From Survey, International Socialism (1st series), No.41, December 1969/January 1970, pp.36-41.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Any attempt to ‘examine the economic basis of the theories of International Socialism’ and to ‘demonstrate ... in fact the Menshevik theories of International Socialism lead to a very bad political practice’ would merit attention in this journal. When the author of such an attempt has been considered for many years the leading theoretician of the ‘Fourth International’ and has also acquired a reputation in certain circles as a ‘Marxist economist’, a serious assessment of his arguments can not only enable us to clarify our arguments, but also to see to what extent his reputation is deserved.
There are, however, two practical difficulties in an overall assessment of Mandel’s pamphlet.  The first is that the range of points covered is so great as to prevent us attempting to deal with other than the major ones. The second is that his critique is not of ‘the theories of the International Socialism group as a whole’. It is a critique of one short presentation of these theories in a review by Mike Kidron; the books and articles by Cliff, Kidron and others where our arguments are put fully are only mentioned a couple of times in passing in Mandel’s pamphlet.
However, by looking at the major points on which Mandel takes dispute with us, the basic untenability of his position can be shown, together with the extent to which he is forced into inconsistencies, distortions and simple misunderstandings in order to defend it, and the overall shallowness of his critique.
The first central point in Mandel’s criticism concerns the nature of capitalism. He argues that
‘Capitalism is a mode of production in which generalised commodity production unleashes a historic process of accumulation of capital, which is in turn a constant (if discontinuous) growth of commodity production, of production of exchange values and of reinvestment of surplus value’. 
‘The rationale of capitalism can be understood only under conditions of constantly expanding commodity production, of a constantly expanding and insecure market, and of firms, of producing units, facing that anonymous market independently from each other and competing for larger and more profitable shares of the. market ... But if we assume generalised and constantly expanding commodity production we assume also the absolute need to realise the surplus value of these commodities, in order to accumulate capital.’
The argument is developed at some length and the central idea is repeated, in different forms, several times. As far as it goes it is a fair summary of a part of Marx’s conception of the nature of capitalism.  But there is an odd omission. Nowhere in the whole section of the pamphlet dealing with this question is there a single mention of the working class or a single reference to the wage labour/capital relationship. Now this is curious. For it was not Michael Kidron but Karl Marx who wrote
‘The relation between wage labour and capital determines the entire character of the mode of production’.
And this is not an accidental aside. Marx’s original starting point was alienated labour, the situation in which the products of man’s labour appear as independent forces, constraints on his activity. In its developed form this implies the separation of the worker from control of the means of production, expropriation of the actual producers, the creation of a proletariat.
The significance of this omission will become apparent later. For the moment, however, let us look at the conclusion Mandel thinks can be drawn from his definition. He sees it as meaning that commodities produced have to be transformed into money, and that therefore that ‘capital accumulation’, ‘the final money form of capital’ and ‘the capitalists thirst for profits’ are ‘exactly identical expressions’. But this is plain unadulterated nonsense. Thirst for profits is not ‘synonymous’ with ‘the basic economic compulsion determined by the structure of capitalist society’. Thirst for profits existed, for instance, among usurers in the slave society of Roman antiquity or in Chinese oriental despotism. So did the ‘final money form of capital’. In neither case did they produce systematic ‘capital accumulation’. What Mandel is trying to say is that in capitalism as Marx describes it they are different elements in an integrated ongoing system. But if that is the case, it is difficult to see the particular sin in describing them as social and psychological mechanisms that make the system function. Yet it is for this that Kidron is subjected to attack. What really matters, of course, is whether they are the only such mechanisms that produce the peculiar features of that system as opposed to other historically existing modes of production.
This leads us to the central argument: whether the capitalist mode of production is to be defined by a system involving the ‘thirst for profit’ and ‘commodity production’ for a ‘constantly expanding and insecure market’, or by something else of which these are but manifestations. Kidron argues that this something else is the competition between rival owners of means of production that forces each to try and resist the inroads of the other by continually expanding the means of production. This establishes a relationship between the different accumulations of alienated labour making up the competing means of production that defines each as capital, and their owners as capitalists. It also determines the dynamic of interaction of capitalists with each other and with those who produce the means of production so as to continually reproduce on an enlarged scale, the competition.
Mandel’s argument is that this cannot be a definition of capitalism because:
The trouble with this definition is that it leaves the concept of ‘commodity’ as unproblematic. This might not matter if one were dealing with small-scale capitalist production with many competing firms exchanging all their produce on the market. With modern capitalism of the Western sort, let alone with that which dominates in countries like Egypt or Syria, this raises immediate problems. For instance, what happens when the capitalist produces for the state? According to Lenin:
‘When capitalists work for defence, i.e. for the government treasury, it is obviously no more “pure” capitalism, but a special form of national economy. Pure capitalism means commodity production. Commodity production means working for an unknown and free market. But the capitalist “working” for defence does not “work” for the market at all.’ 
Or again, in a monopoly when the capitalist has a degree of control over his own prices? As Hilferding has put it:
‘The realisation of the Marxian theory of concentration – the monopoly merger – seems to lead to the invalidation of the Marxian law of Value’. 
Unfortunately Mandel does not even begin to discuss these points. He continually refers to ‘generalised commodity production’ as essential to capitalism, but does not begin to analyse what it means. He is so concerned to try to show Kidron as deviating from the picture of capitalism that Marx paints that he does not see any problems arising as capitalism itself begins to deviate from Marx’s picture. But precisely in order to understand how the system we live under is the same as that analysed by Marx, one had to go beyond mere surface definitions, so as to see how the form of commodity production may undergo profound changes, become hardly recognisable, but the content remains the same. In other words, what is needed is a clear analysis of what commodity production is, the analysis that Mandel does not even refer to in his critique of Kidron.
Despite Mandel’s claim that he is only repeating what Marx wrote – ‘We only say: Marx truly said this’  – he does not in fact take up a point central to Marx’s whole analysis of commodity production: which is precisely that the commodity cannot be taken at face value, that ‘its analysis shows that it is in reality a very queer thing, abounding in metaphysical subtleties and theological niceties’.  One of the most important sections of Capital is after all called ‘the fetishism of commodities’. The commodity is not just a good whose character is clearly visible from the fact that it exchanges with another good. It is a reflection of a more deep-rooted characteristic of social production. As society develops, what is manifested on the surface is the exchange of commodities. But through this one recognises what is beyond: the economic relations of production.  Marx’s conclusion is quite clear.
‘The reason why the products of labour become commodities, social things whose qualities are at the same time perceptible and imperceptible by the senses’ is ‘because the relation of the producers to the sum total of their labour is presented to them as a social relation, existing not between themselves, but between the products of their labour.’
‘As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other. The sum total of the labour of these individuals forms the aggregate labour of society. Since the producers do not come into social contact with each other until they exchange their products, the specific social character of each producer’s labour does not show itself except in the act of exchange. In other words, the labour of the individual asserts itself as a part of the labour of society, only by the relations which the act of exchange establishes directly between the products, and indirectly through them, between the producers.’ 
Marx argues that this process forces the labour of the individual labourer to have a two-fold character: on the one hand it is concrete, useful labour of a particular sort; on the other hand it represents a portion of the total labour of the whole of society.
‘The different kinds of private labour, which are being carried on independently of each other ... are continually being reduced to the quantitative proportions in which society requires them ...’
What is central for Marx’s analysis of commodity production then is that through it the labour of individuals is related in a quantitative fashion to the labour of all other individuals with whom they enter into social relations, not consciously, but rather through the relations that come to exist between the products of their labour. This in turn means that the production process itself is determined by factors outside of it, that is, by the relation of its costs to that of production taking place elsewhere. There is
‘regulation of mutual production by the costs of production ... the product is related to itself as a realisation of a determined quantity of general labour, of social labour time.’ 
For the particular commodity producer this means that his methods of production – his particular relationship with nature and other men in the production process – has continually to be changed as there are unplanned and anarchic changes in the methods of production of all other producers. This commodity production becomes capitalist production when labour power, the capacity for performing labour, as well as the products of labour, becomes a commodity, the price of which (i.e. wages) is determined by the unplanned social interaction between its exploiters that continually forces them to pay for it no more than an historically and culturally determined minimum.
We can sum up what we have been saying up to this point: yes, capitalism is, as Mandel argues, competition on the basis of commodity production. But to fully understand it one has to go further and see that what makes man-produced objects – and above all labour power – into a commodity is precisely competition between producing units that has advanced to the point where each is compelled to continually rationalise and rearrange its internal productive processes so as to relate them to the productive process of the others.
Now if one examines why, say, the competition between Rome and Carthage was not capitalist, the reason is not just the tautological one that it was not based upon ‘commodity production’, but rather that the labour processes which the citizens (and slaves) of Rome were engaged in were not being continually transformed and rationalised so as to keep pace with such changes in Carthage and vice-versa. The ‘social relation’ between the Roman and the Carthaginian citizen established by the competition did not continually intrude upon the actual act of production in this way.
On the other hand, one is now able to see why, and in what sense, production where commodities as defined by common-sense (and Mandel) do not exist can be ‘commodity production’. In monopolies both the goods produced at each stage in the production process and the labour power employed are ‘commodities’ because in the long run the internal organisation of the labour process – i.e., the number of goods produced, the exchange relations between different goods, the percentage of the total social labour time employed in producing them, the price paid for labour power – is determined by its relationship to production taking place in society outside the monopoly. Similarly, with arms production for the government; because there exist complex and unplanned relationships between the process of arms production (albeit not ones arising from competition between commodities on the free market) and the production processes for other goods in society, commodity production can be considered to take place. In both cases, the ‘law of value’ – the complete determination of production by its unplanned market relation to production taking place elsewhere, is negated in a certain sense. But at the same time, it alone provides a necessary basis for understanding how the production process is in fact regulated. An object falling freely through the atmosphere certainly does not fall at 32 feet per second per second; but to understand how it falls one has to begin from the law of gravity.
In an advanced capitalist society most production is not pure commodity production; but one can begin to understand its dynamic through the law of value. There is a partial negation of the law of value, but on the basis of the law of value itself.
The argument about the nature of capitalism in general is a necessary preparation for the discussion about Russia and the other Stalinist states. For Mandel it is settled in advance that these cannot be capitalist states of any sort because a producing unit is, as argued previously, only capitalist when its products ‘have to be sold on the market’.
‘It is absurd to assume that capitalist production was somehow re-introduced because of “competition on the world market” (i.e., that the tail of 1 per cent of output imported from and exported to the advanced capitalist countries is wagging the dog of the Russian economy).’
Mandel does not, however, stop at this point. He feels the need to go on and argue his case in more depth. Rather than take time to point to some of the limitations of his argument here – for instance, the crude empiricism implied in a mere quantitative estimation of the role of foreign trade, without any examination of whether at certain points the qualitative significance of commodities obtained by foreign trade might have been much greater than 1 per cent  (after all, Magdoff has argued persuasively that the very low proportion of US trade with the third world is of central importance to the US economy) merits some of the absurd conclusions that must follow (which if Mandel does not accept, other ‘Trotskyists’ do), that Cuba, say, with the major portion of its productive resources devoted in the next five-year period, as in the last one, to attempting to produce 10 million tons of sugar a year to sell on the world market in competition with other sugar producers, is engaged in commodity production and is therefore capitalist, while Russia is not – we will analyse his arguments further.
Not only is it not true, argues Mandel, that there is commodity production in Russia, neither is there an urge to accumulate capital.
‘As we have said above, it is simply not true that all ruling layers in history have had an urge to pump more and more surplus product out of their producers. And it is even less true that they all have an urge to “accumulate capital”. This “urge” is typical only for the capitalist class under the concrete conditions of the capitalist mode of production (universal commodity production and private property of the means of production, i.e., the existence of several capitals, i.e., competition). Now the Soviet bureaucracy is not a capitalist class. It does not manage factories under conditions of universal commodity production. It is not in the process of competition .with other capitalists. So it is under no economic compulsion to maximise output and under even less economic compulsion to optimise resource allocation‘ (Mandel’s emphasis).
One can only thank Mandel for putting the logic of his argument so clearly. There are two premises and an irrefutable conclusion: only under capitalism is there an ‘urge’, to accumulate capital, Russia is not by Mandel’s definition capitalist, and therefore the Soviet bureaucracy is under ‘no economic compulsion to maximise output ... and to optimise resource allocation’. Clearly if we can disprove this conclusion, we can seriously question (to say the least) Mandel’s whole position. It would seem that we should devote considerable effort to doing so. We do not, however, intend to. For Mandel himself saves us the effort. Only one sentence later he writes that ‘the inner logic of a planned economy calls for maximising output and optimising deployment of resources’ and a paragraph later that the ‘Soviet economy needed urgently to grow from extensive to intensive industrialisation, with much more calculated use of resources than before’.
But Mandel himself has just argued that there can be no such ‘inner logic’, no such need ‘urgently to grow from extensive into intensive industrialisation’, or as he put it earlier no ‘urge to accumulate’ in a non-capitalist society. In a non-capitalist society the consumption needs of the ruling class determine the dynamic of production. A ‘plan’ is merely the organisation of production to fulfil these needs. A ‘plan’ has no ‘inner logic’ to accumulate. The ruling class (or bureaucracy) may want to accumulate and plan accordingly – or it may not and plan otherwise.
In talking of the ‘need’ of the plan to accumulate, Mandel is making precisely the mistake that Marx castigates again and again of ascribing human properties to things, of accepting reified appearances, of worshipping the commodity fetish. The only ‘need’ plans in general have is that of ensuring a proportionate division of inputs to produce the desired outputs – people – whether consciously or unconsciously through their unplanned interaction – not ‘plans’ determine whether this output should be large or small, and for that matter whether it be the result of an ‘optimal utilisation of resources’ of otherwise. Rosa Luxemburg, at least, was very clear that one sort of ‘plan’ would be subject to no such reified pressures:
‘The aim of socialism is not accumulation but the satisfaction of humanity’s wants by developing the productive resources of the entire globe’ 
But why does Mandel, who has certainly read Marx’s strictures against reification and fetishism, so readily fall into this trap himself? The reason is not difficult to find. Clearly something other than the ‘consumption needs of the bureaucracy’  is behind the forced development of the economy. It was obviously not the privileges of the bureaucracy that determined the need for hundreds of millions of tons of iron and steel in the thirties and forties. Nor was it these that produced the collectivisation of agriculture and the near stagnation of consumer good production after 1929. Nor, for that matter, could it have been the consumption needs of other sections of the population. The bureaucracy itself implemented the plans (there were no long term plans before 1928-9) yet according to Mandel it was only motivated in its ‘economic management’, by its ‘consumption desires’. Therefore, something else has to be responsible for all the rest. Given Mandel’s premises it must have been the plan. (What an argument for ‘planning’, that its ‘logic’ entails subordination of consumption to accumulation!) In real life something other than the ‘consumption desires of the bureaucracy’ did determine the dynamic of economic development in Russia, something that makes possible the ‘reification’ of the plan. There can be a ‘tug of war’ between the plan and the desires of individual bureaucrats precisely because the plan is determined by something outside itself other than these desires (and not by some metaphysical ‘logic of the planned economy’). There is only one thing this something else, in contradiction to the desires of individual bureaucrats, can be: the pressures of rival ruling classes outside Russia. It is these that continually determine the pace and direction of economic processes inside Russia. If Mandel is not clear about this, he only reveals that he is more myopic even than Stalin was.
‘The environment in which we are placed ... at home and abroad ... compels us to adopt a rapid rate of growth of our industry.’ (Stalin, 19.11.29) 
To slacken the pace of industrialisation would mean to lag behind; those who lag behind are beaten ... We are fifty years behind the advanced countries. We must make good this lag in 10 years. Either we do it or they crush us.’ 
It was this continual pressure from world capitalism that was responsible for the development of the Russian economy from 1929 onwards. It was this, not the ‘needs of the plan’ or the ‘desires of the bureaucracy’ that produced an accumulation of means of production devoted to further accumulating means of production. Only on such a basis was it possible for the bureaucracy (once its interests had made it abandon a perspective of revolution abroad) to develop the material base to defend its control over Russian society from the intrusions of foreign ruling classes. And, it is worth adding, this is still what determines both the structure of the plan and the degree of fulfillment of its different sectors. Again, the Russian bureaucrats are more aware of this than the ‘Marxist’ Mandel:
‘Owing to the international situation it has not been possible to allocate as many resources as intended to agricultural investment and whilst the 1969 figure exceeds that for 1968 it is below that envisaged in Directives for 1966-70 ...’ 
It is worth adding that Mandel is quite prepared to concede the importance of ‘continued expansion of arms production’ due to competition with the non-capitalist economy in the Soviet Union’ in determining economic development in the West. But apparently, this ‘competition’ does not play the same role in relation to Russia.
If, on the other hand, this competition does determine the whole development of the Russian economy, then the anarchic and unplanned relations between the products of their labour with that of producers outside Russia (comparisons of levels of arms production and of the development of heavy industry generally) will determine the conditions under which Russian workers will produce and live. Because the price of labour power in the West is continually being forced down to a historically determined minimum in the long run, so will the price they receive (i.e., their real wages). Every change in production processes in the West will force changes in production processes in Russia, and vice-versa. Accumulation in the West will force accumulation in Russia (and again, vice-versa). In other words, a total system of reified relations is set up in which the anarchic and unplanned interaction of the products of labour determines the labour process, in which dead labour dominates living labour, in which every concrete act of labour is related to abstract labour - on a world scale – in which although there may be many partial negations of the law of value these are on the basis of the law of value.
Of course, it is ‘methodologically wrong to assume a mechanical and automatic identity between the fact of a country being submitted to “encroachments” of foreign capital and the fact of the country becoming capitalist. Only when these encroachments change the internal mode of production do they lead to the introduction (or reintroduction) of capitalism’. In this at least we wholeheartedly agree with Mandel. That is why Russia in the 10 years after 1917, although continually threatened by foreign capitalism, was not itself capitalist. Until the inauguration of the first five-year plan it was certainly not the needs of competing against foreign capital that determined the inner structure of the production process in Russia. It is clear (both from old sources like Cliff’s Russia and newer ones like the most recent volume of E.H. Carr) that the differing levels of real wages, the consumption level of the peasants, the relative sizes of heavy and light industry, were until 1928 the result of differing pressures of different social groups on the state. There was growth, but no ‘urge to accumulate’. Until 1924 not economic and military competition with the West, but spreading of the revolution was seen as the basis for establishing socialism in Russia. Even after the proclamation of ‘socialism in one country’ in 1925 the bureaucracy did not accept the programme of competing with the West. Rather, it tried to ignore the power of world capitalism in a quite utopian fashion (as Mandel, incidentally, still does).
But it is also the case that in 1928 reality did overtake the bureaucracy and force it to industrialise. In doing so it did bring about changes that are on such a scale quantitatively and qualitatively as to bear description as a ‘change in the mode of production’. Firstly, pressures of world capitalism led to a rapid change in the mode of production in agriculture on an unprecedented scale. Tens of millions of individual peasant farms were collectivised. The Stalinist bureaucracy brought more of the economy into state ownership than the great October revolution had. This was necessitated not by the arbitrary ‘desires’ of the bureaucracy, still less by the ‘logic of the plan’ but by the pressures to build up heavy industry on a scale that could not be sustained without a forcible pumping of surplus agricultural produce out of the countryside. 
Secondly, in industry there was also a change in the mode of production. In a matter of months changes were carried through that were to endure for decades: wages were cut, the rate of production speeded up, piecework introduced, the elementary rights of workers to defend themselves done away with, the independence of the trade unions abolished, the labour camps expanded on a massive scale. These measures were all symptomatic of a change in the whole mode of operation of the economy. Building up of heavy industry in competition with the West was on the basis of such measures. It was that which brought them about. In other words, production and the conditions of production were no longer determined by the needs of .people, ie, by the production of use values, but by the ‘needs’ of competition, the production of exchange values. In other words, through the mediation of arms production, the allocation of resources between consumption and accumulation, between living and dead labour, was determined by (and in turn determined) the allocation operating outside of the Russian economy, in the capitalist world. A leap from ‘freedom to necessity’ had been imposed.
There is no way of rationally understanding the dynamic of development of Russia either in the thirties or today if one denies that a change in the mode of production was forced through by the bureaucracy when it decided to defend itself against capitalism by imitating capitalism. Only this can make sense of Mandel’s own talk of a ‘logic’ to the plan that is different from the desires of individual bureaucrats. But this does not mean that acceptance of this logic of competition with the West was either ‘mechanical’ or automatic – it was in fact resisted in 1928-9 both by a substantial section of the bureaucracy around Bukharin, and by a section of the left opposition who, despite ambiguities, wanted to defend Russia against capitalism by revolutionary means, not by an internal imitation of capitalist exploitation. But it is a matter of fact, unfortunately or otherwise, that these lost out in the struggle and that the Stalinist transformation of the economy took place.
It is worth adding here that with the development of the newer Stalinist-type regimes, it is no longer merely competition with private capitalist states that imposes its laws upon them. It is also the needs of competition with other state capitalist ones (e.g. with orientation of the Russian economy to defence against China and vice-versa). Nor is it only or necessarily military competition. The general crisis confronting the Czechoslovak regime from the mid-1960’s on arose from an inability to sell the produce of its economy on the world market (including to other Stalinist regimes) – that is, from a classical inability for the state capitalist bureaucracy to realise its surplus value.
Mandel’s criticism of Kidron’s analysis of modern capitalism can be more quickly dealt with than the analysis of the Stalinist states, because the issues involved are less profound. Mandel begins by apparently quoting Kidron’s view of Marx’s model of capitalism and of why it should mean that there is a tendency for labour power to decline in absolute terms under capitalism; that “booms become progressively less profitable, and shorter; slumps more lasting and severe”.’ Incidentally, Mandel claims that Kidron ‘will have a hard time finding any evidence in Marx’s Capital‘ for these assumptions. One can only suggest that Mandel refers to pp.630-635 of Capital (vol.1). Thus Mandel quotes Kidron:
‘The model is a closed system, in which all output flows back as inputs in the form of investment goods or of wage goods. There are no leaks. ‘Yet in principle a leak could insulate the compulsion to grow from its most important consequences. ... If “capital intensive” goods were drawn off, the rise would be slower and – depending on the volume and composition of the leak – could even stop or be reversed. In such a case there would be no decline in the average rate of profit, no reason to expect increasingly severe slumps, and so on.
‘Capitalism has never formed a closed system in practice. Wars and slumps have destroyed vast quantities of output. Capital exports have diverted and frozen other quantities for long stretches of time.
‘A lot since World War II, filtered out in the production of arms. Each of these leaks has acted to slow the rise in the overall organic composition of capital and the fall in the rate of profit.’
According to Mandel what is involved in this account is ‘a vulgar theory of overproduction, according to which it is a glut of physical goods which is at the basis of all capitalism’s evil’, which depends for its plausibility on ‘a truly remarkable confusion between use-values and exchange-values ... worthy of inclusion in a textbook simply to show what a lack of understanding of the dual nature of the commodity necessarily leads to’.
What is amazing is that Mandel feels capable of writing this criticism down without mentioning what is central to Kidron’s stress on leaks: their affect on the organic composition of capital and the rate of profit. Kidron never once refers to an ‘overproduction’ of either use values or exchange values in the passage referred to, unlike Mandel who earlier writes that ‘unpredictable developments under capitalism arise from an overproduction of exchange-values ... (which most of the time are caused by ... an increase in the production of use-values).’  The ‘rise’ Kidron is concerned with is a rise in the organic composition of capital (Mandel judiciously omits one sentence from Kidron making this clear in his long quotations, so the reader might well not be aware of this). Further, his ‘closed model’ is precisely a model of the circulation of exchange values: given that all value produced is transformed either into consumer goods or capital goods, and that the value of labour power does not rise, then there will be an overproduction of values than can only be disposed of either by an overproduction of consumer goods, leading to a crisis, or an increase in ratio of constant capital to variable capital in new investment (leading to a fall in the rate of profit, to less investment and therefore to crisis); the only alternative is for there to be a leak whereby values can be drawn from the system. At no point in this argument can there be, given its very form, the confusion of ‘use-values’ and ‘exchange-values’ invented by Mandel.
It is only because he ignores the actual model presented by Kidron, that Mandel is then able to pretend that ‘leaks’ from the system which occur through war, foreign investment, slumps, etc., involve the physical destruction of goods. For instance, Kidron’s whole point is that wars cause possibilities of growth for the system by destroying value that would otherwise have to be transformed into constant capital. This certainly does not mean that wars have to destroy physical means of production in order to counteract the contradictions of the system: indeed, in arguing in this way it is actually Mandel, not Kidron, who confuses capital as accumulated value (the Marxian definition) with a given accumulation of particular use values (‘to destroy capital ... they must destroy industrial equipment to a larger degree than is newly built’ ). Similarly, Kidron’s whole point is not that slumps destroy goods, but that they result in a devaluation of goods, i.e., value is destroyed or ‘leaks’ from the closed system, so as to permit new capital investment at a lower organic composition than would otherwise be the case.
One can put Kidron’s argument another way. It deals with the circulation of value in the system as a whole. For the individual entrepreneur it there are no leaks in this total system, there is an ever-growing, abundance of capital available. This means that the possibilities of expanding and cheapening production always exist for the individual. Indeed, if he does not seize them by utilising a greater portion of constant capital, then his competitors will, his costs of production will be relatively too high, and he will be forced out of business. Enlarged constant capital means an overall (throughout the system) fall in the rate of profit. But if there are leaks whereby value is taken out of the total system, the opportunities for each individual capitalist obtaining value to transform into constant capital will be less, and therefore the constraints on each capitalist to expand his means of production will lessen. The immediate pressures to expand constant capital (and therefore of production) will diminish, the overall rate of profit will fall less, and therefore there will exist the basis for a longer term steady expansion based upon a lower average organic composition of capital. This will be true whatever the form the value that leaks from the system takes, providing its creation employs relatively more dead labour than living labour.
Mandel’s own analysis of the nature of the ‘key difficulty facing monopoly capital’ is that this difficulty is not that of ‘disposing of surplus goods ‘but the difficulty of disposing of surplus capital’. Here Mandel makes the mistake he accuses Kidron of, of distinguishing capital and goods as different use-values, without seeing that as values they are; equivalent (i.e., if you can dispose of surplus goods profitably, then you can dispose of surplus capital). Mandel goes on to distinguish between the effect of ‘the economic function of arms production’ – ‘to provide additional fields for investment for surplus capital’ – and any reduction ‘in the tendency of the increase in the organic composition of. capital and/or the decline in the rate of profit’. But on the classical Marxist model precisely such a distinction is impossible, because only if the rate of profit is prevented from falling too drastically is any long term, steady growth of investment possible. To put it another way; there are always opportunities for capital investment, arms expenditure or no arms expenditure, but these are only seized if the rate of profit is high enough.
Even more fascinating, however, is Mandel’s excuse for not treating ‘in a systematic way the problem of the sharp rise in the rate of growth of the capitalist economy after World War Two’, in his book Marxist Economic Theory. This is apparently because most of it ‘was written in the late fifties, i.e., more than 10 years ago, when most post-war trends were not yet clear’. This statement is nothing short of preposterous. One does not have to go back to the early post-war period, when already in 1946 and 1947 there was an argument by Marxists such as Tony Cliff [20a] against Mandel’s views then that ‘there is no reason to believe that we are facing a new epoch of capitalist stabilisation and development’.  Mistakes at that time were quite natural, given the short duration of peacetime conditions. But by 1950 the post-war expansion was already pronounced enough, despite many Marxist predictions, for writers such as Vance (in the New International) to be attempting theoretical explanations of it. Fully five years before Mandel began writing his book, Cliff and Kidron had substantially developed (in Socialist Review) explanations of ‘post-war trends’ that five years later, according to Mandel ‘were not yet clear’.
Yet even stranger is Mandel’s analysis, developed since, of the reasons for this post-war growth. Apparently, it is because capitalism is undergoing a third ‘industrial revolution’. This has’ been possible because ‘during the “long period” of stagnation of the capitalist world economy (1913-1940) a great “reserve” of scientific and technological inventions had been built up, whose large-scale productive application was delayed as a result of unfavourable economic circumstances prevailing during that period’. The argument, however, is simply contradictory. One moment these innovations are responsible for the economic expansion; the next they were allowed to accumulate for 30 years because there was no economic expansion. In that case, something other than the innovations must be responsible for their present employment – otherwise why did they not cause expansion in the thirties? Mandel seems as incapable now as when he wrote his book 10 years ago of identifying what this other cause might be.
At this point we have dealt with Mandel’s arguments of substance. But there are a few others worth referring to. There is the claim that the ‘working class has overthrown capitalism ... in Yugoslavia, China, Cuba, North Vietnam and is doing so now in South Vietnam’. One wonders when the ‘working class’ actually did ‘overthrow capitalism’ in, say, Yugoslavia. In 1944-45? If so one wonders not just how (through what institutions of mass self-activity and struggle) and led by what revolutionary party, but also why Marxists at the time did not notice this monumental fact. For three years afterwards Mandel certainly did not regard Tito’s regime as any sort of workers’ state. It was, he and his colleagues argued, an ‘extreme form of Bonapartist dictatorship’. In particular relation to Yugoslavia and Albania he himself wrote that the Stalinists had constructed ‘a new bourgeois state apparatus’.  And when someone argued otherwise, they were not merely wrong, but carrying through ‘a complete petty bourgeois revision of the Marxist-Leninist concept both of the state and of the proletarian revolution’.  Again, one wonders when the overthrow took place in North Vietnam. With the establishment of the first Vietminh government in 1945? But those who took power then were described without equivocation by Mandel’s organisation as ‘the Stalinists who themselves long ago abandoned the Communist banner of Lenin and Trotsky ...’  Far from what was taking place in Hanoi being described as a socialist revolution, Ho Chi Minh, like Soekharno, was said to have been ‘logically brought to betray and sabotage the national emancipation’. 
Now, of course, Mandel can change his mind. But one would like to hear his reasons for doing so, to see what evidence there is of workers’ power in Yugoslavia or Vietnam now that was not available previously. It would also be interesting to see Mandel justify his own claimed commitment to the theory of permanent revolution in the light of the avowed policy of the Chinese before taking power and of the NLF today being the ‘bloc of the four classes’.
Instead of doing any of this, Mandel merely asserts that these countries have seen workers’ revolutions, and that to deny this is to assert that ‘capitalism today is stronger than it ever was’ and ‘has ushered in new and sensational phase of development of the productive forces, above all in backward countries’ so that ‘Trotsky was deadly wrong with his theory of permanent revolution’. Such according to Mandel is what Kidron does, and such is ‘Menshevism’. 
Perhaps Mandel reads different editions of Trotsky to the rest of us. The theory of permanent revolution according to Trotsky I know asserts quite unequivocally that the tasks of the bourgeois revolution in the underdeveloped countries can only be solved by the working class, led by a class-conscious revolutionary party. It is not ‘Menshevism’ to assert that as a matter of fact not only has no such party yet led the working class to the taking of power in Vietnam, or China or Cuba, but those that did take power executed (in Vietnam and China) or imprisoned (in Cuba) those trying to build such parties. Neither Mao’s party nor Ho Chi Minh’s party were workers’ parties in anything other than name. Their membership and leadership were not workers, nor was their theory that of proletarian revolution (it was that of classical, unrepentent Stalinism). 
Nor for that matter have the regimes in China, Vietnam or Cuba carried through all the tasks of the national bourgeois revolution. It is mere apologetics to pretend that they have solved the problem of industrial development. The ‘cultural revolution’ in China occurred precisely because the Maoist regime cannot. (Here again Mandel shows his ignorance by asking what would our attitude be if ‘tomorrow most of the decisions of the cultural revolution were reversed’ – in reality most of these ‘decisions’ were reversed two years ago with the setting up of the ‘three-in-one’ revolutionary committees.) In Cuba, despite desperate attempts to overcome the dependence on the world market by diversifying agriculture, the road to development is now seen as lying through the production of more and more sugar to sell in competition with other sellers on the world market. Finally, in Vietnam, the Stalinist leadership has twice already shown itself incapable or unwilling to solve the most elementary of bourgeois national tasks – that of national unity – when opportunities to do so were at hand (in 1945 and in 1954).
It is Mandel who is actually the modern Menshevik, tailing behind a petty bourgeoisie trying to transform itself into a state capitalist class with varying degrees of success in Yugoslavia, in Algeria, in Vietnam and in China. He does so, moreover, at a time when in the largest of these, the Shanghai general strike of January 1967 and the emergence of groups like the Sheng Wu Lien, has revealed new forces challenging completely the pretensions of the bureaucracy.
The theory of permanent revolution cannot be applied in our epoch without certain important modifications.  But its most important conclusions – that the problems of the backward countries can only be solved by proletarian revolutions and even then not without the revolution spreading – become more and more apposite as the successes of the petty bourgeoisie in a few countries prove increasingly limited and transitory. But it is us who draw these conclusions, not Mandel.
Finally, it is worth noting that in order to try and justify himself Mandel pretends complete ignorance of the Marxist position on the national question. ‘All the inconsistencies of the theory of “state capitalism” are revealed quite nakedly’ because we are able to support ‘North Vietnam and the National Liberation Front’, even though we believe their present leaders are ‘the nucleus of a “bureaucratic class” that is going to extract tomorrow the last drop of surplus-value from the South Vietnamese labourers’. One wonders at the inconsistencies both we and Mandel’s organisation have fallen into in the past without him noticing – supporting say, the Kenyan struggle against colonialism, although its leaders ‘were the nucleus’ of an African capitalist class, or the Cypriot struggle led by the cleric Makarios and the fascist Grivas. In fact we found no contradiction whatsoever in giving wholehearted support to these struggles against imperialism, without believing their leaders to be socialists; we have no such problems in the case of Vietnam either. ‘All the inconsistencies of the theory’ we adhere to must lie in the fact that, unlike Mandel, we hold that the fundamental problems facing the populations of these countries cannot and will not be solved until these struggles are led by a real, not a mythical, working class with a revolutionary Marxist party committed to an explicit programme of socialist revolution on an international scale.
In his pamphlet Mandel has set out to ‘reveal most of the contradictions into which adherents of the theory of “state capitalism” enmesh themselves’. Unfortunately, all that he has done is to show himself as ignorant, both about these theories and about quite fundamental questions in Marxism (such as the analysis of the commodity, the relationship between capitalist production and commodity production, and the relationship between use and exchange value); as self-contradictory (over the questions of the dynamic of the Russian economy and of the unprecedented expansion of capitalism in the post-war period); and as dishonest (in making omissions when quoting Kidron so as to distort his argument). I say ‘unfortunately’ because it is only through serious and scientific debate that Marxist analysis can develop. Mandel has made no contribution to this in his pamphlet.
1. E. Mandel, The Inconsistencies of State Capitalism, IMG, 4s.
2. Ibid., p.2.
3. Which is not to say that the details are beyond criticism.
4. Ibid., p.13.
5. Lenin, Works (Russian), vol.XXV p.51, quoted in T. Cliff, Russia: A Marxist Analysis, London, n.d., p.153.
6. R. Hilferding, Das Finanzkapital, Vienna 1910, p.286.
7. Mandel, op. cit., p.4.
8. Capital, vol.1, p.71.
9. K. Marx, Fondements de la Critique de 1’economie politique (French translation of the Grundrisse), Paris 1967, p.169.
10. Capital, 1, p.78.
11. K Marx, Fondements de la Critique, op. cit., p.147.
12. In fact foreign trade has played a crucial role at certain points in the history of Stalinist Russia – particularly in the early thirties when Stalin expected to be able to buy foreign machinery for industrialisation. In order to pay for this he had to be able to sell agricultural produce. But ‘the violent fall in the terms of trade associated with the world depression greatly increased the cost of imported machinery in terms of Soviet primary exports’. (M. Kaser, Comecon, London 1967, p.19) In order to pay for the machinery, more primary produce had to be obtained from the peasantry, hence increasing the pressures for collectivisation.
13. Rosa Luxemburg, The Accumulation of Capital, London 1963, p.467.
14. E. Mandel, op. cit., p.14.
15. Quoted in E.H. Carr and R.W. Davies, Foundations of the Planned Economy 1926-29, London 1969, p.327.
16. Stalin, quoted in Deutscher, Stalin, p.328.
17. Finansy SSR 28/69.
18. For the direct relationship between threats to Russia from the West and the decision to build up heavy industry see, for instance, E.H. Carr and R.W. Davies, op. cit., p.295.
19. E. Mandel, op. cit., p.2.
20. Ibid., p.5.
20a. See, for example, Tony Cliff, All that glitters is not gold, London 1947. Incidentally, at another point, Mandel finds it possible to blame Cliff for ‘not foreseeing’ the need for reforms in Russia in his writings of the ‘fifties’ such as The Nature of Stalinist Russia But that work was not written in the 1950s at all, but in the early months of 1948. And it certainly does point out the major contradiction that the bureaucracy has attempted to solve (unsuccessfully) since:
‘The historic task of the bureaucracy is to raise the productivity of labour. In doing this the bureaucracy enters into deep contradictions. In order to raise the productivity of labour above a certain point, the standard of living of the masses must rise, as workers who are undernourished, badly housed and uneducated, are not capable of good production ... But workers, besides having hands, have heads. The raising of the standard of living of the masses means to raise their self-confidence, increase their appetite, their impatience at the lack of democratic rights arid personal security and their impatience with the bureaucracy that preserves these burdens. On the other hand, not to raise the standard of living of the masses means to endanger the productivity of labour which is fatal for the bureaucracy in its present international relations, and sooner or later drive the masses to revolts of despair.’
For a full description of the reasons me reforms in Russia have not worked one has only to add this, not Mandel’s ‘tug of war’ ‘between the plan and the bureaucrats administering the units of production’ between ‘factory managers’ and the ‘planners’, but
21. Quoted in Hallas, Building the Leadership, IS 40.
22. Soviet Union After the War, September 1946.
24. Resolution of Fourth International, in IVème Internationale, 1946.
25. Editorial in IVème Internationale, December 1946. This same journal also published an interesting description of events in Saigon during 1945-6 in its issue of September/October 1947. Finally Mandel’s organisation also published a pamphlet by Ahn-Van and Roussel, where they write that:
‘The direction of the Vietminh profited by its influence to block the revolution and ... to fulfil its counter-revolutionary role. That is why it decreed in November 1945 the dissolution of the CP ... That is why it forbade the confiscation and division of the land, satisfying itself with decreeing the taking, of “collaborators’” lands; that is why it maintained and legalised the usury system, merely pleading for a lowering of interest rates ... The Stalinist direction sought a compromise with French imperialism and struck at the avant-guard: the Trotskyist leaders Ta Thu Thau, Tran Van Trac and numerous others were assassinated in February 1946 so as to prepare the way for the accords of March 6.’
26. It is not only Kidron who, according to Mandel’s argument must thus be “Menshevik”, but also such lifelong revolutionaries as the late Natalia Sedova Trotsky (see for instance her letter breaking off relations with the Fourth International in Socialist Review, 1950) and the late Alfred Rosmer, Zimmerwaldist, founder member of the French CP and founder member of the Fourth International.
27. For example, the programme of the Vietminh addressed itself to ‘Rich people, soldiers, workers, intellectuals, employers, traders, youth, women ...’ Today, the worker content of the Vietnamese Communist Party ‘is only 18.5 per cent and the higher the party echelon the lower the worker stock’ (Le Duc Tho, quoted in Sunday Times, 7.9.69).
28. For attempts at this, see T. Cliff, Deflected Permanent Revolution in IS 12 and N. Harris, Perspectives for the third world in IS Internal Bulletin, December 1969.
Last updated on 16 November 2009