Working for Reforms While Advancing Toward Socialism

This article is based on “Biden’s Economic Constraints,” Catalyst vol. 4 no. 4, winter 2021, 10-41. The sources for claims about economic trends in this article are found in the Catalyst article.

Unmistakable signs of a new and progressive direction in US politics have taken hold since the inauguration of a new president and the shift in the Senate majority in January 2021. The Biden administration has made proposals for action to combat climate change, inequality and poverty, and oppression of people of color and other marginalized groups. The PRO Act, which would greatly strengthen the legal protections for union organizing drives, has significant support from mainstream Democratic officials. The long hold of neoliberal ideas over the entire mainstream political spectrum seems to have collapsed. As a result, socialists now confront the complex question of how to pursue our goals in this new situation.

Understanding the reasons why these new conditions have emerged is helpful for charting a political course. Although history never exactly repeats itself, a historical perspective about similar periods in the past can contribute to formulating a strategy for socialists today. This article offers an analysis of the underlying forces that periodically usher in a period of political upheaval and institutional transformation in capitalism, along with an account of the particular factors that have promoted the current turn toward progressive reform. A socialist strategy should combine a plan to struggle for immediate improvements for exploited and oppressed groups that are suddenly achievable today, with efforts to move onto a trajectory toward a transition beyond capitalism.

Expansion, Crisis, and Regimes of Capitalism

Capitalism has evolved through a series of distinct institutional forms, or regimes, over time. The monopoly stage of capitalism began to develop during the last decades of the nineteenth century and was consolidated after 1900, superseding the previous small‑business competitive capitalism. In the 1930s a push toward a social democratic form of capitalism began, followed by the consolidation of social democratic, or regulated, capitalism shortly after World War II. Around 1980 the contemporary neoliberal form of capitalism arose. In each period the system remained capitalist, but at a more concrete level many of the institutions, as well as the dominant ideas, changed from one regime to another.

The institutions and dominant ideas of each previous form of capitalism promoted capital accumulation and economic expansion for several decades. However, eventually the contradictions of each form gave rise to a structural crisis in which the existing regime no longer promoted economic expansion. Such structural crises have been characterized by some combination of prolonged economic stagnation, a falling rate of profit, and/or heightened economic instability. So far in history, every structural crisis has persisted until a restructuring process installed a new institutional form of capitalism that again promoted normal capital accumulation and economic expansion.

During the period in which a regime of capitalism is working “effectively,” it is difficult to change the policy trajectory in a way that is inconsistent with the dominant institutions and ideas. For example, once post‑World War II regulated capitalism was consolidated in the late 1940s, the alternation of partisan control of the White House had little impact on the overall policy direction. For example, Bill Clinton’s presidency and the rise of “New Labour” under Tony Blair in the UK extended and deepened neoliberalism, despite promises to the contrary during their respective election campaigns.

However, once an institutional form of capitalism enters its structural crisis phase, previously unpopular ideas and calls for change suddenly get a hearing and marginalized movements grow rapidly, as the conditions of crisis spur various groups and classes to look for a way out of increasingly oppressive conditions. In the 1890s a small-farmer-based populist movement rapidly gained ground, followed a decade later by a rising working-class based socialist movement. Some mainstream political figures such as Theodore Roosevelt suddenly adopted a reformist stance, as did some big business leaders. Out of the resulting class struggle emerged the first significant government regulation of business and banking, along with legislation to protect consumers and workers, in the US.

In the 1930s another structural crisis energized industrial workers, leading to a huge upsurge of worker militancy, major trade union victories, and the rapid growth of the Communist Party. Again some mainstream politicians became reformists, with the leading example being President Franklin D. Roosevelt. At the same time, a fascist movement arose around the world, including in the US. In the US the forces pushing for progressive reform were stronger than those demanding repression, and a process of capitalist reform was set in motion. After World War II, a new form of capitalism was consolidated when a decisive part of big business entered an informal compromise with a strong trade union movement and accepted the main New Deal reforms of the 1930s. Regulated capitalism in the US, a weak form of social democracy, included collective bargaining to determine wages and working conditions, a government-regulated banking system, and a modest welfare state.

The crisis of postwar regulated/social democratic capitalism broke out in the 1970s, taking the form of rising inflation, rising unemployment, a falling profit rate, and instability in the international financial and monetary system. The political outcome was a plunge to the right, not the left. Big business, which had reluctantly accepted postwar regulated capitalism, took the opportunity provided by the crisis to revive previously discredited free-market ideas, using them as a battering ram to attack trade unions, social welfare programs, and government regulation of business. In the US and UK their victory was swift, and by around 1980 what became known as neoliberal capitalism had replaced the previous regime.

Neoliberal transformation has been a disaster for working people and people of color, but it overcame the structural crisis of the 1970s. For some twenty‑five years after 1980, the U.S. economy had long economic expansions – in 1982‑90, 1991‑2000, and 2001‑07 – interspersed with relatively mild and brief recessions through 2007. Inflation was subdued throughout that period and remains so today. The long decline in the rate of profit in the U.S. since the mid-1960s was reversed after 1980, and the income and wealth of the rich grew very rapidly. The deepening global economic integration of capitalism boosted profits while depressing wages. New forms of financial speculation generated a huge flow of profit to the financial sector. However, capital accumulation and GDP growth were only moderate, less vigorous than in the preceding period of regulated capitalism when government and trade unions had supposedly been strangling the economy.

The promise that deregulation and shoveling income to corporations and the rich would benefit workers turned out to be a big lie. The neoliberal era brought declining real wages, while CEO pay skyrocketed. The average hourly wage in constant US dollars was lower on the eve of the 2008 financial crisis than it had been at the start of the neoliberal era, in contrast to the 75% increase in the real hourly wage from 1948 to 1973. Regulated capitalism gave rise to mildly equalizing growth in family income through 1973, but after 1980 growth became sharply disequalizing. The share of income going to the top one percent rose steadily through the eve of the financial crisis of 2008, reaching a level approximating that of just before the Great Depression. Jobs with good health care and retirement benefits and long‑term job security became scarce.

Cutbacks in state funding of public colleges and universities shifted a growing share of the cost onto students and their families. Outstanding student debt rose to $1.7 trillion in September 2020, 3.5 times as great as in March 2006 when the Federal Reserve first began reporting that figure. Average student debt for 4‑year college graduates reached $42,200 in 2012.  As scientists began to warn of the dangers of global warming, the neoliberal resistance to environmental regulation contributed to a sluggish response. African Americans and other people of color have been particularly affected by the retrograde trends of the neoliberal era, through loss of jobs to deindustrialization and cutbacks in public employment, while an era of mass incarceration of African Americans began.

The above cited trends gave rise to growing anger at the status quo among working class people, people of color, and young people. However, as long as neoliberal capitalism was effectively promoting normal economic expansion it was difficult to confront the underlying causes.

The financial crisis and Great Recession of 2008 marked the end of the period when the neoliberal form of capitalism promoted normal capitalist economic expansion. In 2008-09 people watched as the government enacted a generous taxpayer bailout of the bankers who had brought the economy to the edge of ruin, while little help was offered to millions of homeowners facing eviction.  US capitalism entered a period of stagnation, with very sluggish economic growth, low investment, and almost a disappearance of labor productivity growth. Some working people and people of color had placed hope in the incoming Obama administration, but the retrograde trends of the neoliberal era continued unabated including rising inequality and the disappearance of decent jobs.  These developments led to the sudden emergence into the mainstream of two previously marginalized political directions, authoritarian nationalism and social democracy.

Authoritarian nationalism had been marginalized in the developed capitalist countries after World War II, but it now experienced a remarkable rising from the dead in many places, including in the US with the election of Donald Trump on an “America First” platform. Trump ran for president on a relatively consistent authoritarian nationalist appeal that included calls for a big government infrastructure investment program, bringing industrial jobs back to the US through tariffs, and halting immigration, while promising to protect social security and Medicare. Once in office, President Trump compromised with the neoliberals who dominated in Congress, turning over domestic economic, regulatory, and tax policy to neoliberals, while pressing ahead with nationalist policies on trade and immigration. Trump also overtly endorsed white supremacy and the right of an authoritarian leader to remain in power no matter what.

A consistent authoritarian nationalist restructuring of US capitalism could potentially resolve the structural crisis of neoliberal capitalism, as Hitler’s regime was able to end the Great Depression in Germany in the 1930s. Stagnation could have been overcome through a combination of state repression of labor to keep wage growth repressed and profits rising, while a big infrastructure investment program along with rising military spending would promote the growing total demand necessary for a period of normal capitalist economic expansion. Nationalist ideology would provide the glue to maintain working class acceptance of a trajectory with few material benefits for working people. However, the economically inconsistent mixture of authoritarian nationalism and extreme neoliberalism, which foreclosed the possibility of rising public investment, left the US economy mired in stagnation.

The same conditions of structural crisis that propelled the rise of authoritarian nationalism also promoted a rebirth of support for social democracy in the US. Senator Bernie Sanders, running as a self‑proclaimed democratic socialist advocating green-tinged social democratic reforms, came close to winning the Democratic primary for President in 2016 and was a leading candidate for president again in 2020. Bernie’s economic program could have resolved the structural crisis by empowering trade unions and bringing a balanced growth of wages and profits. Growing public investment in green infrastructure and new technologies along with rising spending on social programs would assure growing demand for output. Measures to reign in the speculative excesses of the neoliberal era would encourage a flow of profit into productive investment.

New Movements

The long period of worsening conditions facing working people, people of color, and young people during the neoliberal era, intensified during the structural crisis period, led to a series of protests and uprisings in the US. The massive Occupy Wall Street movement broke out in 2011, the first significant openly anti-capitalist protest movement in the US since the end of World War II. The Black Lives Matter movement originated in 2013 and, unlike the Occupy movement, gained momentum and support in the following years. Trump’s election and reactionary policies spurred a massive resistance movement in 2016-17. Large-scale labor actions have erupted in recent years among teachers and low-wage retail and service workers. That process led tens of thousands of newly radicalized activists to join Democratic Socialists of America (DSA), powering its fifteen-fold growth.

The COVID-19 pandemic that struck the US in March 2020 had a major impact on the country’s political mood. More than 21.8 million jobs were lost in April 2020 as the unemployment rate shot up to 14.7% and remained high through the end of the year, particularly affecting women and people of color. A terrified Congress passed a truly massive bailout and relief bill in March 2020 that provided a lifeline to many people and small businesses, and the poverty rate actually declined despite the deep recession. This offered an impressive lesson about how progressive federal action can benefit ordinary people. The pandemic itself, as a public health crisis, exposed the huge cost of the decades of underinvestment in America’s public health infrastructure.

The aforementioned protest movements likely contributed to a noticeable swing to the left in US public opinion on many economic policy issues including a higher minimum wage, access to affordable health care as a human right, action to combat climate change, affordable higher education, and the right to join a union. While most African American voters chose Biden over Sanders in the 2020 Democratic primaries, they also have shown strong support for Bernie’s economic policy demands. The COVID‑19 pandemic may have further increased public support for progressive economic policies. The pandemic has served as a real‑life case study of the limits of the “free market” and the value of a strong and comprehensive welfare state that assures access to health care, a strong public health system, and income security for the population.

The Trump presidency ended with a remarkable drive to overturn the results of the 2020 election. The centuries-long norm of peaceful transition in Washington, broken previously only by the Civil War, had been challenged. That challenge outraged the constituencies that had supported the Democrats and increased the pressure to move boldly to enact the relatively progressive Democratic platform.

Navigating the Current Political Moment

As in previous structural crises of capitalism, the past political stances of mainstream politicians have proven to be a poor guide to their current ctions. For decades Biden was a centrist Democrat, as was the “Senator from Wall Street” majority leader Chuck Schumer, but not any longer. The first three months of the Biden administration and the slim Democratic majority in Congress have shown a clear break with the normal mainstream politics of the neoliberal era. Biden has pushed bold progressive programs on economic, regulatory, tax, and social policy, with active support from the Senate leadership.

While socialists should focus on our popular constituencies, we should not ignore the evolving position of our main adversary, big business. One factor in the failure of Trump to actually install an authoritarian nationalist regime was the very limited support for that direction from US big business. Few of the initial high level positions in the Trump administration went to representatives of the traditionally powerful sectors of big business. Instead, the business appointees came from the world of speculative capital: hedge funds and private equity funds. Those few old-line big business officials who accepted a position in the administration soon left. Trump set up two business advisory councils composed of CEOs of large corporations, but both disbanded in August 2017 when Trump praised the white supremacists and fascists in the deadly Charlotteville demonstration. US big business has so far stuck with neoliberalism. Authoritarian nationalist policies run contrary to their dependence on the globally integrated market and immigrant labor. Trump’s attack on bourgeois democracy during the 2020-2021 transition further alienated big business, whose leaders seem to understand that a parliamentary republic is the best political form for securing capitalism.

While Trump was not the candidate of big business, the extreme neoliberal regulatory and tax policies of his administration were consistent with their interests. However, there have been some signs that big business leaders might be moving away from parts of the neoliberal agenda. The so-called “shareholder value” movement, which advocated a singular focus on the bottom line and was backed by the likes of Milton Friedman, became the corporate orthodoxy after 1980. In August 2019 the Business Roundtable, the country’s leading big business policy organization, issued a report calling for abandoning that singular focus for consideration of the effects of company decisions on employees, customers, and the general public, as well as shareholders .

Some corporate leaders have spoken out on climate change, which threatens the bottom line of many big companies in the not too distant future. In April of this year, a broad group of major corporations and corporate officials placed an unprecedented two-page ad in The New York Times defending the right to vote, which was a clear criticism of the voter restriction acts emerging from many Republican-controlled state legislatures. While big business is uncomfortable with overt expressions of racism and white supremacy, their neoliberal policy aims have relied on covert racist appeals and measures to limit turnout of people of color in order to elect neoliberals despite the unpopularity of their economic policies. This suggests a new willingness to sacrifice neoliberal goals in the current situation. On the other hand, business groups have uniformly criticized the modest corporate tax increases in Biden’s infrastructure investment proposal.

It is possible that significant elements of big business might go along with a modest green social democracy in this period. In America big business has in the past been able to block progressive change if they are unified in opposition. The two previous periods of progressive change in the US, in the early twentieth century and the post-World War II period, saw big companies accepting the changes, however reluctantly.

If big business does abandon neoliberalism, there is the danger it could do so by endorsing authoritarian nationalism. However, that direction seems to offer little if anything to big business. In the past, big business has endorsed, or at least accepted, fascist regimes when a militant working class difficult to control within liberal democratic institutions, along with a broader threat to capitalism from strong Communist parties, threatened core business interests. Such conditions obviously do not exist today. Authoritarian nationalist regimes are not stable in the long run, and when they collapse there is a danger that capitalism itself might be challenged if big business had been part of the authoritarian ruling coalition.

However,this does not mean that authoritarian nationalism is not a real threat. Such a movement could win power in the US without big business support and impose a new regime on big business as well as the working class. The return of a Trump-like figure, maybe even Trump himself, is possible in 2024. Socialists should take that possibility into account.

Socialists need a strategy that will marginalize the neo-fascist threat while advancing the interests of our constituencies. The last time a significant fascist threat arose in the US was during the structural crisis of the 1930s. That fascist movement attracted support from various sectors of society. However, as the New Deal turned left in 1934-35 its programs brought relief from unemployment and poverty for millions of working people, which prevented the fascist movement from gaining a foothold.

A transition to socialism is not on the political agenda at this time. This would require the emergence of a strong and organized working-class based movement that sees socialism as its goal and is ready to take the steps necessary to reach that goal. However, current conditions indicate that a shift within capitalism, to a social democratic form, is possible today. A critical mass of working people, people of color, and young people have come to regard contemporary neoliberal capitalism as unacceptable, and they are demanding a set of new policies that amount to an anti-racist, green social democracy. It may be possible to push the new political leadership at the federal level in that direction.

The possibilities for progress in this period do not seem to extend to making a fundamental change in the US imperialist role in the world. The Biden administration and the Senate Democratic leadership have continued, and even intensified in some respects, the effort to start a new cold war against China out of fear of the emergence of an economic and political equal to the US. The post-World War II period of social democratic capitalism saw a long series of wars and interventions aimed at protecting US imperial interests. It took massive popular opposition, along with other unusual factors, to force the final US withdrawal from Vietnam. The imperialist drive arises from the core nature of capitalism, which does not change along with capitalist regime change. On this issue, the left will remain in full opposition to state policy.

Nevertheless, socialists should whole-heartedly join in the struggle to move toward the best economic and political direction for our constituencies that is attainable in this period. We should formulate our own demands for reforms and fight for them in the political arena. At the same time, we should continue engaging in grass-roots organizing in the labor, tenants’ rights, Black Lives Matter movement, and other struggles. By working in alliance with non-socialist organizations and movements that are demanding progressive reforms, we can both strengthen the reform forces and expose more people to our ideas and practices.

While progressive reforms under capitalism are always imperfect, and are always subject to withdrawal when conditions change, that is not a reason to stand back from such struggles. That position gives up the only ways we can organize our constituencies. When working people engage in collective action, many will come to realize that the problem they face is not just a particular bad boss or government official, but a system that must eventually be replaced. They come to see that their own oppression is linked to the oppression of others. The experience of collective struggle can construct a small-scale picture of a different future society.

In the past socialist parties in many countries have successfully demanded reforms in capitalism, only to end up turning into reformist parties that jettisoned the original aim of a transition beyond capitalism. Capitalism has various mechanisms that can absorb or deflect radical movements away from their initial goals. There is no example to date of a socialist movement in a parliamentary democracy that has solved the problem of how to move from reform to socialist transition. We have no model to follow.

I have three suggestions for avoiding the reformist trap. One is to develop a vision of what the future socialist system will look like. You cannot fight something with nothing. A well-defined and imaginable vision of an alternative society, in which people make the decisions about how to satisfy their wants and needs in a sustainable manner, is essential to build a movement that aims for more than immediate reform of capitalism. The nineteenth century socialist movement identified the key elements of a future socialism, an interpretation that still seems persuasive today: collective ownership of productive property, a (democratic and participatory) planned economy, and a democratic workers’ state. The arguments for that conception of socialism would go beyond the limits of this article. However, it is worth pointing out here that a “socialism” that allows private ownership of enterprises by employers of wage-labor will have a capitalist class, which will never rest until it can restore a fully capitalist system. A “socialism” that allows market forces to play the dominant role in economic decision-making, rather than a process of democratic participatory planning, will generate many of the oppressive features of capitalism while producing a wealthy class that will eventually move to overthrow “market socialism.”

Some analysts argue that the future society will be a product of the creative activity of the masses as they engage in struggle, and hence it is pointless to try to specify that in advance. That claim is valid regarding the particular institutions and practices that will emerge in a transition to socialism. However, it will not be possible to advance beyond capitalism without a shared vision of an alternative society for which the movement struggles. Capitalism evolved historically without anyone having a concept of it beforehand, by emerging in the interstices of feudal society. However, that is not a plausible path for a transition to socialism.

The second suggestion is that socialists must consciously build an explicitly socialist movement at the same time as they engage in struggles for reform of capitalism. We should continue educating and agitating about the ultimate threat that capitalism poses to humanity and the ways in which socialism can solve, or provide a basis for solving, the main problems faced by humanity. We can do this through schools, workshops, writings, and videos and podcasts, and by informal conversations with those we engage with in reform struggles.

The need to actively build an explicitly socialist movement is not contrary to the need to struggle for reform today. In fact, the two are intimately linked. US history shows that previous periods of significant progressive reform of capitalism had strong radical movements that threatened the capitalist class and won a reluctant acceptance of reforms. We may not be successful in promoting progressive reforms unless we are able to build a growing socialist movement. Further, there is no way to build a growing socialist movement in a period when our constituencies are demanding progressive reform if we abstain from joining the reform struggle.

The third suggestion is that the socialist organization we build must earn the respect of our constituencies. We will have to show that we can be trusted to lead in the reform and ultimately the reconstruction of society. Our internal relations must be appealing to masses of people, as we strive to embody alternative socialist values and norms in our work. We must demonstrate our commitment to fighting for the interests of all exploited and oppressed groups.

There is no way to foresee the future conditions that will finally make a transition to socialism possible. A period of green social democracy will empower working people, who are likely to become increasingly aware of the limits of reformed capitalism. Green social democratic capitalism would itself eventually enter a structural crisis, as every form of capitalism does. If a strong socialist movement has been built by that time, then a transition to socialism might well move onto the agenda. All we can know today is that a strong, vibrant socialist movement is a critical condition for a successful transition to socialism. That means a socialist movement that emphasizes the threat of capitalism to humanity’s future and the ways that socialism can overcome that threat, that earns the trust of masses of working people through its leadership role in struggles for reform, and that draws working people to it through the appeal of its internal socialist values and norms.