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Chapter 4
The
New Deal Synthesis
1.
The Rise of the State-Monopoly Tendency
The
notion of state-monopoly capitalism was coined by Lenin in his pamphlet, The
Impending Catastrophe and How to Combat It, of October 1917. Criticizing the
Kerensky government for tolerating economic chaos instead of introducing state
control of the war economy (which he judged necessary for consolidating the
bourgeois republic), Lenin went on to attack the Mensheviks and Social
Revolutionaries for their failure to see that such state control represented the
'complete material preparation for socialism, the threshold of
socialism'.
In
other belligerent countries, the imperialist war had turned monopoly capitalism
into state-monopoly capitalism. Bukharin even estimated in Imperialism and
World Economy that the nationalization of capital into 'state-capitalist
trusts' constituted the essential feature of imperialist development. But Lenin
only wanted to make the revolutionary-democratic introduction of state-monopoly
capitalism in Russia a factor in accelerating the socialist revolution. A
progressive state-monopoly capitalism according to Lenin should be brought about
by the following measures:
1.
Forced centralization of bank capital into a single bank under state auspices;
2.
Nationalization of the major syndicates (sellers' cartels);
3.
'Abolition of commercial secrecy';
4.
Compulsory syndication of industry and commerce;
5.
'Compulsory organization of the population into consumers' societies'. 2
The
codification of Lenin's works in Soviet Marxism, which fossilized their
articulation of Marxist method and revolutionary tactics into official doctrine,
in due course also elevated the analysis of The Impending Catastrophe to
the level of standard theory. At the 1960 Moscow conference of Communist
parties, state-monopoly capitalism, hitherto used loosely and as a theoretical
category developed mainly in the GDR, was officially adopted as the scientific
designation of advanced capitalism as such. The experience of the 1930s, when
the main capitalist states resorted to an interventionist and corporatist policy
intended to save capitalism from the crisis of its liberal mode of accumulation
(but when Comintern Marxists still rejected any comparisons with the programme
of The Impending Catastrophe), in hindsight was declared to be the
formative period of state-monopoly capitalism. 3
In fact, the state-monopoly phase, linking the World War One experience with the peace-time state intervention of the 1930s and culminating in World War Two, proved transitory itself. The state- monopoly tendency in the bourgeoisie accordingly saw its hegemony evaporate to the degree capitalism succeeded in achieving a synthesis between state intervention and renewed internationalization: a process consummated in the era of Atlantic integration.
As
a result, the essentially Bukharinist assumptions of the theory of
state-monopoly capitalism condemn it to irrelevance in analysing the postwar
period. In present-day France, the fate of the Left government launched on the
basis of an (emaciated) programme of nationalizations illustrates better than
anything the fundamental dislocation of state monopolism by a new liberalism,
and hence, represents a critical moment in the crisis of the theory of
state-monopoly capitalism, its reformist assumptions, and the Communist parties
clinging to its tenets.
The
crystallization of a state-monopoly tendency in the Atlantic bourgeoisie during
the interwar years arose from the survival needs of large-scale industry
confronted with the havoc wrought by an anarchic liberal capitalism, whose
operating principles were no longer adequate to the development of the
productive forces.
After
the Armistice in 1918, state intervention had been dismantled along with the
apparatuses of the war economies as such. The defeat of the working class and
the confinement of its revolution to Soviet Russia allowed the bourgeoisie to
opt for a rehabilitation of pre-war patterns of class and economic relations,
and to retreat from the danger-zone of state control. In their evaluation of
state intervention, the liberal bourgeoisie did not doubt for a minute the
accuracy of Lenin's assessment of state-monopoly capitalism as the 'threshold of
socialism'.
The
state-monopoly tendency in the bourgeoisie, on the contrary, estimated that
capitalism could profit from a mitigation of economic liberalism and a
systematic state intervention. As indicated in Chapter One, such ideas had been
propounded from the late nineteenth century on by Hobson, Ford, and others, and
gradually, their reasoning came to be shared by a generation of the bourgeoisie
dependent on state support, cartelization, and other economic arrangements
contradicting the money-capital concept and the liberal order. When laissez
faire exploded in 1929 and failed to respond to orthodox liberal methods of
reviving it, the productive-capital concept gravitated to a hegemonic position
and the condition of capitalist society elevated the fractional interest of the
state- monopoly tendency to the level of the apparently general interest. The
concrete forms of its breakthrough and the political struggles accompanying them
differed greatly, but everywhere in the North Atlantic area the corporatist
restructuration of class relations, the 'domestication' of the circuit of money
capital under state auspices, and the crystallization of sphere-of-interest
arrangements in the international field unmistakably signified the triumph of
the state- monopoly tendency.
Reciprocating
the entrenchment of socialism in one country in the Soviet Union, Atlantic
capitalism temporarily sought to consolidate itself by an experiment with
Lenin's October emergency programme.
The
Rockefeller Nexus
In
the decade
after 1909, the American iron and steel industry ceded its position as the
fastest growing industry to the transportation machinery, oil, and chemical
industries.4 The most dynamic component of the transportation machinery
category, the automobile industry headed by Ford, in the same period embarked on
a course of international expansion which would make the bourgeoisie associated
with it part of the mass of interests which in the later stages of the New Deal
threw in its weight for the international extrapolation rather than national
consolidation of Fordism. As we shall see below, this development helped
predetermine US hegemony in the restructuration of Atlantic capitalism after the
Second World War, since in Europe a comparable breakthrough of the automobile
industry and the concomitant restructuration of capital towards a
relative-surplus-value, progressive-accumulation configuration did not occur.
The state-monopoly tendency in the American bourgeoisie, therefore, had its centre of gravity primarily in the two other fast- growing sectors: oil and chemicals. Unlike the automobile production firms, these industries faced stiff competition from their European counterparts, organized in powerful cartels. The cartel movement, which had its epicentre in Germany, was a key factor obstructing the growth of a consumer-durables sector, but other- wise enhanced Europe's competitive position. In order to bolster the position of American firms in meeting this competition and combining with or against European cartels, Congress in 1918 passed the Webb-Pomerene Act qualifying US anti-trust law in its extra- territorial aspects.
The
support for the state-monopoly concept on the part of the American oil industry
was relayed through the anti-liberal thrust of its cartel orientation rather
than being a straight reflection of the productive-capital vantage-point,5
since the revenues of oil capital were predominantly composed of commercial
profit and ground rent. Although it was integrated into the emerging automotive
complex at an early date (US gasoline sales surpassed those of kerosene for
illumination purposes just before World War One), the oil industry much more
than the automobile industry remained dependent on state support, even apart
from its publicly subsidized link to the national soil through the depletion
allowance. A.C. Bedford, president of Standard Oil of New Jersey, set the
example for the other Rockefeller companies in this respect by his presence on
Bernard Baruch's War Industries Board during World War One.6
J.D.
Rockefeller, the genius behind the Standard, was already a proverbial tycoon in
the 1890s, but the real history of the Rockefeller financial group began when
they stopped managing the Standard Oil companies and shifted their main activity
to banking. Between 1920 and 1930, the Rockefellers acquired the Equitable Life
insurance group and the Chase National Bank, putting Winthrop Aldrich, John D.
Rockefeller Jr.'s brother-in-law, in charge of their operation.
7
The contribution of the Rockefellers to the characteristic profile of the state-monopoly tendency in the USA lay in two areas. In the field of labour relations, they developed a strategy of pre-empting trade-union organization via industrial representation schemes. After the Ludlow massacre of1914, in which a tent camp of Colorado Fuel & Iron strikers was machine-gunned and burnt down, killing eleven children, J.D. Rockefeller, Jr., who was the principal owner of the company, began to venture into the labour-relations field. Having been publicly exposed as supporting the CF &1 management throughout the conflict, Rockefeller hired the Canadian politician Mackenzie King to work out the eventual Industrial Representation Plan. The plan envisaged regular discussions between workers and management representatives under company auspices, without interference from 'outside' unions. Partially as a result of this example, corporate welfare and representation schemes proliferated during the open shop 1920s. In the meantime, the Rockefellers continued to fund advanced behavioural research (like Charles Merriam's group at the University of Chicago), while sponsoring a new category of labour relations experts, of whom Arthur Young of the Rockefeller-financed Industrial Relations Counsellors, Inc. was the most prominent. 9
The
second contribution of the Rockefellers to interwar capitalism was their
elaboration of a politics of rivalry with Britain and co- operation with
Germany. Nelson Rockefeller, one of J.D. Jr.'s sons, become the main protagonist
of this viewpoint. As was the case with Aldrich, who as a public spokesman was
the counterpart of Morgan's Lamont, Nelson's importance lay in the area of
political strategy rather than economic management. In the course of his
apprenticeship at the Chase Bank in London, Nelson adopted the cartel outlook
prevalent at the time, albeit with an internationalist accent commensurate with
the global reach of the Standard Oil companies and their joint ventures. In this
context, he also came to share the anti-British prejudice of the directors of
Standard Oil, N.J. of which the German, Heinrich Riedemann, who was the director
of international strategy, continued to be the vehement protagonist long after
the world cartel agreement with Royal Dutch/Shell and Anglo-Persian was
concluded in 1928.10
Except
for Britain, where Standard Oil's affiliate' Anglo- American' competed with the
virtual state monopoly established for the domestic market by Shell and
Anglo-Persian (Shell-Mex & BP Co.), Standard tended to base its strategy
upon the national oil policies sponsored by the state-monopoly tendency in the
European bourgeoisie, thus challenging the British-Dutch position carried over
from the liberal internationalist era. In this sense, a second- generation,
sphere-of-interest Atlantic connection was created between corresponding class
fractions in the United States and the continent that would remain pertinent in
the post-war context. This was particularly true of France.
Paribas
in the interwar years played a key role in the effort to emancipate France from
the hold of foreign oil interests. In the process, the bank became a stronghold
of the state-monopoly tendency. Successively, Paribas participated in the
formation of the Omnium Internationale des Petroles in 1920 (set up to manage
the Rumanian oil holdings held by the Deutsche Bank until 1918), the Cie.
Standard Franco-Americaine (with Standard Oil), and the Cie. Française des
petroles (CFP), the national oil company established in 1924.
The
main protagonist of French interests in this context was Ernest Mercier, who
together with Louis Loucheur may be considered as one of the effective leading
figures in the state-monopoly tendency in the French bourgeoisie. Besides
holding key posts in the electricity industry, Mercier headed both the Omnium
and the CFP; in politics, he was the driving force behind French right-wing
corporatism through the Redressement Français,
in which
managers from the oil, chemical, and aluminium industries were organized.12
Mercier in 1928 represented French interests in the negotiations with Standard's
Walter Teagle over the French share of Middle East oil, typical of the
sphere-of-interest struggles conducted in the period. Paribas, which had
interests with both parties mediated in this matter, but by establishing
Standard Franco-Americaine (the future Esso-Standard), Standard Oil already had
become a silent partner in the development of a 'national' French oil industry.
Standard was also the majority owner of the Le Havre refinery set up by a
consortium of US companies under the Webb-Pomerene Act, which started production
in 1933. At the diplomatic level, Standard's interests at a critical juncture
were looked after by Teagle's brother-in- law, W.C. Edge, who was Hoover's
ambassador in Paris. 13
With
Germany, a comparable web of connections developed. Standard Oil's German
subsidiary, DAPG, was already operating profitably in the 1920s, and again, to
quote the official company history, 'benefited from the general rise of economic
activity after Adolf Hitler came to power.' DAPG had a market share of29% in
1938, which made it the most important oil company in Germany. 14
Standard's
connections with Germany ranged from the world of banking (Deutsche Bank,
Warburg) to that of shipping (on account of its important German tanker fleet),
and most of them survived World War Two. Several cartel agreements, moreover,
linked Standard Oil to the German chemical combine, IG Farben. These agreements,
regarding synthetic oil and rubber, were vital to German industrial autarky as
well as to the country's military capacities.
This
company policy fitted into a broader strategy pursued by the Rockefeller group. In
1934 the family public-relations expert, Ivy Lee, was sent to Germany to
discuss with IG Farben how its image, and that of the Third Reich in general,
could be improved. 15 Eventually,
the agreements between Standard and IG Farben became a public scandal when after
the loss of South-East Asian natural rubber supplies to the Japanese, US
capacity for making synthetic rubber appeared to have been sold to the Nazis.
After the war, IG Farben was dismantled, but the German connections of the
Rockefeller group were carried over to the Atlantic integration context, in
which they notably made themselves felt in the sphere-of-interest interludes
between the American offensives.
Of
the internationalists gravitating to the Rockefeller orbit in the interwar years
and adopting a pro-German and sphere-of-interest outlook in the process, the
Dulles brothers and their group were the most prominent. Religion provided the
occasion for an early connection between John Foster Dulles and J.D.
Rockefeller, Jr. Together with his endowment of labour-relations research and
behaviourist social science, Rockefeller in the 1920s and early 1930s became the
most important financier of liberal and ecumenical Protestantism, subsidizing
such organizations as the Interchurch World Movement and the subsequent World
Council of Churches. Rockefeller, Secretary of State Hughes, and Dulles wanted
to ensure that religion would adapt itself positively to such new phenomena as mass
consumption and American expansion abroad. 16
Although the ecumenical
movement clearly cannot be reduced to Rockefeller influence, it is clear from
the memoirs of the Secretary General of the World Council of Churches, Visser't
Hooft, that Rockefeller money and Dulles's personal involvement were major
factors in the organization's development and international policy. (The fact
that wartime discussions of federalist European unity, involving Rossi, Spinelli,
and partially inspired by Bonhoeffer, were held in Visser't Hooft's home in
Geneva and that Visser't reported on them to Allen Dulles, who as head of the
European Bureau of the Office of Strategic Services (OSS) likewise was in
Switzerland, further add to the significance of the connection in terms of the
present discussion.)1
As
with the Rockefellers, the Dulles brothers played a historic role in shaping
both the economic and political form of modem Atlantic imperialism. Sullivan
& Cromwell, the Wall Street law firm in which they were partners and which
they turned into a financial group in the 1930s, was the American agent for IG
Farben and the Vereinigte Stahlwerke, while the brothers were also directors of
IG Chemical Corp. Sullivan & Cromwell had further links with the German
Schroder Bank and with Lazard Freres; Allen Dulles was a director
of the J. Schroder
Banking Corporation in New York. 18
Kuhn,
Loeb in the interwar years also became part of the Rockefeller orbit. Its German
partner, the Warburg bank, because of the anti-semitic terror in 1938 was
renamed Brinckmann, Wirtz & Co., but the connections with Kuhn, Loeb and
with Rockefeller were not affected. Shortly after the war, R. Brinckmann became
chairman of the board of the German affiliate of Standard Oil. 19
These
particular personalities and financial groups shared an inclination to
sphere-of-interest arrangements in international relations loosely linked to a
pro-German orientation that in many respects dovetailed with the mobilization of
'isolationist' industrial and agrarian forces in the Middle and Far West of the
United States. Drawing on the productive-capital concept typical of industry as
well as on the anti-chrematism of the agrarian Populists, the prevailing outlook
in these regions complemented the Rockefeller. Dulles position in terms of
international preferences but otherwise failed to transcend the immediacy of the
state-monopoly configuration. As Schuker notes, 'in the Middle and Far West
particularly there existed a potential for coalescence of pro-German sentiment
with traditional isolationism and agrarian hatred of the ill- understood Eastern
"money interest". '20
In
industry, the backbone of Midwestern, Anglophobic isolationism was to be found
in Chicago. The main families making up the local elite (Armours, Fields and
McCormicks), their press voice (The Chicago Tribune), and the companies
under their influence (International Harvester, Sears, Roebuck, and Inland
Steel), tended to take a hostile view of American involvement outside the
Western Hemisphere. The complementarity of their interests with those of the
users of Chicago-made agricultural equipment contributed to a mutual affinity in
this respect.
A
second major centre of isolationism developed in Cleveland heavy industry. The
iron and steel industry underwent a major- transformation when it was geared to
the expanding automobile, engineering, and oil industries. This transformation
at the level of the technical labour-process was marked by the introduction of
the continuous wide-strip mill in the 1920s. As a consequence, US Steel, the
original near-monopoly organized by Morgan, lost ground to newcomers catering to
the flat steel market. These firms, concentrated notably in the Cleveland area,
in turn, became the torch- bearers of reactionary nationalism in the interwar
years. Charles Hook
of the American Rolling Mill Company (ARMCO)
which had developed the new type of rolling mill, was a close friend of
conservative Republican Senator Robert Taft, while the Cleveland steel companies
(Youngstown Sheet & Tube, National and Republic), were all linked to the
isolationist, anti-New Deal wing of the Republican Party. Through the Mather
family (owning Youngstown and Republic in Cleveland and Inland Steel in Chicago)
the Cleve- land and Chicago heavy-industry groups were linked among them-
selves. Kuhn, Loeb was the underwriter of the Cleveland steel companies.21
Although
the postwar export interests of some of the firms in this nationalist bloc would
modify their opposition to international activism, the context of their rise to
prominence remained relevant. In the Eisenhower administration, where George
Humphrey (of the Cleveland Hanna-Mather group) and John Foster Dulles held the
reins at the Treasury and State Departments respectively, this fraction
reasserted itself and demonstrated by its actions the pertinence of its lineage
to the sphere-of-interest configuration of the interwar years.
Hi-
Tech Industries of the 1920s
Turning
next to the other bastions of the state-monopoly tendency in the North Atlantic
area, the chemical industry (including rayon) may be singled out as a sector
which would continue, at later junctures, to manifest its interwar heritage. The
chemical industry, of course, predated the state-monopoly era, but, as with the
oil industry, it was only after World War One that it became a social force of
consequence. As Fortune put it, 'Chemically.. .the chemical industry
dates from Leblanc and 1791; industrially, the chemical industry was recognized
only after the World War'.22
The
American chemical industry, the third fastest growing national industry in the
decade 1909-1919, was notorious for its protectionist and cartel propensity.
Originally lagging behind the German chemical firms, the confiscation of German
patents during the war put the industry firmly on its feet and enabled it to
participate as an equal in the sphere-of-interest arrangements with its counter-
parts on the other side of the Atlantic. Having hitherto followed a conservative
policy of self-financing, the industry now opened itself to the massive infusion
of bank capital. Thus, Du Pont de Nemours, the great munitions trust which out
of its war profits had been able to gain control of US Rubber and General
Motors, was forced during the 1921 recession to turn to Morgan for credit to
absorb losses incurred by GM. Since the chemical industry had most to fear from
German competition, it tended to be less receptive to pro-German policies than
the Rockefeller or Dulles groups, which through their financial or direct
investment stake in Europe could participate in the autarky or quasi-autarky
policies pursued by the European states in the period. This applied not only to
the smaller Allied Chemical & Dye, whose chairman Orlando F. Weber had a
reputation as the 'vigilant defender of the American chemical industry against
foreign invasion' (Fortune), but also, in spite of General Motors'
European investments,
to Du Pont itself. 23
In
Germany, the chemical industry had a much longer history. The tendency towards
autarky championed by the German chemical industry in a sense related to the
origins of the industry as an attempt to produce synthetic equivalents of
natural products ever since medieval alchemists had tried to make gold. The
necessity for synthetic replacements made itself felt whenever European powers
were denied access to the sea. Thus, the industrial applications of chemistry
experienced a first breakthrough at the time of the British blockade of France
during the Napoleonic wars. Later, the centre of gravity in applying the results
of science to industry shifted to Germany, where a weak capitalism without
colonies had to marshal all available assets to engage in foreign competition.
The experience of the British blockade during World War One only reinforced the
implicit concepts on which the development of chemical industry had hitherto
been based and actually fostered the conviction among German chemical engineers
and capitalists that economic autarky was the only viable basis for prosperity.
American competition in the interwar years contributed to the continued economic
relevance of this idea.24
The
German chemical combine IG Farben was constituted in 1925, but the merger did
not eliminate important differences in outlook amongst its constituent firms.
The light chemicals group, composed of Bayer, Agfa, and BASF, with their
American subsidiary General Aniline & Film, represented an internationalist
interest. Carl Duisberg, the head of IG Farben until 1932, came from Bayer. At
the time of Duisberg's incumbency, the Frankfurter Zeitung, the liberal
newspaper under IG's control, still attacked the cartel policies of heavy
industry. Duisberg's successor, Carl Bosch, on the other hand, came from
explosives and fertilizer plants at Oppau and represented the autarkic tradition
of Hoechst. By the time Bosch took the reins, German experiments in the
direction of a corporate- liberal synthesis had failed due to the inability of
the technologically advanced, export-oriented firms to generalize a strategy of
relative surplus-value production and to subordinate to that end heavy industry
and its cartels.25
As
far as international cartels were concerned, IG Farben up to the close of the
1930s had concluded 162 separate cartel agreements with American firms26 of
which the agreements with Standard Oil have been mentioned already. The oil and
chemical cartels were inextricably interwoven: ICI for instance held 10%
preferential shares in one of the licensing companies for synthetic oil jointly
owned by Shell and Standard under the latter's world rights for the
hydrogenation process obtained from IG Farben.27
ICI
was, in fact, the single most important outpost of the state- monopoly tendency
in Britain. Formed in 1926 out of Brunner- Mond, Nobel, United Alkali and
British Dyestuffs, its directors distinguished themselves as architects of
corporatism in Britain. Sir Alfred Mond, the chairman, following the General
Strike of 1926 took the initiative to open discussions with the TUC on a
flexible format of British labour relations. Lord McGowan, one of the prominent
directors, headed the advisory committee on the cartelization
of electricity distribution companies. 28
The
manifold links between ICI and German capital predisposed the fraction
associated with it to a lenient attitude with respect to German
expansion as long as this could be contained within a sphere-of-interest
arrangement. The Anglo-German Fellowship, which
had its office on the Unilever premises, and in which ICI officers
and stockholders like Sir John Simon were prominent, in this context served as a
vehicle for ascertaining Hitler's intentions and
maintaining his good will.29 Significantly, the pro-German groups at his
juncture generally were in favour of a neo-colonialist reconversion of the
British empire as well; after the war, ICI notably stuck to this line and threw
in its weight for British participation in Western European integration rather
than banking on Commonwealth ties.
As
in other countries, the predominance of a strategy basically deriving from the
requirements of productive capital did not prevent particular banks from
subscribing to it. In Britain, the Midland Bank and the Philip Hill merchant
bank in this sense were a product of the state-monopoly era. As Aaronovitch
writes, 'The rise of the Midland Bank and the Hill-Higginson group in relation
to the older merchant banks was possibly based on the shift towards domestic
industry before the older merchant banks were able to muscle in.'3O The Midland
Bank was a major investor in ICI and had a joint directorate with it in the
person of Lord McGowan.
In
France, the chemical industry likewise was a major catalyst in the formation of
a state-monopoly tendency in the bourgeoisie. The Gillet empire in the Lyons
region constituted one pole of the 'Lille Lyons axis' which linked it with the
Motte textile interests in the North, and which the American historian, Quigley,
sees as the backbone of the state-monopoly tendency in France as it crystallized
in the1930s.31 The Gillet family whose interests ranged from the
chemical firms
of today’s Rhone-Poulac and Kuhlmann to Pechiney, the aluminium group, and the
Credit Lyonnais, was backed
by the dominant Protestant banking-house of the interwar-years, Mirabaud. The
banks specifically associated with the state- monopoly tendency in France, apart
from Paribas and Lazard Freres, were Worms & Co., constituted as a bank in
1928; the Credit Commercial de France; and the Banque Nationale du Commerce et
de l'Industrie (BNCI), which was established in 1932 and in 1966 merged with the
Comptoir National d'Escompte into today's Banque Nationale de Paris.32 In
politics, the Lille-Lyons axis was represented by Louis Loucheur, who was
associated with the Motte family. The BNCI had its front man in Pierre Laval. As
we shall see in next chapter, the state-monopoly tendency only really took power
in Vichy, when most of the French empire was virtually amputated from the
motherland and the weight of liberal colonial capital was accordingly reduced.
Before the war, the influence of the new industries expressed itself only in
coalition arrangements, in which Tardieu, the 'darling of the technocrats', was
a prominent figure sharing the same vantage-point. 33
Everywhere,
the chemical industry contributed to the formation of a generation in the
bourgeoisie rejecting cosmopolitan liberalism and subscribing to
sphere-of-interest arrangements in international affairs. The autarkic impulse
also was a formative force in the rise of the mainly European synthetic
yarn-and-fibre industry which expanded eight-fold between 1920 and 1929
surpassed wool as the textile raw material on the eve of World War Two. AKU
(today's AKZO) in the Netherlands,
launched by Rotterdam/Ruhr coal merchant F .H. Fentener van Vlissingen; SNIA
Viscoj in Italy, converted to rayon production in 1929 by Franco Marinotti;
Courtaulds in Britain; and lesser firms in other European countries, retained
their cartel and state-monopolistic propensities formed in this era. As in the
chemical industry generally, managerialism was prominent here. In Belgium, it
was personified by the figure of Roger de Staercke, who managed chemical and
rayon firms on behalf of the Solvay and Janssen owner families. Fascist
tendencies also were at work in the world of chemical industry: in
Germany IG Farben and in Italy, G. Donegani, the founder of Montecatini, who was
an important supporter ofMussolini.34
Electrical
engineering firms like General Electric, AEG and Siemens were already major
economic powers before the First World War. Yet, the electrification of domestic
labour and leisure was a phenomenon of the 1920s, and the mass production of
electrical household appliances, together with continuing electrification of
production and transportation, gave the industry a greatly increased salience in
national policy. Like the auto industry, electrical engineering was a principal
vector of emerging 'Fordism'. In the case of firms with a
liberal-internationalist background -
like GE
or Siemens - this
took the form of support of a corporate-liberal synthesis
comparable to the approach of the American automobile firms; others, like ITT
(founded in 1920) and Philips, retained a strong state-monopolistic and
sphere-of-interest profile.
In
the field of labour relations, the electrical engineering firms were
particularly dependent on quality labour. They needed high-quality performance
by their manual labour power, but also had to establish a smooth working
relationship with their engineers, on whose inventiveness they depended for
product innovations. At Siemens, the maintenance of a trained workforce was
given top priority. As Sohn-Rethel relates, the Siemens workers, whether the
blind women and girls employed on account of their sensitive fingertips, or the
engineers, were seen as the essential factor in the company's success and were
paid relatively high wages. For the greater part, the workers were hand-picked
specialists at their jobs, often trained in three-year courses at the expense of
the company. They lived in Siemens-town and were well taken care of. Fascism
eventually destroyed the subtle forms of the subordination of labour at Siemens
and in comparable companies, substituting instead the absolute surplus-value
strategy of the German war economy. 35
In
the United States, labour relations were likewise developed with circumspection
by the employers in the electrical engineering industry. The pioneering
Hawthorne experiments in industrial psychology in the 1920s were conducted at
Western Electric, but as early as the turn of the century, General Electric took
the initiative to establish an apprentice school for training workers, which by
the time of World War One had set the standard for an organized group of
industries typical of the era, like International Harvester, Westinghouse, and
Western Electric. 36
In
terms of international orientation, the German electrical companies
had held a strong position even in the United States, but after World War One
they shared in the general decline of internationally operating German capital.
Siemens after its adventure with Stinnes in
1930 was forced to borrow $14 million through Dillon, Read & Co., without
however surrendering to foreign interests. Like the
A
major investor abroad, and through Owen Young directly involved in the
rehabilitation of the Atlantic circuit of money and finance capital, General
Electric in response to the crisis of 1929 developed seminal proposals
anticipating the New Deal. Its contribution to the formation of a state-monopoly
tendency in the American bourgeoisie, although merely transient from the company
point of view, was crucial in determining the form of American state
intervention and represented an early instance of the corporate- liberal
synthesis. In late 1931, Gerard Swope, head of General Electric, at a meeting of
the National Electrical Manufacturers Association presented a plan for
compulsory cartelization of American industry, to be supervised by a board of
employers and workers. Within a month, the Swope Plan had been endorsed by key
liberal capitalists, including Henry I. Harriman, president of the US Chamber of
Commerce. Baruch incidentally had proposed a plan like this already in 1925, but
his plan was part of a more restricted and, isolationist concept of control. 38
In
Britain and Belgium, the electrical engineering industry was dominated by
foreign interests, notably General Electric and Westinghouse. In Britain, the
major domestic factor in the electrical engineering industry, the Lazard group
with English Electric, was part of the appeasement bloc as a corporate member of
the Anglo- German Fellowship, but after the war gravitated to the pro-Atlantic
fraction. Lord Brand, the managing director of Lazard Bros. at the time, was a
major figure in the Cliveden set and the British Round Table Society; director
Adam Marris joined the UK embassy in Washington in 1945 and played a key role in
the preparations of the Marshall Plan.39
In
France, the electrical engineering industry was penetrated by the ever-present
General Electric group, but otherwise constituted a bulwark of the
state-monopoly tendency. Mercier, Loucheur and A. Petsche
held important posts in the industry. Detoeuf, of Alsthom (of which Mercier,
too, was a director), was a prominent advocate of corporatist labour relations
and championed Franco-German rapprochement. Significantly, electrical
engineering was the only industry in which an industrial entente of the type
foreseen in the Bruning-Laval
agreement of 1931 In fact materialized. 40
Philips
of the Netherlands, finally, was a typical product of the state-monopoly era.
Specializing in electrical household appliances, the company undersold its
competitors by its low wages and by a 'feudal system of exploitation', as the
president of General Electric's international division called it in 1935. The
American company's influence in Philips, on account of its 18.7% investment and
a licensing agreement, declined in the 1930s. Anton Philips, the founder, was an
admirer of Henry Ford, who upon his visit to the Netherlands in 1930 made him
chairman of the board of Ford's Dutch subsidiary. In a 1945 article, Fortune correctly
qualified Philips as a 'firm believer in cartels'; the company ever since has
tended to define its interests in terms of some form of European cohesion.41
But
the list of industries which, in a parallel process on both sides of the
Atlantic, bred a generation of the bourgeoisie steeped in the productive-capital
concept, state-monopoly capitalism, and a sphere-of-interest strategy of
international relations, should not obscure the basic qualitative difference
setting apart American from European capitalism at this juncture: the growth
in the United States of a strongly internationalist automotive complex
supporting a new mode of accumulation which for the first time in history
allowed a class compromise between capital and labour to be constructed around a
common interest in a rising rate of exploitation. This fact, in conjunction
with American financial hegemony, provided the basis for the acceleration of
American state monopolism into a new corporate-liberal synthesis, consummated in
the New Deal and subsequently extrapolated to the North Atlantic area as a
whole.
2.
The Corporate-Liberal Synthesis
The
Depression marked the watershed between the era of liberal internationalism and
a new era characterized by the compartmentalization of the Atlantic economy
under the aegis of the productive-capital concept and the state-monopoly
tendency in the bourgeoisie. This 'Great Transformation' for a time seemed to
develop along parallel lines on both sides of the Atlantic, but in the course
of the American New Deal, US state monopolism became part of a renewed outward
thrust, in which 'progressive' state intervention was inserted into a
revitalized liberal internationalism. In Europe, on the other hand, state
monopolism galvanized the mass of interests opposed to orthodox liberalism only
in a negative, tendentially reactionary way.42
Fordism
and the automotive complex supporting it were the key factors shaping the
transformation of American state monopolism into the corporate-liberal
synthesis, providing the specific ingredients for both its social-imperialist
aspect and the internationalization of finance capital from the United States.
Ford's mass production strategy allowed him to break the resistance of skilled
labour- power to its subordination to capital, tap the reservoir of cheap
unskilled workers, and dramatically raise the rate of exploitation. In
combination with the economic and social aspects enumerated in Chapter 1,
Fordism through the generally competitive dynamic of American capitalism and its
'rational' class structure rapidly became the hegemonic mode of accumulation,
spreading well beyond the actual automobile industry.
Articulating high living-standards and a flexible format of labour relations with a new lease on life for the steel industry through the continuous production of sheet steel, the American automobile industry engendered a veritable automotive complex involving the oil, rubber, and glass industries, pioneered new marketing and maintenance practices, and stimulated the development of road networks, suburbanization, new forms of vacationing, and so on. After the steam engine and the railroad, here was another truly epoch-making innovation of industrial capitalism. 43
Already
in the 1920s, therefore, the accumulation of capital in the United States and
the strategies of the main financial groups in large part revolved around the
automobile industry. Du Pont de Nemours' acquisition of General Motors stock was
significant in this respect, and when Dillon, Read & Co. in the interwar
years challenged the hegemony of Morgan, this involved, next to their plunge
into the Atlantic circuit of money capital, an (ultimately abortive) attempt to
build a rival automotive complex out of Chrysler and Goodyear Tire and Rubber,
with which they confronted the General Motors/US Rubber combination (controlled
by Du Pont and Morgan)
and Ford/Firestone. 44
At
the same time, the American automobile companies from an early date engaged in
active internationalization in response to the tendency of European governments
to protect their weak automobile
industries by tariffs. In Britain, when McKenna imposed a 33 1/3% protective
tariff in 1915, more than one-quarter of the automobiles produced in Britain
came out of the Ford subsidiary already.
45 In
France, Ford's first direct investment dated from 1913, while
the German automobile industry was virtually divided between General Motors and
Ford in the course of the 1920s.
In
Europe, automobile production largely remained the domain of skilled workers
until after World War Two. Here, the low value of labour-power in the context of
a more hierarchically stratified class structure tended to act as a brake on the
rationalization of production along Fordist lines. Narrow national markets, and
a heavily cartelized steel industry resisting its transformation into a supplier
of cheap sheet steel for automobile production, often reinforced by various
forms of shop-floor resistance, effectively frustrated the introduction of new
methods of producing and selling popular automobiles. Cars accordingly were
expensive and bought only by the wealthy. In 1938, every fifth American drove a
car, whereas in Western Europe, the ratio was 40:1.46
Thus, while the American
automobile industry was not only the most dynamic economic force in the country
(and an internationally oriented one at that), but also served as the
crystallization point of the emerging progressive mode of accumulation and the
corporate- liberal synthesis as such; in Europe the automobile industry, in the
absence of the conditions favouring a comparable development, was either an
ancillary of American capital or part of a defensive array of interests
controlled by the state-monopoly tendency in its own bourgeoisie.
In
Germany, according to Gossweiler, Opel, owned by General Motors, in the interwar
years belonged to the Dresdner Bank/DANAT Bank grouping together with AEG and
comprador strongholds like Thyssen; the Daimler-Benz and BMW firms, mean- while,
were part of the Deutsche Bank group. Hitler's car for the common man, the
Volkswagen, remained a prototype until after the war. In France, Lazard and
Paribas in 1936 cooperated with the rubber monopoly Michelin, the main owner
since 1934, in the reorganization of the ailing Citro~. Renault, also linked to
Paribas, at this point still refused state interference but after the war was
put under national supervision. In Italy FIAT, an independent and inter-
nationalist concern, resorted to Mussolini's protection to consolidate its
virtual national monopoly during the critical interwar years. In the
Netherlands, the buildings of the Spijker factory, the last national car firm,
were sold to a paper manufacturer in 1929.47
If
in Britain the automobile industry flourished compared to the depressed
situation on the continent, this occurred under the specific conditions of the
Imperial Preference System and the corporatist collusion between capital and
labour under the auspices of the state-monopoly tendency in the bourgeoisie. The
breakthrough of a consumer-durables industry and the rise of strong automobile
firms like Austin and Morris here represented a protracted 'consumption' of
British imperial hegemony rather than a restructuration of industry towards a
Fordist accumulation pattern, as is testified by the resistance put up by the
steel industry to the introduction of a continuous wide-strip mill and the
conditions of its eventual operation in 1939.48
In
the United States, the restructuration of class relations towards the
progressive accumulation pattern and the new corporate-liberal concept of
control was consummated between 1933 and 1941. Roosevelt's New Deal, far from
representing the realization of a clear-cut program, consisted of a process of
class formation in which various fractions, through intense struggles,
successively were integrated into the new hegemonic coalition, while others
dropped out after having been temporarily included. The transition from the
crisis of liberal internationalism to the new corporate-liberal synthesis passed
through four main phases. 49
First,
the
actual breakthrough of the state-monopoly tendency at the expense of
international money capital, in which the Rockefeller group and chemical
industry, notably Du Pont, were prominent. Secondly, a social-imperialist
phase characterized by domestic reform and a corollary, albeit still timid,
internationalist departure from the initial state-monopolism. This second phase,
which soon assumed a veritable 'revolutionary-democratic' quality highly
disturbing to Roosevelt's supporters in the bourgeoisie, was followed in 1937 by
a third phase of countercylical economic policy aimed at containing
working-class pressures within the constraints of the new Fordist social order.
The effectiveness of this policy partially accommodated the segment of the
bourgeoisie which had deserted Roosevelt and had established the Liberty Leagues
in the second phase; but it took until the fourth phase, when Roosevelt
embarked upon a program of support for Britain against Hitler, before the
disaffected mainstream bourgeoisie and the traditional financial aristocracy,
too, were able to find their place in the New Deal coalition.
The
eventual corporate-liberal coalition of mass-production industries, 'reformed'
international bank capital, the state apparatus, and, at a subordinate level,
the domesticated trade unions, hence- forward would remain committed to the
arrangements of the era of American hegemony and Atlantic integration, through
which the Fordist mode of accumulation and the class compromises on which it
rested were extrapolated- to the international level. Yet, only during the
offensive phases, with the domestic US economy going at full tilt and the
Democratic Party in command, would this configuration be geared to its full
potential, articulating state intervention, social imperialism, internationalism
and activism abroad.
The
'unreconstructed' state-monopoly tendency in the American bourgeoisie, as much
as its liberal-internationalist counterpart, in the postwar period could only
reassert itself as part of the recurrent tendency, mostly under Republican
auspices, towards the disintegration of the offensive class configuration. In
between the American Atlantic offensives, the prominence and policies of
Rockefellers and Dulleses in this sense can be traced to the period of their
original ascendancy in the context of the compartmentalization of the Atlantic
economy and the resurgence of Germany.
Corporatism
in Labour Relations
The
elaboration of synthetic concept of control with respect to the working class
was a crucial achievement of the New Deal, and an integral aspect of the
Roosevelt offensive's export model of class relations. The basically private
forms of labour control associated with the new industries of the 1920s failed
to contain the intense class struggles erupting between Roosevelt's election and
World War Two. The industrial welfare and representation schemes pioneered by
Rockefeller, and hardly challenged by the restrictive organizing practices of
the AFL, generally had involved only the better-paid, skilled workers. They had
functioned to make the workers accept the reduction in wages dictated by the
orthodox policy of deflation, but left unorganized the larger mass of
semi-skilled production workers, often already outside the integrative context
of Anglo- Saxon culture.50
When in the course of the crisis mass unemployment spread, class consciousness
among this segment of the working class grew.
Through
the mobilization of millions of working-class new voters and the resulting
expansion of the active electorate, the campaigns of Franklin Roosevelt in 1932
and 1936 swept away the Republican-dominated electoral system established by
McKinley's landslide of 1896. This overturning of forty years of Republican
big-business electoral hegemony raised the spectre of mass radicalization. Thus,
America's most eminent academic economist, Irving Fisher, warned President-elect
Roosevelt that close observers of local working-class opinion were 'smelling
revolution'.51
This threat,
in turn, functioned to loosen the liberal deflationist orthodoxy of a critical
segment in the ruling class. The example of the Swope Plan shows that in certain
capitalist circles a state- monopoly solution was actively contemplated.
Indeed,
quasi-heretical state intervention in monetary and financial policy had been
attempted first under Hoover, who created the Reconstruction Finance
Corporation, a major instrument of state intervention through the Truman period.
Hoover, however, did not dare to venture into the field of forced cartelization
along the lines proposed by the Swope Plan. 52
It was only
the grounds well of the working-class movement which removed these hesitations.
As banker James Warburg noted in his diary in March 1933, 'There is tremendous
and increasing pressure for inflationary relief from all possible sources and
taking all possible forms. . . .Cheapening the dollar would make all these
people happy at least for a certain length of time, and during this time it will
be possible to develop a real program'.
Confronted with a threatening breakdown of the capitalist order, the American ruling class preferred playing for time and thus allowed Roosevelt and his advisers a free hand in taking the necessary measures. The 'real program' at first amounted to an enactment of the Swope Plan by the National Recovery Act. The Act, and the executive organs it created, put the American economy on a state-monopolistic footing with control in the hands of the fraction most closely acquainted with this approach. The National Recovery Administration was headed by former Baruch aide Hugh Johnson; Walter Teagle of Standard Oil led its Industrial Advisory Board and sat on the National Labor Relations Board; while Swope sat on both bodies. The Du Pont group, alienated by Hoover's liberalism, was prominent among the backers of the project at this stage.
However,
Roosevelt's appointment of a woman, Frances Perkins, over the opposition of the
AFL, signalled a new approach to the mass of unorganized workers. Arguing that
'unorganized as well as organized labour should be represented' 54, the
Administration inserted NRA's famous section 7a, which recognized labour's right
to organize within the company and to engage in collective bargaining at the
industry level. This everywhere encouraged the unorganized to organize, and
trade unions to press new demands. However, strikers who turned to Washington
for help in the face of employer victimization (which was extensive everywhere
in the first years of the New Deal) quickly discovered that NRA chief Hugh
Johnson and Secretary Perkins were more interested in the success of the
integrative mechanisms of the NRA, and its impact on the macro- economy, than in
any particular rights or struggles of the working class as such. 55
Although the Supreme Court –a last bastion of economic liberalism—ruled the NRA unconstitutional in 1936, its assumptions still guided the Roosevelt Administration's search for a corporatist format of industrial relations. If, on one hand, the New Deal had to overcome employers' resistance to unionism tout court; on the other, it had to constrain and 'deradicalize' the more militant tendencies of the rank-and-file working class. The first major challenge was the great sit-down wave of 1936-37 which, for virtually the first time in American history, saw a mass transgression of employer property rights. Faced with awesome company repressive apparatuses (private police forces, extensive 'fink' networks, etc.), organizing committees of the newly-formed Committee (later Congress) of Industrial Organization(s) launched epic sit-downs; first in the Akron rubber industry, then in the very heart of General Motors' power: its Flint, Michigan Chevrolet complex. This new form of working-class action, which won recognition for the CIO's rubber and auto unions, put the companies on the defensive since they were compelled to limit the use of force for fear of damaging plant and equipment. In 1937, however, Congress, with the assent of the Administration, outlawed sit-downs. The unions, despite rank-and-file protest, complied and returned to picket-lines outside the plants: with the result of 10 dead and 26 wounded outside a Republic Steel plant in South Chicago in 1937.56.
Also in 1937 pressure was brought to bear on the Roosevelt administration to cut
public spending for employment and thus quell working-class militancy. The
recession came in the midst of the CIO drive and worked both to undermine the
workers' will to strike and to bolster the employers' will to resist. 57
At this
juncture, the AFL took the offensive, and as a result of its greater financial
resources and broader support in the capitalist class, succeeded in recapturing
much of the territory lost to the CIO and more. The AFL in the previous period
had lost influence as a consequence both of mass production and deskilling
tendencies, and because of company feudalism; now that the lightning advance of
the CIO was halted, the AFL veered back to its original pre-eminence by
combining some of the lessons it had been taught by the new organizing practices
of the CIO with its rich experience of class collaboration.
The
restructuration of labour relations from the pre-New Deal format to the new
Fordist pattern far from obliterated the forms of some of the previous
arrangements. Company feudalism paradoxically was reinforced in some sectors,
like chemicals and business machinery, where the challenge of the CIO spurred
employee- representation schemes and pre-emptive wage comparability. But if the
overall outcome was heterogeneous (also due to the fact that the protracted
struggle of the working class took place under changing legal and political
conditions), the compromise, worked out on the national level, between
high-productivity industry and organized workers
became its dominating feature. In the course of the Roosevelt
offensive, organized labour first had to be cut down to size to make this
compromise attractive to the capitalist class; but once this renewed
subordination was achieved, the corporatist mechanism allowed for a relatively
smooth interplay between the big unions' economic demands and the expansion of
American capital. The AFL and CIO both supported labour-saving mechanization in
exchange for pay rises for the stably employed workers forming their core
constituencies. The miners' leader and strategist of the CIO drive, John L.
Lewis, right after World War Two was the first to accept such a deal openly. 58
Eventually,
this compromise also functioned in the context of the internationalization of
American capital, making the AFL and CIO junior partners in the post-war
organization of an informal American empire.
In
Europe, the preconditions for the introduction of a Fordist pattern of labour
relations were largely absent. In the interwar years, European backwardness lent
a particularly reactionary aspect to the state- monopoly tendency, notably on
the continent. Whereas in the United States, the possibilities of expansion,
coupled to the rational two-class structure and the owner-cultivator pattern in
agriculture, made a basically progressive, social-imperialist consensus
possible; in continental Europe, the productive-capital concept was
disproportionally developed from the vantage-point of the pre-capitalist
critique of money capital, and in its Fascist variety eventually would entail
the enslavement of the working class.
However,
the same processes of rationalization of industrial production were at work, and
the requirements of large-scale mechanized production, as well as the typical
class compromises developed in its context, did assert themselves in Europe in
the interwar period, if only temporarily. Northern European Social Democracy
would develop as a crucial agent for the introduction of the Fordist pattern of
labour relations in Europe; and in the interwar years two lines of
development
in this respect stood out: the British example of
a national
compromise and its subsequent devolution to the plant, level, and the German
pattern of plant councils
evolving into a national
compromise (postponed to the post-war era after its initial.
failure in
1928).
In
Britain, which in terms of the
transition to a Fordist pattern of accumulation
occupied an intermediate historical position between the United States and
continental Europe, the state-monopoly tendency materialized in the specific
form of a conciliatory tendency
within both the capitalist and the working classes. Due to the dominant position
of the international commercial
and financial interests, industrial capital at an early date was forced to work
out a basis of agreement with
the workers, notably in the new industries. Since these often were operated by
relative outsiders (Americans in the electrical engineering industry, Germans in
chemicals, the Quaker families in the food industry), these experiments did not
immediately or hostilely incite the established, liberal ruling class.59
In
the Depression, these experiments, which after the General Strike of 1926 had gained prominence through the Mond-Turner discussions
already referred to, were elaborated as a general framework of
labour relations, exemplified in the Macmillan Report of
1931.60 Although the British bourgeoisie was not above contemplating new
forms of state intervention—a
1927 Tory manifesto inspired by Mussolini's New Order carried the signatures of
Churchill and Harold Macmillan—only the Labour party could invest all its
political capital in a prospective corporate-liberal synthesis. The stability of
real wages in Britain during the crisis, contrasting sharply with
developments elsewhere, did much to strengthen the hand of
the right wing of the
trade unions and the Labour Party, allowing them to plot a course of
state intervention along reformist lines compatible with the corporate
liberalism championed by the United States after the war. The early break with
Marxism under the auspices of the
Fabian Society greatly facilitated the absorption of Keynes's recommendations for a euthanasia of
the rentier class and a calculated deficit policy for employment;
although formulated by an avowed enemy of
the working class, this recipe found its historical executor in the
Labour Party, being the only political force in Britain basically committed to
modernization and an enlarged state role.61 It was this ideological homology
which eventually would turn the TUC, the labour Party, and leaders like Ernest
Bevin into crucial relays of American influence and intervention in Western
Europe.
In
some contrast to the British pattern (which on account of economic and
historical similarities was also influential in the Netherlands), German Social
Democracy developed its prototypical contribution to the corporate-liberal
synthesis from the vantage- point of productive capital in direct production. In
Germany, there was
a strong tradition of company feudalism in the metalworking
This
course of events demonstrated the inability of merely syndicalist movements, no
matter how revolutionary, to provide a viable alternative to a vision of
reformed capitalism, which by its own workings, and Henry Ford's in particular,
seemed to hold out the promise of fulfilling the workers' material needs. In
Germany, this reformist ideal was elaborated out along the lines of the
Keynesian critique of money capital, but due to its origins in the councils
movement remained linked to a concept of industrial democracy rather than being
state-oriented. Here, not just the state, but the large corporation already was
seen as a neutral instance. The notion that production 'unjustly',
'capitalistically', was subordinated to the interests of money capital was taken
as a starting point for several influential studies by leading Social Democratic
theoreticians. Fritz Naphtali in 1928 recommended that the workers'
representatives take part in the management of large corporations, and
eventually, of state economic policy as well. The socialization of labour within
the plant, and the promise of more harmonious industrial relations that it held
out, led Naphtali to believe that socialism might not need a violent struggle
after all. 'Though it is far from US', he wrote, 'to conceal the highly
capitalist nature of the new forms of organization, we believe that from this
development. . . a major impulse in the direction of the democratization of the
economy will result and is beginning to do so already.' A comparable point of
view was put forward in Eduard Heirmann's Soziale Theorie des Kapitalismus of
1929.64
Social-Democratic
ideology, proceeding from the assumption that socialized labour in the factory
represented a major step towards an
overall planned economy –and,
if managed democratically, possibly its equivalent—was dependent on the
capacity of modern mass-production
industry to provide a relatively high standard of mass consumption. When
Naphtali's and Heinmann's studies were published, this was already proving an
illusion. In the prosperous year 1928, when the boom associated with
the influx of American capital was at its peak, the real wages of the entire
working class were still not above the pre-war level. Mass consumption
accordingly failed to develop sufficiently, and eventually the trade unions in
the relatively 'progressive' industries (e.g., chemical, electrical, etc.) which
had achieved a semblance of nation-wide bargaining through arbitration, had to
swallow the across-the-board lowering of wages through the Emergency Decree of
December 1931.64 Only after World War Two did the managerialist and technocratic
doctrine of Naphtali
and Heinmann became relevant again in the context of Atlantic integration.
Cementing and in some respects transcending the productive-capital concept, this
outlook tended to favour coalitions between productive capital and organized
labour, and at the state level, between finance capital and Social Democracy. In
the Federal Republic, this led to company co-determination schemes favouring
productive investments to the detriment of dividend payments, and to the
adjustment, through the Godesberg Programme of 1959 and other policy changes, of
Social-Democratic policy to the corporate-liberal and Atlantic unity concepts.65
3.
The New Deal Versus Rentier Control
The
failure of liberal-internationalist capitalism to revive its economic order
after 1929 also brought about, in due course, a fundamental restructuration of
profit distribution as well, The stock market crash and the bank crises of the
early 1930s had made abundantly clear where the weak links in the system were to
be found. In the margin of the momentous class struggle which accompanied the
agony of liberalism , small savers clamoured for the money invested abroad by
investment banks operating in the international circuit of money capital. In the
United States, these investments became the object of the Senate investigation
led by Ferdinand Pecora. Three billions of the eight billion dollars of foreign
bonds which the large. investment banking houses had sold to the American public
in the the 1920s had
defaulted.66 The uproar among the small savers, coinciding with the battles of
the mass-production workers, further: added to the turbulence of the period and
to its apparent anti-capitalist thrust. In fact, what was at stake was the need to emancipate
industrial capital from the tutelage of the investment banks and the petty
investors' community. As Keynes put it in the Concluding I Notes of his General
Theory, 'with the disappearance of (the rentier aspect of capitalism) much
else in it besides will suffer a sea- change. . . (But) the euthanasia of the
rentier, of the functionless investor,
will be nothing sudden. . . and will need no revolution. '67
The
Banking Act of 1933 was meant to separate the functions of money-dealing
commercial capital from the interest associated with fictitious capital. Several
banks had anticipated the restructuration: in 1932, the security affiliates of
the National City Bank of New York and the Chase National Bank were set up as
independent companies. Winthrop Aldrich publicly spoke out in favour of the
separation of commercial and investment banking. In
order to save the position of the Chase Bank (and Aldrich's), the
Rockefellers decided to sacrifice chairman Albert Wiggin to the Pecora
Committee. At the National City Bank, a comparable fate was reserved for
Chairman Mitchell.68
The
Morgan Bank, forced to split into a commercial bank and an investment company
renamed Morgan, Stanley, could not bear the brunt of the attack, since it was
the virtual embodiment of Atlantic, money-capital in the United States. Although
J.P. Morgan, Jr. professed to welcome the inflationary measures of the
administration, the consternation at the bank was complete. Lewis Douglas, a
financier of the group, upon being informed of Roosevelt's decision to devalue
the dollar, lamented that it meant the 'end of Western civilization'. 69
James Warburg,
too, approved of inflation as a temporary measure, but the transfer of the legal
title to the gold of the Federal Reserve to the American state in 1934 as part
of the initial state-monopolism forced him to resign as Roosevelt's adviser and
join the anti-New-Deal Liberty League.
The
bankers from pavenu or anti-Morgan institutions, however, supported the New Deal
for a variety of reasons. Apart from Chase and the National City Bank of New
York (whose former chief, Frank Vanderlip, headed the pro-inflation Committee
for the Nation), this category included A.P. Giannini of the Bank of America,
who had a clear interest in the curtailment of Wall Street tutelage over
American banking and whose experiments with branch banking predisposed him
favorably to Roosevelt's domestic programme. The newly prominent investment bank
combination of Lehman Bros. and Goldmann, Sachs, also was receptive towards the
consumer orientation of the New Deal on account of its interests in department
stores and light industry; moreover, their awareness of the need for structural
change apparently transcended even immediate economic interest or resentment
against anti-Semitism on the part of the Morgan interests. Thus, one could hear
Paul Mazur of Lehman Bros. complaining over the 'tragic lack of planning' in the
capitalist system, while Sidney Weinberg, a Lehman partner and head of Goldmann,
Sachs, was assistant campaign treasurer of the Democratic National Committee in
1932 and 1936.70 According to Burch, W. Averell Harriman, head of the
pro-Roosevelt Business Advisory Council (BAC) formed in 1935, acted as the
liaison between the Jewish bankers and the Rockefeller group.
In
1934, the termination of the era of rentier control was further marked by the
introduction of the Securities and Exchange Commission under Joseph Kennedy.
When in 1935 the attack on investment bank control was carried into the field of
their holdings in utilities, Morgan however no longer stood alone. By its
increasing reformist content, the New Deal had assumed a new quality in the eyes
of several of its initial supporters, and in the conflict which ensued, the
conservative state-monopoly tendency in the bourgeoisie, headed by the Du Pont
group, broke out of the Roosevelt coalition and regrouped in the reactionary
Liberty League.
At
the same time, a new horizon was opened for capital by the internationalist turn
the Roosevelt Administration was making. The Reciprocal Trade Agreements Act of
1934 already revealed the ad- ministration's strategy of providing a new
international framework for the envisaged industrial expansion. Compared to the
previous deflationary policy bolstering the dollar, and to the Hawley-Smoot tariff
established under Hoover, the traditional emphasis between
Thus
Hull's free-trade policy brought agreements with the Netherlands and its
colonies and with Belgium; in 1936, a reciprocal trade agreement was concluded
with France and its empire. The combination of sales prospects abroad with the
dampening effect of business abroad on domestic wages eventually offered a way
back into the Roosevelt coalition to some of the disaffected industrialists.
Thus, while General Motors head Sloan had followed the Du Pont representatives
out of the BAC in 1935, a vice-president of the same firm in 1936 publicly
declared that because of Hull's trade policy he would vote for Roosevelt in the
November election. 72
As part of
the same strategy, steps were taken towards monetary stabilization in the
Atlantic area. The agreement with Britain of 1934, extended to France following
the devaluation of the franc in 1936, prefigured the Bretton Woods system by
stipulating mutual consultation in advance of parity changes as a means to
facilitate the flow of trade and payments. 73
However,
the sphere-of-interest policy in international relations inherited from Hoover,
still remained the overall framework of US foreign policy in the earlier New
Deal period. As late as 1936, Roosevelt instructed his ambassador in Berlin to
be alert to proposals coming from Hitler which might ensure peace, thereby
allowing for German objectives abroad.74 Politically, Roosevelt persisted in the
policy of non-interference in European affairs, until his 'Quarantine the
Aggressors' speech of October 1937 announced that the strategy of accommodation
with the Fascist powers had been abandoned.
The
Subordination of Money Capital in Europe
On
the other side of the Atlantic, comparable developments took place, albeit with
less opportunities for bank capital to recover in the context of international
finance capital. In Britain, although the City had triumphed when Churchill had
put the country back on gold, the industrial interest, represented by the
employers' organization FBI, after 1926 succeeded in challenging the automatism
of subordinating national economic policy to the interests of money capital, and
effectively promoted its concept of tripartite corporatism. The National
Government formed in 1931 was the expression of this shift, and if the liberal
fraction supported it, it was primarily on the assumption that the spectacle of
national unity would shore up confidence in the pound.76 The drastic
deflationary policy upon which J.P. Morgan had made new loans to Britain
conditional, forced the underlying fractional differences to the surface. The
fact that the final incident which caused the critical loss of confidence
leading to the break with gold in September 1931 took place in the British Navy
symbolized the decline of the maritime-liberal fraction. The 'mutiny' of sailors
over their pay cuts thus inaugurated the hegemony of the state-monopoly tendency
led by Neville Chamberlain and John Simon, which, in turn, forced the liberals
(whether in the Labour Party like Snowden or in the Liberal Party, like Samuel)
out of the government in due course. As far as the banks were concerned, a
separation of functions was not necessary since the merchant banks already were
distinct from the joint-stock commercial banks.
In
Germany, the subordination of money capital took the form of a temporary
majority participation by the state in the banks most deeply involved in the
post-war Atlantic circuit of money capital (DANAT and Dresdner Bank), whereas
the Deutsche Bank, which through its merger with the Discontogesellschaft even
more became the bank of the state-monopolistic heavy industries, was only
indirectly supervised. The DANAT bank collapsed and the Dresdner Bank suffered
heavy losses in the bank crisis of1931. The two banks merged in 1932, and the
German state took an interest of 75% in the new institution, compared to a 35.6%
participation by the central bank in the Deutsche Bank. The latter eventually
emerged from the bank crisis reinforced at the expense of its rivals. In the
Third Reich, the
banks were re-privatized without any separation of functions. 77
In
Italy, the IRI was founded in 1933 as a holding for the deficitary industrial
assets hitherto held by bank capital. In this way, a separation of functions was
achieved in practice. As a result of the losses incurred, the Banca Commerciale,
the Credito Italiano, and the Banco di Roma also passed under the influence of
the IRI. Of these, the Commerciale was the main outpost in Italian banking of
the State-monopoly tendency; its head, E. Conti, was also the founder of the
national oil company AGIP and incidentally belonged to the minority in the
Italian bourgeoisie which all along had opposed Fascism. The Bank of Italy in
1936 was put under state supervision, too,
but retained considerable autonomy. 78
As
major foreign investors, the other continental European countries attempted to
cling as long as possible to original gold parities. Belgium was the first to
leave the gold standard in 1935 after having already separated holding and
deposit banks. The subordination of money capital here was part of the
emancipation of Catholic Flanders, with its light industry and agriculture, from
the tutelage of liberal Wallonia and Brussels, where the financial aristocracy
con- trolling the coal and steel industries had its fiefs. 79
In
France, the separation of functions had to wait for the liberation from the Nazi
occupation. As in Britain, the distinct existence of a banking aristocracy and a
lesser banking bourgeoisie already pre-ordained a certain separation of
functions of bank capital. The Popular Front reforms also included a
reorganization of the central bank, but until 1941 the banks largely
circumvented central bank interference due to the ample liquidity at their
disposal. The nationalizations of 1945 finally terminated the independence of
the biggest banks, made them subordinate to the modernization plans, and
introduced a strict division into three categories.80
In
the Netherlands, which together with France was the last country to leave the
gold standard in 1936, no separation of functions was carried through and the
subordination of money capital was postponed until the postwar crisis of the
dominant colonial and shipping capital bloc.81
The
contradiction between money-capital's attempt to artificially bolster the
Atlantic circuit of speculative investment through deflationary policies, and
large-scale industry's need to maintain demand, was ultimately resolved at the
expense of money capital. As was illustrated in the case of Germany, it was not
the inter-war state- monopoly tendency per se which put an end to liberal
internationalism; rather, the reactionary comprador liberals themselves created
the conditions in which the autarky policy and the corporatism typical of the
state-monopoly tendency could be realized. Allergic to the allegedly socialist
aspect of state intervention, these liberals saw a frontal attack upon the
working class as the only way of reversing the trend; whereas in reality, the
presence of working-class organizations in the emerging state-monopolistic
structure was an aspect of a conflict between fractions of capital (money
capital and productive capital) and the concepts of control developed by them.
In
this struggle, the liberals were fighting the very course of capitalist
development itself. The conflict of interest between the liberal bankers and the
nationalist industrialists everywhere was decided by the subordination of the
international bankers to state intervention intended to shore up the
accumulation conditions of large-scale industrial capital and complemented by
corporatism. The way in which the challenge of the working class was handled
varied greatly, from ruthless suppression in Germany and Italy to conciliatory
strategies in America and France. In fact, the absence of a complementary attack
on the working class in the United States caused concern among those most
suspicious of latent 'socialism' in Roosevelt's policies, and this concern drove
renowned liberals like Will Clayton, the cotton broker, and James Warburg, the
banker, into the Liberty Leagues. Their sympathy for fascism resembled that of
Schacht and Thyssen in believing that a death blow to the organized working
class would restore the conditions of their cherished liberal order. In the
United States, however, the outward thrust of capital soon was resumed after the
primacy of industrial capital had been established. In the context of a
synthesis between liberal inter- nationalism and state intervention, men like
Clayton and Warburg rejoined the Roosevelt regime and became leading
missionaries of the corporate-liberal ideal.
In
Europe, however, the subordination of money capital led to a generalization of
state-monopolistic controls of the economy, postponing the restructuration of
class relations by imposing a reactionary united-front configuration on the
bourgeoisie, first in Italy and Germany, and subsequently in Hitler's Europe. In
sharp contrast to the New Deal, Fascism did not effectively transform the
structures and concepts developed in the liberal context, but remained confined
to acting out a cruel caricature of a restructuration of the class structure by
its genocide of the Jews and the annihilation of working-class organizations. As
Gramsci already observed in his Prison Notebooks, the Fascist order 'has
operated to shore up the crumbling positions of the middle classes and not to
eliminate them. . .' Because of 'the vested interests that arise from the old
foundations', Fascism was becoming 'more and more a machinery to preserve the
existing order just as it is rather than a propulsive force'.
82