My starting point for this article is a ground-breaking study by Joseph Stromberg. In "The Role of State Monopoly Capitalism in the American Empire," (1) Stromberg provides an insightful Austrian analysis of state capitalist cartelization as the cause of crises of overproduction and surplus capital. In the course of his argument, he makes reference to Progressive/Revisionist and (to a lesser extent) Marxist theories of imperialism, and analyzes their parallels with the Austrian view.

Although the state capitalism of the twentieth century (as opposed to the earlier misnamed "laissez faire" variant, in which the statist character of the system was largely disguised as a "neutral" legal framework) had its roots in the mid-nineteenth century, it received great impetus as an elite ideology during the depression of the 1890s. From that time on, the problems of overproduction and surplus capital, the danger of domestic class warfare, and the need for the state to solve them, figured large in the perception of the corporate elite. The shift in elite consensus in the 1890s (toward corporate liberalism and foreign expansion) was as profound as that of the 1970s, when reaction to wildcat strikes, the "crisis of governability," and the looming "capital shortage" led the power elite to abandon corporate liberalism in favor of neo-liberalism.

But as Stromberg argues, the American ruling class was wrong in seeing the crises of overproduction and surplus capital as "natural or inevitable outgrowths of a market society." (2) They were, rather, the effects of regulatory cartelization of the economy by state capitalist policies.

The effects of the state's subsidies and regulations are 1) to encourage creation of production facilities on such a large scale that they are not viable in a free market, and cannot dispose of their full product domestically; 2) to promote monopoly prices above market clearing levels; and 3) to set up market entry barriers and put new or smaller firms at a competitive disadvantage, so as to deny adequate domestic outlets for investment capital. The result is a crisis of overproduction and surplus capital, and a spiraling process of increasing statism as politically connected corporate interests act through the state to resolve the crisis.

Although I cannot praise Stomberg enough for this contribution, which I use as a starting-point, I diverge from his analysis in several ways. Stromberg, himself a Rothbardian anarcho-capitalist affiliated with the Mises Institute, relies mainly on Schumpeter's analysis of "export-dependent monopoly capitalism," as read through a Misean/Rothbardian lens. Secondarily, he relies on "corporate liberal" historians like Williams, Kolko and Weinstein. To the extent that he refers to Marxist analyses of monopoly capital, it is mainly in passing, if not utterly dismissive. But such theorists (especially Baran and Sweezy of the Monthly Review group, James O'Connor, and Paul Mattick) have parallelled his own Austrian analysis in interesting ways, and have provided unique insights that are complementary to the Austrian position.

Starting with Stromberg's article as my point of departure, I will integrate both his and these other analyses into my own mutualist framework. More importantly, as a mutualist, I go much further than Stromberg and the Austrians in dissociating the present corporate system from a genuine free market. Following the economic arguments of Benjamin Tucker and other mutualists, I distinguish capitalism from a genuine free market, and treat the state capitalism of the twentieth century as the natural outgrowth of a system which was statist from its very beginning.

Stromberg's argument is based on Murray Rothbard's Austrian theory of regulatory cartelization. Economists of the Austrian school, especially Ludwig von Mises and his disciple Rothbard, have taken a view of state capitalism in many respects resembling that of the New Left. That is, both groups portray it as a movement of large-scale, organized capital to obtain its profits through state intervention into the economy, although the regulations entailed in this project are usually sold to the public as "progressive" restraints on big business. This parallelism between the analyses of the New Left and the libertarian Right was capitalized upon by Rothbard in his own overtures to the Left. In such projects as his journal Left and Right, and in the anthology A New History of Leviathan (coedited with New Leftist Ronald Radosh), he sought an alliance of the libertarian Left and Right against the corporate state.

Rothbard treated the "war collectivism" of World War I as a prototype for twentieth century state capitalism. He described it as

This view of state capitalism, shared by New Leftists and Austrians, flies in the face of the dominant American ideological framework. Before we can analyze the rise of statist monopoly capitalism in the twentieth century, we must rid ourselves of this pernicious conventional wisdom, common to mainstream left and right. Both mainline "conservatives" and "liberals" share the same mirror-imaged view of the world (but with "good guys" and "bad guys" reversed), in which the growth of the welfare and regulatory state reflected a desire to restrain the power of big business. According to this commonly accepted version of history, the Progressive and New Deal programs were forced on corporate interests from outside, and against their will. In this picture of the world, big government is a populist "countervailing power" against the "economic royalists." This picture of the world is shared by Randroids and Chicago boys on the right, who fulminate against "looting" by "anti-capitalist" collectivists; and by NPR liberals who confuse the New Deal with the Second Advent. It is the official ideology of the publick skool establishment, whose history texts recount heroic legends of "trust buster" TR combating the "malefactors of great wealth," and Upton Sinclair's crusade against the meat packers. It is expressed in almost identical terms in right-wing home school texts by Clarence Carson and the like, who bemoan the defeat of business at the hands of the collectivist state.

The conventional understanding of government regulation was succinctly stated by Arthur Schlesinger, Jr., the foremost spokesman for corporate liberalism: "Liberalism in America has ordinarily been the movement on the part of the other sections of society to restrain the power of the business community." (4) Mainstream liberals and conservatives may disagree on who the "bad guy" is in this scenario, but they are largely in agreement on the anti-business motivation. For example, Theodore Levitt of the Harvard Business Review lamented in 1968: "Business has not really won or had its way in connection with even a single piece of proposed regulatory or social legislation in the last three-quarters of a century." (5)

The problem with these conventional assessments is that they are an almost exact reverse of the truth. The New Left has produced massive amounts of evidence to the contrary, virtually demolishing the official version of American history. (The problem, as in most cases of "paradigm shift," is that the consensus reality doesn't know it's dead yet). Scholars like James Weinstein, Gabriel Kolko and William Appleman Williams, in their historical analyses of "corporate liberalism," have demonstrated that the main forces behind both Progressive and New Deal "reforms" were powerful corporate interests. To the extent that big business protested the New Deal in fact, it was a case of Brer Rabbit's plea not to fling him in the briar patch.

The following is intended only as a brief survey of the development of the corporate liberal regime, and an introduction to the New Left (and Austrian) analysis of it.

Despite Schlesinger's aura of "idealism" surrounding the twentieth century welfare/regulatory state, it was in fact pioneered by the Junker Socialism of Prussia--the work of that renowned New Age tree-hugger, Bismarck. The mainline socialist movement at the turn of the century (i.e., the part still controlled by actual workers, and not coopted by Fabian intellectuals) denounced the tendency to equate such measures with socialism, instead calling it "state socialism." The International Socialist Review in 1912, for example, warned workers not to be fooled into identifying social insurance or the nationalization of industry with "socialism." Such state programs as workers' compensation, old age and health insurance, were simply measures to strengthen and stabilize capitalism. And nationalization simply reflected the capitalist's realization "that he can carry on certain portions of the production process more efficiently through his government than through private corporations..... Some muddleheads find that will be Socialism, but the capitalist knows better." (6) Friedrich Engels took this view of public ownership:

The rise of "corporate liberalism" as an ideology at the turn of the twentieth century was brilliantly detailed in James Weinstein's The Corporate Ideal in the Liberal State. (8) It was reflected in the so-called "Progressive" movement in the U.S., and by Fabianism, the closest British parallel. The ideology was in many ways an expression of the world view of "New Class" apparatchiks, whose chief values were planning and the cult of "professionalism," and who saw the lower orders as human raw material to be managed for their own good. This class is quite close to the social base for the Insoc movement that Orwell described in 1984:

The key to efficiency, for the New Class, was to remove as much of life as possible from the domain of "politics" (that is, interference by non-professionals) and to place it under the control of competent authorities. "Democracy" was recast as a periodic legitimation ritual, with the individual returning between elections to his proper role of sitting down and shutting up. In virtually every area of life, the average citizen was to be transformed from Jefferson's self-sufficient and resourceful yeoman into a client of some bureaucracy or other. The educational system was designed to render him a passive and easily managed recipient of the "services" of one institution after another. In every area of life, as Ivan Illich wrote, the citizen/subject/resource was taught to "confuse process and substance."

As a corollary of this principle, the public was taught to "view doctoring oneself as irresponsible, learning on one's own as unreliable, and community organization, when not paid for by those in authority, as a form of aggression or subversion." (10)

Although the corporate liberal ideology is associated with the New Class world view, it intersected in many ways with that of "enlightened" employers who saw paternalism as a way of getting more out of workers. Much of corporate leadership at the turn of the century

And the New Class mania for planning and rationality was reflected within the corporation in the Taylorist/Fordist cult of "scientific management," in which the workman was deskilled and control of the production process was shifted upward into the white collar hierarchy of managers and engineers. (12)

The New Class intellectuals, despite their prominent role in formulating the ideology, were coopted as a decidedly junior partner of the corporate elite. As Hilaire Belloc and William English Walling perceived, "Progressives" and Fabians valued regimentation and centralized control much more than their allegedly "socialist" economic projects. They recognized, for the most part, that expropriation of the capitalists was impossible in the real world. The large capitalists, in turn, recognized the value of the welfare and regulatory state for maintaining social stability and control, and for making possible the political extraction of profits in the name of egalitarian values. The result was a devil's bargain by which the working class was guaranteed a minimum level of comfort and security, in return for which the large corporations were enabled to extract profits through the state. Of the "Progressive" intellectual, Belloc wrote:

The New Class, its appetite for power satiated with petty despotisms in the departments of education and human services, was put to work on its primary mission of cartelizing the economy for the profit of the corporate ruling class. Its "populist" rhetoric was harnessed to sell state capitalism to the masses. The overeducated yahoos admirably fitted the role of useful idiots for their masters.

But whatever the "idealistic" motivations of the social engineers themselves, their program was implemented to the extent that it furthered the material interests of monopoly capital. Kolko used the term "political capitalism" to describe the general objectives big business pursued through the "Progressive" legislative agenda:

From the turn of the twentieth century on, there was a series of attempts by corporate leaders to create some institutional structure by which price competition could be regulated and their respective market shares stabilized. "It was then," Paul Sweezy wrote,

But merely private attempts at cartelization before the Progressive Era--namely the so-called "trusts"--were miserable failures, according to Kolko. The dominant trend at the turn of the century--despite the effects of tariffs, patents, railroad subsidies, and other existing forms of statism--was competition. The trust movement was an attempt to cartelize the economy through such voluntary and private means as mergers, acquisitions, and price collusion. But the over-leveraged and over-capitalized trusts were even less efficient than before, and steadily lost market share at the hands of their smaller, more efficient competitors. Standard Oil and U.S. Steel, immediately after their formation, began a process of eroding market share. In the face of this resounding failure, big business acted through the state to cartelize itself--hence, the Progressive regulatory agenda. "Ironically, contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, but the lack of it." (16)

The FTC and Clayton Acts reversed this long trend toward competition and loss of market share and made stability possible.

The Federal Trade Commission created a hospitable atmosphere for trade associations and their efforts to prevent price cutting. (18) The two pieces of legislation accomplished what the trusts had been unable to: it enabled a handful of firms in each industry to stabilize their market share and to maintain an oligopoly structure between them. This oligopoly pattern has remained stable ever since.

In addition, the various safety and quality regulations introduced during this period also had the effect of cartelizing the market. They served essentially the same purpose as the later attempts in the Wilson war economy to reduce the variety of styles and features available in product lines, in the name of "efficiency." Any action by the state to impose a uniform standard of quality (e.g. safety), across the board, necessarily eliminates safety as a competitive issue between firms. Thus, the industry is partially cartelized, to the very same extent that would have happened had all the firms in it adopted a uniform level of quality standards, and agreed to stop competing in that area. A regulation, in essence, is a state-enforced cartel in which the members agree to cease competing in a particular area of quality or safety, and instead agree on a uniform standard. And unlike non-state-enforced cartels, no member can seek an advantage by defecting. Similarly, the provision of services by the state (R&D funding, for example) removes them as components of price in cost competition between firms, and places them in the realm of guaranteed income to all firms in a market alike. Whether through regulations or direct state subsidies to various forms of accumulation, the corporations act through the state to carry out some activities jointly, and to restrict competition to selected areas.

And Kolko provided abundant evidence that the main force behind this entire legislative agenda was big business. The Meat Inspection Act, for instance, was passed primarily at the behest of the big meat packers. In the 1880s, repeated scandals involving tainted meat resulted in U.S. firms being shut out of several European markets. The big packers turned to the U.S. government to conduct inspections on exported meat. By carrying out this function jointly, through the state, they removed quality inspection as a competitive issue between them, and the U.S. government provided a seal of approval in much the same way a trade association would--but at public expense. The problem with this early inspection regime was that only the largest packers were involved in the export trade; mandatory inspections therefore gave a competitive advantage to the small firms that supplied only the domestic market. The main motive behind Roosevelt's Meat Inspection Act was to bring the small packers into the inspection regime, and thereby end the competitive disability it imposed on large firms. Upton Sinclair simply served as an unwitting shill for the meat-packing industry. (20) This pattern was repeated, in its essential form, in virtually every component of the "Progressive" agenda.

The same leitmotif reappears in the New Deal. The core of business support for the New Deal was, as Ronald Radosh described it, "leading moderate big businessmen and liberal-minded lawyers from large corporate enterprises." (21) Thomas Ferguson and Joel Rogers described them more specifically as "a new power bloc of capital-intensive industries, investment banks, and internationally oriented commercial banks." (22)

Labor was a relatively minor part of the total cost package of such businesses; at the same time, capital-intensive industry, as Galbraith pointed out in his analysis of the "technostructure," depended on long-term stability and predictability for planning high-tech production. Therefore, this segment of big business was willing to trade higher wages for social peace in the workplace. (23) The roots of this faction can be traced to the relatively "progressive" employers described by James Weinstein in his account of the National Civic Federation at the turn of the century, who were willing to engage in collective bargaining over wages and working conditions in return for uncontested management control of the workplace. (24)

This attitude was at the root of the Taylorist/Fordist system, in which the labor bureaucrats agreed to let management manage, so long as labor got an adequate share of the pie. (25) Such a social contract was most emphatically in the interests of large corporations. The sitdown movement in the auto industry and the organizing strikes among West coast longshoremen were virtual revolutions among rank and file workers on the shop floor. In many cases, they were turning into regional general strikes. The Wagner Act domesticated this revolution and brought it under the control of professional labor bureaucrats.

Industrial unionism, from the employer's viewpoint, had the advantage over craft unionism of providing a single bargaining agent with which management could deal. One of the reasons for the popularity of "company unions" among large corporations, besides the obvious advantages in pliability, was the fact that they were an alternative to the host of separate craft unions of the AFL. Even in terms of pliability, the industrial unions of the Thirties had some of the advantages of company unions. By bringing collective bargaining under the aegis of federal labor law, corporate management was able to use union leadership to discipline their own rank and file, and to use the federal courts as a mechanism of enforcement.

And moderate members of the corporate elite also gained reassurance from the earlier British experience in accepting collective bargaining. Collective bargaining did not affect the distribution of wealth, for one thing: "Labor gains were made due to the general growth in wealth and at the expense of the consumer, which would mean small businessmen, pensioners, farmers, and nonunionized white collar employees." (Not to mention a large contingent of unskilled laborers and lumpenproles without bargaining leverage against the employing classes). And the British found that firms in a position of oligopoly, with a relatively inelastic demand, were able to pass increased labor costs on to the consumer at virtually no cost to themselves. (27)

The Wagner Act served the central purposes of the corporate elite. To some extent it was a response to mass pressure from below. But the decision on whether and how to respond, and the form of the response, and the implementation of the response, were all firmly in the hands of the corporate elite. According to Domhoff (writing in The Higher Circles), "The benefits to capital were several: greater efficiency and productivity from labor, less labor turnover, the disciplining of the labor force by labor unions, the possibility of planning labor costs over the long run, and the dampening of radical doctrines." (28) James O'Connor described it this way: "From the standpoint of monopoly capital the main function of unions was... to inhibit disruptive, spontaneous rank-and-file activity (e.g., wildcat strikes and slowdowns) and to maintain labor discipline in general. In other words, unions were... the guarantors of 'managerial prerogatives.'" (29) The objectives of stability and productivity were more likely to be met by such a limited Taylorist social compact than by a return to the labor violence and state repression of the late nineteenth century.

In The Power Elite and the State, Domhoff retreated to a slightly more nuanced position. (30) It was true, he admitted, that a majority of large corporations opposed the Wagner Act as it was actually presented. But the basic principles of collective bargaining embodied in it had been the outcome of decades of corporate liberal theory and practice, worked out through policy networks in which "progressive" large corporations had played a leading role; the National Civic Federation, as Weinstein described its career, was a typical example of such networks. The motives of those in the Roosevelt administration who framed the Wagner Act were very much in the mainstream of corporate liberalism. Although they may have been ambivalent about the specific form of FDR's labor legislation, Swope and his corporate fellow travellers had played the major role in formulating the principles behind it. Whatever individual business leaders thought of Wagner, it was drafted by mainstream corporate lawyers who were products of the ideological climate created by those same business leaders; and it was drafted with a view to their interests. Although it was not accepted by big business as a whole, it was largely the creation of representatives of big business interests whose understanding of the act's purpose was largely the same as those outlined in Domhoff's quote above from The Higher Circles. And although it was designed to contain the threat of working class power, it benefited by large-scale working class support as the best deal they were likely to get. Finally, the southern segment of the ruling class was willing to go along with it because it specifically exempted agricultural laborers.

Among the other benefits of labor legislation, corporate interests are able to rely on the state's police powers to impose an authoritarian character on labor relations. In the increasingly statist system, Bukharin pointed out in his analysis of state capitalism almost a century ago,

The relevance of this line of analysis to America can be seen with a cursory look at Cleveland's response to the Pullman strike, the Railway Labor Relations Act and Taft-Hartley, and Truman's and Bush's threats to use soldiers as scabs in, respectively, the steelworkers' and longshoremen's strikes.

The Social Security Act was the other major part of the New Deal agenda. In The Higher Circles, Domhoff described its functioning in language much like his characterization of the Wagner Act. Its most important result

In his later work The Power Elite and the State, Domhoff undertook a much more thorough analysis, with a literature review of his structuralist Marxists critics, that essentially verified his earlier position. (33)

The New Deal and Great Society welfare state, according to Frances Piven and Richard Cloward, served a similar function to that of Social Security. It blunted the danger of mass political radicalism resulting from widespread homelessness and starvation. It provided social control by bringing the underclass under the supervision of an army of intrusive, paternalistic social workers and welfare case workers. (34) And like Social Security, it put a floor on aggregate demand.

To the extent that the welfare and labor provisions of FDR's New Deal have benefitted average people, the situation resembles a fable of Tolstoy's, in which a humane farmer, at great expense to himself, made endless efforts to render the lot of his cattle more pleasant. A perplexed witness to his bovine welfare state asked him, "Instead of spending all this time and effort on enlarging the pen, piping in music, and so forth, why don't you just tear down the fence?" The farmer replied, "Because then I couldn't milk them!" The capitalist supporters of the welare state are like an enlightened farmer who understands that his livestock will produce more for him, in the long run, if they are well treated.

Hilaire Belloc speculated that the industrial serfdom in his Servile State would only be stable if the State subjected the unemployable underclass to "corrective" treatment in forced labor camps, and forced everyone even marginally employable into a job, as a deterrent to deliberate parasitism or malingering. Society would "find itself" under the "necessity,"

This society would be organized on the pattern of Anthony Burgess' decaying welfare state, in which "everyone not a child, or with child, must be employed." But Belloc's speculation was not idle; since Fabians like the Webbs and H.G. Wells had proposed just such labor camps for the underclass in their paternalistic utopia. (36)

Although we are still far from a formal requirement to be either employed or subjected to remedial labor by the State, a number of intersecting State policies have that tendency. For example, the imposition of compulsory unemployment insurance, with the State as arbiter of when one qualifies to collect:

Still another measure with this tendency is "workfare," coupled with subsidies to employers who hire the underclass as peon labor. Vagrancy laws and legal restrictions on jitney services, self-built temporary shelters, etc., serve to reduce the range of options for independent subsistence. And finally, the prison-industrial complex, as "employer" for the nearly half of its "clients" guilty of only consensual market transactions, is in effect a forced labor camp absorbing a major segment of the underclass.

The culmination of FDR's state capitalism (of course) was the military-industrial complex which arose from World War II, and has continued ever since. It has since been described as "military Keynesianism," or a "perpetual war economy." A first step in realizing the monumental scale of the war economy's effect is to consider that the total value of plant and equipment in the United States increased by about two-thirds (from $40 to $66 billion) between 1939 and 1945, most of it a taxpayer "gift" of forced investment funds provided to the country's largest corporations. (38) Profit was virtually guaranteed on war production through "cost-plus" contracts. (39)

Demobilization of the war economy after 1945 very nearly threw the overbuilt and government-dependent industrial sector into a renewed depression. For example, in Harry Truman and the War Scare of 1948, Frank Kofsky described the aircraft industry as spiraliing into red ink after the end of the war, and on the verge of bankruptcy when it was rescued by Truman's new bout of Cold War spending on heavy bombers. (40)

The Cold War restored the corporate economy's heavy reliance on the state as a source of guaranteed sales. Charles Nathanson argued that "one conclusion is inescapable: major firms with huge aggregations of corporate capital owe their survival after World War II to the Cold War...." (41) For example, David Noble pointed out that civilian jumbo jets would never have existed without the government's heavy bomber contracts. The production runs for the civilian market alone were too small to pay for the complex and expensive machine tools. The 747 is essentially a spinoff of military production. (42)

The heavy industrial and high tech sectors were given a virtually guaranteed outlet, not only by U.S. military procurement, but by grants and loan guarantees for foreign military sales under the Military Assistance Program. Although apologists for the military-industrial complex have tried to stress the relatively small fraction of total production occupied by military goods, it makes more sense to compare the volume of military procurement to the amount of idle capacity. Military production runs amounting to a minor percentage of total production might absorb a major part of total excess production capacity, and have a huge effect on reducing unit costs. And the rate of profit on military contracts tends to be quite a bit higher, given the fact that military goods have no "standard" market price, and the fact that prices are set by political means (as periodic Pentagon budget scandals should tell us). (43)

But the importance of the state as a purchaser was eclipsed by its relationship to the producers themselves, as Charles Nathanson pointed out. The research and development process was heavily militarized by the Cold War "military-R&D complex." Military R&D often results in basic, general use technologies with broad civilian applications. Technologies originally developed for the Pentagon have often become the basis for entire categories of consumer goods. (44) The general effect has been to "substiantially [eliminate] the major risk area of capitalism: the development of and experimentation with new processes of production and new products." (45)

This is the case in electronics especially, where many products originally developed by military R&D "have become the new commercial growth areas of the economy." (46) Transistors and other forms of miniaturized circuitry were developed primarily with Pentagon research money. The federal government was the primary market for large mainframe computers in the early days of the industry; without government contracts, the industry might never have had sufficient production runs to adopt mass production and reduce unit costs low enough to enter the private market. And the infrastructure for the worldwide web itself was created by the Pentagon's DARPA, originally as a redundant global communications system that could survive a nuclear war. Any implied commentary on the career of Bill Gates is, of course, unintended.

Overall, Nathanson estimated, industry depended on military funding for around 60% of its research and development spending; but this figure is considerably understated by the fact that a significant part of nominally civillian R&D spending is aimed at developing civilian applications for military technology. (47) It is also understated by the fact that military R&D is often used for developing production technologies (like automated control systems in the machine tool industry) that become the basis for production methods throughout the civilian sector.

Seymour Melman described the "permanent war economy" as a privately-owned, centrally-planned economy that included most heavy manufacturing and high tech industry. This "state-controlled economy" was based on the principles of "maximization of costs and of government subsidies." (48)

The state capitalism of the twentieth century differed fundamentally from the misnamed "laissez-faire" capitalism of the nineteenth century in two regards: 1) the growth of direct organizational ties between corporations and the state, and the circulation of managerial personnel between them; and 2) the eclipse of surplus value extraction from the worker through the production process (as described by classical Marxism), by the extraction of "super-profits" a) from the consumer through the exchange process and b) from the taxpayer through the fiscal process.

Although microeconomics texts generally describe the functioning of supply and demend curves as though the nature of the market actors were unchanged since Adam Smith's day, in fact the rise of the large corporation as the dominant type of economic actor has been a revolution as profound as any in history. It occurred parallel to the rise of the "positive" state (i.e., the omnicompetent, centralized regulatory state) in the nineteenth and early twentieth century. And, vitally important to remember, the two phenomena were mutually reinforcing. The state's subsidies, privileges and other interventions in the market were the major force behind the centralization of the economy and the concentration of productive power. And in turn, the corporate economy's need for stability and rationality, and for state-guaranteed profits, has been the central force behind the continuing growth of the leviathan state.

And the rise of the centralized state and the centralized corporation has created a system in which the two are organizationally connected, and run by essentially the same recirculating elites (a study of the careers of David Rockefeller, Averell Harriman, or Robert McNamara should be instructive on the last point). This phenomenon has been most ably described by the "power elite" school of sociologists, particularly C. Wright Mills and G. William Domhoff.

According to Mills, the capitalist class was not supplanted by a "managerial revolution," as James Burnham had claimed; but the elite's structure was still most profoundly affected by the corporate revolution. The plutocracy ceased to be a social "class" in the sense described by Marx: an autonomous social formation perpetuated largely through family lines of transmission and informal social ties, with its organizational links of firm ownership clearly secondary to its existence in the "social" realm. The plutocracy were no longer just a few hundred rich families who happened to invest their old money in one firm or another. Rather, Mills described it as "the managerial reorganization of the propertied classes into the more or less unified stratum of the corporate rich." (50) Rather than an amorphous collection of wealthy families, in which legal claims to an income from property were the defining characteristic, the ruling class came to be defined by the organizational structure through which it gained its wealth. It was because of this new importance of the institutional forms of the power structure that Mills preferred the term "power elite" to "ruling class": "'Class' is an economic term; 'rule' a political one. The phrase, 'ruling class,' thus contains the theory that an economic class rules politically. (51)

Domhoff, who retained more of the traditional Marxist idea of class than did Mill, described the situation in this way:

Because of this corporate reorganization, senior corporate management has been incorporated as junior partners in the power elite. Contrary to theories of the "managerial revolution," senior management is kept firmly subordinated, through informal social ties and the corporate socialization process, to the goals of the owners. Even a Welch or Eisner understands that his career depends on being a "team player," and the team's objectives are set by the Rockefellers and DuPonts. (53) The corporate reorganization of the economy has led to permanent organizational links between large corporations, government agencies, research institutions, and foundation money, and resulted in the plutocracy functioning organizationally on a class-wide basis. (54)

Bukharin anticipated the power elite theory of Mills and Domhoff, in which the ruling class ceased to be an "amorphous mass" of wealthy families, and was itself (in C. Wright Mills' words) "reorganized along corporate lines." He wrote of interlocking elites in language that prefigured Mills:

In a passage that could have been written by Mills, Bukharin described the rotation of personnel between "private" and "public" offices in the interlocking directorate of state and capitalist bureaucracies:

It is the common class background of the state and corporate elites, and the constant circulation of them between institutions, that underscores the utter ridiculousness of controlling corporate power through such nostrums as "clean election" reforms. The promotion of corporate aims by high-level policy makers is the result mainly, not of soft money and other forms of cartoonishly corrupt villainy, but of the policy makers' cultural background and world view. Mills commented ironically on the "pitiful hearings" on confirmation of corporate leaders appointed to government office:

Although the structuralist Marxists have created an artificial dichotomy between their position and that of institutional elitists like Mill and Domhoff, (58) they are entirely correct in pointing out that the political leadership does not have to be subject, in any crude way, to corporate control. Instead, the very structure of the corporate economy and the situations it creates compel the leadership to promote corporate interests out of perceived "objective necessity." Given not just the background and assumptions of the policy elite, but the dependence of political on economic stability, policies that stabilize the corporate economy and guarantee steady output and profits are the only imaginable alternatives. And regardless of how "progressive" the regulatory state's ostensible aims, the organizational imperative will make the corporate economy's managers and directors the main source of the processed data and technical expertise on which policy makers depend.

The public's control over the system's overall structure, besides, is severely constrained by the fact that people who work inside the corporate and state apparatus inevitably have an advantage in time, information, attention span, and agenda control over the theoretically "sovereign" outsiders in whose name they act. The very organs of cultural reproduction--the statist school system, the corporate press, etc.--shape the public's "common sense" understanding of what is possible, and what is to be relegated to the outer darkness of "extremism." So long as wire service and network news foreign correspondents write their copy in hotel rooms from government handouts, and half the column inches in newspapers are generated by government and corporate public relations departments, the "moderate" understanding will always be conditioned by institutional culture.

In making use of the "Power Elite" model of Mills and Domhoff, one must be prepared to counter the inevitable "tinfoil hat" charges from certain quarters. Power Elite theory, despite a superficial resemblance to some right-wing conspiracy theories, has key differences from them. The latter take, as the primary motive force of history, personal cabals united by some esoteric or gratuitously evil ideology. Now, the concentration of political and economic power in the control of small, interlocking elites, is indeed likely to result in informal personal ties, and therefore to have as its side-effect sporadic conspiracies (Stinnett's Day of Deceit theory of Pearl Harbor is a leading example). But such conspiracy is not necessary to the working of the system--it simply occurs as a secondary phenomenon, and occasionally speeds up or intensifies processes that happen for the most part automatically. Although the CFR is an excellent proxy for the foreign policy elite, and some informal networking and coordination of policy no doubt get done through it, it is essentially a secondary organization, whose membership are ex officio representatives of the major institutions regulating national life. The primary phenomenon is the institutional concentration of power that brings such people into contact with each other in their official capacities.

In the "monopoly capitalism" model of Paul Baran and Paul Sweezy, the central figures in the Monthly Review group, the corporate system can maintain stable profit levels by passing its costs on to the consumer. The increased labor costs of unionized heavy manufacturing are paid, ultimately, by the non-cartelized sectors of the economy (the same is true of the corporate income tax and the rest of the burden of "progressive" taxation, although the authors do not mention it in this context). Capitalism is no longer predominantly, as Marx had assumed in the nineteenth century, a system of competition. As a result, the large corporate sector of the economy becomes immune to Marx's law of the falling tendency of the rate of profit. (59)

Direct collusion between the firms in an oligopoly market, whether open or hidden, is not required. "Price leadership," although the most common means by which corporations informally agree on price, is only one of several.

In this way, the firms in an oligopoly market can jointly determine their price very much as would a single monopoly firm. The resulting price surcharge passed on to the consumer is quite significant. According to an FTC study in the 1960s, "if highly concentrated industries were deconcentrated to the point where the four largest firms control 40% or less of an industry's sales, prices would fall by 25% or more. " (62)

This form of tacit collusion is not by any means free from breakdowns. When one firm develops a commanding lead in some new process or technology, or acquires a large enough market share or a low enough cost of production to be immune from retribution, it may well initiate a war of conquest on its industry. (63) Such suspensions of the rules of the game are identified, for example, with revolutionary changes like Wal-Mart's blitz of the retail market. But in between such disruptions, oligopoly markets can often function for years without serious price competition. As mentioned above, the Clayton Act's "unfair competition" provisions were designed to prevent the kind of catastrophic price wars that could destabilize oligopoly markets.

The "monopoly capital" theorists introduced a major innovation over classical Marxism by treating monopoly profit as a surplus extracted from the consumer in the exchange process, rather than from the laborer in the production process. This innovation was anticipated by the Austro-Marxist Hilferding in his description of the super profits resulting from the tariff:

Baran and Sweezy were quite explicit in recognizing the central organizing role of the state in monopoly capitalism. They described the political function of the regulatory state in ways quite similar to Kolko:

It is interesting, in this regard, to compare the effect of antitrust legislation in the U.S. to that of nationalization in European "social democracies." In most cases, the firms affected by both policies involve centrally important infrastructures or resources, on which the corporate economy as a whole is dependant. Nationalization in the Old World is used primarily in the case of energy, transportation and communication. In the U.S., the most famous antitrust cases have been against Standard Oil, AT&T, and Microsoft: all cases in which excessive prices in one firm could harm the interests of monopoly capital as a whole. And recent "deregulation," as it has been applied to the trucking and airline industries, has likewise been in the service of those general corporate interests harmed by monopoly transportation prices. In all these cases, the state has on occasion acted as an executive committee on behalf of the entire corporate economy, despite thwarting the mendacity of a few powerful corporations.

The common thread in all these lines of analysis is that an ever-growing portion of the functions of the capitalist economy have been carried out through the state. According to James O'Connor, state expenditures under monopoly capitalism can be divided into "social capital" and "social expenses."

According to O'Connor, such state expenditures counteract the falling general rate of profit that Marx predicted. Monopoly capital is able to externalize many of its operating expenses on the state; and since the state's expenditures indirectly increase the productivity of labor and capital at taxpayer expense, the apparent rate of profit is increased.

O'Connor listed several of the main ways in which monopoly capital externalizes its operating costs on the political system:

We should briefly recall here our examination above of how such socialization of expenditures serves to cartelize industry. By externalizing such costs on the state, through the general tax system, monopoly capital removes these expenditures as an issue of competition between individual firms. It is as if all the firms in an industry formed a cartel to administer these costs in common, and agreed not to include them in their price competition. The costs and benefits are applied uniformly to the entire industry, removing it as a competitive disadvantage for some firms.

Although it flies in the face of "progressive" myth, big business is by no means uniformly opposed to national health insurance and other forms of social insurance. Currently, giant corporations in the monopoly capital sector are the most likely to provide private insurance to their employees; and such insurance is one of the fastest-rising components of labor costs. Consequently, firms that are already providing this service at their own expense are the logical beneficiaries of a nationalized system. The effect of such a national health system would be to remove the cost of this benefit as a competitive disadvantage for the companies that provided it. Even if the state requires only large corporations in the monopoly sector to provide health insurance, it is an improvement of the current situation, from the monopoly capital point of view: health insurance ceases to be a component of price competition among the largest firms. A national health system provides a competitive advantage to a nation's firms at the expense of their foreign competitors, who have to fund their own employee health benefits--hence, American capital's hostility to the Canadian national health, and its repeated attempts to combat it through the WTO. The cartelizing effects of socializing the costs of social insurance, likewise, was one reason a significant segment of monopoly capital supported FDR's Social Security agenda.

Daniel Gross, although erroneously treating it as a departure from the mythical traditional big business hostility to the welfare state, has made the same point about more recent big business support of government health insurance. (69) Large American corporations, by shouldering the burden of health insurance and other employee benefits borne by the state in Europe and Japan, is at a competitive disadvantage both against companies there and against smaller firms here.

Democratic presidential candidate Dick Gephart, or rather his spokesman Jim English, admitted to a corporate liberal motivation for state-funded health insurance in his 2003 Labor Day address. Gephart's proposed mandatory employer coverage, with a 60% tax credit for the cost, would eliminate competition from companies that don't currently provide health insurance as an employee benefit. It would also reduce competition from firms in countries with a single-payer system. (70)

The level of technical training necessary to keep the existing corporate system running, the current level of capital intensiveness of production, and the current level of R&D efforts on which it depends, would none of them pay for themselves on a free market. The state's education system provides a technical labor force at public expense, and whenever possible overproduces technical specialists on the level needed to ensure that technical workers are willing to take work on the employers' terms. On this count, O'Connor quoted Veblen: the state answers capital's "need of a free suppy of trained subordinates at reasonable wages..." (71)

The state's cartelization and socialization of the cost of reproducing a technically sophisticated labor force makes possible a far higher technical level of production than would support itself in a free market. The G.I. Bill was an integral part of the unprecedentedly high scale of state capitalism created during and after WWII.

At best, from the point of view of the employer, the state creates a "reserve army" of scientific and technical labor. At worst, when there is a shortage of such labor, the state at least absorbs the cost of producing it and removes it as a component of private industry's production costs. In either case, "the greater the socialization of the costs of variable capital, the lower will be the level of money wages, and... the higher the rate of profit in the monopoly sector." (73) And since the monopoly capital sector is able to pass its taxes onto the consumer or to the competitive capital sector, the effect is that "the costs of training technical laborpower are met by taxes paid by competitive sector capital and labor." (74)

The "public" schools' curriculum can be described as "servile education." Its objective is a human product which is capable of fulfilling the technical needs of corporate capital and the state, but at the same time docile and compliant, and incapable of any critical analysis of the system of power it serves. The public educationist movement and the creation of the first state school systems, remember, coincided with the rising factory system's need for a work force that was trained in obedience, punctuality, and regular habits. Technical competence and a "good attitude" toward authority, combined with twelve years of conditioning in not standing out or making waves, were the goal of the public educationists.

Even welfare expenses, although O'Connor classed them as a completely unproductive expenditure, are in fact another example of the state underwriting variable capital costs. Some socialists love to speculate that, if it were possible, capitalists would lower the prevailing rate of subsistence pay to that required to keep workers alive only when they were employed. But since that would entail starvation during periods of unemployment, the prevailing wage must cover contingencies of unemployment; otherwise, wages would be less than the minimum cost of reproducing labor. Under the welfare state, however, the state itself absorbs the cost of providing for such contingencies of unemployment, so that the uncertainty premium is removed as a component of wages in the "higgling of the market."

And leaving this aside, even as a pure "social expense," the welfare system acts primarily (in O'Connor's words) to "control the surplus population politically." (75) The state's subsidies to the accumulation of constant capital and to the reproduction of scientific-technical labor provide an incentive for much more capital-intensive forms of production than would have come about in a free market, and thus contribute to the growth of a permanent underclass of surplus labor; (76) the state steps in and undertakes the minimum cost necessary to prevent large-scale homelessness and starvation, which would destabilize the system, and to maintain close supervision of the underclass through the human services bureaucracy. (77)

The general effect of the state's intervention in the economy, then, is to remove ever increasing spheres of economic activity from the realm of competition in price or quality, and to organize them collectively through organized capital as a whole. State socialism/state capitalism very much resembles the servile state prophesied by Hilaire Belloc. Sold to the general population as a "progressive" agenda on behalf of workers and consumers, it is in fact a system of industrial serfdom in which politically connected capitalist interests exploit workers and consumers through the agency of the state.

William Appleman Williams summarized the lesson of the 1890s in this way: "Because of its dramatic and extensive nature, the Crisis of the 1890's raised in many sections of American society the specter of chaos and revolution." (78) American economic elites saw it as the result of overproduction and surplus capital, and believed it could be resolved only through access to a "new frontier." Without state-guaranteed access to foreign markets, output would be too far below capacity, unit costs would be driven up, and unemployment would reach dangerous levels.

The seriousness of the last threat was underscored by the radicalism of the Nineties. The Pullman Strike, Homestead, and the formation of the Western Federation of Miners (precursor to the IWW) were signs of dangerous levels of labor unrest and class consciousness. Coxey's Army marched on Washington, a small foretaste of the kinds of radicalism that could be produced by unemployment. The anarchist movement had a growing foreign component, more radical than the older native faction, and the People's Party seemed to have a serious chance of winning national elections. At one point Jay Gould, the mouthpiece of the robber barons, was threatening a capital strike (much like those in Venezuela recently) if the populists came to power. In 1894 businessman F. L. Stetson warned, "We are on the edge of a very dark night, unless a return of commercial prosperity relieves popular discontent." (79)

Both business and government resounded with claims that U.S. productive capacity had outstripped the domestic market's ability to consume, and that the government had to take active measures to obtain outlets. In 1897 NAM president Theodore C. Search said, "Many of our manufacturers have outgrown or are outgrowing their home markets, and the expansion of our foreign trade is our only promise of relief." (80) In the same year, Albert J. Beveridge proclaimed: "American factories are making more than the American people can use; American soil is producing more than they can consume. Fate has written our policy for us; the trade of the world must and shall be ours." (81) As the State Department's Bureau of Foreign Commerce put it in 1898,

In 1900, former Secretary of State John W. Foster wrote, "it has come to be a necessity to find new and enlarged markets for our agricultural and manufactured products. We cannot maintain our present industrial prosperity without them." (83)

Ohio governor McKinley emerged as spokesman for this new American consensus, proposing a combination of protective tariffs and reciprocity treaties to open foreign markets to American surplus output with help from the state. (84) As keynote speaker at an organizational meeting of the National Association of Manufacturers in 1895, he said:

The imperialism of McKinley and Roosevelt, and the resulting Spanish-American War, were outgrowths of this orientation. They were not, however, the only or obvious form of state policy for securing foreign markets. Much more typical of U.S. policy, in the coming years, was the orientation outlined in John Hay's Open Door Notes (the first was written in 1899), which Williams called "Open Door Empire."

Open Door imperialism consisted of using U.S. political power to guarantee access to foreign markets and resources on terms favorable to American corporate interests, without relying on direct political rule. Its central goal was to obtain for U.S. merchandise, in each national market, treatment equal to that afforded any other industrial nation. Most importantly, this entailed active engagement by the U.S. government in breaking down the imperial powers' existing spheres of economic influence or preference. The result, in most cases, was to treat as hostile to U.S. security interests any large-scale attempt at autarky, or any other policy whose effect was to withdraw a major area from the disposal of U.S. corporations. When the power attempting such policies was an equal, like the British Empire, the U.S. reaction was merely one of measured coolness. When it was perceived as an inferior, like Japan, the U.S. resorted to more forceful measures, as events of the late 1930s indicate. And whatever the degree of equality between advanced nations in their access to Third World markets, it was clear that Third World nations were still to be subordinated to the industrialized West in a collective sense.

This Open Door system was the direct ancestor of today's neoliberal system, which is called "free trade" by its ideological apologists but is in fact far closer to mercantilism. It depended on active management of the world economy by dominant states, and continuing intervention to police the international economic order and enforce sanctions against states which did not cooperate. Woodrow Wilson, in a 1907 lecture at Columbia University, said:

Since trade ignores national boundaries and the manufacturer insists on having the world as a market, the flag of his nation must follow him, and the doors of the nations which are closed must be battered down.... Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process. Colonies must be obtained or planted, in order that no useful corner of the world may be overlooked or left unused. Peace itself becomes a matter of conference and international combinations. (86)

Wilson warned during the 1912 election that "Our industries have expanded to such a point that they will burst their jackets if they cannot find a free [i.e., guaranteed by the state] outlet to the markets of the world." (87)

In a 1914 address to the National Foreign Trade Convention, Secretary of Commerce Redfield followed very nearly the same theme:

Under the Open Door system, the state and its loans were to play a central role in the export of capital. The primary purpose of foreign loans, historically, has been to finance the infrastructure which is a prerequisite for the establishment of enterprises in foreign countries. As Edward E. Pratt, chief of the Bureau of Foreign and Domestic Commerce, said in 1914:

It was, however, beyond the resources of individual firms or venture capitalists, or of the decentralized banking system, to raise the sums necessary for these tasks. One purpose of creating a central banking system (the Federal Reserve Act, 1914) was to make possible the large-scale mobilization of investment capital for overseas ventures. Under the New Deal, the mobilization began to take the form of direct state loans. (90) The state's financial policies, besides promoting the accumulation of capital for foreign investment, also underwrite foreign consumption of U.S. produce. As John Foster Dulles said in 1928, "We must finance our exports by loaning foreigners the where-with-all to pay for them...." (91) These two functions were perfected in the Bretton Woods system after WWII.

The second Roosevelt's administration saw the guarantee of American access to foreign markets as vital to ending the Depression and the threat of internal upheaval that went along with it. Assistant Secretary of State Francis Sayre, chairman of Roosevelt's Executive Committee on Commercial Policy, warned: "Unless we can export and sell abroad our surplus production, we must face a violent dislocation of our whole domestic economy." (92) FDR's ongoing policy of Open Door Empire, faced with the withdrawal of major areas from the world market by the autarkic policies of the Greater East Asia Co-Prosperity Sphere and Fortress Europe, led to American entry into World War II, and culminated in the postwar establishment of what Samuel Huntington called a "system of world order" guaranteed both by global institutions of economic governance like the IMF, and by a hegemonic political and military superpower.

In 1935, a War Department memorandum described the emerging Japanese threat in primarily economic terms. Japanese hegemony over Asia, it warned, would have "a direct influence on those people of Europe and America who depend on trade and commerce with this area for their livelihood." Germany, likewise, was defined as an "agressor" because of its trade policies in Latin America. (93)

After the fall of western Europe in the spring of 1940, Assistant Secretary of State Breckinridge Long warned that "every commercial order will be routed to Berlin and filled under its orders somewhere in Europe rather than in the United States," resulting in "falling prices and declining profits here and a lowering of our standard of living with the consequent social and political disturbances." (94)

Beginning in the Summer of 1940, the CFR and State Department undertook a joint study to determine the minimum portion of the world the U.S. would have to integrate with its own economy, to provide sufficient resources and markets for economic stability; it also explored policy options for reconstructing the postwar world. (95) Germany's continental system was far more self-sufficient in resources, and more capable of autarky, than was the United States. The study group also found that the U.S. economy could not survive in its existing form without access to the resources and markets of not only the Western Hemisphere, but also the British Empire and Far East (called the Grand Area). But the latter region was rapidly being incorporated into Japan's economic sphere of influence. FDR made the political decision to contest Japanese power in the Far East, and if necessary to initiate war. In the end, however, he successfully maneuvered Japan into firing the first shot. (96) The American policy that emerged from these struggles, to secure control over the markets and resources of the global "Grand Area" through institutions of global economic governance, resulted in the Bretton Woods system after the war.

The problem of access to foreign markets and resources was central to U.S. policy planning for a postwar world. Given the structural imperatives of "export dependent monopoly capitalism," the fear of a postwar depression was a real one. The original drive toward foreign expansion at the end of the nineteenth century reflected the fact that industry, with state capitalist encouragement, had expanded far beyond the ability of the domestic market to consume its output. Even before World War II, the state capitalist economy had serious trouble operating at the level of output needed for full utilization of capacity and cost control. Military-industrial policy during the war increased the value of plant and equipment by two-thirds. The end of the war, if followed by the traditional pattern of demobilization, would result in a drastic reduction in orders to this overbuilt industry at the same time that over ten million workers were dumped back into the civilian labor force. And four years of forced restraints on consumption had created a vast backlog of savings with no outlet in the already overbuilt domestic economy.

In November 1944, Dean Acheson addressed the Congressional committee on Postwar Economic Policy and Planning. He stressed the consequences if the war were be followed by a slide back into depression: "it seems clear that we are in for a very bad time, so far as the economic and social position of the country is concerned. We cannot go through another ten years like the ten years at the end of the twenties and the beginning of the thirties, without having the most far-reaching consequences upon our economic and social system." The problem, he said, was markets, not production. "You don't have a problem of production.... The important thing is markets. We have got to see that what the country produces is used and is sold under financial arrangements which make its production possible." Short of the introduction of a command economy, with controls over income and distribution to ensure the domestic consumption of all that was produced, Acheson said, the only way to achieve full output and full employment was through access to foreign markets. (97)

A central facet of postwar economic policy, as reflected in the Bretton Woods agencies, was state intervention to guarantee markets for the full output of U.S. industry. The World Bank was designed to subsidize the export of capital to the Third World, by financing the infrastructure without which Western-owned production facilities could not be established there. The International Monetary Fund was created to facilitate the purchase of American goods abroad, by preventing temporary lapses in purchasing power as a result of foreign exchange shortages. It was "a very large international currency exchange and credit-granting institution that could be drawn upon relatively easily by any country that was temporarily short of any given foreign currency due to trade imbalances." (98)

The Bretton Woods system by itself, however, was not nearly sufficient to ensure the levels of output needed to keep production facilities running at full capacity. First the Marshall Plan, and then the permanent war economy of the Cold War, came to the rescue.

The Marshall Plan was devised in reaction to the impending economic slump predicted by the Council of Economic advisers in early 1947 and the failure of Western Europe "to recover from the war and take its place in the American scheme of things." Undersecretary of State for Economic Affairs Clayton declared that the central problem confronting the United States was the disposal of its "great surplus." (99) Dean Acheson defended the Marshall Plan in a May 1947 address:

One New Deal partisan implicitly compared foreign economic expansion to domestic state capitalism as analogous forms of surplus disposal: "it is as if we were building a TVA every Tuesday." (101)

Besides facilitating the export of capital, the Bretton Woods agencies play a central role in the discipline of recalcitrant regimes. There is a considerable body of radical literature on the Left on the use of debt as a political weapon to impose pro-corporate policies on Third World governments, analogous to the historic function of debt in keeping miners and sharecroppers in their place. (102)  But one of the most apt statements of the process was by a Rothbardian, Sean Corrigan:

Does he not know that the whole IMF-Treasury carpet-bagging strategy of full-spectrum dominance is based on promoting unproductive government-led indebtedness abroad, at increasingly usurious rates of interest, and then--either before or, more often these days, after, the point of default--bailing out the Western banks who have been the agents provocateurs of this financial Operation Overlord, with newly-minted dollars, to the detriment of the citizenry at home?

Is he not aware that, subsequent to the collapse, these latter-day Reconstructionists must be allowed to swoop and to buy controlling ownership stakes in resources and productive capital made ludicrously cheap by devaluation, or outright monetary collapse?

Does he not understand that he must simultaneously coerce the target nation into sweating its people to churn out export goods in order to service the newly refinanced debt, in addition to piling up excess dollar reserves as a supposed bulwark against future speculative attacks (usually financed by the same Western banks' lending to their Special Forces colleagues at the macro hedge funds)--thus ensuring the reverse mercantilism of Rubinomics is maintained? (103)

The American economy could have had access to the resources it was willing to buy on mutually satisfactory terms, and marketed its own surplus to those countries willing to buy it, without the apparatus of transnational corporate mercantilism. Such a state of affairs would have been genuine free trade. What the American elite really wanted, however, has been ably stated by Thomas Friedman in one of his lapses into frankness:

It was not true that the American corporate economy was ever in any real danger of losing access to the raw materials it needed, in the absence of an activist foreign policy to secure access to those resources. As many free market advocates point out, countries with disproportionate mineral wealth--say, large oil reserves--are forced to center a large part of their economic activity on the extraction and sale of those resources. And once they sell them, the commodities enter a world market in which it is virtually impossible to control who eventually buys them. The real issue, according to Baran and Sweezy, is that the American corporate economy depended on access to Third World resources on favorable terms set by the United States, and those favorable terms depended on the survival of pliable regimes.

The "system of world order" enforced by the U.S. since World War II, and lauded in Friedman's remarks about the "visible hand," is nearly the reverse of the classical liberal notion of free trade. This new version of "free trade" is aptly characterized in this passage by Layne and Schwarz:

Oliver MacDonagh pointed out that the modern neoliberal conception, far from agreeing with Cobden's idea of free trade, resembled the "Palmerstonian system" that the Cobdenites so despised. Cobden objected, among other things, to the "dispatch of a fleet 'to protect British interests' in Portugal," to the "loan-mongering and debt-collecting operations in which our Government engaged either as principal or agent," and generally, all "intervention on behalf of British creditors overseas." Cobden favored the "natural" growth of free trade, as opposed to the forcible opening of markets. Genuine free traders, in MacDonagh's words, "hunted down confusions of 'free trade' with mere increases of commerce or with the forcible 'opening up' of markets." (107)

I can't resist quoting Joseph Stromberg's only half tongue-in-cheek prescription "How to Have Free Trade":