Social Corporatism: Classical Economic Rent and Self-Directional Demands

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    Die Neue Zeit
    Classical Economic Rent and Self-Directional Demands

    "In the first place it is self-evident that [the proletariat] would recover what the bourgeoisie has lost. It would sweep all remnants of feudalism away and realize that democratic programme for which the bourgeoisie once stood. As the lowest of all classes it is also the most democratic of all classes." (Karl Kautsky)

    As elaborated upon in Chapter 5, contrary to established Marxist tradition, demokratia – the non-electoral rule of the common people – or even radical republicanism was never the political program of the bourgeoisie, contrary to Kautsky’s unfortunate concession of “the battle of democracy” above in The Social Revolution. Moreover, his musings on the anti-feudal revolution are overly brief. To get a clearer picture of this anti-feudal revolution, an excellent starting point would be Marx’s The Poverty of Philosophy, a critique of the anarchist Pierre-Joseph Proudhon (again, known most notably for his assertion that “Property is Theft”):

    But we all know that competition was engendered by feudal monopoly. Thus competition was originally the opposite of monopoly and not monopoly the opposite of competition. So that modern monopoly is not a simple antithesis, it is on the contrary the true synthesis.

    Thesis: Feudal monopoly, before competition.

    Antithesis: Competition.

    Synthesis: Modern monopoly, which is the negation of feudal monopoly, in so far as it implies the system of competition, and the negation of competition in so far as it is monopoly.

    Thus modern monopoly, bourgeois monopoly, is synthetic monopoly, the negation of the negation, the unity of opposites. It is monopoly in the pure, normal, rational state.

    In light of the recent economic crisis, Professor Michael Hudson, a former Wall Street economist, invoked classical political economy to elaborate upon the aforementioned historical development. Contrary to popular myth, even Adam Smith, best known for conceptualizing “free markets,” meant for it to mean something completely different from the definition used by the modern bourgeoisie. “Free markets,” according to classical political economy, were to be free primarily from economic rent derived from special privilege – the economic core of feudalism – thereby ensuring that income and wealth would be obtained only through personal labour (the role of workers) and through personal enterprise (the role of “industrial” capitalists and petty proprietors). Taxation, therefore, would be based primarily on the collection of this economic rent – most obviously ground rent, but more importantly royalties, monopoly rent, and interest – and its application towards public purposes.

    The political debate at that time was between the position of reducing governments as a means to minimize the collection of economic rent for non-public purposes (as opposed to the vulgarized sloganeering of “small government” that is heard today) and the position of increasing the role of governments as a means to achieve the exact same purpose. In his article on Orwellian doublethink being applied to the government bailouts, Hudson wrote:

    All this history of economic thought has been as thoroughly expunged from today’s academic curriculum as it has from popular discussion. Few people remember the great debate at the turn of the 20th century: Would the world progress fairly quickly from Progressive Era reforms to outright socialism – public ownership of basic economic infrastructure, natural monopolies (including the banking system) and the land itself (and to Marxists, of industrial capital as well)? Or, could the liberal reformers of the day – individualists, land taxers, classical economists in the tradition of Mill, and American institutionalists such as Simon Patten – retain capitalism’s basic structure and private property ownership? If they could do so, they recognized that it would have to be in the context of regulating markets and introducing progressive taxation of wealth and income. This was the alternative to outright "state" ownership. Today’s extreme "free market" idea is a dumbed-down caricature of this position.


    As public relations advocates for the vested interests and special rentier privilege, today’s "neoliberal" advocates of "free" markets seek to maximize economic rent – the free lunch of price in excess of cost-value, not to free markets from rentier charges. So misleading a pedigree only could be achieved by outright suppression of knowledge of what Locke, Smith and Mill really wrote. Attempts to regulate "free markets" and limit monopoly pricing and privilege are conflated with "socialism," even with Soviet-style bureaucracy. The aim is to deter the analysis of what a "free market" really is: a market free of unnecessary costs: monopoly rents, property rents and financial charges for credit that governments can create freely.


    Reformists and more radical socialists alike sought to free capitalism of its egregious inequities, above all its legacy from Europe’s Dark Age of military conquest when invading warlords seized lands and imposed an absentee landlord class to receive the rental income, which was used to finance wars of further land acquisition. As matters turned out, hopes that industrial capitalism could reform itself along progressive lines to purge itself of its legacy from feudalism have come crashing down. World War I hit the global economy like a comet, pushing it into a new trajectory and catalyzing its evolution into an unanticipated form of finance capitalism.

    It was unanticipated largely because most reformers spent so much effort advocating progressive policies that they neglected what Thorstein Veblen called the vested interests. Their Counter-Enlightenment is creating a world that would have been deemed a dystopia a century ago – something so pessimistic that no futurist dared depict a world run by venal and corrupt bankers, protecting as their prime customers the monopolies, real estate speculators and hedge funds whose economic rent, financial gambling and asset-price inflation is turned into a flow of interest in today’s rentier economy. Instead of industrial capitalism increasing capital formation we are seeing finance capitalism strip capital, and instead of the promised world of leisure we are being drawn into one of debt peonage.


    Shifting the tax burden off wages and profits onto rent and interest was the core of classical political economy in the 18th and 19th centuries, as well as the Progressive Era and Social Democratic reform movements in the United States and Europe prior to World War I. But this doctrine and its reform program has been buried by the rhetorical smokescreen organized by financial lobbyists seeking to muddy the ideological waters sufficiently to mute popular opposition to today’s power grab by finance capital and monopoly capital. Their alternative to true nationalization and socialization of finance is debt peonage, oligarchy and neo-feudalism. They have called this program "free markets."

    Particular attention should be paid towards his mention of “Social Democratic reform movements,” which before the war demanded the “socialism” defined by Hudson above. Shortly after that inter-imperialist war, the political spectrum of political economy, including the position of “social democracy” itself, shifted from the classical center to the price economics of the so-called “neo-classical” (marginalist) right-wing, with Austrian pseudo-economics at the far-right. This shift demonstrated irrefutably the inconsistency of the classical liberal position of socializing economic rent while retaining private ownership over properties that generate economic rent. Meanwhile, the spectre of fascism, again mistakenly called “corporatism” by the Italian Fascist tyrant Benito Mussolini (mistaken only in the sense that fascism is actually a subset of corporatism), rose to haunt Europe. While Trotsky emphasized the small-business owners, the self-employed, and the lumpen as being the social base of fascism, he erroneously downplayed the role of the classical economic rentiers – a mistake not made by the very “Stalinized” Comintern that he criticized for its programmatic observation of “social fascism”:

    The merging of industrial capital with bank capital, the absorption of big land ownership into the general system of capital organisation, and the monopolist character of this form of capitalism transferred the epoch of industrial capital into the epoch of finance capital. “Free competition” of the period of industrial capitalism, which replaced feudal monopoly and the monopoly of merchant capital, became itself transformed into finance capital monopoly. At the same time, although capitalist monopolist organisations grow out of free competition, they do not eliminate competition, hut exist side by side with it and hover over it, thus giving rise to a series of exceptionally great and acute contradictions, frictions and conflicts.


    In squeezing enormous sums of surplus profit out of the millions of colonial workers and peasants and in accumulating colossal incomes from this exploitation, imperialism is creating a type of decaying and parasitically degenerate rentier-class, as well as whole strata of parasites who live by clipping coupons.


    Side by side with social democracy, with whose aid the bourgeoisie suppresses the workers or lulls their class vigilance, stands Fascism.


    The combination of social democracy, corruption and active white terror, in conjunction with extreme imperialist aggression in the sphere of foreign politics, are the characteristic features of Fascism. In periods of acute crisis for the bourgeoisie, Fascism resorts to anti-capitalist phraseology, but, after it has established itself at the helm of State, it casts aside its anti-capitalist prattle and discloses itself as a terrorist dictatorship of big capital. The bourgeoisie resorts either to the method of Fascism or to the method of coalition with social democracy according to the changes in the political situation; while social democracy itself, often plays a Fascist role in periods when the situation is critical for capitalism.

    Social corporatism, indeed! Nowadays, the only material difference between rent-based “social democracy” and its other corporatist twins is its dedication to capture a small slice of the private economic rent for various “social justice” issues that tend to be diversionary from class interests or, in older socialist language, “sops.” On the other hand, in Finance Capitalism Hits a Wall, Hudson praised “Stalinist Russia and Maoist China” for purging rentier income in developing their respective economies, and wrote:

    But the question must now be raised as to whether only socialism can complete the historical task that classical political economy set out for itself – the ideal that futurists in the 19th and 20th centuries believed that an unpurified capitalism might still be able bring about without shedding its legacy of commercial banking indebting property and carving infrastructure out of the public domain.

    Because the answer to the aforementioned fulfillment of the anti-feudal revolution is undoubtedly in the affirmative, classical economic rent should be connected to Marx’s expansion of economic rent towards equivalence with surplus value. On the one hand, this connection may be as brief as the mention of “venture” (read: vulture) capital for relatively new businesses that cannot raise equity capital in the stock markets, complete debt offerings, or secure bank financing. It may also be as brief as discussing once more, from the previous discussion section, Meidner’s plan to redistribute a percentage of company profits towards wage-earner funds as non-tradable shares.

    On the other hand, this connection may be as protracted as connecting the various forms of economic rent with their underlying productive and other non-possessive property, as well as with self-directional demands. The application of not some but all economic rent beyond that of the natural environment (already including land and the broadcast spectrum) towards exclusively public purposes poses immediate, intermediate, and threshold concerns, as well as poses the purely transitional concern of surplus value.


    The Social Revolution, Volume II: On the Day After the Social Revolution by Karl Kautsky

    The Poverty of Philosophy by Karl Marx []

    Orwellian Doublethink: ‘Nationalize the banks.” “Free Markets.” by Michael Hudson []

    Programme of the Communist International by Nikolai Bukharin and Joseph Stalin []

    Finance Capitalism Hits a Wall: The Oligarchs’ Escape Plan – at the Treasury’s Expense by Michael Hudson []
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