Capitalism’s Anxiety About the State

I am going to look into what is the relationship between capitalism and the state, the government. What is the relationship, if you like, between economics and politics, if politics is focused on the state. And I want to answer it, because I think, in that way, I can engage many of your questions. There’s a fundamental problem that the state represents for capitalism. And it always did. And that has to be foregrounded. That’s why I’m starting with it, so that you keep that in your mind as we go through the rest of it.

The problem of the state for capitalism has to do with what we call universal suffrage. The extension of the right to vote to everyone, that has now become the norm in modern society. At first, in the early days of capitalism, they didn’t have this problem with the state, because early capitalism didn’t give the vote to everybody. Even in the United States, in our early years of independence, voting was restricted to males, not females, to white people, not brown people, to people who had wealth, not people who didn’t. All kinds of restrictions, but we now have universal suffrage, meaning everybody has the right to vote and the minute you have that capitalism has a problem. Why?

Because in capitalism, a small number of people control the economy. You know, the employers. If you add them all up together all the employers, all the bosses, whether it’s a little business owned by an individual or a bigger one by a family or an even bigger one by shareholders in a corporation, whatever. You put them all together and those who own and run corporations are a small minority of the population. The vast majority of the population, say in the United States or in Western Europe or Japan or virtually everywhere else are the employees, which means that when you have elections with universal suffrage the employees should dominate, because they’re the overwhelming majority. What they want rules. That’s what a democratic one-person one-vote universal suffrage-based state would mean. And that’s a danger for capitalism. Why?

Well, it’s really pretty obvious. The workers have different interests from the capitalists, since the workers would control the government in a world of universal suffrage, which is what we’ve got, then it’s really only a matter of time and not much of that, before the workers realize what their political power with universal suffrage. What it might mean, let me give you some examples. The majority of Americans indicate in poll after poll, that they think that the wealth and income in this country are distributed unequally. The rich get too much and everybody else too little. Well, if they’re the majority they could easily predominate. Take over the state by winning elections, voting and then the state could rearrange the tax system moving wealth from those who have too much to those who have too little, end of story. Very simple, easy to do. If the workers voted their majority position, would be easy to do.

Here’s another example. Laws could be passed giving incentives giving breaks to worker co-ops who decide how much everybody gets paid democratically by everybody getting together. Those co-ops never give a few people millions and everybody else hasn’t got enough to send their kid to college. That’s not the way co-ops work or ever did. And if you had the working people voting their majority in a universal suffrage system they could convert businesses from capitalist enterprises owned and operated by a few, to worker co-ops, which would make sense because they’d be more democratic.

Let me give you another example. If working people, who know what unemployment means, who have suffered unemployment directly or through their families, you think if they were the dominant force politically in a system based on universal suffrage, they would long ago have agreed that if you lose your job in a private sector, if private companies are not hiring enough of us, then the government comes in and does it. A government hiring program would be obvious. You go work for the government until a job opens in the private sector that you would rather have then you move back into. Easy. Obvious. And workers could have that. We did that in the United States in the 1930s, so there’s ample precedent, no problem.

And you could also have the government’s running enterprises for the mass of people that compete with private enterprise and let the more efficient run. Let the government run food industry. Clean, good, healthy food, and let’s see if the government can do it at a lower price than the private sector. Why should we go with the private sector? We want to get the best quality for the lowest price. Let the government come in and compete. Whether it’s with utilities or food. Or, here’s another one. Health care. Maybe if the United States spends more than any other country on health care, which we do, and we get mediocre outcomes, which we do, it might be better to have the government run the health care system like they do in most other industrial countries, because we could get better care at a lower price. We could do all those things by simply using universal suffrage. But you know who understands that best? The capitalists! They know, how vulnerable they are. They are an embattled minority, so here’s what they’ve done, and this is important, to make sure that this state does not threaten or undo their privileged position, their minority privileged position in the American system. Particularly, but in capitalism generally. Number one.

They came up with this ideology called laissez-faire. That the government shouldn’t meddle in the private economy. The government should stay out of the economy. Why? Because private enterprises are efficient and government enterprises are not. I’m a professor of economic history, I’ve taught the subject all my life. There is no evidence for this. This is a “believe it on faith” kind of argument. For every private company that’s been efficient and successful, I can show you a dozen, that haven’t. And for every government program that has been inefficient, I can show you a dozen that haven’t. There is no basis for this. This is pure ideological pap. But it’s powerful. It gives people a reason to back away from giving the government the authority that the majority of people would give it if they understood what was at stake and what their real power is.

The second way that capitalists have hobbled the state, is by making it budget troubles. The government can’t raise enough revenue. It gets people to believe that somehow the government is abusing or misusing the taxes it raises. You shouldn’t trust the government, the government is stealing from you, and then when the government can’t raise enough money to do even the most basic things, you know, what we do? We, the government goes and borrows the money. It runs a deficit and you know who it borrows from? The rich. The capitalists. They’re the overwhelmingly dominant lenders, so the government is now dependent on the capitalists being willing to lend. They make the government dependent on them to control it and then there’s the ideology that the government is the great danger to your freedom, you see and, so you’ve got to keep it small, weak, indebted, dependent, so it doesn’t abuse you. This whole notion that the government is somehow a bad thing that you should keep at bay, that’s where my libertarian friends come in.

For them, it’s the government that you have to watch out for. How convenient. Not the capitalists, not the minority who own and operate all the businesses that produce the goods and services we depend on. No, no, no, no! Not them! The government! Those political officials, but the capitalists are not content with ideology and budget problems. They have a battery of other uses they can pull in to control this scary government for them. They buy the politicians, they buy the parties, and they buy the lobbyists, who actually write the laws. That’s right. Capitalists are the dominant funders of our political parties, at least the major ones: Republican and Democrat in the United States, that makes sure that when they get into office they don’t use what universal suffrage might get: a real change for the benefit of the majority.

They make the political apparatus depend on their money and then finally they demonize the government. Here, again, my libertarian friends come to the rescue. The government is the bad thing. What a terribly convenient ideology for capitalists! You know, in America, I’ve always been amazed to watch the following: unemployment affects one state or another, and people get angry. But who they get angry at? The senator, the congressman, the congresswoman. They get angry at their political representatives, because private capitalists fired them. During the great recession of 2008, 9 and 10, when millions of Americans lost their homes, you know who foreclosed on them? Banks did and private lending companies. You know who threw you out of your home? A capitalist threw you out. You get angry at the government. Libertarians are doing capitalism a major service by getting people to scapegoat the government. Never asking the obvious question: why does the government in a society of universal suffrage where the majority is the working class, why is the government serving the capitalists so well and the working class so poorly? And you know, we all pay the price of a hobbled, crippled, underfunded government, because when we really need it, it can’t perform. Example: the pandemic. We weren’t prepared for covid. We haven’t been able to contain it. The United States has 4.5% of the world’s people and 25% of the covid deaths. You know, what that’s called?

Big fat failure. And part of that is a weak, underfunded, scapegoated government where the political leader who wins office and gets the biggest amount of donations is the one who says that he or she is not part of the government, is an outsider. The irony is, the government is the greatest threat to capitalism and they know it! Which is why they’ve spent so much time so much energy and so much money to this moment to control to limit what the government can do. Don’t be fooled! Government could be a positive transformative agency helping all of us live better lives, but to do that, we, the majority, would have to control what the government is, and what the government does. And that could be very different from the role it plays now. There’s nothing intrinsic about what the government does now. What you’re seeing when the government functions, is you’re seeing the puppet. You’re not seeing the fellow on top, who pulls the strings.