Keynesian Fordism: global political economy of a passive revolution

Antonio Gramsci

This is the second in a series of three texts retracing the historical roots of present-day economic institutions and class relations. The previous post examined the institutional crisis of American society in the Thirties. It characterized the New Deal as an arrested transformation of monopoly capitalism, in which attempts at egalitarian reform were blocked by interest groups operating through both major parties.

This text explores the rise of state capitalism during WWII. It shows how the redoubled technological and organizational capacity of the corporate state was able to generate a global political economy maintained by force of both money and arms, but also based on the new social compact that emerged from the depression and the war. To analyze this global political economy I’m going to use the concept of hegemony, as developed by Antonio Gramsci. I’ll extend that concept to international relations, following the lead of Robert Cox in his book Production, Power and World Order.

As a communist seeking change through the development of productive forces, Gramsci was fascinated with the rationalization of labor proposed by Frederick Taylor, and with its ideological expression in the pronouncements and industrial policies of Henry Ford. “In America rationalization has determined the need to elaborate a new type of man suited to the new type of work and productive process,” he wrote in Americanism and Fordism. A characteristic kind of leadership arose at the point of production: “Hegemony here is born in the factory and requires for its exercise only a minute quantity of professional political and ideological intermediaries.”

Gramsci defines hegemony as “the ‘spontaneous’ consent given by the great masses of the population to the general direction imposed on social life by the dominant fundamental group” – a consent which, he remarks, is “historically caused by the prestige (and consequent confidence) which the dominant group enjoys because of its position and function in the world of production.” A productive hegemony can extend from the national to the international scale. Gramsci asks: “Do international relations precede or logically follow fundamental social relations?” His answer: “There can be no doubt that they follow. Any organic innovation in the social structure, through its technical-military expressions, modifies relations in the international field too.”

Gramsci saw assembly-line manufacturing as an attempt to achieve a higher and more disciplined order of society. Ford himself – representing a populist strain in the US industrial elite – would be no more than a passing phase. It was up to the working classes to “find for themselves an original, and not Americanized, system of living, to turn into freedom what today is necessity.” Yet it was clear that the new productive potentials could easily fail to produce a revolution with an explosive character like that of France in 1789. Instead they could merely update the existing distribution of power, or at best, open up a drawn-out process of passive revolution in which progressive vanguards and reactionary forces would vie for hegemony. The first two Roosevelt administrations were marked by exactly such a struggle. It was resolved to meet the urgencies of World War II. Keynesian Fordism was the technical and military response to the challenge of the Great Depression. Its international expression gave rise to the world order of the postwar period.

Warp Speed

In July of 1940 Keynes declared: “It seems politically impossible for a capitalist democracy to organize expenditure on the scale necessary to make the grand experiment which would prove my case – except in war conditions.” For a decade, Keynes had been arguing for a purely monetary strategy: massive counter-cyclical expenditure on employment would serve to fuel “effective demand” for industrial products, creating multiplier effects for every dollar spent and thereby priming the economic pump. Planning was not an issue for him. In wartime practice, however, planning took a technocratic form that allowed the corporations to meet national priorities while setting the conditions for their own spectacular postwar growth.

Even before the declaration of hostilities, Detroit began retooling with astounding speed into the “Arsenal of Democracy” that Roosevelt called for in a radio address. Gramsci did not live to see it, but the practical and ideological importance of the Ford Motor Co. within US society now became obvious. Its single Willow Run plant produced 8,685 B-24 bombers in the course of wartime operations. On one hand, Ford stood for the entrepreneurial innovations of the 1910s-20s: the assembly-line process, scientific management, high wages, the education of the workforce and the stimulation of effective demand for industrial products via advertising, public relations and consumer credit. On the other, he represented national production capital with global reach: the company’s technological advances had pushed it toward massive exportation, then to the establishment of foreign subsidiaries across the planet. Under the imperatives of multi-theater warfare these strengths were channeled into a corporate/military order, which included rationing of materials, control of strategic supply chains, cost-plus contracts and no-strike pledges by labor unions. The independence of the maverick entrepreneur was subsumed by what J.K. Galbraith later analyzed as “the technostructure.”

The central planning of the economy that Roosevelt’s National Recovery Administration had failed to achieve would now be carried out by “dollar-a-year men” dispatched by the corporations to Washington and the Pentagon. The characteristic figure is Charles Wilson (“Electric Charlie”), a CEO of General Electric who served on the War Production Board from 1942-1944. He undercut the policies of his boss, a New Dealer named Donald Nelson, who from 1943 onward had begun trying to reorient production to civilian ends. Instead, Wilson forged closer ties with the military. He was later appointed to head the Office of Defense Mobilization during the Korean War. The “permanent war economy” (a concept attributed to Wilson himself) became a major component of what we now conceive as Fordism.

As part of the same process, the innovation system of American industry took a quantitative and qualitative leap forward. Historians of technology, focusing on forty-to-fifty-year “long waves” of economic development, have shown that major crises of capitalism produce large backlogs of inventions which cannot be industrialized during the years of economic contraction, but which subsequently provide the technological basis for a new wave of investment. In the case of the US during WWII, this accumulation of inventions was intensified by the drafting of pure scientists into the war effort under the banner of “operations research,” which has been defined as “the effective use of scarce resources under dynamic and uncertain conditions.” Unprecedented sums of federal money were funneled to laboratories, which initially tended to be under direct government control. However, as David Noble shows in his book Forces of Production, professional groups quite rapidly secured the “autonomy of science” for corporations and major universities, while keeping the military contracts. In this way, “big science” was born.

Bell Labs - Telestar 1 - 1962

The results were prodigious: radar, nuclear fission and thermonuclear weapons, as well as the experiments in coding, information transfer and feedback that gave rise to computers and the unified socio-technical theory of cybernetics. The science-fiction of the postwar period – right up to the prime-time image of “Federation Starship Enterprise” – expresses the magnitude of this transformation. Far from merely perfecting the assembly-line process, the US version of Fordism would be characterized by continuous revolutions in production technology, extending to fields such as plastics and synthetic fabrics, electronic communications, jet propulsion, space exploration, etc. From the Manhattan Project in wartime to the civilian research of Bell Labs – the scientific arm of AT&T, a giant corporation recognized by the state as a "natural monopoly" – US society would become technological to the core, with a consequent rise in levels of education and a continuous expansion of the application of science (including social science) to industry, administration, civil life and consumption. Here, and not in simple manufacturing, lay the sources of that prestige which, as Gramsci understood, stems directly from the forces of production.

New World

Given the US economic position at the close of the war – with 65% of global gold reserves at Fort Knox – it was inevitable that American policy imperatives would trump those of Keynes at the global economic conference of Bretton Woods in 1944. Keynes sought a neutral, collectively managed world monetary standard and a financial architecture to curb the power of creditor nations. The Americans wanted to collect their due from wartime debtors like Britain, whose imperial financial system would soon be dismembered through the negotiations over the payback requirements of the US Lend-Lease program. More broadly, the State Department aimed to dissolve the rival trading blocs that had emerged after the collapse of the British gold standard, and to create a vast free-trade zone or “Grand Area” in order to secure not only supplies of raw materials, but also markets large enough to absorb the surplus product of American industry (including industrialized agriculture). The IMF and the World Bank, both created at Bretton Woods, were needed to circulate the capital for this free-trade regime. Negotiated exchange rates between all participating currencies and the dollar, itself backed by gold, would lend stability to the new monetary order centered on the US.

Yet the international financial institutions were only part of a larger project, which had engaged American civic ambition in a whole range of more-or-less feasible attempts to create a global government. In 1943, the liberal Republican Wendell Willikie published a bestseller, One World, which urged the foundation of a transnational democracy as the most effective response to communism – an idea taken up from 1945 onward by the World Federalist Movement. And in a book called And Keep Your Powder Dry: An Anthropologist Looks at America, also published in 1943, Margaret Mead penned the following, entirely characteristic phrase: “We must see this war as a prelude to a greater job – the restructuring of the culture of the world.” Exactly this idea was expressed by an extraordinary map of the “New World Moral Order” (1942) which rationalized all the major land masses into coherent continental blocs structured according to the US federal model.

For a larger version click here

The unification and rationalization of geographical space was not the wild fancy of an obscure cartographer, nor the right-wing conspiracy theory that it appears to be today. Instead it was the object of deliberate wartime planning. In a study of the State Department archives entitled Imperial Brain Trust, Laurence Shoup and William Minter detail the recommendations of high-ranking members of the private-sector Council of Foreign Relations, who had been directly inducted into the Roosevelt Administration to carry out postwar economic planning. One passage is worth quoting at length:

A July 24, 1941, memorandum to the President and Department of State outlined the Council's view of the national interest, describing the role of the Grand Area in American economic, political, and military policy. The memorandum, numbered E-B34, summarized the Grand Area concept, its “meaning for American policy, its function in the present war, and its possible role in the postwar period.” It began by stressing the basic fact that the “economy of the United States is geared to the export of certain manufactured and agricultural products, and the import of numerous raw materials and foodstuffs.” The Economic and Financial Group had found a self-contained United States-Western hemisphere economy impossible without great changes in the American economic system. To prevent alterations in the United States economy, the Council had, in the words of group member Winfield W. Riefler, “gone on to discover what 'elbow room' the American economy needed in order to survive without major readjustments.” This living space had to have the basic raw materials needed for the nation's industry as well as the “fewest possible stresses making for its own disintegration, such as unwieldy export surpluses or severe shortages of consumer goods.” The extensive studies and discussions of the Council groups determined that, as a minimum, most of the non-German world, the “Grand Area,” was needed for “elbow room.” In its final form, it consisted of the Western hemisphere, the United Kingdom, the remainder of the British Commonwealth and Empire, the Dutch East Indies, China, and Japan itself.

The German world was added to this geographic calculation when it became apparent that the US would win the war. By the same calculation, China, North Korea and other countries would be considered “lost” to free trade when they adopted the communist system. Thus the hegemonic struggle was carried out by force of both money and arms. But how could this global economic and military system be internalized by common people? What were the ideals and emotional appeals of the “New World Moral Order”?

Its key institutional expression was the United Nations, a classically Rooseveltian creation. Indeed, the UN Declaration of Universal Human Rights is directly inspired by the “Four Freedoms” speech that justified aid to the Allies in the period before Pearl Harbor. Freedom is the perfect ideal for a free-trade regime – however unequal that free trade may be. But UN idealism could be taken seriously because of the presence of US occupation troops across the world, and because of postwar investment programs, particularly the Marshall Plan for the reconstruction of Europe. At stake was what Roosevelt’s successor, Harry Truman, called a “Fair Deal” for the non-Soviet world. In The Logic of World Power, Franz Schurmann describes the transformative effect the Fair Deal was intended to produce:

The essence of the New Deal was the notion that big government must spend liberally in order to achieve security and progress. Thus postwar security would require liberal outlays by the United States in order to overcome the chaos created by the war. Aid to... poor nations would have the same effect as social welfare programs within the United States – it would give them the security to overcome chaos and prevent them from turning into violent revolutionaries. Meanwhile, they would be drawn inextricably into the revived world market system. By being brought into the general system, they would become responsible, just as American unions had during the war... America had spent enormous sums running up huge deficits in order to sustain the war effort. The result had been astounding and unexpected economic growth. Postwar spending would produce the same effect on a worldwide scale.

Truman was not a charismatic politician like Roosevelt, but a classic tool of corporate interest groups. His role was to functionalize the New Deal for the needs of the Cold War political economy. This meant fusing UN idealism with George Kennan’s grand strategy for the containment of Soviet communism. The result, in Schurmann’s interpretation, was an operational ideology, which was concrete, trustworthy and predictable for all free-world subjects to the extent that it was indistinguishable from the tremendous built environment of the Cold War security state. Every Arctic radar station, every nuclear carrier in the Pacific, every academic contract signed with what Eisenhower would later call the “military-industrial complex” was necessary to make the Cold War ideology tangible, workable, successful.

In fact the industrial economy of Japan was rebuilt, not with a large-scale aid program like the Marshall Plan, but with a flood of heavy-equipment orders to Japanese industrialists for the needs of the Korean War. NATO contracts served a similar function for European heavy industry. US planning, containment of the Soviet Union, and Grand-Area economic growth were one and the same. The restructured world order gave corporate monopoly capitalism its full technological and military expression. The passive revolution of Keynesian Fordism had been extended to the global scale. The US had created a new, historically unique version of Britain’s former free-trade system or “liberal empire.”

Home Front

The passive revolution succeeded internationally because it had first succeeded in the US. The existence of New Deal institutions like Social Security and unemployment insurance, as well as the underlying principle of expanded government intervention in the economy, gave legitimacy to the social democratic welfare states that were created in Western Europe, Japan and other industrialized countries. Social democracy implies the withdrawal of certain fundamental human relationships from the pressure of competitive markets. This was done, initially, under the protective umbrella of the GATT negotiations (General Agreement on Tariffs and Trade), which held off the pressures of free trade during reconstruction, up to the complete liberalization of Western European currency exchanges in 1958. Thanks to the social democracies, welfare – and not warfare – is usually taken as the hallmark of Keynesian Fordism.

The welfare states were not everywhere the same, however, as Esping-Andersen has shown in his classic study, The Three Worlds of Welfare Capitalism. The Scandinavian countries developed a model of universal welfare provision, while Austria, France, Germany and Italy worked out a complicated state-corporatist approach that administers benefits according to the individual’s specific sector of employment. The US, like Britain, exemplifies the “liberal” or “residual” approach, where most of the programs are “means tested,” ie reserved for the impoverished and indigent. The implicit claim is that the citizens of a prosperous society do not need state assistance. Once collective bargaining had been instituted in the US by the Wagner Act of 1935, both health care and retirement pay were mainly provided by the corporations themselves. They resisted universal coverage schemes and sought to keep keep control over the large financial flows implied by such programs. Until Kennedy and Johnson sought to revive the New Deal coalition by a massive expansion of welfare, the administration of effective demand – and the pacification of labor struggles – was left largely to the major employers. Their approach must be analyzed in the realms of both production and consumption.

First, how did the manufacturing corporations respond to the challenges that industrial unionism posed to the drive system of the 1930s, which tended to reduce all workers to homogeneous semi-skilled labor placed beneath the control of machines on the assembly line? On the one hand, it is well known that from WWII onward, collective bargaining was gradually focused on wage/productivity trade-offs, where workers abandoned any input into the organization processes in exchange for a share in productivity increases. This gave management a free hand to restructure the workplace in ways that reduced conflict. Segmented labor in a dual economy replaced the drive system.

Within the “core” or “monopoly” sector – which included defense industries as well as sophisticated consumer manufacturing, engineering firms and raw-materials processing – tasks were organized into a hierarchical career ladder that advanced toward greater degrees of labor autonomy. The very forms of the technologies used in the factories were calculated to serve this managerial strategy, which satisfied workers’ ambitions by dividing them from each other. A split emerged in the core sector itself, between high-paying jobs with employment stability and full benefits, and relatively stable, but lower paying jobs with less benefits. Competition between firms was limited by the cost-plus contracts of the state or by the classic barriers to entry erected by oligopolies. So-called “administered prices” (fixed by tacit or explicit accord between the major players) gave the corporations enough financial leeway to plan over five to ten-year periods, and to retain employees despite the short-term fluctuations of the business cycle.

The other half of the dual economy can be seen (ironically, in the context of free-market ideology) as the “competitive sector,” consisting of basic manufacturing, parts suppliers, distributors, light construction, food processing, etc. Here, salaries were thin, benefits and stability were negligible and the prospects for any kind of labor autonomy were non-existent. The disciplinary function of the industrial reserve army – ie, unemployed masses striking fear into workers’ hearts – was replaced in the full-employment society by the undesirability of work in the competitive sector, which was also heavily racialized and gendered. The clear status difference of these “shit jobs” gave yet more encouragement to the loyalty of the well-paid white male Anglo-Saxon workers of the monopoly sector.

For mass-manufacturing companies such as the automobile makers, however, it wasn’t enough to plan production. Consumption too had to be rendered predictable. The innovations of GM under Alfred P. Sloan in the Twenties and Thirties were now extended to all the major branches of industry. Yearly styling, consumer credit furnished by the corporation itself and planned obsolescence were the norms. The suburban home emerged as the ideal site of consumption, where automobile ownership was strictly necessary. The invention of the television, another major consumer product, allowed for a perfect fit between the stimulation of a generalized Hollywood-style romantic desire and continuous exposure to finely calculated product lines. The Neilsen ratings provided feedback information on consumer preferences, complemented by sociological motivation surveys. The Freudian advertising consultant, Ernst Dichter, developed his Strategy of Desire, based on the presumably universal urge to move upwards through the status hierarchy via the acquisition of symbolic attributes. The Keynesian goal of escaping underconsumption through the stimulation of effective demand took on a libidinal meaning for the corporate marketing departments, which attempted to bring their messages to the very core of the human psyche through the use of depth psychology. Thus the passive revolution culminated in a society of intense behavioral conditioning on the job and massively organized seduction on the weekend. Strict labor discipline found its recompense in the proliferating fantasy worlds of the commodity.

Social-democratic theory conceived the provision of social rights (or what the French sociologist Robert Castel calls “social property”) as state-supported means of access to fundamental use-values: child care, education, health services, intellectual debates, cultural experiences, recreation and the attentions required for a dignified old age. What this did, institutionally and not anarchically, was to open up heterogeneous temporalities, or if you prefer, distinct life moments, in which human potentials could be explored and enjoyed in their own right. In more thoroughly capitalist societies, industrial and financial planning reaches deeply into all these areas of human experience, commodifying them for profit. In the postwar US only one sector, education, was organized in a broadly social-democratic fashion. Is it any wonder that education became a major source of the revolt against the Keynesian-Fordist organization of society?

Hegemony’s Ruins

The argument is often made that American radicalism in the Sixties was defined by LSD: a psychoactive molecule produced by a European multinational, initially distributed in the US by the CIA, and massively used, particularly in universities, to take apart behavioral norms and explore alternative forms of consciousness. I’d place that unlikely love triangle second to another, more important one: the Students for a Democratic Society, the Black Power Movement and the Tricontinental alliance of Third-World liberation parties and governments. The social contradictions that brought these formations together and simultaneously ripped them apart began advancing toward a climax in the year 1966. But those contradictions were precipitated, from 1960 onward, by the Democratic Party’s attempts to combine the welfare and warfare models of Keynesian Fordism.

The 1960 election, between John F. Kennedy and the Republican Cold Warrior Richard Nixon, was very close, with the former winning by only 0.17% of the popular vote. Kennedy, who was in some respects an idealist, saw the black civil rights movement as an invitation to revive the New Deal coalition, not through activism on the streets, but through formal democratic and administrative processes. The result was the largest expansion of the social budget since Roosevelt, redefining what we now call “liberalism.” It began under Kennedy in the areas of unemployment insurance, Social Security, urban renewal and tax breaks for home ownership. Johnson’s election in 1964 along with landslide Democratic victories in Congress gave rise to the “Great Society,” including the War on Poverty, Medicare and Medicaid, Pell grants and low-interest loans for education, the National Endowments for the Arts and the Humanities, public broadcasting programs and still more spending for transportation and urban renewal. Legislation was passed in favor of women and minorities, including the Civil Rights Acts of 1964 and 1968 and the Voting Rights Act of 1965, plus labor and environmental laws. Attempts were also made to “fine tune” the economy through carefully timed injections of Keynesian counter-cyclical funding, which were calculated to smooth out the ups and downs of business cycles. All that paralleled the deepening involvement in Vietnam. A generation of young people were being asked to dream of a better world and to wake up in a military nightmare.

The history of SDS is fascinating, but let’s go quicker. In 1966 the Student Non-Violent Coordinating Committee, a southern civil-rights organization then led by Stokely Carmichael, broke ranks with its white allies from the north (mainly SDS) and began a push for Black Power. SDS affiliates, many of whom were directly threatened by the draft, took that as an invitation to radicalize themselves along the lines of the nearby Black Panthers and distant Third World movements, from the Viet-Cong to the Palestinians and Che Guevara. The hypocrisy of Johnson’s Great Society became unbearable to large numbers of people. The New Left historians Gabriel Kolko, James Weinstein and William Appleman Williams constructed a genealogy of “corporate liberalism” going back to the very origins of monopoly capitalism in the 1890s. A New Left fellow traveler, the libertarian Murray Rothbard, coined the phrase “the welfare-warfare state.” By 1966, draft cards had already begun burning in earnest.

The libertarians would go on to attack the New Deal coalition from the right, eventually contributing (with a little help from the Koch brothers) to the rise of neoliberalism. But they could never have been so successful if traditional Democratic liberalism had not first been discredited from within, both by the blacks whom it claimed to be rescuing from discrimination and poverty, and by its future cadres who had joined SDS. The New Left and the Black Power movement now saw the US free trade regime as a contemporary form of imperialism. Minorities in the US began referring to themselves as “Third World peoples.” Che Guevara might as well have been speaking directly to them, as well as the white radicals, when he declared in his message to the 1966 Tricontinental conference: “Not for a long time shall we be able to know if President Johnson ever seriously thought of bringing about some of the reforms needed by his people – to iron out the barbed class contradictions that grow each day with explosive power. The truth is that the improvements announced under the pompous title of the ‘Great Society’ have dropped into the cesspool of Vietnam.”

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The Fordist hegemony ended where it began, in Detroit, in the summer of 1967. Two black soldiers, just back from their tours of duty, were celebrating their return with a group of revelers in a clandestine after-hours bar, known as a “blind pig.” The cops raided the joint and roughed up the vets and their friends. A typical racist incident turned into one of the largest and most destructive riots in American history. Enraged blacks became snipers, firing hunting rifles from the roofs of apartment buildings. It went on for three days while the city burned. Johnson sent in Army troops. More soldiers just back from Vietnam were faced with a guerrilla uprising in the cradle of the American auto industry. Similar scenes were repeated later that summer in Newark, then in over a hundred cities around the country in 1968 after the murder of Martin Luther King. The US was changed forever. New Deal liberalism had taken a decisive blow. The passive revolution was finally over. Few people under sixty are able to imagine the atmosphere of looming civil war that brought Richard Nixon to power and made him the most reactionary president in US history. Yet hegemony’s ruins can still be seen, with your own eyes, in the city of Detroit, which in 2013 has fallen under the control of an Emergency Financial Manager appointed by a neoliberal governor.

Science fiction was the characteristic literary genre of the American postwar period, marked by the invention of the computer, the atom bomb, the moon lander and color TV. In 1966, the state-capitalist version of science-fiction came to the little screen, in the form of Star Trek. Later on it would provide the imaginary figure for a new US military program, Reagan’s Strategic Defense Initiative, known as “Star Wars.” But 1966 was also the year that Philip K. Dick wrote his great sci-fi novel, Do Androids Dream of Electric Sheep? More intimately than Debord’s Society of the Spectacle, this novel asked what psychic life was becoming under the pressure of relentless efforts to turn citizens into the human vectors of an industrial need to generate both disciplined labor and the desiring energies of effective demand.

At the close of the Keynesian Fordist era, a dystopian vein opened up at the heart of technocratic modernism. Gramsci’s “new type of man suited to the new type of work and productive process” had turned out very differently than hoped, over the forty-year course of a passive revolution unfolding at global scale. Today, if we want to redefine what “progressive” could mean in the context of the present crisis, we have to remember not just full employment and the most positive aspects of social democracy, but all these legacies of Fordism.