Simon Clarke

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Keynesianism, Monetarism and the Crisis of the State

Simon Clarke

Introduction 5

The challenge of monetarism 5

The Hidden Hand and the Limits of the Capitalist State 14

State and economy in the eighteenth century 14

The theory and practice of mercantilism 15

The challenge to mercantilism 17

The division of labour and the rationality of exchange 19

Money and exchange 20

The hidden hand and the accumulation of capital 23

Capital, labour and the equality of exchange 24

The market and the state 25

The limits to the state 28

The principles of public finance 29

Political Economy and the Rise of the Capitalist State 30

Adam Smith and the crisis of mercantilism 30

Classical political economy 33

Ricardo and the problems of post-war reconstruction 36

Political economy and constitutional reform 40

The reformed state and economic regulation 41

The administrative reform of the state 44

The mid-Victorian boom 51

Money, Credit and the Overaccumulation of Capital 54

The limits of liberalism and the critique of money 54

Money and exchange in petty production. 55

Commercial capitalism and the development of money 57

Commercial capital and the rise of capitalism 60

The contradictions of political economy 61

The social form of capitalist production 63

Capitalist competition and the overaccumulation of capital 65

Money, credit and the overaccumulation of capital 68

Overaccumulation crises and the development of state money 70

From the hidden hand to monetary policy 72

The Form of the Capitalist State 76

Capital and the state 76

Civil society and the state 80

Capital and the development of the capitalist state form 83

The limits of the liberal state form 85

The working class and the state 87

Overaccumulation, class struggle and the nation state 91

Economics, politics and the ideology of the state 96

Class Struggle and the State: the Limits of Social Reform 98

Capital, the state and the reproduction of the working class 98

Pauperism and the state 100

Political reform and social administration 102

The crisis of 1873 and the Great Depression 104

Depression, industrial relations and social insurance 107

The limits of social reform 108

Overaccumulation and the Limits of the Nation State 111

The national form of the capitalist state 111

The international system of nation states 112

The 1873 crisis, the nation state and the rise of imperialism 114

Overaccumulation and imperialist war 119

War, Revolution and Depression: The Limits of Liberalism 121

The impact of war 121

The post-war reconstruction of liberalism 123

The reconstruction of the liberal world order 127

The problem of the staple industries 131

The 1929 crash and the collapse of the gold standard 133

Money and credit in the crisis of overaccumulation 135

Economists and the State: The Keynesian Revolution 138

The marginalist revolution in economics 138

The economists and the depression of the 1920s 142

The state and the depression of the 1930s 144

The Keynesian Revolution 147

The political impact of Keynesianism 151

Post-War Reconstruction and The Keynesian Welfare State 153

Wartime planning and the budget 153

Planning for post-war reconstruction 154

Planning for a new international order 156

The reconstruction of Anglo-American imperialism 158

Marshall Aid and the rebuilding of Europe 160

Planning and the budget 162

The legacy of Labour 165

The foundations of the post-war boom 168

Welfare, wages and the working class 170

Keynesianism and the boom 173

The regulation of accumulation on a world scale 174

The limits of liberal Keynesianism 176

Keynesianism, Monetarism and the Crisis of the State 179

The brief triumph of Keynesianism 179

The problem of productivity 181

The rise of Keynesian interventionism 184

The limits of Keynesian intervention 187

The challenge to Keynesianism 190

The turn to the market 193

The class struggle and the crisis of Keynesianism 195

The crisis of Keynesianism and the rise of monetarism 198

The challenge of monetarism 202

The triumph of monetarism 207

Overaccumulation and the world crisis of Keynesianism 214

Conclusion 221

Money, the market and the state 221

The limits of monetarism 224

The crisis of social democracy and the future of socialism 225


The challenge of monetarism

Over the past decade Keynesian full employment policies have been abandoned in one country after another, to be replaced by monetarist policies that place a premium on price stability. The monetarist counter-revolution has not only abandoned the Keynesian commitment to full employment, but more fundamentally has challenged the Keynesian conception of the role of the state in the regulation of capitalism, returning to the pre-Keynesian emphasis on the primary role of money and the market. How are we to understand this development, and what is its significance?

Monetarists would claim that their triumph simply reflects the failure of Keynesianism and the correctness of their point of view: a new sense of realism has replaced the Keynesian fantasy of universal plenty, a popular demand for freedom has arisen to challenge the tyranny of the state. Many Keynesians, by contrast, see monetarism as a reactionary throwback, a misguided academic theory that has been pressed by doctrinaire economists on bigoted and narrow-minded politicians. But to see monetarism as the triumph of either rationality or irrationality is to attribute too much coherence and too much power to theories that serve more to legitimate than to guide political practice. The ideas of monetarism are important, but their importance is ideological, in giving coherence and direction to political forces which have deeper roots.

The most popular explanations for the rise of monetarism look for these roots in political developments. The triumph of monetarism is commonly explained by the political failures of the left, that opened the way for the populist ideology of the New Right, manifested most dramatically in the rise of `Thatcherism' and `Reaganism'.1 The appropriate response of the left is then supposed to be a political response, to regain the ideological initiative. The left has to develop a new politics and a new ideology, that will address the popular hopes and fears to which the New Right speaks, and rebuild a united movement that will win the hearts and minds of the people.

The problem with this approach is that the rise of monetarism cannot be explained in terms of purely political developments. `Thatcherism' and `Reaganism' are only variations on a theme that has been played around the world. Moreover the rise of monetarism has not been specifically tied to the rise of the New Right. In Britain it was under a Labour government, and most particularly from 1976, that monetarist policies began to be pursued and Keynesian objectives abandoned. Moreover the turn to monetarism under Labour did not only involve a turn to monetarist economic policies and objectives. The Callaghan government played all the New Right tunes, however off-key, attacking the trades unions, extolling the virtues of the family, pandering to racism, tightening the administration of social security, stressing its commitment to `law and order', launching the `Great Debate' on education. Although in Britain Thatcher replaced Callaghan, in Southern Europe, Australia and New Zealand social democratic governments have taken it upon themselves to carry through the monetarist revolution, in the guise of a `politics of austerity', while social democratic parties around the world have capitulated to a `new realism'. Thus monetarist policies have been forced on governments of very different political and ideological persuasions, although policies that have in some cases been adopted only under the force of circumstances have in others been espoused enthusiastically. While social democratic governments submit to the power of money in the name of realism, right-wing governments proclaim its power as that of a moral principle. These differences are important, but to stress the distinctiveness of the variations is to ignore the underlying theme. The rise of monetarism cannot be explained in terms of contingent political developments, in terms of personalities and political factions of the right and the left, for these developments are systematic, to be observed throughout the capitalist world. These political developments express a deeper crisis, of which they are themselves a part.

An alternative set of explanations looks to the economic crisis to explain the rise of monetarism, seeing monetarism as a capitalist response to the crisis. There are two very different interpretations of the significance of monetarism along these lines. The first interpretation rests on an identification of Keynesianism with the interests of `industrial capital' and monetarism with the interests of `financial capital'. Keynesian policies involve high levels of state expenditure in support of the productive sector of the economy, state intervention in financial markets to secure cheap credit for industry, and demand-management to provide a growing market for industry, making possible a high and rising standard of living and of welfare provision for the mass of the population. Although such policies serve the general interest, as well as the particular interests of industrial capital, they do not serve the interests of bankers and financiers, who seek high interest rates and the freedom to invest their money where they can achieve the highest returns, without regard for the common good.2

On this interpretation the crises of the 1970s arose because the interests of financial and industrial capital came into increasingly sharp conflict with one another, these conflicts coming to a head in the form of financial crises as the freedom of mobility of financial capital threatened to undermine Keynesian industrial strategies. The rise of monetarism reflected the victory of financial over industrial capital. Bankers exploited their financial power and their privileged access to the state to force governments to adopt restrictive financial policies that restored financial stability and confidence, but at the expense of high interest rates and cuts in public expenditure that drove the economy into recession. The appropriate response of the left within such a framework is to reassert the virtues of Keynesianism within a strategy that subordinates financial interests to the needs of national industrial regeneration, exposing and confronting the narrow and unpatriotic self-interest of the bankers and financiers that hides behind the ideology and politics of monetarism.

This explanation has a superficial plausibility. The economic crises of the 1970s, like those of previous decades, did indeed take the form of financial crises whose resolution sacrificed the real economy on the altar of money. However on closer examination the plausibility of the account soon breaks down. How could financial capital manage to impose policies which are so transparently against the national interest? If Keynesian industrial strategies could really have succeeded, if only they could subordinate financial capital to the state, why has government after government, elected on manifesto commitments to such strategies of national regeneration, capitulated and pursued monetarist policies? Why should ambitious politicians drive the economy into recession if they could so easily have adopted policies which would have brought prosperity and votes? Only the crudest of conspiracy theories could explain such pervasive irrationality.

The problem underlying such an account is that there is no evidence that the supposedly sharp conflict of interest between `financial' and `industrial' capital actually exists. Industrial capital has no more interest than financial capital in the expansion of production for its own sake. Both forms of capital are motivated by the one concern, profit. Only a relatively small part of the capital, even of manufacturing companies, is tied up in plant and buildings required to carry on production, and even the apparent fixity and immobility of those assets proves illusory when production becomes unprofitable. On the other hand, a significant proportion of the assets commanded by the financial institutions takes the form of loans to, and shares in, manufacturing enterprises. Moreover the financial institutions derive the bulk of their profits not from investment of their own capital, but from concentrating the savings and bank deposits of the mass of the population, so that they do not necessarily benefit from high interest rates, their profits depending primarily on commissions and on the difference between interest paid and profits received. The profitability of financial institutions depends on a high level of demand for their loans, which in turn depends on general capitalist prosperity. When the economy goes into a recession, so that there is surplus capital available, the financiers search ever more desperately for outlets for this capital, which is diverted into ever more speculative channels. But this diversion of capital is not the cause of the shortage of funds for productive investment, but the consequence of the shortage of profitable opportunities.

The very distinction between financial and industrial capital is becoming increasingly anachronistic as accumulation on a world scale is dominated by multinational corporations, which take the form of financial holding companies, closely integrated with multinational banks and financial institutions, which move their capital freely between countries, between branches of production, and between productive and financial investments. It was these multinational corporations who closed plant, moved productive investment abroad, and diverted their funds into cash and into financial and speculative investments in the course of the crisis. Far from being the victims of the rise of monetarism, they were its driving force.

The fundamental error underlying this influential approach is its misunderstanding of the power of money. The power of money is not the power of banks and financial institutions, although it is the latter who wield the power of money, it is the power of capital in its most abstract form. Thus the conflict between the needs of the domestic economy and the interests of multinational capital is not a conflict between the interests of different fractions of capital, but between the interests of multinational capital and the needs of the mass of the population. The irrationality of monetarism is not the irrationality of economists and politicians, it is the irrationality of capitalism.

The second kind of economic explanation of the crisis sees it not as a confrontation between `industrial' and `financial' capital, but between capital as a whole and the working class. There are two dominant versions of this approach. On one interpretation the rising wages and high standards of welfare provision associated with the Keynesian Welfare State represented a significant achievement of the working class, asserting its own interests against the interests of capital. In a period of boom capital could afford the concessions required to finance the Keynesian welfare state, in the interests of political and industrial peace. However the continued advance of the working class eventually encroached on capital's profitability and precipitated, or at least intensified, a crisis of profitability. Capital had therefore to reverse the gains of the post-war decades, cutting state expenditure and increasing unemployment in order to weaken the working class politically and industrially so as to restore profitability. Monetarism is the ideological mask that seeks to conceal this capitalist counter-offensive. The appropriate response of the left is a militant and determined counter-offensive to restore the gains of the post-war boom and to bring capital under social control.3

This approach has the merit of bringing the capitalist crisis and the class struggle to the fore. Unfortunately it is much too simplistic. The rate of growth of wages and improvement in welfare provision in the post-war boom had little to do with the strength of the organised working class. Britain had probably the strongest and most militant working class, but consistently had the lowest rates of growth of wages and welfare spending. Rather than militancy being the cause of the profitability crisis, it is far more plausible to argue that it was the consequence, as workers aspirations were increasingly frustrated by the inability of capitalism to deliver the goods. More importantly, the transition from Keynesianism to monetarism does not simply involve a rise in the rate of exploitation. Monetarism does not consist in a frontal assault on the working class, pushing the trenches back a few hundred yards like a Somme offensive, any more than Keynesianism represented an unequivocal advance of the working class. If things were so simple the popularity of monetarism with the working class electorate would be inconceivable. Monetarism rather involves a fundamental restructuring of the relations between capital, the working class and the state, involving not simply a shift in the balance of economic and political power, but a change in the form of the state and class relations, in which some elements of the working class gain at the expense of others.

It is this observation that underlies the second approach which sees the roots of monetarism in the capitalist crisis. In this case the crisis is not simply a crisis of profitability, it is a structural crisis, throwing the predominant institutional forms of regulation of capital accumulation into doubt. The crisis of profitability is not the result of a fall in the rate of exploitation, but of the growing barriers to accumulation presented by the exhaustion of the technological possibilities of the third industrial revolution. It is therefore a crisis of the overaccumulation of capital in relation to the outlets for its profitable employment. First, increasing industrial profits require the massive replacement of labour by machinery, which substantially increases the fixed costs of the enterprise. Second, there are limited opportunities for increasing productivity in the service sector, so that the latter acts as an increasing drag on profitability, whether services are publicly or privately provided. Third, accumulation in the metropolitan centres has run ahead of the supply of raw materials, and especially oil, leading to a sharp deterioration in their terms of international trade. The simplest version of this argument sees the class struggles that ensue from this profit squeeze primarily in economic terms.4

This book draws on the insights of all the approaches outlined above. My starting point is the belief that it is important to take the issues that divide monetarists and Keynesians seriously. Although monetarism and Keynesianism are undoubtedly ideological, even in their most abstract and theoretical forms, they conceal within themselves practical truths, however mystified the form in which they represent such truths. However monetarism and Keynesianism are not populist ideologies so much as ideologies of the state, giving ideological coherence to the institutional framework and policy decisions of the state. The crisis of Keynesianism and the rise of monetarism did not express a popular ideological revolution, but a crisis of the policies and institutions of the Keynesian welfare state. The Keynesian ideology was discredited because Keynesian policies became increasingly unpopular. Monetarism assumed a `hegemonic' position because monetarist policies secured electoral endorsement.

The crisis of the Keynesian state was itself the expression of a more fundamental crisis in the accumulation of capital. This crisis appeared in the growing financial pressure faced by national governments as they attempted to maintain economic growth by expansionary Keynesian policies. However the crisis did not express a conflict of interests between financial and productive capital, but a contradiction between the popular demand for rising incomes and employment, which could only be satisfied by the growth of production, and the capitalist need to subordinate production to profit. This contradiction was not simply a matter of a decline in the rate of profit, whether as a result of the `tendency for the rate of profit to fall' or the growing strength of the working class, but of a structural crisis of accumulation. However this structural crisis was not the result of the changing functional requirements of changes in the labour process, but of the tendency for capital accumulation to take the form of the overaccumulation and uneven development of capital. Moreover the political and ideological crisis to which the crisis of overaccumulation gave rise cannot be reduced to the unfolding of an economic or a structural logic, but was determined by the development of the class struggle within the framework of particular social, political and ideological forms.

My criticisms of the approaches outlined above are not primarily empirical, but are essentially theoretical. The immediate theoretical problem raised by the debate between monetarism and Keynesianism is that of the relation between the power of money and the power of the state. The underlying theoretical problem is the more general one of the relations between economics, politics and ideology. All the approaches outlined above are unsatisfactory in the last analysis in offering a one-dimensional analysis of the crisis of Keynesianism and the rise of monetarism, seeing it alternatively as an ideological, political or economic phenomenon, rather than offering an analysis that can grasp the complex relationship between these different dimensions of the historical process. My primary aim in this book is to develop a more adequate framework within which to grasp both the coherence and the complexity of the relationship between economics, politics and ideology in the crisis-ridden development of capitalism.

The immediate origins of this book lay in my own earlier work on the analysis of ideology. My first book in the field prepared the methodological ground, rejecting the idealism of `structuralist' analysis in favour of an historical materialist approach to ideology.5 The present book develops out of my analysis of the ideological dimensions of political economy, marginalist economics and modern sociology as social theories.6 However the confrontation between Keynesianism and monetarism raises the more complex question of the political significance of economic ideology, which can only be addressed within the framework of a theory of money and the state.

The theoretical framework of my argument draws primarily on two related strands of thought that have developed over the past fifteen years, involving a re-examination of Marxist theories of money and the state. In Britain these developments have taken place primarily through the Conference of Socialist Economists.

The reconsideration of the Marxist theory of money arose out of a renewal of the debate around Marx's theory of value.7 The central theme of the debate was the distinctiveness of Marx's labour theory of value in relation to that of Ricardo, and the conclusion was that for Marx value did not correspond to Ricardo's embodied labour, but to abstract labour that appeared in the form of money. This implied that the distinctiveness of Marx's theory lay not so much in the idea of labour as the source of value and surplus value, as in the idea of money as the most abstract form of capitalist property, and so as the supreme social power through which social reproduction is subordinated to the reproduction of capital.8

The reconsideration of the theory of the state was sparked off by the German `state derivation' debate.9 However the CSE debate also drew heavily on the reconsideration of Marx's theory of value, to move away from the German debate, which was strongly influenced by the systems theory of Jurgen Habermas and Claus Offe, and later embraced the structural-functionalism of Nicos Poulantzas and the French Regulation School.10 This divergence arose primarily because the central substantive issues in the CSE debate were rather different from those that motivated the French and German contributions. The CSE debate was stimulated particularly by Britain's entry into the EEC, which raised the fundamental question of the relationship between the internationalisation of capital, working class struggles and the nation state. The debate then developed in relation to the issues of law and the state, raised by the growing recourse to the legal regulation of the working class through the 1970s; of the relation between money and the state, raised by the succession of financial crises confronted by Labour governments; and of the relation between the working class struggle and the state, raised by the growing conflicts around the form of the welfare state.11 All these issues raised the question of the `form' of the state in relation to the `forms' of class struggle, and it was this question that brought the state debate into a close relationship with the value debate.

The theoretical conclusion of the CSE contribution was that we have to look behind the institutional separation of economics, law and politics to see money, law and the state as complementary economic, legal and political forms of the power of capital. The underlying unity of these differentiated, and complementary, forms of capitalist power was explained by Marx's theory of value, the three aspects being united in capitalist property, money representing the most abstract form of capital, whose power is institutionalised in the law and enforced by the state.12

The methodological conclusion was to reject equally the dominant tendencies of the economistic Marxism of the Second and Third Internationals, and the complexity of post-Marxist modernism, whose sophistication was no more than a mark of its superficiality,13 in favour of a view of Marxism as a theory of social forms. This interpretation drew particularly on Marx's Grundrisse and on various oppositional currents in the Marxist tradition to reaffirm Marx's famous dictum, `men make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly encountered, given and transmitted from the past'.14 However this approach was concerned to reject the interpretation of Marx's dictum in terms of the dualism of structure and process that marks sociological interpretations of Marx. The forms of capitalist domination cannot be theorised in structural-functionalist terms, because the functional imperatives are themselves generated by the forms of class struggle. Moreover these forms express not the functional integration, but the profoundly contradictory character of the capitalist mode of production, so that their adequacy is always problematic not only for the working class, but also for capital. Thus the class struggle does not simply take place within these forms. The forms of capitalist domination are themselves the object of class struggle, as capital and the working class confront them as barriers to their own social reproduction. Although the unity and complementarity of these differentiated forms can be articulated theoretically, their development is the outcome of a history of class struggle in and against the institutional forms of the capitalist mode of production, whose historical resolution is always provisional.

This approach did not lead to a systematic theoretical and historical account of the development of the forms of capitalist domination, the participants in the debate being concerned more to analyse particular aspects of the contemporary crisis. In the meantime there was a tendency to borrow the schematic typology of the French Regulation School to fill the gap, despite an awareness of the theoretical weaknesses of the latter indicated above. Similarly the gap left by the absence of an historically grounded analysis of capitalist crises was filled by relying on the `law of the tendency for the rate of profit to fall', although a more adequate framework was offered by the theory of overaccumulation, which was developed in this context particularly by Makoto Itoh.15

In the absence of such an historically informed account the `form derivation' approach has been accused of `economism'.16 The focus of such an accusation is the analysis of the relation between capital and the state, which has been a persistent problem faced by Marxist political theory. Although capitalists undoubtedly enjoy privileged access to state power, the capitalist character of the state certainly cannot be reduced to the political privileges of capitalists. However the political representation of capitalist interests is only one of the forms through which the relationship between the social power of capital and the political power of the state is mediated. The social power of capital is not embodied in the person of the capitalist, but in the social power of money. The fundamental theoretical problem is therefore that of the relationship between the social power of money and the political power of the state. This is equally the fundamental political and ideological problem raised by the crisis of Keynesianism and the rise of monetarism, and is the underlying theme of this book.

The relationship between the power of money and the power of the state has been a persistent theoretical, political and ideological issue since the first emergence of commerce. However the issue arose in its modern form as the penetration of capital into production subordinated social production to the rule of money and dissolved the social relations of authority and dependence that had hitherto been the basis of political power. The rise of capitalism precipitated a crisis in the political and ideological forms of the pre-capitalist state, which was resolved by the reconstitution of the state on the basis of the radical separation of the state from civil society and of the social power of money from the political power of the state. Although the crisis of the pre-capitalist state form came to a head most dramatically in the French Revolution, the reconstitution of the state was first achieved, less dramatically but more systematically, in Britain, where the erosion of pre-capitalist social relations by the penetration of capital was most complete. The construction of the liberal state form was articulated theoretically by classical political economy, which first systematically addressed the problem of the relationship between money and the state in its modern form, and which gave ideological coherence and political legitimacy to the emerging state form.

The first two chapters of the book examine the rise of political economy and the construction of the liberal state form in Britain.17 Political economy legitimated the radical separation of the state from civil society on the basis of the adequacy of the market as the means by which all particular interests were subsumed under the general interest. The law of property, enforced by the state, was the means by which all members of society, capitalists and workers alike, were confined within the limits of the market, while money was merely the means of circulation, the rational instrument through which conflicting interests were reconciled. The subordination of civil society and the state to the anonymous rule of money and the law expressed not the rule of capital but the rule of reason.

Marx's critique of political economy began with his critique of its theory of money. For Marx money was not merely the means of circulation, but was also, in its developed form, the independent form of value. The subordination of social production to the power of money gave rise to antagonistic social relations of production in which the power of money confronted the direct producers in the form of capital, and in which social production was subordinated to the reproduction of capital. Money and the law were consequently the social forms through which civil society and the state were subordinated to the power of capital. In Chapter Four I build on Marx's analysis of the contradictory form of commodity money and an interpretation of his account of the capitalist tendency to overaccumulation and crisis to develop an analysis of the contradictory forms of credit money and of state money, and so of the limits of the monetary regulation of capitalist accumulation.

In Chapter Five I build on Marx's characterisation of the liberal state form to address the question of the contradictory form and the limits of the capitalist state which derive from the contradiction between the class character and the national form of the capitalist state. The class character of the state, embodied in its liberal form, requires it to secure the reproduction of capital. The national form of the state requires it to express, politically and ideologically, the national interest, against all particular interests. The reproduction of the state correspondingly requires it to resolve this contradiction. The contradiction appears to the state in the form of the social and political aspirations of the working class, to which it has to respond within the limits of its form, confining the working class within the form of the wage and the constitutional form of the state. The admission of the working class to the constitution on a national basis increases the pressure on the state to secure the sustained accumulation of domestic productive capital. However this constraint introduces a further contradiction, between the national form of the state and the global character of capital accumulation.

The remaining chapters of the book present an account of the development of the capitalist state form on the basis of the analysis of the contradictory forms of capital accumulation and the capitalist state. The capitalist state developed in the form of the nation state, within a framework of nation states, in the context of the accumulation of capital on a world scale. The accumulation of capital on a world scale, and the interaction with other nation states, defines the broad context within which particular nation states have developed, but the development of each has its own rhythm and its own harmonies and disharmonies that cannot be reduced to variations on a single theme. As in the earlier chapters the focus of the account is the British state, within the global context of overaccumulation and crisis, but again the aim is neither to provide an historical account of the British state, nor to present the British example as ideal-typical, but to draw out the theoretical, comparative, and contemporary significance of the British experience.18

Chapter Six explores the development of the institutional forms of industrial relations, social administration and electoral representation through which the capitalist state sought to confine the aspirations of the working class within the limits of its liberal form, and in and against which the class struggle has subsequently developed. Chapter Seven explores the contradiction between the national form of the state and the global character of accumulation to analyse the rise of imperialism that culminated in war. Chapter Eight explores the unsuccessful inter-war attempt to resolve the contradictions of the capitalist state form on the basis of the reconstruction of the liberal world order. Chapter Nine then turns to the ideological crisis to which this failure gave rise, a crisis that culminated in the Keynesian Revolution. Chapter Ten analyses the foundations of the Keynesian Welfare State in the period of post-war reconstruction and the early stages of the long boom. The Keynesian Welfare State is presented as the culmination of the attempt to resolve the contradictions of the liberal state form, rather than as a radically new form of the state, based on the rationalisation and generalisation of the systems of industrial relations, social administration and electoral representation within the framework of the liberal state form and the liberalisation of the world economic system. Chapter Eleven then analyses the crisis of Keynesianism as an expression of the underlying contradiction of the capitalist state form in the face of a global crisis of overaccumulation. This contradiction appeared as a conflict between the power of money and the power of the state, as the institutionalised forms of class collaboration increasingly appeared as a barrier to the accumulation of capital and the aspirations of the working class, and so took the form of a class struggle over the form of the state. The rise of monetarism expressed the provisional triumph of capital in this struggle as the subordination of the institutional forms of the Keynesian Welfare State to the power of money confined the aspirations of the working class within the limits of capital.

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