The Invading Socialist Society. C L R James and Raya Dunayevskaya 1947

The Political Economy Of Germain

Governing all economic conceptions are certain philosophic conceptions, whether the economists are aware of them or not. And equally governing all political conceptions are certain economic conceptions. Germain’s whole analysis of Russia is governed by an economic analysis. It is underconsumptionism.

In his Draft Theses (International Bulletin, Published by the Socialist Workers Party, p. 13) Germain writes:

“The tendency toward structural assimilation is undeniable. This tendency does not stem from the need for ‘internal accumulation of capital,’ that is, from any pursuit of profits. It is precisely here that the essential economic difference between capitalist economy and Soviet economy lies. The central problem of capitalist economy is the problem of getting surplus-value – that is to say, the pursuit of profits (under the capitalist system accumulation of capital is the capitalization of the surplus-value; this can be achieved only if surplus-value is gotten). But with Soviet economy the basic question is expansion of production, independently of the matter of profits (the economist Leontiev, in an article published in 1943, acknowledges that between 1928 and 1935 the Soviet metallurgical industry operated at a steady loss and could not have survived and grown except with the help of state subsidies). Whereas imperialism consists essentially in the search for new spheres of capital investment in order to combat the tendency toward a steady decline in the average rate of profit, Soviet expansionism looks for sources of raw materials, finished goods, etc., independently of the question of profits, considering only the needs of production and of the planned economy.”

Germain possesses the virtue of making all his mistakes powerfully and clearly. It is difficult to see how it is possible to make more fantastic mistakes than he concentrates in this passage.

The Soviet metallurgical industry operated at a loss. All that this means is that surplus-labor extracted from one sphere of the economy was used to bolster up another sphere. A capitalist economy, particularly economies that are controlled by the state, does exactly the same thing. There is no special “Soviet virtue” in this. The British state today will have no hesitation whatever in producing in one sphere at a loss in order to bolster such over-all purposes as it has. Germain obviously believes that today a capitalist economy would see a vital industry not grow and even not survive because it could not show a profit on the books.

Germain informs us that “with Soviet economy the basic question is expansion of production, independently of the matter of profits.” According to this political economy, Soviet economy just has to produce and produce and produce.

An economy can only produce with what it has. The national production must attend to the absolute needs of the population in the broadest sense; it must renew the worn-out plant and then it can expand only with what remains. Now if as in Russia, it is a poverty-stricken economy functioning within the world-market, the surplus is strictly limited. It must pay the worker at his value, it cannot afford to pay him more. To do so would lessen the precious surplus. And forthwith, it is in the grip of value production.

This is what Marx taught, that once the proletariat is humiliated, degraded, a proletarian, then automatically the only way of raising the productivity of labor is by expanding the constant capital, the machinery, the plant, at the expense of the workers. Stalin would doubtless be delighted to be able to raise “the standard of living” of the Russian workers. He cannot do it. Even where a plant is doing adequate service, the discovery and popularization of a superior type of machinery in Western Europe compels the rapid depreciation in value, i.e., the scrapping of this particular type of production and the substitution of the higher. Stalin does not need to know political economy in order to do this. Self-preservation dictates this constant reorganization of the economy, as far as possible, in order to maintain a reasonable relation with the other economies of the world. When the world-market existed as a functioning communication, this test according to value acted automatically often by violent crises. Today, when the world-market is in ruins, the same necessity exists. The planners, particularly in backward Russia, have no guide at all except the most ruthless production of surplus-labor to feed the insatiable needs of the economy. Engels in Anti-Duhring summed up Stalin’s dilemma with astonishing precision. The state-ownership of capital, he says, possesses the “technical means” of solving the problems of capitalist production. Technically, production in Russia has an unlimited market. It is into this unlimited pit that the under-consumptionists fall and drown themselves. It would, for example, be insanity to produce vast quantities of food and cotton-goods. The wages of workers must be limited. So are the appetites of even Stalinist bureaucrats.

Stalinism cannot produce and produce and produce. It is constantly caught between the contradiction that it cannot get surplus-labor except from labor-power. And it must keep the cost of labor-power as cheap as possible; otherwise the cost of the commodity, i.e. the labor that goes into it rises to a degree that imperils the whole economy in its relation to other economies. Marx took special care to warn of precisely this when he wrote:

“Centralization in a certain line of industry would have reached its extreme limit, if all the individual capitals invested in it would have become amalgamated into one single capital.

“This limit would not be reached in any particular society until the entire social capital would be united, either in the hands of one single capitalist, or in those of one single corporation.” (Capital, Vol. I, p. 688)

In a given economy, i.e., in a state-capitalist corporation which functioned within the world-market, there would be a struggle to maintain a certain relation between constant and variable capital, between industrial plant and labor. And as long as other economies developed their systems, the state-capitalist corporation would have to maintain a similar relation. That is precisely the dilemma of Stalinism. The planning only allows the planners, insofar as they can guess at what is required) to manipulate the economy and the workers the more easily for the production of surplus-value. If, however, the economy were a state-capitalist corporation embracing the whole world, then and only then would the whole problem be altered. The world-market would have been abolished. Value production would cease, and if men would stand for it, a plan could work. That, however, would not be capitalism, and as Lenin said, we are a long way from that.

The question could best be illuminated by a few theoretical observations on the “Marshall Plan.” If, abstractly speaking, the United States did use its surplus to equip the continent of Europe, in a few-years it would be faced with a modernized economy, so superior to Its own that its own products would be driven out of the American market. Forthwith it would find that it needed to struggle now for surplus-value to re-equip its own plant now depreciated, not by wind and rain, but in value. And so it would go.

The mode of appropriation, i.e., by individual private capitalists, undoubtedly created a certain anarchy of production, particularly of the old commercial type of crises. But the basic contradiction is in production, not in the market, and lies in the contradiction between the constant expansion of capital and the relative diminution of labor. It is not the realization of surplus-value but the falling rate of profit, i.e., the falling relation of the total surplus-value to the total social capital. This relation is determined by capital on a world scale and Stalinism can never escape it. In the early days it made a leap but that relation soon caught up with it and now it is trapped.

What is the solution? It is not an extended market. If the world-market for the sale of consumption goods were increased by the discovery of millions of starving people with gold to pay, it would solve nothing. The solution is the raising of the productivity of labor. If capital could double the productivity of labor and make the vast profits of its early days, there are still vast areas of the world to exploit. It does not need Russia. There is China, India, Latin America, Africa. But the margin of profit is so low that expansion on the gigantic scale now required is prohibited to it. Hence it stagnates and foolish capitalists and still more foolish economists then begin to speculate on “raising the standard of living of the workers to provide a market.” If capital had depended upon raising the standard of living of the workers as a market, there would have been only one capitalist and he would not have lasted very long.

Marx saw that productivity on the basis of expanding plant and degraded workers would reach a limit. And then he made a tremendous step forward, so tremendous that even now we cannot grasp it. It was made only because his specific economic theories were -guided by the dialectical materialist theory. He showed that only by labor itself becoming free could the new levels of productivity be achieved. For him this could not possibly have been a humanitarian flower in the buttonhole of nationalized property. Man, educated, trained by the achievements of capitalism, would raise the productivity of labor by reversing the capitalist method, expansion of plant and degradation of the worker. Only by the increasing development of the worker as a human being, could the capitalist movement be reversed. Bureaucratic collectivism, managerial society, degenerated workers state, all can plan to the last vitamin. They can never reverse this movement.

The whole question of the Marxist analysis of capitalist crisis has been debated for many years. Lenin, in particular, in debates with the Narodniks at the turn of the century, and later, never tolerated any theories which made the decline of capitalism turn on the realization of surplus value, i.e., market economics. Now the experience of Russia, and in its way, the development of the American proletariat, sets the seal on the debate.

Today this is not a question of theory. The validity of Marx’s thesis is proved by the fact that every economy; Stalinist, American and British is faced with the problem of the productivity of labor. The workers are revolting precisely against being made merely the instruments of increasing productivity. Marx saw and stated that the increasing degradation had its affirmative side, the instinct of the workers themselves to take over production and thus carry out the practical solution of what he saw theoretically. This is the inevitable result of value production.

The increase of constant capital not only degrades the workers but must also throw out millions which it must hold in reserve for the increasing bursts of production whether in the old days in ordinary market competition or as today in the competition of war. Stalinist production not only degrades the working class with the same results as in traditional capitalism. Being value production it must also continually throw out millions of workers from production and have them for future spasmodic bursts despite the present decline of the world market. This is the significance of the minions of slave laborers who are no more than the capitalist industrial reserve army of labor.

Unless this is understood as the basis of the capitalist economy, the road is open not only to the misunderstanding of the Stalinist economy but also to basing the revolutionary instincts of the proletariat upon the absence of employment or the need for a “higher standard of living.” From this flows the constant preoccupation with boom and stabilization. The perspective of revolution is based upon the most vulgar economist analysis of world economy and of the proletariat. It is the result of an inability to see that today “be his payment high or low,” the proletariat has been developed by capitalism to a stage of elemental revolutionism. This impedes all perspective of any serious economic recovery altogether apart from economic statistics. The fulfilment of this revolutionism is precisely what Marx called the real history of humanity. And it is because the real history of humanity is rejecting the capitalist system that the antagonisms are shaking the society to pieces.

Thus Marxian economics itself develops and becomes fused with the irresistible socialization of labor and its political expression in the rising mass movement. Of all this there is not a hint in the political economy of Germain.

This is a brief popular statement. The question has been more adequately dealt with in

1. The Development of Capitalism in Russia by Lenin, Chapter I, Translated by F. Forest, New International, Oct., Nov., Dec., 1943.

2. Production for Production’s Sake, by J. R. Johnson, Internal Bulletin of the Workers Party, May, 194o.

3. A. Restatement of some Fundamentals of Marxism, by F. forest, Internal Bulletin of Workers Party, March 1944.

4. Luxembourg’s Theory of Accumulation, by F. Forest New International. April and May, 1946.

J. R. J.