Interview with David Kotz

David Kotz on Capitalism, Socialism and Green Social Democracy

In this interview with C.J. Polychroniou, David Kotz describes his work on Marxian political economy, the “social structure of accumulation” framework for analyzing developments and transitions under capitalism, and the experience of socialism under the Soviet Union and China. Kotz evaluates the prospects for socialism and green social democracy in the immediate future, arguing that “If a period of green social democracy emerges in the next five or ten years, we could see significant progress against global climate change and improvement in the lives of working people, young people, and minorities.”

PERI ECONOMIST INTERVIEW SERIES

David Kotz

This is part of PERI's economist interview series, hosted by C.J. Polychroniou.
Read David Kotz bio here.

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C.J. Polychroniou
Your undergraduate degree was in physics, but you ended up pursuing graduate studies in economics. What attracted you to the “dismal science?”

David Kotz: Many young people who had math aptitude were steered toward physics in the 1950s-60s, due to the Soviet launching of the first earth satellite. That affected me, but also I was attracted by the idea of exploring the secrets of the natural world. In my third year in college at Harvard, I was heading toward graduate school in physics. I also was an activist, in the anti-nuclear bomb testing movement and the civil rights movement, but that was in my spare time. Then in the summer after my third year I went to Mississippi as a volunteer in the Mississippi Freedom Summer. The experience of working in a social movement of black people in Mississippi, who were rising up against the severe oppression, and repression, they faced, redirected my plans. I decided I wanted to follow a path that would contribute to building a movement for a better world. I decided to switch to social science.

I chose economics for two reasons. It is the most math oriented of the social sciences, and I was a math type at that time. And while I was not a Marxist at that time, I was influenced by the Marxist claim that the economic side of society was particularly important, which I thought called for studying economics to figure out the roots of the many problems of contemporary society. So in my senior year most of my classes were in economics – I needed only one more physics course for the major. The following year I enrolled in graduate school in economics, first at Yale for one year and then at UC Berkeley. At that time, most of the economics PhD students had majored in something other than economics, either physics or math, or another social science.


CJP
: From very early on, your contributions to economic analyses were guided by the principles of Marxian political economy. What drew you to Marxism?

DK: When I started graduate school in economics, I was critical of capitalism and interested in socialism, but I was not sure what to think about Marxism. My earlier education, in physics, involved a methodological approach influenced by logical positivism and a kind of empiricism, which made me initially skeptical about the philosophical style of Marx’s works. However, my physics background gave me a concept of what a scientific theory should look like, and as I studied advanced neoclassical theory, I found it to be not a scientific approach but more like a religion. A view of capitalism as the best of all possible economic systems lurked in the assumptions made in neoclassical theory. The theory came to conclusions that every progressive policy would be harmful (rent control, minimum wage laws, etc.), but those claims followed directly from totally unrealistic assumptions built into the models.

I started graduate school in 1965, and soon many of us, influenced by the rising wave of protest against racial oppression and war, found ourselves repelled by mainstream economics which claimed that capitalism tended to eliminate all problems such as discrimination and that capitalism could not generate an imperialist drive to control other countries. Those claims seemed to fly the face of the continuing racial oppression in the US and the imperialist war in Vietnam. So, along with many others, I looked for an alternative approach to economic analysis.

In my fourth year in graduate school a dozen of us at Berkeley organized a year-long study group to read the three volumes of Marx’s Capital. We read it critically, asking many questions. By the end of that year, most of us, including myself, were convinced that Marxism offered the most powerful framework for analyzing capitalism including revealing both its contributions and its problems, as well pointing toward a superior form of society, that is, socialism.


CJP: You have used extensively in your work the social structure of accumulation theory (SSA) for understanding and analyzing contemporary capitalism. How does SSA relate to Marxian political economy, and why can’t rising inequality be explained by the characteristics of capitalism alone?

DK: I regard Marxism as providing a methodology for analyzing societies as well as a set of specific theories about class societies in general and about capitalism specifically. The Marxist theory of history – historical materialism – particularly impressed me as a powerful tool for understanding how human societies evolve over time. Historical materialism is a theory of the rise, development, and crisis of modes of production (slave, feudal, capitalist) and the transitions between modes of production. It seemed that we needed a theory, or approach, for analyzing evolution within the capitalist era.

When David Gordon and his colleagues proposed SSA theory, I saw it as an application of the logic of historical materialism to the evolution of capitalism. It claimed that each successive institutional form of capitalism – each SSA -- initially promotes capital accumulation, which is the central dynamic process of capitalism. However, eventually the contradictions of every form of capitalism turn an SSA eventually turn the SSA from promoter to obstacle to normal accumulation. That initiates a structural crisis, which can be resolved within capitalism only by the construction of a new SSA that will again promote accumulation. There is a clear analogy to the relation between forces of production and relations of production, and between economic base and political and ideological superstructure, in the historical materialist theory of modes of production.

Another factor in my gravitation toward SSA theory was my long-standing belief that, in economics (unlike on physics), central concepts such as “capitalism” or “market economy” were abstractions from a much more complex reality. It seems obvious that capitalism, while always having a few defining institutions (commodity production, the wage-labor relation, production for profit), also always has many other additional institutions that play a role in the operation of an actual capitalist system. That is the key underlying claim of SSA theory. Capitalism is always capitalism with its relations and tendencies, but at any time and place it has features that vary yet are important.

The matter of the trend in inequality, which you bring up, provides a good example. The evidence shows that capitalism does not always give rise to increasing inequality. In the USA from 1948 to the 1970s the degree of income inequality, by many measures, had a slightly declining trend, while after 1980 a sharp trend of rising inequality set in and persisted for decades. The Marxist analysis of capitalism in itself identifies a tendency for inequality to rise over time, but institutions (and the form of the key class relations) can obstruct, or reverse, that tendency. SSA theory, which introduces an analysis of the differences between post-World War II regulated capitalism and post 1980 neoliberal capitalism, can identify the causes of the important break in the trend in inequality.

So my conclusion is that to understand capitalism the starting point is the Marxist analysis of capitalism in itself. However, that is not the end point, it is also necessary to examine the ways in which the wider set of institutions in a capitalist system change over time if we want to have an effective means for analyzing and explaining key developments.


CJP: In your research about Soviet type economies, you took the position that the Soviet system had both socialist and non-socialist features, but rejected the state capitalist thesis. Even so, couldn’t it be argued that what the Soviet model represented was a new social formation, but that it was a far cry from being socialistic?

DK: In my study of the Soviet system, I found no persuasive evidence that it was a form of capitalism. Its laws of motion did not seem to fit Marx’s account of capitalism. There was no pursuit of profit, no capital accumulation drive based on the economic relations of the system (although the political authorities imposed an economic growth imperative), no market economy (except at the margins), almost no legitimate source of income based on owning property. On the other hand, a serious case can be made for the view that the Soviet system was a new class society, not a form of socialism. It did have privileged ruling elite, and one can argue that the elite appropriated a surplus from the labor of the working population. Paul Sweezy eventually took that position.

However, I concluded that the Soviet system did have almost all of the key features of a socialist system as described by Marx and Engels: public ownership of the means of production, a planned economy, a kind of production for use although as defined by the ruling elite. While there was a privileged elite, their material privileges were very small compared to capitalism or other previous class systems of exploitation. The key feature of socialism missing from the Soviet model was the empowerment of working people – authority was top-down, not bottom-up. Hence, I found it to be a distorted form of socialism.

The Soviet experience does, in my view, reveal some of the advantages of socialism. There was no aggregate unemployment, no inflation, quite limited income inequality, a high degree of individual material security, rapid development of the forces of production without a class of wealthy capitalists in charge, provision of a wide array of public goods and services, a non-commercial society, a pace of work that was reasonable without effective pressure to make workers work harder or faster than they wanted to. The Soviet Union, although powerful, did not display the imperialist drive of capitalism (it did dominate its eastern European allies but not for economic benefit, rather for security against another invasion from the west). The USSR provides lessons for those of us struggling to bring about another period of transition to socialism, both positive and negative.

That the USSR had a paranoid mass murderer as its leader under Stalin, and after World War II evolved into an authoritarian system with no respect for individual rights or liberties, does not mean it had nothing to do with socialism. We learned that a socialist revolution can give rise to a version of socialism with serious negative features. After all, the capitalist world includes Sweden and apartheid South Africa, Switzerland and Nazi Germany. Socialism is not a state of perfection, it is a social system more advanced than capitalism, one that makes it possible to provide a secure, satisfying, and environmentally sustainable life for the whole population – which capitalism cannot do – but it can go wrong if it departs from its key features that include rule by working people, not a small elite.


CJP
: What lessons can we draw from the economic transitions in Russia and China?

DK: I believe a variant of SSA theory can be fruitfully applied to both transitions. Both transitions stem from the fact that a socialist system can develop contradictions that require major restructuring, and that such a process of restructuring has dangers for the fate of socialism. The Soviet system brought rapid economic development through the mid-1970s, and thereafter a period stagnation set in. The previously successful institutional form of Soviet socialism had become an obstacle to further progress. I believe that called for a reform of the particular institutional form of Soviet socialism, centered around empowerment of the Soviet people, in the economy and in the state. Gorbachev’s reform plan called for such a transformation. However, the reform program, which centered around free elections, transferring political power from the CPSU top leadership to newly elected bodies, allowing some forms of non-capitalist but non-state enterprise (coops, individual production), and introducing some market elements, combined to create a pro-capitalist class coalition that was able to overthrow the system to bring capitalism. This happened despite the support for socialism among a big majority of the Soviet people, demonstrated in believable public opinion surveys at the time. The victorious pro-capitalist coalition consisted of a small but growing capitalist class of owners of new actually capitalist firms, radicalized intellectuals (especially economists!), and most importantly about 75% of the high level officials of the party and state. Those pro-capitalist officials knew they were not a wealthy exploiting class and they aspired to become one through a transition to capitalism (many of them succeeded).

China was much less economically developed than the USSR. By the 1970s China’s economy was actually growing at a relatively fast pace, but a big majority of the population still lived in the countryside and were poor. After Mao died the party bureaucrats came back to power, and most of them had hated the experience of the Cultural Revolution. Deng Xioping observed the very rapid growth of several Asian capitalist states through what he understood to be a state-managed market system, and decided to apply that to China to accelerate its development. While the economy was not in crisis, the aim of maximizing the rate of development led to a new direction. The result shows the dangers of turning a socialist planned economy into market economy, which was done in stages.

In the 1980s the economy was gradually marketized. This accelerated economic growth, with the rise of the township and village enterprises (TVEs) which were owned by local governments, not capitalists, but they were free to operate in markets outside the central plan. However, the increasingly marketized yet still publicly owned system caused two problems. First, the directors of the TVEs, typically a township or village leader, began to see the opportunity get rich if they could gain control of the surplus generated by the enterprise – they received only a modest salary. Second, the spread of market relations inevitably led to the emergence of liberal ideology, including neoclassical economic ideology. The belief that a market system is the only way to embody individual freedom grows. I observed this phenomenon when I visited China in 1985 and 1986.

Soon the combined effects of the growing influence of the emerging would-be capitalist class in China, along with the rising intellectual influence of neoclassical ideas, led to the widespread belief that a market economy can operate effectively only if enterprises are privately owned by actors who receive the profits from the enterprise. In the mid-late 1980s the transition to the market, a difficult process to manage, ran into growing problems, which broke out as bursts of inflation, a process that led to the Tiananmen protests and their repression. In response, in the early 1990s the leadership decided to allow domestic privately owned enterprises. There followed the rapid growth of domestic capitalist class, with many billionaires. China has not yet transitioned back to a normal capitalist system, but there are strong pressures pushing in that direction.

In my view, there are two main lessons from the two transitions. First, while a transition to socialism is likely to involve sharp struggle as the capitalist class does what it can to resist such a transition, which may require a concentrated leadership of the revolutionary forces, it is essential after the revolution to quickly build institutions that empower working people. A socialism run by a small elite will eventually go back to capitalism. Secondly, while markets can play a role in the early stage of a transition from capitalism to socialism, the role of markets must be gradually restricted and replaced by increasingly effective democratic economic planning that allow individuals and groups to express their needs and wishes and get them embodied in the production and distribution processes. A movement away from planning and toward a market economy after a socialist revolution is a step backward and eventually will bring capitalist restoration. The New Economic Policy in the USSR in the 1920s was clearly understood by Lenin as a step backward although a necessary one that must be temporary. A mature socialism will have “market exchange” in the sense that individuals will to stores (or online) to choose products, and individuals will decide what job to apply for. However, the results of such decisions, which generate what are called “market forces” based on differential profitability of various products, cannot be allowed to dictate the way the economy operates. The neoclassical claim that only market forces can give rise to a rational allocation of resources is groundless – only a democratic planning system can achieve an allocation of resources that will meet everyone’s wants and needs, within the capability of the human and human-made material resources of an economy and the constraints of the natural environment.

 
CJP: Your work on neoliberalism suggests that the rise and persistence of neoliberal policies are linked to changes in the global economy, namely globalization. If this is so, does it mean that the end of neoliberalism is intrinsically linked to structural changes in the global capitalist economy?

DK: Yes. I understand globalization – the greatly intensified global economic integration of capitalism today – to be an aspect of neoliberalism, which I view as the most useful overarching characterization of the post-1980 form of capitalism. I present that argument in chapter 2 of my book The Rise and Fall of Neoliberal Capitalism. The current phase of globalization of capitalism appeared to begin around the late 1960s, and it provided one of the forces undermining regulated capitalism. Once neoliberalism was consolidated, which meant eliminating state-based constraints on capital and letting the market rule, the U.S. Government, and the IMF and World Bank which the U.S. Government dominates, began to actively promote further globalization. Regulated capitalism required a somewhat regulated set of global monetary, trade, and investment institutions, which was embodied in the original Bretton Woods system. Globalization fits in with the neoliberal form of capitalism. So, as you suggest, a decisive turn away from neoliberalism would require a transition to a new form of regulated trade, investment, and money in the global system. Such a shift could happen only if a few of the most powerful capitalist states turned toward a new regulated capitalism, specifically including the USA. A new regulated capitalism would likely take the form of green social democracy, with a new capital labor compromise. However, a shift in that direction, while possible in the near future, is not only possible direction out of the structural crisis of neoliberal capitalism. The other leading possibility is the rise of an authoritarian nationalist form of capitalism. That would bring a bleak future for humankind.

 

CJP: Are you optimistic about the revival of socialism? And what would socialism look like in the 21st century?

DK: I am optimistic for the long-run – the 21st century still has 80 years left to go! At this time a transition to socialism in high-income capitalist countries is not on the agenda. To come onto the agenda, there would have to be a strong and growing socialist movement with mass support.

However, a transition to a period of progressive reform is indeed possible, that is, a period of green social democracy. Several forces are pressing in that direction: the continuing stagnation of neoliberal capitalism, the pressing danger of global climate change which threatens the bottom line of big capital, the continuing radicalization of young people which could get “out of control” if progressive reforms do not emerge, growing recognition of the need to combat institutional racism, the continuing anger of many working people at their worsening conditions. If a period of green social democracy emerges in the next five or ten years, we could see significant progress against global climate change and improvement in the lives of working people, young people, and minorities.

But no form of capitalism works “effectively” forever, at some point the contradictions of green social democratic capitalism – impossible to specify in advance -- would intensify and lead to a structural crisis. Big capital hates any type of regulated capitalism, which restricts their “freedom” to enrich themselves by any means necessary. They will tolerate it under certain conditions, but eventually they will move to dismantle it, as occurred in the 1970s when they were able to dismantle postwar regulated capitalism. Hopefully during a period of green social democracy the socialist movement will grow to become a mass movement, so that when the next structural crisis emerges, that movement will be able to win state power and move beyond capitalism. Such a transition is the only way to finally secure a good and sustainable future for humankind.

The experience of 20th century socialism teaches lessons that can be applied when the next round emerges. 21st century socialism must indeed involve taking state power – capitalism is based on rule by the capitalist class, whose existence depends on a state that legalizes its property in the means of production and hence its power to exploit the majority. The capitalists will no go away as long as the state, and legal system, sanctifies and protects their right own productive property. Taking state power is necessary to take away the property of the capitalist class and turn it into common property, to be used by and for working people. However, taking state power by a party, or coalition, or movement, inevitably introduces the temptation to use the state to rule over the people, with the best of intentions – to secure the new society against its enemies, etc. But we know what road is paved with good intentions! 20th century socialism taught us that.

After taking state power and expropriating the productive property of the capitalist class, the working population (which the former capitalists would have to join!) must be empowered quickly by new institutions of socialist democracy. In my view, that should include the following: 1) an economic planning system that is based on negotiation and compromise among the groups that are affected by economic decisions (see Pat Devine’s book Democracy and Economic Planning; 2) a democratic state, which cannot fully “wither away” but must oversee the planning process as well as maintaining public order; 3) a guarantee of free speech and free association; 4) an independent – not capitalist! – mass media that can criticize state policies, providing essential feedback to state officials and the public who must decide how to vote. 21st century socialism should not adopt Marxism, or any particular theory, as the official state ideology! As a state ideology, Marxism loses its ability effectively analyze the system and diagnose its problems. Only half jokingly, I sometimes think perhaps after the revolution Marxism should be banned, so that rebellious young people would investigate it and pass around illegal copies of Marx’s work and discover its power for themselves.

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