The Cold War has been followed by the class war. A transatlantic
class war has broken out simultaneously in many countries between elites based
in the corporate, financial, and professional sectors and working-class
populists. Already this transnational class conflict has produced Brexit and
the election of Donald Trump to the American presidency. Other shocks are
likely in store.
None of the dominant political ideologies of the West can explain
the new class war, because all of them pretend that persisting social classes
no longer exist in the West. Neoliberalism—the hegemonic ideology of the
transatlantic elite—pretends that class has disappeared in societies that are
purely meritocratic, with the exception of barriers to individual upward
mobility that still exist because of racism, misogyny, and homophobia. Unable
to acknowledge the existence of social class, much less to candidly discuss
class conflicts, neoliberals can only attribute populism to bigotry or
irrationality.
Like neoliberalism, mainstream conservatism denies the existence
of classes in the West. Along with neoliberals and libertarians, conservatives
assume that the economic elite is not a semi-hereditary class but merely an
ever-changing, kaleidoscopic aggregate of talented and hard-working
individuals. Meritocratic capitalism is threatened from within by a “new class”
consisting of progressive intellectuals—professors, journalists, and nonprofit
activists—who are said to be vastly more powerful than CEOs and investment
bankers.
Marxism at least takes classes and class conflict seriously. But
classical Marxism, with its secularized, providential theory of history and its
view of industrial workers as the cosmopolitan agents of global revolution, has
always been deluded.
Fortunately, there exists a body of thought that can explain the
current upheavals in the West and the world very well. It is James Burnham’s
theory of the managerial revolution, supplemented by the economic sociology of
John Kenneth Galbraith. Burnham’s thought has recently enjoyed a revival among
thinkers of the center and center-right, including Matthew Continetti, Daniel
McCarthy, and Julius Krein. Unfortunately, Galbraith’s sociology, along with
his economics, remains out of fashion.
In their politics, Burnham and Galbraith could hardly have been
more different, despite their shared friendship with William F. Buckley Jr. The
patrician Burnham was a leader in the international Trotskyist movement before
becoming zealously anticommunist and helping to found the post–World War II
conservative movement. Galbraith, in contrast, was a passionate liberal
throughout his life.
Yet both believed that a new ruling elite had displaced the old
bourgeois and aristocratic estates. Burnham, following Adolf Berle and Gardiner
Means’s The Modern Corporation and Private Property (1932),
coined the term “the managerial elite” in his worldwide bestseller The
Managerial Revolution (1941). Later, in The New Industrial
State (1967), Galbraith called the same group the “technostructure.”
In his memoir A Life in Our Times (1981), Galbraith wrote:
“James Burnham, partly because he was a stalwart right-winger well out of the
political mainstream and partly because he was not a certified academician,
never got full credit for his contribution. In early editions of The
New Industrial State I was among those in default.”
In his essay “Second Thoughts on James Burnham,” George Orwell
provided a succinct summary of Burnham’s thesis:
Capitalism is disappearing, but Socialism is not replacing it.
What is now arising is a new kind of planned, centralized society which will be
neither capitalist nor, in any accepted sense of the word, democratic. The
rulers of this new society will be the people who effectively control the means
of production: that is, business executives, technicians, bureaucrats and
soldiers, lumped together by Burnham, under the name of “managers.” These
people will eliminate the old capitalist class, crush the working class, and so
organize society that all power and economic privilege remain in their own
hands. . . . The new “managerial” societies will not consist of a patchwork of
small, independent states, but of great super-states grouped round the main
industrial centers in Europe, Asia and America. These super-states will fight
among themselves for possession of the remaining uncaptured portions of the
earth, but will probably be unable to conquer one another completely.
Internally, each society will be hierarchical, with an aristocracy of talent at
the top and a mass of semi-slaves at the bottom.
The thesis of this essay is that the theory of the managerial
elite explains the present transatlantic social and political crisis. Following
World War II, the democracies of the United States and Europe, along with
Japan—determined to avoid a return to depression and committed to undercutting
communist anti-capitalist propaganda—adopted variants of cross-class
settlements, brokered by national governments between national managerial
elites and national labor. Following the Cold War, the global business
revolution shattered these social compacts. Through the empowerment of
multinational corporations and the creation of transnational supply chains,
managerial elites disempowered national labor and national governments and
transferred political power from national legislatures to executive agencies,
transnational bureaucracies, and treaty organizations. Freed from older
constraints, the managerial minorities of Western nations have predictably run
amok, using their near-monopoly of power and influence in all sectors—private,
public, and nonprofit—to enact policies that advantage their members to the
detriment of their fellow citizens. Derided and disempowered, large elements of
the native working classes in Western democracies have turned to charismatic
tribunes of anti-system populism in electoral rebellions against the
selfishness and arrogance of managerial elites.
This essay will conclude with speculation about the possibility of
new cross-class settlements among dominant managerial minorities and
subordinate working-class majorities in developed nations. These new
settlements, if they emerge, will have two characteristics. Like the older
settlements, they will be negotiated at the nation-state level, not at the
transnational level. And just as the older social settlements were influenced
by the world wars and the Cold War, so future cross-class settlements among
managers and workers will be influenced by whether the geopolitical context is
one of great-power peace or great-power rivalry.
The Managerial Elite: Past and
Present
While Burnham and Galbraith included engineers and scientists in
the new elite, they were not describing a technocracy run by PhDs. The most
important managers are private and public bureaucrats who run large national
and global corporations and exercise disproportionate influence in politics and
society. Some are independently wealthy, but most are salaried employees or
fee-earning professionals. Most of today’s billionaires were born into this
upper-middle class, and their descendants tend to disappear back into it in a
generation or two. Actual hereditary aristocrats who survive in the modern West
are anachronisms who, for the most, part avoid ridicule by disguising
themselves as hard-working professionals and managers.
To many in the 1940s and since, Burnham’s description of New Deal
America, Nazi Germany, Imperial Japan, and the Soviet Union as variants of the
managerial society seemed outlandish. But since the collapse of Communism, in
democratic and authoritarian states alike, the global norm in both developed
and developing countries has been some version of the mixed economy with
substantial private and government sectors.
How big is the managerial elite? A rough surrogate is higher
education. Only around a third of Americans have bachelor’s degrees. But many
of these are degrees from low-ranked colleges whose holders are best understood
as belonging to the upper strata of the working class. Using professional and
graduate degrees as a surrogate for membership in the managerial elite would
make it no more than ten or fifteen percent of the population.
Are the managers a class as well as an elite? In a purely
meritocratic society, the ranks of the managerial elite might be refilled
completely by upwardly mobile individuals in each generation. In the United
States, however, the majority of American college students come from the
minority of families in which one or both parents have college degrees. In other
Western democracies as well, membership in the managerial class appears to be
mostly hereditary, though partly open to talent from below.
Whatever you call this post-bourgeois elite—the managers or the
technostructure—its power base is in the core of what Galbraith called “the
bimodal economy”—capital-intensive, science-based, high-tech industries like
manufacturing and the business and financial services which they rely on.
Increasing returns to scale produce a tendency for immense size in these
industries, which tend therefore to be dominated by efficient oligopolies or
monopolies. Galbraith called this “the planning system,” referring to the
private planning done within huge corporations that partly replaces markets
with internal administration. Something like the older economy of small,
owner-operated businesses and competitive local markets continues to exist
around the managerial-industrial core, in what Galbraith called “the market
system.” The economic historian Alfred D. Chandler Jr. confirmed Galbraith’s
analysis, using the terms “core” and “periphery” for Galbraith’s planning and
market systems. For Galbraith and Chandler as well as for Burnham,
industrialization changes the landscape forever, like the eruption of a volcano
in the middle of a plain filled with small villages.
The managerial theory of society is an elitist theory, not a
pluralist one. In Burnham’s words:
From the point of view of the theory of the ruling class, a
society is the society of its ruling class. . . . Political history and political
science are thus predominantly the history and science of ruling classes, their
origin, development, composition, structure and changes.
The private, public, and nonprofit sectors in modern developed
nations do not have separate and distinct elites that can be counted upon to
check each other. Instead, the private sector tends to dominate the public
sector through campaign finance, and the nonprofit sector through donations.
Even in the absence of these methods of elite coordination, the fact that
almost all of the personnel of elite institutions of all kinds belong to the
managerial-professional class and have similar educations and shared outlooks
produces a common mentality, tending toward Orwellian groupthink among
corporate executives, investment bankers, elected politicians, civil servants,
and nonprofit leaders. Managerial dominance is reinforced by lateral mobility
at the top levels of society. Diplomats become investment bankers, investment
bankers become ambassadors, generals sit on corporate boards, and corporate
executives sit on nonprofit boards.
Neither Burnham nor Galbraith believed that the managerial elite
was innately evil or illegitimate. Indeed, both thought that dynamic, large
corporations and competent bureaucracies were necessary for technological
innovation and economic growth. And they did not believe that managers formed a
single global ruling class, any more than capitalists and feudal landlords had
in the past. Both Burnham’s managerial elite and Galbraith’s technostructure
were rooted in particular nation-states, even if those acted merely as
springboards for the geopolitical and economic ambitions of particular groups
of managers.
While neither sought to reverse the managerial revolution, both
Burnham and Galbraith worried about the concentration of wealth, power, and
prestige in the new elite. As realists, they believed that the power of the
managerial class could only be checked by what Galbraith called “countervailing
power” and what Burnham, following the Italian theorist Gaetano Mosca, called
“the juridical defense.” Both phrases refer to actual social balances of power,
not merely the paper checks and balances of written constitutions.
National Industrial Consolidation
The replacement of entrepreneurial capitalism by large-scale
modern managerial capitalism took place relatively rapidly in North America and
Western Europe around the turn of the twentieth century. In the United States,
the prohibition of cartels combined with a permissive attitude toward mergers
and acquisitions produced what historian Naomi Lamoreaux has called the first
great merger movement of 1895 to 1904. In a single decade, 1,800
enterprises—most of them in the manufacturing industry—were consolidated into
only 157 firms.
Following the wave of consolidation, the structure of the American
economy was remarkably stable between World War I and the late twentieth
century. In both 1917 and 1973, 22 of the largest 200 firms were in the
petroleum industry, and many of them were the same firms. Likewise, in both
1917 and 1973, 5 of the biggest 200 corporations were in the rubber industry,
and 4 were the same (Goodyear, Goodrich, Firestone, and Uniroyal). Machinery
companies—many of them the same—accounted for 20 of the 200 biggest firms in
1917 and 18 in 1973. In transportation equipment and food products there were
similar continuities. Even John D. Rockefeller’s Standard Oil lived on, in the
guise of various “baby Standards” created from the court-ordered breakup of the
company in 1911, including some like ExxonMobil that grew into global
Leviathans.
A 1972 study showed that the level of industrial competition was
still similar in all mature industrial economies. In Britain, for example,
between 1909 and 1970 the share of all net manufacturing output of the hundred
largest firms grew from 16 percent to 45 percent.
This global pattern cannot be explained in terms of the
peculiarities of American corporate law or politics. When Chandler studied 379
manufacturing companies with more than twenty thousand employees in 1973, which
were then divided roughly equally between the United States and abroad, he
discovered that the ratios were amazingly similar: 22 transportation equipment
companies in the United States and 22 abroad; 20 electrical machinery companies
in the United States compared to 25 abroad; 24 chemical companies in the United
States compared to 28 abroad; and 14 petroleum companies in the United States
compared to 12 abroad. All of this demonstrates that, in every modern economy,
firms in Chandler’s “center” and Galbraith’s “planning system” that are
characterized by increasing returns to scale tend to be both large and, if
successful, long-lasting, compared to the smaller firms in Chandler’s
“periphery” and Galbraith’s “market system,” in which size produces few or no
competitive advantages.
National Political Settlements
during the Cold War
From the emergence of managerial capitalism through World War I
and the Great Depression, the societies of the North Atlantic were rocked by
clashes among corporate elites on the one hand and angry workers and family
farmers on the other. The bloodiest labor violence was in the United States,
where the armed forces repeatedly crushed strikers. In the 1921 Battle of Blair
Mountain in Logan County, West Virginia, state officials used planes to bomb
armed strikers from the air.
To obtain social peace and mobilize national populations during
World War II, the United States and its allies like Britain brokered
business-labor pacts and promised welfare benefits to veterans. In the ensuing
Cold War, every major industrial democracy devised some kind of “settlement” or
compromise among business and labor interests within the nation.
The postwar settlements were a combination of employer-specific
welfare capitalism and universal or means-tested, social-democratic welfare
states. In West Germany, welfare capitalism took the form of “codetermination,”
or union membership on corporate boards. Japan, following intense labor
conflict after 1945, developed a system of corporate paternalism and lifetime
employment for many workers. Organized labor was weak in the postwar United
States, but the “Treaty of Detroit” negotiated among automobile companies and
unions was a successful example of informal business-labor corporatism. Low
levels of legal and illegal immigration, and social pressure on married mothers
to exit the work force to become homemakers, strengthened the bargaining power
of mostly male workers by creating tight labor markets.
These corporatist systems of welfare capitalism made the welfare
states of the period from the 1940s to the 1970s much smaller than they would
have been otherwise. Wage compression brought about by unions in the
welfare-capitalist system made it easier for payroll taxes to fund entitlements
like public pensions, which in turn were smaller than they might have been
because of the widespread existence of private employer pensions.
The post-1945 settlements in the West and Japan demonstrate
countervailing power and juridical defense in action. The result was the golden
age of capitalism from the 1940s to the 1970s, combining high growth with a
more equal distribution of its rewards than has ever existed before or since.
Multinational Corporate
Consolidation
Following the fall of the Berlin Wall in 1989, the national
settlements brokered by government among managers and labor in Western
nation-states were shattered by the emergence of a new pattern of global
industrial production and corporate organization.
What the economist Peter Nolan has called “the global business
revolution” of the 1990s and 2000s, producing oligopolistic transnational
corporations, was the equivalent of the great merger wave of the 1900s that
produced oligopolistic national firms. In Capitalism and Freedom(Anthem,
2008), Nolan observes:
By the early 2000s, within the high value-added, high technology,
and/or strongly branded segments of world markets, which serve mainly the
middle and upper income earners who control the bulk of the world’s purchasing
power, a veritable “law” had come into play: a handful of giant firms, the
“systems integrators,” occupied upwards of 50 per cent of the whole global
market. The top two firms accounted for 100 per cent of the entire global
market for large commercial aircraft and 70 per cent of the carbonated soft
drinks market; the top three firms accounted for over 80 per cent of the gas
turbine market and for 70 per cent of the farm equipment market, for over 60
per cent of the mobile phone market, and over 50 per cent of the market for LCD
TVs; the top four firms accounted for over 60 per cent of the elevator market;
the top five firms accounted for over 80 per cent of the digital camera market;
the top six firms accounted for over 70 per cent of the auto industry market
and the top ten firms accounted for over 50 per cent of the pharmaceutical
market.
By the time the Great Recession began with the financial crash of
2008, many global industries were dominated by a few large corporations.
Ninety-five percent of microprocessors (chips) were manufactured by four
companies: Intel, Advanced Micro Devices, NEC, and Motorola. Two-thirds of the
glass bottles in the world were made by only two firms, Owens-Illinois and
Saint-Gobin. Half of the world’s cars were made by four companies: GM, Ford,
Toyota-Daihatsu, and DaimlerChrysler. In business services, Microsoft dominated
90 percent of the market for personal computer operating systems. In 2007, the
top two firms controlled 86 percent of the global market in the financial
information industry and 77 percent in electronic games, while three firms
dominated 71 percent of legal publishing and 62 percent of the global market
for artificial joints.
Below the level of transnational corporations, now called
“original equipment manufacturers” (OEMs) or “systems integrators,” a similar
process of consolidation took place at the level of suppliers. On the verge of
the Great Recession in 2008, three firms—GE, Pratt and Whitney, and
Rolls-Royce—dominated the world market for jet engines. Sixty percent of tires
were made by three multinational corporations: Bridgestone, Goodyear, and Michelin.
The emergence of global oligopolies as a result of expansion,
mergers, and alliances corresponded to a trend toward transnational production.
From one-third to one-half of trade was intrafirm trade or transnational
production by a multinational enterprise with suppliers in multiple nations.
The Apple iPhone became an iconic product with components from all over the
world. Apple iPhone 5S and iPhone 6 models included components from China, the
United States, Japan, South Korea, Taiwan, Germany, France, Italy, the
Netherlands, and Singapore.
While supply chains were regional or global, most major
multinationals continued to be rooted in a single nation-state—most often the
three largest developed industrial nations, the United States, Japan, and
Germany. In the developing world, most weak nations were assigned
low-value-added production on the terms imposed by North American, European,
and littoral Asian firms and investors. China, India, Brazil, and other
populous developing countries, however, were able to use control of corporate
access to their large internal labor forces and consumer markets to pressure
foreign capital into promoting projects of national industrial development, by
means including local content requirements and technology transfer agreements.
The Economics of Global Arbitrage
It is widely assumed that globalization since the 1990s is
responsible for unprecedented productivity growth. In fact, productivity growth
has been much lower in the era of post-1989 globalization than it was in the
post-1945 era characterized by less integrated national economies and far lower
levels of immigration. One reason may be that, in the era of globalization, the
new transnational oligopolies have pursued profits by methods other than
technology-driven productivity growth. The most important of these corporate
strategies have been selective arbitrage and selective harmonization.
Global arbitrage has come in two forms: labor arbitrage and
tax-and-subsidy arbitrage. Labor arbitrage includes both relocation of industrial
production from high-wage developed nations to low-wage developing countries,
and large-scale immigration of both unskilled and skilled workers to the global
North. Such labor arbitrage does not encourage, and may even retard,
technological progress, which involves the substitution of new technologies or
new techniques for expensive labor or natural resource inputs. There is no
incentive to make production technology more efficient when profits can be
increased merely by closing factories in high-wage areas and locating them in
low-wage areas, be they poor, anti-union Southern states in the United States
or foreign nations like Mexico and China.
Tax-and-subsidy arbitrage is the practice whereby firms take
advantage of differences in tax rates and subsidies in different countries in
order to similarly boost profits without boosting productivity. Companies that
evade taxation by incorporating in tax havens like the Cayman Islands, Panama,
or Ireland do nothing to increase productivity. Neither do transnational
companies that relocate to China to enjoy not only low-wage, unfree labor but
also ample subsidies of various kinds, including subsidized electricity and
tailor-made infrastructure and worker education programs.
Perhaps the iconic product of the era of globalization is the
Apple iPhone. According to Konstantine Kakaes in MIT’s Technology
Review, producing every single component of the iPhone in the United
States, in addition to assembling it in the United States, would at most add
$100 to the cost of the device. But Apple’s profit margin would be much smaller
than is the case with its present production of the iPhone in six factories
using unfree, low-wage labor in China (plus a factory in Brazil, a concession
to Brazilian import substitution policy).
In addition to illustrating global labor arbitrage, Apple has
mastered the arcane art of tax-and-subsidy arbitrage as well. According to the
European Union, the government of Ireland allowed Apple to channel profits from
several-dozen nations through two Irish companies, one of which was a “head
office” with no employees. As a result, according to the European Commission,
Apple recorded profits of around €16 billion, of which only €50 million were
taxable in Ireland, giving the company €15.95 billion of untaxed profit.
The Politics of Global Arbitrage
Even as they have exploited opportunities for international labor
and tax-and-subsidy arbitrage, firms in the post–Cold War era of globalization
have promoted selective harmonization of laws and rules, when it has been in
their interest to do so. In the second half of the twentieth century,
successive rounds of negotiation under the auspices of the General Agreement on
Tariffs and Trade (GATT) and, more recently, the World Trade Organization (WTO)
effectively reduced most traditional tariff barriers. By 2016, when the WTO
effectively terminated the failed Doha Development Round of global trade talks,
the United States and other leading industrial nations had shifted the emphasis
from removing barriers restricting the cross-border flow of goods to
harmonizing laws and regulations through “multiregional trade pacts” like the
North American Free Trade Agreement (NAFTA), the Trans-Pacific Partnership
(TPP), and the Transatlantic Trade and Investment Partnership (TTIP), in the
interests of transnational investors and corporations reliant on transnational
supply chains.
The areas chosen for arbitrage and harmonization reflect the
interests not of national working-class majorities but of the managerial elites
that dominate western governments. Harmonizing labor standards or wages would
undercut the labor arbitrage strategy, while transnational crackdowns on tax
avoidance would thwart the strategy of tax arbitrage by transnational firms.
Instead, the emphasis in harmonization policy has been on common industrial
standards, the liberalization of financial systems, and intellectual property
rights, including pharmaceutical patents. These kinds of harmonization benefit
transnational firms, investors on Wall Street or in the City of London, and the
holders of intellectual property rights in Silicon Valley and the
pharmaceutical industry.
In many cases, this kind of regulatory harmonization makes
sense—standardizing product safety measures, for example. But the new
regulatory harmonization agreements produce a “democratic deficit” in two ways.
First, they remove whole areas of regulation from the realm of
ordinary legislation, replacing it with “legislation by treaty.” Favorable laws
and regulations that corporate lobbyists are unable to persuade national
democratic legislatures to enact can be repackaged and hidden in harmonization
agreements masked as “trade” treaties. These treaties, often thousands of pages
long, tend to be drafted in secret by committees involving corporate lobbyists
and may be ratified by legislatures without careful scrutiny.
Worse, most of these contemporary regulatory harmonization
agreements include “investor-state dispute settlement” (ISDS) provisions that
allow individual corporations to sue national governments that change the rules
in their countries after the passage of the treaty in private tribunals,
dominated by corporate lawyers, with no appeal mechanism. If Congress enacts a
statute that adversely affects the interests of Acme Inc., then Acme has few
options, other than paying lobbyists and making campaign donations. But if
Congress ratifies a treaty, and later changes a provision by passing a new law,
Acme can sue the federal government for financial damages. The United States
has yet to lose a case to ISDS, but other countries have, and some believe that
the prospect of corporate lawsuits has a chilling effect on new laws and
regulations of which particular corporations disapprove.
None of this is to imply that the transnational managers of the
West and littoral East Asia who control the new global oligopolies are more
selfish or less public-spirited than the managers of national corporations
during the Second Industrial Era. On the contrary, in personal terms, today’s
managerial elite is for the most part less bigoted and often quite
philanthropic. The point is simply that the American, German, and Japanese
corporations of half a century ago were constrained by kinds of Galbraithian
countervailing power and Burnhamite/Moscian juridical defenses that have
crumbled. Thanks to globalization, itself a voluntary policy choice enabled but
not required by new technology, today’s transnational firms have much more
bargaining power in their dealings with workers and democratic nation-states.
Globalization: Hobson’s Imperialism?
That the post–Cold War pattern of globalization has been chiefly
motivated by opportunities for international arbitrage and tax-and-subsidy
manipulation—rather than compelled by the logic of modern technology or the pressure
of free-market forces—is suggested by the fact that a strikingly similar
pattern of globalization was envisioned by the British social philosopher John
A. Hobson more than a century ago, when technology was quite different.
In Imperialism: A Study (1902), Hobson speculated that, if the
Western industrial nations refrained from military conflict with one another,
they might collaborate on the common project of the economic development of
Asia in general, and China in particular.
Western capitalists, Hobson suggested in the racialist language of
his time, might buy the acquiescence of Western working classes in the transfer
of manufacturing from Europe and America to Asia by allowing them to share in
the rents obtained by the exploitation of impoverished Chinese labor:
In a word, the investors and business managers of the West
appear to have struck in China a mine of labour power richer by far than any of
the gold and other mineral deposits which have directed imperial enterprise in
Africa and elsewhere; it seems so enormous and so expansible as to open up the
possibility of raising whole white populations of the West to the position of
“independent gentlemen,” living, as do the small white settlements in India or
South Africa, upon the manual toil of these laborious inferiors. . . . Such an
experiment may revolutionise the methods of Imperialism; the pressure of
working-class movements in politics and industry in the West can be met by a
flood of China goods, so as to keep down wages and compel industry [of Western
workers], or, where the power of the imperialist oligarchy is well set, by
menaces of yellow workmen or of yellow mercenary troops, while collaboration in
this huge Eastern development may involve an understanding between the groups
of business politicians in the Western States close enough and strong enough to
secure international peace in Europe and some relaxation of militarism.
Hobson’s lurid prediction of “yellow mercenary troops” being used
to suppress Western workforces, like similar turn-of-the-century Yellow Peril
prophecies, has not materialized. But his other predictions, translated into
modern language, have come to pass. The claim of neoliberal ideologues that
Western industrial workers who lose their jobs to offshoring in China and other
low-wage countries would obtain new and better jobs in the “knowledge economy”
was precisely a promise that, in the postindustrial West, most workers would
share the intellectual property rents of the knowledge economy, rather like
“independent gentlemen,” while Asian proles and peasants labored in factories.
In the pages of the Economist and other propaganda organs of
the managerial oligarchy, the claim that the lower prices of Chinese consumer
goods outweigh the harm done to the Western working class by partial
deindustrialization is routinely repeated, more than a century after Hobson’s
prediction.
Hobson envisioned a dystopian future for a deindustrialized West
ruled by a class of transnational managers and investors:
We have foreshadowed the possibility of an even larger alliance
of Western States, a European federation of great Powers which, so far from
forwarding the cause of world-civilisation, might introduce the gigantic peril
of a Western parasitism, a group of advanced industrial nations, whose upper
classes drew vast tribute from Asia and Africa, with which they supported great
tame masses of retainers, no longer engaged in the staple industries of
agriculture and manufacture, but kept in the performance of personal or minor
industrial services under the control of a new financial aristocracy.
Hobson further warned: “The greater part of Western Europe might
then assume the appearance and character already exhibited by tracts of country
in the South of England, in the Riviera, and in the tourist-ridden or
residential parts of Italy and Switzerland, little clusters of wealthy
aristocrats drawing dividends and pensions from the Far East, with a somewhat
larger group of professional retainers and tradesmen and a large body of
personal servants.” The “little clusters” of rich rentiers and their
professional retainers and menial servants bring to mind today’s increasingly
stratified “global cities” like London, New York, and San Francisco, embedded
in nation-states with large tracts of derelict, former industrial zones.
Immigrants and Oligarchs
As we have seen, in the late twentieth century, Western managerial
elites, by means of transnational corporations, were able to escape from their
mid-twentieth-century social contract with national workers by offshoring
production, or threatening to do so. Purely domestic companies, like hotels,
restaurants, and construction companies, did not have this option. But they
could benefit from immigration, because loose labor markets weaken the
bargaining power of workers, just as tight labor markets weaken the bargaining
power of employers. That is why, throughout most of history in the United
States and other countries, organized labor has usually opposed large-scale
immigration of any kind, while capitalists and corporate managers have often
welcomed it.
Some Western countries have had formal policies of encouraging
unskilled, low-wage immigration, like West Germany with its Turkish Gastarbeiter (guest
workers). But for the most part, unskilled immigration has been the incidental
result of other policies in particular nations. In the United States, most
legal, unskilled immigrants have been low-income Mexicans and Central Americans
who come on the basis of U.S. family reunification laws, in addition to the
twelve million or so illegal immigrants, mostly from the same nearby countries.
In Europe, asylum laws and refugee policies are the chief source of unskilled
immigration. And some European countries have privileged immigration from
former colonies. Whatever the particular regime, in every Western country the
immigration issue pits the managerial elite against the working-class, native
majority.
Scholars debate the economic effects of immigration to the United
States. A recent National Academies of Sciences, Engineering and Medicine
report tried to put a positive spin on its findings, but they were sobering:
lower wages “for immigrants or native-born workers who have not completed high
school—who are often the closest substitutes for immigrant workers with low
skills,” and the reminder that “first-generation immigrants are more costly to
governments, mainly at the state and local levels, than are the native-born.”
The benefits of low-wage immigration, according to the report, go chiefly to
the affluent consumers of labor-intensive services, while the costs fall on
low-wage workers and taxpayers. The American media reflect the interests of
managerial and professional elites in low-wage employees and cheap domestic
servants, so the bad news was buried in mainstream reporting. “Immigrants
Aren’t Taking Americans’ Jobs, New Study Finds,” declared the New York
Times on September 21, 2016.
The real but limited negative impact of immigration on low-income
workers and stressed government budgets might have been a minor issue in politics,
but for two other factors. One is the combination of relatively high birth
rates among some immigrant groups, like Latin Americans in the United States
and Muslims in Europe, with low and declining native birth rates, which means
that relatively small amounts of immigration can dramatically change the ethnic
composition of a country in a few generations. Even if, in the long run,
immigrants assimilate and merge with the native population, rapid ethnic change
is disruptive and frequently viewed as a threat by natives.
The other factor is the modern welfare state. On both sides of the
Atlantic, it was created in a period of low immigration and high native
fertility after World War II. National welfare states take different forms, but
they are all based on the principle of solidarity among members of the nation,
who agree to work and be taxed to help their fellow citizens in order to be
eligible for that same help in sickness or old age.
The incompatibility of the welfare state and mass immigration was
noted by the libertarian economist Milton Friedman: “If you have a welfare
state, if you have a state in which every resident is promised a certain
minimum level of income, or a minimum level of subsistence, regardless of
whether he works or not, produces it or not. Then [free immigration] really is
an impossible thing.” His ideological opposite, Paul Krugman, agrees. Because
“modern America is a welfare state” and “low-skill immigrants don’t pay enough
taxes to cover the cost of the benefits they receive,” Krugman concluded that
the “political threat that low-skill immigration poses to the welfare state is
more serious” than its other consequences. For his part, Friedman welcomed
illegal immigration as a good thing because illegal immigrants are ineligible for
welfare: “But it’s only good so long as it’s illegal. . . . Make it legal and
it’s no good. Why? Because as long as it’s illegal the people who come in do
not qualify for welfare, they don’t qualify for social security, they don’t
qualify for the other myriad of benefits.”
While using legal and illegal means to promote mass immigration,
in order to discourage unions, suppress wages, avert inflation caused by tight
labor markets, and to provide a buyer’s market in nannies and gardeners, the
managerial elites of North America and Europe also champion “diversity,” which
reduces the likelihood that workers of different ethnicities will unite in a
common front against economic elites. In a letter in 1870, Marx wrote:
Owing to the constantly increasing concentration of leaseholds,
Ireland constantly sends her own surplus to the English labor market, and thus
forces down wages and lowers the material and moral position of the English
working class.
And most important of all! Every industrial and commercial
centre in England now possesses a working class divided into two hostilecamps,
English proletarians and Irish proletarians. The ordinary English worker hates
the Irish worker as a competitor who lowers his standard of life. . . . His
attitude towards him is much the same as that of the “poor whites” to the
Negroes in the former slave states of the U.S.A. . . . This
antagonism is the secret of the impotence of the English
working class, despite its organization. It is the secret by which the
capitalist class maintains its power. And the latter is quite aware of this.
(Italics in the original.)
Similarly, Hobson (with his characteristic racist rhetoric)
speculated that the economic elite might engineer mass immigration:
Lastly, it is conceivable that the powerful industrial and
financial classes of the West, in order better to keep the economic and
political mastery at home, may combine to reverse the policy which has hitherto
been gaining ground in the United States and in our white colonies, and may
insist upon the free importation of yellow labour for domestic and industrial
service in the West. This is a weapon which they hold in reserve, should they
need to use it in order to keep the populace in safe subjection.
Because Hobson envisioned something very similar to the post–Cold
War pattern of offshoring, transnational production, and mass low-wage
immigration in the age of railroads, steamships, and telegraphs, today’s
pattern cannot be viewed as the predetermined result of new technologies like
the Internet, global wireless telephony, and container ships. A number of
different global economic orders are compatible with modern technology, just as
numerous alternatives were compatible with the technology of Hobson’s era. The
technology needed for something like present-day globalization existed in the
1900s. But between 1914 and 1989, a necessary but not sufficient condition for
this kind of managerial globalism was lacking: great-power peace.
From Super-Imperialism to Bloc Wars
Hobson’s vision of a pan-Western syndicate of industrialists and
investors exploiting the industrialization of China and the rest of the
non-Western world was similar to Karl Kautsky’s idea of a “super-imperialist
bloc” of capitalist nations that would set aside military rivalries in the interest
of shared profits from investments in developing countries. Whether sovereign
great powers, absent the pressure of military compulsion, would ever volunteer
to merge to that degree may be doubted. Today’s transnational blocs emerged
only in the shadow of two world wars and the Cold War.
In The Managerial Revolution, Burnham predicted the
division of the postwar world among three “superstates” based on the United
States, Germany, and Japan—inspiring Orwell’s Oceania, Eurasia, and Eastasia in
his novel 1984. Instead, following World War II, West Germany and
Japan became semi-sovereign protectorates of the United States, while Britain
and France, shorn of their colonial empires, became American dependencies as
well. Bipolarity rather than tripolarity structured world politics from the
1940s to the 1990s.
Neoliberal globalization was possible only in the decades
immediately following the Cold War, when the United States was the “sole
superpower” and no credible “peer competitor” had yet emerged. In the 1990s, the
United States and its European allies, along with Japan, South Korea, and
Taiwan, functioned like the pan-capitalist blocs of Hobson and Kautsky, right
down to the offshoring of much of their manufacturing to China. However, the
rise of China is bringing that ephemeral moment to a close—and with it, almost
certainly, an end to the present structure of global industry.
Hobson, in his bigoted style, acknowledged the possibility of the
rise of a powerful industrial China and a consequent protectionist backlash in
the West:
Again, China, passing more quickly than other “lower races”
through the period of dependence on Western science and Western capital, and
quickly assimilating what they have to give, may re-establish her own economic
independence, finding out of her own resources the capital and organising skill
required for the machine industries, and . . . may quickly launch herself
upon the world-market as the biggest and most effective competitor, taking to
herself first the trade of Asia and the Pacific, and then swamping the free
markets of the West and driving the closed markets of the West to an ever more
rigorous Protection with its corollary of diminished production.
Populist Rebellions and Their
Limitations
If I am correct, the post–Cold War period has come to a close, and
the industrial democracies of North America and Europe have entered a new and
turbulent era. The managerial class has destroyed the social settlements that
constrained it temporarily in the second half of the twentieth century and
created a new kind of politics, largely insulated from popular participation
and electoral democracy, based on large donors and shifting coalitions within a
highly homogeneous coalition of allied Western elites. Following two decades of
increasing consolidation of the power of the managerial class, the populist and
nationalist wave on both sides of the Atlantic is a predictable rebellion by
working-class outsiders against managerial-class insiders and their domestic
allies, who are often recruited from native minorities or immigrant diasporas.
Will the result of the contemporary class war among managers and
workers on both sides of the Atlantic be a revival of fascism? In some
countries in Europe, populist nationalist parties have emerged from tiny fringe
fascist parties, or have attracted their supporters. But talk about Weimar
America or Weimar Europe is based on a misunderstanding of history, which
blames fascism on populism. In reality, despite their populist trappings, most
interwar fascist movements were favored by military and economic elites as a
way to block social democracy and communism.
It is not the Weimar republic but the banana republic that
provides the most likely negative model. In many Latin American countries,
politics has traditionally pitted oligarchs versus populists. A similar pattern
existed in many Southern states in the United States between the Civil War and
the civil rights revolution.
When populist outsiders challenge oligarchic insiders, the
oligarchs almost always win. How could they lose? They may not have numbers,
but they control most of the wealth, expertise, and political influence and dominate
the media, universities, and nonprofit sectors. Most populist waves break and
disperse on the concrete seawalls of elite privilege.
In the American South, most populist politicians gave up or sold
out. In some cases, like that of Texas governor and senator W. Lee “Pappy”
O’Daniel, a country music singer, they were simply folksy fronts for corporate
and upper-class interests all along. The few populists who maintained some
independence were those who could finance themselves, usually by corrupt means.
Louisiana governor Huey Long could battle the ruling families and the powerful
corporations because he skimmed money from state employee checks and kept it in
a locked “deduct box.” In Texas, anti-Klan populist governor James “Pa”
Ferguson, along with his wife Miriam “Ma” Ferguson, who was elected governor
after her husband was impeached on the slogan “Two Governors for the price of
one,” sold pardons to the relatives of convicted criminals. As billionaires who
could finance their own campaigns, Ross Perot and Donald Trump could claim,
with some justification, to be free to run against the national establishment.
Those who believe in liberal democracy can look on this kind of
political order only with dismay. Most of the time, coteries within a
nepotistic elite run things for the benefit of their class. Now and then, a
charismatic populist arises, only to fail, sell out to the establishment, or
establish a personal or dynastic political-economic racket. Formal democracy
may survive, but its spirit has fled. No matter who wins, the insiders or
outsiders, the majority will lose.
Alternatives to Populism
Is there an alternative to a Latin American or Southern future for
the West, an endless clash of oligarchs and populists? If there is, it will
take the form of a settlement like that of the post-1945 social contract in its
spirit, though not in its details.
One possible new cross-class compromise between the managerial
elite and the working-class majority in Western nations would take the form of
the radical renationalization of industry. This seems to be what many populists
on both right and left have in mind when they want politicians to “bring the
jobs back”—that is, well-paid manufacturing jobs. But this would sacrifice
benefits from supra-national economies of scale, which are real in industries
like manufacturing, even if the recent pattern of offshoring has been driven by
manipulative policies like labor arbitrage rather than a focus on productivity.
Because of the multiplier effect on the larger economy in which
manufacturing is embedded, it is important for countries to acquire or maintain
high-value-added manufacturing, even if only a minority of the workforce is
formally employed in the sector. But most American workers are already employed
in the nontraded domestic service sector. Their jobs and wages can be
threatened by mass immigration but not by offshoring.
Radical de-globalization and the restoration of something like the
largely autarkic national economies based on vertically integrated national
firms of the 1950s and 1960s, then, would not be desirable, even if it were
possible. At the other extreme is the fantasy of a new global settlement, with
global labor unions and global government (or “governance”) checking global
corporate and financial oligopolies. Post-national global governance that
promotes the shared interests of a transnational working class is even less
likely to happen than radical renationalization.
This leaves two options for a new settlement, which might be
called “neoliberalism plus” and a new developmentalism.
Neoliberalism plus, also called “inclusive capitalism,” is the
preferred response of the transatlantic managerial class to the populist
revolts in Europe and America. Essentially, neoliberalism plus is
Reagan-Thatcher-Clinton-Blair neoliberalism with more subsidies to the “losers”
of globalization. The disempowerment of non-elite citizens by the oligarchic
capture of politics and the destruction of unions would not be altered. But the
masses would be bribed into acquiescence by means of higher wage subsidies,
like the Earned Income Tax Credit (EITC) in the United States, or perhaps a
universal basic income providing every citizen a poverty wage.
While something like this will undoubtedly be tried in many
Western countries, the economics do not work. Bribing workers who have stagnant
or declining incomes with new welfare subsidies requires an economically
dynamic sector of the economy to make the bribes affordable. The neoliberal
donor class, concentrated in elite rentier enclaves, assumes the permanent
existence of high intellectual-property rents flowing from the rest of the
world to tech tycoons, along with global financial rents flowing to money
managers. These rents, it is assumed, will be so high and sustainable that the
tycoons and money managers will gladly share them with the rest of the
population in the nation-states in which they happen to reside.
But global innovation rents quickly disappear, as a result of
lapsing patents, intellectual property theft, foreign success in indigenous
innovation, and the commoditization of former cutting-edge industries. As for
taxing financiers to subsidize far larger welfare states, this may work in
cities like New York and London, but it cannot possibly work on the scale of
nation-states, including continental nation-states like the United States, with
a third of a billion inhabitants.
Nor can advanced manufacturing pay for the massive redistribution
from the few to the many required by the neoliberalism plus strategy. High
productivity in manufacturing and services is incompatible with neoliberal
trade policies that allow the offshoring of both high-value-added production as
well as low-value-added activities by corporations and tolerate the devastation
of domestic high-value-added industries by subsidized imports from mercantilist
countries like China. Even worse, in the nontraded domestic service sector,
flooding the low-end labor market with poorly paid and poorly educated
immigrants reduces the incentive of service industries to boost their
productivity by investing in labor-saving technology or reorganizing their
business models to minimize labor.
In other words, neoliberal economic strategy itself, because of
its bias in favor of business models relying on cheap labor at home and abroad,
tends to undermine the productivity growth needed to pay for the massive
redistribution that, it is hoped, would align the interests of workers and
managerial elites.
It is no coincidence that Reaganism-Clintonism and
Thatcherism-Blairism coincided with prolonged asset bubbles, or that their most
ardent proponents tend to be located in the City of London, Wall Street, and
Silicon Valley. For a time, it is possible for stock-market booms, real estate
frothiness, and other bubbles to fund redistributive taxation. But overbuilt
welfare states that assume perpetual booms instead of slow, steady, and
difficult productivity growth are destined to become insolvent.
Unlike the ephemeral innovation rents of the so-called knowledge
economy, financial, property, and resource rents actually can become permanent.
In earlier generations, successful merchants and industrialists often became
bankers or aristocrats. If the children and grandchildren of today’s IPO
billionaires become landlords and moneylenders, they could transform into a new
aristocracy in a kind of high-tech Western feudalism.
David Ricardo believed that in a three-way struggle among
landlords earning rent, capitalists earning profits, and workers earning wages,
landlords might eventually prevail. In an economy with low or no productivity
growth, landlords, bankers, and other rentiers might displace the managers of
the industrial sector as the dominant class. Just as managerialism succeeded
bourgeois capitalism and feudalism, so managerialism in an age of technological
and economic stagnation might give way in turn to what Peter Frase in Four
Futures: Life after Capitalism (Verso, 2016) has called “rentism.”
New Developmentalism
The term “developmental state” was first used by scholars like
Chalmers Johnson and Alice Amsden to describe the post-1945 regimes of Japan,
South Korea, Taiwan, and Singapore, which relied on export-oriented strategies
as part of programs to industrialize and catch up with the West. But the
concept of the developmental state deserves a far broader definition.
As the economists Erik Reinert, Ha-Joon Chang, and Michael Hudson,
among others, have demonstrated, the mercantilism of Renaissance and early
modern Western city-states, kingdoms, and empires was a version of the
developmental state. From the Tudor era until the adoption of economic
liberalism in the 1840s, England (the United Kingdom after 1707) was a classic
mercantilist state, seeking to help its industries by providing them with a
seller’s market in high-value-added manufactured goods and a buyer’s market in
industrial inputs like commodities and labor. The British empire promoted this
industrial strategy by forcing its Irish, North American, and Indian subjects
to specialize in exports of raw materials to British manufacturers, who in turn
enjoyed monopolies on the sale of finished goods to the colonies.
After Britain pioneered the Industrial Revolution, the United
States and Germany successfully caught up with and surpassed the UK by means of
import-substitution policies that protected their national markets for national
firms. Not until the aftermath of World War II, when the United States briefly
enjoyed industrial hegemony in a shattered world and lacked foreign
competition, did Washington abandon its policy of infant industry
protectionism.
A third variant of developmentalism was devised by Japan and “the
Little Tigers” (South Korea, Taiwan, and Singapore) during the Cold War.
Prevented from using tariffs by “unequal treaties” with Western nations before
World War II and by the General Agreement on Tariffs and Trade (GATT) after
1945, these East Asian mercantilist nations used various nontariff barriers to
preserve domestic markets for their national champions, while reaping the
benefits of scale by exporting to far more open Western consumer markets. The
catch-up strategy of post-Mao China is a version of this East Asian pattern.
Developmentalism has taken quite different forms, in Colbert’s
France and Walpole’s Britain, Hamilton’s and Lincoln’s America, Bismarck’s
Germany, and contemporary East Asia. While methods vary, a constant has been
the understanding of global trade not as a rule-governed arena in which firms
should compete for customers with no regard for borders but as a zero-sum
competition for global market share in high-value-added industries among rival
states.
In liberal economic ideology, questions of trade and questions of
national security are unrelated. But from the perspective of developmentalism,
relative industrial capacity is the most important basis of relative military
power. Great powers, if not lesser states, must constantly worry that the
augmentation of the industrial strength of other blocs will also increase their
relative military power. Even in periods of peace among great powers and the
blocs they lead, each power must prepare for the possibility, however remote,
of conflict with the others. Within a tightly integrated bloc of allied
nations, transnational liberalization may be the order of the day. But
relations between blocs are likely to be guided by the zero-sum logic of
cautious, suspicious, military-inflected developmentalism.
With these dynamics in mind, we can speculate about the future of
the world economy and its implications for new domestic settlements among
managers and workers.
First, the rise of China, followed perhaps by the rise of India,
is likely to produce a world order by 2050 in which most of the global GDP is
produced inside the borders of China, India, the United States, and
Europe—three colossal nation-states and one politically divided region. To update
Orwell, the future blocs may be Eastasia, Southasia, Oceania, and perhaps
Europa. The world will be truly multipolar.
In a world of competitive great powers and great-power blocs, the
most familiar version of developmentalism (the East Asian export-oriented
industrial strategy) will be impossible for political reasons. The United
States tolerated one-sided trade with its East Asian satellites and Germany
(whose mercantilism is real but more subtle) only because it needed their
support in the Cold War and their economies were much smaller than America’s.
It will make no sense for the United States to tolerate similar mercantilist
trade policies at the expense of American industries, particularly those
relevant to defense, carried out by China—the only “peer competitor” the United
States will face in the foreseeable future in the military realm.
Even before the election of Donald Trump, the United States was
already acting as a declining post-hegemonic power with a reawakened sense of
strategic economic nationalism. The failed TPP was sold to the American public
as a way to defeat China in competition for markets in Asia, the counterpart to
the Obama administration’s “pivot” toward de facto military containment of
China. The TTIP, which would have deepened Euro-American integration without
Chinese participation, was motivated in part by a desire to balance the rising
geoeconomic influence of China.
If the United States is growing less willing to act as “the patsy”
(Martin Wolf’s term), offering unreciprocated access to its markets for the
goods of mercantilist states at the expense of its own producers, and if no
other major nation or bloc is willing to be a similar “patsy,” then the kind of
parasitic export-oriented strategy pursued by Japan, the Little Tigers, China,
and Germany cannot succeed. At the same time, classic import substitution
strategies, like the radical renationalization strategy discussed above, are
also rejected by the major economic powers, because they seek markets for goods
and services beyond their borders to reap the benefits of scale in
increasing-returns industries. By default, then, the economic system in a world
of multiple great-power blocs is likely to resemble that of the European
colonial empires.
There are differences, to be sure. The old colonial hierarchy,
with industry monopolized by the metropoles and commodity production in the
colonies, would be replaced by a new hierarchy, in which the metropoles reserve
the higher links of transnational value chains for themselves while lesser
allies and protectorates are ceded lower-value-added production.
Within the dominant nation in a military-economic bloc, it would
be wise to design a new cross-class social settlement to reinforce rather than
undercut the long-term productivity growth both of the nation and the bloc it
leads. There would need to be two strategies, one for traded-sector industries
like manufacturing with potential foreign markets, and one for nontraded
domestic industries that can only be performed in situ, like nursing care and
other personal services.
A new developmentalist strategy for traded-sector industries, by
means of a mix of incentives and compulsion, should discourage corporations
from seeking to boost profits by labor arbitrage, tax arbitrage, and financial machinations
like stock buy-backs and corporate inversions. In times of great-power peace, a
considerable amount of trade among the great powers might be permitted, but
each great power would intervene rather than permit market forces or foreign
industrial policy from eliminating critical industries, particularly those
relevant to the military.
In the nontraded domestic-service sector, a new developmental
state, in the spirit of Hippocrates, would emphasize doing no harm—no harm,
that is, to the all-important high-value national traded sector. Tight labor
markets for domestic service workers, achieved by immigration restriction,
work-sharing, shorter workweeks, or other means, should be looked on favorably
by policymakers, for several reasons. Higher market wages for service workers
would mean a larger domestic market, a true mass market capable of supporting
large-scale industries at home as a base for foreign expansion. At the same
time, higher market wages in the domestic service sector would encourage automation
and other kinds of labor-saving strategies, boosting service-sector
productivity and perhaps increasing domestic demand for labor-saving machinery
and software that can be produced in the nation or the bloc. If high wages lead
to the replacement of fast-food workers by kiosks, the manufacture of the
kiosks could become a new, capital-intensive, high-technology industry.
Competition and Countervailing Power
The decline of the liberal globalism that flourished briefly in
the passing phase of post–Cold War American hegemony, as a result of the
inevitable transition to multipolarity, may be dreaded by managerial elites,
but the working classes of the West and the world may benefit.
History demonstrates that ruling classes of any kind are reluctant
to share power with the ruled unless they are afraid of the ruled or afraid of
rival ruling classes. The former—fear of the ruled—is a weak motive. Popular
revolts seldom turn into revolutions, without the support of dissident members
of a ruling class or of a foreign elite, like the French monarchy that
bankrolled and supported U.S. independence for its own purposes.
The need to mobilize the population for war, or at least the need
to obtain social peace in wartime, has been far more important as a source of
democratizing reforms. From the Greek city-states to the Swiss cantons,
citizen-soldiers have been able to use their contribution to defense to demand
rights and representation. In the United States, the Emancipation Proclamation
and the GI Bill were both wartime measures.
Following the end of the Cold War, the abolition in most Western
countries of conscription and the shift by the United States and other
countries to professional soldiers, mercenaries (contractors), and foreign
proxies has reduced the importance of the citizen-soldier, even as offshoring
and mass immigration reduced the bargaining power of the citizen-worker. Mass
conscript armies are as unlikely to be restored in the United States and
similar countries as mass-production assembly lines that can be crippled by
strikes. And the kind of low-level warfare that the United States has engaged
in since 9/11 requires little sacrifice on the part of most Americans, who
conversely cannot use their sacrifice to demand a greater share of power and
wealth.
Nevertheless, great-power competition, even in the form of limited
cold wars, is likely to reward nations whose economic model is based on
developing productive technology and raising the incomes of domestic
worker-consumers, rather than engaging in labor and tax arbitrage, regulatory
harmonization, and other schemes that boost profits without increasing
productivity. In cold wars and trade wars, even if no blood is shed by the
contenders, countries and blocs with empowered and patriotic workers are likely
to do better than rival nations crippled by immiserated workforces and selfish,
nepotistic, oligarchic elites.
In a geopolitical contest between the developmental model
represented in different ways by Japan and China, minus their current
“export-über-alles” mercantilism, on the one hand, and, on the other hand, the
rentier-dominated oligarchic model represented by Brazil and Mexico, it would
be foolish to wager on the latter. North American and European democracies
cannot and should not emulate modern East Asian developmental states in every
detail. Still, it should be a cause for concern that, since the Cold War, the
United States and Western Europe have been moving along the spectrum, as it
were, away from Asia toward Latin America.
Managerial elites are bound to dominate the economy and society of
every modern nation. But if they are not checked, they will overreach and
produce a populist backlash in proportion to their excess. By a misguided
policy of suppressing wages and thus throttling mass consumption, unchecked
managerial elites may inadvertently cripple the technology-driven productivity
growth responsible for their rise and accidentally cause the replacement of
managerial society itself by a kind of high-tech rentier feudalism.
Managerial society works best when there are not only concessions
to national working-class economic interests—the bribes to the “losers” of
neoliberalism—but also genuine economic bargaining power and political power
wielded by the many. Far from undermining managerial regimes, Burnham’s
“juridical check” and Galbraith’s “countervailing power” make them more
legitimate and sustainable.
And as long as geopolitical conflict does not escalate into the
horrors of world wars, restrained rivalry among great-power blocs is a price worth
paying to preserve a politically diverse world. In the words of Hobson in 1902:
“The hope of a coming internationalism enjoins above all else the maintenance
and natural growth of independent nationalities, for without such there could
be no gradual evolution of internationalism, but only a series of unsuccessful
attempts at a chaotic and unstable cosmopolitanism.”
This article originally appeared in American
Affairs Volume I, Number 2 (Summer 2017): 19–44.
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About The Author
Michael
Lind is
cofounder of New America. Lind has taught at Harvard and Johns Hopkins and has
been an editor or staff writer for the New Yorker, Harper’s, the New Republic, and the National
Interest. Lind writes frequently
for the New York Times and Politico. His most recent book is Land
of Promise: An Economic History of the United States (Harper, 2012).
