Encyclopedia of Anti-Revisionism On-Line

Peder Martin Lysestol

The Soviet Union: Advanced Capitalism


First Published in English: Class Struggle, No. 17, July 1985.
Transcription, Editing and Markup: Sam Richards and Paul Saba
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On 8 February 1948 the Yugoslav party leader, Djilas, returned from a meeting with Stalin in Moscow and reported to the Yugoslav party leadership: “We must expect to have to manage on our own and not count on any assistance. The Soviet government will subordinate us to their own policies and force us down to the same level as the occupied countries of Eastern Europe”. This was the first time a Communist leader questioned the nature of the Soviet state. The Soviet Union’s international prestige was at its peak at this time. Djilas’ statements would never have been believed by communists around the world if they had been made known outside the borders of Yugoslavia.

Today the evidence is that there is much to be said for the Yugoslav criticism.

Through the forcible industrialization campaign in the thirties the bureaucracy and technical intelligentsia had moved further and further away from the working class and the people. The War had given rise to a system of privileges for the highest echelons. Russian chauvinism had become steadily more apparent. After the War profits were given a more central position in the economy, at the same time as the Soviet government took complete control of the economic and political development in the East European peoples’ democracies. This type of negative aspect of the socialist Soviet Union was becoming ever clearer. The counterrevolution which was carried through after Stalin’s death had been “in preparation)) for a long period. For the international communist movement this first became clear after the 20th party congress in 1956. It was from this point that the Chinese Communist Party (CCP) began its criticism of the Communist Party of the Soviet Union (CPSU) – criticism which indeed led to a complete breach after 1960.

Split in the view of the Soviet Union

Throughout the world communist parties and revolutionary groups became split in their view of the development in the Soviet Union. When, in the 1960s, those of us who subsequently formed the Workers’ Communist Party (marxist-leninist) were in the youth movement, we had connections with the Soviet Party’s youth movement. From 1967 onwards we had in reality adopted a standpoint on the conflict between the Soviet Union and China. It was clear to us that the Soviet Union was no longer a socialist society. Subsequently the struggle against the false communism and against social imperialism played an important role in our work. After the Soviet entry into Czechoslovakia in 1968, the occupation of Afghanistan in 1979 and the events in Poland in 1981, more and more progressives have taken a view against parts of, or the entity of, Soviet policy. But, at the same time the Soviet Union has acquired new friends. As a superpower with large economic, political and military resources the Soviet Union has played the part of “progressive” vis-a-vis liberation movements and nations which have struggled against U.S. imperialism. Moreover, the large Soviet market acts as a magnet for capitalist groups and opportunists the world over. For them it is therefore important to tone down the criticism of the Soviet Union. These factors, and the fact that Soviet society is as closed as it is, have meant that there is still much confusion as to the nature of the social system in the Soviet Union. The fine phrases about socialism, the leading role of the party, the planned economy etc., blur the picture and serve to disguise the true facts – capitalism in an advanced form: Social Imperialism. In this article I will present some of the material which shows the Soviet Union to be capitalist. In the first instance I will examine the economic system.

Planned economic growth or crisis?

It may be useful to take a look at what the system has achieved, before going on to criticism of a more theoretical nature. Practical experience is, as we know, the most important source of knowledge. Pompous statements on “victory for socialism.)) are no help when statistics show steadily decreasing growth and crises in the economy!

Historically it is precisely statistics which have been the Soviet Union’s best “friend”. While the capitalist countries in the West were undergoing the world crisis in the thirties, the Soviet community was being methodically developed. Although today Western economists doubt Stalin’s growth figures somewhat, it is “at all events clear that economic growth in the first two five-year periods stood at 5 to 12 per cent. Labour productivity was on the increase and the country was in the process of turning into an industrial great power. Despite the large-scale devastations of war the economy was shortly once again able to show good results. Up to the early 1960s GNP expanded by 5.5 to 6 per cent annually. (In the period 1946–62 growth in Norway was 4.7 per cent). Reference was still made to the Soviet Union’s “brilliant” results. However, the growth figures soon became less impressive, and for the period 1976–80 economic growth was down to 2.8 per cent annually. (By way of comparison, annual GNP growth for Norway was 4.2 per cent in the same period.)

Productivity falling

Economic growth in capitalist Norway stood 50 per cent over the growth in the socialist USSR. Statistics were no longer on the Soviet Union’s side. Not only was GNP expanding very slowly; labour productivity had been falling since 1970 and per capita consumption showed very slow growth. In the five-year period 1976–80, consumption increased by only 1.6 per cent annually, (compared with about 2 per cent annually in Norway). Agriculture had also long shown signs of weakness. From about 1970 onwards it became steadily clearer that the Soviet Union was in the throes of a crisis. Whereas the country up to 1970 was a net exporter of grain, the import surplus was now growing ever larger. The Soviet Union, which had always emphasized the importance of being self-supporting in grain, soon had to import grain from its arch-enemy, the USA. During the seventies and eighties the import surplus has been in the range 15–40 million tonnes annually. Concurrently meat imports were increased sharply. Between 1971 and 1980 the country had to quadruple its imports of meat. Or, as the expert on the USSR, M. Goldman, says in his book “USSR in Crisis”: “Sixty-five years after the revolution food rationing had to be introduced in many large cities”. Kruschov’s plans to make up the ground lost to the USA in just a few decades sound today like a pipe-dream. Despite the fact that the population of the USSR is 20 per cent larger than that of the United States, GNP is still only about 60 per cent of the American figure.

Can the USSR be said to be capitalistic?

In my view the declining growth figures do not show that capitalism is superior to socialism. However, they are a strong indicator that drastic changes have taken place in the Soviet system. More to the point: can it be asserted that a country with a tightly and extensively controlled economy is capitalistic?

In the main the idea that capitalism characterizes countries with a highly developed manufacturing sector, private monopolies and extensive merchandise trade is most probably correct. But, at the same time, there are clearly wide differences between the social systems of the capitalist countries. They differ in regard to historical background, level of development, and also class conditions. These differences have led to the existence of a capitalist superpower like the USA where the economic role of central government continues to be relatively small. At the same time we have a small capitalist country like Norway in which some 50 per cent of GNP is utilized by the state or is redistributed by way of the government budgets. There are capitalist countries where almost the entire banking system and all main industries’ are nationalized. (In Norway, for example, all the largest industrial concerns are today state-controlled.) At the same time there are countries where government business operations are on a very small scale. In the article “Economic problems of Socialism”, Stalin puts forward two crucial criteria for distinguishing capitalism from socialism:
1. The means of production are not community-owned, but privately owned.
2. In a system of commodity production, labour is also a“ commodity.

Additionally, we may include Lenin’s criteria for capitalism having developed into imperialism – the concentration of capital in monopolies, merging of bank- and industrial capital and capital export.

Does the Soviet system exemplify the distinguishing marks of capitalism described by Stalin and Lenin?

Who controls the means of production?

Today one type of Soviet critic asserts that the USSR is a super-centralized social system controlled by the Nomenclature. They say that the country has one set of capital resources. This bears little relation to reality. The Soviet Union is the world’s largest state in extent. There are some 90 nationalities, over 100 languages and wide variation in economic development. In this system contradictions between the nationalities are rife, particularly between the national minorities and the Russians. The Ukrainian nationality numbers approximately 50 million and accounts for about 20 per cent of the population. The Uzbeks number about 10 million, and a number of other nationalities are over 5 million strong. There are contradictions between the state and the collective sector and between the state and the private sector. All these contradictions are between groups which control the means of production. Thus, there is clearly no question of a single centre of power.

I will come back later to the Nomenclature, the most powerful of the power groups in the country. I shall include some data in order to show the size of the various owner-groups.

The state controls without a doubt the most important means of production. It is state property which provides the basis for the power of the ruling class in the country. However, there is little doubt that major contradictions also exist within this system. After the reforms of 1965 the individual trades and enterprises have acquired greater independence. The struggle for credits, projects and prices lays the basis for numerous contradictions within the state economy. Given favourable conditions the individual state enterprises can raise profits and thereby the standard of living of the employees, in the first instance those at director level.

The collective sector

The collective sector is mainly to be found in agriculture. The collective farms control about just as much land as the state farms. Collective property is a form of group property which, through trade with the state and trade on the market, has its own economic interests. About 20–25 per cent of the Soviet population today live on collective farms.

In the Soviet Union there is both a legal and an illegal private sector. The legal sector is to be found in agriculture. It is well known that the USSR today is dependent on the private producers for meeting the country’s needs for important food products. Some 4 per cent of the Soviet Union’s land area is in private hands. Yet this area accounts for 60 per cent the country’s potato production, 40 per cent of fruit and eggs and 25 per cent of meat, milk and vegetables (M. Goldman: USSR in Crisis, New York 1983, page 83). Through private trade much capital is accumulated which goes to consumption of luxuries by the rich. However, it is also used for expansion within the large illegal sector. All who have travelled in the USSR have encountered the black market. According to estimates by Western economists, this market accounts for 20–25 per cent of GNP, i.e. a market larger than the entire national product of Norway! All kinds of article are sold – from machinery and equipment which are stolen from state enterprises to imported luxury cars or foreign currency. There is no reason to doubt that the Nomenclature itself takes an active part in the illegal market. Trips to the West provide them with both access to foreign currency and to goods which can be sold on the poorly supplied Russian market at a huge profit.

The Nomenclature – representatives of the people or a ruling class?

Does the dominant state sector not guarantee that the socialistic sector of the economy wins over the private sector, and that all means of production come under the control of the working class and the working people? A prerequisite for this is of course that the state property is controlled by the working class. This was at one time the case in the Soviet Union. Today the facts show that the ruling class which governs the state and the enormous state enterprise is the Nomenclature, a party-appointed stratum of the community which lives on the “backs of the people”. Can this be proved? Let us look at some facts: If the state was controlled by the people the plans for the economy would also reflect the people’s needs. This in no way tallies with the situation in the Soviet Union. The plans are decided over the heads of the people. It is not the people’s needs but the party leadership’s strategic plans which Gosplan bases itself on when the country’s five-year plans are put into effect. Evidence for this: The economy of the Soviet Union has developed more and more into a war economy. The military-industrial complex and heavy industry tap the country’s resources. The consumer goods sector and service sectors are greatly underdeveloped. The people’s basic needs are not being met. People still have to queue for basic necessities. The quality of consumer goods is very poor. Today the USSR has to import large quantities of consumer goods from Eastern Europe. Hungarian and Yugoslav economists I have spoken to say that “the Soviet Union takes everything we can deliver. They don’t ask about quality”. The following explanation for this was given by a Hungarian economist at the Ministry of Finance in Budapest: “The Soviet Union compels us to deliver “peace merchandise” so that they themselves can invest in the war industry”. In recent years the Soviet defence appropriations have stood at 12–15 per cent of GNP, a figure that is particularly high given the economic problems facing the country.


Another factor which shows how the leaders of party and state have distanced themselves from the people is the extensive system of privileges. The Nomenclature is a secret list of the privileges accorded to certain posts. This privileged echelon is estimated to number 227,000 persons (Matthews, Privilege in the Soviet Union, London 1978). Other authors have also arrived at figures of this order. In the first place the Nomenclature enjoy salaries three to four times the average. As a rule they have a chauffeur-driven car, luxurious country cottages, special vacation spots, and their own stores carrying imported, high quality consumer goods (they must in no event suffer from the inadequate output of consumer goods). They also have their own health service as well as special advantages as regards education for their children, etc.

Is it possible to assert that this upper class stratum represents the working class and the working people. No. On the contrary this is an echelon which has obtained right of ownership over the means of production. Thus, the most important means of production are today not the “people’s property” but the property of an echelon comprising well under 1 per cent of the country’s population. With its control of the means of production this ruling class can buy labour which is exploited so as to increase the power and wealth of the ruling class.

Is labour a commodity?

But this of course presupposes that labour is a commodity, i.e. that the worker sells his labour for pay which is worth less than the wealth he creates. After the economic reforms of 1965 it became clear that the position of the worker on the labour the party publishers, “Novosti Press”, issued the booklet: “Soviet economic reform and its critics”. Page 43 states the following: “... an increase in profits can only be achieved by economizing on materials, labour and financial resources”. This was a signal for extensive rationalization. Nicolaus relates that production switches in the industrial chemicals industry meant a 10–15 per cent reduction in employee numbers. Although there is officially no unemployment in the Soviet Union there is no doubt that workers made redundant through rationalization measures have long gone without work. Nicolaus also states that 59 per cent of the workers change jobs once a year! The workers are exploited in that the surplus wealth they create is utilized by the upper echelons of industry and the state for their own class interests. The working class is left with a wage which, compared to that of the Nomenclature, secures them only a very poor standard of living. The so-called “specialist” development has not narrowed the gap between the leader class and the people. To the contrary. In many areas the disparities appear merely to be increasing.

Maximum profit can only be secured through the “empire”

In the course of the last 20 years the Soviet Union has expanded vigorously outside the country’s own borders. The division of Europe after World War II marked the start of what was to become the Soviet empire. With the approval of the Western powers, the Red Army was able to secure a development in Eastern Europe that served Soviet interests. Stalin’s strategy was now clear: What serves the Soviet Union also serves socialism. Eastern Europe was developed so as to fit into the Soviet economic strategy. The strong concentration of capital around the state monopoly, the military power and the desire for greatest possible profits have made the USSR the most expansive imperialist power of our time. Since the mid-60s the USSR has steadily increased its involvement outside the Comecon area.

Control of Eastern Europe enables the USSR to secure for itself the necessary machines and consumer goods without having to use convertible currency. Through increasing control of countries in the Third World such as Cuba, Vietnam and Ethiopia it can also secure cheap raw materials without using foreign currency. Among other things this makes it possible to reserve Western currency for purchases of necessities such as grain or for know-how such as modern electronics or advanced oil-drilling equipment. It also allows economic resources within the Soviet Union to be earmarked for heavy industry,” production of energy, and manufacture of weapons and other war equipment.

The countries of Eastern Europe function today as economic “leaseholders” for the Soviet economy. Attempts to reform the economy of Czechoslovakia, Poland, Hungary or East Germany are greatly impeded by “compulsory deliveries” to the Soviet Union.

By way of illustration, to permit an increase in exports to the West which would bring in foreign currency necessary to repay the heavy dollar debt, are hindered by the Soviet Union’s insistence that Hungary continue to deliver the goods needed by the Soviet Union. The large Ikaros bus factory in Budapest is an example in point. Realignment of production with a view to increased exports to the West is impossible so long as the Soviets demand regular deliveries of buses to meet their own transport requirements.

There is little doubt that the USSR keeps a close watch on attempts in Eastern Europe to strengthen links with Western Europe. The East German party leader Honecker’s trip to West Germany was stopped precisely because the Soviet government considered that cooperation was in this case being taken too far. The West German government had indeed offered East Germany about 1000 million U.S. dollars in credit.

Trade with Western Europe

At the same time as the Soviet Union keeps a close watch on the countries of Eastern Europe, it fully concentrates its efforts on strengthening its own trade and cooperation with Western Europe.

The economic crisis and the political differences of opinion between the U.S.A. and Western Europe are exploited in order to strengthen the Soviet Union’s position. There is little doubt that in a world in which the economic warfare over markets between the imperialist countries is sharper than at any time since World War II, the sizable Soviet and East-European markets are a tempting proposition.

Through long-term agreements the USSR will become a steadily more important supplier of energy to Western Europe. The high point of energy cooperation so far is the major gas agreement of 1981. This agreement will provide 13 per cent of Western Europe’s supply of gas in the 1990s. The enormous pipeline of 5,500 km was built with the aid of Western credits of NOK 10,000. Germman, French, British and Italian firms are involved.

Norwegian trade, with the Soviet Union has up to now been fairly modest. However, it is clearly increasing. Norway’s exports to the USSR grew by almost 50 per cent between 1977 and 1983. This is far stronger growth than for Norwegian exports overall. The value of Norway’s exports to the USSR is around NOK 1,000 million.

It is also characteristic that after the invasion of Afghanistan, Norway entered into a ten-year cooperation agreement with the Soviet Union. A five-year trade agreement was signed simultaneously; this includes deliveries of paper and other important Norwegian export products.

Kongsberg Vapenfabrikk (a major Norwegian arms manufacturer) has entered into four agreements where, among other things, deliveries of important computer equipment are involved.

It is typical of the Western bourgeoisie’s unprincipled attitude to Soviet imperialism that Minister of Trade R. Steen (Soc.Dem.) stressed that the agreements were entered into in a “good atmospheres This, it may be noted, was immediately after the entry into Afghanistan.

The Norwegian government is to conclude a new trade agreement with the Soviet Union after the general election this, year. There is little doubt that it will mean a new step forward for “cooperation”, regardless of whether the Conservative of the Labour Party is in office. Some people maintain, that trade serves “both parties”, and it is clear that so long as trade is carried on at a low level the imperialists in the Kremlin will have no decisive influence on the other party’s policy. However, there is little doubt that the Kremlin’s goal is to use trade as a means of acquiring influence, and later power.


The best case in point is Yugoslavia. Yugoslavia lies in the “grey zone” between East and West. Its location is strategically important given its border far into Western Europe and its long Adriatic coastline. Between 1948 and 1955 virtually all trade between the USSR and Yugoslavia was at a standstill. However, from 1955 onwards, the USSR concentrated on winning over Yugoslavia by “peaceful” means. Yugoslav manufacturing industry had problems gaining entry to the Western market. But trade with the Soviet Union was an easier matter. As early as in 1965 the Soviet Union was Yugoslavia’s most important export market. In 1980 the Soviet Union was both Yugoslavia’s main export and import market. Some examples: According to Yugoslav trade statistics, 78 per cent of her shoe exports went to the USSR, 56 per cent of her clothes exports and 50 per cent of non-electrical machinery.

At the same time Yugoslavia received 47 per cent of its oil needs from the USSR, which also supplied other important raw materials.-Soviet influence on Yugoslavia’s external trade today is on a par with its influence on the other countries of .Eastern Europe. This means in the next instance that economic pressure can be turned into political and military pressure. The Soviet Union has long demanded military base facilities on the Adriatic coast. Will the crisis in the Yugoslav economy and Soviet pressure compel them to give way?


In recent years people the world over have time and again been shocked by the political adventurism of the Soviet government. Inside the country all opposition is silenced by the dictatorship. This is a fact. It shows the imperialist class content of the Soviet government administration. However this is not only the result of “erroneous policy” of great-power chauvinism. The policy followed is a consequence of the policy of a powerful nation characterized by monopoly of the state. Analysis of the country’s economy shows it to be a society in which a small group, the Nomenclature, controls the most important means of production. They acquire wealth by gross exploitation of the country’s working class and of people in countries which fall victim to their imperialist adventurism.