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Review of Krishnan Nayar's Liberal Capitalist Democracy
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Capitalism unchained
Review of Krishnan Nayar's Liberal Capitalist Democracy
<https://substack.com/redirect/7ad00039-ea29-41c8-a291-03ea0fb5d192?j=eyJ1IjoiMjYyOXJiIn0.uLg4RcERtVngL0SfYMygUX2ErobTsrYoEX4q-vkmGI8>
Branko Milanovic
May 4
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Share
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Krishnan Nayar makes three key points in his recently published
<https://substack.com/redirect/0a29d6c7-8b93-4634-bb9e-b785887c2c74?j=eyJ1IjoiMjYyOXJiIn0.uLg4RcERtVngL0SfYMygUX2ErobTsrYoEX4q-vkmGI8>
Liberal Capitalist Democracy: The God that Failed. First, he argues that
bourgeois revolutions frequently failed to lead to democracy, a view strongly
embedded in the Anglo-American Whiggish history and in simplified Marxism.
Rather they provoked aristocratic reaction and the authoritarian economic
developments which in many respects were more successful than those of
bourgeois democracy. In other words, democracy does not come with capitalism
and, as we shall see, capitalism often destroys it. The authoritarian
modernizers (Nayar studies four: post-1848 Germany, Louis Napoleon’s France,
Bismarck’s Germany, and Stolypin’s Russia) enjoyed wide support among the
bourgeoisie who, fearful for its property, preferred to take the side of the
reforming aristocracy than to throw in its lot with the proletariat. This
indeed was one of the disappointments that surprised Marx and Engels in
1848-51, when they noticed that the propertied classes sided with Louis
Bonaparte rather than with the Parisian workers.
Second, Nayar argues that the unbridled Darwinian capitalism always leads to
social instability and anomie, and that social instability empowers right-wing
parties. He thus argues that Hitler's rise to power was made possible, or was
even caused, by the 1928-32 Depression, and not as some historians think by
either the fear of communism or bad tactics of the Communist Party which
instead of allying itself with Social Democrats fought them.
Third, and for the present time perhaps the most interesting, Nayar argues that
the success of Western capitalism in the period 1945-1980 cannot be explained
without taking into account the pressure that came on capitalism both from the
existence of the Soviet Union as an alternative model of society, and from
strong left-wing parties linked with trade unions in major European countries.
In that sense the period of les trente glorieuses which is now considered as
the most successful period of capitalism ever occurred against the normal
capitalist tendencies. It was an anomaly. It would not have happened without
socialist pressure and fear of riots, nationalizations, and, yes,
defenestrations. But with the rise of neoliberal economics after 1980
capitalism gladly went back to its original 19th and early 20th century
versions which regularly produce social instability and strife.
The lesson to be taken from Nayar is in some ways simple. Capitalism, if it's
not embedded in society and does not accept limits on what can be commodified,
has to go through recurrent slumps and prosperities. But these two cannot be
seen just as a plus and a minus that cancel each other out. Their political
effects are very different. And this is where Nayar takes to task many
economists who saw the 1920s Depression as a cleansing period of capitalism
eventually bound to result in a boom. The point is that here we deal with real
people and not mere numbers: many are unwilling to wait until the boom comes;
they may not even be around for its Coming. Thus they vote for radical
solutions or go out in the street. This is something that is often forgotten by
economists who treat individuals’ incomes over the long-term as a mathematical
summation without realizing that the political effects of the minuses are very
different from those of the pluses.
If we look at the three main theses in Nayar’ s book none of them is new. But
they are when strung together and placed in their historical context. The
authoritarian modernizations have of course been a subject of many books some
of which, like
<https://substack.com/redirect/6cdc3db6-b9b7-4c0f-8d62-fb5a36db8bde?j=eyJ1IjoiMjYyOXJiIn0.uLg4RcERtVngL0SfYMygUX2ErobTsrYoEX4q-vkmGI8>
Barrington Moore’s classic, are cited here. The rise of fascism was, and is,
increasingly linked with austerity policies as was recently done by Mark
Blyth’s
<https://substack.com/redirect/63fab11e-46cb-4f2a-bd09-887a3c48b77e?j=eyJ1IjoiMjYyOXJiIn0.uLg4RcERtVngL0SfYMygUX2ErobTsrYoEX4q-vkmGI8>
Austerity: History of a Dangerous Idea and Clara Mattei’s
<https://substack.com/redirect/874f6a63-2d7b-497f-bb8d-6d3ed52f5fe0?j=eyJ1IjoiMjYyOXJiIn0.uLg4RcERtVngL0SfYMygUX2ErobTsrYoEX4q-vkmGI8>
The Capital Order: How Economists Invented Austerity and Paved the Way to
Fascism. Nayar may perhaps be overstating his case by claiming that many
historians such Ian Kershaw and Joachim Fest tend to ignore the economic causes
of the rise of Nazism because they take capitalist economy as given. This could
be true for some contemporary observers like Churchill as well as Keynes who
seems to have been oblivious to the political effects of the crisis until
comparatively late, but more serious historians do acknowledge a huge impact of
depression. It is indeed hard not to do so when Germany's GDP declined by
one-fifth, and more than one-quarter of its labor force were unemployed.
However there is a more subtle argument in Nayar which deals with the position
of the Communist and Social Democratic parties in Germany. Unlike many
historians who blame Stalin for the decision to direct KPD’s animus not
towards fascists but towards those whom Stalin called “social fascists”,
meaning SPD, Nayar thinks that the collaboration between the two parties was
impossible given their different constituencies and positions within the Weimar
system. SPD was strongly embedded in the Weimar system. It participated in the
austerity policies, supported spending cuts and the balanced budget, and was
involved in the decision not to extend unemployment benefits which triggered
yet another fall of government and the elections that finally brought Nazis to
power (thanks of course too to the behind-the-scene machinations of von Papen
and Hindenburg’s son). KPD, on the other hand, had its ranks swelled by the
unemployed, that is, by the same people whom Social Democrat were driving into
the street. It was impossible for the two parties to collaborate, whatever
Stalin wanted or not. For sure, the lack of cooperation opened the way for
Hitler but without knowing the future which of course no participant in the
political life can know, there is simply no way that the two large left-wing
parties could ever join forces.
Nayar’s third point about the indirect support that the communist regimes and
the left-wing parties provided to capitalism and capitalists, by pushing them
to reform the system and realize that without much stronger social policies,
they risk being overwhelmed by communist parties, is also a point that is
increasingly recognized. Here is the link to a very important
<https://substack.com/redirect/32aecfe1-ddf9-4599-8fcb-048e8621155f?j=eyJ1IjoiMjYyOXJiIn0.uLg4RcERtVngL0SfYMygUX2ErobTsrYoEX4q-vkmGI8>
empirical paper by André Albaquerque Sant’Anna that documents that the welfare
policies were more strongly developed in countries where either socialist or
communist parties were stronger or the threat of the Soviet Union was greater.
Nayar quotes a number of British politicians and intellectuals who make the
same point even if sometimes unaware of doing it. He rightly criticizes Tony
Judt, who, bizarrely, refused to accept it.
The Soviet experience and its international importance did not play a role only
in Western Europe; it did not play the role only in Italy which had at one
point one-third of its voting population support the Communist Party, or in
France where the share of the communists oscillated around 20%, but also played
an important role elsewhere, including in the beginnings of the Dutch planning
or Indian five-year plans. So there is I think no serious contest on the
matter. Nayar might pick on some historians who are singularly blind to reality
but the reasonable view is that the (much embellished) Soviet experience did
have a strong impact, indirectly promoting policies which would never have
happened otherwise and would have been discarded by the capitalist class
out-of-hand.
In that part of the book Nayar is scathing about the disconnect of the
so-called Marxist intellectuals with reality in their own countries and the
world. He rightly ascribes that disconnect to inability to accept that
capitalism has been, even if reluctantly, accepted by the majority of the
population including by majority of workers, that real incomes had been rising,
and that the typical communist party’s role which saw itself as leading the
working class in an antagonistic relationship with bourgeoisie was simply
obsolete. Consequently, Marxist intellectuals became what Nayar calls
“intellectual playboys” without any discernible impact on politics. To us today
they appear, and they probably were at the time, laughable. Had they been
really interested in Marxism, and not in philosophizing for a few, had they
been interested in the topics that preoccupied Marx, Engels, Lenin, Trotsky,
Kautsky etc., and that had to do with the development of capitalism and lives
of normal people, they would have noticed changes that had occurred between
1945 and 1980. The size of the working class had declined, real incomes have
risen, the power of trade unions was vanishing, large companies no longer
exerted the role which they had in the past, and perhaps most importantly the
technological change became very different from the technological progress that
was known in the 19th and early 20th century. All these developments simply
escaped the attention of the (quasi) Marxist set mentioned by Nayar: Sartre,
Althusser, Marcuse. (To be fair, Nayar’s selection is itself narrow, perhaps
too much influenced by the Londonese (my coinage) and Parisian salons. There
were many on the left who saw these developments, but it is true they were less
popular among the juventud rebelde of the 1960s and 1970s than the people
mentioned here.)
They missed the change in capitalism, but capitalists anyway did not pay much
attention to them. Neoliberalism felt emboldened by the internal dynamics that
marginalized the working class and then by the precipitous fall of the Soviet
Union and communism. Once capitalism was without a rival, it promptly went back
to its past policies, manifesting many of its worst features that were
forgotten during the trente gloirieuses. Marx, with his critique of capitalism,
now became much more our contemporary than the myriad of other philosophers,
Garton Ash, Ignatieff, Fukuyama e tutti quanti, who oblivious of history’s
lessons celebrated the triumph of capitalism in no less unrealistic prose than
Sartre and Marcuse reviled it thirty years ago.
The question which is on everybody’s mind after having read Nayar’s book is,
What next? Because if capitalism continues along the current trajectory that
Nayar believes almost preordained, it must again produce instability and
rejection. And that would—again--play into the hands of right- wing movements.
We may replay a century later the same story that we have seen in the 1920’s
Europe. History seldom repeats itself word-by-word or drum-by-drum: we are not
going to see the black shirts or different-color uniformed movements which
inundated Europe in the ‘twenties but we might see, as we already do, parties
with roots in nationalist or quasi fascist movements coming back to power and
undoing globalization, fighting immigrants, celebrating nationalism, cutting
access to welfare benefits to those who are not “native” enough. Is it fascism?
Its light variety? This is the melancholy conclusion that can be made based on
this sweeping study of western political and economic developments in the past
two centuries.
The book is impressive in the amount of detail it marshals, in Nayar’s
erudition and his eye for the unusual and the absurd, and his take-no-prisoner
style. However, there are also limits: the book deals only with West European
countries, and only a select few of them (UK, France, Germany), and just in one
segment with Russian pre revolutionary developments. It is also true that the
selection of intellectuals that are targeted by Nayar’s often acerbic, and in
some cases savage or funny, commentary is limited to the relatively small group
of French and British intellectuals, sprinkled, for a good measure, by a few
Americans. The European intellectual scene was much broader than the people who
were mentioned in the book. The book also does not deal with the rest of the
world: Africa and the anti-colonial struggle are not present at all; Latin
America is entirely absent; India is just mentioned in a few sentences; China
is non-existent except for the Korean war. So, it is a book that in its
geographical, as well as ideological, scope, and the selection of the people
whom Nayar excoriates, is limited. Nevertheless, taking these limits into
account it deals in a very persuasive manner with a critically important period
in western political history and makes us rather fearful of the future.
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Restack
© 2023 Branko Milanovic
548 Market Street PMB 72296, San Francisco, CA 94104
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