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Peter Binns

Understanding the New Cold War

(Spring 1983)

First published in International Socialism 2 : 19, Spring 1983, pp. 1–48.
Transcribed by Christian Høgsbjerg.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

For more than 30 years the Socialist Workers Party has argued that armaments and military competition have been an essential part of post-war capitalism both west and east. For most of the time most bourgeois analysts and most fellow socialists disagreed with us. Now, however, things are different. The past five years have seen the tearing up of the SALT-2 treaty, a rearmament programme unprecedented since 1951 in both NATO and Warsaw Pact countries, and the creation of a new generation of weapons of mass destruction which are qualitatively more dangerous and destabilising than any hitherto. Furthermore the extensive trade, finance, and capital links between east and west that developed so rapidly in the 1970s, have been even more rapidly curtailed in the 1980s. All these events have been so palpable, so visible and so worrying that it has now become a commonplace that we are living in the age of what has been called the New Cold War.

The purpose of this article is to examine this period, to look at the theories that have been advanced to explain it (including our own past theory) to see how well they have performed in the light of the evidence of post-war history, and to draw some conclusions about how to fight back against the dangers of the nuclear holocaust that the present period threatens.

The most popular theory of the New Cold War in the west is, not surprisingly, that of Thatcher and Reagan. They argue that an increasingly aggressive Russia has initiated a series of military escalations and aggressions (the deployment of SS-20s in Europe, the Afghan invasion, the military role of Cuban troops in Angola and so on), which has ‘forced’ the west to respond so as to avoid a tragic repeat of the policy of ‘appeasing dictators’ which they diagnose as being the underlying cause of World War II. This theory will not be discussed directly further in this article; the historical detail refutes it at every point, and sufficient of this detail is included here to make this abundantly obvious without further separate treatment.

To be taken more seriously are two other sets of theories. Firstly there are those that present the Thatcher/Reagan line in reverse. The new Cold War is explained in terms of the inherently aggressive nature of just one side, but that side is the west rather than the east. This view is based on the assumption that (i) capitalism is, by its very nature, imperialist and militarist, (ii) the west is capitalist but the east is not; and this leads them to conclude that (iii) the ‘offensive’ imperialism of the west has caused the New Cold War, and with it the essentially ‘defensive’ reaction of the west’s victims in the east. Against this ‘socialist’ view there are the anti-socialist theories of the dominant current in the peace movements at the present time, the bourgeois pacifists. Mostly clearly articulated in Edward Thompson’s writings, they share the assumption that the west is capitalist and the east is not, but go on to assert that the cold war between the two has now superimposed on east and west a common structure represented by their military-industrial complexes (one which implies, in Thompson’s words, that both societies are now dominated by what he calls ‘exterminism’).

Against such views we shall advance a Marxist alternative in the pages that follow. (Though a more explicit analysis and critique of views can be found elsewhere in our publications. [1]) The New Cold War, we shall argue, can only be seen as a product of ageing capitalism in crisis. Essential to this view is the understanding that as capitalism ages, military competition between national or state capitals becomes more and more central, and that, for instance, the state capitalisms of the east are not mere helpless victims of this process, but, on the contrary actually contribute to it themselves. Only on this basis, it will be argued, can one both explain the broadly symmetrical militarism of east and west, and at the same time apply a class analysis – and therefore also a class solution – to it.

Capitalism and war

War is endemic in all class societies without exception. But this is not true for pre-class societies. In particular it is not true for those societies that Marxists have referred to as ‘primitive communist’. In such societies private property has not yet arisen. Hunting and gathering define the means of production, and this is characteristically associated with a nomadic existence as the tribe moves on to fresh areas. The social hierarchy is generally fluid, with an elective and changing leadership which arises only when it is specifically felt to be needed by the tribe as a whole. Given an availability of food which is adequate for the growth in the population, as the experience of pre-Columbian America shows, wars will not take place between neighbouring tribes. [2] There is no readily available wealth for plunder because the gap between ‘production’ (hunting, gathering) and consumption is too close. There is no possibility of the victorious tribe gaining any significant surplus from the other tribe and therefore war cannot be seen by it as an alternative means of gaining access to the means to live.

This of course changes markedly once class society – and private property along with it – arises. For there then emerges a fundamental chasm within society. For the first time a class of people arises whose very mode of existence rests upon the exploitation of other people’s work. Crucially this implies also the creation of permanent coercive armed apparatuses to ensure the transfer of surplus produce from the direct producers to those who rule but do not themselves work, without which the serf, the bondsman and the slave would soon throw over the yoke of their own exploitation. War has now, from this point on (and until the abolition of class society), become an endemic and intrinsic part of the social structure itself. It has done so in two ways. First of all class society has created the means of war, the relatively permanent armed apparatuses. Secondly, and much more importantly, it has created the social mechanisms which have institutionalised (and legitimated) the seizure of the fruit of the labouring activity of the direct producers themselves. Since societies are now based upon internal plunder and coercive armed apparatuses, war, for the first time, appears as a purely rational and logical implication of this ‘natural’ state of affairs carried into the outside world. Or, to put it in reverse, if there was no means for holding and retaining the surplus produce appropriated from the direct producers within (i.e. if internal plunder were impossible), then external plunder would be impossible too. The consequences of this is, of course, that to abolish war we must first of all abolish class society altogether.

Yet this is a consequence that is strongly resisted by many – including some who think of themselves as Marxists. For them, even though capitalism is a form of class society, it is thought of as being one specifically based upon ‘peaceful’ forms of competition rather than upon direct coercion. Discipline is provided not by the manacles of the slave but by voluntary entry into the market.

If this were really the Marxist position, there would have to be something quite seriously wrong with Marxism itself. For, even if we leave out of account for the moment the present century with its quite unprecedented mass slaughters in 1914–18 and 1939–45, it is clear that from its very origins capitalism has been involved in a continuous series of wars. In the 17th century British mercantile capitalism fought a series of wars in order to limit and push back Dutch colonialism and trade. In the 18th century Britain’s burgeoning industrial capitalism inflicted a similar series of defeats on the French state. And even Britain’s ‘mature’ capitalism of the 1850s was involved in war against feudal Russia and in the Indian colonies.

Under feudalism war was limited by the weakness of the state, and even the ancient empires went through periods of hundreds of years at a time when wars were restricted to border skirmishings with peripheral tribespeople. But capitalism is of its essence a dynamic and competitive system. The military power of the capitalist state has been crucial to its success. It has been needed first of all to carry out the large scale international plunder without which what Marx called ‘primitive capital accumulation’ could not have taken place. [3] Secondly it has been needed to forcibly remove the direct producers from access to any means of subsistence other than through being employed by capital – usually through enclosures and other means of restricting access to the land. [4] Finally since, as Marx put it, world trade is already implicit in the first act of capitalist production, the military power of the capitalist state has been needed to protect this trade and the colonial system which opened it up from rival powers. [5] These three areas of capitalist militarism led to three distinct types of war during the epoch of the rise of capitalism: colonial wars, civil wars and trading wars.

Those people who want to abstract these various forms of war from their ‘Marxist’ explanations of capitalist society are therefore doing something quite alien both to Marx’s own analysis and also to the very dynamism of capitalism itself, which, in accelerating the pace of its own development as a world system, from the very beginning precipitated, at an accelerating pace, a whole series of wars.

Marxist explanations of the 1914–18 war

None the less, the 1914–18 war produced a profound shock amongst Marxists at the time. It precipitated a major crisis in the international socialist movement – the Second International – as most of the major parties sided not with the proletariat but rather with their own national bourgeoisies. It also forced upon them a re-examination of the capitalism of their day in order to explain how the carnage could have taken place at all.

The centre of the debate concerned the nature of imperialism. Virtually everyone in the Second International understood that the ‘liberal’ laissez-faire capitalism of the middle of the 19th century had somehow grown over into a more monopolised imperialism, but the question remained of how this ‘imperialism’ was to be characterised. At a theoretical level, the debate between the internationalists and those who Lenin and Luxemburg characterised as the ‘opportunists’, centred on how the world economy was to be understood. Was capitalism to be seen first of all as a world system which conditioned the behaviour of the national states within it, or was it rather to be seen as an aggregate of the various national capitalisms that composed it?

The tradition associated with Hilferding and Kautsky and the majority of the German Social Democratic party stressed the latter. For Hilferding the phenomenon of imperialism was thus explained by reference to the purely external operations of the various national capitals interacting with each other at the point where they spill out from their own purely internal developments. [6] In Kautsky’s case, in his theory of ‘Ultra-Imperialism’ (published a few weeks before the outbreak of hostilities in 1914), he saw no reason why the different national capitalisms might not come together to form ‘a holy alliance of the imperialists’ and impose an imperialist peace through ‘a federation of the strongest who renounce their arms race’. In the same way that mutually hostile private capitals had been brought together in the cartelisation of industry, why, he asked, should the various competing nations not come together to construct an equivalent international ‘cartelisation of foreign policy’? [7]

The problem that such theories faced was to explain the total war that this imperialism unleashed. If Hilferding had been right the combatants should have withdrawn from the battle long before the costs began to heavily outweigh the profits from investment overseas. How the war could have persisted beyond 1915, on that theory, becomes a complete mystery. The same is true of Kautsky’s theory. One would have to conclude that the behaviour of the capitalists and the politicians had become completely irrational. In that case again one could not use Marxism to explain what was going on. Marx argues that ‘it is only as personified capital that a capitalist has a right to exist’, and the foundation of Marx’s system is based on the assumption that enough capitalists are rational people for the system to operate so as to maximise profits. If they were all lemmings one would need a psychologist rather than an economist to explain the workings of the system instead. On Kautsky’s theory one has to I make precisely this latter assumption in order to explain how the 1914–18 war could have taken place.

But Hilferding and Kautsky do not represent the only interpretations of the total wars of the twentieth century from a Marxist point of view. There is another tradition too. It derives from Trotsky, from Rosa Luxemburg, from Lenin and from Bukharin, and it was the orthodoxy of the Communist International and the Bolshevik party before the dominance of Stalin and his ‘socialism in one country’ theory. [8] In each case these theorists began not with a series of national economies which were only externally conjoined, but rather with the world economy as their starting point. This was a crucial move. If the various national economies have only the same sort of freedom in the world economy as private corporations had previously within the national economy then several conclusions immediately follow. Firstly the necessity to exploit the working class, to extract surplus value, to set it to work to drive forward the accumulation of capital – all this will follow from the mutual competition of all the national capitals with each other. Competition will therefore determine the form and the extent of production within the national economy. Secondly this production will in its turn bring forward new and changed forms of competition between the competing national economies and the states that preside over them. It was, crucially, in the analysis of these latter changes that these theorists made the most significant contributions to a Marxist understanding of imperialism and the politics of total war.

It is in Lenin, and above all Bukharin, that we get the fullest development of an understanding of these changes. For both of them the ageing of capitalism gives rise to military competition complementing – and in some circumstances replacing – price competition. This is due to two main factors. Firstly within each country economic power becomes concentrated and centralised into the hands of fewer and fewer giant corporations. Secondly, in order to exploit the efficiencies implicit in a world division of labour each capital becomes impelled to extend its tentacles beyond its own national borders. The first tendency implies a greater and greater integration of the corporation with the state; the second implies an extension of its operations overseas. The combination of the two necessarily leads to the national state bursting through its purely geographical borders; and in the long run to the collision of one state’s external tentacles with those of another. But there is a difference between this and the situation where one purely private capital confronts another. When one state or state-backed corporation collides with another, this implies that weaponry, armies, navies etc. will be needed to defend and safeguard sources of raw materials, markets, factories and so on against rivals. Military competition will then supplement (or even replace) price competition. The more this happens the more the corporations will take the form of what Bukharin called ‘state capitalist trusts’. According to Bukharin:

When competition has finally reached its highest stage, when it has become competition between state capitalist trusts, then the use of state power, and the possibilities connected with it, begin to play a very large part. [9]

This means that:

Competition is reduced to a minimum within the boundaries of ‘national’ economies, only to flare up in colossal proportions, such as would not have been possible in any of the preceding historic epochs. [10]

In fact, Bukharin argues,

even if free competition were entirely eliminated within the boundaries of ‘national economies’, crises would still continue, as there would remain the anarchic structure of world economy. [11]

Bukharin tells us that ‘This anarchic structure of world capitalism is expressed in two facts: world industrial crises on the one hand, wars on the other’. [12]

And this led Bukharin to conclude that:

The struggle between state capitalist trusts is decided in the first place by the relation between their military forces, for the military power of the country is the last resort of the struggling ‘national’ groups of capitalists. [13]

It follows from this analysis that two tendencies are simultaneously and mutually implicit in ageing capitalism: the first is the growing together of capital and the state, and the second is the tendency for war between the various statised capitals. The two are not at all separate, the one mutually implies the other.

It is important to stress this point, for there have been all too many people, particularly on the left, who have been attracted to the idea that ageing capitalism implies war, but who have refused to spell out the corollary that this involves – and must involve – the increasing statisation of capital, and that the more any national capital or group of capitals is statised the more its mutual competition with other capitals will take the form of direct military competition.

There are several questions that this analysis immediately raises. To what extent does it genuinely follow from Marx’s own analysis? Is it still valid today? And does it illuminate our understanding of the New Cold War?

Certainly it is very easy to relate the two crucial theses of Bukharin concerning the statisation of capital and the militarisation of the state to Marx’s own analysis in Capital. They seem to follow as entirely logical consequences from Marx’s theory of crisis forcing capital to become more and more centralised and concentrated. [14] Furthermore Marx was well aware that competition between capitalists could take on many other forms than the pure price form that is assumed in the first volume of Capital. [15]

When we come on to look at the way Bukharin’s analysis fitted the reality of 1914, the matter is more complex. He was certainly right to stress the importance of the world economy as opposed to the national economy as the starting point for his analysis. As he himself points out in his Imperialism and the World Economy world trade was expanding fast before 1914. In fact it grew by 50% in the eight years 1903–11 [16], faster than the growth in world output. And with hindsight we can now see that the countries that appeared to be important exceptions to this rule – Germany and the United States-soon ceased to be so in the years that followed. [17] Looking at the situation today, we can amply confirm the correctness of Bukharin’s observations. Since 1840, for instance, the output per worker has, as a world average, increased seven fold; but in the same period the level of exports per worker has increased no less than twenty eight fold.

World trade, however, was, in Bukharin’s view, a quite inadequate measure of the internationalisation of capital. Unlike commodities, which have to physically change hands (and which require ships and railways to transport them), capital can ‘flow’ wherever there is a postal or telegraphic link between accredited centres of capital. The main thrust of Bukharin’s account is directed to explaining why French and British capital in particular had, by 1914, already emerged as fully international in form. He does so by showing how foreign securities had become at least equal alternatives to home investment, making truly international comparisons of the rate of profit to be earned in different countries a prerequisite for future successful investment. [18] British foreign investment expanded very rapidly; in the six years 1883–89 foreign capital stock increased from £95 million to £393 million [19], and in the years leading up to the 1914 war foreign investment was absorbing fully 50% of all savings. [20]

Bukharin was also quite correct to tie in this process with, on the one hand, the increasing centralisation of capital, and, on the other, its increasing militarisation and statisation. In the 1880s and 1890s the former tendency was most strongly marked in America and Germany, where, after the crises of 1873 and 1884, there followed a series of bankruptcies and mergers which led to the formation of giant trusts and cartels. In America this was the epoch of the rise of Carnegie, Morgan and Rockefeller; in Germany that of Krupp and Siemens. In both cases the concentration and centralisation of capital proceeded very fast indeed. [21] In Britain during this period it was the latter tendency that was most strongly marked. Millions of square miles of Africa were conquered, and under the protection of the British state new areas of investment were opened up. Imperialism obviated – for a time – the immediate need for British capitalism to pursue the course of systematic economic concentration. [22]

Yet by the early years of the new century these separate tendencies had become thoroughly intertwined. In Britain the opportunities for further easy investment in the Empire and elsewhere declined, and in the first decade of the century the inflow of profits from overseas came to exceed the outflow of new investments. In Germany and America the opportunities for further mergers of capital had been more or less exhausted at the same time. America and Germany turned toward the British solution (with the USA replacing Spain as the colonial power in the Caribbean and Germany turning toward East Africa, Turkey and the Balkans), and Britain turned toward the Germany solution (with an extremely rapid centralisation of banking capital in particular).

Bukharin’s analysis therefore, certainly fits the facts very well. But this is not the full story. Marx himself was able to demonstrate how the crisis was able, through the process which gave rise to the restructuring and centralisation of capital, to restore (even if only temporarily) the general rate of profit, and hence also to regenerate the system for new (though successively shorter and shallower) upswings. [23] To do so his analysis was firmly based on an analysis of the rate of profit, and above all on the way in which that rate tends to rise or fall in accordance with the ratios of work hours the system needs (or living labour) to the sum total of capital stock (or dead labour) within it. [24]

There is no doubt at all that Bukharin was aware of these aspects of Marx’s theory of capitalist crisis. But at no point does he attempt to show the way in which militarism or war perform the same function as capitalist crisis by restructuring capital and restoring the general rate of profit. [25] So, for Bukharin, while war is a product of capitalism, it does not necessarily produce consequences for the number of capitals that confront each other or for the rate of profit at which they must continue to operate.

Bukharin’s analysis is therefore incomplete. Later on in this article we will try and fill this gap.

American and Russian imperialism in the Second World War

If Lenin and Bukharin provided the broad framework for understanding the economic forces at work during the total capitalist wars of the twentieth century, the question then remains of how these forces were mediated through the perceptions and politics of the rival ruling classes involved. In particular, we need to begin with the events that brought about the current alignment of the dominant world powers – the Second World War.

That war produced two qualitative changes in the alignment of dominant world powers. Firstly it led to the military defeat of two important rivals to the United States. The defeat of Japan opened up the remainder of the Pacific to US influence and the defeat of Germany left no question that the United States would now be the dominant world power industrially and technologically. Secondly the war so weakened the industrial and financial base of America’s allies that all the old European imperial powers – France, Belgium, the Netherlands and, above all, Britain – were forced to accept at best a subordinate status and, at worst, the status of American surrogate in international affairs.

But the defeat of Germany and Japan had been in little doubt from at least the end of 1942 when it had become apparent that Russia could absorb the entire military might of the German army and survive. [26] It was then only a matter of time before the overwhelming economic power of the Allies would crush the Axis powers. [27] From the very start, therefore, each Allied ruling class was concerned – indeed obsessed – with the question of power in the post war world. As the war progressed this question came to occupy a larger and larger proportion of their attention. At the height of the Allied war effort in 1944 for instance, Churchill was so concerned to include Greece in the post-war British sphere of interest, that his diaries and communications show references to this matter significantly outnumbering those concerning the military conduct of the war against Germany itself. [28]

How did the ruling classes of what were to become the two superpowers fight out this battle between allies? We will begin with America. The American ruling class’s retreat into isolationism after the First World War behind large tariff walls and other measures of economic protectionism helped to cause the very slump of which it was to be one of the most major victims in the 1930s. While Britain (through trade with the Empire) and Germany (though a state-led rearmament programme) were able to mitigate some of the worst effects of the slump – at least by the latter years of the 1930s – America’s economy continued to stagnate ‘until the war boom of 1940 began’. [29] Roosevelt and his closest policy makers and advisors, above all Hull and Stimson, were determined that this should not happen again. To prevent it they evolved policies which broke completely from the isolationism of the 1930s. Central to their aims was the dismantlement of the British Empire and its opening up to American capital as part of general move toward ‘free trade’ through which, it was assumed, the overwhelming predominance of the US domestic economy would ensure the complete hegemony of US capital throughout the world. [30]

To begin with they, perfectly correctly, saw the British ruling class as the major barrier standing in their way. But the urgency of the British need for finance and materials to fight the war made the American strategy an entirely feasible one. The war with Germany had become a total war; nothing less than the very survival of British state capital itself was at stake. Its survival, even if only in a severely curtailed and subordinate form, could only be ensured through the alliance with America. Hull, Stimson and Roosevelt knew that at the end of the day the British ruling class had no real alternative. Even before America entered the war as a belligerent power Britain was already fairly tightly bound to American apron strings through the finance and war materials that the US had provided Britain through the Lend-Lease scheme. [31]

By 1943, and after much violent debate between the two allied ruling classes, a common war strategy had been concluded that enabled there to be a fairly common front against their Russian rivals in the remaining two war years. [32] The Americans agreed to make Europe the major priority, but successfully insisted that Churchill’s militarily irrelevant plans for a major thrust in areas of past and present British influence in the Mediterranean be dropped in favour of the invasion of northern Europe (allying with Stalin in doing so). [33]

But getting the British to toe the line on the form that the post-war world would take proved much more difficult. Churchill himself was devious, cunning and utterly unprincipled. His obsession with the defence of British ruling class interests meant that on many occasions he supported the supposedly enemy fascists if that meant resisting the advances of the supposedly friendly Americans in areas where there was a degree of British influence. In Italy for instance, it initially meant accommodating to, rather than getting rid of Mussolini himself [34], and in Greece it meant an actual preference for continued German Nazi occupation to help prevent the consolidation of EAM, the national liberation movement. [35] The American leaders themselves were, of course, not the least bit more principled themselves. In their turn they supported the neo-fascist allies of Hitler in Vichy France and their counterparts in the Darlan/Giraud regimes in North Africa as a counter to the protegé that Churchill was nurturing in emigré London – de Gaulle. [36]

Yet there was an important difference between the British (along with the Russian) ruling class on the one side and the American on the other. Churchill and Stalin were much clearer about the game that all three were playing; the game was the strategy of power politics and the rules, derived from the traditions of Machiavelli and von Clausewitz, were familiar to the European powers. The American ruling class were playing the same game but confused themselves with their own rhetoric and propaganda. To be sure both Churchill and Stalin dressed-up their own naked plunder of those parts of the world under their own control in suitably high-minded verbiage about ‘free speech’, ‘free trade’, and ‘democracy’ on the one hand and ‘equality’, ‘socialism’ and ‘peace’ on the other, but never for one moment do such matters appear as the actual determinants of policy for them. Each accepted that notwithstanding the aspirations of the indigenous populations in reconquered Europe they were to be forcibly included in one or another sphere of influence, with the nature of the regime that presided over them being determined by whichever great power they had been consigned to. The overwhelming support of the Greek population for EAM was therefore seen as a problem by the British ruling class which would have to be overcome by massive oppression including a full scale war against ELAS (EAM’s military wing), the incarceration of 20,000 Greek anti-Nazi troops in prisoner of war cages, the banning of the Communist Party and so on. [37] In doing this Churchill received support and help from Stalin which he duly appreciated. [38] In return Stalin expected – and received – Churchill’s help and support over Stalin’s similarly unpopular occupation of Rumania. [39] The American leaders however, while still playing the same game, played it in a much more confused manner – particularly at the beginning of the war period. This was due to several reasons.

Firstly, looking at US official documents one cannot avoid the sheer blundering incompetence of the US officials compared with their much more astute Russian – and above all British – counterparts. [40] The classic example was the extraordinary short-sightedness of the American rulers over the implications of the solution they imposed on Italy. Against the wishes of British and Russian allies (and the bulk of the indigenous post-Mussolini forces), they, on the basis of the power conferred by their military occupation, removed Badoglio from the new Cabinet, replacing him with someone much more compliant to American interests, and then backed the latter regime with the then vast sum of 100m dollars credit to ensure its viability. [41] By doing this they set a precedent. Italy was the first Axis or Axis-occupied power to be overrun, and the US government had refused out of hand any form of co-determination of Italy’s future in conjunction with the other two Allied governments. The US military occupation was simply used to block Russian participation in any occupation commission for Italy. What seemed to be beyond the comprehension of the US authorities was (i) that their sheer financial power would inevitably have led to a pro-US post-war regime in Italy anyway, even with a regime formed on the basis of mutual co-determination between the Allies [42]; and (ii) the logical implication of this position was that Stalin should be permitted an equally free reign in the much more extensive terrain that would shortly fall to his troops in eastern Europe – in Poland, Eastern Germany, Czechoslovakia, Hungary, Rumania and Bulgaria – and whose fate, until that point, Stalin had assumed would also be settled not unilaterally but by some form of co-determination.

Secondly, to this incompetence – which was in part a product of the limited experience of the American leaders at the time – was added the considerable confusion that they felt as to their aims. We have mentioned already the difficulty they experienced in separating the ideology of free trade from the reality of power politics, yet there can be little doubt that their real aims were, quite simply, the maximisation of American power, influence and profit: the evidence on this matter is quite overwhelming. At every point where that power conflicted with the principles of free trade it was those principles that was unceremoniously sacrificed. In China the US prevented other trading nations getting a foothold, and the small print on the Lend-Lease agreement with Britain forced Britain to (i) deliver over to the Americans the most important areas of its export trade (above all in Latin America – producing the biggest ever qualitative leap in US domination of that continent), and (ii) to purchase large quantities of American wheat at prices well in excess of those on the world market. [43] All these were quite clear curtailments of the principles of free trading. Yet it remained possible for the US to go on thinking in this way for the simple reason that in nine cases out of ten ‘free trade’ was synonymous with trade with the USA during the war period.

All the same the ideological fog that it had produced prevented the US ruling class from pursuing its power interests effectively in eastern Europe in particular, and this was of crucial importance in determining the form that the developing conflict with Russian state capital would take. For their part, as we shall see below, the Russian bureaucracy were not at all inclined initially to set up mini Russian look-alikes in eastern Europe. For them the crucial aim was the creation of regimes which, whatever their social system and whatever their trade and capital links with the West, would under no circumstances follow a foreign policy hostile to Russia. [44]

By going for broke, by insisting on the exclusion of Britain and Russia from areas where America was strongest, the American ruling class was to lose far more than it gained. Its refusal to publicly countenance any real discussion with its allies on spheres of influence in the post-war world came about because on the one hand its real aims – the inclusion of the entire world outside Britain and Russia in the American sphere of influence – were impossibly large, yet, on the other hand, they were at the same time partially unconscious ones for the American policy makers, hidden as they were behind a fog of half-believed rhetoric about ‘free trade’.

This had two crucial consequences for the form that the first Cold War would subsequently take. Firstly the American rulers felt, correctly, that post war Europe insufficiently reflected their own interests – particularly when their own considerable power was taken into account. They felt cheated by their allies. In France, the most important occupied country by far, they had been outsmarted by the British and had to accept the ‘anti-American’ regime of de Gaulle; and their disastrous policy in eastern Europe had lost them the entire region to the Russians. Secondly, this frustration continued to be refracted through the ideology of ‘free trade’; American capitalism’s interests were seen not as the plundering, rapacious, exploitative and self-interested things that they were, but rather as the universal and benign interests of humanity as a whole, the defence of which automatically implied a veritable moral crusade. [45]

So far then, we have presented the background to the First Cold War in terms of the American rulers’ motives. What about the Russians? What role did Stalin play in its development? It is important to be very clear about this, because the very backwardness and devastation of the east implied a somewhat different course of action for the defenders of the interests of the ruling class in Moscow. To understand this best one should compare it with the different reactions of the ruling class in the USA after the First and the Second World Wars. In 1918 the dominant sections of US capital looked inwards towards America itself. On the one hand they felt insufficiently strong to challenge British capital in most of its traditional markets and investment areas outside the United States (even in what were later thought of as America’s ‘natural’ markets in the Pacific and Latin America), and on the other hand they saw great opportunities for growth within continental America itself. [46] In 1945 the situation was very different. In terms of the level of industrial production and productivity and in terms of its financial reserves and capacities America had now become incomparably the most powerful country in the world. [47] Furthermore what was then holding back the US was the devastated and backward nature of the rest of the world; if American capital wanted trade and opportunities for new investment, then the only way of creating it was by using some of its own vast resources to finance reconstruction outside America. [48] In 1945 the position of Russia’s ruling class was rather closer to that of the USA not in 1945, but in 1918 – at least with respect to its external policy. The infrastructure of Russian industry was completely shattered by the war and it could not hope to be able to compete with the Americans (or even the British for that matter) in the international capital and aid market. [49] It therefore adopted a policy of virtual indifference to the internal structure of the states that surrounded it, given only that they did not develop a hostile foreign policy towards the Russian state.

A whole series of examples bear this analysis out. For instance Russia did not invade Finland (although it would have been very easy for it to have done so), but instead the Russian bureaucracy simply accepted a commitment to neutrality on Finland’s part, guaranteed by the erstwhile Allies. In China Russia backed US protegé Chiang Kai-shek (bringing all its influence to bear on Mao to accept the Chiang regime). In Czechoslovakia Russia was the first of the Allied powers to recognise the fairly conservative Benes emigré government in exile in London. [50]

But whatever the intentions of Roosevelt, Stalin and Churchill during the ‘heroic’ period of the Alliance, 1942–44, reality turned out differently. From late 1943 onwards Europe began to be de facto divided into eastern and western spheres of influence. A number of factors contributed to this situation, some of which we have mentioned already, for example the Italian example which was soon followed by the western Allies being forced to accept equivalent rights for the Russians in Rumania. Then there was the western rejection of the Russian proposals for a European Advisory Commission to administer the whole of occupied Europe. [51] On top of that events moved very fast in 1944–45. Without prior agreements as to how the newly re-conquered areas were to be ruled, the Russian bureaucracy was faced with the de-facto supremacy of the west in France, the rest of Western Europe and the Far East, and the west was faced with Russian supremacy in eastern Europe.

This, roughly, was the situation that faced the Allied powers at the Potsdam conference in July 1945. They had already, at the Yalta conference in the previous year, agreed on the carve-up of the re-occupied nations between them [52], but what exactly did that mean? Take, for example, Poland. According to Yalta, Poland had to be ‘friendly’ to Russia, but ‘reorganised’ so as to include some western-orientated leaders, to have a ‘democratic character’ based on ‘broad representation’, and so on. But who was to interpret what exactly was meant by that?

Roosevelt died in April 1945, to be replaced by Truman. At the same time two new factors of crucial significance entered the situation: the rapid collapse of Japanese military power, and most important of all, the new secret weapon: the atom bomb. The collapse of the Japanese removed the last plank on which the wartime alliance had been built, because instead of needing a Russian attack from Siberia to help secure America’s defeat of Japan, it now became the paramount US concern to eliminate the Japanese before the Russians joined battle just so as to be able to exclude the Russians from the final eastern settlement. [53] The wanton slaughter of hundreds of thousands at Hiroshima and Nagasaki – Truman’s ultimate war crime – was the centrepiece of this strategy. It ensured that the American ruling class alone would determine Japan’s fate, and at the same time was a warning to the Russian leadership that henceforth the American government would insist on running everything its own way. According to one commentator this led to a rejection of Yalta by Truman that was categorical, deliberate and immediate. [54] And, while not publicly disowning Yalta, he made it quite clear that the only ‘interpretation’ of Yalta that he would countenance was one that would involve the complete scrapping of most of what the Russians had been doing in Eastern Europe. For their part the Russian bureaucracy, who seem to have tried to live up to the spirit of ‘equality in plunder’ of Yalta, initially tried to compromise and concede, but to no avail. Truman simply issued his orders and left it at that. [55]

The conflict between the Russian and American ruling class was now on in earnest. Once started the process seemed to be unstoppable, with each escalation by one side leading to an equivalent escalation by the other. Each response by one of the combatants was in its turn used as an excuse by the other for its own further escalation in the tempo of the Cold War. [56]

Understanding the first Cold War 1945–1956

There is some debate about when the first Cold War began. From Potsdam and Hiroshima in July/August 1945, onwards the leaders of both Russia and America were defining the other quite unambiguously as enemy number one, but the exact form that this competition would take was not clarified in practice. In 1947, however, the Communist Parties were thrown out of the government coalitions in France and Italy and the eastern European countries threw out the non-CP politicians, created one-party states, and proceeded to construct state capitalist regimes in the image of Russia itself. [57] 1948 saw the Berlin blockade and airlift, the first direct (but ‘cold’ – not a shot was fired) confrontation between Russia and America out of which the rival military pacts were formed.

Yet the need to keep the conflict cold was not yet apparent. On the American rulers’ side an attitude of extreme beligerence expressed itself in their willingness to use nuclear weapons against Russia to get their way. [58] On the Russian rulers’ side there was the threat that any nuclear attack on Russian cities could be countered by a Russian military occupation of all of continental Europe. [59] It was only the events of 1949–50 that changed all that. America received two traumatic blows in 1949 – the quite unexpected acquisition by Russia of nuclear weapons and the Chinese revolution, shortly to be followed by the Korean war. From then on America began a rearmament programme unprecedented in peacetime, and matched – as far as it was possible in a more backward economy – weapon for weapon by Russia.

The most characteristic features of the first Cold War were clearest in the years that followed these events – the early 1950s. They are correctly thought of as the high water mark of the First Cold War. In those years the immense power of American capital was used to construct a world order which provided the framework for the perpetuation of the wartime boom into the post-war period. It was – until the 1970s at least – very successful. It consisted of several interconnected and mutually supporting elements; crucially it depended on American capitalism being dominant in three areas: finance, production and the military.

In 1945 America was producing about one half of total world commodities. In addition it was by far the most important trading nation. [60] During the war it had succeeded in expanding its economy quite phenomenally. As one study of the period put it: ‘As pre-war business went, 1940 was a record year, with a national production of $97 billion ... Yet ... by the end of 1943 the gross product had increased to between $185 billion and $190 billion. On top of the $90 billion war programme, consumer expenditure in 1943 – even when measured in 1940 prices – exceeded those of earlier years, rationing, war priorities and war saving notwithstanding.’ [61] This remarkable doubling of the size of America’s GNP in three years was due to two main factors: (i) the large amount of under-utilised resources, a legacy of the 1930s slump; and (ii) the taking over of fully 90% of all investment by state owned and controlled capital. [62]

The American ruling class were obsessed with the problem of how to prevent a slump when the war ended – fully half of the economy was devoted to the war, and a staggering 28 million people were in the armed forces or engaged in war production. Clearly these workers had to be switched to peacetime production, but how? Who would buy the things that they might make? The internal American market could only be significantly extended by a general increase in wages and that would imply such inroads into profit as to make it quite unacceptable to American capitalism. The alternative was a massive export drive – but who then would be in a position to purchase American goods? The world’s major markets had been so devastated by the war – with many countries reduced to semi-subsistence economies – that that was out of the question too. Besides, America was already saturating the world market with its exports.

Luckily for American capitalism its productive power was matched by its world financial dominance too. The British empire and the Sterling area had been broken into and laid open by the debts and obligations that the British state was forced to obtain in order to fight the war. [63] To begin with the skeleton of the new financial order was laid in the wartime provisions of the system of Lend-Lease that America extended to its Allies. Determined that there should be no return to the pre-war situation where from 40–50% of world trade had been subject to control or cartelisation, Roosevelt manage to pressurise Churchill into making the necessary concessions on this matter. [64]

After the war there followed a whole series of measures through which American capital took a complete grasp on world finance. Firstly there was Marshall Aid through which very large sums of money were channelled to the western European economies to aid recovery from the devastation caused by war [65], and which ensured a high level of demand for the American goods that recovery entailed. Then there were the international banking institutions that were set up at the Bretton Woods conference of July 1944 – the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). Both were set up to encourage the ‘open door’ policy – the complete freeing of private capital to engage in unrestricted foreign trade and investment. The IMF established fixed and unrestricted exchange rates and dedicated itself to the ‘harmonisation of national policies’ (i.e. the insistence of the maintenance of laissez-faire principles) to achieve this. And since voting in the IMF was proportional to the capital contributed, American capital (in conjunction with some of the Latin American countries it dominated) was in a position to decide just what it was that constituted a ‘harmonious’ domestic economic policy on the part of the recipients of IMF aid. The IBRD was even more directly a tool of American international economic policy. Again control was proportional to the national capital that had been invested – thus ensuring US domination – and its function was quite openly ‘to promote private foreign investment by means of guarantees or participations in loans and other investments made by private investors’.

For the American capitalists this control over international financial institutions was to be used to ensure that their own funds would be used to finance American trade, and it was only on this basis that Congress authorised the release of funds- loans would be available, but only to finance trade with the donor country. As one of the leading theorists of Bretton Woods, Herbert Feis put it: ‘The United States could not passively sanction the employment of capital raised within the United States for ends contrary to our major policies or interest ... capital is a form of power.’ [66]

The other limb of American power was military. It is true that in 1945–46 the US economy underwent a massive conversion back to a peacetime economy, but this was no ordinary peacetime economy by pre-war standards. Even at its low point in 1948 a total of 9.8% of the US economy was directly or indirectly involved in armaments production. (This compared with less than 1% before the 1939–45 war.) And the proportion very rapidly increased in the years that followed. Having created a world order that ensured (for the time being) continuing dominance of American capital, it became of crucial importance to have the military might to defend it (under the appropriate guise of the defence of free trade or the defence of the free movement of capital). The Chinese revolution in 1949 and the Korean war of the following year exposed the scale of the task that America had taken on in being the world’s policeman, and immediately led to the ‘permanent arms economy’ – the continuous devotion of sums of money to armaments unparalleled in peacetime. By 1951 as much as 21.1% of the American economy was allocated to the military, and thereafter American military expenditure played a central role in the perpetuation of the prolonged post-war boom.

This umbrella of American military power was seen as an essential part of their infrastructure by US companies investing overseas. Reflecting many years later, and in the aftermath of America’s military defeat in Vietnam, the editors of Business Week sadly concluded that ‘the international economic structure, under which US companies have flourished since the end of World War II, is in jeopardy’. This was because ‘fuelled initially by the dollars of the Marshall Plan, American business prospered and expanded on overseas orders despite the cold war, the end of colonialism, and the creation of militant and often anti-capitalistic new countries. No matter how negative a development, there was always the umbrella of American power to contain it.’ This provided the military and political framework of which ‘the rise of the multinational corporation was the economic expression’. With the defeat in Vietnam the editors feared that ‘this stable world order for business operations is falling apart’. [67]

Yet it would be a mistake to believe that the American state was here acting simply as an instrument that was being wielded by American private capital in defence of their profits; as Chris Harman has recently pointed out, the sums spent on arms exceeded by far both the total amount being invested overseas and the profits realised on these investments during this period. [68] In short, much more of the profits of American capital were taken away in taxes for arms than were given back in profits from overseas investments. Although one can argue that the effect of the arms economy was to prolong the boom, expand production and extend the opportunities for profitable investment, since no one knew this when rearmament started, it cannot have been the motivation behind the rearmament programme itself.

Rather, having created a western bloc of capital in which American capital was by far and away the dominant element, the American state was faced with the reality of an eastern block from which it was excluded (or rather, perhaps, from which it had already excluded itself by its cut-off in aid to Russia in 1945). The Cold War rearmament programme was therefore not about the profitability of one or another group of private capitals, but rather the viability of the American national block of capital in military and strategic terms vis-à-vis Russian state capital. This was clearly revealed in NSC 68, the secret policy document adopted by the US National Security Council in April 1950 (note, before the Korean war which was later used as the rationalisation for the US rearmament programme). The document called for a big militarisation of the economy, a ‘rapid and sustained build-up of the political, economic, and military strength of the free world’. This is necessary because it has to be realised ‘by this Government, the American people, and all free peoples, that the cold war is in fact a real war in which the survival of the free world is at stake’. NSC 68, in fact, envisaged a ‘rollback’ strategy ‘to hasten the decay of the Soviet system’ and to ‘foster the seeds of (its) destruction’. America ‘should take dynamic steps to reduce the power and influence of the Kremlin inside the Soviet Union and other areas under its control’. [69]

That it was the military and strategic viability of US versus Russian state capital that motivated American behaviour (rather than the rate of profit of American corporations) was also made clear by a US spokesman at the time of the Korean war itself. He claimed:

‘Were either of the two critical areas on the borders of the Communist world to be overrun – western Europe or Asia – the rest of the free world would be immensely weakened... in the economic and military strength required to resist further aggression ... If western Europe fell, the Soviet Union would gain control of about 300 million people, including the largest pool of skilled manpower in the world. Its steel production would be increased by 55m tons a year to 94m, a total most equal to our own ... Its coal production would leap to 950m tons compared to our 550m. Electric energy in the area of Soviet domination would be increased from 130 to 350bn KW hours, or almost up to our 400bn.’ [70]

In order to understand this highly aggressive ‘rollback’ strategy, it is important to bear in mind several factors if the first Cold War is to be made sense of.

Firstly (and most importantly), the cold war was not so much the first act in a new post-war situation, but rather the last episode in the clash of the imperialist powers of World War II over who would gain from its spoils. From the American rulers’ side their exclusion from eastern Europe (and then from China) was not something that they had fought a war for. From the Russian side too, the re-emergence of an anti-Russian alliance of America, western Europe, and, worst of all a reinvigorated and rearmed west Germany, was something that their whole wartime politics had been devised to prevent. Neither side felt that their minimum conditions had been met, and for both of them the rearmament programmes of the 1950s followed quite directly from this. It was only some eleven years later, in 1956, that (as we shall see) both sides had more or less accepted the post-war status quo.

The second feature to bear in mind is the sheer dominance of the USA among the western powers and Russia among the eastern powers. America could afford to spend 15–20% of its GNP on armaments and still be the biggest producer and most extensive investor in the west. Russia could afford to put aside a quarter of its economy for armaments and still preserve its economic dominance throughout the Communist world. In the early 1950s the United States did not yet have to glance nervously sideways at the growing power of a Japan or a West Germany; Russia was not yet faced with a belligerent China or a westwards-orienting Hungary. Both ruling classes had the time and the space to indulge themselves in the fight for the spoils of World War II.

Thirdly, although the question of the post-World War II settlement was a crucial one, new areas of danger and uncertainty occurred – particularly in many of the newly emergent third world countries – which threatened to erode American capital’s financial and military preponderance. For the Americans there was the danger that the Chinese example might be followed in the whole of South East Asia, with, at one time or another, Malaya, Indonesia, Indo-China, and Burma being thought of as dominoes to be knocked down in a chain beginning in Peking but masterminded in Moscow. Then there was the Middle East, where Egypt, the most powerful and influential country in the region had, under Nasser’s military nationalism, switched foreign policy allegiances from America to Russia. It was feared that preoccupations with economic development in the Third World would lead to nationalisations, protectionism, autarchy and an orientation on Russia rather than America. By hitting at Russia, the American ruling class hoped that it would be dealing with what it saw as the source and inspiration of these policies.

Finally there was the feeling among America’s policy makers that time was running out; that the epoch of American capital’s dominance over Russian state capitalism was limited. For Russia’s economy was developing very fast in this period. Throughout the 1950s its growth rate was much higher than America’s (though slightly less than that of Japan), and Russian publications written at the end of this period were extrapolating the statistics and boasting about ‘overtaking’ the USA by the year 1970 in per capita income, and even claiming that ‘by 1980 the Soviet Union would then exceed the American level [of industrial production] twice over’. [71]

The ‘Socialist Review’ group and the first Cold War

After the Second World War there were several problems that Marxists had to face up to. In particular, they needed to ask why post war stabilisation took the previously unprecedented form of the Cold War. For the small number of Marxists who still adhered to the revolutionary traditions of Marx, Lenin and Trotsky, it was a crucial test. Unfortunately most failed it. Some turned their Marxism into an empty dogma by denying that these things were happening, others accepted the reality but only by dismantling the foundations of Marxism in doing so. [72] The crucial problem that Marxism faced was this: could an account be given that both explained the militarised stabilisation of the system in the post-war boom, and at the same time showed how it would, in the long run, lead to a reassertion of the central features of Marx’s theory of capitalist crisis?

The American Marxist economist W.T. Oakes (who also wrote under the name of T.N. Vance) was the first to attempt to do this. Writing in 1944 he concluded that a new era of capitalist development was opening up, that of the ‘Permanent War Economy’, which could temporarily stabilise the system. [73] He repeated this thesis during the period of the Cold War rearmament programme of the early 1950s. But certain crucial problems remained. During a world war one has a life-and-death struggle between rival national blocs of capital. Therefore it becomes quite possible for each capitalist to voluntarily subordinate his own individual interests to those of the state. A permanent war economy under those circumstances is an entirely different matter to one in peace time. The capitalists permit their own separate interests to be subordinated to those of state capitalism as a purely military phenomenon, but also so as to re-emerge with newer and better opportunities for profit thereafter.

If they were to continue to do so in peace time this could only imply an extreme weakness on their part, a lack of confidence in their own ability to make it alone in the post-war world market that is so great that they are actually willing to stop being individual capitalists and are willing instead to convert themselves into being bondholders of the state. On occasions this has certainly happened; post-revolutionary China provides one example. [74] But as a theory that is applied to the United States in 1945 it makes no sense at all. We have already shown how the whole of US war aims were single-mindedly directed at creating a post war world in which American capital would be both private and free. The war, so far from weakening American private capital, made it vastly stronger than before. Why then did US capitalists continue to consent to the huge arms programme of the 1950s? Why did they permit the permanent war economy to continue as the peacetime permanent arms economy?

Obviously there had to be something qualitatively different about the world in 1945 compared with 1918. For in 1918 the military state capitalisms that Bukharin analysed so succinctly were largely dismantled: in 1945 they were not. The Oakes/Vance thesis simply repeated in the early 1950s what it had first asserted of the war years of the early 1940s, and it was therefore open to the objection that if the various ruling classes were able to dismantle their military machines in 1918, why were they not able to do likewise in 1945?

Looked at from the point of view of the western economies considered purely on their own there was simply no answer to this question. The theoretical log-jam could only be broken once an adequate characterisation of socio-economic relations within Stalinist Russia had been given, and above all, of the way this affected the world economy. This, and with it the first theoretically sound analysis of the permanent arms economy, was provided by Tony Cliff in the late 1940s in his State Capitalism in Russia. It is important to stress this point, for many people, including some who ought to have known better, have seen that work as one restricted to a mere classification of Russian society as a species of capitalism, and ignored its dynamic implications for the world economy considered as a whole. Above all they have falsely assumed that the theory of permanent arms economy emerged without our own political tradition as an explanation first of all for the western part of the world economy, when in fact it arose in the explanation of Russia itself. [75]

For Cliff the role of the arms economy in the ageing capitalist system is to ensure that ‘a large proportion of the products is not exchanged, that is, not produced as values, but as use values’. [76] The state merely amasses military hardware which is neither consumed by workers not by capital. Hence armaments neither increase wages (and therefore the rate of exploitation of the working class remains high), nor do they add to capital accumulation (and therefore the organic composition of capital grows less fast and the rate of profit declines more slowly).

Cliff explains why:

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

And in an extreme capitalist crisis the arms economy can lead into an all-out war and ‘stoppage of accumulation and a destruction of capital on such a scale that accumulation becomes possible anew’. [77]

The Russian and American ruling classes did not ‘chose’ to create an arms economy because of its positive consequences in creating the longest boom in capitalism’s history. No choice at all was involved in the matter; rather, it followed from the specific features of the world in which they found themselves. American capital’s ability and willingness to compete commercially and financially in the world market was quite unmatched by that of Russia. On the other hand both countries had considerable military power. As Cliff put it 35 years ago: ‘the commercial struggle has so far been of less importance than the military’, and this leads to a situation where ‘the armament industry occupies a decisive place in Russia’s economic system’. This is because the decisions of Russia’s bureaucracy ‘are based on factors outside of its control, namely the world economy, world competition’, and because this ‘international competition takes mainly a military form’. [78]

The military state capitalisms of Britain, France, Germany and America in the First World War were thus dismantled after 1918 because within each country the capitalists – rightly or wrongly – felt strong enough to compete on their own (or, in the case of Germany, were not free to opt for a state capitalist alternative). [79] But in 1945 the situation was different. In Russia the counter-revolution of the bureaucracy in the 1920s had led to the consolidation of its rule in the 1930s as a collective presiding over a monolithic state capitalism. The continuation of its rule as a class depended on a continuation of (i) centralised administration as opposed to the price mechanism as the regulator of production, and (ii) its monopoly of the forces of terror and coercion which ensure that these central diktats were followed in practice. For the Russian ruling class, military power was all they possessed to defend themselves against western capital. For the American ruling class this fact, in its turn, implied the need to supplement their financial and productive power with a military power that was equivalently overwhelming.

With this in mind it now becomes much easier to explain the first Cold War. First of all there is the general historical background that we have discussed above. This reveals how the essential war aims of both Russia and America were thwarted by the other and explains why it is useful to see the first Cold War as the final act of World War II rather than the first act in the build-up to World War III. Secondly there is the existence of the world economy, which forces the Russian ruling class to compete with the ruling classes of the west. Thirdly there is the internal structure of Russian state capitalism – the fact that it is centrally administered, that the means of production are owned by the bureaucracy (but owned collectively, as a class, not individually), that it is technologically much more backward than the west – all of which force it to compete at a military level first of all. These considerations suffice to explain the unique phenomenon of a militarisation that takes place both in peacetime and in conditions of a huge economic upswing rather than a capitalist crisis.

The difference between Cliff’s and Bukharin’s theories needs to be stressed. Bukharin’s theory starts from the world economy in crisis and proceeds to explain imperialism and, with it, state capitalism, on the one hand, and world war on the other. Cliff’s theory, by contrast, while tracing the origins of state capitalism in Russia to the historically exceptional circumstances of a successful counter-revolution by the bureaucracy, and its consolidation to the world crisis of the 1930s, nevertheless explains its post-war form in terms of military competition within the world economy during a quite unprecedented period of upswing. In short while Bukharin was able to show how crisis and state capitalism gives us the arms economy, Cliff, in his turn, was able to show how economic upswing and state capitalism gives us an arms economy too.

When – and only when – this has been accepted, does the first Cold War become explicable. From this point on one can begin to explain the effects of the permanent arms economy on prolonging and extending the post-war boom, the function that it had in this process. But from the function alone one cannot infer the reasons why the ruling classes either took that course to begin with, or, for that matter, why they persisted with it. Without the theory of state capitalism, then, the theory of the permanent arms economy cannot stand up properly.

In the 1950s and 1960s the theorists from our own tradition – particularly Cliff and Kidron – began to develop some of the consequences of this understanding of the world economy (and the role of Russia within it) for the western economies too. [80] They concluded that the arms economy contributed to the boom in the following ways:

  1. It ensured that surplus value that might otherwise have contributed nothing to the expansion of production (as happened in the 1930s) was actually put to work. In so doing it prevented any sudden reversion to a crisis of under-consumption.
  2. But at the same time it ensured that that state-induced armaments investment did not eat into future possibilities for capital earning adequate rates of profit. It neither increased workers’ real wages, nor did it add to the size of the capital stock in the non-arms sector of the economy (and therefore did not force down the rate of profit through forcing the same quantity of surplus value to be divided among a larger quantity of capital stock).
  3. Although paid for out of the surplus value that would otherwise have ended up in the capitalists’ pockets, it enforced similar costs on a significant number of the major eastern and western capitalist countries and thus ensured – to a degree and for a time – that the participants did not lose out commercially from the costs of the arms economy.
  4. Because much of the money that went on the arms economy went into research, a technological spin-off occurred which enabled the rate of exploitation to increase even while workers were experiencing real wage rises. Even when workers’ living standards were rising, therefore, their productivity was rising faster still and this meant a larger proportion of the working day went into producing surplus value for the capitalists. The rate of exploitation went up, partly or wholly compensating the capitalists for the costs of the arms economy.

The theorists of the permanent arms economy made a number of predictions on the basis of this theory. They argued that it could lead to a boom of unprecedented length and one which would expand the forces of production on a world-wide scale to an unprecedented level. They were quite right. Even in the already industrialised Atlantic economies there was considerable expansion in the GNP in the years 1940–74. The most sluggish of the lot, Britain, doubled its output; and the others expanded to between three and five times their previous output. Elsewhere the results were even more dramatic. Russia’s output went up seven times, and in Japan and the newly industrialised parts of Asia and Latin America it went up ten or twenty times.

The permanent arms economy theorists also argued that under these circumstances the organic composition of capital would rise only very slowly, and therefore the rate of profit would also only fall very slowly too. Here again they were quite right. Until the latter part of the 1960s – by which time, as we shall see below, armaments were occupying a significantly smaller proportion of the national economies of the major protagonists than before – both the organic composition of capital and the rate of profit remained within quite narrow limits. [81]

Finally they argued that the arms economy could only temporarily stabilise world capitalism; that the pressures on the rate of profit to fall were being offset only temporarily and only partially. Furthermore they argued that the arms economy would make the crisis when it came, that much more intractable. It would have worked against the restructuring of capital within the boom period, thereby making the task a more serious one once the boom faltered. The prospects for crisis, once it came, were therefore for deep and extended crises. Under these circumstances, on the one hand a cutback in the armaments sector would precipitate a serious crisis of overproduction; on the other hand its extension would at that point merely eat further into falling profit rates.

Although the theory was too often presented in an ad hoc manner which obscured its roots in both the Marxist theory of crisis and the theory of state capitalism [82], and although it missed some of the more concrete consequences that would follow from the arms economy [83], its overall explanatory power cannot seriously be doubted. [84] Certainly no other alternative came near to providing a Marxist understanding of the economic background to the whole of this period.

From the Hungarian revolution to the Cuban missiles

At an economic level the years of the 1950s and early 1960s were thus ones of continuity rather than of sharp change. But at apolitical level the complex set of circumstances that gave rise to the first Cold War gradually began to change.

If the six years from 1950 to 1956 were the high point of the first Cold War, the next six, 1956 to 1962 considerably modified it. Although imperialist rivalry and military competition between the rulers of Russia and America has been a permanent feature of the post war world, it became clear during this period that each superpower in fact accepted the existence of other other, and each came to accept, however grudgingly, its own share of the carve up of the world that followed World War II.

This was expressed most clearly when the Hungarian revolution in 1956 was crushed by Russian tanks and half a million troops. In spite of the intentions of NSC 68, no move was made by America to rollback’ the Russians, to apply military pressure elsewhere, to curtail trade or financial connections. There was no long-term increase in armaments expenditure by America, no increased escalation in the building of new weapons systems, no expansion in the number of the CIA sabotage teams who had been parachuted in to ferment trouble among Russia’s national minorities since the late 1940s. On the contrary, the trade and finance links (small though they were) went on increasing slightly after 1956, the number of sabotage agents seemed to decline somewhat, and, crucially, arms spending went on falling throughout this period, with only the slightest hiccup of a temporary increase in 1957 before resuming its downward path again. [85] The difference between this reaction and the response 23 years later to the Afghanistan invasion is an obvious and immediate one. [86]

Even the event that seemed to bring the superpowers nearer to the brink of a ‘hot’ war than any other event since 1945 – the Cuban missiles crisis of October 1962 – ultimately proved the same point. For it led to a recognition by the Russian ruling class that it could not get away with establishing the same sort of nuclear base in America’s backyard that the American ruling class had itself been maintaining for years in Russia’s own backyard (in Germany, Turkey, Iran etc.). And it led in its turn to the American rulers conceding that they would not continue to use overt military intervention to destroy the Castro regime.

The result of all these events was to establish a comparatively stable and mutually accepted division of the world into spheres of influence. If the process through which this stability was created was a terrifying one, with the threat of nuclear destruction ever present, and if the reckless indifference of the Kennedys and the Khrushchevs to the fate of the hundreds of millions of lives they were using as pawns in their game was a moral outrage, the fact remained that in the aftermath of their games of nuclear chicken there was an unmistakable trend in world politics towards an accommodation between the superpowers, towards a mutual acceptance of the rights of the other power to rule.

For the rulers in Moscow and Washington, and the class they represented, this made a lot of sense at the time. The world economy was expanding fast, and within it there were plenty of opportunities for all capitals – state or private – to grow without needing to plunder other capitals. Each capital could expand through the rapid increase in the size of the workforce or in its productivity, and the major world powers ensured that both took place.

Russian state capitalism was growing at roughly 7% per annum in this period, but more than 4% of this growth was provided by the expansion of the workforce as it took in those unemployed (or underemployed) within the rural economy. [87] The rest of its industrial base was very backward and undercapitalised, and it was easy to expand productivity by simply increasing the extent of its mechanisation during those years. [88] For American capital too the prospects for growth were good. The domestic workforce was still growing quite fast (an appreciable proportion of it coming from immigration) and abroad American multinational capital was beginning to earn large profits from its overseas operations. [89] Starting from much higher levels of productivity initially, less of its growth came from this direction, but this did not impede its overall performance. Furthermore even the weakest economies, like Britain’s, still managed a real growth figure of at least a couple of percent per year in this period.

In such periods of generalised capital growth, the existence of any one national block of capital is not generally threatened by another. There is no need for a life-and-death struggle with a rival national block of capital in order to survive. The military forces of the state might be used to threaten and cajole, to secure marginal advantages here and there, but it will not be worthwhile for them to be used when the risks of a real hot war are high – particularly if that war were to take on nuclear proportions.

It is in this light that the Cuban missile crisis has to be understood. It was not that Kennedy believed that the installation of the missiles would sound the death knell of American capital, nor that Khrushchev believed that without them the same would be true for Russia. Rather, each took up a position that it was well able to retreat from. The danger came from the highly accident-prone nature of the game they were playing, not from the necessity to use military force to inflict a decisive defeat on the other.

The emergence of ‘detente’

The Cuba crisis ended with the installation of the ‘hot line’ between Washington and Moscow; and from then until the end of the 1960s what later became known as ‘detente’ gradually emerged to define the public face of the relations between the two. The period of that transition to detente during the middle 1960s consisted of several main features.

Firstly the recognition of the other superpower’s sphere of influence took on a more overt form. For the Chinese rulers at the time this implied an actual collusion of the two in ‘superpower hegemonism’. While this claim was exaggerated, it certainly is true that even while engaged in a permanent series of conflicts for power and influence around the world, the American and Russian ruling class at that time were very careful to localise the conflicts and to prevent them interfering with the slowly developing trade and financial links between Russia and the west.

Secondly none of these conflicts was allowed to alter the general trend towards decreasing armaments expenditure. Even though a permanent arms economy still existed with armaments occupying a percentage of the economy that was five or ten times greater than before the war, the overall tendency was for a slight decline in the arms sector. (With the advent of the Vietnam war – which involved more than half a million US troops – the trend was temporarily reversed in America, but it reverted again shortly after.) This downward trend characterised not just the two major superpowers, but all their allies in NATO and the Warsaw Pact as well. [90]

Thirdly, under the umbrella of the post-war arms-induced boom, there arose new challenges to both Russia and America as the links between them and the other members of their own camps began to weaken. Japan and Europe emerged as important trading competitors to the USA, cutting into its balance of payments figures and thereby weakening the dollar, which, in its turn, had provided the whole basis of the post-war western financial system. This process took place most rapidly in the vast outpouring of dollars that occurred during the Vietnam war in the late 1960s and early 1970s. In fact it reached such catastrophic proportions then that many sections of the American ruling class turned against the war by the late 1960s, arguing that ‘Washington could save the people of South Vietnam and Cambodia from communism only at a cost that made a mockery of the word “save”.’ [91]

In Russia the growth rate began to falter in the 1960s and produced some severe headaches for the ruling bureaucracy. By then the avenue of more extensive growth, gained by the productive employment of under-employed labour resources, had begun to dry up: a labour force that was being expanded at 4% per year in 1960 was expanding at not much more than 1% ten years later. More worrying still, there arose a chronic problem of flagging productivity: the increasing amounts of capital that were being built up per capita were not being reflected in increasing production. More and more capital was being pushed into the system, but less and less was coming out in expanded production. [92]

Several possible answers emerged or were implicit in the debate in the Russian economic press that took place in the 1960s [93]: (i) central administration of the economy could be relaxed to encourage local initiative, with greater flexibility in prices and for the payment of bonuses (the so-called ‘market socialist’ solution); (ii) greater emphasis could be placed on foreign trade, in particular to gain access to more efficient and technically advanced capital goods and machinery; and (iii) resources could be diverted from the arms sector to production and consumption. All of these answers however implied a loosening of ties between the central bureaucracy in the Kremlin and Russia’s satellites in eastern Europe and they all implied a degree of relative accommodation with the west.

In both Russia and America therefore, the need for a certain loosening of the structures inherited from the first Cold War of the early 1950s began to appear as the 1960s wore on. Militarily too, the overwhelming advantage in strategic nuclear weapons that America had enjoyed at the time of the Cuba crisis (and which had strengthened its determination to play nuclear chicken with the Russians) had more or less disappeared by the end of the decade, by which time each side possessed the means to deliver thousands of nuclear warheads on to each others doorstep. Each side, therefore, had a real motivation for at least regularising the military posture that they assumed against the other.

From the late 1960s until the middle of the 1970s – the high water of ‘detente’ – the atmosphere surrounding the competition between Russia and America became very different from that which pervaded the first Cold War period.

First of all there was an acceleration of the tendencies mentioned above. Progressively smaller proportions of the economies of Russia and America were devoted to armaments until the latter part of the 1970s. Trade links between the blocs developed extremely rapidly, especially between western Europe and the east (exports to Russia from West Germany thus expanded more than five times in 1970–75). And there was a massive expansion of western credit to the eastern European countries (though much less to Russia itself). From insignificant sums this credit grew to such an extent that in the later part of the 1970s countries like Rumania, Hungary – and above all Poland – were owing western banks many billions of dollars. [94]

And for the first time these growing ‘peaceful’ links acquired international public political recognition in a whole series of summit meetings and arms control treaties. The latter were particularly significant, for none at all were agreed to from 1945 until the signing of the Partial Test Ban Treaty in 1963. But from 1967 to 1974 arms control treaties followed thick and fast: the 1967 Outer Space Treaty (to keep outer space free from nuclear weapons), the 1967/68 Treaty of Tlatelolco (prohibiting nuclear weapons in Latin America), the 1968 Non Proliferation Treaty, the 1971 Sea-bed Arms Control Treaty (forbidding all weapons of mass destruction on the sea-bed), the 1972 Biological Warfare Convention (prohibiting the manufacture of biological weapons and entailing the destruction of existing stocks), the 1974 Threshold Agreement (prohibiting nuclear tests of more than 150 kilotons even when underground), and, most important of all, SALT-1, the 1972 interim agreement to fix a common ceiling on the numbers of anti-ballistic missile systems and inter-continental strategic missiles.

It is certainly possible to argue that these measures were largely cosmetic and that underneath the arms race continued as before. There is some truth in this view; after all each one of these measures did not threaten (and if anything enhanced) the military profile of the superpowers. Most of the test ban treaties were, after all, directed against newcomers muscling in on the preserve of the superpowers (as indeed were those agreements that prohibited weapons in certain new zones in the world). SALT-1 too, contained a large cosmetic element. This agreement limited the number of intercontinental rockets that Russia and! America could possess but still allowed for massive increases in the number of independently targetable warheads that could be carried on each missile. Indeed the period that followed the collapse of detente, the late 1970s, saw by far the greatest increase in the strategic warheads possessed by Russia and America that there has ever been – but all within the limitations of SALT-1.

Yet even if one concedes that this view is partly true one still needs to ask why there was a need to make things seem different. Why did Nixon sign SALT-1, and why did the US legislature ratify it? Certainly it diverted attention from Watergate and from the decline in the dollar, but one still needs to explain why was there a political mileage to be gained from peace when, only a few years later, Reagan’s election showed that at that later date there was an equivalently great mileage to be made from war.

The answer can only be that, while wanting to cover themselves with sufficient military power to guard against things going wrong, the rulers of both Russia and America felt it to be in their interests to reach some kind of an accommodation with the other side – to peacefully carve up the world’s riches between their respective ruling classes, rather than go to war over them. Certainly both ruling classes were becoming obsessed with the way in which their huge arms burdens were damaging productivity in comparison with the rapid strides being made elsewhere (particularly in Japan), and both were looking for a formula that would permit some of the resources that were then being squandered on arms to be used to jack up ailing levels of productivity. In America the balance of trade went into the red for the first time since the war in 1971, and in the next 3 years – faced with rapidly rising oil import bills – it went very heavily into the red. Nixon was faced with the need to devalue the dollar (thus threatening the financial stability enshrined in the 1944 Bretton Woods agreement) and to cut back on arms. The latter provided the background to America’s move in the direction of detente. [95]

The New Cold War

The problem that the Russian and American ruling classes faced was that ‘detente’ did not produce the required results. The late 1970s saw America being overtaken by Japan as the largest exporter of manufactured goods. American productivity also continued to lag still further behind its competitors in western Europe and the Far East, and even when profits did temporarily rise during the 1977-79 boomlet it did not lead to increased investment in American industry, but rather, via the increased activity of the international banks, into speculation or productive investment elsewhere. [96]

The Russian ruling class faced comparable problems – though they became apparent only somewhat later. Any solution to the problems of the Russian block countries would have required, as we have already noted above, an increasing participation in the world division of labour. Only this would have permitted the eastern ruling class to acquire the advanced technology that they needed to modernise their industry and agriculture. But the ruling class in the Russian block countries tried this avenue with disastrous results from 1975–81. In an attempt to create export-oriented industrial plant during the years of easy credit in the late 1970s, they borrowed heavily on the international finance market to purchase the capital goods required, hoping to benefit from the exports that would follow. Instead their heavy borrowing itself contributed to rising interest rates, and thereby to the slump of the 1980s. They were left with massively increased foreign debts and a collapse in the international market for their goods. Like every other unit of capital during an international crisis, the eastern state capitals found themselves to be simultaneously both cause and victim of the crisis. [97]

For both the American and the Russian block ruling classes then, detente had gone badly wrong. The hoped for gains in the domestic economy were just not taking place, and there seemed no prospect of this improving given the downturn in the world economy. To have altered this situation would have required Far Eastern wage levels and property values in America, and ceding control of large chunks of the Russian block state capitalist economies to international finance in the east. In both cases such a strategy would seriously have threatened the stable relations upon which each ruling class depends in order for it to rule, and was therefore out of the question.

In both America and the Russian bloc countries, the state overestimated its ability to control events. In the latter case for all its coercive power and for all its managerial power within its own confines, it was powerless to control the movements of capital and trade within the much larger entity of the world economy. In America’s case it was the internationalisation of US capital that made increased investment and productivity within America slip through its grasp. The 1960s and 1970s had multinationalised too much of America’s domestic industry and too many of its banks. Investment leaked out like a sieve to wherever it could earn highest profits, and only in certain sectors of the economy was that id America itself. [98] To have repeated the triumph of Japanese state capitalism, in which state agencies like MITI have been able to direct and channel both state and private funds to consciously worked out projects, would, at the very least, have required the dismantlement of much of this structure of US multinational capital – hardly a serious solution since world trade and capital flows could hardly function without it.

This state of affairs forced both the Russians and the American ruling classes to reassess their situation. The early post-war period in which each had been the predominant industrial power in the eastern and western worlds respectively was fast disappearing. Yet there remained in their hands certain strengths that they began to utilise in increasing quantities. Central to this reassessment was their own military power, which as yet remained unchallenged by any third party.

When Carter in the late 1970s reversed the downward trend in the US arms budget (followed in a more extreme way by Reagan) and began to adopt a much more aggressive posture towards Russia, this had several consequences.

It killed off much of east-west trade in a few short years-German] exports in particular, where machine tool manufacturers were particularly badly hit. Even where there were no formal bans, the threat of them was sufficient to kill off trade. [99] And although Reagan’s blunderings on the issue of the Siberian gas pipeline showed the limitations on the power of the American state, too much should not be read into his failure to stop the project. He has certainly succeeded in creating an atmosphere in which the earlier plans to build more pipelines (not to mention numerous other engineering projects) will now be cancelled. [100]

This policy, due to the low level of US-Russian trade in capital goods, has therefore largely been aimed against America’s European rivals – France, Germany etc. There is no doubt either that this policy will be reinforced. Reagan’s government has been pressings for the strengthening of Cocom – the western powers’ military) economic committee that monitors and controls ‘strategic’ trade with the east – a policy that is certain to be approved in one form or another by the west Europeans, and which will almost certainly lead to further losses for European capital engaged in engineering. [101] What will not suffer, however, is the export of American wheat to Russia – a testimony to the much greater weight that the American ruling class is able to throw around compared with its allies at the military/strategic level.

America’s much greater military than industrial strength (which contrasts sharply with the situation in the 1940s and 1950s) has several sources. For a start while price competition in the world market depends on cost efficiency, military competition depends largely on the absolute size of the armed power on each side. So while South Korean capital can effectively compete with US capital in shipbuilding, and Japanese and German capital compete with it in motor vehicles and precision engineering respectively; none of them has a large enough economy to match the armed power that the USA is able to put into the field – even if they were to gear up their economies to military production. America and Russia’s rulers might well be procuring their military forces in economically inefficient ways, but the absolute size of their economies ensures their preponderance in this field. It is this military preponderance which ensures that it is the American state that calls the shots within NATO, that American interests and personnel are the most influential in committees like Cocom etc., and therefore that the economic interests of American capital are furthered – as far as it is possible to do so – within them.

Furthermore, while America’s large increases in arms expenditures every year from 1977 are certainly important, they are only one part of a major change in military policy that has taken place since then giving the American ruling class a much more offensive posture and revealing the aim of being able to initiate and win a nuclear confrontation with their Russian rivals. The Rapid Deployment Force, the new generation of ‘first strike’ missiles (Cruise, Trident, Pershing II etc.), and the new targeting policy embodied in Presidential Directive 59 (implying a first strike by US missiles on the Russian missiles before they have left the ground) all point unmistakably in this same direction.

In the 1950s, the 1960s and the early 1970s, the burden of the arms economy was largely carried in the west by the United States (with Britain, then France and Germany carrying a somewhat lesser burden in comparison with their GNPs). And in the ‘detente’ period in particular few other countries could be induced to invest in military resources for the western alliance. The much more sharpened offensive profile of the USA in the latter part of the 1970s and the 1980s was designed to change all that too. The 1978 NATO meeting thus ended up with all its members committing themselves a minimum of 3% per year real increases in armaments. And more recently the Reagan government has been bringing enormous pressure to bear on the new Japanese prime minister to increase Japan’s military forces and to take greater responsibility for the defence of the whole north west Pacific zone. [102]

Very important things are at stake here. The nationalism of Japan’s state capitalism is well known in the commercial sphere, but Japan’s ruling class is well aware also of the significance of the military power that has under-laid the world economy upon which their export-led growth had depended. As the temperature of the military posturing of east and west hots up, it will be more and more difficult for the Japanese ruling class (which currently devotes only about 1–1.5% of its GNP to armaments) to resist the pressure to participate more fully in this process of militarisation. If they do participate it could bring about some significant developments that the American ruling class is seeking: (i) it would reduce the quits phenomenal percentages of the GNP that Japan has hitherto set aside for accumulation and which has been the most important; single factor underlying the growth of the Japanese economy; (ii) it might open up new markets for US military hardware: at the moment US productivity in the most important part of this area: (warplanes and missiles) is at least twice as high as Japan’s, so US; arms producers have hopes of sales in this, the one area where US technology still has a clear lead; (iii) it might provide dramatically cheaper sources for some of the inputs that the US defence industry needs now, or will shortly be needing – carbon fibre, fibre-optics and associated photon-operated microchips (crucial for missiles seeking to overcome the electro-magnetic pulses that would best encountered in a nuclear war), ferrite paint (crucial for the new radar-invisible ‘stealth’ technology) – in all these areas Japan is the leading producer.

How far these measures will enforce a greater sharing of the west’s arms bills, and how successful they will be in furthering the interests of American capital once that has been accomplished, is as yet difficult to assess [103], but it is certainly as plausible a strategy as any other one currently available for American capital.

While the lead in this return to militarism has been taken by the United States, the consequences it has had have affected both NATO and Russian block countries in a similar manner. The cut off in trade – and above all finance – from the west to the eastern European countries, has thrown the eastern European countries more fully back into the arms of the Kremlin. The process has been an uneven one however, with important exceptions; East Germany for instance has been able to maintain industrial exports, Bulgaria western tourism and Hungary agricultural exports and offshore financial operations – none of these three has therefore been drawn closer to the Russian ruling class since the slump of the 1980s began. But in the case of Poland, Czechoslovakia and Rumania the dependence has sharply increased. At the end of 1981 Russia was baling out Czechoslovakia and Rumania to the tune of $344 million and $460 million per annum respectively, in hard currency subsidies. Poland seemed likely to join the big league of Russian dependencies with no less than $1,900 million (alongside Cuba’s $1,860 million and Vietnam’s $1,040 million) in hard currency subsidies. [104]

The costs of maintaining this empire are therefore considerable. Nonetheless they confer considerable benefits on the Russian ruling class at a moderate price. In the case of Vietnam and Cuba this has been immediately cashable in military terms. For the cost of a ‘mere’ $1,000 million dollars the Russian ruling class has access to the 1-million strong armed forces of Vietnam for use in south east Asia. From the Russian point of view, the border war between Vietnam and China has been particularly important, for it has forced the Chinese ruling class to split its armed forces between the northern front (where they confront Russia) and the southern front (where they confront Vietnam), thus relieving Russian forces on the other side of the Chinese border. Given that total Russian armament expenditure is, very roughly, in the region of $150,000–300,000 million per annum, and that between a quarter and a third of this is earmarked for the far eastern front, this represents very good value. For less than a half of one percent of Russia’s arms bill, Russia has purchased a million-strong army that has halved the pressure on its eastern flank. In Cuba, an analysis of costs and benefits also reveals similar – if not such great – benefits. For 1% of its total arms bill it has purchased an effective army of 200,000 that has carried out military campaigns in Angola and Ethiopia, for instance, which, whatever else may be said of them, are of considerable value to Russian foreign policy.

In this light the subsidy that has been going to Poland is not a very large sum either, particularly in view of the alternative open to the Russian ruling class. Clearly the provision of money was part of a deal worked out with Jaruzelski during the preparations for his coup in December 1981, in which Russia agreed to fill in where necessary for the shortfall in western finance that might follow from the military coup. Had a Russian invasion been mounted instead, the costs would have been much greater. If it took armies of half a million to quell Hungary in 1956 and Czechoslovakia in 1968, it would have taken a force of at least twice that size in Poland in 1981. Not only is Poland’s population bigger than Czechoslovakia’s and Hungary’s combined, but the Polish workers’ movement was much bigger and much more deeply entrenched. By using the financial carrot the Russian ruling class incurred costs equivalent to less than 1% of its arms bill, but if instead it had used the military stick, would have absorbed fully 25% of its armed forces.

At the same time there was a considerable build-up of Russian military strength during the latter part of the 1970s. From a position where they had fewer than 50% of the American total of deliverable strategic nuclear warheads in the mid-1970s, they moved to near parity in the early 1980s (thus opening up for them too the opportunity to base their military strategies around ‘first strike’ policies). Similar increases appeared also in aircraft and helicopters, submarines and mobile land forces.

In the case of both Russia and America therefore, the New Cold War has presented their respective ruling classes with additional burdens, but, at the same time, it has also given them both on the one hand new opportunities to consolidate their relationships with their own allies, and, on the other hand, to dictate to a greater extent their allies’ military and commercial policies.

The New Cold War and the first Cold War

Looking at a blow-by-blow account of the 1970s therefore, it is a relatively easy thing to see why detente did not serve the interests of II the American and Russian ruling classes, and therefore why the reversion to a greater state of armed belligerence between them took place during this period. What this does not tell us, however, is how permanent a change is implied by this process (might it revert to a new period of detente as quickly as the New Cold War began?), or how far this belligerency might go (is it strictly shadow boxing or are we in the lead in to World War III?). To answer these questions we need to go beyond the immediate decisions and perceptions of the ruling classes involved to an analysis of the real world itself, and, above all, to an analysis of the present world crisis. The reasons for doing so should be obvious once we recall the fact that we have two models of capitalist rearmament in the 20th century – that of Lenin and Bukharin which is tied in to the theory of total war, and that of the permanent arms economy which is tied in to the opposite phenomenon of the first Cold War, capitalist restabilisation and peace.

If the New Cold War fits the latter model, if the present situation is just a reversion to the structures of the first Cold War, then two very important consequences follow. Firstly, although the sabre-rattling might unleash an accidental nuclear war, we can at least rest assured that, since it is not in the interests of either eastern or western ruling classes for these dangers to persist, they will be likely in the not too distant future to reach a new accommodation between themselves. Secondly, there will be no need to mobilise the working class to get rid of the risk of nuclear war – the natural functioning and expansion of the world system will do that for us instead.

But if the New Cold War’s rearmament pattern follows rather that portrayed by Lenin and Bukharin, the opposite will follow. The crisis will drive the rival ruling classes further and further along the path of headlong collision, and the only force capable of stopping them will be the only force capable of ending the system that drives them along this path – the working class itself.

The problem that we face, however, in assessing which of these theories is more appropriate to the world today, is the relative incompleteness of their formulation in the first place. As we noted earlier on, although Bukharin’s and Lenin’s theories presuppose a capitalist crisis brought on by a rising organic composition of capital and a falling rate of profit, neither of them explicitly bring this in to their actual analysis of the war itself. We would need to do this to fill in their account; only then could we compare the period before the 1914–18 war to that of the early 1950s, and then to the current period of the 1980s.

Fortunately this has been done already in this journal. In a series of articles which root the theory of the permanent arms economy much more satisfactorily within the theory of state capitalism, Chris Harman has recently both completed Bukharin’s analysis (by showing how the crisis of 1914 was brought about by the falling rate of profit), and at the same time he was able to show how the permanent arms economy succeeded in preventing such a fall in the 1950s and 1960s. The figures show, for instance, constant, or even rising rates of profit for American capitalism from 1950 to the mid-1960s, during which time the organic composition of capital remained low; followed by a rapid rise in the organic composition in the early 1970s, and as a result of this, a consequent rapid fall in the rate of profit. [105]

In other words, in its essential details the current period of rearmament resembles not the early 1950s, but rather the years preceding the 1914–18 war. We can therefore expect the continued crisis to push the ruling classes of the two superpowers (and their hangers on in the NATO and Warsaw Pact alliances) further along the road of all-out confrontation. In an important sense, therefore, it is inexact to refer to this period as that of the New Cold War. There is nothing intrinsically ‘cold’ about the nature of the confrontation that we are currently witnessing, quite the opposite is the case; we are seeing, rather, the accelerating war drive of ageing, militarised state capitalisms in crisis. The first Cold War was concerned with how the spoils of a war which had already been fought, and which had already restored the conditions for a renewed expansion of the system, were to be divided out. The Russian and the American ruling classes were not at that time driven into opting for a military solution, because there was, simply, no crisis to drive them in that direction. They could each go on expanding without having to plunder the other’s resources to do so. But the New Cold War is above all about the superpowers’ ruling classes feeling the need to do just that. That is why, if we are to understand the current period and formulate strategies within it, we have to understand the differences between the first Cold War and the New Cold War, and see above all that the latter is essentially about the crisis driving the rival ruling classes towards all-out war.

Yet it might be objected, how could it be rational for the ruling classes in Russia and America to go to war, when an all-out war would obliterate both of them? Surely they will hold back from pressing that fateful button? And isn’t this particularly true in the epoch of nuclear weapons? If so is it not disingenuous to bring in comparisons with 1914 (or even 1939)?

To assess these objections we need to remember several important facts about the world we live in.

The first is that what may be rational for all ruling classes as a whole, is by no means rational for any one of them on their own. In fact there is no such thing as ‘all ruling classes as a whole’, especially not in a world crisis which sharpens still further the competition between them, forcing them apart in a particularly extreme manner. Perhaps it was, in some supra-national logic, ‘irrational’ for the British ruling class to go to war in 1914; certainly the result of it all was their definitive losing out to the American ruling class in world power. But what was the alternative for them? Had they failed to go to war they would certainly have lost out to the German ruling class, a prospect that they relished even less. They had to choose between two options: (i) to permit German imperialism to gain world dominance through a drive to the Balkans, Turkey and the middle east, and to do so without a fight; (ii) to go to war, with the prospect of there being some chances at least of emerging strengthened (if for; instance Germany had backed off quickly). Under these circumstances they chose option (ii). However unlikely they were to win through it, at least the chances were better than the certain defeat that they faced through the former option.

The events that could trigger World War III might not be so very different. Should either the Russian or the American ruling class feel that their essential interests are being threatened by the other, then they might also be prepared to take a chance of a major show of force to intimidate their rival. Just as with Britain in 1914, the American or Russian ruling class might have to balance the certainty of them losing to the other if they do not fight, against the possibility of not losing if they do. The fact that the former option would leave the world intact while the latter might not, might well make ‘far sighted’ and ‘humanitarian’ members of the ruling class argue for the former. But for how long could they continue to persuade their more militaristic colleagues to agree? There is no simple answer to this question. All we can say is that the more severe the world crisis the shorter the time it would be before the balance tipped in the direction of the war mongers. No doubt the fact that a holocaust would result if the gamble went wrong would make the ruling class more circumspect than in 1914, but since their existence as a class depends on their success in their struggle against the ruling class of the other side, at some point or other they would be forced to take the gamble.

The situation is in many ways comparable to the question of safety in potentially dangerous industrial processes. In a period of capitalist upswing the ‘humanitarians’ on the board of directors, who prefer at least minimally adequate safety precautions, are more likely to get their way – if not for humanitarian reasons, then for the sound commercial reason that it is better to reduce present profits somewhat if this makes long term production (and therefore long term profits) more secure. But in a crisis profits are squeezed to the point where, for the weaker sections of capital, a different equation rears its head: either one continues adequate safety provision or it is cut back. If the former, then one faces the certainty of maintenance costs wiping out profits, and hence bankruptcy. If the latter, then, it is true, there is the chance of a major accident destroying the plant, but equally there is a chance of that not happening and the plant remaining commercially viable. In spite of the fact that cutting back on safety makes the plant more accident prone, it now becomes ‘rational’ for the management to choose this course of action – if their whole investment gets blown sky high as a result, well, that is just a chance that has to be taken. At chemical plants in Flixborough and Manchester in recent years we have seen the result of just this logic in operation.

The ruling classes of the superpowers will be forced to think more and more in a comparable manner the deeper the crisis becomes. The more their own economies become threatened at the commercial level, the more they will feel the needed to gain access to resources, markets and capital (and also prevent other ruling classes gaining access to them at the same time) by whatever other means there are at their disposal – including military means, as with the chemical plant manager, they will no doubt initially opt for safety; so long that is, as their viability is not threatened. But as soon as it is – and that after all is what is implied in periods of deepening crisis – they will be forced to take risks: to threaten and cajole, to engage in low key military operations to get their way first of all, but being prepared to escalate as the crisis makes the situation more and more desperate. In this reckless game, to win is to force the rival ruling class to step back, to lose is either to step back oneself or for neither to step back – and bring about the nuclear holocaust. As the crisis deepens it is inevitable that the dangers of the latter happening will very rapidly increase. So long as the capitalist system itself persists, ultimately, since crisis is endemic to it, this must eventually bring about a nuclear war if not now, then at some point in the future.

This is particularly the case now that the barrier between nuclear and non-nuclear weapons has become so diffuse. So long as nuclear weapons were essentially strategic weapons of last resort (as in the 1960s, for instance, when both the Russian and the American ruling classes possessed only a ‘second-strike’ capability), and at a tactical or a battlefield level the forces were basically non-nuclear, it was still possible to believe that the stocks of nuclear weapons would be used as little in the next war as mustard gas was in the last. But now the situation is quite different. The acquisition of first-strike capacities (and the implementation of first-strike military strategies through the new targeting policies of America – and presumably Russia too), the development of vast numbers of ‘battlefield’ and ‘tactical’ nuclear weapons (America had over 20,000 of these at the last count) – and their complete integration into ‘conventional’ weaponry – all these have abolished forever the days when nuclear weapons were simply weapons of ‘last resort’. Indeed it is now overt NATO policy not to attempt to match any purely conventional Russian thrust into Europe with conventional weapons alone, but immediately to escalate to the nuclear level. Any future total war between the superpowers would therefore certainly be a nuclear war.

The class struggle and the struggle against nuclear weapons

Those who argue that the Bomb is a human issue and therefore not a class issue have therefore got it seriously wrong. Of course nuclear weapons do put all humanity at risk (apart, that is, from the really tiny numbers of the ruling class who will survive the holocaust in their deep bunkers) and the moral case against our ruling classes’ headlong dash along the road to nuclear destruction is a real one that has to be made. But having made (and constantly repeated) this moral case, we will then have to assess – in the coolest and most scientific manner possible – the best strategy for stopping this drive toward world war. To confine oneself to the world of morality, to what ‘ought’ to be the case, to ignore completely the question of how to win – is to indulge in the worst form of sentimentalism. If you really are convinced by the overwhelming strength of the moral argument against nuclear weapons, then the very least you will do is try and find out how to stop them, and then follow this up in practice.

As we have argued in this article, this means recognising that the roots of war lie in class society, and that the source of the current war drive lies in the crisis in the world capitalist economy. It also means recognising that the only plausible strategy for ending this war drive is to eliminate the system that gives rise to it. This system consists of ageing national or state blocks of capital which compete with each other – with whatever weapons there are to hand – for the share out of the surplus value that has been created out of the exploitation of the world’s working class. Take away the process in which this surplus value is pumped out of the working class, and you take away also both the possibility of the exploiting classes and also the competition between them – including the military competition that produces total wars.

The only plausible strategy for fighting against the war drive is one, therefore, which contributes to the struggle of the world’s workers against capital. The moral outrage against the bomb must be harnessed behind this struggle if it is not to be frittered away uselessly, leaving our nuclear-armed ruling class intact.

Yet this is a particularly hard message to get across in the present period. On the one hand we have had the spectacle of millions of people in Europe mobilised on the streets in moral outrage against our rulers’ drive toward world war. But on the other hand there has been a massive downturn in the only process through which these rulers can be ultimately threatened – workers’ struggles. There appears, therefore, to be no ‘natural’ connection between these two: those who become involved in the fight against nuclear weapons will by no means spontaneously gravitate toward the struggle of workers in other arenas – in places of work and so on.

If the links will not occur spontaneously then they can only be made inside people’s heads by carefully explaining where and how they exist. An understanding of capitalism as a total, world system will be an absolute prerequisite for success in doing this. This does not imply any specialised knowledge of military science or economics, but it does mean that one has to be able to see through the nonsense that the media (and also, unfortunately, some on the left too) push about capitalism being about ‘peaceful’ commerce, or about Russia being ‘socialist’, or at least intrinsically different from the capitalist west. Since Russia is, similarly, a contributor to the arms race, unless it is seen for what it is – a state capitalist society – it will be impossible to explain war as a product of capitalism, an impossible to present socialism as the answer not only to capitalism but to the threat of nuclear war too.

Convincing even a sizeable minority of those who have been mobilised by the threat of nuclear weapons that they can win only a generalised attack on the capitalist system that needs the weapons and only by directing this attack on its roots at the point production – all this will certainly be a major task for revolutionaries in the coming period. If it seems more modest and less spectacular than including a reference to rejecting Cruise and Trident in Labour’s election manifesto, then we can only reply that it is better to make small steps and stay on your feet than big steps which land you flat on your face.


1. See in particular C. Harman, Marxism and the Missiles, in Socialist Review, October/November 1980 and P Binns, review of Exterminism and Cold War, in Socialist Review, February 1983.

2. B. Malinowski refers to the general consensus among anthropologists on this point in his A Scientific Theory of Culture (New York 1960), pp. 215–16.

3. Cf. K. Marx, Capital, vol. 1, chapter 26.

4. Ibid., chapter 27.

5. Marx refers to ‘competition on the world market’ as ‘being the basis and the vital element of capitalist production’, Capital, vol. 3, Moscow 1962, p. 109.

6. R. Hilferding, Finance Capital.

7. Karl Kautsky’s position was spelt out in out in a number of articles in Neue Zeit in 1914–15.

8. Perhaps Trotsky’s most important contribution to Marxism was his theory of permanent revolution, a theory which crucially depends on the world economy as its starting point (Cf. Alex Callinicos’s article on it in International Socialism 2 : 16, Spring 1982). Rosa Luxemburg’s theories are also based on the same assumption (Cf. her The Accumulation of Capital, London 1963, chapters 3–9) as is Lenin’s Imperialism: The Highest Stage of Capitalism. It is, however, more clearly articulated by Bukharin in his World Economy and Imperialism and his Economics of the Transformation Period, New York 1971. (The former work appears in English with, as Mike Haynes points out in a forthcoming book on Bukharin, the mistranslated title of Imperialism and World Economy, London 1972).

9. N. Bukharin, Imperialism, op. cit., pp. 123–24.

10. Ibid., p. 119.

11. Ibid., pp. 53–54.

12. Ibid., p. 53.

13. Ibid., p. 125.

14. Cf. in particular K. Marx, Capital, vol. 1, Moscow 1961, pp. 626–27.

15. Cf. K. Marx, Capital, vol. 3 (op. cit.), p. 429, and Engels’ comments on this point on pp. 428–29.

16. N. Bukharin, op. cit., p. 37.

17. This induced a number of German and American theorists at the time to believe that economic development would imply much more autarchic and ‘nationalist’ economic policies (in the case of Walter Sombart in Germany, for instance, this turned his ‘socialism’ into extreme pro-imperialism in the 1914–18 war). The purely temporary nature of this phenomenon is well explained in C. Harman, The crisis last time, International Socialism 2 : 13, Summer 1981, in particular pp. 4–5.

18. N. Bukharin, Imperialism, op. cit., pp. 41–44.

19. Figures quoted in C. Harman, The crisis ..., op. cit., pp. 3–4.

20. Figures quoted in M. Kidron, Imperialism the Highest Stage but One, International Socialism (first series) No. 9, 1961, p. 18.

21. Cf. S.H. Holbrook, The Age of the Moguls, London 1954, pp. 61–130.

22. Cf. E. Hobsbawm, Industry and Empire, London 1969, p. 129.

23. For the most complete exposition of Marx on this point cf. C. Harman, Marx’s Theory of Crisis and its critics, International Socialism 2 : 11, Winter 1981.

24. Henceforth this ratio will be referred to by its Marxist name – the organic composition of capital.

25. This point is developed at some length in M Haynes’ forthcoming book on Bukharin mentioned above.

26. From the fall of France in 1940 to its re-invasion in 1944, a total of only eight German divisions were employed in active service on the entire western front (including North Africa, Greece, Italy and the whole of northern Europe) in comparison with the one hundred and ninety two that were hurled at Russia during this period. But even at the most successful points in the German military advance (in the Summers of 1941 and 1942) when large parts of the Russian army had been smashed, the Russian armed forces were still more numerous, with more tanks and aeroplanes than their German counterparts.

27. By the end of 1943, for instance, the American shipbuilding industry was turning out more Liberty ships than the number of torpedoes and submarines that Germany was able to turn out against them.

28. Cf. L. Woodward, British Foreign Policy in the Second World War, London 1962, p. 241.

29. Cf. C. Harman, The crisis last time, op. cit., pp. 13–21.

30. The most thorough and best documented account of the policies and strategies of the American ruling class is to be found in G. Kolko’s The Politics of War (London 1969).

31. Ibid., pp. 280–286.

32. Ibid., p. 23.

33. Woodward, op. cit., p. 241.

34. W. Churchill, The Second World War, vol. 5, Closing the Ring, London 1952, pp. 44–45.

35. Ibid., pp. 458–60.

36. Kolko, op. cit., pp.64–69.

37. Churchill, op. cit., pp. 463, 465–67.

38. Churchill, op. cit., vol. 6, Triumph and Tragedy, London 1954, p. 610.

39. Kolko, op. cit., p. 141.

40. Cf. ibid. on France (p. 65), China (p. 268) and the United Nations (p. 277).

41. Woodward op. cit., pp. 402–03.

42. The willingness of the Italian Communist Party to collaborate with such a policy – irrespective of the wishes of Russia – is stressed by Kolko (ibid., pp. 57, 62–63).

43. Cf. ibid., p. 284.

44. Cf. the discussion that follows below on Poland in the latter 1940s.

45. Most members of the American ruling class at the time were well aware, of course, that the ‘open door’ policy was one designed to help their interests and therefore also to hinder those of other ruling classes throughout the world. Cf. in particular the way in which Stettinius, Truman’s secretary of state, formulated the matter, which is quoted in Kolko, op. cit., p. 167.

46. Cf. H.U. Faulker, American Economic History, 1960, pp. 603–609

47. Ibid., pp. 725–728.

48. So long, of course, as that aid was tied to the purchase of US produce (cf. Kolko, op. cit., pp. 255–56).

49. A. Nove, An Economic History of the USSR, London 1969, pp. 287–293, 313–315.

50. Kolko, op. cit., p. 124.

51. Ibid., p. 141.

52. A. Rapoport, The Big Two, Indianapolis 1971, p. 89.

53. Ibid., p. 90.

54. G. Alperovitz, quoted in ibid., pp. 88–89.

55. Molotov’s shocked reaction to this is recorded in ibid., p. 91.

56. Cf. in particular J.W. Spanier, American Foreign Policy since World War II, New York 1962.

57. Cf. Y. Gluckstein, Stalin’s Satellites in Europe, London 1952.

58. Rapoport, op. cit., pp. 88, 148–49.

59. Ibid., p. 103.

60. It is important to remember however, that the conditions of Lend-Lease restricted British exports quite considerably at this time.

61. A.D.H. Kaplan in The Liquidation of War Production, quoted in C. Harman, The crisis last time, op. cit., p. 25.

62. Ibid., p. 25.

63. The British war effort was paid for out of Lend-Lease and out of huge loans which were forced upon the sterling area countries. The pound sterling was therefore not convertible, requiring Britain to keep dollar reserves, the size of which was controlled from Washington.

64. Cf. R.M. Gardner, Sterling/Dollar Diplomacy: Anglo-American Collaboration in the Reconstruction of Multilateral Trade, Oxford 1956, pp. 41–42.

65. Cf ibid., passim.

66. H. Feis in Sinews of Peace, pp. 137–38, quoted in Kolko, op. cit., p. 258.

67. Business Week, April 7th 1975, quoted in N. Chomsky, Towards a New Cold War, London 1982, p. 106.

68. C. Harman, State capitalism, armaments and the general form of the current crisis, International Socialism 2 : 16, Spring 1982, p. 49.

69. First made public in the Naval War College Review, May/June 1975, it is quoted in Chomsky, op. cit., pp. 21–22.

70. Quoted in Harman State capitalism ..., op. cit., p. 50.

71. Y. Polatyev & Y. Joffe, Peaceful Competition USSR/USA, published by Soviet Weekly as Soviet Booklet No. 102, January 1963, pp. 27–28.

72. A concise summary of this period is contained in D. Hallas, Building the leadership, International Socialism (first series), No. 40.

73. Cf. H. Draper’s reprint of this material in his A Permanent Arms Economy, Berkeley 1970. [Note by ETOL: This material can be found in the T.N. Vance Archive.]

74. In China ‘The government was particularly eager that the capitalists convert themselves into professional managers in the employment of the state. They could then not only continue to rule their enterprises, receiving a generous salary as employees of the state, they could also continue to receive interest and dividends on the capital invested in their former enterprise. By 1960, there were still some 300,000 merchants receiving interest on trading organisations, and an even larger number of capitalists in the same position.’ (N. Harris, China and World Revolution, International Socialism (first series), No. 78, p. 18)

75. We have M. Kidron in mind here. Having made important contributions to the development of the theory itself, he later on rejected the theory in a manner which made one wonder how deeply it was understood in the first place. His positive contributions are contained in his articles International Capitalism and A Permanent Arms Economy in International Socialism (first series), nos. 21 and 28, and his later rejection in Two Insights Don’t Make a Theory (ibid., no. 100). Kidron’s position, and in particular his misunderstanding of the source of the theory of state capitalism, is discussed in some detail in an unpublished paper by P. Binns in 1977 entitled The Arms Economy and the Rise of State Capitalism.

76. T. Cliff, State Capitalism in Russia, London 1974, p. 232. One does not have to share Cliff’s view that armaments are not produced as values in order to accept the essence of Cliff’s argument. As we shall see below, whether or not they are produced as values, they fail to play a role in the reproduction either of labour power or of capital, and therefore the same consequences follow as if they were produced as use-values only.

77. Ibid., p. 231.

78. Ibid., pp. 209–13; T. Cliff, Rosa Luxemburg, London 1959, pp. 81–85.

79. At the time of course, they were still looking very nervously over their shoulder at revolutionary Russia. But here the threat was from what their own working classes might do having been inspired by Russia; it did not come from any commercial threat that Russia was able to pose at the time to European and American industry. In fact Russia’s industry – starting off to begin with from a much lower baseline than the western capitalist countries before 1914 – was in any case quite literally decimated by the war and the western blockade.

80. Cf. the Kidron articles mentioned in note 75 above, and also T. Cliff, A Permanent Arms Economy (1957), reprinted in A Socialist Review, London 1965.

81. Cf. C. Harman, State Capitalism ..., op. cit., p. 42.

82. Particularly in the Cliff (1957) article mentioned in note 80 above.

83. For instance none of the theorists of the 1960s fully appreciated the extent to which the rising organic compositions of capital would be accompanied by structural change within the system. Perhaps they should have seen the way in which some of the newer economies, relatively unencumbered by arms burdens themselves (particularly in the Far East), could increasingly emerge as the focus for capitalist production on a world-wide scale – but the fact remains that these implications of the theory of the permanent arms economy were never fully drawn out at the time.

84. Cf. the discussion in C. Harman, State capitalism ..., op. cit. However, in that article, Chris Harman fails to mention the massive impact that the rise in productivity had in cheapening the costs of labour – and therefore increasing the rate of exploitation of the working class – thus offsetting the tendency for the rate of profit to fall in the 1950s and 1960s. Instead he refers to the ‘von Bortkiewitz’ effect as the explanation for this. But the latter (which Chris Harman does not attempt to quantify) is far too slight to bear the weight that is here being thrust upon it. We shall not attempt to explain how exactly it functions here (but it is well explained in C. Harman, op. cit., and in his Marx’s theory of crisis and its critics, International Socialism (2 : 11)). However it relies upon relative price changes that are brought about by differences in the organic composition of capital in the arms and non-arms sectors of the economy respectively. But nowhere (not even in America) in the west are arms procurements more than 4% of the GNP. Even if the organic composition in that sector were twice as high as in the rest of the economy, it would still only have a negligible effect on average prices. At a generous estimate it would contribute to a once-and-for-all reduction in the price of the factors of production of around 2% – a figure that is smaller by a factor of ten or hundred than that contributed by productivity rises after 1950 – even in the most sluggish of the post war economies like those of Britain and America.

85. Cf. E. Mandel, Late Capitalism, London 1975, p. 276 for the statistics.

86. Perhaps to refer to American rearmament as a ‘response’ to Russian move into Afghanistan is a little inexact. As Chomsky (op. cit.) points out, the Russian invasion was used rather as an ex post facto justification for moves that the American ruling class were already engaged on.

87. According to Russian official figures, the growth rate was around 9% in this period. But different western sources (cf. Grossman in Problems of Communism, March 1976) give figures varying between 5% and 8%.

88. The full figures are given by the Russian economist and planner Khachaturov in Voprosy Ekonomiki 1973 : 3 (reproduced in Problems of Communism, XVI.5, 1973, p. 9).

89. Cf. R. Gilpin, US Power and the Multinational Corporation, New York 1975, p. 16.

90. Cf. E. Mandel, op. cit., p. 276.

91. Quoted in Chomsky, op. cit.

92. Khachaturov, op. cit., pp. 9–12; A. Zauberman, The Eastern European Economies, Problems of Communism, March–April 1978, p. 56.

93. Cf. W. Brus, The East European Reforms: What happened to them?, Soviet Studies, April 1979.

94. For the definitive account of Poland see part II of C. Barker & K. Weber, Solidarnosc: From Gdansk to Military Dictatorship (International Socialism 2 : 15, Winter 1981–2).

95. Cf. J. Steindl, Stagnation Theory and Policy, Cambridge Journal of Economics, March 1979.

96. Cf. Special Report: The Slow Investment Economy, in Business Week, 17th October 1977.

97. Barker & Weber, op. cit.; Russia itself, however, was more immune to these pressures on account of its size, and its hard currency-producing oil and gold extracting industries.

98. This point is developed in detail in N. Harris, Of Bread and Guns, London 1983.

99. Cf. the discussion in The Economist special report East-West trade: an end to business as usual (May 22nd 1982).

100. Cf. Ibid.

101. Cf. The Economist, 20th November 1982, pp. 25–26.

102. Ibid., 18 December 1982, pp. 11–12, 75–78.

103. The Economist, for instance, believes that the Japanese ruling class will prefer to build much of the military equipment themselves, even if initially at higher cost, so as to emerge eventually as a world leader in this area too. (cf. ibid., 6th December 1982, p. 66)

104. Ibid., 6th February 1982. But (ibid., 12th February 1983) the Russian subsidy actually delivered may have been considerably less.

105. Cf. C. Harman, International Socialism 2 : 13, op. cit., pp. 5–6 and International Socialism 2 : 16, op. cit., pp. 40–43, 62–64.

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