Notes on ‘Political Capitalism’

Rackets and Society

God Shows Job Behemoth and Leviathan, by William Blake

In the latest issue of New Left Review, Dylan Riley and Robert Brenner have a piece entitled “Seven Theses on American Politics” that has generated a good deal of debate within left-wing circles. Robert Brenner is one of the preeminent Marxist historians and Dylan Riley is a political sociologist. Readers of Unpopular Front might be familiar with Riley’s name because I’ve discussed his book The Civic Origins of Fascism in Europe several times.

I don’t have the time or ability to assess all the claims in the piece, but I want to think a little bit about the concept of “political capitalism” that the authors introduce that essentially forms the basis of their entire approach. According to Riley and Brenner, “Beginning in the 1990s, and definitively since 2000, Republican and Democrat rule alternates on the narrowest of margins. Winning an election no longer involves appealing to a vast shifting centre but hinges on turnout and mobilization of a deeply but closely divided electorate.”

This new electoral structure is related to the rise of a new regime of accumulation: let us call it political capitalism. Under political capitalism, raw political power, rather than productive investment, is the key determinant of the rate of return. This new form of accumulation is associated with a series of novel mechanisms of ‘politically constituted rip-off’.’ These include an escalating series of tax breaks, the privatization of public assets at bargain-basement prices, quantitative easing plus ultra-low interest rates, to promote stock-market speculation—and, crucially, massive state spending aimed directly at private industry, with trickledown effects for the broader population: Bush’s Prescription Drug legislation, Obama’s Affordable Care Act, Trump’s cares Act, Biden’s American Rescue Plan, the Infrastructure and chips Acts and the Inflation Reduction Act. All these mechanisms of surplus extraction are openly and obviously political. They allow for returns, not on the basis of investment in plant, equipment, labour and inputs to produce use values, but rather on the basis of investments in politics….

The rise of political capitalism has profoundly reconfigured politics. At the elite level, it is associated with vertiginous levels of campaign expenditure and open corruption on a vast scale. At the mass level, it is associated with the unravelling of the previous hegemonic order, for in a persistently low- or no-growth environment––‘secular stagnation’—parties can no longer operate on the basis of programmes for growth. They cannot therefore preside over a ‘class compromise’ in the classic sense. In these conditions, political parties become fundamentally fiscal rather than productivist coalitions.

Let me try to translate that a little bit from Marxinese. Basically, as I understand it, their idea is that there’s not a lot of growth in the economy, so there’s less to share, so there’s less room for compromise over the social product, and therefore interest groups battle to try rig the the political system and “make it rain” in the form of a “politically constituted rip off.” Political coalitions are now “fiscal” not “productivist,” meaning they try are made up of groups coming together to try grab from the fiscus, the treasury, rather than the productive classes—in Marxist terms, the bourgeoisie and proletariat, capital and labor —working out a deal on how to split the social product. (Note that “confiscation” has the same Latin root as fiscal —fiscus, referring to the baskets that stored the Imperial treasury.)

Now, the cynic in all of us might probably say, “Same as it always was, right?” It might sound a little dubious that this really constitutes “a new order” as such. As Tim Barker points out in his much more comprehensive critique of the term:

Every single item in the Riley/Brenner laundry list of new forms of political extraction—tax breaks, the privatization of public assets at bargain-basement prices, low interest rates, stock market booms with irrational consequences, massive state spending aimed directly at private industry—existed at different points in the 1945-1973 “golden age,” a period that they discuss without ever letting on that anything of the sort was occurring.

I’d also just point out that Marx was also aware of the use of the state as a kind of shake down machine back in the 19th century. Writing in the 18th Brumaire on the centralization of the French state, Marx speaks of the state as kind of a rationalization of feudal privileges and titles into a factory system:

The seignorial privileges of the landowners and towns became transformed into so many attributes of the state power, the feudal dignitaries into paid officials, and the motley patterns of conflicting medieval plenary powers into the regulated plan of a state authority whose work is divided and centralized as in a factory.

Party politics degenerated into grabbing the state and squeezing it, a spoils system: “The parties, which alternately contended for domination, regarded the possession of this huge state structure as the chief spoils of the victor.” (It’s worth pointing out, in Riley and Brenner’s favor, that capitalism in this period was not very productive compared to the 20th century; France was still a largely agrarian nation, backwards compared to the development of capitalism in England.) Marx describes Napoleon III trying to powers of the state and taxation to make everyone happy, but instead ends up “juggling”. —“Bonaparte would like to appear as the patriarchal benefactor of all classes. But he cannot give to one without taking from another.” (Riley himself compared Trump to Napoleon III, something I’ve discussed at length before.)

As Barker hints, if you think for a moment of American politics it’s hard to think of when there wasn’t something that might be labeled “political capitalism:” there’s all the Gilded Age bilking and manipulation of the state, the concomitant rise of urban machine politics and their systems of patronage, the cooperation of big business with the New Deal, the military-industrial complex etc. But what Riley and Brenner are suggesting is that this is both new and old: something of a regressive move in the history of capitalism, if not exactly a step back towards feudalism, then something at least with some feudal characteristics.Riley has written of the danger of Trump being a return to “patrimonialism.” For them, capitalism’s possibilities of generating vast social bounty is diminishing and along with its particular social and political forms. I think an understanding the “regressive model” of political capitalism benefits from a short genealogy of the concept.

Where does the term “political capitalism” originate?

So far as I can tell, the term “political capitalism” first appears in Max Weber’s Economy and Society where it refers to a very primitive social and political arrangement: “Since the time of Hammurabi political capitalism has existed wherever there has been tax farming, the profitable provisions of the state's political needs, war, piracy, largescale usury, and colonization.” For Weber this political capitalism is “irrational” and even impedes the emergence of true capitalism market society, because it is primarily consumptive and not productive:

…patrimonialism can resort to monopolistic want satisfaction, which in part may rely on profit-making enterprises, fee-taking or taxation. In this case, the development of markets is, according to the type of monopolies involved, more or less seriously limited by irrational factors, l.e. important openings for profit are in the hands of the ruler and of his administrative staff. Capitalism is thereby either directly obstructed, if the ruler maintains his own administration, or is diverted into political capitalism, if there is tax farming, leasing or sale of offices, and capitalist provision for armies and administration.

Why irrational? Because it is particularistic. In the Hegelian background of Marx, Weber, and pretty much all of the thinkers discussed here the universal stands for rationality and what is essential, and the particular stands for irrationality and the accidental. It is the happenstance of birth and privilege or through cronyism and violence—being in the right place at the right time—rather than through the rational operation of competition in the free market that determines who benefits and also produces wealth for the whole society. For Weber, participation in the market universalizes and therefore rationalizes the economy, it makes uniform (in theory) the process of production and consumption across the entirety of society, rather than the hoarding of a few households and tax farmers. Weber writes:

It is only in the modern Western World that rational capitalistic enterprises with fixed capital, free labor, the rational specialization and combination of functions, and the allocation of productive functions on the basis of capitalistic enterprises, bound together in a market economy, are to be found.

This gets us part of the way there to understanding how it is being employed by Brenner & Riley. “Political capitalism” is a departure from modernity into some pre-rational past, before the advent of the miracles of modern capitalism. So far, this is more or less compatible with a Marxist account because we know Marx viewed history as progressive—capitalism is after all an advance over feudalism. Marx also believed that there was a certain rationality and universalism implicit in the capitalist mode of production, there was now potentially enough for everybody, but that it was inhibited by the irrational form of capitalist society: social—universal production—but private—particular—ownership. But the simple Weberian identity of free market capitalism with rationality and universalism as such is, as they say, “insufficiently dialectical” and indeed about as far from Marxism as one could possibly get.

Kolko’s “Political Capitalism”

Before proceeding to the next section, I want to make a brief excursion to look at another use of “political capitalism.” Gabriel Kolko made use of it in his studies of the Progressive era and beyond. Kolko was a New Left historian and one of the originators of the “Corporate Liberalism” theory. In the wake of Vietnam, the New Left took a more jaundiced look at the 20th century’s expansion of the state than Leftists had traditionally: bureaucracy and bigness were now seen as the enemy. Behind the putative universalism of progressive reforms and regulations lurked the self-interest of the ruling class: “political capitalism” was the use of the political system to stabilize their continued dominance. Here is the shortest summary of Kolko’s thesis: “American ‘progressivism’ was a part of a big business effort to attain protection from the unpredictability of too much competition.” It’s worth pointing out that for Kolko this is a process of “rationalization” using modern techniques, not a regressive return to an older mode of domination:

Political capitalism is the utilization of political outlets to attain conditions of stability, predictability, and security—to attain rationalization—in the economy. Stability is the elimination of internecine competition and erratic fluctuations in the economy. Predictability is the ability, on the basis of politically stabilized and secured means, to plan future economic action on the basis of fairly calculable expectations. By security I mean protection from the political attacks latent in any formally democratic political structure.

As an aside, translated into its crudest form, something like Kolko’s thesis forms the background assumption of a type of left populism that sees deceit and chicanery behind every reform or political change. In any case, this is not quite the sense of “political capitalism” in which Brenner and Riley are using it, although they do call “Bidenism” a type of “Progressivism” at one point.

Libertarian Uses of “Political Capitalism”

Funnily enough, a big fan of Kolko’s work on the Progressive Era was the libertarian economist Murray Rothbard, just about as fervent an anti-socialist as one could imagine. More recently, the public choice theorist Richard Holcombe employs Kolko’s concept in his 2018 book Political Capitalism: How Economic And Political Power Is Made And Maintained. Here’s how he defines it: “Political capitalism is more than just an explicit recognition that politics influences the economic system – an idea that is well recognized by both academics and the general public. Rather, it is a system in which the political and economic elite design rules so that they can use the political system to maintain their elite positions.” I’ll just say that Holcombe’s purpose is to differentiate this bad, “crony capitalism” from a good, pure capitalism of unfettered competition and move on. In summation, the libertarian use of “political capitalism” is essentially a populist move to just attack any sort of putatively universalistic or beneficent state action as interest group politics in disguise.

Hegemony vs. Economic-Corporate Politics

Let’s look now at the other key ingredient of Riley and Brenner’s conceptualization: Antonio Gramsci. Dylan Riley frequently calls his approach Gramscian. For Gramsci, there are basically two possible forms of politics and the state: “economic-corporate” phase and the “hegemonic” phase. These categories map over the particular and universal dyad. Economic-corporate politics are just interest groups hashing out their differences as groups, a hodgepodge of particular interests. As in Weber, this is often associated in Gramsci with an older form of society, like the guilds systems of the Middle Ages. Gramsci associates the “economic-corporate”with domination. Hegemonic politics emerges when a particular social class aspires not to merely dominate but to lead, to shape the moral and intellectual direction of the nation, and to promote a social order that naturally will benefit the ruling class the most, but also creates a broadly beneficially system for the entire social body, so even subordinate groups have a gratifying or at least marginally satisfying place in it, both materially and spiritually. I think a quick summary of what Riley and Brenner essentially contend is that we’ve regressed to an economic-corporate phase of politics and the state from a hegemonic one. As they write, “The new political structure to which this has given rise prevents the construction of hegemonic growth coalitions and the associated phenomenon of massive electoral landslides. It produces instead a vicious, narrowly divided politics of zero-sum redistribution, largely axed on conflicts of material interest within the working class.”

(One can also imagine here a Gramscian critique of the “economism” of the Kolko thesis: “Well, yes, of course the ruling class benefits most, but you don’t understand that the reason this worked is because it was hegemonic not merely economic-corporate, people really were genuinely persuaded in the rationality and fairness of this order, not merely tricked.” Gramsci’s critique of economism would also extend to too closely tying certain market conditions to available political possibilities.)

To sum up briefly, for Weber, the universal and the rational emerges from the market. For Gramsci, the universal and the rational emerges from politics. Riley and Brenner propose a kind of synthesis: we lack both the dynamism of the market and (therefore?) the possibility of hegemonic politics (or is it the other way around?), the universal cannot emerge, and so we are in a way “sinking into the abyss of a new dark age made more sinister and perhaps more prolonged by the lights of a perverted science,” to quote Winston Churchill.

Rackets and the Spirit

This also brings to mind the attempt of the Frankfurt School to theorize the “racket society” during World War II. With the rise of fascism and the failure of proletarian revolution, Horkheimer proposed that a more elementary form of domination was prevailing, a break from the class system and a return to earlier patronage and personalistic models was occurring. As Martin Jay points out in an 2020 essay on the concept in relation to the film The Irishman and Donald Trump’s political ascent, this was no doubt inspired by their exile in the United States and witnessing both the prevalence of organized crime and the slang expression itself as a descriptor of the state of society:

In “The End of Reason,” published in 1941, Horkheimer claimed that “procurers, condottieri, manorial lords and guilds have always protected and at the same time exploited their clients. Protection is the archetype of domination.” Now in the post-liberal age, whether it be called monopoly or state capitalism, organizational tendencies were restoring such direct, unmediated power arrangements in which any pretense of representing general interests or universal principles had been abandoned.

In his memorandum, the Rackets and the Spirit, Horkheimer opposes the racket to the “spirit,” Hegel’s geist, the living universal of society:

In “Rackets and Spirit,” Horkheimer argued that “each racket conspires against the spirit and all are for themselves. The reconciliation of the general and the special is immanent in the spirit; the racket is its irreconcilable contrast and its obfuscation in the ideas of unity and community.” Equally problematic was the explicit repudiation of the rule of law and the ideal of popular sovereignty, both of which were mocked by the unapologetically particularist self-interest of protective solidarity.

We can clearly see a close homology here between Brenner & Riley’s thesis and the idea of the racket society, a turn from capitalism that has at least the pretense to or an incomplete universalism to one that is just essentially baldfaced grabbing. As Jay writes, “In exposing the lie of equality of opportunity and the fairness of market mechanisms, the return of racket society might be grudgingly admired for stripping the ideological veil from actual domination. But what it also undermined was the dialectical promise that such ideologies always contain.” The Frankfurt School ultimately discarded the racket theory but the idea that there’s was a regressive core of capitalist development remains in the background of Dialectic of Enlightenment.

Til’ Next Time

What I believe Brenner & Riley have re-discovered with “political capitalism” is just a variation on the fundamental contradiction of capitalism identified by Marx and anticipated by Hegel, namely that it only appears to be universalistic but is revealed to be the rule of a particular class, and that, as Marx puts it in the Grundrisse, “‘the law of the jungle persists even in ‘constitutional republics.’” Marx anticipated that capitalism would produce a universal class that would abolish particularism, but also from time to time imagined the opposite might also be the case: that it could produce a particularism that would seem to abolish the universal. But this is getting long so I will have to get to that next time.