Commentary on Political Economy

Sunday, 13 June 2021

MARX AND SCHUMPETER - State and Capitalist Accumulation or Capitalist Trans-crescence and Statality?

MARX AND SCHUMPETER - State and Capitalist Accumulation or Capitalist Trans-crescence and Statality?

In one of the most perspicuous, perspicacious and incisive studies of economic theory, the great Italian economist Paolo Sylos-Labini, himself the author of an inspiring tome on Oligopoly and Technical Progress (and a pupil of Joseph Schumpeter's at Harvard) after conducting a valiant review of economic dynamics in Marx and Schumpeter, comes up with the rather astounding conclusion that the Austrian economist was by far a more “political” theoretician than the German! (See, Paolo Sylos-Labini, “The Problem of Economic Growth in Schumpeter and Marx”.) At first blush, this would seem to be, again, a most surprising and unwarranted conclusion when one considers that Marx’s entire critique of political economy was based, of course, on the “critique” of what others considered to be “economic science”, entirely grounded on the historical agency of “class struggle”, and therefore for that very reason comprehensively “political” - whereas, in contrast, Schumpeter’s theory of economic development is founded on the Individualitat of the “entrepreneurial spirit”, on its capacity for “innovation” as a process of “creative destruction”, and therefore - again, in contrast to Marx - as a seemingly “a-political” force for capitalist economic dynamics, growth, development or evolution.

But here is precisely where Sylos-Labini sees in Schumpeter the far greater “political” element in the study of economic reality: for whereas Marx’s critique is quite plainly focused on the violence of the wage relation derived from the historical struggle between capitalist bourgeoisie and socialist proletariat, he rarely if at all devotes any attention to the complex but extremely “political resultant” of this class struggle, that is to say, to the effect of this struggle on the specific “development” of capitalist industry and society not just in terms of the concentration of capital and the centralization of capitals, or indeed of “the immanent law of the tendential fall of the rate of profit”, but also on the crucial repercussions of this struggle on the very technological process of capitalist development - once again, not merely in terms of industrial concentration and centralization and of market oligopoly and monopoly, but much rather on the quite essential and complex technological aspects of development in terms of industrial techniques, production and distribution affecting the relations of power between economic agencies. For it is clear that in terms of depth of analysis of capitalism, in its production and distribution of commodities, this extremely complex interaction of the productive and distributive process is exquisitely political in a far more essential and dynamic manner than the mere static statement of a basic fundamental - and indeed much less “dialectical” - opposition of workers and capitalists!

Astounding as it may sound, it is quite true to observe that Marx’s class struggle and the antagonism of the wage relation describes - to borrow from Antonio Gramsci - a “war of position”, static and unchanging, unless one views it from a Hegelian-Marxist dialectical but ultimately teleological perspective; whereas Schumpeter’s focus on the role of technological progress or development or simply on the innovative trans-crescence of capitalist production and distribution describes a much more dynamic and therefore political “war of movement” between economic agents, be they individuals or classes. Seen from this perspective, Schumpeter’s much sharper and heavier focus on the metamorphic or dynamic aspects of capitalist trans-crescence turns out remarkably more political than Marx’s much broader and unsurpassed analysis of the overall holistic changes in the industrial capitalist concentration and financial centralization. Marx takes a look inside the factory, sees the irreducible conflict between commanded worker and commanding capitalist - and leaves it at that. Schumpeter, instead, studies the capitalist market and attempts to trace its productive and distributive dynamic changes back to the process of innovation (Innovations-prozess). The problem with Schumpeter is, of course, that he stops at the “individuality” of the entrepreneur, the subjectivity (“economic subjects”, Wirthschafts-subjekte) of the captain of industry. But equally, the problem with Marx is that he does not peer more closely into the way in which the antagonism between workers and capitalists over wages and over industrial process transforms itself into or has an impact on the constant transformation or creative destruction of both the industrial process (labour process and machinery) and the distributive process (market concentration and marketing or distributive process itself).

The overwhelming conclusion that arises from our statement of the political problem in Marx and Schumpeter is that although, or indeed because, they approach the process of capitalist transformation or dynamics from different directions - the factory for Marx, the market for Schumpeter - neither of them manages to study or analyze satisfactorily the interface of these two spheres of capitalism, that is, industry and market. It is from the extremely complex interaction of industrial production and market distribution or consumption that a new universe of political relations emerges, springs open and prepotently demands our attention. For it is out of this complex interaction that the entire notion of the “statality” of capital emerges. Schumpeter completely eluded the role of the State in capitalism (except perhaps in his last great work, CS&D). But so did Marx in large part. The Austrian because of his emphasis on the entrepreneurial Spirit of creative destruction, and the German because of his fixation with the strictly “industrial” opposition of working class and capitalists over control on the distribution of value as the driver of capitalist social and political development intended as capitalist accumulation. Because of his much greater emphasis on the “extrinsic” or market repercussions of innovation on society, Schumpeter ended up being by far the more “political” observer of the trans-crescence of capitalist industry and society leading to the analysis of “the war of movement” between economic agents, whereas Marx narrowed his attention to the effect of power relations within production on the distribution of value and the accumulation of capital understood as fixed concepts, and therefore less “political” in the dynamic Schumpeterian sense. Schumpeter fixes his gaze on the Entrepreneur - and leaves out the State. Marx peers into the rivalry between workers and capitalists - and also leaves out the State except as mere “concentrated violence of bourgeois society”. Thus, Marx e-liminates (sidelines) the State to an external adventitious and peripheral role in the process of capitalist quantitative accumulation of value. Schumpeter totally neglects the State - and yet his “psycho-sociological” approach invites far closer scrutiny of the political nature of capitalist development as qualitative trans-crescence (Entwicklung).

Marx is political with classes. Schumpeter less so with individuals. But Marx treats capitalist enterprise as having primarily a quantitative aim - accumulation ; whereas Schumpeter sees accumulation as the secondary outcome of a successful qualitative aim, to prevail over others through technological change. This explains why for Marx the State is extrinsic to production and the wage relation; whereas for Schumpeter the State is extrinsic to innovation. Yet, the ultimate motivation of the capitalist in Marx and the entrepreneur in Schumpeter is one of preserving political command through production and distribution of commodities - and this will to power of either a class (Marx’s “capitalist command”) or of individuals (Schumpeter’s “entrepreneurial profit” or Unternehmers-gewinn) involves statal functions to be effectual and effective. Because of its more political character embedded in entrepreneurial innovation,  Schumpeter's analysis does not require explicit analysis of the State as an integral part of the process of transformation, which is why it is entirely absent; whereas in Marx the State is present but its role is extrinsic to the wage relation as part of civil society. In Schumpeter the need for the statality of capital is evident because it is intrinsic to the crisis-prone transformational role of capitalist industry and yet he totally overlooks the State because of the individualist premises of the analysis. In Marx, the State is present as the enforcer of the violence of class antagonism; but only as coercion, as “the organized violence of society by one class against the other, and therefore external to capitalist industry which belongs to the sphere of what Marx, following Hegel, calls “civil society” (burgerliche Gesellschaft).

A sharper illustrative approach to the statality of capital is to examine the different roles that economic crisis plays in Marx and Schumpeter. For Marx, crisis is a wholly negative, destructive event in the capitalist economy to which this economy is constitutionally prone because of the contradiction between the Sozialisierung and the Planlosigkeit. The State intervenes in a crisis externally, in a purely coercive manner, to prop up the failing system. In Schumpeter, instead, capitalist crises are essential, intrinsic to the system because it thrives on them, on the critical role of innovation - and indeed because capitalist development is entirely dependent on “disturbances” (Storungen), on creative destruction (shopferische Zer-storung) and innovation. Because of this centrality of crisis in capitalist dynamics, the State should play a much greater stabilizing and interventionist role in Schumpeter’s theory than in Marx’s - but it does not. (Max Weber’s Munich tryptich of 1919 - the two lectures on Die geistiger Arbeit and the vast tract on Parlament - can be seen as a direct reply to Schumpeter: Weber exalts the role of the State and belittles that of the Entrepreneur despite having dedicated his Protestantische Ethik to the entrepreneurial Spirit!)

Hence, in both Marx and Schumpeter, the role of the State in capitalist dynamics - the “statality” of capital as anecessary functional emanation  of the wage relation does not arise. But we must exercise care in defining what we mean by "State" because the State is a specific social institution that has many and multifarious roles impossible to confine to strictly "economic" functions pertaining to social reproduction. This is where the distinction between the Political and the Economic becomes crucial. This is why we prefer to speak not of "the State" as an abstract entity separate from capital, but rather of the "statality" of capital - to emphasise the statal functions required by capital to reproduce and expand its social relations of production ! We prefer to approach the problem not from the angle of an abstract notion of “the State” as an instrument or organ or institution, an apparatus, separate and distinct from capitalist industry, but rather as Marx does for “civil society”, that is, in terms of its functional and stabilizing or regulatory role. By concentrating on the sphere of innovation (technological and marketing, and so productive and consumption  transformations), Schumpeter lays the emphasis on the side of the social relations of production in a dynamic, changing, strategic political sense so that there is a flowing flexible dynamic to these transformations. Schumpeter understands capitalist dynamics as a diffuse tactical “war of movement” between multifarious “economic subjects”. In Marx, instead,  we find an invariant - linear and teleological, even eschatological - dialectic (or theodicy!) of antagonism, of social conflict that is merely posited as static rather than as strategic or tactical. This is why Schumpeter can anoint or label Marx as “the Prophet” (in CS&D). Thus, whilst the Political in Marx is restricted to this “war of position” - this static antagonism, or an antagonism that is dialectical only in a philosophical and teleological Hegelian sense;  in Schumpeter the conflict is more one of movement, of tactics without any real supersession of the entrepreneurial activity which is not conflictual or antagonistic in a dialectical Hegelian sense and does not involve social classes but is simply eristic in the tradition of Schopenhauer and Nietzsche - one that can be reduced rather to individual motives, in line with the "methodological individualism" of the Austrian School

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