Financial markets may be booming in the expectation that the US economy will grow faster under President Trump. But they forget that the main emphasis of Trump’s programme, in so far as it is coherent, is to make America great again by imposing tariffs and other controls on imports and forcing US companies to produce at home – in other words, trade protectionism. This is to be enforced by new laws.
That brings me to discuss the role of law in trying to make the capitalist economy work better for the interests of capital. It’s an area that has been badly neglected. How is the law used to protect the interests of capital against labour; national capital interests against foreign rivals; and the capitalist sector as a whole against monopoly interests?
Last year, there were a number of books that came out that helped to enlighten us both theoretically and empirically on the laws of motion of capitalism. But I think I missed one. It’s The Great Leveller by Brett Christophers. Christophers is a Professor in Human Geography at Uppsala University, Sweden. His book takes a refreshingly new angle on the nature of crises under capitalism. He says that we need to look at how capitalism is continually facing a dynamic tension between the underlying forces of competition and monopoly. Christopher argues that in this dynamic, law and legal measures have an underappreciated role in trying to preserve a “delicate balance between competition and monopoly”, which is needed to “regulate the rhythms of capitalist accumulation”.
Christophers reckons this monopoly/competition imbalance is an important contradiction of capitalism that has been neglected or not developed enough. It may not be the only contradiction but it is an important one that the law (imperfectly) works on. Indeed, uneven and combined development is an inherent feature of capitalism.
Christophers argues that corporate laws swing from one aim to another, depending on the needs of capital in any particular period. Thus, in certain periods, anti-trust legislation (breaking up monopolies) dominates legal economic thinking; at others, it is patenting and protecting ‘intellectual property’ (monopoly rights). The law is a “great leveller”, aiming to keep a balance between too much competition and too much monopoly.
I’m reminded of the recent period prior to the global financial crash and the Great Recession. The tone of the day was to ‘deregulate’, particularly in the financial sector, to allow new financial products (derivatives) to expand ‘financial diversification’ (competition). The dangers of this ‘excessive risk-taking’ and uncontrolled ‘competition’ were brought to the attention of the ‘powers that be’ at the annual Federal Reserve Jackson Hole central bankers symposium of 2005 by Raghuram Rajam, then a professor at Harvard and later head of the Reserve Bank of India. He presented a paper that questioned the reduced banking controls introduced by Clinton’s advisers, Robert Rubin and Larry Summers in the late 1990s. Immediately he was attacked by Summers as a ‘Luddite’, holding back progress and competition. Of course, after the Great Recession, Summers became a leading supporter of banking regulation and of the Dodd-Frank banking regulation laws.
The balance between competition and monopoly is the main theme of Christophers’ book. In my view, contrary to the view of the Monthly Review school, who follow Paul Sweezy’s characterisation of modern capital as ‘monopoly capitalism’, monopoly is not the dominant order of capitalism: competition is – at least what Shaikh calls ‘real competition’, in his huge Capitalism. The continual battle to increase profit and the share of the market means monopolies are continually under threat from new rivals, new technologies and international competitors. The history of capitalism is one where the concentration and centralisation of capital increases but competition continues to bring about the movement of surplus value between capitals (within a national economy and globally).
Brett Christophers understands well this dialectical dynamic in capitalism. In his excellent theoretical chapter 1 on Competition, he rejects the monopoly capital theory. “Monopoly produces competition, competition produces monopoly” (Marx). The law plays a key role in trying to achieve a balance between the inherently unstable and precarious forces of centralisation and decentralisation that Marx prognosticated.
However, Christopher seems a little ambiguous or ‘soft’ on the theoretical explanations offered for the inherently unstable nature of capitalism. He appears to accept the view that (underlying) causes of capitalist instability cannot be found in the capitalist mode of production but, as Marxist David Harvey has argued, must really be found in the full circuit of capital (production, distribution and circulation). To emphasise, as Marx did himself, the production of surplus value at the core of crises and imbalances is to be “productivist” (Jim Kincaid) and to exclude the “chaotic singularities of consumption” (Harvey). The “anarchy of capitalism” is to be found in competition and exchange, not in the exploitation of labour in production (Bob Jessop).
Well maybe, but this leaves Christophers open to the massaging of Marx’s value theory so that no marks are left. First, he appears to accept Harvey’s view that value can be created in exchange or even consumption (p74). Second, he appears to follow the view of post-Keynesian Michal Kalecki that profits are the result of the degree of monopoly or ‘rent-seeking’, thus dismissing Marx’s clear view that new value only comes from the exploitation of labour, not from monopolistic power. Then there is the reference to the work of mainstream economist Edward Chamberlin’s theory imperfect competition, an extension of neoclassical marginal equilibrium theory. Marx’s value theory as the basis of the laws of accumulation of capital and competition among capitals has been ignored or chipped away by these authors.
But this is perhaps another debate. The theme that Christophers highlights is the role of the law in evening out the anarchic swings between excessive monopoly and ruinous competition in different periods of capitalism. This is a new insight. As Christophers says, this is a “work of levelling not plugging” to achieve “ongoing growth – in a relatively stable fashion”. Even that seems a generous concession to the efficacy of competition law between capitals in maintaining stable expansion and accumulation under capitalism. Do we not note over 50 slumps or recessions in the last 200 years and three huge depressions under the capitalist mode of production, where legislation on banking, corporate monopolies, patents and intellectual property did not work in preserving ‘harmony’?
In a series of well-researched chapters, Christophers outlines the detail in the swings between monopoly and competition according to the conditions of capitalist development. He makes a convincing case for arguing that the first case of ‘legal leveling’ began at the outset of 20th century after a period of excessive competition threatened to drive capitalism into a deflationary spiral. Legal support for monopoly powers to protect profits dominated between the world wars. After the second world war, competition came to the fore in order to help innovation and new industries. In turn, the neo-liberal period from the 1980s, the laws of patent and intellectual property increasingly superseded the anti-trust legislation of Golden Age of the 1960s and 1970s.
This is a powerful narrative but it is also raises questions of causation. Should we not see company and competition laws as reactions to changes in the health of capital accumulation, rather than something that (successfully?) evens out the upswings and downswings of capitalist expansion? Christophers reckons that the profitability of capital has been “remarkably consistent” since 1945, with an average of corporate profits to GDP of 10% in the last 70 years, which “rarely strayed far from this mean” (p2). But profits to GDP are not the measure of the profitability of capital (at least in Marxist terms) and even so there has been a wide divergence (6-14%). All the proper measures of US profitability show a secular decline since 1945, not stability; and in particular, a fall from the 1960s to the 1980s followed by a rise during the neo-liberal period 1980-00 – and a small decline, subsequently to date (see my book, The Long Depression).
This suggests to me that corporate and competition law is more like another counteracting factor designed to react to the health and profitability of capital in the same way as globalisation, attacks on the trade unions and privatisations that we saw from the 1980s – in an attempt (partially successful) to raise profitability of capital as a whole. After all, it is the level of profitability for capital as a whole which is key to the degree and frequency of crises rather than the sharing out of profit among capitals.
Marx argued that, as capital accumulates, it will experience regular and recurring crises of production and exchange, slumps we call them. They occur because accumulation leads, over time, to a fall in profitability and profits, forcing capitalists into an investment ‘strike’. However, Marx also outlined several counteracting factors to this law of the tendency of the rate of profit to fall: greater exploitation, cheaper technology, expanding foreign trade; speculation in financial assets. Law could be seen as another counteracting factor, introduced to curb either the excesses of ‘ruinous competition’ in driving down prices and profitability (i.e. helping to protect super profits from innovation or monopoly power); or to break down too much ‘monopoly control’ that could hamper profitability for more efficient smaller capitals or from new technology.
Indeed, one area of law that is missing from Christophers’ otherwise comprehensive analysis is labour law. One big area of capitalist law is designed to ensure the dominance of capital in the workplace and over the production and control of surplus value. These are even more important to capital than the laws designed to level the playing field between capitalists.
As we approach the 150th anniversary of the publication of Volume One of Marx’s Capital, we can remember that Marx spent much time recounting the role of law and regulation (inspector reports) in the struggle to protect and improve the conditions and hours of workers in Victorian factories and work places. The battle for the 10-hour day and getting children out of dark satanic mills and mines etc.
It is no accident that the Trump administration is looking to deregulate banking and reduce environmental regulations, not to help small businesses against monopolies, but instead business in general against labour and the cost of people’s health. Take the right to work laws of the last 30 years or more. Following decades of declining membership, unions face an existential crisis as right-to-work laws being pushed at state and federal levels would ban their ability to collect mandatory fees from the workers they represent, a key source of revenue for organized labour. In their first weeks in office, the new Republican governors of Kentucky and Missouri have already signed right-to-work laws, making them the 27th and 28th states, respectively, to ban mandatory union fees.
On the first page of his book, Christophers rightly highlights the comments that Keynesian guru Paul Krugman made on his blog back in 2012. Inequality of incomes had risen sharply in the neoliberal period and the average wages of non-supervisory workers had stagnated. The share of value going to capital had risen. “So the story has totally shifted; if you want to understand what’s happening to income distribution in the 21st century economy, you need to stop talking so much about skills, and start talking much more about profits and who owns the capital. Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial.” (Krugman) The amiseration of the working class, as Marx called this relative poverty, appeared to be borne out. As Krugman said, “isn’t that an old fashioned sort of Marxist discussion?”
As Christophers explains, Krugman offered two possible reasons for this amiseration: either growing monopoly profits of ‘robber barons’ (the Kalecki argument) or technology displacing labour with the means of production (the Marxist argument of labour-saving and ‘capital bias’). The latest research on the causes of the long-term fall in US manufacturing employment alongside rising output shows that the Marxist explanation is more convincing than the Kalecki ‘monopoly rents’ one.
It’s not monopoly power or rising rents going to the ‘robber barons’ of the monopolies that forced down labour’s share, it’s just (‘real competition’) capitalism. Labour’s share in the capitalist sector in the US and other major capitalist economies is down because of increased technology and ‘capital bias’, from globalisation and cheap labour abroad; from the destruction of trade unions; from the creation of a larger reserve army of labour (unemployed and underemployed); and from ending of work benefits and secured tenure contracts etc (labour laws). Companies that are not monopolies in their markets probably did more of this than the big firms.
Christophers only deals with international trade law in passing, as his perceptive analysis concentrates on concentration and centralisation within national economies. But “The Donald” is concentrating his enviable skills and focus on international law to revoke trade agreements; control the movement of labour across borders and impose tariffs and restrictions on rival powers’ exports etc. The irony is that this will do nothing to restore manufacturing jobs and incomes in the US – quite the contrary. No great levelling there.
Perhaps the real great leveller under capitalism is not so much laws designed to level the playing field among competing capitals –important as Christophers has shown that it is. The real leveller is capitalist crises themselves. In another new book, also coincidentally called The Great Leveller, Walter Scheidel, a Stanford University historian, argues that what really reduces inequality is catastrophe – either epidemics, wars or massive economic depressions. It is a simple and perhaps crude idea. But it is certainly true that the Great Depression of the 1930s cleansed capitalism of its unproductive and inefficient capitals and massively weakened labour to create conditions for new levels of profitability. And the world war itself destroyed capital values (and physical capital) and introduced new military-induced technologies to exploit new layers of the global working class in the post-war boom. That was a great leveller of the capitalist landscape (in a different sense) – to lay the basis for renewal of the profit making machine from the 1940s through the Golden Age of the 1960s.
So far the current Long Depression has not managed a similar ‘levelling’. As Christophers says, it is unclear whether the law will be applied to reduce monopoly power as it was after 1945. While the depression is unresolved, I doubt it. Indeed, as Christophers confirms, the balance between competition and monopoly has moved to the international plane, with the likelihood of a new imperialist struggle that we saw at the beginning of the 20th century.