The last twenty years have seen a boom of unprecedented size in the capitalist world. Never before has capitalism grown so fast for so long. This boom has been accompanied by far reaching institutional changes. Big business is becoming increasingly rational and calculating. It is beginning to plan far into the future—for five, ten or twenty years. State intervention by means of taxation, subsidies, or forecasting is now common throughout the advanced capitalist world. These changes have thrown the Left into intellectual, if not organizational, disarray. Many who had identified socialism with full employment and planning are confused. We have full employment. We have planning of a kind. Yet we do not seem to be any nearer to socialism. It is, therefore, important that the role of the State in the modern capitalist economy and the nature of capitalist prosperity should be understood. Yet apart from a small number of writers who inhabit a marxist underworld, comparatively few attempts have been made to do this.

The publication of Andrew Shonfield’s Modern Capitalism is, therefore, to be welcomedfootnote1. It is one of the few books by a ‘respectable’ writer which recognizes the interrelationship of political, economic, and social changes at the present time. Much of the book parallels, with rather less perception, the discussion which has been taking place among continental marxists. Whether or not the author has borrowed from their work on neocapitalism—probably not—or whether the two are independent responses to facts which are daily becoming more obvious is unimportant. The point is that Shonfield’s book makes it respectable to discuss political economy—a subject which has, for so long, existed only on the fringes of intellectual life in this country.

Although Modern Capitalism is more a collection of essays on political economy, with a common theme, than a coherent thesis Shonfield’s position is roughly as follows:

The postwar period has seen an unprecedented boom in Western Europe. Economic growth has been almost uninterrupted, especially in Europe, and has been as fast or even faster than ever before. This has not been achieved by depressing the living standards of the masses but has, on the contrary, been accompanied by a widespread diffusion of the benefits of growth throughout the population. Some of the causes of the boom are transient: postwar reconstruction, housing. Others are more permanent: the growth of international trade and specialization, the full employment policies of modern capitalist governments, the high rate of technological progress, and planning both at the firm and the national level. The boom can, therefore, be expected to last indefinitely.

Rapid growth, technological change, the increasing size and vulnerability of investment, make coherent planning by firms a necessity, and will make national planning inevitable. This planning has its dangers. If a corporatist solution is adopted, where trade unions and employers do a deal behind closed doors the ‘public’ interest may suffer. More to the point, corporatist solutions give weight to the backward firms and obstructive trade unions which may impede efficiency. Instead planning should be a cooperative venture between a ‘wheeling and dealing’ state and the more progressive employers and trade unionists. The state bureaucracy must inevitably play an important part in this. It will have to be more active than in the past. ‘Active’ government, however, represents a threat to the freedom of the individual. So some method of protection for the individual against arbitrary administrative decisions has to be devised. ‘Government in a goldfish bowl’ where all government decisions are to be subject to public scrutiny together with an ombudsman with the power to reverse a wide range of administrative decisions would go a long way towards preventing this abuse of public power. A second problem is the control of the planners. Unless the relationship between the state and private interest groups is open there is a danger of a secret deal being made between the state bureaucracy and some private interest. More than simple publicity is needed to prevent this. Parliament must be equipped with specialist committees to allow elected representatives to make proper decisions.

Shonfield is at his best when describing the forces which are changing the attitude of big business toward some kind of planning, or at least market research, on a national level. Big business is becoming increasingly vulnerable to bad predictions. A higher and higher proportion of total cost of production is becoming inflexible. Many employees are now maintenance workers, staff, or simply cannot be laid off, owing to the difficulty of replacing them. In certain dynamic sectors expenditure on long lived capital equipment with high maintenance costs is becoming more and more important. This is an expense which must be met however small sales are. At the same time business firms are growing rapidly in size and rational control of these huge firms is becoming a necessity. Organizational techniques are being developed which allow extensive planning of the firm. The need for planning and prediction is reinforced by the increasing dependence of big business on modern science and technology. Often there is a lag of seven or eight years between the beginning of a research project and the appearance of the final product on the market. In this situation there has to be some kind of long term prediction. Shonfield handles all this very well. He provides extensive documentation from a number of countries on increased planning by big business, cooperative ventures by groups of firms afraid of spoiling the market by overproduction and so forth. He discusses how big firms are becoming increasingly interested in secure sources of supply and outlets for their products: how, therefore, they are prepared to cooperate with and even press for state coordination of activities, so long as it does not interfere too much with their autonomy. He shows how the service provided by ‘indicative’ planning, in which the government tries to predict the future shape of the economy, is to some extent provided by private organizations in some countries: the Munich Business Surveys in Germany, and the National Planning Association in the United States. He shows how this may be inadequate and that there may be compelling reasons for private enterprise to support government intervention: if, for example, there is a serious bottleneck in the supply of some basic input such as steel, there may be pressure for some kind of government aid to remove it.

The most interesting part of the book deals with Germany. Shonfield shows how, despite the rhetoric of Free Enterprise, the German miracle was extensively promoted by government intervention and subsidies to certain lagging or especially important sectors: he infers, indeed, that Germany has the most rather than the least guided economy in Western Europe. Perhaps the most important aspect of the book is the way he shows that many conventional ideas about European countries are wrong, and that there is much greater similarity between the role of the government in Germany and France than at first sight appears. The ideological opposition of the German government to a National Plan has not prevented it from intervening extensively in the economy.