Tony Cliff

State Capitalism in Russia

Chapter 7:
Russian economy and the Marxian law of value and theory of capitalist crisis
(Part 2)



Can there be world state capitalism?

If the production of the whole world were controlled by one authority, that is, if the Stalinist bureaucracy could unite the world under its rule and the masses were forced to accept such a régime, the resulting economy would be a system of exploitation not subject to the law of value and all its implications. Examining the problem – in hypothetical form at that date (1915), of course – Bukharin reached this very conclusion. In his book, World Economy and Imperialism, he explains that if the national state were to organise the national economy, commodity production would remain “in the first place [in] the world market”, and the economy would be, therefore, state capitalist. But if “the organisation of the whole world economy as one gigantic state trust” took place (which, incidentally, Bukharin did not believe possible), “we would have an entirely new, unique, economic form. This would be capitalism no more, for the production of commodities would have disappeared; still less would it be socialism, as the domination of one class over the other will have remained (and even grown stronger). Such an economic structure would, most of all, resemble a slave-master’s economy, with the absence of the slave market.” [34]

(Because of national and social conflicts, it is very unlikely that such a world empire could ever in fact exist.)



Marx’s theory of capitalist crisis

It is impossible within the framework of the present work to deal adequately with Marx’s analysis of the capitalist crisis of overproduction. We shall have to limit ourselves to a short summary.

Unlike all pre-capitalist forms of production, capitalism is forced to accumulate more and more capital. But this process is hampered by two complementary, and yet contradictory, factors, both arising out of the system itself. One is the decline in the rate of profit, which means the shrinking of the sources of further accumulation. The other is the increase in production beyond the absorptive capacity of the market. If it were not for the first contradiction, the “underconsumptionist” solution of the crisis – to raise the wages of the workers – would be a simple and excellent answer. If it were not for the second contradiction, fascism could, by continuously cutting wages, have staved off the crisis for a long period at least.

Dealing with the second horn of capitalism’s dilemma, the low purchasing power of the masses, Marx wrote:

The entire mass of commodities, the total product, which contains a portion which is to reproduce the constant and variable capital as well as a portion, representing surplus-value, must be sold. If this is not done, or only partly accomplished, or only at prices which are at below the prices of production, the labourer has been none the less exploited, but his exploitation does not realise as much for the capitalist. It may yield no surplus-value at all for him, or only realise a portion of the produced surplus-value, or it may even mean a partial or complete loss of his capital. The conditions of direct exploitation and those of the realisation of surplus-value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relations of the various lines of production and by the consuming power of society. This last-named power is not determined either by the absolute productive power nor by the absolute consuming power, but by the consuming power based on antagonistic conditions of distribution, which reduces the consumption of the great mass of the population to a variable minimum within more or less narrow limits. The consuming power is furthermore restricted by the tendency to accumulate, the greed for an expansion of capital and a production of surplus-value on an enlarged scale. [35]

And he adds:

The stupendous productive power developing under the capitalist mode of production relatively to population, and the increase, though not in the same proportion, of capital values (not their material substance), which grew much more rapidly than the population, contradict the basis, which, compared to the expanding wealth, is ever narrowing and for which this immense productive power works, and the conditions, under which capital augments its value. This is the cause of crises. [36]

Elsewhere he expressed the same idea in these words:

The last cause of all real crises always remains the poverty and restricted consumption of the masses as compared to the tendency of capitalist production to develop the productive forces in such a way, that only the absolute power of consumption of the entire society would be their limit. [37]

In the final analysis, the cause of the capitalist crisis is that a greater and greater part of the income of society falls into the hands of capitalist class, and a greater and greater part of this is directed not towards buying means of consumption, but, instead, means of production, that is, it is directed towards the accumulation of capital. Bas, as all means of production are potentially means of consumption – that is, after a certain lapse of time, the value of the means of production becomes incorporated into means of consumptions – the relative increase in the part of the national income directed to accumulation compared with the part directed towards consumption, must lead to overproduction. And this is a cumulative process. The increase in accumulation is accompanied by rationalisation, resulting in an increased rate of exploitation. The greater the rate of exploitation, the greater is the fund from which accumulation is drawn, as compared with the wages of the workers and the revenue of the capitalist. Accumulation breeds accumulation.

If “the poverty and restricted consumption of the masses” were the only cause of the capitalist crisis, the crisis would be permanent, because the wages of the workers, on the whole, always lag behind a rise in the productivity of labour. We should then not have known the one-time catastrophic equation of different elements, but a permanent slump.

But there is the other horn of the dilemma, the decline in the rate of profit. The process of capital accumulation is accompanied by a rise in the organic composition of capital, that is, there is a substitution of dead labour (embodied in machinery, etc.) for living labour. Since the latter produces surplus value and the former does not, there is a constant tendency for the rate of profit to decline. This decline in its turn makes competition between the capitalists keener, for each must try to increase his total profits at the expense of his rivals. Competition leads to rationalisation, and so to an ever greater rise in the organic composition of capital. From this vicious circle there is no escape.

This tendency is not by itself the cause of the cycle of revival, boom, crisis, and depression. Marx explains that the decline of the rate of profit is a very slow process [38], which is subject to many counteracting forces. Nevertheless is constitutes the background of the economic cycle. The immediate causes of the cycle are changes in the wage rate resulting from the changes in the demand for labour power which accompany the process of accumulation. On the decline of the rate of profit Marx wrote: “It promotes over-production, speculation, crises, surplus-capital along with surplus-population.” [39] “The barrier of the capitalist mode of production becomes apparent ... In the fact that the development of the productive power of labour creates in the falling rate of profit a law which turns into an antagonism of this mode of production at a certain point and requires for its defeat periodical crises.” [40]

On the rise of the level of wages following on increased employment during a boom, he declared that if it were said “that the working class receive too small a portion of their own product, and the evil would be remedied by giving them a larger share of it, or raising their wages, we should reply that crises are precisely always preceded by a period in which wages rise generally and the working class actually get a larger share of the annual product intended for consumption.” [41]

On the connection between the trade cycle, the rate of profit, the level of wages, and the extent of unemployment, when this last factor is of decisive importance as marking the end of the boom and the beginning of the crisis, Marx wrote:

The whole form of the movement of modern industry depends, therefore, upon the constant transformation of a part of the labouring population into unemployed or half-employed hands ... As the heavenly bodies, once thrown into a certain definite motion, always repeat this, so is it with social production as soon as it is once thrown into this movement of alternate expansion and contraction. Effects, in their turn, become causes, and the varying accidents of the whole process, which always reproduces its own conditions, take on the form of periodicity. [42]

According to his analysis, the rate of profit determines the rate of accumulation, the rate of accumulation determines the extent of employment, the extent of employment determines the level of wages, the level of wages determines the rate of profit, and so on in a vicious circle. A high rate of profit means a quick accumulation, hence an increase in employment and a rise in wages. This process continues to a point where the rise in wage rates so adversely affects the rate of profit that accumulation either declines catastrophically or ceases altogether.

The cycle of the rate of profit and the cycle of accumulation and the cycle of employment, is the life-cycle of fixed capital (i.e. machinery, buildings, etc.):

To the same extent that the volume of the value and the duration of the fixed capital develop with the evolution of the capitalist mode of production, does the life of industry and of industrial capital develop in each particular investment into one of many years, say of ten years on an average. If the development of fixed capital extends the length of this life on the one side, it is on the other side shortened by the continuous revolution of the instruments of production, which likewise increases incessantly with the development of capitalist production. This implies a change in the instruments of production and the necessity of continuous replacement on account of virtual wear and tear, long before they are worn out physically. One may assume that this life-cycle, in the essential branches of great industry, now average ten years. However, it is not a question of any one definite number here. So much at least it is evident that this cycle comprising a number of years, though which capital is compelled to pass by its fixed part, furnishes a material basis for the periodical commercial crises in which business goes through successive periods of lassitude, average activity, overspeeding and crisis. It is true that the periods in which capital is invested are different in time and place. But a crisis is always the starting point of a large amount of new investments. Therefore it also constitutes, from the point of view of society, more or less of a new material basis for the next cycle of turn-over. [43]

This theory explains why, in spite of the antagonistic mode of distribution and the tendency of the rate of profit to decline, there is not a permanent crisis of overproduction, but a cyclical movement of the economy. During the period when fixed capital is being renewed and added to, the introduction of new means of production does not result directly in an added supply of finished goods. But after a time, maybe after a few years, the value of the new means of production begins to be incorporated in new products, in the form of both means of production and means of consumption. This takes place without any, or with only a relatively small amount of capital being invested at that time. In other words, for a few years investments in the construction of new industries or the expansion of existing ones are very large compared with the increase in the output of finished goods. These are the years of boom, and they are followed by a period in which the output of finished goods expands considerably, almost simultaneously with a decline in the rate of accumulation. This is the crest of the boom and the harbinger of the coming crisis. Then comes the crisis: production declines catastrophically while investment stops or even gives place to disinvestment.

There is another factor which must be considered in this connection – the disproportion between different industries. This may be the direct result of the anarchic character of capitalist production. The capitalists of one industry may over-estimate the demand for its products and therefore overexpand its productive capacity. As there are many capitalists, it is only after the goods are produced that the capitalist becomes aware, through the market, that supply has exceeded demand. This leads to a fall in prices, decline of profits, restriction and a decline in the demand for labour power, raw materials and machinery produced by other factories, and so on. This restriction is not necessarily compensated for by the expansion of production in other industries. On the contrary the contraction of production in one industry can lead to similar results in other industries which are directly or indirectly dependent on it. If the industry which suffers first from over-production is an important one, a general crisis may result. “That a crisis (and hence also overproduction) be general it is enough that it seize hold of the leading articles of commerce.” [44]

In this case the disproportion between different industries is the cause of the decline of the rate of profit and the decline of the consumption of the masses, and these three factors together bring about the crisis.

But disproportion between different industries may be the result of the decline of the rate of profit or the underconsumption of the masses as well as, in its turn, their cause. If on the basis of a certain rate of profit there is a certain rate of accumulation, the rate of profit determines the demand for means of production and leads to a certain relationship between the demand for producer and consumer goods. A decline in the rate of profit, by causing a decline in the rate of accumulation, immediately changes the pattern of demand; and so upsets the balance of the demand for the two types of production. A similar relation exists between the underconsumption of the masses and the proportion or disproportion between the different industries. “The ‘consuming power of society’, and ‘the proportionality of the various branches of production’ – these are absolutely not individual, independent, unconnected conditions. On the contrary, a certain state of consumption is one of the elements of proportionality.” [45]

One of the symptoms of disproportion between different industries is a change in the relation between the output of raw materials and the demand for them. Generally at the beginning of the revival the supply of raw materials exceeds the demand, and their prices are therefore low. As economic activity increases, these prices rise, thus increasing the cost of production, which adversely affects the rate of profit. [46] During a boom the prices of raw materials usually rise more than those of finished goods, and during a crisis fall much more steeply: the reason for this is that the supply of raw materials is far less elastic than that of finished goods.

Another indication of the same disproportion, which is a result rather than a cause of the economic cycle, but which has nevertheless and important reflex influence, is the rate of interest. The capitalist entrepreneurs do not receive the whole surplus value produced in their undertakings, but only what remains after the deduction of rent, taxes and interest. At the beginning of a trade revival, there is generally an excess of credit over the demand for it. Hence the rate of interest is low, and this in turn encourages the revival. During a boom the rate of interest continues to be low, until shortly before its end, when it rises sharply, reaching its maximum with the onset of the crisis. After this it falls very sharply. [47] Thus, while the curve of the general rate of profit and the curve of the economic cycle as a whole roughly correspond, the rate of interest curve shows much greater zig-zags which cut across the curve of the economic cycle. The changes in the rate of interest spur the revival on at an ever wilder pace on the one hand, and on the other plunge the economic system into ever-deepening crises.

Credit has made it possible for capitalism to develop at an unprecedented tempo, but it also increases the instability of the system. It blinds the industrialists to the real condition of the market, so that they continue to expand production beyond the point at which they would have stopped if all payments were made in cash. This postpones the onset of the crisis, only to make it more serious.

One further factor contributing to the onset of a crisis is the existence of a chain of middlemen between the industrial capitalist and the consumers. Owing to their activity, production can, within certain limits, increase without a corresponding increase in the sale of products to consumers. The unsold products remain as stocks in the hands of merchants, making the crisis, when it comes, more severe.

This, in brief, is Marx’s theory of the capitalist crisis.



State capitalism and the crisis – the posing of the problem

It is obvious that some of the causes of crises of overproduction in traditional capitalism would not exist in a system of state capitalism. For instance, middlemen not only would not exist under state capitalism, but even in private enterprise can be eliminated by the industrialist selling his product directly to the consumer through his own trading network. Again, credit would cease to be a factor if all payments were made in cash. Also, under state capitalism, the rate of interest would not contribute to the fluctuations in the tempo of production. As the state would own all the capital, the use of credit would be no different from the use by each capitalist of his own capital. Yet again, the disproportion between different branches of the economy likewise would not act as the initial cause of the crisis. Although there might be miscalculations in investment, and the supply of a certain product might exceed the demand, the fact that the state would plan production and demand makes any serious disproportion impossible. Moreover, as the state would own all the industries, there would not be a cumulative process of decline in prices and a decline of the rate of profit spreading from one industry to another, but the effect of a partial over-production would be spread directly over the whole economy. When the next cycle of production began, the production of certain goods would be decreased and equilibrium restored.

These factors would, it is true, cease to have an effect only if the state capitalist economy were self-sufficient. If it were to produce for the world market, to receive credit from other countries, etc., the factors would then have a certain influence.

But what of the fundamental dilemma which faces traditional capitalism? How can a high rate of profit be achieved while surplus value is realised? How can capital be quickly accumulated without undermining the market which it requires? In a certain phase of the cycle – the boom – traditional capitalism temporarily solves the problem: a high rate of profit leads to quick accumulation, that is, a big increase in the production of means of production compared with production of means of consumption. Hence a big part of the surplus value can be realised in the industries manufacturing means of production, that is, in the system of production itself. (This alone is a sufficient explanation why the underconsumption of the masses does not cause a permanent crisis, and prevent any expansion of production under capitalism.) If capitalism could transform the boom from a temporary phase to a permanent condition, there would be no overproduction. Can state capitalism do this? Can it ensure a high rate of profit, a high rate of accumulation, a high level of production, while yet preserving the antagonistic way of distribution, “the poverty and restricted consumption of the masses”?



Bukharin on the crisis in state capitalism

The only Marxian economist to consider the theoretical problem of the crisis of over-production within a state capitalist economy was Bukharin. In his discussion of Rosa Luxemburg’s theory of accumulation, he poses, among other problems, the question of how reproduction on an enlarged scale would take place under state capitalism [E] and discusses whether there would be a crisis of overproduction. He writes:

Is accumulation possible here? Naturally. The constant capital grows, since the consumption of the capitalists grows. New branches of production corresponding to new needs are always established. The consumption of the workers, although definite limits are placed upon it, grows. Despite this “underconsumption” of the masses no crisis arises, as the demand of the various branches of production for each other’s products as well as the demand of the consumers, capitalists as well as workers, is fixed in advance. (Instead of “anarchy” of production – what is, from the standpoint of capital, a rational plan.) If a mistake is made in production goods, the surplus is added to inventory and a corresponding correction is made in the next production period. If a mistake is made in workers’ consumption goods, the surplus can be divided among the workers or destroyed. Also in the case of a mistake in the production of luxury goods “the way out” is clear. Thus there can be no kind of crisis of general overproduction. The consumption of the capitalists is the motive power for production and for the production plan. Consequently there is in this case not a specially rapid development of production(there is a small number of capitalists). [49]

Bukharin’s words “in this case not a specially rapid development of production” may be misleading. Not only will production be “not especially rapid”, but it will be slowed down compared with the tremendous productive capacity of a “free” capitalist economy: there will be virtual stagnation. It is interesting to note that Marx connected stagnation or “a dormant state” with a decrease in the number of capitalists to a mere handful in the whole world. “The rate of profit”, he wrote, “that is, the relative increment of capital, is above all important for all new offshoots of capital seeking an independent location. And as soon as the formation of capital were to fall into the hands of a few established great capitals, which are compensated by the mass of profits for the loss through a fall in the rate of profits, the vital fire of production would be extinguished. It would fall into a dormant state.” [50]



Tugan-Baranovsky’s “solution”

Could there not be a capitalist mode of production with a high and continuously rising level of production together with the present antagonistic mode of distribution?

It would be possible to construct a model on the following lines. Every rise in the productivity of labour would be accompanied by a corresponding rise in the production of means of production, while production of means of consumption would not outpace the rate of growth of the population and the consumption of the capitalist class. As techniques changed, workers and capital would be transferred from the production of means of consumption to the production of means of production: more people and capital would be engaged in the production of machinery in order to produce machinery in order to produce machinery, and so on, while the production of means of consumption would not increase in proportion to the rise in the productive capacity of society. Production would become more and more roundabout, and so the market for which capitalism would produce would be within itself. Provided the correct relationship were kept between the two sectors of industry, there would be no crisis of overproduction, however low the purchasing power of the masses.

This was the argument of Mikhail Tugan-Baranovsky, a Russian non-Marxist economist. He wrote:

The schemes quoted above were to prove a principle which might meet with objections; unless the process be adequately understood, namely, the principle that capitalist production creates a market for itself. So long as it is possible to expand social production – if the productive forces are adequate for this-the proportionate division of social production must also bring about a corresponding expansion of the demand, as under such conditions each newly produced good represents a newly created purchasing power for the acquisition of other goods. From the comparison of simple reproduction of the social capital with its reproduction on an expanded scale, the most important conclusion to be deduced is that in a capitalist economy the demand for commodities is in a sense independent of the total volume of social consumption: it is possible that the aggregate volume of social consumption as a whole goes down while at the same time the total social demand for commodities grows, however absurd it may seem to “common sense”. [51]

Only a disproportion in the rate of expansion of the two sectors of industry can cause a crisis. “If ... the expansion of production is practically unlimited, then we must assume that the expansion of markets is equally unlimited, for if social production is distributed proportionately, there is no limit to the expansion of the market other than the productive forces available to society.” [52]

Technical progress is expressed by the fact that the importance of the means of labour, the machine, increases more and more as compared to living labour, to the worker himself. Means of production play an ever growing role in the process of production and in the commodity market. Compared to the machine, the worker recedes further into the background and so also the demand resulting from the consumption of the workers as compared with the demand resulting from productive consumption of means of production. The entire workings of the capitalist economy take on the character of a mechanism existing for its own sake, in which human consumption appears as a simple moment of the process of reproduction and the circulation of capitals. [53]

In another work, Tugan-Baranovsky reduced the idea to an absurdity:

If all workers except one disappear and are replaced by machines, then this one single worker will place the whole enormous mass of machinery in motion and with its assistance produce new machines – and the consumption goods of the capitalists. The working class will disappear, which will not in the least disturb the self-expansion process (Verwertungsprozess) of capital. The capitalists will receive no smaller mass of consumption goods, the entire product of one year will be realised and utilised by the production and consumption of the capitalists in the following year. Even if the capitalists desire to limit their own consumption, no difficulty is presented; in this case the production of capitalists’ consumption goods partially ceases, and an even larger part of the social product consists of means of production, which serve the purpose of further expanding production. For example, iron and coal are produced which serve always to expand the production of iron and coal. The expanded production of iron and coal of each succeeding year uses up the increased mass of products turned out in the preceding year, until the supply of necessary minerals is exhausted. [54]

Clearly, as Tugan-Baranovsky himself remarks, the main point of his analysis is not “the wholly arbitrary and unreal assumption that the replacement of manual labour by machinery leads to an absolute diminution in the number of workers ... but rather the thesis that, given a proportional distribution of social production, no decline in social consumption is capable of producing a superfluous product.” [55]

Tugan-Baranovsky’s “solution” is impossible of application under individual capitalism because of the dependence on one another of the two sectors of the economy, and because of the uncontrolled exchange between them.

Under capitalism there is production both of use values and of values. The purpose of the former is the satisfaction of human needs, independent of the particular form of the economy; but the purpose of the latter (the production of values) is “accumulation” – in order, as Marx expressed it, “to conquer the world of social wealth, to increase the mass of human beings exploited by him [the capitalist]”. [56]

Although the capitalist may consider use value only as the bearer of value, and although he may consider consumption only as a means and not an end, the means is nevertheless vital, because without it the end could not be achieved. “Consumption produces production by creating the necessity for new production ... No wants, no production. But consumption reproduces the want.” [57]

The dependence of accumulation on consumption means that the sector of the economy producing capital goods depends on the sector producing means of consumption. Under private capitalism this relationship is achieved without conscious planning. If the supply of capital goods exceeds the demand for them to a greater extent than the supply of consumer goods exceeds the demand for them, the price of the former decreases relatively to the price of the latter. Hence the rate of profit decreases in industries producing means of production and increases in industries producing means of consumption. This leads to a falling off of accumulation in the first and an increase in the rate of accumulation in the other sector of the economy. Capital will then be transferred from the first to the second until a balance is restored between the two.

This process requires free movement in the price of commodities, free movement of capital from one sector to the other, and a rise in wage rates consequent on the expanded employment in the first sector which originally causes an an increase in the demand for the products of the consumer goods industries.

These factors make the application of the Tugan-Baranovsky “solution” impossible under individual capitalism. Nevertheless, from a capitalist standpoint it has a sound element in it. In actuality it is the extension of the phase of revival and boom in the economic cycle, a phase during which accumulation increases more than consumption, and the production of means of production increases more quickly than the production of means of consumption. For a number of years accumulation can far exceed consumption without disturbing the balance of the economy. This and the fact that the link between the cycles of the rate of profit, accumulation and employment is the rate at which fixed capital (machinery, buildings, etc.) wear out, suggest that if increased production of consumer goods could be prevented while production of capital goods steadily increased, the boom would last longer than is usual in the decennial cycle. This is possible under state capitalism, because the state owns all the capital of society, and can control its movement between one sector and another.

State capitalism eliminates another factor which under private capitalism causes the turn from boom to crisis, and thus makes the Tugan-Baranovsky “solution” possible for a time. Under private capitalism, a high rate of profit leads to rapid accumulation, a high level of employment and high wages. This process reaches a point at which wages are so high that they eat into the rate of profit, which falls steeply, dragging down with it accumulation, employment and wages. The workers, being “free” to bargain over the sale of their labour power, the “relative surplus population is ... the pivot upon which the law of demand and supply of labour works. It confines the field of action of this law within the limits absolutely convenient to the activity of exploitation and to the domination of capital”. [58]

Under a totalitarian state capitalist regime, even if there is practically no surplus population, and full employment exists, wages can for a long time remain “within the limits absolutely convenient to the activity of exploitation and to the domination of capital”.

The Tugan-Baranovsky “solution” is therefore possible under state capitalism, if it is backward compared with world capitalism, if means of production are scarce and if, therefore, the paramount need of the economy is the production of machinery in order to produce more machinery, and so on. But when the production of machinery succeeds in bringing the economy up to the level of the rest of the world, will this state capitalist system be faced with overproduction? There can be only one reply to this question, the reply given by Bukharin, viz, that the economy will be practically stagnant.

At first glance Bukharin’s description of the relation between state capitalism and the crisis of overproduction appears to be the exact opposite of Tugan-Baranovsky’s “solution”. Tugan-Baranovsky speaks of a capitalist system in which there is a very rapid rise of production and accumulation; Bukharin of a system in which production and accumulation are on a very small scale. The former describes accumulation increasing independently of consumption, the latter as accompanying and being dependent on consumption. Yet the two theories have this in common: both point to the fundamental contradiction in capitalism between accumulation and consumption. The former suggests that this contradiction can be resolved by freeing accumulation and production entirely from consumption; the latter by slowing down accumulation and production to the pace of consumption. The former says that increased production can take place with accumulation only benefiting from it; the latter argues that quick accumulation is impossible and that production must therefore slow down. The former reflects the boom, the latter the crisis in the capitalist cycle. Both “solutions” leave the worker subordinated to capital.

The Tugan-Baranovsky “solution” is possible under a system of state capitalism in a backward country. Bukharin’s description applies to state capitalism which reaches saturation point in the means of production. The latter is a capitalism which, although apparently free from crisis is really in permanent crisis, for if production does not rise above demand, production is restricted to demand. Both art a product of the contradiction between the productive forces and the capitalist relations of production and distribution.

But besides these “solutions”, there is another means whereby state capitalism can eliminate the crisis, viz. a war economy.



Production and consumption of means of destruction

A unique feature of the consumption of the capitalists, according to Marx, is that it does not constitute part of the process of reproduction. The “consumption” of means of production (depreciation of machinery, etc.) leads to the creation of new means of production or new means of consumption, the consumption of the workers results in the reproduction of labour power, but the products consumed by the capitalists do not contribute at all to the new production cycle. There is, however, one form of consumption which, although possessing this characteristic, is nevertheless a means to acquire new capital and new possibilities of accumulation, “to conquer the world of social wealth, to increase the mass of human beings exploited”. This is war production.

Like the crisis of overproduction, the war economy, while being an integral part of capitalism, throws into relief the obstacles to the capitalist mode of production, which are present in the system itself. Furthermore, a capitalist war leads not only to a stoppage of accumulation and a destruction of capital on such a scale that accumulation becomes possible anew, but to such destruction that there is a tendency towards the complete negation of capitalism and a reversion to barbarism.

In spite of superficial resemblances, however, a war economy and a socialist economy are opposite poles. In a war economy, as in a socialist economy, the state takes control of the economy and plans production and distribution. In a war economy, as in a socialist economy, there is the maximum possible production. But if the relations of distribution are antagonistic, and if the enormous accumulation of the past impedes new accumulation, maximum production is possible only if a large proportion of the products is not exchanged, that is, is not produced as values, but as use values. In a socialist economy, the aim of production is the creation of use values; the main aim of a war economy, too, is the production of use values. But in a socialist society use values are those needed by the people, while in a war economy they are guns, military equipment, and stores – use values inimical to the interests of the people.

A war economy is inevitably accompanied not by a crisis of overproduction, but by a crisis of underproduction, because the demand for goods outstrips the productive capacity of the economy. Inflation, on a large or small scale, always accompanies a crisis of underproduction.

The part played by war preparations and war in Russian state capitalism is such that it has not yet had to face the Bukharin “solution”. In so far as the economy is directed to the production not of means of destruction but of means of production in order to produce means of production, and so on, it follows the Tugan-Baranovsky “solution”. In any case the production of means of consumption lags far behind the production both of war materials and capital goods.

Given the world situation today, it appears that the war- economy “solution” is the only expedient of the Russian bureaucracy until such time as either socialism or barbarism will render a “solution” to the contradictions inherent in capitalism – orthodox or state – superfluous.




E. Bukharin defines state capitalism in these words: “the capitalist class united in one united trust, an organised economy, but one which is at the same time, from the standpoint of the classes, antagonistic.” [48]



34. N. Bukharin, World Economy and Imperialism (Russian), 3rd ed., Moscow 1920, p. 157n.

35. K. Marx, Capital, Vol. III, p. 286.

36. ibid., pp. 312–313.

37. ibid., p. 568.

38. See, for example, Marx, Capital, Vol. III, p. 199.

39. ibid., p. 283.

40. ibid., p. 303.

41. ibid., Vol. II, p. 476.

42. ibid., Vol. I, pp. 694–695.

43. ibid., Vol. II, p. 211.

44. K. Marx, Theorien über den Mehrwert, Vol. II, Book 2, p. 293.

45. K. Marx, Das Kapital, Marx-Engels-Lenin ed., Vol. II, p. 562. Quoted by P.M. Sweezy, The Theory of Capitalist Development, London 1946, p. 186.

46. K. Marx, Capital, Vol. III, pp. 140–141.

47. ibid., pp. 569–576.

48. N. Bukharin, Der Imperialismus und die Akkumulation des Kapitals, Vienna-Berlin 1926, p. 80.

49. ibid., pp. 80–81.

50. K. Marx, Capital, Vol. III, p. 304.

51. M. Tugan-Baranovsky, Studien zur Theorie und Geschichte der Handelskrisen in England, Jena 1901, p. 25.

52. ibid., p. 231.

53. ibid., p. 27.

54. M. Tugan-Baranovsky, Theoretische Grundlagen des Marxismus, p. 230. Quoted by Sweezy, op.cit., p. 168.

55. ibid., pp. 230–231. Quoted by Sweezy, ibid., p. 169.

56. K. Marx, Capital, Vol. I, p. 649.

57. K. Marx, A Contribution to the Critique of Political Economy, Chicago 1918, pp. 278–279.

58. K. Marx, Capital, Vol. I, p. 701.


Last updated on 20 September 2018