Decade of Decision: The Crisis of the American System. By Michael Harrington. Simon and Schuster, $11.95.
January 1, 1981        

For some years now, Michael Harrington has been America’s most visible social democrat. He’s written nine books in two decades, taught, lectured, debated Buckley, Kemp and nearly every other conservative able to speak consecutively for half an hour, founded and chaired the Democratic Socialist Organizing Committee (DSOC), and tirelessly lobbied the Democratic Party to differentiate itself somehow from the Republican Party.

Unfortunately, not much has come of all this effort. The civil-rights and social-welfare gains of the sixties were an expanding economy’s way of buying social peace. Class warfare of a sort broke out in the seventies, and the haves won easily: no tax reform (except for various Proposition 13s), no welfare reform, no labor-law reform, no national health insurance, no consumer protection agency, no public energy corporation, a niggardly windfall-profits tax, a massive capital gift to profit-bloated oil companies for synfuel development and, of course, ballooning defense spending. After arduously earning the right to write part of the 1976 Democratic platform, and then helplessly watching it fade into oblivion, it seems that Harrington, DSOC and the rest of the democratic left may as well have campaigned for Angela Davis, for all the influence they achieved with the Carter administration. Their presence in the 1980 campaign was negligible.

Never daunted, Harrington returns to the fray with “Decade of Decision,” an updated polemic and program for these confused and mean-spirited times. The book’s constant theme is that the priority of private over public decision-making power is neither necessary nor benign. Stagflation, sectoral inflation, unemployment, gross inequalities of income and wealth, urban and regional decay, environmental deterioration, the degradation of education and culture — all these public ills are in large measure the result of decisions taken without public knowledge or control. Harrington argues, for example, that stagflation is chiefly caused by ‘administered prices.” whereby companies with sufficient market power simply target profit goals and then, during a recession, raise prices to meet these goals. Since, oligopolistic industries—most major industries — the costs of entry are too high to allow newcomers to move in and take competitive advantage of these high prices, the dominant companies are immune from the “law” of supply and demand.

Sectoral inflation — the devastating inflation in the “key” sectors of health, food, housing and energy — is another case. Even a superficial comparison with every other advanced industrial society makes it perfectly clear that our fee-for-service system and private health insurance cost more and deliver less. Milk and sugar price supports bought by bribes, farm subsidies to curtail production and the larcenous grain deal with the Russians are all public scandals. Federal financing goes for high-cost housing, where the profits are, while low-cost housing disappears from most cities. The deviousness and greed of the major oil companies is widely acknowledged. In all these cases, Harrington merely states the obvious. What the Left has to contend with in these areas is not arguments but the power of the oil lobby, the AMA, the dairy, sugar and grain lobbies, and the real estate industry.

There is, however, a body of conservative argument about productivity and unemployment, which Harrington takes on. So far, the Right’s strategy for explaining away successively higher levels of unemployment has been to redefine each as “full employment”; that is, according to Herbert Stein, the lowest jobless rate that “you could not get below without an acceleration of inflation.” Other culprits besides inflation include women (newly “over supplying” the job market), environmental and occupational-safety regulations and the minimum wage. Anyone who has watched the sleek Herbert Stein or the fatuous Arthur Burns lecture a respectful Congressional committee on the government’s profligate generosity toward the poor, the unemployed, the workers in hazardous occupations and the environment will enjoy Harrington’s sendup of their more outrageous mystifications.

And yet, although Harrington parries the neoconservative ideological assault more or less skillfully, one has the uneasy premonition that there is a knockout punch waiting for the doughty democratic socialist. Since it’s Harrington’s book, the punch never lands, but the premonition lingers. And in fact, there is a decisive counter-argument, though it comes not from the Right, which, now as always, only dimly comprehends its own practice, but from the far Left.

The Right is always admonishing the Left that the market is an equilibrium mechanism, and that any well-intentioned interference during a temporary disequilibrium will only postpone the economy’s eventual self-adjustment. Social spending—transfer payments and public enterprise—comes out of personal savings and corporate profits through taxes and borrowing; the latter also bids up the price of money (the interest rate), further lowering profits. In both cases, government revenue comes from the private surplus, which is the source of all new capital. Employment depends on capital formation, i.e., investments, which in turn depends on profits. So it is in a society’s interest to maximize profits, e.g., by lowering capital-gains taxes, increasing depreciation allowances, repealing minimum wage laws, etc.

This is the “trickle-down” theory, about which several things may be said. One is that it does not justify the currently popular “supply side” tax cuts. Harrington points out that the main sources of investment in this country are retained profits, pension funds and insurance companies, while the main beneficiaries of the proposed cuts will be rich individuals who regularly put their money into gold, rare violins and other hedges against inflation. In other words, Kemp-Roth is a fraud, a simple giveaway, the rich soaking the rest of us.

Nevertheless, the “trickle down” theory, when suitably formulated, as by Marx, contains the nub of the matter. Harrington is remarkable among prominent political figures for actually understanding and applying Marx. Most of Marx, anyway. He falters in the last lap, so to speak, and this fatal lack of closure explains why his reform program is, finally, a piece of magnanimous futility.

Harrington proposes a number of what he calls re “structural reforms”: price controls on oligopolies (but not wage controls), national health insurance, maximum output in agriculture with support for decentralized family farms, a tax assault on the maldistribution of wealth and income, and investment in railroads, mass transit, solar energy, housing rehabilitation and other ways of meeting social needs and providing full employment. As he says, all these reforms add up to one: “democratic control of the investment process.’’

All this sounds not far from the Kingdom of Heaven. However, it’s true, as the Right argues in somewhat different terms, that in a market economy, public investment must ultimately be financed from surplus value — Marx’s term for what, in this context, we may simply call profits. In Marx’s theory, profit is the monetary form of that part of the total social product which goes to those who own rather than (as wages) to those who work. More precisely, it goes not chiefly to individual plutocrats for their consumption (though some does), but for reinvestment, or capital accumulation.

All economists. Marxist and mainstream, are agreed about the necessity for capitalism to accumulate, or expand, in order to survive. Since profits are the source of new investment, a long-term fall in the rate of profit means severe economic contraction; that is, depression. That the rate of profit has a secular, cyclical tendency to decline, and so to precipitate crises, is the central thread of the vast and intricate argument of “Capital.” Harrington crucially misinterprets this crisis tendency as merely a systemic imbalance between profits and wages— “underconsumptionism,” in theoretical jargon. Whence his strategy: to smooth out the business cycle by increasing the wage share and redistributing profits through government spending.

Though Harrington explicitly rejects Keyensiansim as he understands it, his solution is essentially Keyensian; i.e., it is an attempt to modify the effects of the market system while retaining its basic mechanism. The Keyensian solution to the problem of recession was: whenever capital investment slowed and unemployment increased, the federal government should take up the slack by increasing its own spending. However, since all government spending finally comes from income produced in the private sector, increased public spending, just like a general rise in wages, lowers the surplus available as capital, thus aggravating the capital shortage and leading to a further decline in investment.

That increased government spending has a negative effect on capital formation is not an invention of conservative ideologues. But their conclusion—to call for cuts in government spending as a stimulus to investment — ignores the reason why government spending increased in the first place; to offset a prior decline in investment. Cuts in government spending will most likely bring, not a revival of capital investment, but rather, a sharp rise in unemployment.

Harrington is properly distressed at the human cost of higher unemployment. But given the limits of his program, he must somehow answer criticism from the Right that his proposals for massively increased public spending will eventually slow investment, the motor of capitalism and the ultimate source of all employment. One might reply, following Marx, that beyond a certain point (now on the horizon), nothing will stimulate investment. But that would imply rather different recommendations from Harrington’s; specifically, scrapping the market system and production for profit, and planning production directly to meet collectively agreed-upon needs.

The market economy is a self-adjusting system, all right; but the mechanism of adjustment is depressions. Milton Friedman and other tough-minded economists on the Right perceive this clearly enough (though they doubtless wouldn’t agree with Marx about why), and so they say: let’s have a real one. Harrington, like Keynes, implicitly defends capitalism against the charge of periodically bringing on the appalling and universal misery of depressions, by offering a program he claims will avoid them.

Unfortunately, as Marx saw, there is only one way to avoid depressions: to do away with the market, wage labor and commodity production. To Milton Friedman, this naturally means the Gulag. To one with a less impoverished conception of human possibilities, it means direct popular control of production, as expounded in this century by the hitherto marginal libertarian Left, including Luxemburg, Pannekoek, Korsch, Mattick and a few others. Remote from popular consciousness (and even mainstream Left consciousness) though it may be, this strain of libertarian communism is of ancient provenance. Harrington should heed this sardonic and prescient retort from an earlier democratic socialist, the Leveller Thomas Rainborough, made to Oliver Cromwell during capitalism’s first “decade of decision”: “Sir, I see that it is impossible to have liberty but all property must be taken away. If it be laid down for a rule, it must be so. … The poorest he that is in this realm hath a life to live as the greatest he…”