Chris Harman


Making sense of socialism today

(Autumn 2005)

From International Socialism (2nd series), No.108, Autumn 2005.
Copyright © International Socialism.
Downloaded with thanks from the International Socialism Website.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

El Porvenir del Socialismo (The Future of Socialism)
Claudio Katz
Herramiento, Buenos Aires

The anti-capitalist movement since Seattle, the anti-war movement and the series of popular uprisings in Latin America have given new life to revolutionary Marxism internationally. Groups of Marxists in different countries, often coming from different traditions developed in semi-isolation from one another, now find themselves confronting similar issues as they play a role in the movement, and come to some very similar conclusions. This does not mean that the arguments of the past are irrelevant. But they have to be taken up in new ways, as part of a collaborative effort to deal with the challenges of the 21st century.

Claudio Katz’s book (currently only available in the Spanish original) is a contribution to this process, dealing with the central question of what we are aiming for when we fight for socialism. He makes the point right at the beginning that the issue has been raised for socialists everywhere since the collapse of the USSR 14 years ago destroyed the model which very many identified with. ‘The collapse of the USSR has buried these positivist beliefs and the socialist project has to be put again as an appropriate hypothesis, challenge or civilised alternative to existing barbarism’ (p.17).

The original project outlined by Marx and Engels remains valid – the struggle for a genuinely communist society, where ‘individuals would be emancipated from class inequality and state oppression’ as ‘the surpassing of the levels of production and consumption predominant under capitalism would do away with the scarcity of essential goods ... New forms of self-government would replace the last vestiges of state administration’ (p.19).

But communism, he rightly insists, is not something that can be arrived at overnight, in the immediate aftermath of a successful revolution. It will only be finally achieved after a transitional period in which human beings, emerging from the struggle against capitalism, create democratic organs that take into their hands the major means of production and subject them to democratic planning.

There has to be such planning. Once-fashionable models of ‘market socialism’, in which there is competition between publicly-owned enterprises, end up ‘treating capital, profit, interest and money as necessary, suprahistoric features and forgetting their capitalist functions’. But this does not mean we could jump from the present society straight to one where every single economic transaction would be planned in advance.

There would have to be planned coordination of major industrial activities. But the myriad of other activities could only be fitted into these through utilisation of certain market mechanisms for ‘a long period of experimentation’ (p.159). ‘In no case would it be possible to install overnight the working out of all prices ex ante [i.e. in advance]’ (p.160). He argues, again in my view correctly, that models like that of Michael Albert in his book Parecon in which the market is completely eliminated could only fully come into their own after a period of transition in which the economy was rejigged in a completely new direction to that under capitalism, in which basic scarcity began to disappear and the process of struggle has given much greater weight to the ties of solidarity between people.

The harsh reality is that any transition towards socialism begins with revolution from below taking over the economic structure that exists at present. Whether we like it or not, the day after the revolution, as the day before, the process of producing goods and providing people with livelihoods would be determined to a very large extent by existing market relations. The prevailing prices would reflect that. And it would not be possible simply to stop all production while a huge social audit works out what resources exist and how they could be used by reorganising the economic mechanism in its totality.

What is quite possible, however, is to begin consciously shifting certain major sorts of investment and output (for instance, necessarily away from production of luxuries for the rich or weapons of mass destruction), assessing in advance the likely impact on other areas of production, and then testing whether the assessment is correct in terms of the actual impact on relative prices and the operation of the market in other sectors of the economy. Capitalist states actually do something very similar to this when war makes them intervene in the market to shift priorities away from direct market competition to military production. There is no reason a workers’ state could not shift priorities in a quite different direction – away from production for economic and military competition between capitalists towards satisfaction of the immediate needs of the mass of the population.

There would, however, be one central difference. Breaking the domination of the market and subordinating it to planning would not just require dictates from above (from assemblies of popularly elected delegates), but also continual discussion and involvement in decision-making by those actually engaged in doing the physical work of production. Workers in previously competing firms would from the beginning discuss how to pool their resources and capacities to produce things which other people need, to stop duplication, to end the waste of advertising – and at the same time to reduce the destructive burden of work on their own lives. That is why there would be a move in the direction of the sort of self-managed economy conceived of by people like Albert, but not its instantaneous replacement of everything that exists at present.

This ties in with the other theme in Katz’s book – the absolute centrality of democracy. He insists again and again that it cannot be treated as a secondary question, as many people on the left treated it before 1989-91.

Yet if there is much to agree with in his conclusions, there is, in my view, a great weakness in his work that does damage to the way in which he comes to many of his correct conclusions and leads him astray on two important points. The weakness lies in his attempts to analyse exactly what the character of the USSR was, the roots of totalitarianism, its economic dynamic and the reasons for its eventual collapse. And this is not a minor part of the book, but accounts for two of the five chapters, and is a reference point for many of the discussions taken up in the other three.

What went wrong in Russia?

Claudio Katz’s account of the USSR and the other Eastern states is one which is in tune with much of the common sense of the left internationally. Through from the late 1960s to 1989 this held that they were an advance on Western capitalism because there was planning and state ownership of the major means of production, but that there were serious political deformations that needed rectifying through greater democratisation. Such essentially was the view of people like Paul Sweezy and Paul Baran who produced the American Marxist Monthly Review, of the editorial team of New Left Review in Britain, of the left wing of European social democracy, of the Eurocommunists who emerged in the leaderships of some orthodox Communist parties after the Russian invasion of Czechoslovakia in 1968, and of the great majority of academic Marxists. They spoke variously of ‘socialist societies’, ‘actually-existing socialism’, ‘post-capitalist societies’ or sometimes of ‘degenerated and deformed workers’ states’, and disagreed about the degree of political renovation that had to take place and how it was to come about. But they were more or less agreed on the essentials of the characterisation.

Katz very much relies on the version of this put forward by Ernest Mandel. He was a revolutionary, unlike most of the others, but his description of the functioning of what they all called ‘post-capitalist economies’ was not all that different from the others.

These economies were seen as combining two contradictory features. On the one hand they were planned, which meant they were not subject to the tendency under capitalism to recurrent crises of overproduction and a long term trend to declining growth rates as a result of dependence on the rate of profit. One after the other, many of these advantages were frittered away by bureaucratic top-down management and the orientation of production to the consumption requirements of a parasitic bureaucracy. Mandel’s account was based upon certain ideas Trotsky had begun to develop as the Soviet Union went through the traumatic changes of the late 1920s and the 1930s. But whereas Trotsky made successive, shifting attempts at analysis as the reality of Stalinism unwound in front of him, with a different interpretation in 1932 to 1929 and in 1936 to 1933 [1], Mandel set out a fixed picture of an economy that was ‘planned’ and therefore ‘progressive’ compared to capitalism, but run by despots and subject to bureaucratic distortion. Such talk upset old-style Stalinists – ‘tankies’ as those inside the British CP were called (after their support for the invasion of Czechoslovakia in 1968) – but it did not run all that counter to the views of the Spanish, Italian or British Communist parties, or of most of the academic left. [2] It was a loose formulation that did not locate any fundamental development dynamic to the Eastern states. But for this reason it let people have their cake and eat it – to hang on to the old orthodoxy about socialism being at least half constructed in a third of the world and to criticise particular barbaric policies of the Eastern bloc rulers.

The traumatic economic and political crises that all the East European states went through in 1989-91 had a devastating impact on the old common sense of the left. ‘Socialism’, or at least ‘actually existing socialism’, had proved itself not merely despotic but economically less successful than Western capitalism. ‘Post-capitalism’ seemed to be less advanced than the system it was meant to have superseded.

After a brief flurry of belief that Gorbachev was going to save the situation by carrying through far-reaching reforms, deep demoralisation set in and even affects some sections of the left today.

The bureaucracy that had existed, people began to see, had been more than a minor excrescence on an estimably healthy structure. It had been a cancer eating right into society. Increasingly people talked of it as a class, and insisted that what they wanted in terms of socialism in future was something very different from what had gone by this name in the past. So most of Mandel’s disciples now describe the old USSR as having been run by some sort of new ruling class, as do most of those writing for, say, Monthly Review or Science and Society.

But the phraseology leaves open the questions: what sort of class; and what motivated its economic decision-making that ended up so disastrously?

The solution much of the left adopted was to change its attitude to the regimes without changing the essentials of its old analysis. They still spoke about an economy run along lines which had broken with capitalism. They still saw attempts at planning damaged by bureaucratisation. But where in the past they had put a plus sign, they now put a negative one [3], emphasising the elements of inefficiency and waste and opposed to the pre-1989 stress on ‘progressive’, ‘post-capitalist’ features. Some went so far as to accept the views of those ‘new class’ theorists like Hillel Ticktin (and the later Max Shachtman) who held that the Eastern regimes, far from being more advanced that Western capitalism, were intrinsically more inefficient (in the process simply ignoring the levels of waste and inefficiency that characterise Western capitalism – sections of the left were effectively accepting the same arguments in this respect as people like Alex Nove). [4]

The very looseness that made the old formulations popular on the left now led to quite contradictory conclusions.

Unfortunately, the looseness is still present in Katz’s book. Instead of providing a real analysis of the dynamic of the Stalinist societies, he simply provides an eclectic account in which sometimes the positive and sometimes the negative features predominate.

So he writes of the need:

... to recognise that in these regimes – neither capitalist or socialist – there were elements present which were embryonic of the socialist project ... To recognise these aspects is not the same as to characterise these regimes as variants, types or versions of socialism. They put in relief a process of development and involution, rather than a constituted system ... The major problem is to define what are the elements that can be rescued from the general debacle of real socialism (p.53).

One could also locate the socialist aspects of these regimes in the advances achieved on the social plane (wages, education, health) as in the framing of a certain equality of income ... But one also has to recognise that these elements tend to weaken at first and then get diluted to the degree that the paternalistic and authoritarian bureaucracy strengthened its control of power ... They ceased to be seen as conquests and were not defended when capitalist restoration took away these rights (p.54).

But elsewhere he paints a picture not that dissimilar to Ticktin’s and Nove’s: ‘Bureaucratic authoritarianism can even end up bringing about results even worse than capitalist control for the direction and development of society’ (p.49). ‘The functionary interested in obtaining the reward for fulfilling the plan lacked the rationalising obsession that guides the head of a corporation’ (p.57).

What is missing in all this is any indication of why the bureaucracy behaved as it did. According to Mandel, the bureaucracy subordinated economic production to its own consumption. But why should this lead to the obsessive centralisation of planning described by Katz, the strangling of initiative in red tape, the lack of concern for rationality in production? Unless, that is, you hold a view that sees bureaucracy as always engendering more bureaucracy, in the way bourgeois sociologists like Robert Michels (and postmodernists like Castoriadis) have argued. But if you believe that, it is very difficult to ward off the anti-socialist argument that any revolution will give rise to a bureaucracy that will destroy its initial aims. Katz quite rightly criticises those who see bureaucracy in the West as an inevitable feature of ‘progress’ (p.195), yet his own account of the Stalinist states rests on a similar view of bureaucratic growth.

Accumulation and the world system

What is missing from Katz’s account (as it was missing from Mandel’s) is the one central feature that characterised the dynamic of the Soviet economy from 1928-29 onwards, and then the economies of Eastern Europe, North Korea, China and so on. This was the subordination of all economic activity to the building up of means of production (what Marxists usually call Department I of the economy). This was the pattern with every Five Year Plan, so that the means of production expanded in one Five Year Plan were mainly used to build further means of production in the next one. There were targets for the growth of output designed for consumption, but these were the ones which were never fully fulfilled. Indeed, through the first decade of ‘planning’ in the USSR from 1929 to 1939, the growth of industry often at a faster rate than planned was accompanied by a fall in the output of consumer goods, food and housing for the mass of the population, and the same was true in the seven years after the consolidation of Stalinist rule in Eastern Europe (1948-55). This in itself, incidentally, proves how illusory the ‘planning’ really was: if two of us plan to go from London to Manchester but one of us ends up in Glasgow and the other in Brighton, then our progress had little to do with our plans. The same was true of the economies of the USSR and the other Eastern states.

It was domination of the economy by the drive to build up means of production that explained the disorganisation, chaos and waste in whole areas of production. At the beginning of every ‘plan’ vast new industrial projects would begin to be constructed. But after a while it would become clear that they could not all be finished. Some (usually catering for people’s consumption needs) would be ‘frozen’, while the resources for them were diverted elsewhere (to the production of means of production). This meant a continual chopping and changing of the goods resources were expected to produce, sudden pressure on people to produce more of one product and less of another, a concealment at every level in the production process by people of the resources at their disposal in case they were suddenly pressed to produce more, and massive amounts of waste as some of the things contained in the plans were produced, but not other things necessary for their use (such as the case in the 1980s when vast amounts of fertiliser were wasted because one of the frozen projects was the building of the factory to provide the bags for packing the fertiliser).

All the faults spoken about by Ticktin and Nove and emphasised in the later writings of Mandel can be traced back to this drive to expand the means of production at all costs.

But why did the bureaucracies impose this pattern on the economies? Katz at points comes close to the reason. He writes, for instance, that the technological failures of the USSR in its last years were:

... also a consequence of the strategic project of building socialism through competition with the capitalist world ... The competition conspired against the basic principle of encouraging the participative and popular construction of socialism ... The gigantism, the disregard for quality and the lack of concern for cost were in a great measure by-products of this ideological distortion ... The incapacity of the centralist model to encourage technological change was the product of an authoritarian regime and strategy of autarchy, centred upon ruinous competition with advanced capitalism (p.181).

What he does not see, however, is that more was involved than an ‘ideological distortion’. The whole pattern of the Soviet economy from 1929 onwards was determined by the resolve of its rulers to ‘catch up and overtake’ the Western capitalisms. Only when you grasp this can you make sense of the drive to build up means of production regardless of the human and material costs.

This also then enables you to make sense of other apparently irrational features of the system. We now know, for example, that not only did the ‘collectivisation’ of the 1930s have a catastrophic effect on tens of millions of peasants (causing 3 or 4 million to die of hunger in Ukraine and Kazakhstan). It also reduced total food output. But while doing so, it strengthened the ability of the bureaucracy to channel increased quantities to the cities to provide for the growing numbers involved in industrial projects and for exports to pay for imported machinery. It fitted in with the drive to accumulate means of production, however inhumane it was. The use of slave labour fitted in likewise. Slavery is very inefficient except for the crudest, most easily supervised of unskilled work. But such work fitted in with building industry in remote parts of the country out of next to nothing.

Finally, many of the ‘superstructural’ features of Stalinism also followed from the drive to accumulate. It necessitated destroying the most elementary organisations of workers, the trade unions and works committees which still survived, although in an attenuated form, until 1928; it necessitated massive levels of repression against workers and peasants; it required driving out of the party and the state machine anyone who might give ground to resistance from below; it required terror to break the last links to the traditions of 1917; it even required massive censorship of novels and poems, lest they somehow serve as a focus for people’s hostility to the system.

The drive to accumulate did not have simply an ‘ideological’ origin. It followed from the logic of a bureaucratic group controlling one part of the world in the face of hostility from capitalist ruling classes elsewhere. The bureaucracy had emerged as a force in the 1920s, as the Bolshevik Party was left holding power as the working class it represented was decimated by the economic devastation produced by foreign invasion and civil war. Through the 1920s it kept its position by balancing between the different classes – the different strata of the peasantry, the urban middle classes, the new petty bourgeoisie bred by the encouragement of petty production during the New Economic Policy, and the working class, which still exerted some influence indirectly through the allegiance the older layer of party members felt towards it. During this period the bureaucracy increasingly exercised a de facto monopoly of control over the armed forces, the police and the major sections of industry, and could be said to be beginning to occupy a place of its own in the relations of production – to be a class in itself, in Marx’s term. But it did not drive production in a particular direction as an expression of its own interests. Here was an economy which had broken with capitalism, at least in its nationalised sectors, and had not developed any dynamic of its own except that determined by the interplay of different social classes. For these reasons Trotsky’s references to a ‘degenerated workers’ state’ were not completely misplaced (although the degeneration of 1928 was much worse than that of 1921).

But then the whole structure experienced a very deep crisis. On the one hand, the peasantry became reluctant to deliver food to the towns unless they were able to get more industrial goods for themselves in return – goods which industry did not have the capacity to produce (the so called ‘scissors crisis’, expressed in the divergence between the prices of agricultural and industrial goods). The result was growing hunger in the cities and threats of massive unrest. On the other hand, warlike threats from Britain created pressure to divert more industrial output to military purposes. In a desperate attempt to feed the cities, the regime sent the army into the countryside to seize food from the peasants. But this created the danger of still more unrest.

We know from researches by the Czech historian Michal Reiman [5] that a wave of panic hit those running the regime in late 1928. Afraid of losing their control over the country from a combination of rebellion at home and armed pressure from abroad they turned, pragmatically, to a series of measures that involved superexploitation of the peasantry and working class in order to build the industry they lacked. This was not a simple ‘ideological’ decision, but rather reflected their position as a privileged group with de facto control of the means of industrial production.

The result was pushing the economy on a completely new path, driven by a very different dynamic of the 1920s. Production for consumption by the different classes was replaced by production for accumulation.

Accumulation could not take place without the bureaucracy driving through policies that placed it in sharp antagonism to the other major classes, the peasants and workers. It had to organise itself to separate the peasants from their control over agricultural production, and to break the resistance of workers to a deterioration in their living standards and working conditions. Accumulation had replaced consumption as the goal of economic activity. And the accumulation was in response to external pressures, the pressures of the world system upon the bureaucratically-run state.

This was not just a quantitative change of the sort which Trotsky and the left opposition had meant a couple of years earlier when they called for increased resources to go into building up industry. They had done so because they recognised the need to plan to improve workers’ living standards and to buy off discontent among the peasantry over the shortage of industrial goods. Even Preobrazhensky, who upset people by his talk of ‘primitive socialist accumulation’, accepted that ‘the first, quite obvious difference between the state economy of the proletariat and that of the typical capitalist economy is the fact that ... in relation to the worker [the state economy] begins to act as a system of production for consumption by the producers’. [6] But all this changed after the crisis of 1928-29. Accumulation became the goal to which consumption was subordinated. A qualitative change had taken place. Marx and Engels contrasted the situation between capitalism and socialism in The Communist Manifesto:

In bourgeois society, living labour is but a means to increase accumulated labour. In communist society, accumulated labour is but a means to widen, to enrich and to promote the existence of the labourer.

From being in one category, in however a distorted form, until 1928, the USSR moved into the other afterwards.

Until 1989-91 many people ruled out a qualitative change taking place in these years because it took place without the normal paraphernalia of revolution and counter-revolution – armed uprisings, civil war and so on. To see this as social counter-revolution, they claimed, quoting Trotsky, was ‘to wind back the film of reformism’. The argument ignores the degree of violence involved in the onslaught on the peasantry – the whole peasantry, and not just the supposed kulaks. There was civil war throughout the countryside, even if it was a one-sided civil war. And the violence against those workers who kept to the notions of 1917 continued right through the decade as the gulags filled up, the 30,000 inmates of 1928 expanding to 660,000 by 1930 and then 5 million by 1935. In any case, how can people who see 1928-29 as too ‘peaceful’ to be a counter-revolution make the claim that the much more peaceful events of 1989-91 were one?

A second argument long used was that direct competition for markets between the USSR and the capitalist world was limited. But competition for markets is not the only way in which the economies of countries impinge on one another. They also do so in so far as they are preparing for (or engaged in) warfare. For the development of the potential for military force is in proportion to the development of industry. And the military sector made up a major part of the USSR’s economy right through from the late 1920s to the late 1980s. It was a mechanism tying in what happened in the USSR’s economy to what happened in the world system. The bureaucracy could only maintain its control over the USSR if it built up an arms potential to match that of the Western powers, and it could only build up that arms potential if it built heavy industry.

Finally, its has been argued that the bureaucracy had no choice. This used to be one of the favourite arguments of the more intelligent supporters of Stalin. He had to industrialise as the only way to defend the workers’ state. In fact, however, there was an alternative – engaging in limited industrialisation which did not devastate the lives of workers and peasants while looking towards the development of world revolution as the only long term way of preventing the superior productive forces at the disposal of the Western powers being used to crush the workers’ state. This was the alternative posed by all the Bolshevik leaders until 1924 and by the Left Opposition afterwards. But it was not a viable alternative to a privileged ruling bureaucracy like that around Stalin. They had to turn to competitive accumulation if they were to survive and, in the process, transform themselves into a class based upon that accumulation.

Once embarked on that path, there was no departing from it. The internal mechanisms of the USSR’s economy (and after 1945 of the Eastern European countries) were restructured around this goal. They then fed back into the world economy, putting pressure on other elements in the world system: so it was that by the late 1960s Russia was involved not only in military-industrial competition with the West, but also in military-industrial competition with China. And military competition was increasingly supplemented with growing levels of market competition.

Many on the left do not like the term ‘state capitalism’. For them capitalism consists of private companies competing and accumulating in competition with each other. It is not a view that was held by Marxists like Engels (who criticised the Erfurt Programme written by Karl Kautsky for talking of ‘private capitalism’ [7]), by Bukharin (who spoke at length about ‘state capitalism’ in his Economics of the Transition Period) or by Lenin (who accepted the use of the term in his marginal notes to Bukharin’s work). [8]

Is there any point in quibbling about definitions? Not for its own sake. Definitions only matter in so far as they point to the fundamental dynamic determining the development of something – in this case, recognition of the dependence of the internal dynamic of the USSR on its structural relationship with the capitalist system as a whole. And some people who reject the term ‘state capitalism’ for the former Eastern states do go at least some way to such a recognition. For instance, Istvan Meszaros does this in his book Beyond Capital, where he sees the connection to the world system as producing ‘capitalism without capitalists’.

But this dynamic is missing from the understanding of those who talk about ‘post-capitalist’ or ‘new class’ societies. Here Claudio Katz again puts forward a characteristic position. He argues that the Eastern states could not have been state capitalist because:

... all investigations of the economy of actually existing socialism have situated the bottleneck in these systems in underproduction and not in the typical generation of unsellable surpluses that characterises capitalism. The economy of chronic shortage of supplies differs radically from crises of overproduction ... The difference between the two systems is expressed in this contrast.

But overproduction of goods is not a permanent feature of capitalism. It is one stage in the economic cycle, that of the slump, and is proceeded by the preceding stage, the boom, in which production grows more rapidly than the imports of raw materials, components and labour needed to sustain it. ‘When additional capital’, writes Marx, ‘is produced at a very rapid rate, and its reconversion into productive capital increases the demand for all the elements of the latter to such an extent that actual production cannot keep pace with it, this brings about a rise in the prices of all commodities that enter into the formation of capital’. [9] The rise in prices, Maksakovsky pointed out, ‘is not the result of speculation – it expresses the underproduction of products and the impossibility, at any particular moment, of fully satisfying the direct demand of the particular customers’. [10]

The cycle includes an alternation of ‘underproduction’ and ‘overproduction’, just as it involves an alternation of boom and slump. Behind both lies a fundamental contradiction: the tendency to accumulate capital on a scale that cannot be sustained; the tendency, as Marx puts it, of the capitalist mode of production ‘towards absolute development of the productive forces, regardless of the value and surplus value it contains and regardless of the social conditions under which capitalist production takes place’. [11]

The sudden closure of firms that can no longer make sufficient profits, the sacking of their workers, wage cuts and a further diminution in the market for goods are the ways capitalism classically reacted to the crises resulting from its own tendency to over-accumulation. But this classic picture was modified for a very important chunk of the 20th century – the 1940s, 1950s and 1960s – even in the advanced Western countries.

There was a cyclical pattern to economic growth, but there was not slump of the classic sort. So in Britain in those decades unemployment never rose above about 2 percent, while in Germany and Japan unemployment fell until it was down to about 1 percent. The reason, crudely, was that the growing integration of big business and the state within the framework of the national economy allowed the state to intervene to stop the shortages and inflation of the up-phase of the economic cycle without precipitating big crises of overproduction. Meanwhile, large arms expenditure created a market for output which was not hit by the downturn in activity.

State monopoly capital could not stop economic fluctuations, since it could not stop competition between rival capitals pushing them to invest on a scale which used up available resources – but it could attempt to prevent cyclical overinvestment causing cyclical overproduction. The over-accumulation did not go away. But the crises of overproduction seemed to.

The situation was not qualitatively different in the Eastern states. Their economies too were driven by the pressure of (international) competition to bouts of accumulation which exceeded the resources necessary if they were to be sustained. The accumulation of shortages (called by perceptive East European economists ‘the raw material barrier’) led to pressures for prices to rise (‘the inflation barrier’) and attempts to overcome the shortages by an upsurge of imports (‘the foreign trade barrier’). The result was sudden signs of crisis the state could only cope with by freezing investment projects and switching resources from production of consumer goods to finishing other projects. Workers’ living standards were squeezed so as to increase the portion of their labour which was directed to satisfying the demands of accumulation, and the expansion of some sections of industry was sacrificed to the requirements of other sectors. As in the West, the state could suppress certain symptoms of the cyclical crisis. It could not suppress the cycle itself. Indeed, there were cases where the cycle was more pronounced than in the West, as two Czechoslovak economists noted in the late 1960s. [12] Other economists noted similar fluctuations (wider than in many Western economies) in Yugoslavia [13], and an analysis of the USSR pointed to the existence of cycles there. [14]

But that was not all. As well as the fluctuations in growth, there was a tendency for average growth rates to decline over the decades, reflecting the fact that greater amounts of investment per worker were needed to achieve a unit increase in output (similar to what Marx described when he spoke of the rising organic composition of capital). This meant that the pressure on resources grew from the peak of one cycle to the peak of the next. The tendency to try to overcome the pressure by increased imports grew correspondingly, and the imports had eventually to be paid for by greater exports, or by loans from Western bankers. By the mid-1970s the Eastern European economies were all very dependent on foreign trade, and the USSR was increasingly so (although, given its size, to a lesser extent than them). This then made it more difficult for the state to use administrative methods to deal with the symptoms of crisis – something again similar to what happened with Western capitalism by the mid-1970s, when the growing internationalisation of production undercut the capacity of the state to discipline capitals. [15]

By that time, the point had already been reached in Poland where the bureaucracy could no longer cope with the shortages caused by overinvestment without creating the deep social and economic crisis out of which grew a huge upsurge that came close to sweeping the bureaucracy away in 1980-81.

The same pressures were soon building up in the USSR. Those who talk of ‘post-capitalism’ or ‘actually existing socialism’ tend to miss the key point about the crisis that eventually blew up in Gorbachev’s face in the late 1980s. They tend to see things simply in terms of a bureaucracy (or a section of it) that could not restrain its desperate desire to turn itself into a private capitalist class. But that hardly explains why this desire had an impact at that time rather than at any point in the previous six decades.

The key factor precipitating the crisis was the realisation by a section of the bureaucracy that what had happened in Poland could happen in Russia. Increasing amounts of accumulation were needed to achieve a given level of economic growth. But this carried with it the growing risk that the next cycle of overaccumulation would tie up so many economic resources that the basic needs of the rest of the economy (and most of the population) could not be met, and that there would be a profound contraction of the economy just as they confronted an escalation of the arms race by the Reagan government and a fall in the oil revenues they needed to pay for essential imports.

The group round Gorbachev began to talk about reform and restructuring as a way to ward off crisis. But they already lacked the resources to solve the problems of some sections of big industry at the expense of others, and lost the means to direct what each section of industry did. Each group of bureaucrats sought to grab resources to protect its own corner amid rising social unrest – culminating in the miners’ strikes of 1989 and 1991, and the upheavals in Eastern Europe, the Balkan republics, Armenia, Georgia and elsewhere. Sections of industry shut down; other sectors found they had no market for their output; workers were laid off or denied wages owed to them; unemployment, which had always existed as structural unemployment in certain regions (especially Central Asian soviet republics) [16], now hit areas where the high rates of accumulation had previously absorbed virtually the whole labour force.

Economists, planners and frightened bureaucrats began to look for any scheme to get them out of the mess, until finally they gave up attempting to control what was happening and went for ‘shock treatment’. This allowed the different sections of industry to battle it out with each other through a supposedly free market, even though it was bound to intensify the downturn that had already begun. Privatisation was a way for the individual sections of the bureaucracy to try to protect themselves from the general crisis of the system – it was not the cause of the crisis. It came after the crisis had erupted on a massive scale – it did not precede it. As in Poland a decade before, the crisis had impoverished wide sections of the population before there was any general trend to privatisation.

The roots of the crisis lay in the pressure to accumulate for the sake of accumulation that arose from the bureaucracy’s position as part of a competitive world system. Marx wrote that capitalism enters into crisis because ‘capital and its self-expansion appear as the starting and the closing point, the motive and the purpose of production ... production is only production for capital ... the means of production are not mere means for a constant expansion of the living process of the society of producers’. [17]

The crisis which tore apart the old Eastern bloc fits absolutely into this picture. So too do the pressures which have driven China from the old Stalinist model which prevailed until the mid-1970s towards full participation in the world market in a way which virtually everyone now accepts is indistinguishable from other forms of capitalism. What took place in 1989 to 1991 was not a ‘counter-revolution’, nor was it a move from a ‘post-capitalist’ society to a capitalist one – whether this is seen as a move backwards or forwards. It was part of the working logic of competitive accumulation based on the exploitation of wage labour – or, as we usually call it, capitalism.

Socialism and development

Much of the left used to see the USSR as providing the model for the countries of the global South to overcome their economic backwardness. Indeed, the impact of influential works like Paul Baran’s The Political Economy of Growth was to virtually identify socialism with ‘economic development’. Even today there are many people who think the aim of the Russian Revolution, for instance, was industrialisation. In fact, none of the Bolsheviks held that view in 1917. The view of the whole Marxist left in Russia was that if Russia was taken in isolation, the only way to overcome its backwardness would be through capitalist development, which would be undertaken by the bourgeoisie. Before 1917 the Bolsheviks differed from the Mensheviks in believing that the capitalist class would be too cowardly to overthrow tsarism, and that that task would fall to an alliance between the peasants and the workers (‘the democratic dictatorship’). But they also held that once that task had been achieved the workers would have to go into opposition, to defend themselves against the effects of capitalist industrialisation. They held this view because they recognised that socialism was only achievable because the development of production under capitalism had, for the first time in history, raised the possibility of moving towards socialism. They only changed their line to one close to Trotsky’s, that of the possibility of beginning to build socialism in Russia, in the course of 1917 itself. But this did not mean industrialisation within a closed Russian economy. Again and again, Lenin reiterated, the opportunities of moving towards socialism were there because the spread of the revolution internationally would overcome Russia’s backwardness. [18]

Trotsky ten years later spelt out very clearly the limits of what could be achieved. The productive forces had, under capitalism, outgrown national borders. Any attempt to build socialism within the confines of national boundaries was therefore to push the forces of production backwards, to attempt the impossible – building a higher form of society on the basis of a lower level of provision for humanity’s material needs – and to do so in the face of military threats from capitalist societies with more developed levels of production. This was, he concluded, ‘a reactionary utopia’. [19]

Three quarters of a century later we can see where ‘development’ in one country led – to all the horrors associated with capitalist industrialisation.

‘Development’ with the aim of matching within a single country the level of the productive forces in already industrialised parts of the world is only conceivable through pumping vast amounts of surplus out of the workers and peasants. So in China 40 percent of output every year goes to investment, in India and South Korea 30 percent. The other side of that has been enormous repression of attempts by workers and peasants to organise to protect their living standards – and in both China and India enormous poverty among very wide sections of the population even as their ruling class and sections of the middle class gain. Yet there are still those on the left who believe that this is the sort of development popular movements need to pursue.

Unfortunately Claudio Katz does not directly take on such arguments. Instead he half-concedes to the developmentalist view. He quite rightly asserts that ‘the “countries of the periphery” cannot simply wait for successes in “the first world” even though socialism is necessary and must be constructed on a world scale’ (p.42). But then he seems to suggest that victorious revolutionary states in Third World countries can proceed indefinitely in isolation towards achieving ‘the minimum level of productive development required for the beginning of socialism’, ‘creating the minimum economic (productivity, efficiency, sectoral integration) and social (availability of means of production, easing the burden of work, better education) preconditions indispensable for beginning in the direction of socialism’. During this phase ‘it is necessary to complete the unfinished modernisation of the semi-industrial nations without turning their backs on the world market, promoting the social forces that can push these changes forward’ (p.43).

There needs to be an end to the confusion over this point. A revolution in a semi-industrialised country can produce an improvement in the conditions of the mass of people by distributing the wealth of the very rich towards the poor, and by refusing to pay interest and profit repatriation to capitalists of the advanced countries. It can also begin to shift the direction of industry and agriculture to producing things directed to improving the conditions of the masses. And it can, if objective conditions are favourable, begin to raise the productive level of society as a whole slowly, especially by providing inputs into peasant-based agriculture that allow more food to be produced while binding the peasantry to the revolutionary project.

But it cannot even begin to raise the productive forces to a level comparable to that of the advanced countries unless it is to begin down the Russian road – ie to take on the historic task of capitalism, not that of socialism. And in the medium term there is no way of avoiding the terrible alternatives facing a revolutionary regime so long as it remains isolated in one country. Either close its back on the world market and then suffer a decline in its productive forces and lose access to developments in technology taking place on a world scale, leading to economic stagnation and loss of popular support, or reach out to the world market, only to find its future dependent on the ups and downs of the world system (which is what has happened to Vietnam and, in reality, to Cuba, forced back in the late 1960s to the island’s pre-revolutionary dependency on the production of one commodity, sugar, for sale on world markets, something which led to economic devastation and acute poverty once the collapsing USSR withdrew its subsidies in the late 1980s [20]). These things need to be said if the Marxist left is going to break with national developmentalist goals which necessitate exploitation of workers and peasants.

Socialism and democracy

The failure fully to come to terms with the experience of the Eastern states has one final consequence. It leads to a partial revision of revolutionary notions of democracy. Towards the end of his book Claudio Katz argues that the lesson of Stalinism is that democracy based upon workers’ councils will not be enough to prevent the danger of bureaucratisation of socialist revolutions. Parliamentary structures existing alongside any council-type organisations are also needed.

This is not some peculiar new view from Katz. It is to be found in a new draft manifesto produced by the Ligue Communiste Révolutionnaire in France. It is also a throwback to an idea that existed during the German Revolution of 1918-19. Only it did not come from the revolutionary tradition to which both Katz and the LCR belong, but from Rudolf Hilferding, who played his part in preventing the German revolution moving in a socialist direction. He was a leader of the Independent Social Democrat Party, which had broken from the Majority Social Democrats towards the left during the First World War but would not endorse socialist revolution, using the slogan of ‘Parliament and workers’ councils’ in conscious opposition to the revolutionary call for a Räterepublik (‘council republic’).

Rosa Luxemburg is often quoted as supporting this dual structure of soviets plus parliament. She argued for it early in 1918, in an unpublished pamphlet about the Russian Revolution. But as Tony Cliff writes in his short book on her [21]:

In the German Revolution Rosa Luxemburg radically altered her standpoint and vigorously opposed the slogan of the USPD: ‘Workers’ Councils and a National Assembly’. Thus on 20 November 1918 she wrote, ‘Whoever pleads for a National Assembly is consciously or unconsciously depressing the revolution to the historical level of a bourgeois revolution; he is a camouflaged agent of the bourgeoisie or an unconscious representative of the petty bourgeoisie.’

The councils represented the working class, in all its diversity, in confrontation with capitalism; parliament was at best a talking shop where some workers’ representatives engaged in bitter debates with representatives of the bourgeoisie and petty bourgeoisie.

This was not some peculiarity of the Russian and German revolutions. The highest form of organisation of workers in struggle during the whole of the 20th century took the form of council-type organisations: the militia committees in Spain in the summer of 1936, the workers’ councils of Hungary in 1956; the cordones in Chile in October 1972; the inter-enterprise committee in Gdansk in August 1980. At each stage they drew together workers with quite different political traditions to work out how to carry the struggle forward and to implement their decisions. They were embryos of potential workers’ power. For that reason those opposed to the development of the movement tried to disband these bodies (which is what the Communists and Socialists persuaded the anarchists to accept in Spain) or to dilute their significance (which is what Hilferding’s slogan in 1918-19 did).

When there is no democracy, the demand for parliamentary elections can represent a fight for minimal political rights for workers, but when the movement has reached the level of the creation of workers’ councils, parliamentary electoral politics is a step backwards.

Claudio Katz uses two strange arguments to justify his position. One is that council-type structures are associated with single-party control. But this was not true in Russia until mid-1918, when the willingness of the Social Revolutionary and Menshevik parties to take part in counter-revolutionary risings led to them leaving the soviets. And it was certainly not the case in Germany, Spain or the Hungarian Revolution. Claudio Katz seems to fall into this error by equating councils with some of the organisations used in what he calls the ‘actually existing socialist states’ to bind workers to the system. Sloppy terminology leads to him confusing real workers’ organisations with their opposite.

His second argument is that somehow a parliamentary-type structure would provide a genuine socialist state with protection against bureaucratisation. I just don’t see it. Parliamentary structures did not stop the fascists taking power in Italy or the Nazis in Germany; Stalin’s 1936-1938 orgy of terror took place against the inauguration of what was supposedly the most democratic parliamentary-type constitution in the world; parliamentary institutions with free elections did not stop the former Stalinist nomenklatura maintaining its power in a slightly different form after the eruptions of 1989-91. The only thing that could have stopped any of these things was a mass movement organised from below through its own democratic organisations of struggle. Workers’ councils and similar forms of ‘popular power’ are the way to stop dictatorship, not reliance on parliamentary forms.

In looking in the parliamentary direction, both Claudio Katz and the LCR are reacting to their own failure fully to grasp what the essence of Stalinism as a system was. The formulations about ‘post-capitalist societies’ or ‘actually existing socialism’, like the discarded formulations about ‘degenerated’ and ‘deformed’ workers’ states, imply some degree of continuity between the revolution of 1917 and the horrors of Stalinism. The rejection of Stalinism then turns into suspicion of the revolutionary democracy which it finally destroyed.

Katz is absolutely right to argue that there is a future for socialism and that it involves rejection of what people identified as socialism in the past. But by not going far enough in breaking with that identification he weakens his own most important arguments, and ends up with a position which can only produce confusion next time a rising movement confronts the institutions of existing society with its own revolutionary democracy.


1. For an account of Trotsky’s changing views, see C. Harman, From Trotsky to State Capitalism, in International Socialism 2:47 (Summer 1990), pp.137-139.

2. I debated with two of that party’s intellectuals in the early 1980s, the Eurocommunist Monty Johnson and the more ‘tanky’ inclined John Foster of Paisley University – they had no compunction in quoting Mandel against me.

3. Trotsky had pointed out in In Defence of Marxism in 1940 that people like Max Schachtman who had broken with the description of the USSR as a ‘degenerated workers’ state’ to speak of a ‘new class’ society had done so without providing a different account of its functioning. This is essentially what happened after 1989-91 to nearly all of those who had previously seen ‘actually existing socialism’, ‘post-capitalist societies’ or ‘degenerated workers’ states’ as more advanced than capitalism.

4. On this see my article, The Myth of Market Socialism, in International Socialism 2:42; my Explaining the Crisis (London 1984), pp.100-113; and M. Kidron, Waste US 1970, in Capital and Theory (London 1974). Mike Haynes provides a very good account of the relation between capital accumulation and waste in Russia in Russia, Class and Power 1917-2000 (London 2002). This book gives a very accessible account of the working class character of the Russian Revolution, the Stalinist counter-revolution and the contradictory dynamic of state capitalism.

5. M. Reiman, The Birth of Stalinism (London 1987), pp.37-84.

6. E. Preobrazhensky, The New Economics (Oxford 1965), p.122.

7. ‘I know of capitalist production as a social form, as an economic stage: and of capitalist private production as a phenomenon occurring one way or another within that stage. What does capitalist private production mean then? Production by a single entrepreneur, and that is of course becoming more and more an exception. Capitalist production through limited companies is already no longer private production, but production for the combined account of many people. And when we move on, to the trusts, which control and monopolise whole branches [of production], then that means an end not only to the private production, but also to the planlessness.’

8. See N. Bukharin, The Economics of the Transformation Period (New York 1971). This edition contains the marginal notes that do not exist in other translations.

9. K. Marx, Theories of Surplus Value, vol.II (Moscow 1975), p.64, quoted in P.V. Maksakovsky, The Capitalist Cycle (Leiden 2004), p.64.

10. P.V. Maksakovsky, as above, p.64.

11. K. Marx, Capital, vol.III (Moscow 1962), p.244.

12. J. Goldman and K. Kouba, Growth in Czechoslovakia (Prague 1969), p.41.

13. B. Horvat, Business Cycles in Yugoslavia, Eastern European Economics, vol.X, nos.3-4.

14. Fluctuations in Soviet Growth, Soviet Studies (January 1969).

15. See the analysis I made at the time in C. Harman, Poland and the Crisis of State Capitalism, International Socialism 1:93 (November-December 1976).

16. Despite claims by those nostalgic for the past, unemployment did exist in the USSR: Izvestia gave a total figure of 8 million in spring 1990. For a discussion on the whole question, see I. Advion, A Note on the Current Level, Pattern and Trends of Unemployment in the USSR, Soviet Studies (July 1989), p.460.

17. K. Marx, Capital, vol.III, as above, p.245.

18. Trotsky drew together many of the passages where Lenin made this point. See L. Trotsky, The Third International After Lenin (New York 1957), pp.1-75.

19. As above, p.51.

20. One fault in Katz’s book, as in much other Marxist writing from Latin America, is not to critically appraise what has really happened to the Cuban economy and working people’s lives.

21. Claudio Katz refers to an Argentinian translation of this book but, probably because of a faulty translation, interprets Cliff as endorsing the soviet-plus-parliament view. Unfortunately, it seems to have been the only writing of Cliff’s that Katz has had access to.

Last updated on 13 January 2010