Capitalism unchained

Review of Krishnan Nayar's Liberal Capitalist Democracy

Krishnan Nayar makes three key points in his recently published Liberal Capitalist Democracy: The God that Failed. First, he argues that bourgeois revolutions frequently failed to lead to democracy, a view strongly embedded in the Anglo-American Whiggish history and in simplified Marxism. Rather they provoked aristocratic reaction and the authoritarian economic developments which in many respects were more successful than those of bourgeois democracy. In other words, democracy does not come with capitalism and, as we shall see, capitalism often destroys it.  The authoritarian modernizers  (Nayar studies four: post-1848 Germany, Louis Napoleon’s France, Bismarck’s Germany, and Stolypin’s  Russia) enjoyed wide support among the bourgeoisie who, fearful for its property, preferred to take the side of the reforming aristocracy than to throw in its lot with the proletariat. This indeed was one of the disappointments that surprised Marx and Engels in 1848-51, when they noticed that the propertied classes sided with Louis Bonaparte rather than with the Parisian workers.  

Second, Nayar argues that the unbridled Darwinian capitalism always leads to social instability and anomie, and that social instability empowers right-wing parties. He thus argues that Hitler's rise to power was made possible, or was even caused,  by the 1928-32 Depression, and not as some historians think  by either the fear of communism or bad tactics of the Communist Party which instead of allying itself with Social Democrats fought them.

Third, and for the present time perhaps the most interesting, Nayar argues that the success of Western capitalism in the period 1945-1980 cannot be explained without taking into account the pressure that came on capitalism both from the existence of the Soviet Union as an alternative model of society, and from strong left-wing parties linked with trade unions in major European countries. In that sense the period of les trente glorieuses which is now considered as the most successful period of capitalism ever occurred against the normal capitalist tendencies. It was an anomaly. It would not have happened  without socialist pressure and fear of riots, nationalizations, and, yes, defenestrations. But with the rise of neoliberal economics after 1980 capitalism gladly went back to its original 19^th and early 20^th  century versions which regularly produce social instability and strife.

The lesson to be taken from Nayar is in some ways simple. Capitalism, if it's not embedded in society and does not accept limits  on what can be commodified, has to go through recurrent slumps and prosperities.  But these two cannot be seen just as a plus and a minus that cancel each other out. Their  political effects are very different. And this is where Nayar takes to task many economists who saw the 1920s Depression as a cleansing period of capitalism eventually bound to result in a boom. The point is that here we deal with real people and not mere numbers: many are unwilling to wait until the boom  comes; they may not even be around for its Coming. Thus they vote for radical solutions or go out in the street. This is something that is often forgotten by economists who treat individuals’ incomes over the long-term as a mathematical summation without realizing that the political effects of the minuses are very  different from those of the pluses.

If we look at the three main theses in Nayar’ s  book none of them is new. But they are when strung together and placed in their historical context.  The authoritarian modernizations have of course been a subject of many books some of which, like Barrington Moore’s classic, are cited here. The rise of fascism was, and is, increasingly linked with austerity policies as was recently done by Mark Blyth’s Austerity: History of a Dangerous Idea and Clara Mattei’s The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. Nayar may perhaps be overstating his case by claiming that many historians such Ian Kershaw and Joachim Fest tend to ignore the economic causes of the rise of Nazism because they take capitalist economy as given. This could be true for some contemporary observers like Churchill as well as Keynes who seems to have been oblivious to the political effects of the crisis until comparatively late, but more serious historians do acknowledge a huge impact of depression. It is indeed hard not to do so when Germany's GDP declined by one-fifth, and more than one-quarter of its labor force were unemployed.

However there is a more subtle argument in Nayar which deals with the position of the Communist and Social Democratic parties in Germany. Unlike many historians who blame Stalin for the decision to direct  KPD’s animus  not towards fascists but towards those whom Stalin called “social fascists”,  meaning SPD, Nayar thinks that the collaboration between the two parties was impossible given their different constituencies and positions within the Weimar system. SPD was strongly embedded in the Weimar system. It participated in the austerity policies, supported spending cuts and the balanced budget, and was involved in the decision not to extend unemployment benefits which triggered yet another fall of government and the elections that finally brought Nazis to power (thanks of course too to the behind-the-scene machinations of von Papen and Hindenburg’s son).  KPD, on the other hand, had its ranks swelled by the unemployed, that is, by the same people whom Social Democrats were driving into the street. It was impossible for the two parties to collaborate, whatever Stalin wanted or not. For sure, the lack of cooperation opened the way for Hitler but without knowing the future which of course no participant in the political life can know, there is simply no way that the two large left-wing parties could ever join forces.

Nayar’s third point about the indirect support that the communist regimes and the left-wing parties provided to capitalism and capitalists, by pushing them to reform the system and realize that without much stronger social policies,  they risk being overwhelmed by communist parties, is also a point that is increasingly recognized. Here is the link to a very important empirical paper by André Albaquerque Sant’Anna that documents that the welfare policies were more strongly developed in countries where either socialist or communist parties were stronger or the threat of the Soviet Union was greater. Nayar quotes a number of British politicians and intellectuals who make the same point even if sometimes unaware of doing it. He rightly criticizes Tony Judt, who, bizarrely, refused to accept it.  

The Soviet experience and its international importance did not play a role only in Western Europe; it did not play the role only in Italy which had at one point one-third of its voting population support the Communist Party, or in France where the share of the communists oscillated around 20%, but also played an important role elsewhere, including in the beginnings of the Dutch planning or Indian five-year plans. So there is I think no serious contest on the matter. Nayar might pick on some historians who are singularly blind to reality but the reasonable view is that the (much embellished) Soviet experience did have a strong impact, indirectly promoting policies which would never have happened otherwise and would have been discarded by the capitalist class out-of-hand.

In that part of the book Nayar is scathing about the disconnect of the so-called Marxist intellectuals with reality in their own countries and the world. He rightly ascribes that disconnect to inability to accept that capitalism has been, even if reluctantly, accepted by the majority of the population including by majority of workers, that real incomes had been rising, and that the typical communist party’s role which saw itself as leading the working class in an  antagonistic relationship with bourgeoisie was simply obsolete. Consequently, Marxist intellectuals became what Nayar calls “intellectual playboys” without any discernible impact on politics. To us today they appear, and they probably were at the time, laughable. Had they been really interested in Marxism, and not in philosophizing for a few, had they been interested in the topics that preoccupied Marx, Engels, Lenin, Trotsky, Kautsky etc., and that had to do with the development of capitalism and lives of normal people, they would have noticed changes that had occurred between 1945 and 1980.  The size of the working class had declined, real incomes have risen, the power of trade unions was vanishing, large companies no longer exerted the role which they had in the past, and perhaps most importantly the technological change became very different from the technological progress that was known in the 19^th and early 20^th century. All these developments simply escaped the attention of the (quasi) Marxist set mentioned by Nayar: Sartre, Althusser, Marcuse. (To be fair, Nayar’s selection is itself narrow, perhaps too much influenced by the Londonese (my coinage) and Parisian salons. There were many on the left who saw these developments, but it is true they were less popular among the juventud rebelde of the 1960s and 1970s than the people mentioned here.)

They missed the change in capitalism, but capitalists anyway did not pay much attention to them. Neoliberalism felt emboldened by the internal dynamics that marginalized the working class and then by the precipitous fall of the Soviet Union and communism. Once capitalism was without a rival, it promptly went back to its past policies, manifesting many of its worst features that were forgotten during the trente glorieuses. Marx, with his critique of capitalism, now became much more our contemporary than the myriad of other philosophers, Garton Ash, Ignatieff, Fukuyama e tutti quanti, who oblivious of history’s lessons celebrated the triumph of capitalism in no less unrealistic prose than Sartre and Marcuse reviled it forty years ago.

The question which is on everybody’s mind after having read Nayar’s book is, What next? Because if capitalism continues along the current trajectory that Nayar believes almost preordained, it must again produce instability and rejection. And that would—again--play into the hands of right- wing movements. We may replay a century later the same story that we have seen in the 1920’s Europe. History seldom repeats itself word-by-word or drum-by-drum:  we are not going to see the black shirts or different-color uniformed movements which inundated Europe in the ‘twenties but we might see, as we already do, parties with roots in nationalist or quasi fascist movements coming back to power and undoing globalization, fighting immigrants, celebrating nationalism, cutting  access to welfare benefits to those who are not “native” enough. Is it fascism? Its light variety?  This is the melancholy conclusion that can be made based on this sweeping study of western political and economic developments in the past two centuries.

The book is impressive in the amount of detail it marshals, in Nayar’s erudition and his eye for the unusual and the absurd, and his take-no-prisoner style. However, there are also limits: the book deals only with West European countries, and only a select few of them (UK, France, Germany), and just in one segment with Russian pre revolutionary developments. It is also true that the selection of intellectuals that are targeted by Nayar’s often acerbic, and in some cases savage or funny, commentary is limited to the relatively small group of French and British intellectuals, sprinkled, for a good measure,  by a few Americans. The European intellectual scene was much broader than the people who were mentioned in the book. The book also does not deal with the rest of the world: Africa and the anti-colonial struggle are not present at all; Latin America is entirely absent; India is just mentioned in a few sentences; China is non-existent except for the Korean war. So, it is a book that in its geographical, as well as ideological, scope, and the selection of the people whom Nayar excoriates, is limited. Nevertheless, taking these limits into account it deals in a very persuasive manner with a critically important period in western political history and makes us rather fearful of the future.