Capitalism and reforms

This post includes sections on: can capitalism be reformed, proposed reforms, do reforms protect capitalism, why reforms won’t work, and capitalism undoes reforms that benefit ordinary people.

This post is critical of reforms because they mostly protect capitalism in different ways and get in the way of building transformational mass movements. But I also do not completely discount them, as I think they might have a positive part to play in moving us towards ending capitalism.

Can capitalism be reformed?

The obvious answer is no. But its more complicated than that. It depends what you mean by reform and timescales. If the question means can capitalism be reformed long term to meet the needs of ordinary people, then no way. If you mean when capitalism gets out of control can it be reformed so things are a bit less unequal to quieten demands for system change, then quite possibly, such as the 1930s in the US and the post-war decades in the UK.

Twenty-first-century capitalism may be less profitable but the corporate elite are clearly securing massive profits. These could be redistributed in workers wages, or from tax increases to fund a welfare state to meet everyone’s needs, unlike the substandard social safety net we currently have. I do think redistributive reforms are possible but it will require pressure from mass movements, which do not currently exist.

The Tory response to Covid could be seen as a reform and it certainly shows what’s possible. It contradicts the neoliberal claims that if we leave things to the free market and everything will be fine. I more see this as crisis response, with the Tories needing to balance the demands of the public to meet their basic needs and capitalists demands to keep the economy running. Extending the job retention or furlough scheme in the Spring and Winter was due to pressure from unions and business leaders, but there has not been a strong demand from the left. The question now is how will the government deficit be paid for – tax rises or more austerity. We’ve still not recovered from the last round of austerity by the coalition government following the 2008 financial crisis. Austerity now would continue the process of rolling back postwar gains related to benefits, more NHS privatisation and the welfare support for the most vulnerable (see the final section of the post for more on this).

Proposed reforms

Many reformist capitalists do not support the neoliberal form of capitalism – extreme inequality and corporate power – that we live under at the moment. They want a ‘fairer’ or ‘more equal’ form of capitalism. There are no shortage of proposals to reform capitalism, these include Robert Reich, David Korten, Thomas Piketty, Murray Edwards College, Cambridge University, Dominic Barton, the global managing director of McKinsey & Company, Ray Dalios, George Soros, Joseph Stiglitz.

Then there are different names for a better capitalism: decent capitalism, responsible capitalism, inclusive cap, stakeholder cap, ethical capitalism, conscious capitalism, Economic Dignity, Common-Good Capitalism.

In the UK, Ed Miliband when he was the leader of the Labour Party (2010-2015) wanted to introduce a proper industrial strategy to introduce national and regional investment and to bring in controls over the excesses of corporate behaviour. The Corbyn project presented itself as democratic socialist but due to the limits of global neoliberalism, could have only moved us towards social democracy. The current Tory government are looking to copy past Labour Party policies with their ‘levelling up’ rhetoric, although it seems unlikely they will follow through.

The UK left-leaning think tank Institute for Public Policy Research came out with its 10 point plan for a better Britain in 2018: Reshaping the economy, Securing good pay and good jobs, Improving the private sector, promoting competition and protecting consumers, Increasing public investment, Strengthening the financial system, Tackling wealth inequality, Fair and simple taxes, Environmental sustainability, Devolution. It’s likely that Theresa May when Prime Minister was sympathetic so some of these ideas.

Do reforms protect capitalism?

Mostly yes. Many on the radical left argue that fighting for reforms maintains capitalism by making it more stable or profitable.

Nate Hawthorne has a more nuanced understanding. He describes in this post that reforms help capitalism function, he gives the example of extending credit to companies so they can operate. This could be broadened to include all the things that governments do that make the economy and business environment easier for companies to operate in and make profits.

Nate also describes the importance of the spreading of ‘capitalists class consciousness’ to ensure capitalist system stability. Capitalists will have ‘boss-consciousness’ related to their employees in their business but some will be more focused on increasing their personal wealth over the long term interests of the capitalists class. Reforms can limit the excesses of some self-serving capitalists. This is called the ‘corporate compromise’ by Young et al in Levers of Power: How the 1% Rules and What the 99% Can Do About It. The book describes how the creation of US legislation goes through a process of being generally agreeable to difference corporate interests to ensure the stability of capitalism [1]. It describes how Barak Obama worked very hard to keep the capitalist system stable so it worked for the business world as a whole [2]. And that Donald Trump violated the corporate compromise because he advanced certain business interests over others [3].

Reforms also prevent social unrest by doing just enough to stop it from boiling over. This relates to movements, campaigns, street protests, demonstrations and riots. Examples of this would be the US civil rights laws in the 1960s or the poll tax riots in 1990 in the UK.

Reforms have also saved capitalism from revolution by giving mass movements what they demand to quiet them down. The example here would be the New Deal in the US in the 1930s following a mass movements of trade unions, socialists and communists. [4]

As well as reforms protecting capitalism from itself, greedy capitalists or mass movements, reforms are also used to protect capitalisms profits in the form of anti-trade union laws. (for more information on this see a summary in the final section of this post).

Following the Wall Street Crash of 1929 and the Great Depression in the 1930s, several factors combined to saved capitalism: Keynesian economic theory; mass movements demanding state support and welfare reform; and the economic stimulation generated during the war and the rebuilding after. Richard Wolff asks an important question: has the systematic crushing of the left over the last forty years taken away one of the important mechanisms for protecting capitalism? [5]

Why reforms won’t work

There are several ways to think about this. First, if reforms are achieved that benefit ordinary people but you leave the capitalists in power, they will always undo or roll back any gains for ordinary people (see the next section for more details). The capitalists can’t help themselves. So reform is not enough and we need to end capitalism. [6]

Second, the mid-twentieth century reforms were achieved because of a combination of rebuilding after the war resulting in a high demand for labour, powerful working-class movements, the increasing profitability of capitalism with capitalist classes willing to share some of their profits, and British capital could not move abroad as it does now so had nowhere else to go. There is also an argument that the threat of communism from the Soviet Union put pressure on western elites and states. [7]

Third, currently, the left is so weak and corporate power so dominant that we’re not winning any reforms. This is the ‘structural power’ argument. [8]

Fourth, some on the left advocate a gradualist strategy through reforms to ending capitalism and creating a socialist society. There is a lot to unpack in future posts on this point but I do think that a rupture with capitalism will be required, a revolution.

Capitalism undoes reforms that benefit ordinary people

Since the 1980s the current form of capitalism, neoliberalism has been rolling back the gain that ordinary people made through the 20th century. Using the four categories from the previous post on these gains I will briefly describe how they have been undone.

First, what is privatisation? It is the selling off of publicly owned services, industries and institutions so they become privately owned and run. In the UK it started with the steel industry in the 1950s, then in the 1980s, Thatcher sold off a large number of public institutions, industries and services. Council housing was sold off in the 1980s through the right to buy scheme. The public services campaign group We Own It gives a great history of the privatisation of different publicly owned services, industries and institutions in Britain.

Parliamentary reform

Paul Foot in The Vote: How it was won and it was undermined, provides an excellent history of success of electoral reform up to the early 20th century. And then how it was undermined for the rest of the century. The continuing struggle for electoral reform is ongoing and important to weaken the Tories and open things up for the radical left.

Worker’s Rights

See a summary of the UK government anti-trade union legislation from 1980-1999 here and from 1979-2010 here. Since 2010 there has been the Trade Union Act 2016 [9], and then further restrictions since that act during related Covid.

Education

Stephen Ball in The Education Debate describes how since the 1980s schools have been remodelled on commercial and industrial institutions. He argues that neoliberalism has changed the British education system through four key mechanisms: top-down performance management, greater competitiveness and contestability, choice and voice, measures to strengthen the capability of public servants to deliver improved public services. Here is a summary by Ball of neoliberal education policy in Britain from 1979-2010 under the Tory’s and New Labour. And here is the We Own It perspective on Academy schools.

Social Welfare

The most recent reform of the welfare system was The Welfare Reform and Work Act 2016. A 2019 report by Frank Field MP, Heidi Allen MP and Feeding Britain called The ‘Other Britain’ and the failure of the welfare state, found that the welfare system is failing the most vulnerable. They list the key issues to be:

  • benefit freeze – claimants no longer get an annual increase in line with inflation so have less and less to live on
  • Universal Credit, issues include 5-week wait and advance payments, third party deductions and old social loans, sanctions, Work Capability Assessments
  • Medical assessments and Personal Independence Payments (PIP)
  • No recourse to public funds for migrants
  • Jobcentres are unsupportive and uncaring
  • The gig economy and the working poor cannot afford to cover their outgoing so need food banks
  • Problem Debt due to low pay force people into high-cost debt

The increasing use of food banks in the UK is another clear indication that the welfare state is failing: “In 2019/20 approximately 1.9 million people used a food bank in the United Kingdom, around 300 thousand more than the previous year.” [10]

The NHS is a key institution of Britain’s welfare state. We Own It has identified three ways the NHS is being undermined:

  • creating competition so private companies provide services funded by taxpayers;
  • the reorganisation of the NHS so regional commissioning groups allow local NHS service contracts to be managed by private companies;
  • the Tory governments have reduced the level of funding, which could make people think a publicly owned NHS isn’t working and so the private sector might be seen as a solution.

Endnotes

  1. Levers of Power: How the 1% Rules and What the 99% Can Do About It, Kevin A. Young, Tarun Banerjee and Michael Schwartz, 2020, chapter 2
  2. Levers of Power, page 131
  3. Levers of Power, page 133
  4. https://lithub.com/howard-zinn-how-fdr-forestalled-a-second-american-revolution/ and https://www.youtube.com/watch?v=4bT8f72s2uU
  5. Crisis and Openings: Introduction to Marxism – Richard D Wolff, 130 min, https://www.youtube.com/watch?v=T9Whccunka4
  6. AskProfWolff: A Critique of Robert Reich, 4 min https://www.youtube.com/watch?v=SNRyDa79ygA; Understanding Marxism: Q&A with Richard D. Wolff, 35 min https://www.youtube.com/watch?v=eU-AkeOyiOQ; How Reaganomics Killed America’s Middle Class, 54 min https://www.youtube.com/watch?v=ZdCNGkZoIZw&t=3004s; Crisis and Openings: Introduction to Marxism – Richard D Wolff, 129 min, https://www.youtube.com/watch?v=T9Whccunka4
  7. see conclusion of https://www.counterpunch.org/2020/12/27/the-tragedy-of-corbynism-a-postmortem. Also http://libcom.org/blog/reform-possible-22122011 and http://libcom.org/blog/reform-possible-reformism-guaranteed-22122011
  8. Levers of Power: How the 1% Rules and What the 99% Can Do About It, Kevin A. Young, Tarun Banerjee and Michael Schwartz, 2020
  9. https://en.wikipedia.org/wiki/Trade_Union_Act_2016 and https://www.theguardian.com/politics/2015/jul/15/trade-unions-conservative-offensive-decades-strikes-labour
  10. https://www.statista.com/statistics/382695/uk-foodbank-users/