Paul Sweezy, Monopoly Capital, and the current economic crisis

I'm planning to write a post, sometime soon, on the current financial crisis and recession that appear to be spreading from the United States to all the developed late-capitalist powers. It's fascinating to me that so many of the contours of this looming crisis- not just the claim that Western capitalism would collapse, not just the hope that Western capitalism should collapse, but a detailed analysis of how and why it would be collapse- were predicted several decades before. I'm thinking, of course, of the "underconsumptionist" thesis propounded by a number of left-leaning thinkers: by Sismondi, and by the Harvard economist Paul Sweezy et al. Of course I don't mean to dismiss the older prophecies: the visions of so many people, religious and secular, who foresaw that the current age, the age of lust, greed, and pride, would come to a bloody and fiery end, and that a new age of love and harmony would be ushered in.Those prophecies are invaluable as aids to faith, hope, and love, and ultimately they will be fulfilled. But in addition, it would be good for us to know how and why the kind of economy and society we have today, late-capitalism, with all of the distortions and deformations it has caused- to the natural environment, to other species, to the poor, to developing countries, to rural areas, to the family, to our own sense of virtues like justice, love, labor, and charity- is eventually going to fall, and why its end is in some sense inevitable.

Paul Sweezy provides such an argument. It will be a while before I can write detailed posts on the current crisis, as I need to skim through "Monopoly Capital" in my spare time and marshall his main points. But basically, Sweezy argues that modern Western capitalism is by its very nature underconsumptionist. Not that we in the West consume too little. On the contrary, we consume far too much- this is why we have raped the natural world, and are rapidly running out of virtually every natural resource- fossil fuels, metals, timber, arable land, water, fisheries. The point is that we consume less than the system produces; that a mature capitalist system tends towards a state in which the system cannot absorb the surplus that it generates. This wasn't true for early, competitive capitalism: but it is true today, in the world of globalized, oligopolistic capitalism. For the nature of oligopolistic capitalism is that it partakes both of aspects of monopoly and aspects of competition. Inasmuch as it resembles competitive capitalism, businesses are driven to keep their costs low (and globalization helps drive them even lower). Yet inasmuch as it resembles monopolistic capitalism, with industries being dominated by a few players who have swallowed up their rivals through consolidation and buyouts, companies are free to keep their prices high, and in fact tend not to use lowered prices as a means of competition.

This creates an ever expanding ocean of surplus profits in the hands of the owners of capital. And the nature of monopoly capitalism is that it has no good way to use up that surplus. A feudal Christian state could use them up by building churches and monasteries. An oriental monarchy could build palaces and pleasure gardens. A social-democratic state might simply pay workers more, or force prices to be lowered. A real socialist state would not have the problem in the first place, as there would be less separation between producers and consumers, and therefore no surplus beyond that which was socially necessary. A competitive capitalist economy could lower prices and get rid of the surplus that way. An environmentalist state could use the surplus to plant trees and solve our carbon-dioxide problem. But no, a monopoly capitalist state can't do any of these things, for in their different ways they would all challenge the logic and surplus of the system.


Sweezy predicted that monopoly capitalism would use up the surplus in three primary ways. It would throw some bones to the poor, to persuade them to buy into the system and become dependent on it, without actually doing anything to remedy their plight or to give them control over their own livelihoods and destinies. It would throw money at an ever expanding and ever more bloated military establishment, using ever higher and more expensive technology against ever more meaningless and pitiful threats (Iraq, anyone? Grenada?) as well as, of course, against crushing revolutions in the developing world. These seem to be good descriptions of the "welfare state" and "warfare state" in the modern West respectively.

But most of all, Sweezy said, American late-capitalism would use up the surplus through the sales effort. As monopoly capitalism suffers from inadequate demand (because profits, to have value, must be invested, and you can't invest in production without a demand for that production), monopoly capitalism would create the demand. It would invest heavily in advertising, marketing, sales, and all the other types of economic activity that employ so many people in our wonderful late-capitalist utopia, and that create utterly nothing of any meaningful value. Go into your nearest grocery store and look at how much on the shelves is really necessary to a fulfilling and happy life. It would invest in pouring out a nonstop stream of mendacious messages to get people to buy stuff they don't need, and in making people feel that the old, sturdy products they had were unfashionable and out of date; it would invest in differentiating their products from the absolutely identical products of their competitors through meaningless brand-name differences. It would invest in creating a swollen, dependent middle class of salespeople, marketers, public-relations specialists, consultants, and I don't know what else, in order to keep the populace employed, in order to keep the demand for goods high while the price of production stayed low, in order to keep the wheels of industry turning, and in order to keep surplus profits from backing up. Like Orwell's Eastasia, modern capitalism would be faced with the imperative to keep the wheels of industry turning, but at the same time to keep the actual fruits of production out of the hands of the poorest of the poor- for that would challenge the very logic of the system. This huge and bloated class of people involved in the "sales effort" would be, in the strict sense, unproductive workers: they would not produce anything, but rather be involved in selling what was produced. In that way, they would be net consumers of the surplus, and would not contribute to expanding the surplus further. They would be the equivalent of the slaves who built the Pyramids, or the retinues of domestic servants in the European Middle Ages.

Sweezy draws, in careful detail, a picture of why monopoly capitalism would be driven to use the sales effort as its last tool to keep demand high and to use up the surplus generated by capital, and also shows how society and human beings were morally, intellectually, and spiritually corrupted and deformed by the system. But one point he doesn't make, perhaps because it wasn't yet a reality in his time. He doesn't point out another way that monopolistic businesses would collude with the capitalist state to increase demand, particularly among the poor and working class. How they would use advertising to persuade people to buy beyond their means, and would then extend them credit to do so. How they would encourage people to buy houses they couldn't afford with cheap loans; how they would encourage people to buy things on credit cards that they would never be able to afford, and fall into lifelong cycles of debt. How thrift would become a vice, and profligacy a virtue. How the American economy would shift further and further away from actually producing goods, until most of our manufactured goods had labels on them from Asia or Central America. How the American economy would become less and less dependent on real goods, and more and more on moving paper money around. Until we reached a point at which the bulwark, the strength, the only real basis of our economy was our ability to persuade people that we had lots of money that they wanted, and an ability to pay whenever they required it. And what would happen when they decided to call our bluff? Sweezy didn't know all this, but I'm sure he would have seen this as yet more confirmation of his theory. And he would have been right. Sweezy was right, and our slide into a parasitic economy of consumers rather than producers proves it better than ever.

Sweezy was wrong about some things, but he was right about the deepest things. He was right to see in late capitalism not just irrationality and immorality, but also a fundamental incoherence. Those contradictions have only gotten deeper since he wrote his boom "Monopoly Capital" (dedicated to Che Guevara) in 1966, and the real question for us today is this: will the crisis of 2008 be seen, in retrospect, to have been the straw that broke the camel's back, the spark that set the world on fire?