Commentary on Political Economy

Saturday 23 January 2021

HOMAGE TO ANTONIO GRAMSCI on the centenary of his foundation of the Partito Comunista Italiano.

It may be said from the outset that economics is truly a concentrate of politics and that consequently economics can be distinguished from politics only in terms of the time periods or cycles that the two spheres occupy. Economics is the inner sphere of social reality, spinning around a hypothetical centre with a different torque or angular momentum from that of the political sphere which has a faster cycle or torque. As we shift from this hypothetical centre of the social sphere to its outer layers, economics grows increasingly political until it turns into policy and finally, at the outer surface of the social sphere, it finally resolves itself into strategy and tactics.

Contrary to what Lenin is said to have quipped, then, politics is not a concentrate of economics. It is the other way round: economics is a concentrate of politics. In other words, it is not politics that "boils down" to economics; it is economics that can be reduced to a bundle of politics. The important thing is to focus on the meaning of the phrase "a concentrate of" and the phrase "boils down to". What is it that we mean when we say that "in the final analysis" politics is economics or the opposite, that economics really is politics? What kind of "reality" do we refer to when we speak of the ultimate foundations of economics or politics? As we all know, necessity is not just "the mother of invention" - meaning that there are some needs that are so fundamental that they stir up human imagination and inventiveness. Necessity can also be camouflaged and disguised or simply be rationalised away as "virtue": this is what we do when "we make virtue out of necessity". Differently put, we recognize that there are situations in social relations when we are coerced into doing things that either we would rather not do or else "concentrate the mind" to the point of inducing virtue - the acquiescence to necessity as virtue - or inventiveness, the desperate search for alternative solutions. But in all these cases, in all these instances, what we call ‘necessity’ is a function of social relations, not of physical or physiological necessity. If we accept that our environment offers sufficient resources for human societies to reproduce themselves, then it is evident that economics - which as "the dismal science" is often confused with "the sphere of necessity" - has little to do with physical or physiological necessity but must instead have everything to do with "coercion". The necessity of economics intended as a "science" is therefore in reality the necessity of political coercion. That is why it is correct to insist that "economics is a concentrate of politics", in the sense that what we describe or circumscribe as a separate field of human activity - "the Economic" - is a specific form of coercion imposed by some people on other people in the sphere of the production of and for human needs and their satisfaction. 

To accept with Lenin that "politics is a concentrate of economics" would be tantamount to asserting that economic activity is dictated by a "necessity" that is independent of "coercion", that is physical or even physio-bio-logical in nature – and therefore independent of "the Political". This may make sense in terms of the economic determinism – indeed, an eschatology or even a “theodicy” of communism – that Lenin inherited from Marx’s labour theory of value and is implicit in the conception of human history expounded most explicitly in The Communist Manifesto and in the “Preface to A Contribution”. It was this economic determinism that Eduard Bernstein attacked with his Evolutionary Socialism wherein he sought to reformulate the strategy of the Social Democratic Party for the conquest of political power in post-Wilhelmine Germany. To be sure, Bernstein’s attack on the notion of the “general crisis of capitalism” or Zusammenbruchstheorie had little resemblance to Marx’s notion of the inevitability of its decline and replacement by “the dictatorship of the proletariat” – which was certainly consistent with the gradual transition to communism and even more consistent with a revolutionary overthrow of bourgeois regimes than with a sudden catastrophic end to capitalism. As Karl Kautsky pointed out in his stinging rebuke Bernstein und das sozialdemokratische Programm, there is nothing remotely resembling a Zusammenbruchstheorie in Marx with the possible exception of “the law of the tendential fall of the rate of profit” (at p.42: “Eine besondere ,,Zusantmenbruchsthteorie" ist von Marx und Engels nicht ausgestellt worden.”). Rather, what was more significant than the applicability of the “general crisis” to capitalism for Bernstein’s attack on Marxist eschatology was the undeniable determinism of Marx’s theory based on the notion of “socially necessary labour time” and, consequently, of the validity of the Law of Value. For if, indeed, we assumed the notion of socially necessary labour time to be valid, then, given a fixed working population, there can be little doubt that rising productivity would push socially necessary labour time toward the zero bound, that is, to a point where workers will receive little or nothing out of the social product whereas capitalists will be entitled to the near totality of it! This tendency of capitalism combined with the anarchy of production dictated by the reality of market competition necessarily entails the equal necessity of its supersession by political means to a new and higher form of social production that Marxists call communism. 

It was these two pivots of Marxian revolutionary economic theory – those of (i) the unsustainability of surplus-value extraction (Marx’s law of the tendential fall of the rate of profit) and (ii) the anarchy of capitalist market competition – and the obvious implication that these two factors would lead to inevitable and irremediable crises for capitalist production and for bourgeois society – that Bernstein attacked, first, by challenging the “necessity” of the compression of workers’ wages as a proportion of total income (“the immiseration thesis”); and second, in further evidence of the erroneity of this Marxian hypothesis, by showing that indeed, far from the progressive immiseration of the working class and the growing intractability of capitalist crises, the recent emergence of welfare and interventionist states in Western Europe – the Sozialstaat supplanting the liberal laissez-faire Rechtsstaat or Lassallean “night-watchman state” - together with their regulation of capitalist industry occasioned in part by the rapid ascent of social-democratic parties and trade unions – that these new political realities militated in favour of the ability of the capitalist system to avoid catastrophic political and economic crises and also – and this is the crux of Bernstein’s reformist thesis - in favour of the ability of socialist parties to achieve the gradual and peaceful, non-revolutionary evolution of capitalist society into a socialist one of freedom and equality. (On the transformation of the State in the nineteenth century, see the insightful studies by Franz Neumann collected in his The Democratic and the Authoritarian State and The Rule of Law, and those co-edited with Otto Kirchheimer in The Rule of Law under Siege. Again, Bernstein's theses are reviewed elegantly in L. Colletti, From Rousseau to Lenin.)

Note that both these theses which form the essence of Bernstein’s socialist reformism can be derived directly from Marx’s own economic determinism. For if, indeed, it is possible to calculate “socially necessary labour time” by reason of its “necessity”, and with it the magnitude of surplus value (the profit or value added by living labour after the cost of the means of production and real wages are subtracted from the total value realized from the sale of the products), it must follow that the Value derived from the Law of Value and the Labour Theory of Value is a calculable material quantity irrespective of the political relations between workers and capital, that is, irrespective of the mode of production. But in that case the crucial question in the Marxian critique of capitalism boils down to the distribution of value in capitalist society and not to its production – because the mode of production is not called into question: the mode of production – what is produced when and how, by what means - remains exactly the same under capitalism as under socialism. All that changes is how the product – the Labour Value – is distributed between capitalists and workers. Furthermore, even the ownership of the means of production becomes relevant only to the extent that it affects (a) the distribution of Value in accordance to the labour-content of the product, and (b) the occurrence of economic crises and consequent unemployment due to the “anarchy” of private capitalist ownership.

It is true that Marx had intended “the Law of Value” – that economic value could be measured by labour content, specifically “labour-power” – to apply only to a capitalist economy and not to a socialist one. Indeed, Marx considered his greatest discovery to be undoubtedly the notion of “labour-power” – in other words, the notion that it is not “concrete labour” that measures the value involved in capitalist production but rather “abstract labour” or “labour-power”, the abstraction of human living activity coerced by capitalist employers into a measurable time entity (“man-power”). But here Marx was trying to have his cake and eat it, too. For if the measure of capitalist value is labour-power and labour-power cannot be measured scientifically because it is strictly a measure of political coercion, then it is inconsistent to call Marx’s theory “scientific”! Throughout his works, Marx was torn between his search for economic determinism, that is the historical inevitability of the supersession of capitalism by socialism, and the simple reality that by its very nature history is not and cannot be an inevitable process. Specifically, Marx’s theorization of capitalist industry as dependent on market competition between and within the capitalist and working classes meant that the overall operation of the capitalist mode of production was independent of political factors such as strategies and organizations not immediately related to the process of production that could affect the operation of capitalism as a whole and more particularly the stratification and composition of social classes, including the working class and the proletariat more broadly, and the segmentation of the working class itself through incomes policies and through the labour process. 

This difficulty may be illustrated most effectively by examining the most fundamental components of the Law of Value – the notions of socially necessary labour time and that of labour-power. For these notions to lend themselves to practical economic use in the calculation of the value of commodities and then of their individual prices, it is obvious that the particular living labour that goes into the production of the commodities, of dead labour, must be capable of homogenization or “real abstraction” (the phrase was coined by Alfred Sohn-Rethel in Intellectual and Manual Labour) so that what are incommensurable living labours may be rendered equivalent and thence measurable in an abstract manner. But how can such an “abstraction” of living labours be achieved? Either it is done politically, that is, through an institutional process that consciously directs the processes of production of commodities and their distribution through pricing and the market process – or else this is achieved mechanically through the market process itself, in which case it may be said that the capitalist market is capable of co-ordinating the entire process of capitalist production and distribution automatically. Of course, the latter option is the one propounded by bourgeois political economy through the notion of economic “equilibrium”. 

What we find in Marx is the impossible attempt to show that the Law of Value applies to capitalist production through the exercise of coercion over living labour so that it is reduced to its “real abstraction” as labour-power in the process of circulation of capital (from valourization in the process of production to realization in the market) to ensure the expanded reproduction of capitalist industry. But we ask, once again, how is this possible? If indeed the abstraction of living labour is achieved by means of political coercion, it is then impossible for this coerced living labour to be homogenized as an abstract entity, as labour-power, by “impersonal market forces”, that is, by means of a market process that is independent of conscious political manipulation or direction or management. In other words, it is impossible for capitalist industry to be at once decentralized – so that no political agencies determine or ensure the co-ordination of the productive system through market-clearing prices – and centralized so that living labour can be coerced into its abstract form, homogeneous labour-power, as “socially necessary labour time”! (We may recall here that Gyorgy Lukacs, in History and Class Consciousness, perhaps sensing the incongruity of the Marxian position, resorted to describing this “real abstraction” as a “necessary illusion” – conceding inadvertently the pleonastic inconsistency, given that there can be nothing “necessary” about an “illusion”, and nothing “illusory” about a “necessity”! Of course, the same applies to the equivalent phrase “real abstraction” because an abstraction is not real and reality is not an abstraction.)

One of two things: either labour power and socially necessary labour time are politically-coerced abstractions, in which case the capitalist system is directed by specific political institutions and historical agencies (the capitalist class, the capitalist State), or else they are real objectively measurable and quantifiable entities that can be co-ordinated through an “impersonal”, “self-regulating market-pricing mechanism”. But in the latter case it is obvious that the capitalist market mechanism would be an entirely “scientific” institution whose anarchical crises of overproduction or underconsumption with consequent underemployment can be avoided easily, contrary to what Marx envisaged in his critique. Conversely, in the former case, it is impossible to see how the Marxian Law of Value could apply to the capitalist system of “independent” or “decentralized” production for the market! Even if we agree with Marx that the Law of Value, where commodity values and prices are determined by socially necessary labour time, applies only to capitalism as a historically specific form of class exploitation, it is impossible to conclude that such a mode of production could ever co-ordinate itself in any manner other than by conscious political direction – and therefore that any such “law” of value could ever be possible, let alone be effectual.

To recapitulate: if, as Marx contended, the Law of Value applies only to the capitalist mode of production, then it follows conclusively that the notion of “socially necessary labour time” on which that of Value depends is just as necessarily the effect of political coercion. But then, in that event, the homogenization of living labour as labour-power “embodied” in commodities can be effected only by means of political measures and institutions and certainly not by “impersonal market forces” or “decentralised decisions”! If, conversely, the Law of Value is an absolute standard applicable to all societies, then the difference between capitalism and socialism becomes merely one of the just distribution of Labour Values – a question of Ethics, not one of systematic class exploitation and oppression. 

Ronald Meek, in his impressive Studies in the Labour Theory of Value, reviews Bernstein’s objections to Marxian theory and rightly points out that Marx intended the Law of Value to apply only to capitalism. But he remains ambivalent over whether Marx’s theory is to be considered “scientific”, in which case it is clearly a vicious circle, which Meek does not concede, or political, in which case it makes perfect sense from a practico-historical viewpoint, but Meek considers to be insufficient to qualify as "theory". Whilst he opts for the political theory that the Law of Value applies only to capitalism, Meek then gets entangled in the insistence that such a “theory” would be scientifically indeterminate or unprovable:

But surely there are two salient points which a theory of distribution appropriate to our own times should concentrate on explaining: First, how is it that unearned incomes continue to be received in a society in which the prices of the great majority of commodities are determined on an impersonal market by the forces of supply and demand, and in which the relation between the direct producer and his employer is based on contract rather than on status? And second, how are the respective shares of the main social classes in the national income determined in such a society? Unless one is content to rely on some sort of explanation in terms of “force” or “struggle” (in which case again one could only with difficulty speak of a theory of distribution), it is impossible to give adequate answers to these questions without basing one's account on a theory of value.2 (Meek, Studies, p.250.)

Evidently, like Marx before him, Meek is trying to circle the square, that is, attempt the impossible, because he is looking for a precise scientific theory of distribution, how a capitalist economy can co-ordinate itself as a market economy, without resorting to “force” or “struggle”, when in fact such co-ordination can only be politically regulated, and certainly not be the product of “impersonal market forces”! Meek’s retort is that such a “theory” is not distinguishable from a general theory of exploitation:

A “theory of distribution” which said only that unearned income was the fruit of the surplus labour of those employed in production would hardly qualify as a theory at all; and the mere fact that it expressed input and output in terms of embodied labour would not make it any more likely to qualify as one. At the best, such a “theory” could be little more than a generalised description of the appropriation by the owners of the means of production, in all types of class society, of the product of the surplus labour of the exploited classes. (ibid.)

Repeatedly, Meek reverts to the notion that for Marx “socially necessary labour time” referred to an absolute standard or measure by means of which the capitalist “transformation” of labour-time values into market prices, and therefore the calculation of profit as surplus value, was to be determined. (See above all his discussion of Benedetto Croce's critique of Marx's labour theory in Studies.) But this is simply false, because in Marx the concept of “socially necessary labour time” refers to “labour-power” not in a theoretical society analysed scientifically or objectively but specifically to the abstraction of human concrete labour achieved by means of capitalist political violence and coercion! Throughout his Studies, Meek overlooks the fact that for Marx, as for us, capitalism is a specific mode of production operating according to historically specific modes of exploitation or “social relations of production”, into which we will inquire presently. The essential point to Marx's critique was not to determine the distribution of value in a capitalistic society on scientific grounds but rather to show that capitalist production was conceivable only through the violence of the reduction of concrete labour to abstract labour or labour-power. The problem then becomes one of discovering how such an abstraction or homogenization of concrete labour or living labour can take place in a politically sustainable manner, albeit one not immune to severe and often catastrophic crises. 

It is true that Marx often deviates from this position in a misguided attempt to give his critique of capitalism the (Darwinian!) status of a natural science (a science of history in the Engelsian distortion of historical materialism re-baptized as dialectical materialism). Yet, this cannot detract from the essential validity of Marxian theory when interpreted in its politico-practical, historico-materialist dimension. No greater claim need be made for the originality and greatness of Marx’s critique and theory of capitalism than that it discovered the precise historico-political mode of exploitation specific to capitalist enterprise! Once again, the residual problem then remains of how it is possible for capitalist enterprise to regulate and calculate values and prices to ensure at least partially the co-ordination of social production. As we shall discuss later, this exakte Kalkulation at the heart of capitalist enterprise will become the political measure or rule of Weber’s entire theorization of Western capitalist “rationalization”.

Bernstein’s revision of Marxist economic and political theory starts from this deterministic Marxist premise that all human activity – taken as “labour” in the abstract – can be measured, and that this absolute measurement entitles workers to their rightful share of the social product. It follows that for Bernstein the essence of socialism was the fair distribution of the social product according to the “labour” required for its production. For Bernstein and for social democracy, the key sins and flaws of capitalism consisted in (a) the “theft of labour time”, and (b) the unnecessary wasteful recurrence of economic crises or slumps. The whole social question then became one of distributive justice, not one over the political control of the entirety of social production including its what, when and how. 

Furthermore, Bernstein concurred with the prevalent critique of Marx’s “scientific” labour theory of value set forth by Eugen Bohm-Bawerk in Karl Marx and the ‘Close’ of His System to the effect that Marx’s theory could not establish a direct verifiable empirical link between “socially necessary labour time” and the market-clearing prices of individual commodities. Following Bohm-Bawerk, Bernstein objected that Marx’s labour theory of value was no theory at all because it pretended “to transform” aggregate value into aggregate prices. But such an equivalence of “aggregates” clearly amounted to sheer metaphysics because any “aggregate” in the world may be said to be equivalent to any other “aggregate”. The difficulty of what became widely known as “the transformation problem” from values to prices that Marx attempted to solve in Volume Three of Capital is that the problem is not open to solution because, even if we accept that there is such a thing as “socially necessary labour time”, this “necessity” must ultimately be validated by “market prices” – which yields the vicious circle that labour values determine market prices and market prices determine labour values! 

Paradoxically, the critiques conducted by Bohm-Bawerk (vaunted as “the bourgeois Marx”) and Bernstein led scores of Marxists (from Bortkiewicz to Hilferding and Sraffa) to theoretical and mathematical contortions to prove that such transformation of values into prices was possible. Yet it is obvious that precisely in the event that Marx’s “system” could be “closed”, the very closure of this system would turn the Marxian critique of political economy into a tautology – value is defined so as to be the equivalent of price - and Marx’s entire notion of “praxis” (“philosophers have hereto interpreted the world; the point now is to change it”) into an eschatology, that is to say, into an immutable destiny incapable of the very “revolutionary praxis” that Marx exhorted! Once the notion of value is reduced or reified to a quantity, labour-time, then it is obvious that the calculations of the individual value of commodities can be “transformed” into prices by applying simultaneous equations that take account of “the average rate of profit”. (This is what Bortkiewicz achieved mathematically – see his “On the Correction of Marx’s Fundamental Theorem”, in P. Sweezy [ed.], Karl Marx and the Close of his System.) But then, the Marxist attempt to prove the “scientificity” of “Marxian economics” – what was on the contrary the Marxian “critique of economics” – would demonstrate the very thing that Bernstein and Bohm-Bawerk wished to prove (!) – the eschatological nature of Marx’s theory -, which is why Schumpeter, Bohm-Bawerk’s pupil in Vienna, could speak presumptuously of “Marx, the Prophet” (in Capitalism, Socialism and Democracy).

To return to Bernstein’s revisionism, in a nutshell, it can be summarized thus: once it is established that all Value is created by Labour – through the absolute “scientific” version of socially necessary labour time -, it becomes clear that the redistribution of value from capitalists to workers can be achieved by peaceful reformist social-democratic means through the process of parliamentary representation which was already spreading throughout Western Europe with the introduction of ever more “universal” suffrage. The process of production of Value and pricing of the product becomes thus a “technico-neutral” question – a mere matter of social engineering - that is now removed from the more “ethical” question of the workers’ claim to the fruit of their own Labour. Thus, Bernstein’s revisionism and reformism represent a seismic shift in socialist politics not just in tactics but indeed in strategy – because the fundamental presuppositions (Voraussetzungen) of Marxist theory have changed. The very title of Bernstein’s series of essays that kicked off the controversy around the Bernstein-Debatte and the secession of the Third from the Second International referred to The Premises (Voraussetzungen) of Socialism. And these premises had changed in part, as we have seen, because of the crucial ambiguity in Marx’s own theorization of the evolution of capitalist enterprise. By seeking to give a scientific foundation to his critique of political economy, Marx had ended up reducing the political basis of capitalist industry – the violence of the “exchange” between living and dead labour, its coercion, in the production and reproduction of human society – to the economic quantification of the distribution of a scientifically calculated Value between workers and capitalist “managers”.

This technical scientization of the production and distribution of Value according to the calculable amount of Labour represented by them threw open the question over the integration of working-class parties in the bourgeois institutions of parliamentary government and representation that was at the centre of the dramatic split in the workers’ movement between the Second and Third International, between social-democratic and communist parties around the Organizationsfrage – the question of the organization of the workers’ party either into a reformist majoritarian “umbrella” mass party leading to a broad-based parliamentary democracy or into a minority revolutionary “vanguard” that would lead the proletarian “masses” to the dictatorship of the proletariat. It is important to appreciate that both the social-democratic and the communist variants of the Marxist movement agreed on the “scientific” determination of labour-values in society, whether capitalist or socialist. They also agreed that in a capitalist society founded on private property the preponderance of anarchical decisions in capitalism over the scientifically planned decisions under socialism would result in unnecessary and oppressive social and economic crises of underemployment and immiseration and social waste. The difference between the Sozialismus and the Kommunismus lay precisely on the degree of scientificity, and therefore of steered planned economic decision-making, that could be achieved in a socialist economy. The lesser degree implied by Bernstein’s critique of Marx meant that greater democratic consensus was required to avoid the upheavals (and evils) of capitalism; whereas the greater degree of scientificity claimed by the Kommunismus meant that only the “democratic centralism” of the dictatorship of the proletariat could steer society to socialism by wresting the ownership of the means of production from the exploitative anarchy of the capitalist bourgeoisie.

The inability of both the Sozialismus and the Kommunismus to understand and penetrate the true political foundations of capitalist industry can be traced back to the contradictory ambivalence of Marx’s critique of political economy and specifically to his inability to construct a political theory of capitalist society and its State: in other words, his failure truly to understand and theorize what we have called “the society of capital”, - a society founded and constructed entirely in the likeness and for the purposes of capitalist industry.

The change in strategy that Bernstein proposed and that was adopted enthusiastically by the German bourgeoisie in its backing of the integration of the Sozialdemokratische Partei Deutschlands (SPD) with the establishment of the Weimar Republic in 1919 had already been presaged in Friedrich Engels’s 1895 Introduction to the re-edition of Marx’s The Class Struggles in France. Written shortly before his death, this Introduction can be regarded as a last testament on the part of Marx’s lifelong companion, and for that reason alone it received enormous attention in the workers’ movement leading up to the First World War. It is an important document for our purposes because it addresses several analytical themes that are essential to the schematization and periodization of our own study of the origin, formation and seizure of power of revolutionary movements in the totalitarian era between the World Wars. To be sure, Engels had intended his theses to be a mere change of the tactics to be adopted for the transition to communism; but they were never meant as a change of strategy because unlike his assistant Eduard Bernstein, whom he appointed as trustee of his intellectual estate, Engels unflinchingly held fast to the theoretical premises of the Marxist critique of capitalism. 

In this astoundingly visionary short exposition, Engels owns up to “errors” that he, together with Marx, had committed in the assessment of the political preconditions required and the revolutionary tactics to be adopted for the successful transition to a communist society. Tersely summarized, these errors referred principally to the ability of a minority vanguard or leadership of the working population to lead the majority of the proletariat to a successful revolutionary insurrection, given the spread of capitalist enterprise and the rise of the bourgeoisie as the hegemonic political force in control of powerful nation-states with their pervasive bureaucratic apparatus including sizeable standing armies capable of putting down any uprising with overwhelming force. In support of his critical revision, Engels could do no more than to point to the fate of the Paris Commune of 1871 – itself the subject of another Marxian piece on The Civil War in France where the errors of the earlier tract written in 1848 were repeated. As a remedy for these “errors”, Engels proposed a change of tactics toward a more “majoritarian” conquest of power by socialist workers’ parties given that the spread of parliamentary representation and of universal suffrage could not but lead to the gradual political supremacy of the proletariat and its eventual transformation of human society to socialism by either peaceful or, if compelled, revolutionary means.

The reason for us recalling this quite remarkable Introduction by Engels is once again that it presciently identified, with laudable perspicacity, the essential ingredients of the origin and formation of proto-totalitarian regimes in accordance with our thesis on “the primacy of economics” in the first phase – comprising the first two stages – of the historical evolution of these regimes. To repeat, these ingredients are: - (a) the spread of capitalist enterprise; (b) the rise of the bourgeoisie as the hegemonic political force within integrated economic regions; (c) the formation of powerful nation-states with their pervasive bureaucratic apparatus to govern and administer these economic regions, including (d) sizeable standing armies capable of putting down any uprising with overwhelming force. Yet, what Engels leaves out is what his summary of the developments he lists actively implies about the politico-economic evolution of class antagonism within advanced industrial capitalist industry and society. These are crucial omissions the analysis of which, had Engels adverted to them, would have greatly enhanced our understanding of the epochal upheavals that were to afflict Europe and the entire world shortly after his death in 1895 – the same year in which this Introduction was written. 

The first major omission relates to Engels’s patent and perhaps ingenuous triumphalism concerning what he thought was the relentless and unstoppable rise of social democracy as a party-political force that would lead inexorably not just to the triumph of socialism in a particular nation, but indeed to its almost imminent triumph in all of Western Europe. In his fatidic forecast, Engels exhibited further “errors” to be added to those he had already conceded with regard to the development of capitalist bourgeois rule and the formation of nation-states with powerful anti-insurrectionary standing armies. Essentially, Engels failed to recognize that, despite their expanding parliamentary institutions, the very bourgeois nation-states with their standing armies that Engels had identified as the primary reason for the suppression of the 1848 insurrections and the 1871 Paris Commune – these same nation-states could and would incite even more powerful nationalist movements able to defeat the progressive social-democratic proletarian parties and indeed to divide them along nationalistic lines, overriding thereby any “internationalist” solidarity then existing between European working-class and proletarian organizations, both party-political and syndicalist. In his Introduction Engels grossly overstates the ecumenical internationalist strength and solidarity of the European workers’ and proletarian movement whilst wholly neglecting the ability of bourgeois nation-states to instigate, organize and orchestrate nationalist movements capable of exploiting economic tensions between national bourgeoisies that could then erupt into open military conflict. Indeed, the Franco-Prussian War ought to have been foremost in his mind as a redoubtable omen of this quite open possibility.

Furthermore, and this is the second omission, Engels – and in this he had at least the partial excuse that Marx himself had never addressed specifically this essential aspect of capitalist industrial strategy as an aspect of class antagonism – entirely failed to grasp the implications of the tremendous transformation of the industrial capitalist labour process which was to form the basis of became known as the Second Industrial Revolution – namely, the rapid rise of the “mass worker” (Ungelernt, unskilled) to replace the “artisanal worker” (Gelernt, skilled) exacerbated by the rapid expansion of Taylorism and then Fordism early in the twentieth century. Again, not just Engels, but Marx himself had failed to address in any real detail the importance of the class composition of the working class as the driving force of capitalist industry reflected in the labour process.

Two levels of omissions, then, one driving the other, representing the combined ability of the capitalist bourgeoisie to drive divisions within the global working class through what Marx himself called “the real subsumption of living labour” in the process of production, and therefrom of distribution itself through income policies. And then the ability of the capitalist bourgeoisies organized around existing nation-states as optimal currency areas with separate industrial and financial hinterlands, to sow and spread divisions between separate working classes and their party-political organizations in their external inter-national relations through the exasperation of nationalisms around trade and cultural conflicts.

But a corollary to these failures concerning (a) the potential division and segmentation of the European working-class and proletarian movement along labour-process industrial policies affecting its class composition – skilled, unskilled, unemployed, petty-bourgeois -, and (b) the division within and between proletarian movements along nationalist lines dictated by the organic division of the capitalist class itself along economic regions governed by nation-states – as a corollary and consequence of these realities, Engels failed to perceive how the social-democratic political parties themselves would become entangled and enlisted by the national bourgeoisies by means of the existing nation-state institutions and bureaucracies in the administration of the tremendous processes of industrial re-organization vital to the transformation of capitalist industry broadly comprising what has come to be known as the Second Industrial Revolution! 

Broadly described, then, we can now number three levels of failures and errors to be added to the ones already identified by Engels in his 1895 Introduction – failures and errors of analysis that, and this is most important, were equally committed not just by Marx and Engels themselves but indeed by the entirety of the European working-class and proletarian movements from the First to the Second Socialist International to the Third or Communist International under the aegis of the Bolshevist-Leninist Party of the Soviet Union. 

Despite the errors of historical and politico-economic analysis listed above, there remains a residuum of historico-materialist insight in the Engelsian overview of the historical tendency of capitalist societies. This residuum concerns first of all Engels’s correct identification of the early “errors” contained in the historical studies conducted by Marx and himself, in the sense that had it not been for Engels’s correct application of the historico-materialist method, he would not have been able to identify these “errors” so perceptively and perspicaciously. And second, though this may seem paradoxical, the very “error” contained in his excessively optimistic “internationalist” and “gradualist” assessment of the prospects of social democracy in Western Europe, which involved the failure to foresee the aggressive use on the part of “national” bourgeoisies and their state apparatus of “nationalist” movements founded on that “de-composition” of the labour process that would lead to growing and irreparable divisions within and between proletarian political organizations and movements throughout Europe – this very “error” implicated an emphasis on a supranational approach to the analysis of class antagonism in Europe that was fundamentally correct. In both cases – the correct identification of “errors”, and the adoption of an “internationalist” and “gradualist” approach to the strategy of the working class in Europe -, Engels saw right because he attempted to follow the historico-materialist thread that leads the political concentrate of the capitalist mode of production through its economic categories, from the valorization of capital via the production process to its realization in the circulation process, from the “formal subsumption of labour” to its “real subsumption” whereby capital seeks to transform the labour process as an antagonistic strategy to weaken the composition of the working class and subject it to capitalist command.  

Nevertheless, it is certainly true that Marx and Engels and the workers’ movement were unable to detect and attempt to forestall the countermeasures that bourgeois institutions and capitalist industry were already beginning to implement in the opposite direction, that is, the exasperation of chauvinist and nationalist conflicts fomented by means of the breakdown of working-class composition through industrial and income policies; and that this inability meant that this counter-revolutionary and reactionary strategy of the European bourgeoisie went entirely unanswered and unopposed by the workers’ movement in all its manifestations. We shall try to show how the failure on the part of Marx and Engels and of the entire European workers’ movement leading up to and including the Third International to develop an effective historico-materialist or Marxist political theory, and specifically a theory of the bourgeois State as a collective capitalist able to affect and direct the social stratification of society through its social policies, resulted in the inability of this movement to support existing liberal parliamentary institutions and to contrast and defeat totalitarianism. 

These errors of analysis do not mean that the historico-materialist method which places the social relations of production well ahead of other broad “cultural” or “political” considerations was also erroneous or inappropriate or even inadequate, as most of the “cultural” and historicist interpretations of revolutionary movements and fascism are keen to suggest! In an effort to prove our thesis, our next task will be therefore to trace the evolution of capitalist enterprise from the concentration of workers under one factory roof, to the concentration of capitals and the formation of social capital by means of credit, finance and the average rate of profit. We shall demonstrate that it is the transformation or evolution or development of capitalist social relations of production that direct or determine corresponding developments in the political and cultural spheres, and not the other way round, as exponents of the historicist school so loudly propound. 

These organic institutional features of capitalist command over living labour in the production and distribution processes need to be linked to the establishment of capitalist command over a determinate territorial hinterland related principally to the mobility of the labour force and the availability of other resources for production as well as “markets” for the sale of commodities. Control over this economic hinterland enables the formation of a bourgeois class and the erection of a state-form or nation-state equipped with a strong centralized bureaucracy and above all an imponent standing army to police the hinterland. It is the drawing of this nexus between economic hinterland, bourgeoisie, nation-state, and finally all the other “cultural” and ideological manifestations of the bourgeois capitalist State, from nationalism to racism and expansionism, that will help us identify the origins, formation and development of revolutionary movements that lead to totalitarian dictatorship. The obvious aim of this tracing of complex politico-economic links is to establish a historical relation between the development of capitalist industry and the nation-state, and then between nation-state and nationalism leading to the extreme totalitarian deviations of revolutionary movements.

As may be gleaned from our review of Engels’s 1895 Introduction to The Class Struggles in France, the “errors” which Engels confessed had been committed by Marx and himself and the additional errors that we listed earlier were due to the lack of the kind of political theory that Marx’s critique of capitalism contained implicitly, but one that Marx failed entirely to develop. What we are saying is that the “errors” that Marx incurred in the application of his theory of capitalism to the political events occurring in his time were not due to any corresponding “errors” in the theory itself, but rather to the application of the theory that Marx carried out. The reasons behind Marx’s erroneous application of his theory of capitalist industry to the society of capital – his failure to develop a political theory apposite to capitalist industry as social capital – can be attributed to his inability to see that capitalist industry is only a part of the society of capital, but not its entirety! Furthermore, had Marx extrapolated his theory of capitalist industry to the social and political developments implicit in that theory, he may have been able to predict political developments in the society of capital of equal foresight and importance to those that he successfully predicted regarding the evolution of capitalist industry and finance itself!

The blatant contradiction in Marx’s Labour Theory of Value that we have exposed above explains his ambivalence with regard to the theorization of the State in capitalist society. Marx’s firmly-held belief in “impersonal market forces” as the unshakeable foundation of the capitalist mode of production meant that he interpreted capitalist society as a construct of social relations of production between individual workers and individual capitalists – as a set of economic links that he called “civil society” – that were entirely independent from political forces such as “the State” or liberalism, nationalism, religion or culture tout court which he saw as an “ideological superstructure” entirely and scientifically determined by the “economic base” of civil society. It is a widely known fact that Marx never developed a political theory worthy of the name after completion of the three volumes of Capital (although Volume Three was published posthumously). It is true that he had promised to devote a later volume of his vast oeuvre to the State, and that he died before being able to keep his promise. Marx’s Critique of Hegel’s Doctrine of the State is purely a philosophical and methodological revision of Hegelian dialectics as applied to social history. Other remarks on the State are largely confined to The German Ideology. (For reviews of Marx’s approach to the capitalist State, see “Marxism” in N. Bobbio, Dizionario di Politica and S. Avineri, The Social and Political Theory of Karl Marx.) But even a cursory look at his tangential or incidental commentary on the nature and character of the State in capitalist society scattered throughout his writings shows conclusively that even had he had time to complete such a study – and provided he held firmly to his earlier pronouncements on the subject -, Marx would never have been able to develop anything like an adequate political theory of capitalist society. To be sure, our contention here is that Marx’s historico-materialist method combined with his critique of political economy could have led indeed to the enucleation of a powerful, coherent and cogent theory. Yet, such a theory would have had to diverge quite significantly from the overall premises and perspective on which his disparate commentary was clearly founded. 

Of course, whilst it may be fair to upbraid Marx for unduly extending his theory of capitalist industry to capitalist society overall, and therefore incurring the “errors” that Engels pointed out, we are much less entitled to chastise him for failing to extrapolate from the capitalist society that he confronted in his time to the kinds of developments that took place after his, and indeed after Engels’s, time. The first mistake Marx made was to believe that the class antagonism of capitalist society was a magnified yet exact replica of the antagonism between workers and capitalists inside the factory walls. In other words, Marx failed to see that the kind of politics that pertain to the labour market and to the labour process is not the same as the politics that applies to the entirety of capitalist society. Capitalist industry is not confined to the factory walls! Capitalist industry requires for its existence, reproduction, and expansion a society of capital that comprises at least those elements of social life that precede the birth of capitalist industry and – much more important perhaps – social features or resources that go beyond the boundaries of the particular society in which a specific capitalist industry is first located and develops. 

We cannot stress these points strongly enough. What we are contending is that Marx confined his analysis of capitalist social relations of production to the very restricted realm of the labour market and of the labour process – to what we may call loosely “industrial relations”. And from these industrial relations Marx then presumed to extend the same kind of “politics” to the entirety of the society in which capitalist industry first originated and developed – without regard to the fact that this society is a far greater entity, both in size and reach and political significance, than the more limited sphere of worker-capitalist or factory relationships! It is possible, for instance, to have an authoritarian workplace, on one side, within a democratic society on the other side! Conversely, it is possible for a society of capital to display more representative features within the factory walls, in its industrial relations, and entirely authoritarian and even despotic structures at the broader political level.

Simply and curtly put, Marx failed to see that capitalist industry (including finance capital) and the society of capital are not necessarily one and the same thing! Marx’s greatest error was to reduce all social relations required by capitalism to the narrow confines of the social relations that obtain inside the workplace – in other words, to the social relations of production required by capitalist industry. Marx mistook bourgeois society for a factory-society, as if the capitalist factory could extend seamlessly to the rest of society and cover it entirely. – Whereas in fact we know that for this to occur the capitalist factory must first rely upon and gradually transform the rest of the society in which it operates to its image and likeness, to “the society of capital”, without ever succeeding in this process of assimilation and integration because it is impossible for capitalist social relations of production to swallow all social relations. It is entirely fair to claim that Marx’s theory and critique of capitalism remained wholly locked inside the factory gates! 

Capital is continually expanding and can never be static without abolishing itself – it is “value in motion”. Consequently, capitalist social relations of production always require use values – first among them a “reserve army of unemployed” - that lie outside of the circulation of capital. In his effort to theorize capitalist social relations of production, Marx reduced human society to the factory precinct and forgot entirely that capitalist industry is only a part – yes, the vital part, but still only a part – of the society of capital but not its entirety! Capitalist industry requires for its simple reproduction, and especially for its expanded reproduction, the existence of areas and regions of social life that are not yet subjected to its “social relations of production”. This ought to have been obvious to Marx; but in his theoretical eagerness to apply Ockham’s Razor to his theory of capitalism (in other words, to reduce the theory to the simplest formula, to its minimum common denominator), Marx forgot that capitalist industry can exist and thrive only within a larger “social body” on which it can feed! 

Even the best bourgeois economic theoreticians have perceived this essential characteristic of the capitalist economy by adverting to the “externalities” of its operation – that is to say, the ravages of capitalist industry on the environment and on society whose “economic costs” are not included in the circulation of capital, precisely because they are “external”, they lie outside that process of valorization and realization of capital through what is only apparently, and catastrophically, mistaken for “the self-regulating market mechanism” or “impersonal market forces”. (See above all, A. Pigou, The Economics of Welfare and J. Schumpeter, The Theory of Economic Development.) The very fact that Marx dedicated Volume Two of Capital to the schematic analysis of the simple circulation of capital (what Schumpeter described later as Kreislauf or “circular flow”, that is, a capitalist economy in static equilibrium) shows implicitly that Marx believed in the theoretical possibility of such a static equilibrium or circular flow whereby capitalist industry is a “self-contained” unit not reliant on any “external” factors such as classes other than capitalists and workers, the reserve army of the unemployed, the capitalist state and bureaucracy, other nations, non-renewable resources affecting the political relations between capitalists and workers intra-nationally and inter-nationally.

To revert to the simplest criticism we can make of Marx’s theory of capital: in his haste to reduce capitalism to a scientific formula, Marx forgot that “the forces of production” do not and cannot cover the entirety of “the social relations of production” and still less “social relations” overall, and that “the economic base” cannot be separated categorically from “the ideological superstructure” – because politics is not a concentrate of economics but instead it is economics that is a concentrate of politics – because capitalism is not reducible to “impersonal market forces” but is instead entirely dependent on specific social, political and historical agencies that cannot be reduced to a simple “scientific” or “economic” formula. Of course, anyone who has read Volume One of Capital, or indeed the section on “Pre-Capitalist Economic Formations” of the Grundrisse will know full-well that Marx was aware of how violent the transition from feudalism to capitalism was, what he called “primitive accumulation” (ursprungliche Akkumulation) where he describes how capitalism came into being “steeped in blood from head to toe” by expropriating the existing peasantry, especially in England, in what came to be known as “the enclosure movement”. Yet even from this potent historical perspective, Marx still sees the period of primitive capitalist accumulation whereby the bourgeoisie “formally subsumes” the existing agricultural and artisanal mode of production prevalent in the decaying feudal absolutist regime as the doings of “the bourgeoisie” – as a historical “class”, yes, but still as a collection of individual proprietors! 

What Marx failed to see, even when it ought to have been so evident, is that the emerging bourgeoisie acted not as a collection of separate individuals but much rather through the agency of the reformed absolutist State – in England as in France! The insurmountable, almost unpardonable, problem with Marx’s theory of capitalism is that he always saw the bourgeoisie as a collective of individual proprietors and entrepreneurs and the capitalist State consequently as “a committee of management” (in the Communist Manifesto) acting not as an independent agency with its own political instruments extending over the entirety of society, including those elements not yet within the cycle of the circulation of capital, but rather as a simple elementary blunt tool of social repression against the proletariat. Yet, in its bluntly political and therefore “superstructural” role, Marx’s theory places not just the capitalist State, but political coercion itself, outside the scope of his entire theory and critique of capitalism! So keen was Marx to show that the capitalist mode of production could operate through “impersonal market forces”, that he forgot the very violently coercive “act of birth” of capitalist enterprise – that original sin of “primitive accumulation” – that not only lay the foundations for all future capitalist industry but also has remained to the present day an essential feature of the society of capital! In other words, Marx forgot that political violence and coercion are intrinsic elements of capitalist enterprise and industry  and that, as we are about to demonstrate, capitalism possesses its own “statality” without which it could not have arisen and developed as a mode of production: indeed, capitalism is inconceivable without its own “statality”.

Let us look at this paramount deficiency in Marx’s theorization of capitalism from a slightly different angle, but one that does not change the substance of our review of the Marxian theory of capitalism and of our positing of a fresh Marxist theory of the capitalist State, one that builds on the solid foundations that Marx himself laid down. In his attempt to schematize his critique of the capitalist mode of production down to its most basic elements, Marx reduced capitalist society to its “productive” elements, and specifically to the monolithic conflict between workers and capitalists. By so doing, Marx neglected the undeniable reality that capitalist society involves conflicts not just between workers and capital but also conflicts within the working class and the capitalist class themselves, and then also between elements of society that are not included in the direct process of production yet are necessary parts of it because capital is value in motion, seeking to expand continuously so as to involve elements of society, potential use values, that do not yet form part of its process of valorization and realization, yet are essential to it as the “living space” needed for capital to expand, to accumulate itself as value. 

Because he neglected the dynamic of conflict within and between classes and elements internal and external to the production, circulation and accumulation of capital, Marx failed to theorize the organic need of the capitalist class to erect a State that is not a mere appurtenance of capitalist social relations of production, one that is not a mere excrescence but is instead precisely what we have called it – the expression of an “organic need” of the capitalist class to preserve and expand its social relations of production, that is, its command over the working class in the direct process of production, but also its political domination and hegemony over those parts of society that are external yet essential to that process. The problem with Marx’s theorization of capitalism is that he reduced the society of capital to the pure antagonism over the process of production (ownership of the means of production) between workers on one side and capitalists on the other. These quintessential relations of production Marx encompassed under the concept of “civil society” (burgerliche Gesellschaft) which he adopted from Hegel’s Philosophy of Right and adapted for his own purposes.

Of course, the greatest Marxist theoretician to perceive this deficiency in the Marxian theory and critique of capitalism was the founder of the Italian Communist Party, Antonio Gramsci. (For the following sections, see N. Bobbio, “Gramsci e la concezione della societa’ civile”, now translated in C. Mouffe (ed.), Gramsci and Marxist Theory.) It was Gramsci who first perceived the subtle yet strong and pervasive links between the political coercion that obtains in the workplace and the broader bourgeois social domination through the apparatus of the State. Whereas for Marx the State was a pure blunt weapon of “the organized and concentrated power” of the bourgeoisie over the proletariat, emanating from the pure economic social relations of production obtaining in the workplace, for Gramsci workplace relations themselves formed only part of the overall “hegemonic dominance” of the bourgeoisie over civil society. In other words, whereas for Marx the concept of civil society was exclusively an economic category denoting the strictly productive aspects of social relations and excluding the superstructural ideological aspects embodied by the State, for Gramsci civil society was a broad social category that contained and therefore included and conditioned the social relations of production.

For Gramsci the struggle, conflict and antagonism between workers and capital was only a part of civil society, albeit the dominant because productive part, the part serving the most basic needs of society for its reproduction, at least for no other reason than the fact that civil society contained social relations that preceded capitalist industry as well as social relations that had not yet been absorbed by capitalist industry. Of course, we would add that capitalist industry requires the presence of a potential or reserve army of living labour for inclusion in the expanded reproduction that is the essence of capitalist accumulation – because surplus value, or profit, has no meaning outside of the extension of the wage relation to new populations of workers.

There are two ways, then, in which Gramsci altered and improved on Marx’s notion of civil society inherited from Hegel: the first is that civil society is now extended to social relations lying outside the sphere of capitalist production and indeed defining and therefore conditioning those social relations of production which Marx had instead thought to be independent of broader “superstructural” social relations. And the second alteration effected by Gramsci is that now the capitalist State is not seen as a mere superstructural appurtenance or excrescence of capitalist social relations of production – indeed as a blunt tool or weapon for their violent imposition – but rather as an institutional expression of this expanded notion of civil society. Whereas Marx sees in the State an ideological dissimulation of the social relations of production represented by civil society as he understood it, Gramsci instead interprets the State as the political expression of a civil society that contains but is not confined to social relations of production. 

The insuperable problem with Marx’s hermetic separation of State and civil society is that if indeed social reproduction depends ultimately on the social relations of production and the State is merely the violent imposition of these “social relations of production”, then there is absolutely no need whatsoever for the State to exist at all! As Norberto Bobbio has ably pointed out, in effect Marx’s notion of civil society as confined to social relations of production reduces Marx’s conception of these social relations of production to a Hobbesian state of nature in which individual is pitted against individual regardless of whether these individuals are then reclassified as members of the working or capitalist class! Given that for Marx the reproduction of capitalist society, whether simple or expanded, depends on social relations of production, and given that the State is only a blunt instrument for the imposition of these social relations of production or civil society, it is impossible to see why the capitalist class should ever require the services of any institution such as the State for any purposes whatsoever! If we agree with Marx that what makes a worker and what makes a capitalist can be reduced to mere social relations of production, that is, relations of force limited to the workplace, to the labour process, it is impossible then to see why a State structure is needed by the bourgeoisie to exercise a social power that it possesses already as part of its ownership of the means of production! Worse still, even the idea of “ownership” becomes meaningless or paradoxical because as a legal entitlement it presupposes the existence of a State! 

The great merit of Gramsci’s revision of the Marxian conception of civil society is that it draws attention to the important reality that whilst the working class, even in its political existence as a class and not just in its purely material productive role, is essential to the reproduction of capitalist society, it is not by reason of that fact alone necessarily its hegemonic class. Indeed, the very fact that the bourgeoisie is able to maintain its political supremacy, its hegemony, over the society of capital without resorting most of the time to the State, or “the concentrated organized violence of society” as Marx defined it, shows that the roles of productive centrality and political hegemony can and do diverge. The reasons for this divergence we have already pointed out. To repeat: first of all, capitalism is an expanding social relation because capital accumulation requires necessarily the extension of the wage relation to greater numbers of workers both absolutely and relatively with respect to populations; which means that for capitalism to subsist there must be populations of potential workers (a reserve army of the unemployed or self-employed workers) not yet employed directly by capital. Second, the bourgeoisie is able to devise employment and incomes policies that can segment and divide the labour force as a political class, as a working class. This ability of capitalists to exploit the labour and productive processes so as to de-compose the working class politically is an intrinsic aspect of the capitalist ownership of the means of production, of the separation of workers from the means and from the products of social labour. 

Gramsci’s entire political and intellectual life was devoted to exploring the multifarious ways in which the bourgeoisie exploits these various strategies to maintain its hegemony over society, and to suggesting ways for the workers’ movement to overcome them by seeking to impose its own countervailing hegemony over society on the road to emancipation from the exploitative wage relation. This is particularly true of those “prison notebooks” (quaderni del carcere, in Italian) dedicated to “Americanismo e Fordismo”. But before we delve into this aspect of Gramsci’s work, let us merely state that its most striking feature is that it points to what is a most indispensable task for those of us who hold to a historico-materialist interpretation of social history – which is the development of a proper Marxist “political theory”, something that Marx himself failed to do, as we have argued thus far.

We have already adumbrated (following Bobbio’s excellent lead) the improvements that Gramsci sketched to a proper Marxist political theory of capitalism. Let us state from the outset that, despite its “corrections” of Marx’s own inchoate theory, Gramsci’s own approach to the political theory of capitalism remains (as Bobbio quite rightly also insists) fundamentally and profoundly “Marxist” in the sense that the Italian founder of the Communist Party never diverged from the theoretical position about the “centrality” of the working class to the society of capital. Gramsci’s quest was to find out how and why this economic productive centrality or even “essentiality” for the reproduction of the society of capital, had not yet evolved into effective political supremacy or hegemony over that society – a hegemony that was quite obviously still in the hands of the bourgeoisie, especially in the dark days of the Fascist Dictatorship that had seized power in Italy and had led to his own “confinement” in prison from where he was writing his Quaderni del Carcere.

Furthermore, there is are two major aspects at least in which Gramsci’s novel restatement and extension of Marxian political theory alluded to what could become potentially the major most invigorating mine of material for the development of such a theory, one that Marx himself had failed properly to exploit: we are referring to the notion of “the statality of capital”. Let us pause on the meaning of this neologism, “statality”. By this term we intend to refer to the fact that it is inherent and intrinsic to the very concept of capital that there be a “State”, a social agency and instrument, by means of which the command of capitalists over the working class is put into effect. And this social agency, the capitalist State, is not an abstract concept separable from that of “capital” itself, in the way one can speak of a “feudal State” or a “Roman State”, but is indeed an essential part of the latter, a conceptually and historically inseparable part of the reality of capitalism. We have already alluded to Gramsci’s incipient intuition of the manner in which the bourgeoisie exerts its command over the labour force and hegemony over the working class, the proletariat, and society as a whole through the deployment of the production process – that is, not just the process of production but also that of consumption through the selection of the “products” to be produced -, and then, internal to this production process, the labour process, that is to say, the particular political method of production imposed on workers so as to enable the bourgeoisie the better to impose and co-ordinate or better “homologate” and “homogenize” that command so as to break up the composition of the working class. As we intimated earlier, this political de-composition of the working class is achieved by the bourgeoisie both through the labour process and (most important) through the process of consumption through what are known as wage or “incomes policies”.

It is this latter aspect, one of the two to which we referred above, that of wage and incomes policies, that Gramsci was unable to integrate into his study of bourgeois social hegemony, in large part because his grasp of economic theory, even the Marxian branch, was limited at best. In this, Gramsci was in good company because Marx himself – this is a point we have made repeatedly here –, and indeed the entirety of Marxist theory from Engels through to Lenin and later theoreticians, failed to grasp the “statality” of capital. But there is yet one more important aspect of this statality of capital that has remained almost entirely unexplored by Marxist political theory, although the same cannot be said of the broader non-Marxist political theory and historiography – and this ought to be reason for embarrassment as well as regret for Marxist theoreticians: we are referring to the entire sphere of analysis and study that normally goes under the rubric of “fiscal studies” or “fiscal sociology”. Indeed, it is this aspect of the statality of capital that has come progressively to play by far the most important and central role in the entire development of capitalism since its historical inception. For all its progressive expansion, however, this central role was not just essential in the origin of capitalism but was indeed quite determinant, as we shall see presently. In other words, it is not so much that statality is an essential component of capitalist industry that has gradually grown in importance or centrality over the four centuries of the history of this mode of production; it is rather that statality was the defining and determinant aspect of capitalism right from its beginnings, and its expansion has merely trans-formed the character of capitalism in line with its ingrained fundamental tendencies. Differently put, we could say that statality was always the determinant characteristic of capitalism, yet initially it was not its preponderant part as it has become in its late stages.

The reason why we are taking this long detour in our theorization of totalitarianism with this examination of Marxist political theory is that we are trying to show how totalitarianism is a tendential development, and indeed the tragic denouement, of the statality of capitalism. It follows that before we can trace this contentious link between the statality of capital and its ultimate catastrophic collapse into totalitarian dictatorship we must enucleate the theoretical nature of this statality of capital.


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