Capital,the State,and Economic Policy

1. Introduction

According to a number of commentators, “neoliberalism” is in crisis. The climate emergency is upon us. The neoclassical/mainstream approach to economics that bolstered these intertwined developments is experiencing a crisis of legitimacy. Policies influenced by heterodox economics are on the assent. For progressive heterodox economists, neoliberalism consists in the rule of a weak state with a disembedded market, resulting in an economy that serves the 1 percent at the expense of the 99 percent. According to this perspective, socialism should use a strong state to re-embed the market and facilitate an economy that serves the general interest.

Yet Marx—in contrast to classical political economy, classical Marxism, Keynes, and Polanyi—offered a critique of political economy. Moreover, Skouras’s (1994: 421) entry on the “Theory of the State” notes that while “radical political economy has traditionally leant towards the state (largely in reaction to neoclassical theory), there is no compelling theoretical reason for this inclination.” This is because “the market-state antagonism is clearly not identical but subsidiary” to what “radical political economy regards” as the “fundamental antagonism in capitalism… between capital and labor” (Skouras 1994: 421). As Skouras further notes, the question of the relationship between the capital relation, the capitalist economy, the capitalist state, and economic policy was at the heart of the Miliband-Poulantzas debate and an ensuing wave of state theory throughout the 1970s and 1980s.

The issues that Skouras raises, and questions raised by these state theories, were addressed in the early development of heterodox economics. Unfortunately, such an understanding of the state has been missing from the predominant contemporary heterodox economics discourse. While the contribution of Campbell et al. (2019) attempts to interject the principles of radical economics back into contemporary heterodox economics to “start a conversation,” the following intervention aims to bring the Open Marxist critical political economy perspective from the Conference for Socialist Economists (CSE) into contemporary heterodox economics. I do so by critically contrasting what I term the predominant contemporary heterodox economics discourse with Simon Clarke’s critical Open Marxist conception of the state and economic policy. This intervention does not intend to offer a programmatic answer to these issues or point to their practical repercussions. Rather, it interjects a perspective and raises questions.

I first provide an overview of the development of state theory in the history of economic thought and trace the development of heterodox economics. I then outline the predominant contemporary heterodox discourse and the Open Marxist critical Marxian perspective of Simon Clarke. I argue that the predominant contemporary heterodox discourse conceives of the state as a neutral instrument and advocates for Polanyian and Keynesian policies that are held to serve the general interest in opposition to policies of neoclassical economics, which are held to serve private interests. In so doing, the predominant contemporary heterodox economics discourse takes a progressive view of the state-market dichotomy in opposition to the regressive view of mainstream economics. Yet, the predeominant contemporary heterodox discourse neglects the question of the organization of capitalist society. I then show how Clarke conceives of the state and economy policy as integral to the crisis-ridden class antagonistic reproduction of capitalist society. For Clarke, the general interest is capital in general, and progressive and regressive economic policies contribute to the reproduction of capitalist society. I conclude by comparing these perspectives and drawing out points that I hope ignite a debate on these issues in heterodox economics.

2. Heterodox Economics and the History of Economic Thought

Classical political economy conceived of itself a science of society. ¹ Practitioners within this paradigm sought to ascertain the principles that guided the creation and distribution of wealth in order to realize a harmonious society. Adam Smith, the foremost representative of this approach, conceived of these principles on the basis of the division of labor, which itself arose from the human propensity to sympathetically truck and barter. In Smith’s time, the division of labor had developed into commercial society. According to Smith, three main classes contributed to the production of unparalleled wealth and should receive fair compensation in the distribution of wealth via the market, which in turn would facilitate the further development of the division of labor. However, greedy and immoral capitalists often tried to appropriate too much wealth for themselves, leading to inequality and stemming the further development of the division of labor. For Smith, this is why the state was necessary to facilitate the development of the division of labor. The state should stand above the particular interests of these immoral and greedy capitalists, uphold laws, and provide necessary moral education that would facilitate this harmonious process—thus serving the general interest of society.

Marx wrote a critique of political economy that was simultaneously a critique of the capitalist system and of classical political economy. Contra Smith, the capitalist division of labor, market, and the state were not expressions of progressive human development, but historically specific. They did not arise on the basis of the human propensity to truck and barter, but were created by the bloody process of primitive accumulation, which led to creation of the state-market dichotomy and the market dependency of the capitalist and working classes. For Marx, the creation and distribution of capitalist wealth within the capitalist division of labor did not amount to the attainment of social harmony on the basis of human nature. On the contrary, it was an inherently crisis-ridden and antagonistic process mediated by the endless process of accumulation, which compelled the behavior of individuals within the antagonistic class relation as personifications of economic categories rather than as moral or immoral actors. In the fragmentary discussions of the state Marx provided, he noted that the state had facilitated primitive accumulation and stepped in when necessary in order to reproduce capitalist society. According to Marx, the capitalist state was thus a “public force organized for social enslavement” that had to be abolished (Marx 1974: 207).

Classical Marxism departed from Marx’s critical project. In this tradition, Marx did not offer a critique of political economy, but rather a Marxist political economy that built on Smith and Ricardo, developing the concepts of surplus value and exploitation. Rather than drawing on Marx’s fragmentary critique of the capitalist state, classical Marxism used Engels’s transhistorical definition of the state as a neutral instrument. In classical Marxism, the social disorder of capitalist society was attributed to the ownership of the means of production by the capitalist class, their rule of the state, and their subsequent exploitation of the proletariat, who produced the wealth of capitalist society but were not fairly compensated for it. Instead, their proceeds were distributed to the capitalist class in the form of profit. Socialism would overcome capitalist rule and unequal distribution via the proletarian rule of the state and the economy leading to social harmony.

Neoclassical economics broke with the labor theory of value that underpinned classical political economy and classical Marxism, establishing the discipline of economics. The market was deemed the prime mover, a self-equilibrating mechanism, facilitating the general interest of society on the basis of the self-interested action of individuals endowed with the dubious human nature of homo economicus. Rather than facilitating the development of the market and promoting the general interest of society, it was now necessary for the state to be extrinsic to the market. The state should only step in at moments where human error or other erroneous state policies had led to temporary disruptions. Class and moral education were conspicuously absent. According to Heilbronner (1997), neoclassical economics thus made a hash of Smith’s work.

Keynes and Polanyi developed important criticisms of neoclassical economics while still adhering to some of its fundamental assumptions. Keynes argued that the market was prone to disruption on account of human nature. Yet, since Keynes argued that the latter consisted in the unintended consequences of irrational acts of self-interest, an active and robust state could fix this problem by monitoring and intervening in the economy in the interest of all. Polanyi marshaled historical evidence to argue that the free market was neither the prime mover nor self-facilitating. The free market had been created by the state, but “disembedded” from the state by free market zealots, leading the free market to undermine society. For Polanyi, the progressive countermovement of the New Deal had re-embedded the market, restoring social harmony.

Heterodox economics as an international subfield developed in the 1960s. Originally the provenance of a number of elite academics who thought that Marx was necessary to understand the economy, it developed into a radical and pluralist enterprise comprising a number of approaches that pitted themselves against mainstream economics. In the first decades of the development of heterodox economics in the United States, under the auspices of the Union for Radical Political Economics, and in the Review of Radical Political Economics (RRPE), heterodox economists participated in debates over Marx’s theory of value and developed new radical political economic and critical readings of Marx that contrasted Marx with Keynes and classical political economy. ² Other scholars in RRPE brought the state debates of the 1960s and 1970s to bear on heterodox economics (see Clark 1981; Miller 1986; Mosely 1979). In the United Kingdom, members of the CSE likewise participated in debates in Capital & Class over Marx’s theory of value and the state (collected in Mohun 1994; Clarke 1991). Open Marxism drew on the critical interpretations of Marx put forward in these debates by John Holloway, Sol Piciotto, and Simon Clarke who themselves drew on Isaak Illich Rubin, German value-form theory, and the state derivation debate, which sought to reconstruct and further develop Marx’s critique of political economy.

Unfortunately, these perspectives—in spite of the aforementioned work of scholars such as Campbell and his coauthors, and the heretical economics of Bellofiore (1989) and Alami (2019) recent Open Marxist publication in RRPE—are now largely marginalized or nonexistent in heterodox economics. Instead, a predominant heterodox discourse has developed that eschews Marx’s critique of capitalist society, his critique of classical political economy, and Marxian critiques of Keynesianism. This discourse assimilates Smith’s approach to classical political economy with Polanyian and Keynesian analyses of the state–market dichotomy, which in some instances are tied to a neoclassical Marxist interpretation of Marx.

3. The Predominant Contemporary Heterodox Economics Discourse

A number of recent heterodox textbooks (Bowles et al. 2017), theoretical works (Crotty 2019; Shaikh 2016; Skideslky 2018), and policy papers (Pollin 2018; Shaikh 2018) can be read symptomatically to establish such a discourse. Despite different methodological perspectives and analytic categories, these thinkers share a theory of the state and economic policy that is explicitly or implicitly comprised of the following eight elements:

Such an approach mirrors Smith’s social theory with a Polanyian analysis of the state-market dichotomy that draws on Polanyian and Keynesian policy proposals. If Marx is used at all—as is the case with Shaikh and Bowles et al.—it is a neoclassical Marxism: Marx the classical political economist is drawn on to analyze unequal distribution, which economic policy should remedy via state redistributive policies. Consequently, as Skideslky (2018: 11) states: “the central question of political economy today is as it has always been: what does a government do to secure the relatively smooth—and socially and morally tolerable—functioning of a decentralized, money using, largely privately owned economy?”

In the predominant heterodox economics discourse, the answer to Skidelsky’s question is double faceted. In the first instance, policies should not be developed by mainstream economists—their policies misconstrue the state-market relation on the basis of a one-dimensional theory of human nature, a theological conception of the self-equilibrating market, and advocacy for a weak state. According to the predominant heterodox economics discourse, the policies advocated for by mainstream economists serve private interests and lead to disequilibrium and disorder, such as the pressing social issues of inequality and climate change. Instead, the predominant heterodox economics discourse holds that the state should enact legislation to serve the public interest, insofar as this legislation will facilitate the harmonious function of the division of labor, leading to social harmony. Class—insofar as it exists in the predominant heterodox discourse—is conceived of in terms of who is hurt or who benefits from the state’s market and redistributive policies. The question of the organization of capitalist society is passed over in silence.

4. Critical Marxism and the Critique of the State

The Open Marxist approach I now outline focuses on the work of Clarke (1988, 1991), who developed an interpretation of Marx that contrasted with classical political economy, marginalism, and Keynesianism in a way that proves itself fruitful for this intervention. Rather than conceiving of Marx as a proponent of political economy, Clarke developed the critique of political economy. Moreover, in contrast to the predominant heterodox approach, Clarke held that Marx did not disagree with “Smith’s analysis of the capitalist state, but only with his identification of the illusory common interest of the state and the market with the real interest of individual and community” (Clarke 1988: 125).

Such an approach eschews debates about which approach to the state-market dichotomy facilitates the right distribution of the proceeds of the division of labor. Instead, it holds that “we have to look behind the institutional separation of economics, law, and politics to see money, law, and the state as complementary economic, legal, and political forms of the power of capital” (Clarke 1988: 15). It continues that the “underlying unity of these differentiated, and complementary, forms of capitalist power were explained by Marx’s theory of value, the three aspects being united in capitalist property, money representing the most abstract form of capital, whose power is institutionalized in the law and enforced by the state” (Clarke 1988: 15–16).

Thus, the state and the market are neither separate entities, nor is the division of labor transhistorical, nor do humans labor by nature. Rather, all of these phenomena are part of the historically specific organization of capitalist political economy as a contradictory and antagonistic totality. This social form was created by the state-facilitated process of primitive accumulation and the subsequent creation, not only of the class relation but also of the social spheres (the “economy” and state) and the supraindividual social forms (property, money, and law) that mediate and reproduce this relation. Crucially, the process of accumulation and reproduction neither proceeds from how the state and the market relate to each other nor is it merely a question of asserting the general interest through the instrument of the state in opposition to the immoral particular interests of capitalists, statesmen, or neoclassical economists. Rather, these “forms of capitalist domination” and their “functional imperatives are themselves generated by the forms of class struggle” and are “the object of class struggle, as capital and the working class confront them as barriers to their own social reproduction” (Clarke 1988: 15–16). Consequently, the general interest is that of capital in general, which asserts itself through the persistence of property, law, and the market qua the inherently antagonistic, contradictory, and crisis-ridden process of accumulation and reproduction.

This process of accumulation and reproduction is mediated by money and dependent on profit maximization through maximizing the rate of exploitation in the production of commodities that are successfully sold on the market. To be a productive worker is not to be robbed of the wealth that you create, but to be compelled to sell your labor power on the market in order for the opportunity to be exploited in exchange for a wage through which one can obtain sustenance. It is not a stroke of luck but a great misfortune. To be a capitalist is not to be a member of conspiratorial class, but to be compelled to strive to accumulate and exploit in competition with other capitalists on pain of ruin, “leading to the tendency for capital to develop the productive forces without limit” (Clarke 1988: 123). Hence, it is the market, as a barrier to individual capitalists competing with each other, that acts as capital in general, “evaluating the contributions of particular capitals in accordance with their contribution to the reproduction of total social capital; devaluing overproduced commodities and revaluing those in short supply” (Clarke 1988: 123).

The compulsion to accumulate in competition with other capitalists and overcome the limits of the market leads individual capitalists to seek out “new markets by commercial expansion and by displacing backward forms of production, and to reduce costs by lengthening the working day, forcing down wages, intensifying labor and, above all, by transforming methods of production” (Clarke 1992: 10). Yet, this leads to the cumulative “tendency to develop the productive forces without regard to the limit of the market,” which “underlies the tendency to the global overaccumulation and uneven development of capital, as the development of social production confronts the limits of its capitalist form as production for profit” (Clarke 1992: 10). Crucially, this tendency to overaccumulation “appears in its most dramatic form” in the eruption of a general crisis of overproduction, but it is also “the everyday reality of accumulation” (Clarke 1992: 10).

Hence, a “general crisis is not a pathological eruption in the… course of capitalist development, the result of the subjective ignorance or misjudgments of capitalists or politicians, but is only the most dramatic expression of the permanently crisis-ridden character of accumulation” (Clarke 1992: 10).

This contradictory, antagonistic, and crisis-ridden dynamic is mediated by and mediates the state. The capitalist character of the state is thus not which class rules the state or which social and economic policies the state enacts. Rather, the state’s capitalist character is constituted by the “formal separation of the state from civil society, and the corresponding subordination of state and civil society to the rule of money and the law.” Hence, the state “secures the general interest of capital in the first instance not by overriding the rule of the market, but by enforcing the rule of money and the law, which are the alienated forms through which the rule of the market is imposed not only on the working class, but also on all particular capitals” (Clarke 1988: 124).

This leads to a critical perspective on the democratic character of the state, and economic and social policy.

With respect to the democratic character of the state, democratic constitutions codify the separation of the political sphere from the economic. Property and the persistence of the class relation are left outside the realm of democratic decision-making, by dint of the constitution they are to be enforced by the punitive force of the state. Within the political sphere, members of antagonistic classes are granted equal rights. As citizens, they support different parties that will enforce the constitution but may have progressive or regressive redistributive economic and social policies. Either way, rather than being tantamount to the assertion of the general interest against private interests, bourgeois democracy is a process of depoliticization and the creation of an illusory common interest—that of capital in general. This is the case no matter which party is supported or which policies are legislated. For, by virtue of this process of depoliticized displacement, class struggle is contained within capitalist society by the constitution. Demands are translated into party platforms or social and economic policies that perpetuate the power of money and the law. The bureaucratic implementation and oversight of these programs likewise nullify class and individual autonomy and power.

With respect to economic and social policy, since the state is mediated by the dynamic of accumulation, the “rule of market… gives rises to periodic crises that call for substantive state intervention” (Clarke 1988: 124–125). In these moments of intervention, the state must seek to establish illusory communal interests against particular interests. In contrast to the predominant heterodox approach, policy is conceptualized as the means by which the state intervenes in the name of an illusory common interest that attempts to contain and depoliticize class struggle, securing the general interest of capital in general, thus reproducing capitalist society

Keynesianism and neoliberalism do not then refer to two different approaches representing different interest groups. Nor is one progressive and the other regressive. Nor do they represent two different periodizations. While the mid-20th century welfare state did improve the standard of living of some, it also led to the development of social administration and the integration of working-class individuals into a paternalistic state bureaucracy that undermined class unity and autonomy. Welfare likewise upheld precarity and redistribution operated within the limits of the wage form. Neoliberalism led to a different type of depoliticization with a lower standard of living via the state creation and enforcement of marketization in combination with a minimal safety net. Rather than resolving social problems, social and economic policy has the unintended consequence of prolonging them, enforcing the rule of money and the law through policies that establish an illusory communal interest, contain and depoliticize class struggle, and reproduce capitalist society.

5. Conclusion

The upsurge of interest in socialism has led to a return of “socialist” policy proposals that rest on the predominant contemporary heterodox perspective on the state. This discourse sees the state as a neutral instrument that has been used to promote the private interest of venal capitalists, but can and should be used by socialists to enact legislation that promotes the general interest. Such a discourse conceives of the state primarily in terms of the state-market dichotomy. Similarly, this discourse sees heterodox economics in terms of a normative view of the state-market dichotomy that opposes the mainstream’s view. Hence, the predominant contemporary heterodox discourse opposes the ruling ideas of neoclassical economics and ruling neoliberal policies with progressive ideas and policies that draw on classical political economy, Polanyi, and Keynes.

While such a theory is certainly more progressive than its mainstream alternative, it leaves out what Skouras indicated was distinct about the radical political economic theory of the state: the relationship between the state-market dichotomy and the capital relation. This intervention has sought to interject Clarke’s Open Marxist critical political economy perspective on capital, the state, and economic policy into the contemporary heterodox economics conversation. Such a perspective conceives of the organization of capitalist society as inherently contradictory and antagonistic, withboth regressive and progressive policies as an essential part of this process. By bringing this critical perspective back in, I raise issues, and questions, to start a debate on how conceptions of the state-market dichotomy pertain to emancipation, human flourishing, and the organization of capitalist society.