Workers Vanguard No. 1126

26 January 2018


Ideologues of Decaying Capitalism

The Bankruptcy of Liberal Economists

By Joseph Seymour and Bruce André

(Part Two)

This part concludes the article, Part One of which appeared in WV No. 1125 (12 January).

Economist Marc Levinson in An Extraordinary Time and his more liberal counterpart Robert J. Gordon in The Rise and Fall of American Growth both address the slowdown in the U.S. growth rate since the 1970s. Levinson at least recognizes that the slowdown was rooted in a decline in investment, although he provides no explanation for that decline. Gordon provides an explanation that is more apologetic for the capitalist system and even more pessimistic regarding future prospects.

Gordon’s implicit premise is that all progressive technological innovations—in the spheres of both production and consumer goods—have been and will be transformed into new, widely marketed (that is, generally affordable) commodities, although in some cases with a lengthy time lag. To paraphrase Voltaire’s parody of the German philosopher Gottfried Leibniz, with regard to technological innovation Gordon views American capitalism as the best of all possible worlds. If the possibilities for growth have diminished in recent decades, it is because the intrinsic character of technological innovations has changed in a way that diminishes their effect on productivity.

The structure of Gordon’s historical study of U.S. economic growth is based on the concept of three successive industrial revolutions. The first industrial revolution (IR #1) derived from inventions developed between 1770 and 1820, primarily the steam engine and its offshoots—railroads, steamships and the shift from wood to iron and steel. The second industrial revolution (IR #2) derived from technology developed in the late 19th century, particularly electricity and the internal combustion engine. The third industrial revolution (IR #3), beginning in the 1960s, was centered on new information and communication technology (ICT), such as computers and smartphones.

According to Gordon, the root cause of the slowdown in U.S. economic growth in recent decades was the diminishing effects of the second industrial revolution and the insufficient potency of the third:

“This decline in productivity growth by almost half reflects the ebbing tide of the productivity stimulus provided by the great inventions of IR #2. Its successor, the ICT-oriented IR #3, was sufficiently potent to cause a revival in the productivity growth trend to an average of 2.05 percent during the decade 1995-2004. But the power of ICT-related innovations to boost productivity growth petered out after 2004.”

Gordon never considers the possibility that some progressive technological innovations might not be transformed into widely marketed commodities because it is not profitable to do so. Later we will address his insistence that computerization and new digital technologies in general cannot significantly increase labor productivity in the future. In fact, he maintains that these technologies have pretty much exhausted their potential.

Here we will consider Gordon’s implicit assumption that all new, widely marketed commodities were more efficient than those they replaced and improved the living standards of the populace. In particular, let’s consider the partial replacement of electrified streetcars and subway and elevated trains by the automobile, which began between 1910 and 1930. Gordon analyzes the transition from one means of personal transportation to another in some detail. However, he does not attempt to measure their comparative techno-economic efficiency. Did electrified subways and elevated trains expend greater or lesser economic resources per passenger mile than Model T Fords? And if lesser, wherein lay the advantages of the automobile?

Gordon does acknowledge that the ascendancy of the automobile was not just the result of the workings of “free market” capitalism. Government policy was a very important causal factor:

“Government policies encouraged urban sprawl and undermined the financial viability of urban transit and passenger railways. Even before World War II, public policy was skewed in favor of the automobile by building streets and highways with public funds while leaving urban transit and interurban electric railways to operate as self-sufficient private companies. Many of the early roads were built by issuing bonds on which the interest was paid by local property taxes, so the automobile owner and transit rider paid equally to build a road system that made the automobile ever more attractive than transit.”

However, Gordon offers no judgment on whether government policies that favored automobile travel at the expense of public mass transit were economically rational and socially beneficial. Nor does he address why state and local governments pursued auto-friendly policies. The answer, of course, is primarily rooted in the capitalist drive for profits: The bourgeois politicians involved were beholden to the owners of the big car companies, like Henry Ford and Alfred P. Sloan of General Motors, and also the rubber and oil companies that provided tires and gasoline.

Class Struggle and a Shorter Workweek

Gordon states: “This book is about not just the standard of living from the viewpoint of the consumer, but also the quality of working conditions both outside and inside the home.” In keeping with his main theme, that the American people experienced a qualitative improvement in everyday conditions of life during the first half of the 20th century, Gordon cites the reduction in the average workweek from 60 hours at the turn of the century to 41 hours by 1950. But his liberal worldview blinds him to both the fundamental cause of that important change in the lives of working people and the inherent limitation of its impact on their quality of life.

According to Gordon, the decrease in the average workweek resulted from an interest shared by business owners and their workers in having a rested and healthy workforce:

“Interpretations of the movement for shorter hours center on the widespread belief on the part of both firms and labor leaders that a reduction in hours would improve work performance and increase production. Higher productivity and higher real wages made possible a gradual reduction of hours of work, for the onerous demands of sixty- and seventy-two-hour work weeks had created an exhausted male working class.”

To back up his view, Gordon cites legislation passed during the Progressive Era in the early 20th century and the New Deal in the 1930s.

In fact, the 40-hour workweek was won through decades of hard-fought and often bloody class battles by the workers movement. Agitation by the nascent industrial working class for the eight-hour day and for unions led to the Great Rail Strike of 1877, which was brutally suppressed by the Army. In the 1886 Haymarket massacre, Chicago police attacked workers rallying for the eight-hour day and arrested eight anarchist labor organizers who were subsequently framed up and imprisoned or executed. In the 1937 “Little Steel” strike, whose demands included a 40-hour week, police killed ten workers near the gates of Republic Steel in South Chicago in what became known as the “Memorial Day Massacre.”

Today, after decades of one-sided class warfare by the bourgeoisie and givebacks by the hidebound trade-union bureaucracy, the 40-hour workweek has been substantially eroded. The average workweek for full-time U.S. workers has risen to about 47 hours, nearly a full extra eight-hour day per week. About one in five full-time workers toil 60 or more hours a week, while millions are unemployed or forced to work part-time.

Workers need to fight for a shorter workweek with no loss in pay, linking the fight for decent working conditions to the struggle for jobs for all. A 30-hour workweek at 40 hours’ pay, with the available work divided among everyone, would go a long way toward addressing both unemployment and the serious safety problems resulting from fatigue and understaffing.

The capitalists would, of course, reply that such demands are not practical—at least, not if they are to maintain their obscene wealth. Indeed, the felt needs of the working class run right up against the inability of the capitalist system to satisfy them. The solution will not be found in the struggle, however necessary, by workers for a slightly bigger share of society’s wealth against a capitalist ruling class determined to maximize its profits. The goal must be a wholly different type of society, a workers America where the productive wealth has been ripped out of the hands of the tiny capitalist elite and put at the disposal of the vast majority. Such a society can be achieved only when the working class, led by a revolutionary party, overthrows capitalist class rule through a socialist revolution and establishes a workers government.

On Labor and the Quality of Life

Like the class battles that won the 40-hour week, the steady erosion of this historic gain for labor since the late 1970s is for Gordon a closed book. Yet even if we accept his focus on the first half of the 20th century, when the workweek was reduced from 60 to 40 hours, this gain actually constituted something less than a qualitative change in the lives of American working people. While deploring growing income inequality in the U.S. in recent decades, Gordon does not address or even recognize a more fundamental inequality in all capitalist societies in all times: between the vast majority who have to perform what Marx called “alienated labor” to secure the means of subsistence for themselves and their families and the privileged few who can engage in creative, satisfying work.

In the preface to The Rise and Fall of American Growth, Gordon recounts that his interest in the changing rates of economic growth and labor productivity over the course of U.S. history goes back to his days as a graduate student in economics at the Massachusetts Institute of Technology in the mid 1960s. The research for this book was undertaken to satisfy his intellectual curiosity, not because he had to do so to earn a living. But very few people have the luxury of working to satisfy their intellectual curiosity or express their creative impulses.

Consider, for example, the employees of Princeton University Press, who transformed Gordon’s manuscript into the printed pages of a book. True, they use technology that is radically different from that used by their predecessors in the 1920s, who set type for books by prominent academic economists of the time like Irving Fisher and Wesley C. Mitchell. And they work in more comfortable facilities. Nonetheless, they do the same kind of work for the same personal reason, to earn a livelihood.

Reading Gordon’s book, one would conclude that the 40-hour workweek and 11-plus-month work year, as in the U.S., is the highest possible level of organized society with regard to the necessary labor time expended by its members. However, in a planned socialist economy it would be possible, through a progressive, self-reinforcing increase in labor productivity, to radically reduce the total labor time necessary to produce both the means of production and articles of consumption. Within no more than a few generations, people would only be working, say, 20 hours a week and six months a year. Everyone would then have both the available time and access to material and cultural resources to acquire the scientific and technological knowledge that is now the province of a privileged elite. Projecting a future communist society, Marx wrote more than a century and a half ago:

“Free time—which is both leisure and time for higher activity—has naturally transformed its possessor into another subject; and it is then as this other subject that he enters into the immediate production process. This process is simultaneously discipline, with respect to the developing human being, and application, experimental science, material creative and self-objectifying science, with respect to the developed man, whose mind is the repository of the accumulated knowledge of society.”

—“Outlines of the Critique of Political Economy” (1857-58)

In a future communist society, there would be a vast expansion of the number of people capable of developing technological innovations on the order of Gordon’s heroes of the past, like Thomas Edison, Karl Benz (inventor of the automobile) and Guglielmo Marconi (a developer of the radio).

World War II: An Instance of State Capitalism

For Marxists, the most valuable part of Gordon’s book is his analysis of the “great leap forward” in labor productivity that occurred during the Second World War (1939-45) and carried into the first few decades of the postwar era. Gordon concludes: “World War II saved the U.S. economy from secular stagnation, and a hypothetical scenario of economic growth after 1939 that does not include the war looks dismal at best.” This was the one moment in modern American history when the expansion of productive facilities embodying new, more advanced technologies was not determined by the profit-making calculations of corporate executives and Wall Street financiers. In order to defeat its capitalist-imperialist enemies, the U.S. government—the executive agency of the American ruling class as a whole—directed and financed the unprecedented construction of industrial plant and equipment.

A standard economic history of the Second World War states:

“The period 1940 to 1944 saw a greater expansion of industrial production in the United States than any previous period.... Between 1940 and 1944 the total output of manufactured goods increased 300 per cent and that of raw materials by about 60 per cent. Investment in new plant and equipment, much of it direct investment by the government, is estimated to have increased the productive capacity of the economy by as much as 50 per cent.”

—Alan S. Milward, War, Economy and Society 1939-1945 (1977)

Government-funded factories and other productive facilities were turned over free of charge to corporate capitalists, thereby greatly increasing their profits both during and after the war. Gordon comments in this regard: “Though private capital input stagnated during 1930-45, the amount of capital input financed by the government surged ahead throughout that fifteen-year interval. Of particular interest was the creation of new plant facilities paid for by the government but operated by private firms to produce military equipment and supplies.”

Franklin D. Roosevelt and the other political directors of the U.S. imperialist state (for example, Secretary of War Henry L. Stimson and Secretary of the Treasury Henry Morgenthau) were intimately familiar with the workings of industrial corporations and banks. They knew from firsthand experience that they could not depend on the normal mechanisms of the capitalist market to maximize the output of armaments in the shortest possible time. Big industrialists like Henry Ford and Henry Kaiser were therefore guaranteed profits through the cost-plus method of setting procurement prices. Their firms were paid whatever they claimed it cost them to build battleships, bombers, tanks, etc., with an additional markup for profit. Over the course of the war, the after-tax profits of industrial firms increased by 120 percent.

Far more important in its long-term economic effects was direct government financing of the construction of factories and other industrial infrastructure. Gordon emphasizes that the number of machine tools—the core component of an industrial economy—doubled from 1940 to 1945, and “almost all of these new machine tools were paid for by the government rather than by private firms.” Ford’s gigantic bomber-building plant in Willow Run, Michigan, was government-financed. Likewise were major pipelines, still in use today, conveying petroleum from the Texas oil fields to the Northeast. Moreover, the basic technology underlying what Gordon termed the “third industrial revolution,” beginning in the 1960s, also originated in the U.S. military during the Second World War. The prototype of the mainframe computer, ENIAC (Electronic Numerical Integrator and Computer), was developed by scientists and engineers, employed by the war department, at the University of Pennsylvania.

When the American capitalist-imperialist state maximized production, labor productivity and technological innovation, it was in order to bring death and destruction to other peoples. Arguably the most important scientific and technological breakthrough in the 20th century, the unleashing of nuclear energy, was used to incinerate the civilian populations of the Japanese cities of Hiroshima and Nagasaki.

Gordon Versus the “Techno-Optimists”

Gordon’s main foil in his book is an intellectual current he deems “techno-optimists,” who foresee new technologies such as robotics and artificial intelligence placing the American economy on the cusp of a wave of economic growth. Like Gordon, these techno-optimists (including Joel Mokyr, Gordon’s colleague at Northwestern University, as well as Andrew McAfee and Erik Brynjolfsson at MIT, among others) believe that it is technological innovation above all else that determines the course of society. The dispute involves two very different questions. One concerns the sphere of consumption in the present, the other the sphere of production in the future.

Gordon argues that the effect of the new information and communications technologies on the quality of everyday life has been relatively meager compared to the major innovations and inventions in the century between 1870 and 1970. Those ranged from indoor plumbing, electric lighting and central heating to automobiles, airplanes and television. Gordon writes:

“Though there has been continuous innovation since 1970, it has been less broad in its scope than before, focused on entertainment and information and communication technology (ICT), and advances in several dimensions of the standard of living related to food, clothing, appliances, housing, transportation, health, and working conditions have advanced at a slower pace than before 1970.”

At another level, the dispute between Gordon and the techno-optimists is over the “futurology” of the likelihood of dramatically transformative new technologies developing and being put into widespread use in the near future. Both sides implicitly treat capitalism as a system that best fosters technological innovation. Both, of course, write off the perspective of a collectivized planned economy as not meriting serious consideration.

In a 2014 essay titled “The Next Age of Invention: Technology’s Future Is Brighter than Pessimists Allow,” Mokyr rhapsodizes about supercomputers, 3-D printing, genetic engineering and the like. There is, however, no mention of wages, production costs, markets or profits. These basic categories determining capitalist production and investment in new technologies are likewise absent from his brief polemical response to Gordon’s recent book, “Is Our Economic Future Behind Us?” (29 November 2016). In the unlikely event that Mokyr becomes CEO of Apple or General Electric, these companies would likely face bankruptcy. If he followed his own prescriptions, Mokyr would use the most advanced and therefore most expensive equipment, irrespective of whether this elevated production costs above those of competing firms.

In his 2014 essay, Mokyr does advance an economic argument in the service of techno-optimism: “A second reason technological progress will continue unabated has to do with the emergence of a competitive global marketplace, which will encourage the spread of new technology from its originating locations to other users who do not wish to be left behind.” In fact, the extension of international trade and capital export hardly represents an unambiguous encouragement to the development of technology. In the imperialist epoch, the international economy runs up against the very nation-states upon which the imperialists base their power, constituting an obstacle to the further development of humanity’s productive forces. Production in Europe, Japan and some spots in Asia may use modern methods. However, the vast pool of cheap labor available in South and East Asia and Latin America tends to inhibit investment in laborsaving technology in both the Third World and the imperialist centers.

When U.S. and European industrial firms shift manufacturing operations to poor countries, they often tend to use less capital-intensive methods of production. Consider clothing manufacture. While the technology exists to perform this in capital-intensive, highly automated plants, it remains cheaper for companies to pay workers in oppressed neocolonies like Bangladesh pennies on the dollar to sew clothing in conditions that are closer to those of the 19th century than the 21st.

In First World countries, too, current scientific and technological knowledge is not used in a rational and socially beneficial way, and in many cases is willfully misused. Consider the field of medical research, where major efforts are made to treat baldness and erectile dysfunction while only a pittance is invested in new drugs and vaccines for potentially fatal tropical diseases.

In the U.S. alone, some 23,000 people die every year of infections from antibiotic-resistant bacteria. A study commissioned by the British government reported that by midcentury as many as ten million people a year globally could die from drug-resistant bacteria if new treatments are not discovered. Yet despite the critical social need, most of the world’s largest pharmaceutical companies long ago stopped developing new antibiotics, citing low returns on investment.

Likewise, some 25 million people in the U.S. suffer from so-called rare diseases, such as Lou Gehrig’s disease and cystic fibrosis as well as sickle cell anemia, which overwhelmingly affects black people. Yet investment in research on treatments and cures for such diseases is notoriously meager, even though rare-disease research has often uncovered fruitful pathways for treating and curing some of the most prevalent ailments. The Center for Health Journalism at the University of Southern California explained the reluctance of pharmaceutical companies: “Most say investing in treatments for rare diseases—ones that affect tens of thousands of people—does not make for good business sense.”

Disregarding the laws governing the capitalist mode of production, Mokyr, McAfee, Brynjolfsson & Co. project a quantum leap in productivity in the near future through the use of “brilliant technologies.” Gordon implicitly accepts the limitations of the capitalist system in denying the very possibility of such a development. With regard to robotics, he writes: “The exponential increase in computer speed and memory has apparently raced far ahead of the capability of robots to duplicate human movements.” Gordon offers no argument for why this gap could not be greatly reduced by future advances in scientific and technological knowledge. He makes no assessment of the resources currently expended on robotics research.

Most of the vast amount of scientific research conducted by universities is directly funded by the federal government, and the biggest chunk of federal funding is directed toward military ends. The U.S. budget last year directed $6.5 billion in R&D to the National Science Foundation, while the R&D budget of the Air Force alone totaled almost $27 billion. Research in the physical sciences, including robotics, even if at some layers of remove, tends toward the ultimate end of building better drones and other machinery to blow up things and kill people in the interests of capitalist imperialism. Mathematics funding tends toward algorithms for securing state secrets and operations while hacking into the secrets of others. The National Security Agency is widely thought to be the largest employer of mathematicians in the U.S.

At every turn, despite its thirst for technological innovation, capitalism is not the ally of scientific advance but its opponent. From intellectual property laws and the perverse incentives of the market to the tens of billions spent on more effective weaponry, capitalism directs research in the interests of the ruling class and its state apparatus. If those same resources were directed toward advancing human knowledge, furthering human happiness and putting mankind in control of its destiny, what could be accomplished is nearly unimaginable. This requires overturning the capitalist-imperialist system through a series of proletarian revolutions, laying the basis for a globally planned socialist economy. It is to lead the proletariat in that fight that the International Communist League seeks to reforge the Fourth International, world party of socialist revolution.