Regulated Capitalism, Theories of

the totality of bourgeois reformist and revisionist conceptions arguing that state regulation of the economy makes it possible to overcome the antagonistic contradictions of capitalist reproduction.

As early as the 19th century, the spokesmen for some schools of bourgeois political economy, such as the German historical school, called for a more active influence by the state on various aspects of the economy. However, theories of regulated capitalism did not develop until the beginning of the 20th century, when the problem of regulating market conditions gained prominence, owing to the exacerbation of the contradictions of capitalism—in particular, the increase in the destructive force of crises of overproduction.

Theories of regulated capitalism, most of which link the cyclical development of the capitalist economy to the uneven-ness of the investment process and to fluctuations in consumer demand, become especially popular under state-monopoly regulation of the economy. The advocates of theories of regulated capitalism contend that the prevention or alleviation of cyclical economic crises requires the regulation of all capital investments and of consumer demand. The dominance of private capitalist ownership of the means of production rules out the possibility of direct, centralized distribution of capital investments and the establishment of incomes and prices in conformity with a plan. Therefore, state regulation affects primarily credit and government financial operations.

During the early development of state-monopoly capitalism, the principal bourgeois ideas for “overcoming” the capitalist cycle were prescriptions for credit regulation, based on a monetary and credit theory of the cycle (A. Hahn and R. Hawtrey, for example). The economic crisis of 1929–33 demonstrated the untenability of theoretical constructs relying on the efficacy of credit controls and practical experiments in monetary and credit policy.

At the end of the 1930’s a macroeconomic conception of the capitalist cycle elaborated by J. M. Keynes became the theoretical basis for the programs of state-monopoly regulation. Keynes’ main premise was that modern capitalism could no longer function as a spontaneously developing and self-regulating economic system. According to the adherents of Keynes-ianism, the most important reason for this situation is the shortage of private effective demand. Consequently, programs for a compensatory expansion of demand by the bourgeois state are emphasized in economic regulation. Referring to the lessons of the crisis of 1929–33, Keynes expressed doubts about the effectiveness of monetary and credit policy as a means of maintaining economic stability. According to Keynesian theories of regulated capitalism, the most reliable means of stimulating economic activity is to increase government spending by a sum that exceeds the increase in tax revenues and to meet budget deficits by increasing the national debt. The transfer of the center of gravity to compensatory financing reflected substantial progress in the development of state-monopoly capitalism. The expansion of the economic functions of the bourgeois state and the implementation of an ever-expanding range of state-monopoly measures entailed a sharp increase in the share of the national income redistributed through the channels of state finance. Bourgeois economic literature both covertly and overtly supported the thesis that the growth of military consumption by the state is the most effective means of controlling and preventing economic crises.

After World War II (1939–45) theories of regulated capitalism were further developed by Keynesian economists, including A. Hansen and S. Harris. According to the Keynesians, because the contemporary capitalist economy is a complex economic system made up of heterogeneous elements, it must be regulated spontaneously (for example, through the mechanism of competition). Moreover, it must also be regulated by means of special (“discretionary”) government economic measures, including various operations in financial and monetary and credit policy, as well as state-monopoly regulation of production conditions in some branches of the economy. Many contemporary reformist and revisionist theorists, such as J. Strachey, have adopted similar positions. Although there is a wide variety of theories of regulated capitalism, they all support the idea that the bourgeois state is capable of providing for the planned development of the economy in the interests of the “general welfare.”

With the beginning of the third phase of the general crisis of capitalism, anticyclical regulation was incorporated into more general programs for economic growth, which were designed to provide a sound foundation for the possibility of a rapid, long-term development of capitalist production (R. Harrod and N. Kaldor, for example). The widespread acceptance of theories arid practical programs for economic growth in the 1950’s and 1960’s reflected not only the deepening internal contradictions of imperialism but also the increasing role of the world socialist system in the economic competition between the two world systems. The broadest possible spectrum of theories for planning the capitalist economy is represented in bourgeois economic literature. Citing the expansion of private monopoly regulation and the application in many imperialist countries of long-term programs of economic development and indicative planning, some bourgeois and reformist ideologists conclude that the anarchic “market economy” will entirely disappear, giving way to “crisis-free,” “planned” capitalism. Such judgments are often used as “arguments” to reinforce the theories of the economic synthesis and convergence of the two opposing socioeconomic systems—socialism and capitalism. The widespread acceptance of theories of regulated capitalism is evidence of the bankruptcy of previous bourgeois apologies for free capitalist enterprise. The growing emphasis on theoretical and specific programs for regulating the capitalist economy is directly related to the elaboration of many economic policy measures designed to strengthen the capitalist system and increase the profits of the big capitalists. The theories of regulated capitalism try to conceal the real essence of state-monopoly regulation, which is implemented in the interests of the ruling class.

Marxist-Leninist economic theory has demonstrated that the transition of capitalism from free competition to the domination of the monopolies gives rise to a tendency toward “capitalist planning.” With the tremendous strength of the capitalist monopolies and the tremendous strength of the state combined in the single mechanism of state-monopoly capitalism, the conditions are ensured for the development of the tendency toward capitalist planning. Measures designed to restrict market spontaneity in the interests of the largest monopolies are more and more extensively applied. However, the capitalist trusts, as V. I. Lenin emphasized, have never reached and cannot ever reach the level of total planning. An inherent characteristic of imperialism takes shape from a contradictory unity, consisting of the monopolies, on the one hand, and fluctuations in market conditions, competition, and crises, on the other hand. Under the continued domination of private capitalist ownership of the means of production, the decisive role in the economy is inevitably played by the spontaneous forces of the capitalist market.

By absolutizing the regulatory influence of the bourgeois state on the economy, the authors of the theories of regulated capitalism do their utmost to minimize uncontrolled processes and to deemphasize the exacerbation of the conflict between state-monopoly regulation and competition between private capitalists. In reality, the regulation of the capitalist economy involves contradictory processes, because state-monopoly measures cannot rid capitalism of the spontaneous effect of its inherent economic laws. Under contemporary conditions, even the most developed capitalist states have not been freed of serious economic upheavals. Cyclical upsurges are inevitably followed by crises of declining production. For example, in the USA between 1948 and 1972, the total volume of industrial production declined significantly at least five times.

The development of the capitalist economy is accompanied by a waste of social labor and natural resources and by the expansion of the scale of parasitic consumption. The competitive struggle becomes particularly fierce, strengthening the effect of spontaneous market forces. The number of bankruptcies rises rapidly, and large capitalist firms are increasingly among those that are ruined or submerged. The capitalist countries experience an intensification of the inflationary rise in prices—a process that remains uncontrolled, as many bourgeois economists admit. The concurrent rise in inflation and unemployment has become a permanent phenomenon. The rampage of the uncontrolled money market leads to a further exacerbation of the crisis of the currency system of capitalism.

All of these phenomena are evidence that state-monopoly regulation is not capable of curbing the spontaneous forces of the capitalist market, because the forms and scale of regulation suit the interests of monopoly capital and are designed to preserve its dominant position.