The Frankenstein Problem of Capitalism
“If capitalism survives by creating monsters that it cannot itself fully control, then those monsters must also have the capacity to harm capitalism itself. Like Frankenstein’s monster, they might destroy their own master.”

The capitalist class structure helps explain why democracies tend to govern in favor of capital. And the conjunctural class structure similarly gives ample evidence for the financial sector’s leverage over politics. But if the capitalist state needs autonomy to help reproduce capitalist property relations and to prevent capitalism from destroying itself through crises, then like Frankenstein’s monster it also has the capacity to wield its power against those capitalist relations— or at minimum to withhold its help in reproducing them. Even if capitalist democracy is typically governed by its capitalist masters, those political institutions hold a latent capacity to be turned against them as well. Much like capitalism itself may create its own gravediggers in the proliferation of the working class, the political apparatuses that afford it governing capacities can be used for other purposes. Autonomy can be subordinated by capitalists and workers alike.
The political sociologist Claus Offe identifies this problem in his pivotal essay on “the crisis of crisis management.” Solving crises in capitalism are key to his story. Offe shows that to overcome recurrent crises in capitalist development, the state develops “flanking subsystems,” such as state agencies, committees, programs (such as welfare), and quasi-governmental entities such as central banks, that actively intervene in relations of production, exchange, and investment. The interventions of these subsystems aim to legitimate the economic system with the population as a whole, but they also need to promote accumulation and profit making for firms. In some circumstances— for example, where there is rapid growth and markets tighten to increase wages— accumulation leads to legitimacy for the system; these need not be inversely related. However, the systemic need for both legitimation and accumulation might also contradict each other, by running counter.
For capitalism to survive, Offe reasoned that capitalist democracies pursue stabilizing interventions that overcome capitalism’s own anarchic and self-destructive tendencies. This notion should be an intuitive one for readers who lived through the bailouts of the Great Recession, the passing of the CARES Act during the COVID pandemic, and the subsequent interest-rate hikes the Federal Reserve triggered to respond to inflation. While there were other options left unpursued on the table— for example, in the case of inflation, price controls— the debate was nonetheless about stabilizing the economy. Finance capitalism might require the near continuous presence of a bailout state. There are a whole host of policy interventions that states use, but the key point is that they do not simply enforce property rights and allow the chaos of the market to ebb and flow, they actively and continuously manage it. In short, capitalism runs into crises that require political coordination in order to be overcome.
And states are the social institutions that play this role in the most decisive way. This intervention would not be possible without a degree of autonomy from the direct influence of the business class and its various segments. Sometimes what capitalists want is not what they need. And therefore, to effectively stabilize capitalist social relations, capitalist states need to govern on behalf of capitalism not necessarily at the behest of capitalists. This stabilizer role gives capitalist democracy a contradictory double character. It must protect capitalist relations of exploitation and domination from the very conditions those relations produce while also ensuring that capitalist relations remain dominant in the political economy. As Offe writes, “This precarious double feature of the capitalist state continuously demands a combination of intervention and abstention from intervention, of ‘planning’ and ‘freedom,’ in short it demands an ‘opportunism.’” But here is the rub. In asserting itself over economic relations in the effort to protect those relations, it necessarily reveals those relations to be profoundly political in their basic constitution and reproduction and therefore calls into question for the demos the private — and by extension the capitalist — character of production, exchange, and investment it seeks to protect.
When states develop the bureaucratic autonomy and capacity needed to save capitalism from itself, that very autonomy becomes vulnerable to being subordinated to interests and, counterintuitively, to being used against capitalism itself. If capitalism survives by creating monsters that it cannot itself fully control, then those monsters must also have the capacity to harm the thing that brought them into existence— that is, capitalism itself. Like Frankenstein’s monster, they might destroy their own master.
Therefore, when capitalist economies become more firmly propped up by flanking state subsystems designed to keep accumulation afloat, which is an endemic feature of finance capitalism, they begin to face a political threat to the autonomy of those systems. This is the recurrent Frankenstein problem for capitalist states. That contemporary states prop up our dominant financial institutions makes clear their political character.
The Frankenstein problem of capitalist democracies leads to three contradictions. First, once this capacity is created, interest groups— most often capitalists themselves— will try to command it. Such state capacity underscores the pivotal centrality of the state and its agencies in class struggles for power.
Second, there is no stable equilibrium between regulation and marketization, bail outs by flanking subsystems and letting the market decide. As capitalist societies develop, the state follows a dialectical dance of capacity construction, dismantling, and redesigning in ways that never look the same twice. Our most recent dismantling period, the neoliberal revolution lead by Reagan, Thatcher, and Xiaoping might in part be treated as a reaction to this enlarged state capacity with its flanking subsystems, which notably took the form of public entitlements such as housing in the UK and welfare provisioning in the US. In our monster analogy, who were the neoliberals other than Shelley’s late-act villagers wielding lanterns and pitchforks? But in our downturn era of finance capitalism, industrial strategy, and sovereign money, central bank capacities are enlarged, redesigned, and monstrous; the bailout state is firing on all cylinders.
And third, as the state intervenes, it also transforms people’s expectations for what can be achieved via the state itself. These interventions have cultural effects. This adds a critical normative wrinkle to the Frankenstein problem. As states intervene to support private accumulation, typically with bailouts for private firms, they transform workers’ perceptions and expectations about what is politically desirable and feasible, making it harder to justify not also allocating intervention power to working class people also ensnared by the given crisis. This is why, in the age of the bailout state, it has become easier to imagine the end of capitalism than it has to reverse climate change. The Obama-era Recovery Act bailed out firms but did not offer similar assistance to families that were losing their homes. By the Trump-era Coronavirus Aid, Relief, and Economic Security Act, such a one-sided intervention had been made normatively impossible. CARES injected cash into the pockets of both firms and workers, playing an accumulation role that needed cash transfers to workers to be legitimated.
This process of the enlargement of state capacity can lead to contradictions that create dysfunctions in the state. When spending and state interventions become detached from accumulation, state budgets can become squeezed, leading to fiscal crises. As the state becomes larger and more differentiated, it then increasingly loses its capacity for rationally intervening to support accumulation.
The internal differentiation of the state leads to these various parts being subordinated to competing interest groups, typically sectors of business but also other special interests or labor interests as well. Ironically, the very expansion of the administrative capacity of the state undermines the capitalist state’s ability to engage in rational planning and long-term forecasting.
Finally, as the state becomes increasingly dysfunctional, it risks losing the “mass loyalty” of the population and undermining its own electoral sources of governing legitimacy. While liberal capitalist democracies do tend to govern for capital because of a combination of structural constraints and historical contingencies, like Frankenstein’s monster, they can— and indeed have— become a force against capital itself. A long history of movements of the demos show how working-class politics have subordinated the interventionist arms of the state and in turn changed their very structure.
In the US, in the context of the Great Depression, a disruptive workers movement helped to pass the National Labor Relations Act, which instituted the National Labor Relations Board. The board imposed stricter constraints on capitalists and extended wider organizing freedoms to workers. A few decades later the civil rights movement won massive legislation that was enforced through an empowered division of the Department of Justice, significantly transforming the basic freedoms of Black workers.
These transformations lay at the center of the emancipatory potential of politics. But to be durable and resistant to elite capture and degradation, subordinating the interventionist apparatuses of the state to the demos also requires the institutionalization of deliberative and participatory democratic processes. Democratic ruptures do not simply require making something public— as I have shown, the public/private distinction is an illusion. They require making processes democratic such that the working-class demos itself has a say.
— An edited excerpt from The Master's Tools: How Finance Wrecked Democracy (And a Radical Plan to Rebuild It) by Michael A. McCarthy.
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