People's Democracy

                           Paul Marlor Sweezy (1910-2004)

                                                                             Prabhat Patnaik              

PAUL M Sweezy who died on February 28 was an outstanding intellectual, a part of a galaxy of Marxist economists which included, among others, Maurice Dobb, Michael Kalecki, Oskar Lange, Paul Baran and Josef Steindl. All of them worked, at least for long stretches of time, in the advanced capitalist world, where they not only enriched the Marxist tradition and influenced thousands of young scholars, but also made profound and original contributions to the discipline, making it more socially sensitive and relevant, and setting its intellectual agenda for nearly six decades.

Sweezy came from a prosperous East Coast American family: his father was the Vice-President of the First National Bank of New York. He went to Harvard as a matter of course, where he and the renowned “mainstream” economist Paul Samuelson, were among the favourite students of Joseph Schumpeter. From Harvard Sweezy went for a while to the London School of Economics, where he duly enrolled to attend the lectures of Friedrich Von Hayek, the conservative Austrian economist who had migrated to England. Hayek’s strong and persistent attacks on Marx in the course of his lectures persuaded Sweezy to make a proper study of Marxism. At the end of that study he was a Marxist! And the result of that study was his magnum opus, The Theory of Capitalist Development (1942).

Meanwhile Sweezy had joined the economics faculty at Harvard; but he was denied tenure, his Marxist predilections having become apparent meanwhile. He resigned from the Harvard faculty, gave up his academic career altogether, and set up, along with his friend Leo Huberman (well-known for his excellent introduction to Marxism, Man’s Worldly Goods), a journal Monthly Review, which became a major socialist journal. (Among its first set of contributors was Albert Einstein with his essay “Why Socialism”?)

The popularity of Monthly Review arose from its simplicity, its concreteness, its concern with the third world, and, above all, from the centrality of imperialism in its overall theoretical perspective. No other Marxist journal in the English language (and that naturally excludes Jean-Paul Sartre’s Les Temps Modernes) kept imperialism so firmly in the centre of the picture as MR (and Sweezy’s co-editor Harry Magdoff was to write an extremely influential book on the subject The Age of Imperialism).

Sweezy did not keep himself confined to editing MR and writing outstanding books. He was an activist who threw himself into all the major political issues that came up during his eventful life, from the defence of the Soviet Union , to the fight against fascism, to the defence of the Cuban Revolution (Che Guevara was a personal friend of Baran and Sweezy), to the struggle against US aggression on Vietnam, to solidarity with the student upsurge of the late sixties. During the Second World War, when the Left supported the war effort against fascism, Sweezy was associated with the Office of Strategic Security (OSS) which was to become the precursor of the CIA.

In 1954, at the height of the McCarthyite witch-hunt, Sweezy was summoned on two occasions to appear before the Attorney General of New Hampshire who had been conferred wide-ranging powers to investigate “subversive activities”. Upon his refusal to answer questions he was declared to have been in contempt of court and sent to the county jail (though he was released on bail). His appeal against the contempt verdict was turned down by the New Hampshire Supreme Court, but upheld eventually by the U.S. Supreme Court in 1957.

While Sweezy’s The Theory of Capitalist Development was the most significant work on the Left produced in America in the decade of the forties, Paul Baran’s The Political Economy of Growth was the most significant work on the Left produced in America in the decade of the fifties, and Baran and Sweezy’s Monopoly Capital was the most significant work on the Left produced in America in the decade of the sixties. Joan Robinson, the distinguished economist once described Sweezy as a “real saint.” The term may appear odd being applied to a Marxist, but what stood out about Paul Sweezy, in addition to his brilliance, his intellectual calibre and his profound commitment to the cause of socialism, was a nobility of character that is indeed extremely rare to find.

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Sweezy’s enduring and awesome achievement was his book The Theory of Capitalist Development (TCD). TCD was remarkable for a number of reasons: first, it was an extraordinarily lucid presentation of Marx’s ideas on economics, one which has remained unsurpassed in the six decades that have elapsed since it first appeared. Secondly, it was a convincing demonstration of the proposition that the essentials of Keynes’ ideas which were then shaking the world were already embedded in Marx’s writings. Thirdly, it introduced to the English-speaking readers for the first time a whole range of Marxist economic ideas that had developed in the continent by thinkers from Kautsky, to Hilferding, to Grossman, to Rosa Luxemburg, to Tugan-Baranovsky, to Louis Boudin, to Otto Bauer, to Nikolai Bukharin. Fourthly, it provided a cogent  explanation of contemporary phenomena, such as inter-imperialist rivalry, and fascism, starting from the basics of Marxist economic theory, not as accidental or conjunctural occurrences, but as phenomena rooted in the political economy of capitalism. And finally, and most significantly, it advanced a theory of “underconsumption” which was to dominate the Marxist economic discourse thenceforth. Indeed both Baran’s The Political Economy of Growth, and Baran and Sweezy’s Monopoly Capital were basically re-iterations and refinements of the “under-consumptionist” theory first advanced in TCD.

 “Underconsumptionism”, which refers to the view that a shift in the distribution of social income away from the workers to the capitalists, produces, through shrinking demand, a tendency towards stagnation under capitalism, was of course an old idea. It had been advanced by a host of writers from Sismondi to Hobson, to Luxemburg, to Otto Bauer. Sweezy’s, and Baran’s, contribution was to argue that “underconsumptionism” was an ex ante tendency, and to eliminate thereby a whole range of confusions surrounding the theory. The theory for the first time acquired a rigorous totality.

The standard objections to “underconsumptionism” were two-fold: first, there was no perceived tendency towards secular stagnation in the capitalist world. And secondly, there was not even any statistical evidence to show that the share of profits in output was rising in the advanced capitalist countries as assumed by the underconsumptionist argument.

Baran and Sweezy’s ingenious answer to these objections can be explained with a simple arithmetical example. Suppose the total output is 100, of which wages constitute 50 and profits 50; workers’ consumption is 50, capitalists’ consumption is 25 and investment is 25. Now suppose that the distribution changes to 40:60 between wages and profits, and that capitalists’ consumption and investment remain unchanged. Since workers cannot consume beyond their wages, total demand in the economy would be only 90 compared to 100 earlier. But if the State chips in with an expenditure of 10 which it raises through a tax on profits, then we shall once again have an output of 100, and (post-tax) profits of 50 (though the wage bill would be 40).Neither the total output nor the share of post-tax profits in it would have changed compared to the initial situation, even though clearly there has been an ex-ante tendency towards underconsumption. In other words, the ex ante tendency towards underconsumption, which underlies the new situation, is not (and indeed is scarcely ever) directly visible: it has called forth and is therefore camouflaged by State intervention. This, Baran and Sweezy argued, is exactly what was happening in post-war capitalism, where State intervention, taking the form of larger military expenditure, had prevented the realization of the ex ante tendency towards underconsumption.

Of course advanced capitalism today has developed a whole range of new contradictions, arising from the emergence of a new form of international finance capital and the globalization of finance that it promotes, which have undermined the scope for State intervention of the Keynesian kind that Baran and Sweezy had taken for granted in Monopoly Capital. Nonetheless the tendency towards underconsumption highlighted by them has to be reckoned with as a basic element in any analysis of contemporary capitalism.

After the publication of Maurice Dobb’s Studies in the Development of Capitalism, Sweezy had been involved in a famous debate with Dobb (a debate in which Rodney Hilton, Kohachiro Takahashi and Christopher Hill had joined later) on the transition from feudalism to capitalism (because of which the debate is sometimes referred to as the “Transition Debate”). That debate need not be reviewed here but the essential point of Sweezy’s intervention, on the basis of Henri Pirenne’s work, was that the opening up of Mediterranean trade had played a crucial role in the undermining of feudalism and the ushering in of capitalism. (Dobb’s reply to this was that the impact of trade depended on the internal state of the mode of production under consideration, and that trade had even given rise to a “second serfdom” in Eastern Europe).

The real point about Sweezy’s intervention to my mind however had been to underscore the role of demand-side factors; and even his underonsumptionism was concerned with demand-side factors. In other words there is a continuity of thought in Sweezy between his underconsumptionism and his stance in the transition debate.

Demand-side factors continue to be underemphasized in Marxist economics, notwithstanding Marx’s clear stand against Say’s Law. It is in this context that Paul Sweezy’s contribution would be remembered as a seminal one to Marxist economic theory. He would be celebrated in the years to come not only as a “saint” but also as a “sage”.