Capital strike. Now that’s a name I’ve not heard in a long time. But it’s not dead . . . not yet.
The idea of a “capital strike” has been around forever. It’s the obvious complement to the labor strike: just as workers can shut down production by refusing to come to work, capital can shut down the economy by refusing to invest and hire workers. You can find discussions of capital strikes during the Great Depression. But as a theoretical concept, the capital strike was popularized by the neo-Marxist theorists of the 1970s and 1980s. Adam Przeworksi used it in Capitalism and Social Democracy to explain why reformist projects of redistribution ultimately run up against a revolutionary limit. He notes that:
Under normal circumstances it can be expected that the increase of aggregate demand should stimulate investment and employment. Redistributional measures . . . are usually justified by appeals not only to justice but also to efficiency. (Przeworski, p. 44)
But as long as investment decisions are left in private hands, there’s a problem:
Such a program cannot be successful, however, when economic demands grow spontaneously and when they are accompanied by structural transformations. . . . Increased government intervention means precisely that non-market rationality is imposed upon the process of accumulation, that is, that capitalists are forced to make allocations which are suboptimal with regard to profit. Measures of nationalization, distribution of land, and monopolization of credit and foreign exchange by the state threaten the very institution of private profit. Under such circumstances, rational private capitalists will not invest. (p. 45)
Likewise, Claus Offe used the possibility of capital strike to identify the limits of the welfare state:
The constraints that the capitalist economy imposes upon the state, thereby disorganizing its capacity to maintain ‘order’ by responding effectively to political demands and requirements, are based upon capital’s power to obstruct. As long as investment decisions are ‘free’, that is, as long as they obey the rule of maximum expected profitability, the decisive variable constraining ‘realistic’ political opinions is what Kalecki has called ‘business confidence’. The ultimate political sanction is non-investment or the threat of it (just as much as the ultimate source of power of the individual capitalist vis-à-vis the individual worker is non-employment or termination of employment). The foundation of capitalist power and domination is this institutionalized right of capital withdrawal, of which economic crisis is nothing but the aggregate manifestation. (Offe, Contradictions of the Welfare State, p. 244)
Today, however, this leftist argument isn’t heard much, probably because real challenges to the power of capital are so thin on the ground. But lately I’ve noticed that “capital strike,” like “capitalism” before it, seems to have gone from a left-wing pejorative to a term that is proudly claimed by Capital and its agents. Here’s Charles Krauthammer explaining that Capital is on strike against the Obama administration:
There are three major areas a corporation, small or large, has to worry about: health care costs, energy costs and the cost of money. In each of these, the administration either has or is planning regulations worth thousands of pages which (a) are going to raise costs, as we know, but also are going to interact in ways that nobody understands and are going to create uncertainty. If you’re trying to figure out who you’re going to hire and how many, and you have no idea if you’re going to be able to afford the extra health care costs, you’re not going to hire. With energy and cap and trade, you know it’s going to increase the cost of energy, and, with the cost of money, the financial regulations are not just going to affect the big banks, but this consumer agency is going to involve itself and regulate every kind of lending, from auto dealers to shirt makers. So, in every area, there’s going to be an increase in uncertainty, you know the increase in regulation. And when you don’t know what’s going to happen, you don’t invest. We are having a capital strike.
And just the other day, John Boehner said in a speech that “job creators” (Republican code for capitalists) are on strike:
I can tell you the American people — private-sector job creators in particular — are rattled by what they’ve seen out of this town over the last few years. My worry is that for American job creators, all the uncertainty is turning to fear that this toxic environment for job creation is a permanent state. Job creators in America are essentially on strike. The problem is not confusion about the policies. . .the problem is the policies.
Thinking in terms of a capital strike is also helpful in understanding the debate in economics between, on the one hand, liberal technocrats like Brad DeLong and Paul Krugman, and on the other hand reactionary economists like Robert Lucas and Robert Barro. Barro, for example, argues that investment requires “Stable expectations of a sound economic environment, including the long-run path of tax rates, regulations and so on.” He then proposes a series of policies that he believes will reassure investors and create such a “sound” economy, including cutting Social Security, abolishing corporate and estate taxes, and of course cutting income taxes.
In response, DeLong, Krugman, and others have spent plenty of time showing that business is not overly worried about uncertainty, but rather is concerned about weak consumer demand. Tax rates are at historically low levels; the rich are richer than ever; corporations are sitting on their cash hoards; and so on. All true: but none of these arguments really matter.
People like Barro aren’t neutral, objective economic analysts — they’re advocates for one side in a power struggle between capital and labor. It may well be true that capital is not, in fact, on strike against taxes and regulations. Given the incoherency of the capitalist class that I’ve previously discussed, it’s hard to imagine capital getting its act together in this way. And for all the fulmination of the teabaggers, we’re certainly not in the position Przeworski described, where “the state threaten[s] the very institution of private profit.” But just as in a labor strike, sometimes you don’t actually have to go out on the picket line: you just have to convince the other side that you’re ready and willing to strike. Just as a union might use a strike authorization vote to increase its leverage at the bargaining table, so the the right’s economic propaganda is designed to tilt the political playing field away from labor and toward capital.
But “capital strike” started out as the left’s term, and it might be to our benefit to reclaim it. Doing so would give us an additional answer to the austerity faction, one that goes one step beyond the technocratic liberal answer that “there is no capital strike/all we need is to increase aggregate demand.” We can go on to point out that, if there is a capital strike, that doesn’t imply that we should just give in to Capital. When labor goes on strike, the boss can give in to the workers’ demands, but the alternative is for the Pinkertons or the President to break the union. Likewise, when faced with a capital strike, we have alternatives to capitulation; these range in severity from wealth redistribution, through to debt forgiveness, and all the way to outright expropriation.