Explaining Long Waves

At the heart of Mandel’s reflections was his theory of long waves. This theory states that the history of capitalism unfolds not only through short economic cycles with a duration of seven to ten years, but also through long-range alternations of about fifty years (roughly twenty-five years up, twenty-five years down). On the basis of this theory, Mandel had already predicted in the Socialist Register of 1964 that the postwar international economic boom would “probably come to an end sometime during the Sixties.”

The theory of long waves was not Mandel’s invention. The Dutch economist Jacob van Gelderen had suggested it on the basis of statistical research as early as 1913. Twelve years later, working independently of van Gelderen, the Russian economist Nikolai Kondratiev presented it again in his book The Major Economic Cycles. Many economists, both Marxist and non-Marxist, have now accepted the idea of long economic cycles, although the statistical evidence is not yet fully convincing and we still lack a detailed explanation of the phenomenon.

The peculiarity of Mandel’s interpretation of the long business cycles was that he attempted to reconcile two explanations of these waves that were usually considered to be in conflict with one another. One theory was that of Kondratiev, the other that of the Bolshevik leader Leon Trotsky.

Kondratiev and Trotsky debated the nature of long waves in the 1920s, asking whether they were true wave movements — the “big brothers” of the short cycles — or successive but vastly different periods in the history of capitalism (Trotsky’s view). Kondratiev saw the long waves as a purely economic phenomenon unfolding in accordance with laws. Trotsky, on the other hand, believed that the long waves were largely the result of extra-economic causes, both political and military.

Mandel tried to reconcile these conflicting views by stating that while there was a “certain kind” of wave motion, this wave movement also arose from noneconomic causes. That seemed like a rather far-fetched construction, which resulted in obscure passages of Late Capitalism such as the following:

Although we . . . reject the concept of the “long cycle” and do not, therefore, accept the mechanical determination of the “ebb” by the “flow” and vice versa, we have nevertheless attempted to show that the inner logic of the long wave is determined by long-term oscillations in the rate of profit.

This raised the question: How can waves be noncyclic and yet oscillate regularly?

In a later book titled Long Waves of Capitalist Development (1980), Mandel clarified what he meant. In his view, the onset of a long wave would largely depend on noneconomic factors such as wars, defeats suffered by labor movements, etc. However, once the long wave had been set in motion, it developed more or less independently from that point and came to an end after a few decades.

In this way, it resembled the firing of a cannonball. Although the moment at which the cannonball is fired may depend on many factors, once it has left the barrel, it continues on its way “autonomously.”

Periodizing Capitalism

Whether or not Mandel’s argument on this point was convincing, the phases into which he divided the history of capitalist development make sense, broadly speaking. These were the periods he identified from the late eighteenth century to the present:

First wave

1793–1825 up

1826–47 down

Second wave

1848–73 up

1874–93 down

Third wave

1894–1913 up

1914–39 down

Fourth wave

1940/45–66 up

1967–present down

The first wave occurred mainly in Britain where the industrial revolution took hold at a very early stage. The second wave brought more countries into its scope, the third wave was broader still, while the fourth wave was the most all-encompassing to date at the time Mandel wrote Late Capitalism.

Each wave coincided, according to Mandel, with a clearly defined phase in capitalist development. If we omitted the first wave, which was limited in geographical scope, we arrived at the following classification: the second wave was the period of early capitalism, the third was the period of monopoly capitalism, and the fourth was the period of late capitalism. It was Mandel’s intention to examine this fourth wave in more detail. As an eternal and inveterate political optimist, he assumed that the fourth wave of capitalism would also be the last.

The Nature of Late Capitalism

After the collapse of the Nazi dictatorship and the end of World War II, workers’ struggles resurged in several countries during the late 1940s. However, the capitalist elites of Europe found ways to contain those struggles, keeping the share of wages in the national economy low. They also recruited refugees, foreign workers, and housewives to the workforce in order to hold down wages.

For Mandel, these developments had combined with other factors to produce a new technological revolution with its origins in the armaments industry. For the first time in history, large-scale arms production continued in peacetime. Never before had arms production shown “such a long and uninterrupted tendency to rise or to absorb such a significant portion of the total annual product” of national economies.

The nonmilitary application of the new techniques began in certain sectors of the chemical industry. It then extended to other areas where the reduction of labor costs was a central priority from the early 1950s. There had been numerous inventions during the interwar years that capitalists could not turn to profitable use at the time due to the downturn in the economy. They could now deploy this stock of technical discoveries.

Under capitalist conditions, Mandel insisted, this technological revolution was not an unambiguous step forward. There was a serious contradiction running through it. On the one hand, there was a liberating potential attached to these advances in the material forces of production, which might put an end to “mechanical, repetitive, dull and alienating labour.” On the other hand, the spread of automation represented a new threat to working-class jobs and incomes and could result in “intensification of anxiety, insecurity, return to chronic mass employment, periodic losses of consumption and income, and intellectual and moral impoverishment.”

Under late capitalism, the productive forces were growing faster than ever before, but this development was uneven in several ways. A large part of the world did not benefit since they they did not have access to the new technical and scientific possibilities.

Economic development also came with an increase in “the parasitism and waste accompanying or overlaying this growth.” For Mandel, such “parasitism and waste” included the permanent buildup of arms, hunger in the Global South, “contamination of the atmosphere and waters” as part of a wider “disruption of the ecological equilibrium,” and the growing “production of useless and harmful things.”

After 1960, the opportunities for capitalist expansion began to diminish despite the impact of new technologies. The happy years of late capitalism had reached their end point. Class struggle intensified, first in France, Italy, and Great Britain, before spreading to other parts of the world as well.

At the same time, rivalries between imperialist powers increased, especially those between the United States and the members of the European Economic Community (EEC). These factors plunged late capitalism into a crisis that would intensify in the years to come.

Structural Features

Three important structural features characterized late capitalism in Mandel’s analysis. First of all, the period since 1945 had witnessed a reduction in what he called “the turnover-time of fixed capital.” This meant that machines of all varieties were being replaced by new, better, and more profitable ones at an increasingly rapid pace.

For entrepreneurs, the issue was not whether the old machines had lost their utility, but merely whether they were still profitable enough compared to newer models. Mandel provided many figures to illustrate this point. The average economic life span of computers, operating systems, and production machinery was steadily decreasing.

A second, related feature was the accelerated pace of technological innovation. Thirdly, the need to keep investing in the most profitable machinery meant that firms had to take big risks involving major financial outlays. This in turn meant that planning had to be much more precise than in previous stages of capitalist development.

The marketing of goods also had to be carefully planned. The logic of technological revolution therefore drove late-capitalist companies to map out their sales in advance through vast expenditure on “market research and market analysis, advertisements and customer manipulation, planned obsolescence of commodities (which very often brings with it a fall of the quality of the commodities) and so on.”

All of this also resulted in changing corporate structures. Mandel took Marx’s distinction between concentration of capital and centralization of capital as his starting point. Concentration meant that individual firms accumulated more and more capital while remaining separate; centralization, on the other hand, meant that the number of firms was reduced through the creation of trusts, monopolies, and the like.

Mandel concluded that the international concentration of capital under late capitalism began to precipitate international centralization: “The multinational company becomes the dominant organizational form of big capital.” He argued that we should understand this trend as “capital’s attempt to break through the historical barriers of the nation-state.”

It came with an important change in geopolitical relations. Although Europe’s former colonies had gained formal independence in the postwar decades, Mandel argued that the imperialist countries had simply replaced direct with indirect rule in the Global South.

The rise of indigenous bourgeoisies and the growing influence of worldwide multinational firms promoted a real but limited and comparatively slow growth of internal markets in these countries. As a result, the ex-colonies began exporting manufactured consumer goods as well as raw materials. The importance of colonial surplus profits diminished, while that of unequal exchange between North and South increased.

Late Capitalism and the State

The international centralization of capital had implications for international politics and, more specifically, for individual nation-states. Increasingly, the scope of state activities was expanding over larger areas. That could happen in two ways. In the first, a single state expanded its power, with the prime example being the consolidation of US hegemony after 1945. In the second, new, supranational state powers emerged, such as the EEC (which later became the European Union).

Having examined the international context of nation-states in detail, Mandel turned his attention to their internal structure. The original German version of Late Capitalism treated the capitalist state rather superficially and unhistorically, with the weakest point being a number of passages that “explained” the class character of the state by referring to the bourgeois origin of its higher officials.

This explanation was apparently inspired by the work of British political scientist Ralph Miliband. It could lead to major misunderstandings, fostering the idea that one could wrest the state from bourgeois control by reforming the civil service. However, this argument was certainly not one that Mandel intended to make. The corrected chapter in the English translation avoided this error and put much greater emphasis on structural and historical aspects of the state.

Mandel arrived at some far-reaching conclusions. On the one hand, he argued that late capitalism only appealed “in exceptional situations” to fascist or quasi-fascist regimes like the military dictatorships in Spain (1939–75) or Chile (from 1973). On the other hand, because of the deepening economic crisis noted above, capitalist bourgeoisies did feel it necessary to anticipate future resistance from the working class and other sections of the population.

For Mandel, the general trend in late capitalism was clearly toward a “strong state” that would impose more and more restrictions on the democratic liberties which had existed in the past when conditions were most propitious for the organized working-class movement. This development was to some extent inevitable.

Mandel insisted that late capitalism was in urgent need of replacement by a democratic socialist society — one in which the economy would be subordinated to “the democratically determined needs of the masses,” with resources dedicated to the self-development of individuals rather than their “self-destruction” and that of humanity as a whole. He foresaw two possible ways for capitalism to end: through a democratic socialist revolution or through its own exhaustion.

In making this argument, he was in line with Marx, who had argued in Capital that “the true barrier to capitalist production is capital itself.” Mandel believed that there was an “absolute inner limit of the capitalist mode of production.” If capitalist profits could only exist thanks to living human labor, the continuing automation of industry and agriculture would, in the long run, lead to the disappearance of those profits and the collapse of the system.

Late Capitalism in Perspective

Late Capitalism is a massive, complex work of over six hundred pages, so I have only been able to highlight a few notable aspects of the book. The big question, of course, is to what extent it can help us today.

One can certainly criticize some parts of Mandel’s argument. However, he identified a number of important trends that are still at work today. Technological innovations follow one another in rapid succession, while the average life span of the means of production is continually reduced. In the consumer sphere, too, companies offer “updated” products time and again to replace older ones.

Unequal exchange is still an essential part of the world economy today and so is the armaments industry. Global social inequality has not diminished, while the influence of multinational corporations has only increased since the 1970s. To that extent, Mandel’s analysis remains highly topical.

Of course, there have also been new developments over the last half century. Mandel spoke with foresight about the destruction of the environment, but he did not anticipate the dangers of climate change (and neither did the vast majority of his contemporaries). There have also been significant changes in the purely economic sphere since the early 1970s.

At the time Late Capitalism appeared, manufacturing was still predominantly concentrated in the Global North. Over the last few decades, it has spread to the countries of the Global South. The introduction of steel-box shipping containers and new communication technologies such as the internet made “hyperglobalization” possible.

This means that goods manufactured in one country very often tend to be assembled from components produced in other countries, which in turn contain subcomponents that were made in other countries still. As a result, at least one quarter of the world’s wage earners now form part of global supply chains.

In the same period, we have also seen the surprising rise of China as an economic and political superpower, as well as the transition to capitalism in other self-described socialist countries throughout Eastern Europe and Central Asia. Neoliberalism became the secular religion that legitimized all these shifts.

Stagnation, Decline, Collapse?

Rates of economic growth have in general slowed down since the 1970s, although the trend has not been the same in every country and region. In the Global North, worker productivity rose by an average of 3 percent every year between 1938 and 1973 before declining to 1.6 percent between 1973 and 2010. Growth rates were higher in significant parts of the Global South, yet even there the trend is leveling off in many countries.

Average profit rates in the highly developed capitalist countries have now been declining for fifty years, and interest rates have even fallen below zero for a time. We seem to have arrived in a new era where all kinds of assumptions that we previously took for granted no longer apply.

Mainstream economists such as Larry Summers now talk about the problem of “secular stagnation.” In 2016, the journal Foreign Affairs devoted a whole issue to the question of “How to Survive Slow Growth.” By that point, the Organisation for Economic Cooperation and Development (OECD) had already published a report that argued global growth prospects over the coming decades seemed “mediocre” in comparison with past experience:

While growth will be more sustained in emerging economies than in the OECD, it will slow due to a gradual exhaustion of the catch up process and less favourable demographics in almost all countries.

Influential economists like James Galbraith, Meghnad Desai, Robert Gordon, and Richard Wolff also believe that capitalism has lost much of its dynamic élan. Others have gone further, arguing that the breakdown of capitalism as such is a realistic prospect. According to authors such as Wolfgang Streeck and Immanuel Wallerstein, capitalism has exhausted its possibilities and has no long-term future.

However, it is not enough for us to await the “automatic” collapse of capitalism that both Marx and Mandel foresaw as a possibility — a collapse that could assume extraordinarily dangerous forms. As David Harvey has argued, we ourselves must act to stop the machinery of capital accumulation: “The capitalist class will never willingly surrender its power. It will have to be dispossessed.”