The Soviet State - part 1 (1962)

From the August 1962 issue of the Socialist Standard

Russia is a mysterious country in many ways. Its internal power struggles are submerged, dramatic affairs in which we usually realise that one man has fallen and another taken his place only by their relative places on a rostrum or in the line up to greet Krushchev at an airport. What news comes out is carefully filtered.

Nevertheless, we know enough about Russia to be able to say that the social system which exists there is Capitalism. This means that it is basically the same system as in England and America, although it would obviously be foolish to say that it corresponds in every way. When feudalism was the recognisable social system in many parts of the globe it, too, took different forms in different countries, but basically it was the same social system in all of them.

The Russian Government claims—and its claim is supported by the Communist Parties of the World—that the Soviet Union is a Socialist country. The Soviet Constitution states, for example, in Article 1 that the Union of Soviet Socialist Republics “is a Socialist State of workers and peasants.” And Article 4 adds that:

“the economic foundations of the U.S.S.R. consist in the Socialist ownership of the implements and means of production, firmly established as a result of the liquidation of the Capitalist system of economy, the abolition of private property of the instruments and means of production, and the abolition of the exploitation of man by man.”

But it is not constitutions that determine social systems. Capitalism in Russia does not rest on a legal constitution, but on the social and economic relationships which operate there. The evidence that has come from Russia in the past and is still coming now, shows clearly that certain basic features of Soviet society correspond to what we recognise as Capitalism. In fact, the so-called “evidence” for the existence of Socialism there is mainly a listing of the superficial differences between Russian Capitalism and some of the other Capitalist powers. These differences mean a lot to the ardent supporter of Russia; a critical analysis puts them in a less convincing light.

To begin with, we have to chop away some of the confusion which Communist party leaders have so assiduously spread over the years. Writing in Economic problems of Socialism in the U.S.S.R., Stalin said:

“absolutely mistaken . . . are those comrades who allege that, since Socialist society has not abolished commodity production, we are bound to have the reappearance of all the economic categories characteristic of capitalism: labour power as a commodity, surplus value, capital, capitalist profit, the average rate of profit, etc. “(Page 21).

He went on to justify these apparent contradictions by claiming that in Russia commodities, money, banks, and so on, “. . . while they lose their old functions and acquire new ones, preserve their old form, which is utilised by the Socialist system” (page 59), and that “. . . it is chiefly the form, the outward appearance, of the old categories of Capitalism that have remained in our country, but . . . their essence has radically changed in adaption to the requirements of the Socialist economy” (page 60).

This sort of argument is dishonest enough to explain away anything. Stalin, of course, had the last word—any comrades who remained “absolutely mistaken” long enough probably went under in one of the purges which were so often necessary to protect what we were told was Socialism in Russia.

What are the fundamental criteria by which we recognise the capitalist social system ? They are: wage labour and commodity production; and capital investment and accumulation.

Do these things exist in Russia? The Soviet state is the centralised monopoliser of the means of wealth production, to which the workers in Russia have to sell their energies for money. It therefore employs the Russian workers and pays them wages just like other employers in other countries. Thus the relationship between the Soviet state and its workers is one of capital and labour. Members of the Communist Party may not think that this fact in itself proves that Capitalism exists in Russia, but Karl Marx, to whose theories they pay lip service, would certainly have thought so. In his Wage Labour and Capital, he summed up his argument with “wage labour presupposes capital—capital presupposes wage labour.”

Capital is accumulated in Russia by the State and invested in state enterprise. Now the State can only do this if it is appropriating the surplus-value, or the results of unpaid labour time, of the workers it employs. This surplus value may not be distributed in dividends in the same way as in other Capitalist countries, but this makes no difference to the basic situation. In this country the State take a sizeable portion of surplus value by way of taxation upon the Capitalist class; in Russia, it also takes it directly from the workers it employs. The Soviet State does impose some taxes—capital can thus be accumulated in either way.

Raising productivity

In his book Industry in the U.S.S.R. (Moscow, 1949), E. Lokshin wrote:

“Socialist industry has incomparably greater possibilities than Capitalist industry of raising the productivity of labour, of constantly lowering production costs and thus increasing accumulations.” (Page 100.)

But before making this statement, he was careful to prepare the way for it by quoting Stalin:

“History up till now,” said Comrade Stalin, “has known three paths of the formation and development of powerful industrial states. The first path is the path of grabbing and pillaging colonies . . . The second path is the path of military conquest and the exaction of large indemnities from one country by another . . . The third path is the path of usurious concessions and usurious loans from capitalistically developed countries to a capitalistically backward country . . . All these paths were inacceptable to the Soviet Union . . . The Communist Party and the Soviet Government led the Land of Soviets along a different course, of industrialising the country by drawing on its interior sources of accumulation” (our emphasis).

These statements of Stalin’s may be true in themselves, but Lokshin’s defence of the Soviet Union is typical in that he uses them to give a completely false comparison between what he calls “capitalist methods of accumulation” and the method which is used in Russia—”interior sources of accumulation.” Capital can only be accumulated from the exploitation of labour. So what else can Lokshin’s “interior sources” be other than the unpaid labour of Soviet workers?

No one can deny the dissimilarities between Capitalism in this country and Capitalism in Russia. The capitalist class in Russia is not as distinct as in this country and “Western style” private property is largely non-existent in the Soviet Union. But it does not follow from this that Capitalism has gone from Russia, and with it the exploitation of man by man. It does mean that in Russia the state is the biggest property owner and exploiter of all.

For exploitation has nothing to do with conditions of work, nor with the value of wages. Exploitation is an integral part of the relationship between employer and employee, whereby the employer can appropriate surplus value for the accumulation of capital, by paying the worker less than the value of what he has produced or assisted in producing. Thus it is possible for a worker with a relatively high wage to be exploited at a higher rate than a worker with a lower wage.

It may be argued that the State uses some surplus value for the creation of things like roads, schools and hospitals. But this is only the accepted function of the State in a highly organised society. The capitalist class in this country needs a centralised authority to do these things because it could not possibly do them without such an authority. In Russia, the State has the same functions, but with a difference. It has the field to itself.

Ian Jones

                                                                           (To be concluded)

Back to the USSR (2026)

Book Review from the May 2026 issue of the Socialist Standard

A Marxist Analysis of the Soviet Economy. By Erwan Moysan. Routledge Frontiers of Political Economy.

At one time ‘the nature of the USSR’ was a burning issue. That was before 1991, while it still existed. The regime itself and its supporters in other countries claimed that it was ‘socialist’, a view that had to be refuted. The Trotskyists couldn’t decide whether it was a ‘degenerate workers state’ or a new class society of ‘bureaucratic collectivism’ or a form of ‘state capitalism’. Eventually they split into rival factions over the issue. Today the question is largely of academic and historical interest. However, there is one aspect that can usefully be addressed: why did it collapse?

Our view was that the USSR was capitalist because the defining features of capitalism (class property, wage-labour, production for the market, and capital accumulation) all existed there and that, given that most industry was state-owned, ‘state capitalism’ was the best description. Moysan has essentially the same position and, like us, notes that ‘Marx and Engels’ understanding of socialism as a worldwide society without classes, state, wage labour, commodity production, value and surplus-value, money, or competition of capitals is directly in contrast to the Stalinist view’. Chapter 1 is a very good description of the ‘capitalist mode of production’.

The view that the USSR was socialist or that it was a ‘degenerate workers state’ is easily disposed of. Unless you redefine socialism (as the ‘Stalinists’ did) then the existence of widespread (and spreading) wage-labour was proof that it wasn’t socialist; while the fact that the workers there were oppressed and exploited refuted the claim that it was a place where the workers ruled. Little wonder then that more independent-minded Trotskyists came up with the idea that it was either a new class society or a form of state capitalism.

The collapse of the economic system in the USSR was not something that the alternative Trotskyists expected; they — those who talked of ‘state capitalism’ as well as those who saw a new class society — thought that the system was more advanced than classical capitalism. Some of them saw that this was where the rest of the capitalist world was heading.

Moysan rejects this — which in any event was disproved by events — and argues that the USSR was less advanced and that the greater role of the state in the economy was a sign that ‘the Soviet economy was a catch-up economy’, writing that ‘countries that develop later must, in order to compete with countries with a high organic composition of capital, “catch up”, and this entails brutal state-led accumulation of capital’ (p. 111).

His explanation for the collapse of such state-led capital accumulation was that in the USSR it led to a ‘crisis of absolute overproduction of capital’ — and so to a slowing down of capital accumulation — due to a labour shortage caused by agriculture being so backward that not enough workers were being released to work in industry.  The only way out was abandonment of the type of state capitalism that existed in industry there and a move towards the sort of capitalism that existed in the other capitalist countries.

We get a brief mention in a footnote referring to a debate at our conference in 1969 about the nature of the ruling class in the USSR. During the debate, Moysan notes, some members argued that ‘the private sector was more important than commonly thought, and that the Soviet Union was going towards a Western-style capitalism’, which turned out to be what happened.

Adam Buick

Editorial: Two budgets (1952)

Editorial from the April 1952 issue of the Socialist Standard

Budgets are the concern of the capitalists, not of the working class, though it suits the Labour Party, like the other reformist parties, to pretend otherwise. The workers are not poor because of the Budget, but because the capitalist class own society’s means of production and distribution. It was admitted by the Economist (25th December, 1943) that:—

"1,800,000 persons, who are 7 per cent. of the adult persons in the country, own 85 per cent. of the private property and draw 28 per cent. of the individual incomes of the country."

The Economist said that their readers would be surprised to team this. Why they should be surprised was not explained; this inequality has been a feature of social life in Britain and the rest of the world throughout the capitalist era, and is equally true now despite all the talk of redistribution.

The capitalist State has to meet the cost of its civil service, armed forces and re-armament programmes and all the rest of the organisation necessary to the capitalist system. It does this through taxation the burden of which falls on the shoulders of those who alone can bear it, the propertied class. The wealth the workers produce belongs to the capitalist class and what the workers receive as wages and salaries is far below the value of what they, the workers, produce. That is how the workers are legally robbed and why they are poor. Rises or falls of prices, rises or falls of taxation and changes from one form to another, do not affect the fundamental position of the working class—at most they have temporary effects. White capitalism continues, the only sound policy for the working class is to struggle at all times to the fullest extent that conditions permit, to raise their wages and resist downward pressure.

During and since the war, under the abnormal conditions then existing, and with unemployment at a very low level, successive governments used the system of food subsidies in order to discourage the trade unions from pressing for higher wages. It was linked with high taxation on drink and tobacco, and, from 1946, the grant of children’s allowances to level the condition of the workers. The whole scheme was a device to lessen the movement for a general rise of wages and to divide the married workers against the unmarried. With it went the incessant demand of the Labour Government that the workers should refrain from "unreasonable” wage claims. Now that the fierce struggle against foreign competitors is hotting up again in the markets of the world, the policy is being modified because it has served its purpose. It was merely a wartime interlude in the running of capitalism, which is now getting back to normal pre-war conditions.

Against this background it will be seen how nonsensical is the Labour Party case against the Butler budget. They call is a “rich man’s budget,” as if any budget could be anything else. Mr. Douglas Jay, Labour M.P., speaking in the House of Commons on 17th March, accused Mr. Butler of "robbing the poor to pay the rich”—as if the details of any particular budget were of any importance by comparison with the ceaseless exploitation of the working class \\hich went on unchanged during six years of Labour government.

They charge the Tories with raising the cost of living, forgetting that while they were in power it went up about 40 per cent. They say that he is against wage increases, as of course he is, but forgetting the years in which they also preached "wage-restraint.” They denounce him for reducing food subsidies, but forget that it was Sir Stafford Cripps who decided not to permit any increase in the subsidies even though that meant a rise of the cost of living; a flat departure from the statement of his predecessor, Mr. Dalton, who in 1945 said:—

“I have decided to hold the present cost of living steady until further notice, even if this means an increase in the necessary Exchequer subsidies." (Hansard, 23rd October, 1945. Col. 1877.)

It was on that occasion that Mr. Dalton admitted the purpose of the subsidies as being "to restrain any disproportionate increase in wage rates,” and paid tribute to the "steadiness and good sense which the trade unions and their leaders have shown during the war in this regard.”

In April, 1951, when Mr. Gaitskell, as Chancellor of the Exchequer, repeated the decision not to increase the food subsidies, he admitted that this decision would mean a further rise of food prices and indeed the official food index figure rose from 131 in April, 1951, to 143 in October.

Other Labour Party critics charge the Tories with tenderness towards high profits, and one misguided Labour journal Forward, in its issue for 23rd February, 1952, chides the Tories on the ground that company profits repented during January, 1952, were up by £10,000,000. What it overlooked was that the company reports issued in January, 1952, related to profits made under the Labour Government in 1951!

Now that the Labour Party is in Opposition it will wage the sham fight about the details of running the capitalist system, but there was every justification for the jibe of the Liberal leader, Mr. Clement Davies, that if Mr. Gaitskell had been in Mr. Butler's place his Budget would have been "much of a muchness.” All budgets, no matter who introduces them, are designed to promote capitalism, not to undermine or abolish it.

Mr. Butler’s budget of 11th March had been preceded on 6th March by the budget report of the Russian Finance Minister, Mr. Zverev. They differed by five days, and little more.

The Russian Budget

The Russian Finance Minister’s budget report was reproduced in full in Soviet News (12th March, 1952) published by the Russian Embassy in London. It makes interesting reading particularly as evidence of the similarity of capitalism's problems and their treatment in the two countries.

They both have their re-armament problems; naturally both offered as instruments of “ defence,” not of "aggression.”

In 1952 the Russian Government plans to spend "for the defence of the country” 113,800 million roubles (£10,346,000,000 at the Russian official rate of exchange of 11 roubles to the £).

The amount of money to be raised from State loans in 1952 is set at £3,864 millions, and the estimated expenditure on the lottery prizes and interest to bondholders (“to pay out winnings to the population and interest on loans”) is estimated at £800 million. This latter figure relates, of course, to the interest, etc., on the total amount of loans outstanding, not merely to the additional loans to be raised during the year; at the average rate of 4 per cent. it implies that the total amount of bonds outstanding in 1952 will be about £20,000 million.

Turnover Tax (similar to the British purchase tax) brought into Budget revenues in 1951 the amount of £22,500 millions, an increase of 4.9 per cent. over 1950. It is to be increased this year by another 4.9 per cent. 

Mr Butler stepped up the taxes on profits by means of the Excess Profits Levy. His opposite number in Russia, Mr. Zverev, is going to do the same.

“Total profits in the branches of the national economy will amount to 88,100 million roubles in the current year as against 74,700 million roubles in 1951. The rise in profits makes it possible to leave a substantial part of them at the disposal of enterprises and Ministries for expanding production. At the same time, the profits tax paid into the State Budget will be increased and the share of this tax in the State Budget revenue will rise from 10.2 per cent. in 1951 to 12.2 per cent. in 1952.”

“The profits tax paid by State enterprises will be increased by 14,000 million roubles, or 29.2 per cent. more than last year. . ."

Conservative and Labour Party speakers are always urging the workers to produce more and lower the cost of production. Mr. Zverev’s report contained numerous remarks of the same kind. He reported that in 1951 “the labour productivity of workers in industry rose, by 10 per cent. compared with 1950.” But he was not satisfied with this and asked for more. His report also contained many complaints about industries which had failed to keep down their wages bill and operate sufficiently profitably:—

"It should be said that certain Ministries, enterprises and economic organisations are for from making full use of available potentialities for the further reduction of production costs, cutting trade outlays and making the work of economic organisations more profitable.”

“One of the main requisites for the further reduction of production costs is also the improvement of the organisation of labour at enterprises and the frugal expenditure of wage funds. Not all enterprises, however, live up to those requirements.”

For example, he complained that the Ministry of Paper and Woodworking Industry “permitted the mills to cover the over-expenditure of the wage fund,” and the Leningrad engineering plant of the Central Textile Machinery Administration of the Ministry of Machine and Instrument-making Industry “did not fulfil its production plans last year and overspent 13,500,000 roubles on wages.”

Time and time again he came back to this theme of not spending too much on wages, improving the control of “labour per unit of output,” and watching over “the expenditure of wage funds” and of “the timely and complete receipt of payments into the Budget.” Numerous branches of industry were named as being among those which illegally “overdraw the wage funds.” Others were charged with allowing expensive machinery “to stand idle a great deal,” thus adding to production costs, and many State farms were criticised because they “do not yet have a sufficiently high productivity of labour.”

We are told by Communists that in Russia the trade unions have control over the fixing of wages. What they do have (a very different matter) is the right to discuss the way the “wages fund” is allocated to different grades of workers; but of course the real control resides with those who fix the total amount of the wage fund for each enterprise, that is the Government and its agencies. How true this is can be seen from the Finance Minister’s report. Not once does he even mention as a possibility that the workers or the unions might have pressed for a bigger expenditure on wages. In each of the dozen cases that he refers to he tells the managements firmly that once the Government has fixed the wage fund they have got to stick to it and devote their energies to cutting down production costs and increasing the workers’ output.

British capitalism’s financial wizards and productivity experts would feel very much at home if transplanted to Mr. Zverev’s department.

It is only necessary to add that the Budget Report was unanimously approved. The session ended as follows, according to the Soviet News account:—

“Stormy, prolonged applause. All rise. A prolonged ovation in honour of Comrade J. V. Stalin resounds in the Kremlin Palace.”

It seems to have been like the Tory cheers for Mr. Butler.

The Socialist comment on British and Russian budgets is simplicity itself. The aim of the working class should be to end private and State capitalism and bring the means of production and distribution into ownership by the whole community as the basis of Socialism. While the workers continue to neglect this real issue and devote their attention instead to capitalism’s budgets and taxation they will remain a poverty-stricken exploited class and the exploiters will continue to be safe in the enjoyment of the privileged position that capitalism bestows on them.

Finance & Industry: If only prices would come down! (1961)

The Finance and Industry Column from the January 1961 issue of the Socialist Standard

If only prices would come down! 

A woman reader of the Evening News (28/11/60) wrote referring to the old saying that what goes up must come down, and asked if this applies to the cost of living; “if so I haven’t noticed it”.

About 99 per cent. of the population would say, if asked, that they “want prices to come down”. They don’t really mean this. What they mean is that it would be very nice if the prices of the things they buy went down and the price of the thing they sell went up. The worker would like to sell his mental and physical energies to his employer at a higher price (a higher wage) and at the same time get more for each pound he spends, through lower prices in the shop. And manufacturers who sell industrial products would like to see those prices go up and all other prices (including wages) go down.

One exception to this general attitude is the common practice of trade unions of associating themselves with their employers in approving higher prices. Thus the railway unions approve higher fares and the coal miners higher prices for coal.

But coming back to the question in the Evening News, would workers be better off if prices were lower? France a few months ago and Russia this month gave one kind of answer to the question, the answer being that it did not make any difference. What happened was that France cut the face value of her currency by 100, and the Russians cut their rouble by 10. At the same time all prices, wages, fares, etc., were cut in the same proportion, so everyone was in just the same position as before.

But on some occasions prices have not been reduced by this kind of government action but have fallen under the influence of trading conditions. Did the workers gain then?

It happened in 1920-1922. Between November 1920 and December 1922 prices fell on average of 35 per cent.; like being able to buy for 13/- some article which had cost 20/-.

But in the same period wage rates fell on average by the same percentage (or perhaps a little more). So the worker who could buy articles at lower prices had fewer shillings in his wage packet to buy the articles with.

It was a time when unemployment was heavy and conditions were particularly unfavourable for trade union resistance to wage cuts.

New Russian Rouble

The declaration of the Russian government that as from 1 January 1961 the official rate of exchange of the rouble will be 2.52 to the £ which will make it of higher value than the dollar and equal to about 8/-, will not mean much in practice since (unlike the dollar) it is not tied to gold and is not freely convertible into pounds or dollars. Commentators in the newspapers mostly take the line that the aim of the Russian government is prestige, the satisfaction of having at least a nominal exchange rate greater than that of the dollar. In addition however there is already the long term purpose of making the rouble eventually a gold backed world currency acceptable in inter-national trade as the pound and dollar have been.

The Daily Worker (17/11/60) anticipates that “the new exchange rates and the change in the gold content of the rouble herald the opening up of peaceful competition between the rouble and the dollar”, and “It may not be long before the rouble begins to challenge the dollar for primacy in world trade”.

There was a time when even the Daily Worker would have recognised that the trade war between capitalist states is anything but “peaceful competition “.

Rouble Millionaires

The Daily Telegraph (6/12/60) tells of a Russian woman who got into the ranks of the rouble millionaires by a piece of private enterprise that landed her in jail for three years. She ran an organisation, complete with a lawyer as secretary, a “scientific consultant”, an accountant, and a network of agents selling cure-all herbs at 45/- a packet. When arrested she had 700,000 roubles (worth about £60,000 at the old rate of exchange) and had just bought a country house for 300,000 roubles. “Her daily earnings would sometimes amount to 5,000 roubles, or eight times a worker’s monthly wage”.

The Economic Horizon

A year ago most of the political and economic forecasters were happy about the boom time ahead and still confident that if anything went wrong the government could fairly easily take the steps that would put the economy back on expansion. Now they are not so sure. The fact that they are all asking the question is itself a pointer to growing uneasiness, made greater by the foreseeable but generally not foreseen collapse of motor exports.

Now it is accepted that America and Canada are likely to have unemployment greater than in any year since the end of the war and there is the natural fear that British export trade may fall further and the jobless increase in number.

Gone is the post-war optimism based on the belief that they could always dip into the Keynesian remedies and keep everything under control. One of the current activities is the setting up of export councils to boost the sale of British goods in overseas markets, including the Export Council for Europe set up by the Federation of British Industries and manned by “some of the most prominent men in British industry and commerce ” (Financial Times, 11/11/60).

But before anyone accepts that the export problems of British capitalism can readily be solved by pushing into other markets (and thereby crowding out some other would-be sellers) it has to be remembered that other sections of the capitalist class would have had the same idea. Canada has appointed a “super salesman” to head its export drive, in the person of a new Minister of Trade and Commerce, and the American government is trying to boost their exports. Sweden, too, is aiming to solve its problems by more exports, and their eyes are fixed on the market for their goods in Britain. And to add to the troubles of all of them Russian exports are finding their way into many of the world’s competitive markets.

Paul Bareau, the new economic editor of the Daily Mail (25/11/60) argues that the present troubles in this country are due to “the excessive optimism and rashness of the years 1958 and 1959. Restrictions on hire purchase should never have been completely removed. This freedom was abused and we are now paying the price”.

So you take your choice between those who say that there is no need to worry because the government can always take action to put things right, and those who say, like Mr. Bareau, that the government did take steps but they were the wrong ones and had the effect of making things worse.

However, Mr. Bareau is cautiously hopeful. “The coming year will provide plenty of problems; but they will not be the problems of a great slump”.

Edgar Hardcastle

Unemployment in Yugoslavia (1963)

From the December 1963 issue of the Socialist Standard

A number of people have asked us for the source of the figures on unemployment in Yugoslavia given in the September SS. The figures were taken from the International Labour Review's statistical supplement, June 1963. According to the supplement the figures show registered unemployed from "employment office statistics". It is interesting to note that Peking Review (27'9/63), an English language magazine from China, gives the following figures in an article on Yugoslavia. “According to official statistics,” says the article, “ in February, 1963 the number of the unemployed reached 339.000, or about 10 per cent of the number of the employed. In addition. every year many workers go abroad seeking work.”

Adam Buick

Poland is state capitalist (1982)

From the October 1982 issue of the Socialist Standard

Before the Second World War Poland had been governed by a military junta led by Pilsudski. The political outlook of Pilsudski was close to that of the largest pre-war political grouping in Poland, the National Democrats — a band of crudely anti-semitic fascists whose national ideal was similar to that of Hitler’s Germany. During the war the Polish working class were victims of some of the foulest Nazi atrocities. In June 1945 a Committee of National Liberation declared Poland to be a ‘People’s Democracy'. There was by no means a wide Polish consensus in favour of the new government, which was seen to be a political puppet of the Stalinist state bureaucracy which was effectively the capitalist ruling class of Russia. In 1945 a "Democratic Alliance", comprising the Communist Party of Poland and the Socialist Party of Poland, won a number of votes in the election. Soon after the election the Socialist Party was expelled from the “Alliance" and the agents of Russian capitalism dominated Poland.

The leader of the Polish Communist Party in 1945 was Gomulka who, above all else, was a Polish nationalist. Even before adhering to the Russian policy of state capitalism he was committed to the equally anti-socialist policy of strong national pride. The difference between state capitalism and private capitalism is that under the former a state bureaucracy (composed of senior Party members) possess capital, whereas under the latter form of capitalism the means of wealth production and distribution are privately possessed. Neither form of capitalism excludes the other entirely; for instance, in 1945 the Labour Party nationalised a number of industries; this did not stop them from being capitalist concerns, which produced wealth for profit rather than use. but simply altered the political arrangements.

Similarly, although Gomulka's Poland was primarily state capitalist, this did not stop his government from trading with the West and borrowing 40 million dollars from Western banks. These bank loans are of crucial importance: as soon as a professedly ‘socialist state’ borrows money from a bank it has to repay the loan and the only way it can do this is by the process of exploiting its workforce. A second economic area in which Gomulka resisted pressure from the Kremlin to establish total state capitalism was agriculture. The Stalinist policy was to nationalise all land, but Gomulka found it politically inexpedient to do this. He had gained power by promising the Polish peasant farmers that they could retain ownership and control of their land. Lenin and the Bolsheviks had promised the same thing to the Russian peasants in 1917, but they broke their promise when in power. Gomulka kept his promise to his supporters and as a result 80 per cent of the agricultural land in Poland remained the possession of 10 per cent of the population. This is still so today.

Gomulka's political insolence, which he was forced into in order to retain the support of his capitalist-nationalist-minded supporters, earned him the criticism of his Russian masters. In September 1948 Gomulka was removed from the leadership and replaced by the hard-line pro- Kremlinite, Bierut. From 1949 until 1956 Poland, like other Stalinist satellites, underwent a period of state terror and unprecedented economic hardship for the workers. During this period, marked by the notorious Six-Year Plan, everything was sacrificed so that industrial capital could be accumulated. The aim of the government was to turn Poland into an industrial power and in order to do this maximum profits had to be extracted from the labour of the wealth producers.

Just as in Britain in the early 1800s. and in Chile and Zimbabwe today, working class combination is outlawed so as to ensure the passivity of labour which is necessary for the rapid accumulation of capital, so in Poland the trade unions were regarded as an unacceptable obstacle to the objectives of state capitalist production. As in Nazi Germany, the state did not ban unions, but took them over. During 1949 and 1950, 80 per cent of Polish trade union officials were purged. The state-run unions ceased to be a weapon of working class resistance against the rate of exploitation (which even before 1948 they were hardly able to be) and became a weapon in the hands of the exploiters to extract as much profit as possible out of the exploited. The excellent Polish film, Man of Marble, provides a vivid social portrait of the appallingly tyrannous condition of Polish capitalism during the period of the 'plans' for capital accumulation.

The death of Stalin and Bierut, and the relaxation of state terror which occurred after Krushchev denounced Stalin at the Tenth Congress of the Communist Party of the Soviet Union, resulted in a desire on the part of many Poles — including some Party members — to liberalise state capitalism. In Hungary, the period of so-called destalinisation was considered by the Kremlin to be excessive and in 1956 the Russian tanks went in to Budapest. In Poland the end of the brief period of “liberalism" was decisive, if less dramatic. In 1956 fifteen thousand workers in Poznan held a demonstration to complain about the high production targets which they had been set. The militia was used to break up the demonstration and eighty workers were murdered on the streets.

After 1956 Gomulka returned to power. As in 1946, he chose to finance Polish industrialisation by borrowing from the Western banks. Between 1957 and 1963. 529 million dollars were borrowed from America alone. The result was a consistent effort by the state authorities to intensify the rate of exploitation — notably in heavy industries like ship building. In 1970 the workers in the Gdansk shipyard decided that enough was enough: they went on strike and made the fatal mistake of demonstrating in the streets. The state responded in the only way it knew—just as the authorities in Manchester did at Peterloo — and once again workers were fired on and killed.

In Gdansk in 1970 the state had exposed itself as a ruthless defender of capital and an opponent of the working class interest. Learning from the street demonstrations of 1970. many Polish workers began to realise the need for organisation. After the Gdansk affair Gomulka was removed for a second time and Gierek was brought in to replace him. Although the leader was new, the policy remained the same: Gierek borrowed heavily from the West, receiving 100 million dollars from Russia and 50 million dollars from the West in 1971 alone. There seemed to be an initial success. By 1973 Poland had the third fastest productivity growth rate in the world. Production of consumer goods rose by 7 per cent and real wages rose by 40 per cent between 1970 and 1975. By 1975 Poland owed 6,000 million dollars to the Western banks. To pay off these debts more wealth had to be produced. To produce more, machinery had to be imported. To buy the machinery, more debts were incurred. Eventually, the Polish state decided to cut back on the production of consumer goods for the home market and devote more and more production to goods for export. The contraction of production for the home market led to increased prices of consumer goods and a second problem: the private farmers, who own most of Poland's land, refused to sell their agricultural produce to the state because they had nothing useful to buy with the money. The commodities required by the peasant farmers, such as machinery and chemicals, were being produced for export. Consequently there was a desperate shortage of food, as the price increased still more.

By 1980 the Polish state owed 27,000 million dollars to the banks. It was finding it difficult to sell its goods on the world market because of the world recession. Productive growth, which increased by about 9 per cent between 1971 and 1977, was contracting. Sixty per cent of the industrial products due to be completed in 1980 were unfinished at the end of that year due to lack of goods, leaving Poland with 10.6 billion dollars worth of frozen assets. In 1975, 30 per cent of Polish government expenditure was on food subsidies and welfare services; by 1980 this had fallen to 20 per cent. In 1980 there was a coal shortfall of 12 million tons; shipbuilding amounted to 400,000 tons, 35 per cent less than in 1978. Truck production fell by 6 per cent of 1979 figures and there was a sugar beet shortfall of 30 per cent.

It was thus in response to a crisis of capitalism that the workers in the Gdansk shipyard went out on strike in 1980. In 1981 the workers' journal, Jednosc, contained an article which posed the question: how is the emancipation of labour to be achieved? The answer given was that "it involves true socialism, undistorted socialism . . ." and went on to make the highly perceptive statement that “State ownership and social ownership of the means of production are two completely different concepts which should never be confused. The means of production may be owned by the state, but this does not mean that it is thereby the property of the working class”.

Socialism means the common ownership and democratic control of the world and everything in it by the whole community. There cannot be socialist countries or socialist governments or socialist banks or socialist police or socialist prisons. Our fellow workers in Poland must learn from their experience of opposing their oppressors in recent times. The enemy is capitalism, whatever its form, and to the end of destroying it the Polish workers will have the support of socialists everywhere.

Steve Coleman

Vodka-cola (1979)

Book Review from the November 1979 issue of the Socialist Standard

Co-production deals between Western enterprises and East European governments are becoming big business and attract a lot of notice in the press. These deals now represent 10 per cent of East-West trade and are rapidly growing in number and importance.

Co-production is distinct from normal East-West trade, which is handicapped by the fact that it doesn’t allow the Eastern bloc to buy all it needs. The West doesn’t want payment for exports in roubles or other Eastern currencies as these are practically worthless. Russia has been paying for much of its imports with large amounts of gold but as this tends to reduce its price then Russia’s trading position simply worsens, while other Eastern countries have little or no gold anyway.

Barter deals are hopelessly inadequate as Western exporters rarely want the commodities being offered in exchange. Even so, barter does exist. Pepsi-Cola, long reviled by communist propagandists as a “monopolist”, has built a plant in Russia capable of producing 74 million bottles a year for Russian consumption. Since Pepsi wouldn’t take roubles and Russia needed its gold for American wheat, payment is made in Vodka and Pepsi were given the monopoly for selling Russian wines in the USA.

Despite Kruschev’s boast that Russia would surpass the West economically within 15 years, she has fallen further behind and the gap is widening all the time. To catch up, Russia and her satellites need Western technology but cannot acquire enough of it for the reasons given. Also, they already owe the West such a staggering debt (at least 80 billion dollars) that they cannot count on extended credit forever.

However, steps are being taken to rescue the Eastern bloc from its predicament, for a price, by none other than Western big business —the very “multinationals” who are supposed to be the mortal enemies of “international communism”. Just how and why this is being done is explained in a new book, Vodka Cola, by Charles Levinson. (Gordon and Cremonesi, £7.90.)

In the book Levinson lays bare the reasons for the current “detente” between the West and the Eastern bloc. This has nothing to do with either side learning to love the other but is dictated by their respective economic needs. The East must modernise its industry in order to keep its population passive. After all, expectations of a better life must be met someday. For Western big business there is the glittering prospect of a potential new market of 400 million people, plus the opportunity to switch its production away from a unionised, high-wage, strike-prone labour force to one which is state regimented, low-wage and forbidden to strike.

So the last thing the multinationals want to do is disturb the status quo behind the Iron Curtain. Any growth of political freedom there would produce genuine trade unions and the inevitable inroads into profit margins. Hence their enthusiasm for detente. Levinson also points out that the agreements signed by Eastern and Western politicians are only political window dressing. It was the businessmen of both sides who made the real breakthrough and all the politicians have done is merely help smooth the way for future deals. When it comes down to it, ideological differences are demolished by economic realities.

These co-production deals enable the West to sell the East what it needs and get paid, not in dud currencies or shoddy, inferior products, but in cheap Eastern made goods manufactured to Western standards which can be sold on the world market at a fat profit.

Co-production takes a variety of forms:

LICENCING: until the early 1960s only a few licences to use Western technology were purchased in the East. Now there are several thousand. These were previously paid for in scarce hard currency but now payment is likely to be in the products being made under licence. For example, Fiat, Volkswagen and British Leyland have been paid for their licences in vehicles and parts.

BUY-BACK: this means that industrial giants like Renault of France and Montedison of Italy will supply—in this case Russia—with an entire car factory and chemical plant and be paid in cars and chemicals for sale throughout the world. The Eastern partner is also helped to market its share of production through distribution companies specially set up for the purpose. In this way much needed hard currency flows back to the East to enable it to buy more of what it requires.

LEASING: the Eastern bloc also uses equipment rented from Western companies. So far this has not happened within Russia itself, but its merchant fleet has leased thousands of cargo containers and other equipment from the West, so privately owned means of production and distribution exist in part of the Russian economy. Levinson’s view is that leasing will increase because of the advantages it offers the East, among which is the acquiring of modem technology without spending huge amounts of hard currency. He predicts that it is only a matter of time until leasing will be allowed within Russia.

The list of “monopolists” involved in co-production deals makes fascinating reading: General Motors, Exxon (Esso), Ford, Unilever, IBM, Krupp, ITT (played a leading part in setting up Pinochet’s regime in Chile), Coca-Cola, Du Pont, Westinghouse, ICI, Union Carbide, Fiat . . . Many of them are bitter opponents of trade unionism in their own plants and all of them, needless to say, collect their share of the surplus value created by the Eastern workers employed in the various projects.

Cyrus Eaton, the American multimillionaire, revealed how it is done when he explained his 40 million dollar 50/50 deal for building a tyre factory in the East in 1970. The communist state partner would own and operate the plant. Eaton’s half would be in tax-haven Switzerland and would market the tyres in the West. Eaton says

“This enabled the Eastern country to earn hard currency and because of lower labour costs the venture can sell tyres cheaper than Western countries can. The plant in the East sells the tyres to the marketing subsidiary at cost —thus leaving profits to the joint marketing subsidiary.” (p. 87.)

Nice one, Cyrus.

All of this must have its effect on Western jobs. Naturally, the co-production partners deny this and claim that the increased trade will provide the West with 2 million new jobs. But the Eastern products, because they are made by low-wage labour, consistently undercut similar Western products. Indeed Western manufacturers and trade unions are forever protesting about “dumping” on Western markets. In Britain the footwear, textile, tailoring, motor car and TV tube industries, to name a few, have been badly hit by cheap imports from many countries and thousands of jobs have been lost. So while the British Communist Party demands action to “fight unemployment” their Eastern counterparts are busily contribute: it.

Unfortunately for the Eastern bloc the present type of co-production deal cannot fully solve their problem. The technology they are buying tends to be second rate and outmoded by Western standards. The West will not hand over the latest developments because it feels it does not have sufficient safeguards as things stand. For example, equipment and know-how supplied under one deal can easily be pirated and used by the East for other projects of its own, so Western companies are increasingly demanding a 50/50 share in the ownership of the plants as well as the products and profits. Because the Russians have refused to allow this they have failed to clinch several important deals. The Russian government’s refusal stems from an unwillingness to lose face: how would it be able to explain away such a blatant example of private, as opposed to state, ownership of part of “socialist industry?

Hungary and Rumania have gone some way towards meeting this problem. Although not allowing Western-owned plants, they do permit Western companies to own a large share of the profits of the joint venture (payable of course in hard currency). Volvo of Sweden has an agreement with Hungary for the assembly of Volvo cars with 48 per cent of the profits going to Volvo shareholders. This represents legal ownership of part of Hungary’s means of production. In Poland the government has gone all the way; foreign companies can legally own the entire project and if the deal is terminated then company can take out its original investment plus its share of capital gains.

The pressure on Russia to come some sort of compromise is enormous. Russia apparently needs the latest in mini computers but IBM and other suppliers are refusing to provide them. They want to protect their technology by retaining control over its use and means joint ownership of the project where it is being used. Only in this way can the company prevent its technology being applied outside of the contract.

Levinson frequently refers to the theories of Karl Marx and seems to have understood these better than most writers. For example, he says

“The end result of co-production operations is profits for the capitalists, and this means that the socialist enterprises are involved in creating the surplus value which Marxism regards as the basis of the capitalist class’s exploitation of the worker.” (p. 261.)

If the words “Eastern state capitalist” had been substituted for “socialist” then we couldn’t have put it better. He mistakenly attributes the failure of Russian nationalisation to “Marxist ideas” but continues

“Nobody (in Russia), unfortunately, had raised the minor question, ‘Whether the business be private or nationalised, how does it profit the worker who is subjected to the same authoritarian labour methods in either case?’ ” (p. 224.)

Although the book contains several other mistakes regarding Marx’s views, these cannot obscure the value of Levinson’s work as an aid to understanding how business, East and West, operates and what its priorities are. And we cannot help noticing that the analysis of modern society by Levinson, and many others outside our ranks, is very similar to our own. Nowadays, you don’t have to be a socialist to be struck by capitalism’s glaring contradictions and antisocial nature.

Vic Vanni

Blogger's Notes:

Charles Levinson replied to this review in the March 1980 issue of the Socialist Standard.

In connection to Levinson's book, the following might be of interest to some readers. In 1981, there was a fictional adaptation of the book entitled Beloved Enemy. Directed by Alan Clarke (who also directed Scum, The Firm and Elephant) and adapted for television by David Leland, it was transmitted on the BBC as part of the Play for Today series of dramas.

Beloved Enemy is available to watch on YouTube:

Letter: Vodka-Cola (1980)

Letter to the Editors from the March 1980 issue of the Socialist Standard

Vodka-Cola

I should like to express my appreciation for your letter of 11th November and the review of “Vodka-Cola” in the November issue of the Socialist Standard.

I also very much appreciate your positive comments on “Vodka-Cola”, which will be the core conflict of the ’80s between democratic socialism and authoritarian state capitalism.

I also appreciate your comments in the utilisation of the term “socialist” and the loose handling of “Marxism” in the text. I share entirely your definition of the USSR as an example of state capitalism -and not socialism. And, of course, the entire tenor and objective of “Vodka-Cola” is to confirm what you state that the means of production and the distribution of its output have now largely been accumulated by small elitist minority groups whose interests converge on the exploitation and the expense of the majority of the population, and especially those who relate to society through their earned incomes.

Charles Levinson

Geneva

Notes on Russia: Squaring the circle (1962)

From the July 1962 issue of the Socialist Standard

Alongside the development of Russia as a great capitalist trading power it is interesting to look at the attempt made by Stalin a few years before his death to square Russian policy with Marxist principles.

Frederick Engels in his Socialism, Utopian and Scientific (1892) had written that with the capture of power and “the seizing of the means of production of society, production of commodities is done away with, and simultaneously, the mastery of the product over the producer ". He also wrote that as a first step “The proletariat seizes political power and turns the means of production into State property.”

Someone put the question to Stalin, why was it that years after capturing power the Russian Communist Party still continued commodity production, i.e. production of articles for sale. Stalin, in his Economic Problems of Socialism in the U.S.S.R. (Published in Moscow in 1952) set out to answer the question. He did so by arguing that in the first of the two passages quoted above Engels meant all the means of production, and the Russian Government had in fact taken possession of only some of them, the industrial means of production, but not the agricultural means of production.

This in itself is a hollow excuse as far as Engels is concerned because Engels certainly did not write, or think, that 35 or more years after gaining political power an essential part of the means of production would still not have been taken over.

But Stalin had another and even more curious defence. It was that Engels had had in mind the one country, Britain, in which agriculture had in 1892 been “capitalised” and concentrated; and Stalin then expressed doubt whether Britain could abolish commodity production, because of its dependence on foreign trade.

Why Stalin's thoughts were concerned with the problem of foreign trade was made clear elsewhere in Stalin’s book because he had realised that Russia too was becoming more dependent on foreign trade. He wrote: -

. . . it will soon come to pass that these countries will not only be in no need of imports from capitalist countries but will themselves feel the necessity of finding an outside market for their surplus products, (p. 36)

By “these countries” Stalin meant Russia and the other miscalled “socialist” countries.

Though Stalin's tortuous “explanation” may have satisfied his questioner it landed him in the further dilemma that while Engels had seen the capture of power and the ending of commodity production bringing to an end “ the mastery of the product over the producer”, for Mr. Stalin the producers in Russia and the other countries were increasingly coming under the “necessity” of finding foreign markets for exports, just like the rest of the capitalist world.

The recent big increase of prices of meat and other foods in Russia in order to increase the income of the collective farms and peasants and encourage them to raise output and efficiency of production, shows that the problem of agriculture is still far from being settled. British capitalism solved the problem in 1846 from the standpoint of the industrial capitalists by abolishing the corn laws which protected the landed interest and maintained high food prices. Agriculture was allowed to decline, cheap food was imported from abroad which kept prices (and wages) low and enlarged the profits of the manufacturers and shipowners. Russia now is in a somewhat similar position since the Russian Government could lower its own food prices if it allowed the importation of cheap food from America and other countries in which agricultural production is more efficient and cheaper. But this of course would involve problems even greater than those faced by British capitalism over a century ago.

To put the matter into perspective from a socialist point of view it need only be added that trade problems are capitalist not socialist. The idea of “socialism in one country” is a false one. In a capitalist world there can only be capitalist economy, with its associated need for commodity production and foreign markets. Socialism is an international concept and in that framework such problems do not exist.

Edgar Hardcastle

State capitalism (2025)

Book Review from the March 2025 issue of the Socialist Standard

The Spectre of State Capitalism. By Ilias Alami and Adam D. Dixon. Oxford University Press. 2024.

At one time the concept of ‘state capitalism’ was used only by socialists, to describe the state acting as a capitalist by investing capital, employing wage labour, and producing for the market. As far back as April 1910 the Socialist Standard carried an article entitled ‘Evolution and State Capitalism’ which explained that nationalisation was not socialism. From the 1920s we applied the concept to the economic system in the USSR. Other articles followed in the 1930s and 40s. The concept was also applied to other countries where, in the absence of a strong enough capitalist class, the government set up state enterprises to introduce and develop capitalism.

Today China is routinely described by politicians and the media as ‘state capitalist’. There is even a branch of academia devoted to ‘state capitalist studies’ of which Alami and Dixon’s book is both a product and a description. A large part of their book is taken up with questions of methodology and definitions for specialists in the subject, which makes it rather heavy-going for the general public.

Their conclusion is that the term should be applied only to particular state bodies, such as state-owned enterprises (SOEs), sovereign welfare funds, and state-funded development banks where the state is an actual owner, and not simply to any state intervention in the capitalist economy. They distinguish between an old state capitalism of nationalised industries, often natural monopolies, and a new state capitalism of ‘state-capital hybrids’ which are consciously structured and behave exactly like private capitalist corporations or investment funds, seeking to maximise profits, paying dividends, engaging in financial wheeling and dealing, and even taking over other businesses.

The authors come up with some perhaps surprising facts:

‘Their [SOEs] share among the world’s 2,000 largest firms doubled to 20 per cent over the last two decades. Over the same period, the assets controlled by SOEs grew from about $13 trillion in 2000 to $45 trillion (equivalent to half of global GDP) (IMF). Many SOEs are in top rankings such as the Fortune Global 500. According to the OECD, half of the top ten non-financial firms as measured by revenue are SOEs. In 2021, they made up 132 of the world’s 500 largest companies—up from thirty-two just two decades ago. UNCTAD estimates that there are at least 1,500 state-owned multinational enterprises, which are SOEs that control assets or other entities in countries other than its home country. In other words, many SOEs now compete on the world market, and perform as efficiently as private capitalist firms in some sectors.’

Alami and Dixon see the ‘new state capitalism’ of ‘state-capital hybrids’ as a new stage in the evolution of capitalism, after ‘neoliberalism’. This is certainly an increasing feature of contemporary capitalism but whether it represents a new era is another matter. In any event the advocates of ‘free market’ capitalism are back on the defensive. Even those who accept capitalism as we know it in the West are alarmed at Chinese-style state capitalism. Alami and Dixon quote the President of the European Commission complaining about ‘distortions created by China’s state capitalist system’ and Blinken, the late US Secretary of State, insisting on the need for protection ‘from the aggressive state capitalism of modern autocracies’.

Apologists for the West portray the conflict with China as one between ‘liberal capitalism’ and ‘state capitalism’. A case for this can be made out but it was that even under Mao when the apologists were calling China ‘communist’. At least they are now being honest.

In the final chapter Alami and Dixon come out as some sort of leftists, citing Marx. They see a potential ‘progressive’ side to their new state capitalism as, by further blurring the distinction between the economic and the political realms, it opens up the possibility of achieving ‘non-reformist reforms’. This, despite their conceding that (by ‘valorise’ they mean create surplus value):

‘State-owned capital is still subjected to the imperatives of self-valorization. The state can partially or temporarily suspend these imperatives (for instance, by accepting a lower-than-average rate of profit, or by institutionalizing other social and political goals alongside profit maximization), but if it does so over the long term, the risk is that the capital becomes devalued. State-owned capital must therefore continue to valorize not to be destroyed, and with it, the social wealth that it represents.’

Which is precisely why supposed non-reformist reforms can no more lastingly overcome the economic laws of capitalism than can common-or-garden reforms.

Adam Buick

Unsocialist (2024)

Book Review from the December 2024 issue of the Socialist Standard

State Socialism in Eastern Europe: History, Theory, Anti-capitalist Alternatives. Edited by Eszter Bartha, Tamás Krausz and Bálint Mezei. Palgrave Macmillan, 2023. 356pp.

The term ‘State Socialism’ in the title of this book is used to refer to the system that existed in the Soviet Union and the regimes of the Soviet bloc from the late 1940s until the whole edifice crumbled from 1989 onwards. Though it is clear that this system was not socialism as we would understand it but rather repressive state capitalism masquerading as socialism, this has not prevented many academics who study the history of that era from continuing to refer to it as socialism and indeed as ‘really existing socialism’. And this is precisely what we find in this collection of 14 essays, which focus predominantly on aspects of how those regimes, especially Hungary, were organised in the period when they were part of the Soviet bloc. The way the editors describe it is as an attempt ‘to address the long theoretical, conceptual and political debate on the interpretation of “actually existing socialism” in the Soviet Union and Eastern Europe’.

But while such debate may give academics something to occupy their minds with, in reality the single most important thing to know is that the regimes in question were not in any sense socialist but simply represented a different – and invariably more repressive – way of managing the buying and selling system known as capitalism. That system, wherever it exists or has existed, is one of money and wages, economic inequality, and a small class of employers ruling the roost over a large class of employees, even if this consideration seems far from the minds of most of those contributing to this volume. The chapter by Susan Zimmerman on work and gender politics in ‘State-Socialist Hungary’, for example, while clearly the product of comprehensive and painstaking research, confines itself to description and analysis of how those particular aspects of capitalism manifested themselves in post-war Hungary and in no way challenges the idea of whether ‘socialism’ can exist within the framework of an economic system of buying and selling and production for the market. In his essay on Hungary between 1963 and 1985 (sometimes referred to as the period of ‘goulash Communism’), Bálint Mezei discusses what he calls ‘Hungary’s third road experiment of socialism’. Another chapter, jointly written by the editors as an introduction to the anthology and entitled ‘From Socialism to Neo-Liberalism: Lessons from Eastern Europe and Hungary’, states the book’s intention ‘to draw a historical lesson from the state socialist experiment in Eastern Europe and Hungary, which can be instructive in the search for an alternative to the global neoliberal capitalism’. Yet this too, despite its title, shows few signs of appreciating that the main lesson to be learned from the topic under discussion is that the passage from one system to another in Eastern Europe with the fall of the Soviet bloc was in fact a passage from one kind of capitalism (state capitalism) to another (private capitalism) and that the only viable alternative to either cannot be some form of ‘socialist state’, since socialism is by definition a worldwide, stateless society as well as one without classes, markets and contractual relations.

Close to 40 years ago (and so before the collapse of the Soviet-backed regimes of Eastern Europe), a book entitled State Capitalism: the Wages System Under New Management was published by Palgrave Macmillan, the same publisher as for the volume currently under review (State Capitalism – libcom.org). It stated the unerring truth that ‘private capitalism and state capitalism are equally suitable institutional arrangements for allowing capital to exploit wage-workers’, a truth vindicated by history since that time yet still not fully grasped by many academics. In addition, as an alternative to either form of capitalism, the book’s authors, Adam Buick and John Crump, also stated the need for a society that abolishes both the wages system and the production of goods and services for the market, replacing it with a system of voluntary cooperative work and production for use. The collection of essays currently under review also claims to ‘contribute to the discussion about anti-capitalist alternatives’, but its overwhelming focus is on the organisational variants of capitalism and, looking forward, with a nod to perhaps minor changes to the ‘neoliberal’ regimes that have now taken over that may allow a few more crumbs to fall from the table. A look back at Buick and Crump’s analysis would surely help the contributors to this volume to see the wood for the trees.

Howard Moss

Is there a "Road" to Socialism? (1988)

Book Review from issue 5 of the World Socialist Review

State Capitalism: The Wages System Under New Management by Adam Buick & John Crump (The MacMillan Press Ltd, 1986)

You have only to attend a meeting of any of numerous groups identifying themselves as "socialist" or ’'communist” to find out one thing: with few exceptions, they do not define their immediate goal as being worldwide in scope. They regard replacing the buying and selling of necessary goods and services with free access to the same as a very long-term aspiration (though the notion enjoys wide acceptance as an abstraction). Between the cup of communism and the lip of capitalism, they claim, there lies a wide gap, and that gap can only be bridged by a complicated and unpredictable series of short-term objectives. Eventually society will be transformed, it is true, but not starting from the present reality as we currently understand it.

Those groups organized as formal political parties seeking to attract the support and/or the votes of workers and other sectors of the population thus find themselves nailed fairly tightly to a framework of nationalism which has to justify itself through an appeal to "proletarian internationalism" or something similar. Followers of Lenin and Trotsky. for example, advocate setting up a "workers’ state" which will liquidate the institutions and mechanisms by which private owners of the means of production perpetuated their legal monopoly over the output of goods and services. According to this scenario, the exploiting (capitalist) class continues in existence for a while but is sternly regimented by the party in control of the machinery of state and enjoying the well-informed support of the majority.

In State Capitalism Adam Buick and John Crump carefully dissect the concept of state ownership of the means of wealth production and lay bare the mass of rationalizations leading up to it. First they establish the general boundaries of discussion by defining what the term capitalism means, then they distinguish between two models of capitalism: the one traditionally accepted as such (private capitalism, the earliest form) and the other representing a number of historic adaptations or variants of capitalist monopoly over social production (in response to some structural failure on the part of the "private" model). Since this second type is characterized by the nationalization of enterprises--with or without a thoroughgoing state management of the system of production—it is of course best described as "state” capitalism.

This result can be accomplished in two ways. Either the state can bail out individual capitalists by taking over the legal proprietorship and control of their businesses without a major political upheaval occurring (as has become common in western Europe); or a revolutionary opposition can develop within the bosom of capitalist society and, with varying degrees of majority support, raze the preceding regime to the ground, totally reorganizing the system of exploitation (as in eastern Europe, Russia and China). In the second case, a new capitalist minority replaces the old, leaving the same or equivalent relations of production intact. Though from a narrowly legal angle the new minority renounces all private title to the system of production, they nevertheless retain monopoly control over it.

"Socialist” Profits?

In the fourth chapter, the authors deal with a question which everyone has sooner or later asked: What makes a state-capitalist economy different from a "classical" one? They tackle a couple of familiar old fallacies: namely, the belief that

"Socialist" profit is not capitalist profit because "all profits belong to the people" or, to put it another way, because "the state distributes profit for the benefit of the people. "Socialist" wages are not the mark of an exploited working class, but are the means by which social wealth is distributed according to each individual's contribution to production.

(Ch. 4, "The Capitalist Dynamic of State Capitalist Economies")

In the end, however, no matter on what ideological grounds wage exploitation is put into effect, the leopard cannot avoid keeping its spots. 

"Profit is pursued because, due to the competition which is inherent in world capitalism, state capital continually has to invest newly acquired surplus value in a compulsive effort to accumulate and hence expand itself." (p 101)

Before going on to socialism as the alternative to either state or private capitalism, they briefly outline some of the ideological underpinnings on which the justification for state capitalism rests, showing how the thinking of its advocates evolved out of "classical" socialist theory (as found in the writings of Marx or Engels) into its Leninist and post-Leninist forms.

Basic Features of Socialism

Having comprehensively sapped out the state-capitalist terrain, Buick and Crump have no difficulty elucidating the basic features of a socialist society: It must be worldwide; all goods and services will be produced for use only and distributed free; it will have no classes, states or national frontiers; no exchange of goods and services will take place—since there will no longer be any market to regulate consumption.

The disappearance of economic value would mean the end of "economic calculation" in the sense of calculation in units of "value" whether measured by money or directly in some unit of labour time. (Ch. 6, "The Alternative to Capitalism")

The need for planning will be met by establishing "a rationalized network of planned links" occupying the successive phases through which the cycle of production/consumption passes. "Planning" in that context will mean only the coordinating of "a direct interaction between hunan beings and nature." (The authority of economists rests partly in fact on the working class’s uncritical acceptance of their doctrine of an inherent natural scarcity. )

If the language in the last chapter makes heavy use of the conditional tense, this does not imply any prediction of utopia. It only acknowledges that workers have so far failed to shake themselves out of the slumber of poverty. This is a process which necessarily must take place on a world scale (if not everywhere at precisely the sane time); for a whole society to make the changeover to production for use requires a conscious understanding of the stakes by enough of the world's population to constitute a political force greater than any that capital can muster in its own defense.

Such an intense concentration of well-informed opinion has not yet occurred nor will it ever—if workers (including both highly paid professionals and exploited agriculturalists) continue to limit their thought horizons to those of the national state into which their destiny as wage slaves has thrust then. The admirable thing about State Capitalism is that it provides a sorely needed theoretical framework for tearing loose of the deadly embrace of nationalism This framework (as noted in the book) has been slowly emerging within the world socialist movement in the decades since the Bolshevik revolution, most significantly in the propaganda of our companion party, the Socialist Party of Great Britain. The book itself makes a highly readable contribution to this ongoing effort to create a class-conscious, socialist majority—one that will finally get capitalism's funeral cortege rolling toward the cemetery.

Blogger's Note:

Buick and Crump's book was also reviewed in the April 1987 issue of the Socialist Standard.  

Letter: Profit motive in Russia (1965)

Letter to the Editors from the November 1965 issue of the Socialist Standard

Profit motive in Russia

Dear Sirs,

I am writing as one who is anxious for Socialism to be established and therefore agree with your basic principles. However I am extremely puzzled at your antagonism to the Communist countries and the Daily Worker.

Surely it is obvious that these are working for the same principles as the SPGB, so why knock them? Your behaviour is almost as bad as that of our government, which claims to be Socialist but supports the USA in its Colonialist adventures.

This blind spot of yours makes you fail to understand the difference between Russia’s profit motive and that of the Capitalists. The argument in the August Socialist Standard is nonsense. You say quite correctly “. . . the surplus that arises from the labour of all will be used for the benefit of all.” Is not this what occurs in Russia? Their profits do not go into private pockets, but are collected by the State for the benefit of all the Russians.

You sneer at the word “State”. Who would administer the profits in this country if it became Socialist according to your ideas? It could only be the State. What happens now to the profits of the Nationalised industries here? It ceases to go to shareholders pockets but is used for the benefit of all consumers. That is Socialism.

By ignorantly knocking the countries which have become Socialist, you are making your party quite ineffective. This is a great pity, because we can ill afford to waste such a potential.

Are any of the Labour Party M.P.s also members of the SPGB? If not why not?

Yours faithfully,

H. Horwood.

Reply:

The aim of the article under discussion was to show that the origin of Profit was not efficiency or price-raising but the unpaid labour of the working class. Profit is the form under which the surplus above the consumption needs of the producers is taken by the owning class in capitalist society. This is so in Russia as here. 

H. Horwood denies this. He argues that, profits made in State industries are not the same as profits made in private industries as they are used to benefit everybody instead of going into the pockets of a few shareholders. “That”, he says, “is Socialism”. We would call it State capitalism. State profit-making is not Socialism. In socialist society there will be no State and no profits. The whole social product (including the “surplus”) will belong to society as soon as it is made. Buying and selling and all that goes with it like profit-making and working for wages won’t exist. It will just be a question of alloting what is made to various social uses and to individual consumption. This is production for use.

We are asked about the State. As Gabriel Deville, once put it: “The State is the public power of coercion created and maintained in human societies by their division into classes, a power which, being clothed with force, makes laws and levies taxes”. The State is not just an administrative machine; its central feature is force. In socialist society, with the end of classes there will be no need for a public power of coercion; the centre will simply be a clearing house for settling social affairs. In class societies the State is used by the ruling class to serve its ends. Today the capitalists are the ruling class so the State serves their ends. The duties they give it are many: from looking after their general interests at home and abroad to the running of industries. Such State-run or nationalised industries have nothing to do with Socialism. The basic features of capitalism, profit-making and working for wages, remain.

What happens to the profits of nationalised industries? In Britain, despite the popular myth, most of them make a “trading surplus”. Some of this is paid out as interest on loans; some is ’taken as taxes; the rest is used again to exploit wage-labour or kept as a reserve. How much goes in interest payments can be got from the blue-books on National Income and Expenditure. Woiswick and Ady in The British Economy in the 1950's give a table based on this information. For most of the period interest payments amounted to about 40 per cent of “gross income (before depreciation)”. In 1960, for instance, this was £590m. Of this £286m. went as interest and £12m. as taxes, leaving a net income of £292m. Let’s see where this interest goes. Before 1956 all the nationalised industries except coal could borrow directly from the capital market. They used to offer interest-bearing stock for sale. The 1956 Finance Act made them borrow from the Treasury. So the interest goes to the Treasury and in the end into the pockets of those who lend to the government (including, ironically enough, the Moscow. Narodny Bank which holds British Treasury bills!). Most of the profits are of course re-invested as in private industries. But capitalists can still enjoy the proceeds of exploitation in the State industries—as bill and bond holders instead of as shareholders.

In Russia the arrangements are a little different and more complicated to unravel. The State industries are controlled from the centre as to output, prices and surplus. Most of the surplus which the State industries make is taken by the centre as taxes and is used to pay for the upkeep of the State as well as for sharing out amongst the State industries for re-investment. Until recently the State used to raise extra money for investment by means of loans, often compulsory. The rich were given a chance to invest in government bonds. The fact that this has stopped doesn't mean that the wealthy class who rule Russia don't get a share in the proceeds of the Slate exploitation of wage-labour. They do. but not in the obvious forms of dividends on shares or interest on bonds. They get it as prizes, bonuses, bloated salaries and the like (all devices used by private corporations in the West to share out profits and avoid profits taxes). Mr. Horwood's argument about the people's profits is wrong, but it would be more plausible if political democracy existed in Russia.

It also shows how, as Russian State capitalism gets more and more like the capitalism of the West, its supporters are driven to ever more fantastic arguments to keep up the pretence of Socialism. In the past no one would have dared to argue that Russia was socialist because State profit-making was Socialism.

Finally, no Labour M.P.s are members of the Socialist Party because by joining a capitalist party they have ranged themselves on the side of the opponents of Socialism and arc thus ineligible for membership.

Editorial Committee.