Developing Marx’s insights, Lenin and other Marxists rightly argued that capitalism had reached its ‘highest stage’ in the early twentieth century. It had fulfilled its historic mission to develop the productive forces by socialising production, albeit brutally and chaotically. Early competitive capitalism socialised labour between firms. Later monopoly capitalism deepened the technical division of labour within them. Thereafter, rather than any vigorous virtues of competition it ever had, capitalism increasingly manifested the decadent and rentier vices of monopoly, diverting resources from production and suppressing competition.

These overripe capitalisms plunged the world into the Thirty Years’ crisis and after 1945, capitalist economies could stabilise and even enjoy a three-decade-long ‘golden age’ only by borrowing social welfare, public ownership and planning, and in the case of Japan, South Korea and Taiwan, land reform from the policy-toolkits of Communist-led countries. These measures promoted growth, expanded working class consumption (compensating for lost colonial markets), and sponsored research and development for productivity growth. The US was forced to tolerate and even aid the very statist ‘miracle’ recoveries of rivals because they inoculated Western working classes and Eastern peasants from communism.

Its attractions were substantial. Communist-led countries enjoyed robust and enviably sustained growth, reinforced by technological innovation. The Soviet Union produced deterrent nuclear weapons by 1949, launched the Sputnik satellite in 1957 and put Yuri Gagarin into orbit in 1961, forcing the US into the envious vanity of landing ‘Man’ on the moon.

No wonder many other Third World countries turned to communism while the most committed of the Third World’s other efforts at autonomous national development also preferred Soviet or Chinese models to Western ‘development’ recommendations. Their success was considerable even if short of high expectations.

The postwar world had moved decisively leftward and so did the international order. Though the US sought to emulate nineteenth century UK-style world dominance pluripolarity had advanced too far. Its Cold War swagger notwithstanding, the US was constrained by rival capitalist powers pursuing state-led combined development, socialisms proliferating and stabilising and Third World countries asserting their sovereignty.

The Bretton Woods institutions of international governance, with the United Nations at their core, emphasised the equality and sovereignty of nations and non-aggression. The US managed to force the dollar on the world, but only by promising dollar-gold convertibility, a burden it would prove unable to bear. It managed to organise the North Atlantic Treaty Organisation (NATO) only to be deterred by the Warsaw Treaty Organisation. Capital controls, planning, economic and trade management, and fiscal and monetary policy geared towards full employment and development were normal and pervasive and confined capital in national cages.

Third World countries, with most at stake in these arrangements, built powerful international institutions and movements – the Bandung conference, the Non-Aligned Movement, the Group of 77 + China and the United Nations Conference on Trade and Development – to harness them for development, autonomy and South-South cooperation. The Five Principles of Peaceful Coexistence – respect for sovereignty and territorial integrity, non-aggression, non-interference in internal affairs, equality and mutual benefit, and peaceful coexistence – agreed by Zhou Enlai and Jawaharlal Nehru in 1954, inflicted setbacks on imperialism and capitalism.
While there were some left reversals, pre-eminently the Sino-Soviet split, most expected the world’s leftward inclination to continue into socialism.

However, capital remained in command of imperial economies. While it expanded productive capacity with the support of states, though increased working-class consumption and socialist and developmental advances vastly expanded demand, inevitably production outstripped demand. Productivity growth also peaked, despite considerable state support and, as highly organised Western working classes and Third World countries demanded higher wages and prices, they squeezed imperialist capital’s profits. As investment and growth slowed, imperialist economies entered a crisis: the Second Slump of the 1970s fatefully coinciding with US defeat in Vietnam.

Go to “Neoliberalism: Elixir for Senile Capitalism?”

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