That is more or less a Kuwait-size billionage. I have no doubt that in order to get a further loan, they will have 120 billion barrels. Everybody is sitting on an oil gusher. If it is false, then the people who are going to finance it are in trouble. If it is true, the people who are sitting on the oil gushers are in trouble. I am not sure that it is the solution. And if they are all actually going to use the same sort of solution, then it is clearly not a solution.

So let me end here. I have tried to show that, through looking at the crisis a little more closely, you can see that conditions have changed markedly between a previous phase of capitalism and today. That in a previous phase, the crisis was something that the system could overcome. In the current phase, my imagination is not strong enough to see how the system can overcome the crisis. Can overcome it without such upheaval that it will break. We have always said that capitalism has got two clay feet. One of them is the workers. The other one is the other capitalists. You can, I suppose, walk with two clay feet, but when the clay feet have invaded your whole anatomy, when you are all clay, it is very difficult. The only thing that is not clay is your brain. It is the only thing that allows you to see that the world is not made out of breakable material.

This is the situation I think that we have reached. I think it is a situation that we reached before the perception of the situation. For a long time we were obscured by the boom. Then from the mid-1960s, for the last 10 years, it has been falling apart. We have noticed it falling apart, but I do not think we have understood how deeply in crisis the system is. I think it is very deep.

Questions, contributions, discussions from the audience

Anon: It seems to me, although I may be wrong, that there is a very definite Friedmanite inference—not implication, but inference—in what you have been saying.

As I understand it, for 30 years on either side of the start of the century, the Gold Standard attempted in international terms to perform part of the control system that you mention, in conjunction with the banking system. When the General Strike came in this country, as I understand it, the mechanism of the Gold Standard, whereby wages were directly pushed downwards—a halt was called to that method—and the Gold Standard was not operated thereafter.

However, it does seem to me, that the system that we have experienced in this country over perhaps the last five years, is reminiscent of the Gold Standard to the extent that real living standards have been seriously depressed, perhaps greater proportionately, than at any stage in the past 40 years. We have a system whereby the government of the day is able to blame a part of it on exterior forces, like the quadrupling of the oil price in 1974, etc. So it does seem to me, that there is an alternative system operating, which is tending to help downwards, that part of the cycle. Maybe not as dramatically as it was in the 1930s, but nevertheless it seems to be operating. I say that it seems to have a Friedmanite inference in that we have seen over the last few months that this government in power at present has readily acquiesced in controlling the money supply within certain limits.

We have heard from the utterances of Keith Joseph, NAFF33 and a few other right-wing monetarists, that there is no problem with doing away with the Social Contract. You simply tighten up the money supply and you take the consequences. To the extent that you can blame the consequences in greater unemployment on exterior forces, which in our case is relatively quite easy. You may find a way out of your dilemma, at least a partial way. You may succeed in bringing the country into part of the downswing of the cycle, and we have come into the downswing cycle over the past 5 years. So long as you can blame it on somebody else, you may be able to prevent the logical conclusion of workers actively protesting. I would like a little elaboration on that.

MK: The first question was about an alternative system to reduce standards. In other words, in the old days, the laws were projected on to the Gold Standard and the Gold Standard imposed, as it were, a certain kind of economic behaviour in the individual countries. What is it now that leads to a reduction of standards, or leads to the financial discipline that seems to have prevailed over the past couple of years in reducing British living standards? Also, what does this mean in terms of agreement or disagreement with the Friedmanite views?

As far as the first question is concerned—the alternative system to the Gold Standard. I would say that there is no outside compulsion on any country to impose a cut in living standards, except the compulsion of the market. The difference between now and then is an institutional difference. Here it is a voluntary act on the part of the governments as they interpret the world market situation. Now obviously, if one of their methods of competing is by cutting workers’ standards, then one of the methods they would try to use to cut workers’ standards is to impose a monetary corset on themselves. It is easier for them to do that by invoking an outside power. So they pump up the IMF as the big ogre. But in principle, it is a reaction by the capital itself to what it sees to be its best interest to the situation outside, rather than any imposed solution to the problems. It is complicated by the fact that the Gold Standard was run by British capital. By the British state disciplining both British capitalists, and certainly disciplining the rest of the world. Later there was a Gold Exchange Standard and the American dollar was king. For a long time, the American government acted, not only to control its own situation, but also to control the situation outside. Now with the break of the dollar supremacy—I am not saying the dollar is not a powerful currency and that the Americans do not have any influence—but the situation is more one of the major capitals competing to get their currencies accepted as reserve currencies by the rest of the world. There is no way that they can actually discipline the rest of the world. It is much more voluntary. The mechanism has changed completely.

As for Friedman and Friedmanism. I would say that their analysis, insofar as they are saying that there is no financial discipline within the modern world, they are right. Insofar as they are saying, that there is no way that the individual capitals can be forced to do something, they are right. When they say that the solution is to reinvigorate a private capitalist system, to restore a private capitalist system, they are so anachronistic as to be out of their minds. The scale of operation now is such that there is no possibility of having a private capitalist system. Now, it is true that you can, with the private capitalist system have financial discipline, because one of the consequences of a private capitalist system is an independent banking system. This is what they would love to do—have a banking system that actually rations money and is firm about it. When they complain about current Central Bank policies, it is because they know that the Central Bank can only be firm in periods. They cannot actually be the disciplinarian over the system, because they belong to the system. They are part of capital itself. That is where they are right—that there is no discipline. It is also where they are wrong. There is no way of re-imposing that discipline without reverting to the 19th century in the way that they want.

Anon: You have only spoken about state capitals. What about international capitals?

MK: I did not want to bore you with international capitals, because I assumed that so many people were at the meeting that we had on Tuesday.

Let me just summarise what I said there. It is that all the progress towards a state capitalisation is a two-fold process. On the one hand, it is the progress towards an integration of the state with capital, towards national planning, towards an explicit economic policy and long term economic policy, towards control over natural resources—insofar as you can control natural resources.

At the same time, it is a process of enclosure of the world’s market by other national capitals who are doing exactly the same thing. Which means that the only export market that a national capital has, and the process itself partly results from the increasing size of production, it means the need for world markets. Just to give you an example, Boeing Corporation provided something like half the planes for the entire world civil aviation fleet over the past 10 to 15 years. So Boeing could not exist only within the United States. The uranium processers cannot exist only in Britain, the United States and Russia or wherever. They need the world market. But that world market is made up of the home markets of the other state capitals. One of the most effective ways of getting into the home market of the other state capitals is, not by exporting goods, but by making the stuff in their home markets. For that there has to be an arrangement. You open yours for production, they open there’s for production. That means that a necessary part of the state capitalisation of the world is the growth of the multinational corporation as the economic mechanism for exports into the home markets of other countries. It is a dual process.

Anon: You say that you cannot think of any option capitalism has to get out of its crisis. You also seem to be saying that capitalism is about to collapse—not by workers doing anything, like revolution, but just by being strong.

MK: Yes, that it seems a very quietist view that the collapse of capital will come automatically?

I do not think that is right. I think that by describing, by trying to make this imaginative leap into the problems as seen by capital, is a necessary thing for us to do. If we confront capital, then we have to see where their weaknesses are and where the weaknesses are not.

Now, it might be that they themselves find that the crisis is the end. I do not think so. It might be that they think that they can still live with it. I should expect that, as far as most of the chancelleries of the world are concerned, they are saying to themselves, well, we do know that we can survive if some of us go under. That it is not going to be me. That in Whitehall, they are looking at Italy and rubbing their hands with glee to some extent, and saying, if only that country would sink into chaos, we would be able to buy up the best bits, and that would expand the place for British capital.

Throughout what I said, there was always in the background, one of the things that is restricting the capital worldwide, is the increased power of the working class and the limits that poses on the policy options that capital has.

Now, nobody is as wise as we are that the capitalists are pushing very hard for many of the traditional solutions that they found in the past. In the past they found a solution in keeping workers un-unionised. The most extreme of them turn to Grunwick and say, we will support you to the hilt in order to keep this place un-unionised. We do not want legislation to sustain workers.

There is a stream of opinion, even within the state capitalised world that we have, that wants to take on workers on a 19th century, private capitalist basis. Obviously, they are going to get their noses bloodied. Sometimes workers are going to lose. On balance, I think workers are going to win in that way. Now, what that means is that, where capital is weakest, where the workers’ situation is strongest, where the confrontation sometimes comes, obviously, the rest of the capitalists come round to support, for loyalty reasons, because they cannot be seen to lose etc, etc. They will come around to defend weak positions. This is where often a break will occur.

When I say that capitalism is in schtuck, I am not saying that they are going to resign. I am just saying that these are the delineations of their problem. Therefore, this is the general structure of our approach, that is all. I am not calling for quietism.

Anon: Is one of the possible solutions for capitals the fact that they are sitting on oil reserves? You also say that no working class has been smashed over the last few years. I am not sure if this is accurate—what about Thailand, where if they have not been smashed, they have been slowed down pretty well?

MK: Why would we be in trouble if everybody had oil gushers? No, we would not be in trouble if everybody had oil gushers. If everybody had oil gushers we would be in trouble, because then oil would not be a scarce resource. The trouble would move somewhere else. Whether it would be uranium, whether it would be skilled labour power or another thing—oil is just a symbol of something else.

Obviously, if oil is a scarce resource, and I do not know if every Mexico is sitting on an oil gusher, but it might be that only Mexico and Britain are sitting on oil gushers. If it remains a scarce resource, then clearly those that have it will win out in competition with those that do not. When I say that the world system is in crisis, it does not mean that some individual capitals are not going to survive longer than other capitals. It certainly seems to me that Germany will survive longer than Britain at the current situation. If Britain has oil and Germany does not have oil it will change the balance of advantage towards Britain and against Germany. In that case it might be that Britain will survive and not Germany. What I am saying is that the structure of the crisis means it is difficult for them to get rid of some of the components of the world system. It is difficult for them to thin out the population in an overcrowded capitalist market. Some of them are going to survive. It might be those with oil gushers.

As for the Thai working class being smashed—I do not know. I do know that there was a huge attack. What the results have been I do not know. You might be right, and Chile is not the only country with peculiar circumstances. That Thailand also has peculiar circumstances. In the major industrial economies it has not happened, and I think it is going to be a very difficult thing for them to engineer—because workers are so irreplaceable at this moment.

Anon: Can you elaborate more on under-developed countries?

MK: Again, this is something that we spoke about last time. That there was a period in the 1950s and 1960s in which it looked as if the state capitalisation of the world was extending through the industrialisation of backward countries and so on. It all looked really very rosy as far as they were concerned. It now seems that the cost of entry into the capitalist world was too great for even the biggest of the backward countries to manage. Whether it is China or India or Brazil or whatever—they each in turn came up against problems. Even countries that were so devoted to autarchy, independent development, nothing to do with the world market like Burma, for example, have recently changed their policy to accept loans, and therefore been tied to the consequences of accepting loans from the big capitals.

So what it seems to be is this. That the weak state capitals of Africa, Asia and Latin America are unlikely to develop into competing competitive capitals. That they are in for a period of stagnation in which their resources will be dragged into the sphere of influence, into the use of, the developed state capitals. For those reasons and other reasons as well, we are turning back into the period of the end of the 19th century. A period of new imperialism, although it is not called colonisation. It means their resources can be absorbed, almost formally, into the sphere of operation of the larger capitals. That would save, to some extent, the larger capitals from the decline that I was talking about. But it will not save them very much, because the relative sizes of the larger capitals and the peripheral capitals are so different now than they were in the 19th century, that no amount of resource flow from those entire continents could provide the requisite inputs that are necessary for development.


1 Thanks are due to Colin Barker, Nina Kidron, Richard Kuper, Amelia Barratt, Ian Birchall, Alex Callinicos and Sam Farber for their kind assistance. I dedicate this piece to Colin Barker who has assisted me over the years with kindness, consideration and astute political guidance. Nothing was ever too much trouble and he will be greatly missed.

2 Callinicos, 2003.

3 Birchall, 2003.

4 Harman, 2003.

5 Callinicos, 1977.

6 Callinicos, 1977.

7 Kidron, 1977.

8 Personal communication.

9 Harman, 1977.

10 Callinicos, 1977.

11 A fuller version of this article appears online—Barker 2019a, b and c. This version includes discussion of Kidron’s article on Waste.

12 Binns, 1978.

13 I should say a few words about how the recordings of Kidron’s two 1977 lectures have been made available. The original audio recordings were made by Colin Barker; I have transcribed and edited the recordings, but with the intention of keeping them as close to the originals as possible. Mike clearly did not read directly from a pre-prepared script so I have attempted to remove repeated remarks, mis-speaking etc, as far as possible. I have not, knowingly, changed any of Mike’s meanings.

In the “Open Forum” sections some questions were inaudible. Fortunately, Mike had the happy knack of repeating a question before answering it. In these instances I have inserted an appropriate question in the text. Questions and contributions were taken in batches and answered in batches. I have re-ordered proceedings so that questions and answers follow each other directly. Those asking questions or making contributions were not generally identified by name. I have inserted a name only when the identity is obvious. Finally, and unfortunately, the tape of the first talk ends abruptly in the middle of Mike speaking so we have no record of his response to some important contributions.

14 Barker, 2019a.

15 Personal communication.

16 Kidron, 2002 (published while Rees was editor of this journal).

17 Personal communication.

18 Birchall, 2011.

19 Rudge, 2018.

20 Harman, 2009, p263 and 266.

21 Callinicos, 1982.

22 Kidron, 2002.

23 Harman, 2003.

24 Probably a reference to Braverman, 1974, a subject of much discussion at the time.

25 Jack Jones, general secretary of the Transport and General Workers Union (now incorporated in Unite) between 1968 and 1978, was one of the main architects of the Social Contract under the Labour government of 1974-9.

26 A committee chaired by the historian Alan Bullock recommended in January 1977 that, in companies with more than 2,000 employees, trade unionists should be elected as representatives on the board of directors. Bosses’ opposition and then the advent of Thatcher made it a dead letter.

27 In his second talk Kidron elaborated at length on this point, arguing that in the “state capitalist system”, not only have the state and capital merged, but so too have the “producers and suppliers of goods and services, and the suppliers of finance… This leaves the system without an external disciplining force…it has no mechanism to clean out its dead wood. It has no mechanism to lighten the load. It is weak in controlling the population of capitals. It is weak in controlling the claims to resources by individual capitals. What actually is the case is that by the system losing a state which is larger, more powerful, than the individual capitals, it has lost most of the mechanisms to discipline the individual capitals… That is why we have reached a situation in which inflation is more or less endemic—because nobody can really prevent it.”

28 The Rank and File initiative was an attempt by the IS to organise workers through a series of projects including a number of rank and file newspapers introduced by IS members in different industries.

29 Tony Benn was industry secretary in 1974-5 but was demoted to energy secretary by prime minister Harold Wilson after he and rest of the Labour left failed to prevent the referendum of June 1975 voting in favour of Britain staying in the European Economic Community.

30 This is probably a reference to The OECD Guidelines for Multinational Enterprises, first published in 1976; the current version can be found at

31 The tape breaks off here.

32 A reference to Ted Heath calling, and losing, a general election in the middle of a miners’ strike in February 1974 under the slogan “Who Governs Britain?”

33 Joseph was a right-wing Conservative member of the shadow cabinet who worked closely with Margaret Thatcher. The National Association for Freedom (now The Freedom Association) was a notorious right-wing, anti-trade union pressure group founded in 1975.


Barker, Colin, 2019a, “Notes on Capital and the State: part 1” (25 January),

Barker, Colin, 2019b, “Notes on Capital and the State: part 2” (8 February),

Barker, Colin, 2019c, “Notes on Capital
and the State: part 3” (22 February),

Binns, Peter, 1978, “Editorial”, International Socialism 1 (summer),

Birchall, Ian, 2003, Michael Kidron (1930-2003), Revolutionary History, volume 8, number 3,

Birchall, Ian, 2011, Tony Cliff: A Marxist for his Time (Bookmarks).

Braverman, Harry, 1974, Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century (Monthly Review Press).

Callinicos, Alex, 1977, “Editorial”, International Socialism 100 (1st series, July),

Callinicos, Alex, 2003, “Mike Kidron (1930-2003)”, Socialist Worker (5 April),

Callinicos, Alex, 1982, Is There a Future for Marxism? (Palgrave Macmillan).

Harman, Chris, 1977, “Better a Valid Insight than a Wrong Theory”, International Socialism 100 (1st series, July),

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