Breakdown 2.0? Systemic Blockages in Late-Stage Statism and Late-Stage Liberal Capitalism

Abstract

Castells’ analysis of the breakdown of Soviet statism is possibly more relevant now than when it was written. By identifying systemic blockages to necessary societal transformation—then from industrialism to informationalism—he offers a framework to analyze the contemporary crisis of liberal democracy. Then and now, the challenges are caused by the system’s inability to organize the complexity created by itself which creates more and more internal contradictions. Two current challenges threatening the stability of the liberal democracy are rising social inequality and the crossing of geophysical boundaries of the earth as an ecological system. The inability to address these challenges is related to systemic blockages within liberal democracies. Parallels to the late Soviet Union are drawn without predicting outcomes.

Castells’ analysis of the breakdown of Soviet statism is one of the chapters of the Information Age trilogy (Castells, 2000) that is possibly more relevant now than when it was written. In the original context, it served mainly as a relatively isolated study of a systemic breakdown due to a failed transition towards a new paradigm, informationalism, with limited impact on the overall development of the network society that had already emerged in its basic form. Today, the question of systemic breakdown is worth revisiting because from the theoretical structure of Castells’ account, a sharper perspective on our contemporary crisis, this time of (neo)liberal democracy, might be developed. ¹

This strategy is, admittedly, a very un-Castellsian. First, Castells has rarely worked by historical comparison. To the best of my knowledge, the only attempt to develop a theory based on comparative historical and cross-cultural studies in his entire work was in The City and the Grassroots' (Castells, 1983). Five rather short historical and five much more extensive contemporary studies of urban crises provided the basis to sketch a theory of the relationship between social movements and urban transformations. Since then, cross-cultural analysis has remained central to his method, whereas cross-temporal analysis played only a minor role. Second, and more importantly, the character of my endeavor is speculative. This is something that goes against the very grain of Castells’ approach (see, Stalder, 2006). An approach that is explicitly empirical as a way to constrain speculative and predictive tendencies that are so prevalent in the popular but also the academic discourse of techno-social transformations, at least since Daniel Bell’s “venture in social forecasting”, the subtitle of his seminal study on the Post-Industrial Society (Bell, 1973). However, my aim is not forecasting; instead, I want to see how far this speculative comparison can be extended and what it reveals about our present moment.

In many ways, it seems that the late Soviet Union could not be further away from our current techno-capitalist world. One was a sclerotic system, closed, rigid, opaque, and inflexible to the point of crumbling when attempting to reform itself; the other one prides itself on its transparency and innovation capacity. Indeed, supposedly radical innovation, “disruption”, has become a ubiquitous and largely positive term in the business literature (e.g., Stuchtey et al., 2016), a mantra in the popular, Silicon Valley-inspired discourse on the relation between technology and society, and a trope even in critical activist cultures (e.g., Bazzichelli and Cox 2013).

Furthermore, as Castells stressed, the main event that made the continuation of the Soviet model untenable happened “outside” rather than inside the Soviet block (28). ² A wave of social and technical innovation underlying the transformation towards a new social paradigm, informationalism, in the West (as well as Japan and what were then called the “Asian Tigers”). The Soviet system could not compete on this new terrain, whereas it had been relatively successful in competing on the old terrain of industrialism (10–12) if one disregarded the enormous human and ecological costs this “success” entailed. In today’s highly globalized and interconnected world, the notion of separation between inside and outside is much harder to maintain. Furthermore, while the vision of a long-lasting triumph of liberal, free-market democracy (Fukuyama, 1992) fared poorly against the subsequent historical development, the geopolitical situation, until very recently, could not be equated with the system-level competition between two quite separate blocks, similar to the competition between US-led capitalism and Soviet-dominated statism.

So, with these caveats in mind, let us turn to Castells’ analysis of the breakdown of the Soviet Union in order to extract the theoretical argument that structures it.

Limits to Complexity: Systemic Blockages in the Soviet “Statism”

In the 1960s, the existing forces of production (centering around heavy industry and centralized, assembly-line mass production, “industrialism” in Castells’ terminology) came into a crisis, because after several decades of extensive growth, they reached the upper ceiling of the complexity that could be organized through them. ³ It is important to note this happened to industrialism in general, that is, more or less simultaneously in the capitalist West and the statist East. Hence, it is not a coincidence that the unrest of 1968 was a global event. The crisis threatened to undermine its fundamental organizational objective (capital accumulation by private interests under capitalism, power accumulation by state actors under statism). The difference was how the two blocks reacted to the systemic causes that created the crisis.

The basic structure of the argument is already contained in the opening quote taken from Abdel Aganbegyan, one of the leading Soviet economists at the time, a close adviser to Gorbachev during Perestroika, and one of the main sources for Castells’ account. Aganbegyan argued that,

[t]he contradiction which became apparent in the 1950s, between the development of the production forces and the growing needs of society on the one hand, and the increasingly obsolete productive relations of the old system of economic management on the other hand, became sharper with every year. (quoted, 5)

The underlying hypothesis is not novel. As Castells put it, it is “an old Marxian idea, according to which specific social systems may stall the development of productive forces” (9). In his famous introduction to the Grundrisse, Marx distinguished between the “productive forces” (labor, machines, state of scientific, technical and organizational knowledge, methods and raw materials, that is, everything that is available to be organized at a specific historical juncture) and the “relations of production” (the relation between humans in the production of these necessities, that is, how this organization is actually realized in a particular context). How these forces and relations frame one another has been subject to extensive debates, most recently re-formulated through the notion of “techno-economic paradigms” (Perez, 2010). What is important to remember is that the same productive forces can sustain quite different relations of production and, thus, political systems. ⁴

Aganbegyan and Castells pick up on Marx’s famous observation, that

at a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or—what is but a legal expression for the same thing—with the property relations within which they have been at work hitherto. From forms of development of the productive forces, these relations turn into their fetters. Then begins an epoch of social revolution. ⁵

It has always been unclear when this “certain stage” would be reached. Marxist theory has always assumed that the liberal, capitalist relations of production would come under such pressures at some point. So, Castells sees it as an “ironic historical twist” (7) that this theory would help to explain the fate of Soviet statism rather than that of liberal capitalism.

Castells’ argument here is that the crisis that became evident from the late 1960s onward was “the expression of the structural inability of statism and of the Soviet variant of industrialism to ensure the transition towards the information society” (8). On the level of the productive forces, the economy had been developing forward through increased quantitative input (more labor, raw materials, energy, and land) defined in five-year plans which led the Soviet economy to become “more complex, technologically advanced and organizationally diversified” (19). However, the central planning could not accommodate this increase in complexity, thus introducing ever more friction into the economy. The political system, organized towards maximizing state power, was also unable to introduce more flexibility into the economic system for fear of diminishing its own power, the very essence of the system itself. Thus, while there was significant technical and research expertise, there was no mechanism to translate this into economic innovation, except in the case of the military, which led innovation along a trajectory that was of little use to society at large.

There was another mechanism in the economy’s organizing principle of the economy that discouraged innovation: the accounting system set up by central planning. As Castells explains,

the performance of each unit was measured in the gross value of production measured in rubles. This value of output (or valovaya produktsiya, val) included the value of all inputs. The comparison of val between years determined the level of fulfillment of plan and, eventually, the premium for managers and workers. Thus, there was no interest in reducing the value of inputs in a given product, for instance by using better technology or better management, if the val system could not translate such improvements into higher value added (20).

In contemporary terminology, the incentive structure for managers in the productive process was misaligned. Inefficiency (high value of inputs) was rewarded, while certain types of innovation, those who might have created higher productivity (creating more output with less input), were discouraged. Thus, different core groups of the system—central planners, political/military leadership, and industrial managers—were, for different reasons, discouraged from transforming the system all through the 1970s into the mid-1980s. Politically, the system fell into stasis. Yet, economically, it still developed mainly by expanding the “shadow economy,” indeed, creating a Soviet version of “flexibility and networking as an organizational form” (66). During that time, the different groups became further isolated from the rest of society and each other. The planners, whose plans were increasingly distant from, and dysfunctional for, the processes of the economy, retreated into higher-level of abstractions; they became “aloof” (20). In order to fulfill their targets and work around chronic shortages needed to go outside the planned economy, ambitious industrial managers relied more and more on the shadow economy, to fix the shortcomings of the plan. In the process, they began to assume control over key sectors of the economy. This process, however, further increased the distance between plan and actual production, introducing more friction and increasing the necessity to resort to the shadow economy. Since it was outside the official system, the shadow economy had a substantial criminal dimension and, in the process, corruption of officials, which still were very powerful (particularly those in the security apparatuses), increased massively, further isolating the political leadership from the rest of society.

There was, of course, significant popular discontent but relatively little outright opposition. For one, rigid control over the means of communication, building on Lenin’s idea of controlling the paper supply to control the press, meant that any articulation of critique was limited to a small, isolated, and heavily controlled group of “dissidents” that had minimal reach into the general public. Perhaps even more importantly, while the system became widely seen as nonsensical, it was also believed to be immutable and long-lasting. Ordinary people reacted with apathy and low-level resistance (small-scale sabotage, alcoholism, and absenteeism) to the growing disconnect between the official accounts of reality and their everyday lived experience. A deep cynicism towards the official pronouncements and rituals developed, even while people still participated en masse in them, and irony and the cultivation of the absurd became widespread tropes in popular as well as underground culture (Yurchak, 2006).

These were the purely internal reasons why the system fell into a crisis. The relations of production held back the further development of the productive forces, trapping them in an exhausted model that could still grow somewhat by its own means—increasing quantitative inputs—but these means were increasingly irrelevant to the actual challenges. However, due to the dominant groups’ self-interest and adopted strategies, the political system was also unable to overcome its built-in limitations to the degree of complexity it could handle. Yet, a higher degree of complexity was demanded by the imperative to reorganize the productive process and address, even in a limited manner, the citizenry’s needs.

On their own, the stagnation created by different social groups the reactions of to these contradictions might have festered for a while longer. We will never know. However, the fact that the West had managed to overcome the limitations of industrialism by moving to a new mode of production, informationalism, thus increasing productivity and complexity, meant that the Soviet model not only began grinding to a halt by itself but also rapidly fell behind. This was particularly dramatic in the one area where there was direct competition with the West: the military. These contradictions and the apparent inability to overcome them brought other contradictions in the system to the fore, namely the relationship between ethnic identities and Soviet class-oriented ideology. ⁶ The formulation of antagonistic nationalism, a retreat into pre-Soviet forms of ethnic and religious identity, became the dominant way to express relations between the society and the state once such expression was allowed. This “ultimately doomed” (38) the reform project by turning the energy thus released into centrifugal forces, leading to the breakdown of the Soviet Union and the rebirth of the Orthodox Church and Russia (and many more countries, old and new).

Possibly due to the relatively strict Marxist framework that shapes this account and a retrospective tendency to see historical developments as inevitable, Castells’ analysis foregrounds the structural and sees attempts to counteract them through conscious political action as largely ineffective. Gorbachev’s reforms are framed as “too little too late”. Others, such as Krastev (2012; p. 14), maintain, on the contrary, that “a central factor in the end of the Soviet system was Mikhail Gorbachev’s failure to grasp its nature”. The importance of policy is particularly poignant given the fact that China faced many of the same structural challenges. However, by choosing a very different political course, the Chinese leadership managed to transform the system while maintaining political and territorial integrity (see, Weber, 2021). For the purpose of this paper Castells’ focus on the structural, however, is not a weakness but a strength because my aim is precisely to look at structural blockages rather than policy dynamics responding to them.

Increasing Complexity: Neoliberal Informationalism

While statism, following the social unrest of the late 1960s, retreated into stagnation, (liberal) capitalism—driven by technological innovation, social movements, and economic competition—introduced a massive wave of transformation. Regarding the forces of production, this entailed a fundamental upgrade of the infrastructure and organizational models based on the capacities of digital communication and data processing. Concerning relations of production, it entailed a more gradual transformation, adopting neo-liberal policies, which meant breaking up collective organizations, introducing de-regulation, and installing generalized competition (mainly through markets, but also other means, such as rankings) as its steering mechanism. Information technology provided the infrastructural means for both.

The idea to use general competition expressed by numbers (price or rank) to organize society was deeply informed by a type of thinking that was first laid out in Hayek’s famous essay “The Use of Knowledge in Society” (Hayek, 1945). Through the fluctuation of prices, the invisible hand would guide individuals who would voluntarily follow it out of self-interest. From this, as Hayek put it elsewhere, “spontaneous order” would follow, too complex, too dynamic for any single social actor, no matter how large, to comprehend. There were few to take up this advice at the time, but by the 1970s, this changed. For reasons that had directly to do with the crisis of the productive forces of industrialism and the relations of production of Keynesian capitalism. As already mentioned, after several decades of growth, industrialism was reaching the ceiling of the complexity (mass production) it could organize and internal frictions started to mount. The increased bargaining power of post-war unions, rising demands on the welfare state (which Castells theorized as “collective consumption”), and strong state interventions into the economy were further depressing profits. The institutions of the postwar economic order, such as the Bretton Woods system and the fixed currency exchange rates, fell apart.

This provided the pressures in the West to embark on an extensive transformation program to reach a higher level of complexity—capable of addressing changing demand and organizing the expanded productive capacity of society—as a way to improve profitability and competitiveness, re-adjust the relations of production in favor of capital and develop new markets to ensure capitalist expansion. IT provided a new infrastructure to increase scale, speed, and flexibility of social coordination and thus breaking the old trade-off between flexibility (organized through dense, multi-directional, complexity-inducing information flows) and scale (organized through rigid, complexity-reducing bureaucracies). Through the combination of scale and flexibility, new forms of organization were created that competed against the old organizational types in the economy as well as in civil society, pushing them to the margins. This provided the basis from which a new social morphology emerged, the Network Society, as the Information Age trilogy has shown. Neoliberalism provided the ideological direction, installing markets as a superior way of coordinating complex actions in the context of necessarily limited knowledge and uncertainty ⁷ while introducing its own form of reductionism by abstracting the complexity of human interaction to numbers: first and still foremost, the price signal, and later, a whole range of additional metrics.

Limits to Complexity: Systemic Blockages in Liberal Capitalism

From the point of view of the core constituencies of neoliberal capitalism (investors, managers, and politicians/state bureaucrats), this program has been spectacularly successful. Yet, during the process, two significant contradictions emerged. First, contrary to the ideology of competitive opportunities for everyone, the rising share of appropriation of profits by the owners of capital resulted, predictably, in stagnant or falling wages or income for the majority of workers. Inequality increased under neo-liberal informationalism sharply and hardened structurally (Piketty, 2014), undermining the fundamentals of liberal democracy. Second, contrary to the ideology of immateriality of digital technologies, informationalism has always been based on massively increased resource extraction. First, because the material basis of IT itself is dirty and resource-intensive (Jones, 2018), second, because new technologies have enabled higher and more extensive rates of extraction (e.g., hydraulic fracking, deep-sea drilling), and third, because it enabled a massive expansion of wasteful consumerism. Between 1950 and 2015, the production of plastics grew from 1.5 million to 322 million tons, ⁸ most of it for one-time use and much of it dumped into the environment. This triggered the “great acceleration”, the comprehensive depletion of resources and destruction of the natural habitat (McNeill & Engelke, 2014), which began already under industrialism but sharply increased under informationalism (Steffen et al., 2015).

These contradictions are not new and have been known for several decades but have been left unaddressed. This has created several systemic blockages that can be compared to those encountered by the late-stage Soviet Union, insofar as they threaten to prevent the transformation of the political and economic system in order to build capacity to address the rising complexity of the challenges that have built up over the previous decades.

Informational capitalism, and the extractivism that underlies it, has reached hard social and ecological reproduction limits. This seriously undermines its capacity to address the needs of its citizenry, threatening its very survival. While many technological and organizational innovations could help to address some aspects of this problem, from renewable energy to resource-efficient social organization and recycling (Rifkin, 2019), the exclusive focus on the price signal produces the wrong incentives because the externalized costs simply disappear from the calculation, even if it is widely understood that this way of organizing the world is nonsensical. The ubiquity of competition—enforced through “aloof” financial markets working on ever-higher levels of abstraction with an exclusive focus on the price signals—rewards inefficiency (high waste output). It also makes it impossible for managers, even if willing, to develop new production methods to consider the increased range of human and non-human actors and their complex demands, which would be necessary to organize the economy at a sustainable distance from these hard limits.

The institutional political system of liberal democracy has not been able to organize the transformation of the economy by integrating the new forces of production into some form of “green” paradigm. On the contrary, it has fallen into the stagnation of its own, becoming captured by very narrow interests, hardened in its resolve to prioritize its interests over all others, and steadily increasing the distance between the political system and the citizens it claims to represent. The decline in the legitimacy of the political institutions of liberal democracy has been an enduring feature of informationalism (Castells, 1996). While the rituals have long been observed and public participation in the occasional mass events has remained high, this is not an indicator that people believe in the system. Trust in political institutions is at an all-time low. In the US, it fell from nearly 60% in the late 1960s to about 17% under the Trump administration (Pew Research Center, 2019). Indeed, even in established liberal democracies, anti-politician candidates and parties showing a distinct disdain for established norms and the decorum of politics have won elections (Parikh, 2019). They no longer pretend to follow rules widely understood as not being followed anymore. Thus, dishonesty appears honest. The political system is reaching a point of rupture (Castells, 2019).

However, the crisis of the liberal order goes more profound than the political institutions of democracy. Instead, it extends across the entire institutional landscape, even to those institutions which were historically understood to be at a distance from the political system, in particular science and news media, which were long seen as following the ideal (albeit imperfectly) of making sense of the world outside the pursuit of power or profit. Their subjugation to the profit motive (science becoming dependent on industry funding and aimed at producing intellectual property in the form of patents, the media becoming dominated by profit-maximizing conglomerates) has eroded their always-contested position as arbiter of facts and interest-free knowledge. Consequently, their expertise and narratives have become de-legitimized, even in the face of existential crises where science and an informed public would be much needed to address them. Furthermore, science has been deeply politicized. In Romania under Nicolae Ceauşescu weather reports were famously manipulated in order not to acknowledge that temperatures were reaching levels above or below which production would have to be halted (Crampton, 1997, p. 247). Under the Trump administration, the Environmental Protection Agency had to remove all references to “climate change” from its website because of fear that acknowledging the reality would bring production to a halt (Nost et al., 2019).

Nonetheless, the epistemic crises go even deeper, and, once again, the parallels could be instructive. Václav Havel famously spoke about the split between public lies and private truths, meaning that the public sphere was permeated with lies, while in the private sphere, people could speak truthfully (Havel, 1979). Yurchak (2006), however, argues that separation between the two spheres was never so clear and that the crises of epistemology permeated the entire culture in the former Soviet Union. This blurring of public and private speech is a constitutive part of social media which turn—to various degrees—all communication, even the supposedly most private messages, into strategic communication aimed at gaining status within epistemic communities, destabilizing meaning across the board (Stalder, 2018).

Two more parallels are notable. Even larger sectors of the economy operate outside regulation. This move is partly an intended effect of the politics of deregulation, promising to “liberate” the economy from government “red tape”, partly the consequence of active attempts by the elites to evade taxation and seek favorable regulatory environments. These are a constitutive feature of neoliberal globalization (Laval & Dardot, 2014), as is the porosity of the walls separating the official and the criminal economy, which are connected by money laundering by major financial institutions, by illegal dumping of waste from seemingly regulated industries and by many more systemic linkages. They provide what Castells (2000) called the “perverse connection” in the informational economy.

While much of this has taken place in the shadows, it is not limited to it. Many of the most innovative and high-profile companies are also working openly and proudly at the margins of legality, able to shift in and out of competing regulatory regimes as it fits their changing corporate strategies. If they are ever caught breaking the law, they can avoid fines or absorb them as operating expenses. Many companies, particularly the new global IT corporations, are now too big, too powerful, or too complex to be fully regulated (Moore and Tambini 2018). In a full reversal of (neo)liberal thinking, leading technology entrepreneurs are now arguing for monopolies to be socially and economically desirable while “competition is for losers” (Thiel, 2014).

These blockages create a profound crisis of the liberal order, understood as a particular way of organizing the relations of production within capitalism. At the same time, they create conditions undermining the well-being of the citizens and hollowing out their expectations of the future. The final years of the Soviet Union also show that such crises extend to all levels of the system. From the geopolitical to the subjective, they undermine what was once understood as a kind of social contract (reciprocal rights and expectations) and call into question what it means to be a person in society (Yurchak, 2006). Then and now, satire has become a popular way of talking about a reality that is, at the same time, deadly serious and patently absurd. Today, comedians have become powerful political commentators, sometimes even directly ascending to power, precisely for their ability to treat political culture as many people see it, a joke. Another reaction to this subjectivity crisis is the retreat into older forms of identity that are seen as not contaminated by the present condition. In the case of the Soviet Union, it was the return of pre-Soviet nationalism (including Russian) and nostalgia for folk culture, and in the liberal West, the rise of white supremacy and the nostalgia for industrialism and its culture of segregation and patriarchy plays a similar role. The resulting sharp polarization makes any attempt at reform much more difficult.

Finally, as already noted, it is difficult to make a clear separation between internal and external dimensions of globalized neoliberal capitalism. One could say that these blockages manifested themselves within the Western-dominated neoliberal system that has had no “outside” competitor. Until quite recently, at least. Within the US (and Europe), China is now seen as a direct and serious competitor, both economically and geopolitically (Mahbubani, 2020). One of the areas in which this competition is most acutely felt is in the development and application of Artificial Intelligence (AI) (Schmidt, 2020). Here, AI is understood not as a particular set of applications but as a general infrastructural technology that eventually will come to underlie all processes. It is seen as a key component when developing a new paradigm for higher efficiency, much like the microprocessor was understood to become infrastructural in the 1970s, leading to a “third wave” of economic and social transformation (Toffler, 1980).

Conclusion

This exercise has been a thought experiment. I have tried to draw out a number of parallels between the late Soviet Union, under the grip of what showed itself to be a fatal crisis, and the present-day liberal democratic order of the West, led by the United States, under the grip of a crisis with an uncertain outcome. The point raised is a structural one, focusing on systemic blockages which, as they were left unaddressed, began to permeate all aspects of the political order: from the geopolitical to the subjective.

This analysis allows, I hope, to draw out more sharply the depth of the current crisis of informational capitalism, perhaps untwisting the historical irony that Castells noted when using this framework to study breakdown of Soviet statism, even if the initially envisioned transition to communism does not seem particularly likely, nor does a breakdown of capitalism per se. It is the liberal system that is threatened by systemic blockages. Contrary to when Castells analyzed the breakdown of Soviet statism, no new paradigm has yet emerged that could replace informationalism and the political system unable to reform itself beyond it.

But if trying to see parallels between historical developments is already fraught with difficulties and under the constant danger of selection bias, then extending parallels into the future is entirely untenable. Liberal democracy is not Soviet statism. It is more diverse, much richer, and much more dynamic. It has both the technical and the ideological capacity to increase its ability to manage complexity geared towards staying within the hard limits of the earth system. Every crisis is resolved in a unique way, for better or worse. This comparison can provide a sense of the scale of the challenges and the urgency of addressing them. Who will rise to the challenge and at whose expense is part of an open historical process.