Why Russia was capitalist (1998)

Book Review from the September 1998 issue of the Socialist Standard

Capitalism and Class Struggle in the USSR. A Marxist Theory. By Neil Fernandez. Ashgate. 1997.

This book represents a breakthrough from our point of view in that, for the first time, our view that Russia from Lenin to Gorbachev was a form of capitalism is both given its proper historical place and discussed seriously.

Basically, our view (which we expressed from the 1920s on) was that Russia was capitalist because of the continued existence there of the wages system under which workers have to sell their labour power for a wage or salary to live. As Marx put it in a passage we often quoted, "capital presupposes wage labour; wage labour presupposes capital. They reciprocally condition the existence of each other; they reciprocally bring forth each other" (Wage Labour and Capital).

Fernandez argues that this is alright as far as it goes, but that it doesn't go far enough. To clinch the argument that Russia was capitalist you have to able to show also how money-capital and the law of value functioned there. This, he says, the SPGB never really attempted to do, so that our theory of Russia as (state) capitalist remained inadequate.

It is true that we did not describe in detail the precise way that the Russian capitalist economy worked but this was because we did not consider it as operating much differently from capitalism elsewhere, except that the workers' employer and exploiter was a state trust (nationalised industry) rather than a private capitalist firm or individual. Hence "state capitalism". Fernandez, however, is wrong to classify us amongst those who argued that Russia was "state capitalist" rather than merely "capitalist", as we tended to see state capitalism in Russia as a more widespread version of the examples of state capitalism that existed in Britain and elsewhere.

He also ignores the fact that there were different points of view within the SPGB on some issues. For instance, in the 1960s there was a discussion about the nature of the Russian rulers: were they simply a government running Russian capitalism for a developing private capitalist class or were they a ruling and exploiting class in their own right? A majority voted for the second view, but the point is that, on the basis of acceptance of the view that Russia was capitalist, different views on its exact nature were permissible within the SPGB.

From the early 1920s on we were aware, from material provided by the Russian authorities themselves, that Russian industry was not run as a single state trust—USSR Ltd—but was divided into separate trusts covering different industries which traded with each other and made profits and that some, for a period from the 1920s to the 1940s, even issued bonds on which they paid interest.

This view, that the basic units of the Russian capitalist economy were these state trusts whose money-commodity relations with each other the central government tried to plan, is developed in more detail by some of the others whose views on Russia Fernandez discusses—in particular Bettleheim, Chavance, Buick and Crump, and Chattopadhyay—but Fernandez doesn't find it any more adequate in its developed form, for two reasons. First, that in his view the various Russian state trusts cannot be regarded as competing against each other for profits. Second, that while they did seek to cover their costs and even make some profit, they were not motivated by maximising their profits. In fact, he says, their motive was to conform to, and exceed, the physical output targets set by the central planners.

It is true that Russian trusts did not aim to maximise their profits but rather to meet the physical output targets set by the central state but it was this that, in the long run, proved to be the problem. In the end, the central planners, who were trying to maximise surplus value at the economy level, were unable to do this as they did not know which particular industries were more profitable than others or indeed if a particular industry was profitable at all.

According to Fernandez, capitalist competition in what he deliberately calls the "bureaucratic capitalism" (rather than "state capitalism") that used to exist in Russia was not between the various trusts into which he admits Russian industry was divided, but between various sections of the bureaucracy (from central planners to factory managers) as they competed to control as much as possible of the surplus value extracted from the workers with a view to reinvesting it.

It's a theory that conforms to some of the facts, but can a struggle amongst different sections of a bureaucracy really be regarded as competition between separate capitals? Wouldn't this mean that competition for resources between different managers within a capitalist firm would also have to be regarded as a competition between separate capitals? Such competition is non-market and non-monetary and so fails to meet the objection of those who argue that, whatever Russia was, it wasn't capitalist as the surplus extracted from the workers was extracted in kind and not in value form. Fernandez is only able to get round this objection by the dubious ploy of extending the concept of money way beyond both its Marxian and its normal sense of a circulating medium to include "bureaucratic clout and influence". According to him, such clout represented the "money-capital" of these bureaucrat-capitalists who in striving to increase their ability to command resources were striving to make a "profit" on their "capital". It's all rather far-fetched.

Fernandez is off the mark in other parts of his book too, in particular his ideas about how to get to "a society without money, commodities, the State, wage-labour, and exploitation" (he favours a world-wide civil war, with rioting and looting in the meantime). Despite this dangerous nonsense, the book also contains a discussion of how workers' resistance to their exploitation contributed (he argues that it was the main factor) to the final collapse of the so-called Communist regime in Russia. But of course this is a long time ago now, so his book — like all others on the same subject — is about history rather than the contemporary world.

Adam Buick