State capitalism? Problems of the Plannability of Capitalist Society - A Review of the Discussions at the Old Frankfurt Institute for Social Research

Kurt Martin (Kurt Mandelbaum)

I was invited to talk here about the discussions among the staff of the old Frankfurt Institute for Social Research, who about half a century ago (and later) dealt with the crisis problem, the prospects of capitalist development and the possibilities of a planned economic reorganisation. The debates were stimulated primarily by Dr. Pollock's essays, published between 1932 and 1941, in which he finally managed to assert the end of the primacy of economics over politics. Not to be separated from this are earlier works and discussions on planning in the Soviet Union as well as Henryk Grossmann's studies, which are presented in various essays and in his book on "Das Akkumulations- und Zusammenbruchsgesetz ..." (1929).

Personally, I can say in advance that I came to Frankfurt as a student in 1924 and became Pollock's assistant after my doctorate in 1926. Formally, I was connected to the Institute during my emigration until the outbreak of war; but from 1935, my connection was very loose, as I remained in Europe instead of going to the United States with the other members of the Institute. I never belonged to the core group of the Institute, which from about 1930 onwards, mainly in emigration, developed the "Critical Theory" (Horkheimer, Adorno, Löwenthal, Marcuse and - for a time - Fromm). Intellectually, I had felt more at home in the old institute under Carl Grünberg, where the focus of interest was on political economy and historical studies. I was also closely connected with the Adolph Löwe Group (Dr. Burchardt and Gerhard Meyer), who were friends and colleagues of the institute, but had little or nothing to do with " Critical Theory ".

The discussions I have to report on took place at different levels. The starting point in those years - I am thinking of the late 1920s and early 1930s - was the crisis analysis under the assumption that the dynamics of capital accumulation and therefore of economic activity depend on the profitability of production, the profit rate. For Grossmann, Marx's hypothesis of the increasing "organic composition" of capital was decisive. If one takes as an approximate measure of this "organic composition" the capital coefficient, i.e. the ratio between the value of the capital invested in the means of production and the national product, then one can easily conclude with Marx and Grossmann that, if the development of technology has the tendency to drive up this coefficient, the rate of profit (calculated on the capital input) must fall as long as the share of profit in the national product - the Marxian "rate of exploitation" - remains constant. According to Grossmann, whenever this tendency prevails, a situation arises in which profit is no longer sufficient to continue accumulation at the old level.

Pollock's side was not convinced that the tendency to increase the organic composition was stronger than the counter tendencies (also treated by Grossmann). Instead, Pollock's crisis analysis was based on the "anarchy" of production and the resulting dispositions between the individual branches of the economy. To be more precise, he argued that the self-control of the economy, which still functioned relatively well in the classical capitalism of the 19th century, is today so weakened by the concentration and centralization of capital and by the growth of fixed costs that it inevitably comes to ever greater bad investments and circulation disturbances - unless the tendency to replace the market by planning gets the upper hand. For Grossmann, this analysis was unacceptable; for him, bad investments and implementation difficulties were purely secondary phenomena which could possibly be controlled by economic policy without this changing the fundamental causes of the crisis.

In the Pollock camp there were many discussions about the possibility of planning within the framework of the capitalist order. As early as 1932 Pollock wrote that capitalist owners could never tolerate economic planning, since they would then have to cede all decisive functions to a central position and be degraded to mere pensioners. "In no social order has the mere receipt of pensions at the expense of society been maintained in the long term without visible consideration." (Zeitschrift für Sozialforschung, Jahrgang 1, 1932, S. 27). A year later - that was after the National Socialist seizure of power - he began to revise his attitude, as can be seen from a note he added to his essay "Bemerkungen zur Wirtschaftskrise" (Remarks on the Economic Crisis) (Z.f.S., Jahrgang 2, 1933, S. 349); I remember the discussion my friend Gerhard Meyer and I had with Pollock about this: we were not convinced. On the basis of his further studies and especially his analysis of the National Socialist regime, Pollock finally arrived at his conception of "state capitalism" (1941), a class order in which a powerful bureaucracy, combined with the top magnates of industry, centrally and efficiently controlled the economy according to a general plan. In this new order, whose elements and contours were already observable in Europe and partly in America, all so-called economic laws would lose their validity with the disappearance of the autonomous market. The large private companies will then function as government agencies and work for the intended use instead of giving priority to profit interests. With the primacy of politics the economy becomes totally controllable and by applying engineering thinking to the economic process it will then be possible, according to Pollock - at least in principle - to solve all economic problems technocratically-rationally. The thesis of the end of the primacy of economics was Pollock's specific contribution to the development of Critical Theory. For the aforementioned core group of the institute (to which he himself belonged), Pollock's economic analysis was apparently convincing; many of his other collaborators, however, especially those who came from economics, remained skeptical.

Looking back on the discussions that took place 40 or 50 years ago in the old Frankfurt Institute, what can be said about it today? As far as the general crisis problem is concerned, I would remind you that in the post-war period the developed capitalist countries had a long period of prosperity which lasted until the 1970s; unemployment was low, cyclical disturbances were mild. Whatever the historical circumstances that made this prosperity possible, there was no need for central planning in Pollock's sense. For some time it seemed sufficient that the capitalist governments were willing to periodically create additional demand a la Keynes in order to mitigate disturbances. In the meantime this has changed again. Profit rates in most rich countries have been declining since the mid-1960s and a general deep economic downturn began in the 1970s, showing many symptoms of classic crises. Großmann's analysis helps us little to explain: from many studies we know that the organic composition of capital (in contrast to the technical composition) has not shown a definite trend because of the relative reduction in the cost of the elements of "constant" capital. Most studies agree that among the many factors at work that eventually led to the economic downturn, the decrease in the share of profit in the national product was probably decisive. The rate of exploitation - to quote Marx - has decreased greatly in the developed capitalist countries as the offensive and defensive economic power of the working class has grown as a result of the long period of near full employment. (1) I can't remember anyone in the many discussions we had half a century ago at the Institute about the prospects for capitalist development talking about economic growth - the accumulation of capital - getting into trouble because of insufficient or declining exploitation of the workers; it was hard to think of such a thing then. At present, all governments are trying to slow down and at least partially reverse the development that has led to a decrease in the profit ratio.

As far as Pollock's concept of planning in "state capitalism" is concerned, this model presupposes that private power of disposal is transferred to the state in all decisive areas and that the economy is then largely centrally controlled. According to Pollock, a division of state decisions between a plurality of agencies which have their own information (and perhaps special interests) is hardly compatible with a planned economy with truly uniform economic management. The problems and limitations of such central planning are only briefly touched upon in Pollock's essays, and it is clear, as he himself notes, that in many technical respects the Soviet Union comes closest to his idea of state capitalist planning. (2) The post-war development in the rich countries, however, shows little similarity with the characteristic features of Pollock's model, even if one takes into account the deliberately ideal-typical escalation of the model.

Finally, I would like to say that there can be no doubt about the secular increase in state activity in the economy, which has the consequence that today it is more difficult than perhaps 100 years ago to clearly separate the area of the economic from the area of the political and to stick rigidly to the picture of the economic basis and the political superstructure. It is just as unconvincing to turn this around and talk about the primacy of politics. But it is Dr. Pollock's lasting merit to have emphasized early on, with regard to very concrete problems, that it is necessary to research the relationship between state and society anew.

Annotations



(1) In the ensuing discussion it was argued that the decrease in the profit ratio did not benefit the wage share as much as it did the growth of the state share. This point is important, but it can be shown that in the post-war period higher social security benefits and access to other social services that complement labour income have contributed significantly to the growth of government expenditure.

(2) S. F. Pollock, Stadien des Kapitalismus. Herausgegeben und eingeleitet von Helmut Dubiel. S. 129 (Anmerkung 16 zu "Staatskapitalismus").