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Pete Binns

Revolution and state capitalism in the third world

(Autumn 1984)

First published in International Socialism 2:25, Autumn 1984, pp. 37–68.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Throughout the 1950s, 1960s and early 1970s, third-worldism was an important current on the left. It was a response to events of enormous significance; more than half of humanity threw off the shackles of colonialism or the remnants of the old pre-capitalist social structure after the Second World War. In many cases new leaders appeared speaking the languages of ‘socialism’ or ‘humanism’; they would harness the toiling masses behind the efforts of the state and state-planned economic growth would take place, eliminating poverty, exploitation, inequality and suffering. Some, like Mao in China, Castro in Cuba and Ho Chi Minh in Vietnam saw themselves as part of the orthodox Communist movement; others – Sukharno in Indonesia, Ben Bella in Algeria, Nkrumah in Ghana, Nasser in Egypt acknowledged a distinct, but closely related ‘socialist’ perspective.

We disagreed with both varieties of ‘socialism’. We argued that socialism is about self-emancipation, not doing things ‘on behalf of the masses; the agency for socialist change can only be the working class and not the existing state apparatus however benevolent (indeed we argued that the workers would have to smash that selfsame state apparatus); and we argued that the end result of third worldism – whether accompanied with or without the rhetoric of ‘socialism’ – would be state-capitalism not socialism.

Third-world socialism was, however, immensely influential in its time. This was hardly surprising; quite unprecedented gains took place in the third world between 1950 and 1970 – life expectancy outside Europe and North America went up to fifty years from a figure that was in the low thirties in 1950, starvation and famine were eliminated for thousands of millions in countries like China and the establishment of important new industries and the elimination of illiteracy seemed to be common trend in a majority of them.

Today however, third-worldist ‘socialism’ has undergone severe shocks and crises. Some of its most pervasive variants such as Maoism have all but disappeared, carrying with them the disappearance of tens, perhaps hundreds of thousands of the western socialists who followed them out of left wing politics altogether. Montreal, Milan and New York were cities which in the early 1970s could each boast of several thousand Maoists involved in active socialist politics at home. Today these activists have completely vanished and their organisations have collapsed along with them.

Certainly it would be wrong to explain the collapse of Maoism and kindred doctrines purely in terms of what has been going on in China or elsewhere. What we in the SWP have referred to as the downturn in working class struggle here at home has, of course, been an important factor in determining these events. All socialists have found the going much tougher since the mid-1970s; no organisation, in these circumstances, could expect massive growth. But while our own much smaller current has managed to sustain itself, and even grow a little, the Maoists and their ilk have fallen flat on their faces. Much of the responsibility for this comparative failure must rest on the fundamentally flawed vision of the road to socialism that these strategies involved.

The collapse of third-worldist socialism has not simply been a product of the economic failing of the third world as a whole, or even parts of it. It is certainly true that many countries that received starry-eyed attention in the 1960s – China, Cuba, Vietnam etc. – have experienced a number of acute economic problems more recently, but this hardly explains their fall from grace since. In the case of China and Cuba, relative to the world market as a whole, their economic performance has in fact improved in the past fifteen years.

Rather, it is what has happened to the latest generation of third world ‘socialist’ states that is in question. While China, Cuba and Vietnam went on to construct state-directed economies after their respective revolutions, the more recent examples – those which have taken place after the return of the world system to crisis in 1974 – seem to have exhibited a completely different pattern of development. In the southern African revolutionary states – Angola, Zimbabwe and Mozambique – and in Nicaragua, revolutionary regimes, often established after a long and bitter guerrilla war, have performed a remarkable about-face and have ended up with a series of very significant accommodations with western capital.

It is not a matter of this country or that failing to live up to the expectations of its followers. If that were all that was involved it might still be possible to retain the general strategy with a number of more minor qualifications (’If only the Gang of Four had won in China ...’, ‘If only Vietnam had not been so devastated by war ...’ and so on). It is more serious than that. The whole third-worldist socialist alternative has been posited on the assumption that whatever mistakes the leaders of these revolutions might have made, they were at least embarking on a course that was distinct from that of the western nations. And it is precisely that which the recent history calls into question.

This article is an attempt to answer the question why it is that countries that underwent revolutions in the latter part of the 1970s – Angola, Mozambique and Nicaragua in particular – have been unable to create an alternative path of economic and social development; why the classic state-capitalist road which in the past was taken by Cuba, China etc. no longer seems open in the way it did when the world economy was still participating in the long post-war boom; why, in spite of original intentions to follow such examples, they have not come to fruition.

The post-1974 revolutions:
(i) Nicaragua

The Nicaraguan revolution, which brought the present Sandinista regime to power in 1979, was an event of great significance. For many years previously it had seemed that Latin America as a whole was destined to lurch further and further to the right; extremely repressive military dictatorships had come to power in the southern cone smashing the workers’ movement in their path, first in Brazil, then Uruguay, then Chile and finally Argentina. Elsewhere a mixture of civilian and military regimes continued a depressingly familiar diet of traditional right-wing politics serving the interests of the major landowners and the multinationals, interspersed with the occasional nationalist or populist junta, which, however, was usually just as overtly anti-working class in practice. Not since the 1960s, when the success of the Cuban revolution inspired millions in Latin America had hopes been raised so high as when the Sandinista revolution sharply reversed this trail of defeats for the left.

Furthermore the Nicaraguan revolution was qualitatively different from the Cuban revolution in two crucial respects. It involved an incomparably higher level of struggle; the dictator Somoza’s National Guard did not fall apart in 1979 as did Batista’s army in Cuba in 1958, rather it required a mass insurrection that involved hundreds of thousands of people. Secondly, it was the workers in the cities who were the main protagonists of the Nicaraguan revolution. Until the workers became involved in the insurrectionary struggles the Sandinista guerrillas were both marginalised and containable by Somoza. [1] In Cuba however, while many workers approved of and consented to the new Castro regime in 1959, in no way did it come to power as a result of their struggles. On the contrary, what struggles did take place occurred hundreds of miles from where most workers lived – in the mountains of Oriente, the plains of Camaguey etc. The urban revolution was conducted by guerrillas who were not workers but predominantly de-classed intellectuals and peasants. [2]

As a result of a US-organised blockade which cut off the 80 percent of Cuba’s trade that had hitherto gone to the Americas, Castro was forced within two years of the 1959 revolution to transform Cuba into a state-capitalist country. Banks, industry and commerce were taken over by the state, to be followed by major tracts of land within the next two years. This did not come about as a result of a preconceived plan by Castro; on the contrary, faced with the American blockade there was little choice in the matter. While the Cuban revolutionaries originally conceived of their revolution as ‘neither capitalist nor communist’, but something in between, an ‘olive green’ revolution, the fact remains that the determination of American governments to destroy the regime – by diplomatic isolation, economic blockade and even military invasion – forced Castro to build a militarised state-run economy that survived through bilateral trade and aid deals with the Russian economy. [3]

In spite of certain differences between Cuba and Nicaragua, there was a fairly universally held belief in the early 1980s that this pattern of development could easily be repeated in Nicaragua. It was a belief which Mike Gonzalez also gave expression to in the pages of International Socialism as late as 1982. Concerning the future of the Nicaraguan revolution, he asked:

Who, then will be the beneficiaries? It seems unlikely that the old bourgeoisie will reassert themselves; many have already left the country and for the rest the prospects of recovery in the midst of a world recession that has brought even wealthy Mexico to the brink of disaster seem very remote.

This leaves the Sandinista state. Increasingly it will be forced to take upon itself the task of capital accumulation ... the consolidation of the state capitalist alternative becomes increasingly the likely outcome of the process. [4]

With the benefit of two further years of hindsight, we can now conclude that this judgement was at best premature. Five years after the revolution more than 60 percent of the economy is still in private hands [5], and the regime is doing everything in its power to placate the bourgeoisie. Members of Cosep (the Higher Council for Private Enterprise) previously imprisoned have been released and prosecutions of Cosep members for economic sabotage have been cut right back. [6] The political party (the Christian Democrats) and newspaper (La Prensa) of the bourgeoisie have been defended by the regime, and in spite of the difficult military situation, elections have been brought forward to permit the Christian Democrats to contend for office. [7]

Nicaragua’s ambassador in Washington, Antonio Jarquin, could quite plausibly complain recently that ‘it is very difficult to convince the White House that we are a coalition government with a public sector not very much bigger than the one you have in Britain.’ [8]

Why has this happened? The crisis in which the Sandinista regime found itself and which was seen as pushing Nicaragua further along the road to state capitalism has not gone away these past two years. On the contrary it has got worse. The foreign debt has grown to $3 billion [9] (more than $1,000 per head of the population, worse than that of Brazil) and the American blockade has tightened; the most recent exclusions now include the importation of bananas and landing rights for Nicaraguan airliners. [10] From 1981, largely under pressure from the American government, loans and aid from the major international agencies have also been withdrawn – $30 million from the Inter-American Development Bank in 1981-82, $2.2 million from the IDB in 1983 and $40 million from the World Bank in the same year. [11]

Worst of all have been the damaging effects of the war against the Sandinista regime carried out by the CIA and the ‘contra’ guerrillas. Up to 15,000 contras have been operating within the country, and quite substantial areas in the North, the South and along the Atlantic seaboard have been occupied by them. [12] They have killed more than a thousand people and wreaked many hundreds of millions of dollars worth of damage in sabotage on oil terminals, bridges and government installations over the past year. [13] Production of crucial crops like coffee – a major source of foreign revenue – have been very badly affected too; earlier this year there were reports of the war preventing the harvesting of as much as 50 percent of the crop. [14] On top of that the mining of all of Nicaragua’s ports by the CIA was preventing other export crops from being sold; whether or not that continues the additional insurance costs that shippers will have to pay will go on eating into the value of Nicaraguan produce into the foreseeable future. [15]

Not surprisingly defence currently absorbs fully a quarter of Nicaragua’s GNP and could well grow further. The Sandinista National Supply Commission’s Internal Report predicts that The aggression will continue, probably with greater intensity, damaging production and requiring greater allocations for defence’ and foresees no chance of repairing the damage to production ‘until the end of the decade.’ [16]

The Nicaraguan working class is being made to bear the continuing burden of defence, repairing a ravaged economy and debt repayment. Wages are to be frozen (including even the minimum wage of around £30 per month) while prices of basic commodities are set to rise. The National Supply Commission thus foresees stagnating or falling workers’ living standards for the rest of the 1980s. [17] Naturally enough, genuinely independent trade unions are completely incompatible with this state of affairs and the regime has instead created a monolithic state-run union federation, the CST (Sandinista Workers’ Central) to which no rivals are permitted. When workers have attempted to set up their own independent organisations they have been instantly crushed – last year for instance six dockworkers from the major port, Corinto, were jailed for the ‘crime’ of merely trying to remove their union from the CST. [l8] On the one hand, then the Sandinista regime owes its very existence to the mass workers’ struggles and insurrection that overthrew the Somoza dictatorship, but on the other hand it owes its future viability to the extent to which it can now incorporate and exploit the working class – and crush it when all else fails.

This abrupt change in its relationship with the working class is of central importance to socialists. But it is important to stress that the Sandinista government itself has never, in fact, claimed to be constructing socialism in Nicaragua. From the very beginning it has been quite clear that its goals were rather those of national economic development within the context of the world economy. Only the personal property of the Somoza dynasty was to be socialised and run, so it was seen, for the benefit of the nation as a whole. It was not the first stage of a movement against capitalism and in favour of the workers in general. Quite the opposite in fact; some of the strongest backers of the move to take over the Somoza-owned sector of the economy came from within the rest of the capitalist class itself. It was they who lost out when the Somoza regime just happened to award contracts exclusively with Somoza-owned companies – particularly in the several hundred million dollar bonanza that followed the reconstruction of the capital, Managua, after the 1972 earthquake, when the bourgeoisie actually took to the streets in protest against their own exclusion from the gravy train. [19]

Yet this lengthy tradition of the accommodation of the Sandinistas to the Nicaraguan bourgeoisie and the ease with which they moved against the working class in office is neither surprising nor unique. For parallels we need look no further than Cuba and Castro’s 26 July Movement up to 1960. But in the latter case the alliance with the old bourgeoisie was definitively broken thereafter. The working class remained excluded from power, but were now directly subordinated to the economic needs of the new state bureaucracy instead of the old bourgeoisie. In the case of Nicaragua as well all the preconditions seemed to be present for what Tony Cliff has called ‘deflected permanent revolution’ [20] – the rise to power of a state capitalist ruling class on the back of a popular revolution in which the working class has become subordinated to a layer of petty bourgeois intellectuals. Yet that is not what has happened so far. As we have seen, in spite of the severity of the crisis, both economic and military, that has beset the Nicaraguan revolution, this by now classic trajectory along the path of a ‘deflected permanent revolution’ towards state capitalism has itself been interrupted. It is as though the mass insurrectionary struggles of the Nicaraguan working class in 1978–79 have now been doubly ‘deflected’ – first of all in 1979–82 when the Sandinista regime rather than the workers took power, and once again in the period since then. The second ‘deflection’ has taken the Nicaraguan workers no nearer to gaining power of course; rather it has served to entrench the power of the old Nicaraguan bourgeoisie itself.

The post-1974 revolutions:
(ii) Mozambique and Southern Africa

The collapse of the Portuguese dictatorship in 1974 was a direct product of the growing strength of the liberation movements in its African colonies. In Angola, Guinea-Bissau and in Mozambique the military strength – and above all the popular base – of the movements fatally undermined the Portuguese empire. Frelimo’s struggle in Mozambique was of immense significance, not just in the old empire but elsewhere in southern Africa as well. It led on the one hand to the Portuguese revolution of 1974–75 itself, on the other hand to the successful guerrilla struggle of ZANU-PF in Zimbabwe. Mugabe’s bases were all in Mozambique and victory would have been impossible without them. Despite crippling attacks from the air and on land by the white settler Rhodesian forces, the new revolutionary government of Samora Machel in Mozambique kept on aiding the Zimbabwean guerrillas until final victory was achieved.

This level of international solidarity with other liberation movements was incomparably higher than, for instance, that of the Sandinista regime in Nicaragua whose support for the Salvadorian FMLN has rarely been more than tokenistic. [21] Furthermore it did not stop there. After the victory in Zimbabwe Machel went on to provide similar facilities for the South African ANC and in the early 1980s the ANC launched spectacular raids on key economic targets in South Africa like oil storage depots and refineries. For a certain period of time it looked to many commentators as if the liberation tide in Southern Africa was flowing irresistibly against the apartheid regime in Pretoria,and that the only question remaining was not whether the regime would fall, but when it would.

This impression was strengthened by the depth and extent of Frelimo’s revolutionary traditions. For more than seven years now it has officially classified itself as a ‘Marxist-Leninist’ organisation and, since the murder in 1973 of the founder of the PAIGC in Guinea-Bissau, Amilcar Cabral, it has clearly been the most radical of all the African liberation movements.

Frelimo’s radicalism was both ‘socialist’ and ‘internationalist’. The ‘internationalism’ was not however the internationalism of the world proletariat against their exploiters but rather the realisation that the strength of South Africa was too great for liberation to succeed purely within the confines of Mozambique itself. It implied an alliance with the rest of the black southern African states (including some with an already established record of severe repression against their own working class like Zambia [22]) as well as support for the ANC guerrilla struggle in South Africa itself. Frelimo’s ‘socialism’ fitted into this picture. It was to be achieved in two stages; peasant-based guerrillas would drive out the colonial (or settler) power, whereupon the state – now headed by the revolutionaries – would create the material base for ‘socialism’. This ‘socialism’ would be guaranteed by a rapidly developing economic base, controlled from below by ‘collective self-management’ by workers and managers, and from above by the Frelimo regime itself.

The recognition of the power of the apartheid regime was certainly realistic enough. Before Frelimo came to power the Mozambican economy relied heavily on its South African links; half a million tourists used to bring in $15 million each year in foreign revenue, and, much more important, 120,000 Mozambican workers were employed in South African gold mines, the great bulk of their wages being compulsorily remitted back to Mozambique. All but a small fraction of the goods trans-shipped through Maputo – black Africa’s largest port – and the revenues that went with them came from South Africa as well. The fate of Mozambique depended from the beginning, therefore, much more on the conscious actions of the South African state than on any other.

For Frelimo, breaking the power of South Africa implied firstly the attempt by all the black southern African states to co-plan their economies to substitute for the revenues and goods involved. But even in the very best of times this would not have been possible. All the black front line states have major problems of unemployment or underemployment; which amongst them could possibly take the services of 120,000 Mozambican miners, paying the state huge hard currency remittances in the process? Where would the 10 million tons of annual throughput needed to fully occupy Maputo’s port facilities be found amongst these states? The unfortunate fact was that the whole development of Mozambique had been posited on its links with advanced capitalist economies and it could not survive without them.

The fact that South Africa could (and indeed did) break the economic links; bringing economic disaster to Mozambique, meant that the strategy to be followed for liberation within South Africa itself was of critical importance. Unfortunately Frelimo seemed to assume that the same strategy that had worked in Angola, Zimbabwe and Mozambique – rural guerrilla warfare – could work in South Africa itself: hence the support for the ANC guerrillas. But there is a big difference between these countries. Even Zimbabwe, the most advanced of the black southern African countries, is a substantially rural nation. The same strategy could not possibly work in a much more developed and urbanised country like South Africa. Only a strategy that was based on the several million strong black South African working class could hope to succeed. And for that to take place a decisive break would have been needed from the politics of both Frelimo and the ANC; there could be no question of a ‘national liberation’ stage being completed before a ‘socialist’ stage began.

It was on this rock that the Mozambican road to socialism foundered. Guerrilla warfare failed to destroy (or even to seriously worry) the apartheid regime. South Africa counter-attacked economically and militarily. Direct economic sabotage coupled with such measures as re-routing trade away from trans-shipment through Maputo, cutting by two thirds the importation of Mozanibican miners and ending the remittance system for the rest, all had a devastating effect on the economy. The economic chaos created conditions favourable for active military intervention as well; even without the continued series of direct raids on ANC installations in Mozambique, South Africa was able to turn the tables on Frelimo by organising black counter-revolutionary forces into the National Resistance Movement (MNR). South Africa showed that far from being ripe for guerrilla incursions from the neighbouring black states itself, the reverse was the case. The Frelimo regime proved to be much more vulnerable to a reverse flow of the guerrillas. [23]

South Africa’s economic and military pressure coupled with a three-year drought brought the Frelimo regime to its knees. In November 1983 it admitted that already 40,000 had starved to death [24] (more recent estimates put the number at 100,000 [25]) and that the economy was in complete ruin. By March 1984 it surrendered to the apartheid regime at the historic meeting of P.W. Botha and Samora Machel in a railway carriage on the border between the two countries that has become known as the Nkomati accord. It led to the 800 ANC organisers being kicked out of Mozambique and the resumption of certain economic links between Mozambique and South Africa. The most notable of these is the contract to supply South Africa with £11 million of electricity per annum from the Cabora Bassa dam on the Zambesi, but it is also clear that the very economic foundations of the ‘independent’ and ‘socialist’ state that Mozambique was to have become are also being bartered away. South African companies are being invited to form joint companies with Mozambican state farms and even white Transvaal farmers are being asked to rent land in Mozambique. In return South African agreed to call off the MNR but at the time of writing this had not happened. The MNR had in fact increased its operations, threatening to cut off the capital Maputo and extending its activity to the whole country bar one province on the northern Tanzanian border. [26]

What has happened to Mozambique is in no way exceptional. The other major front line states to win independence through guerrilla wars, Angola and Zimbabwe have fared no better, though for quite different reasons.

Zimbabwe is much more developed and better endowed with resources than Mozambique. At first fight this might seem to make it less vulnerable to South African pressure, and in some respects this is indeed the case. The financial resources available to the state and its military regime are greater; so too is the infrastructure of command and communications, and the regime’s ability to co-opt and buy off opposition, while slight in comparison with its apartheid neighbour to the south, still obviously gives it more room to manoeuvre than has been available to Frelimo. But this strength is itself a source of an additional weakness.

The state’s income is dependent on two things; first of all the tiny group of 6,000 overwhelmingly white farmers who produce 77 percent of the agricultural produce on the market, and secondly foreign trade. [27] Expropriating the farmers has proved impossible. It would lead to a dramatic fall in marketable surplus as hungry peasants would grow crops relevant to their own immediate consumption needs rather than cash crops for the world market. As regards trade, the 14 years of illegal white settler rule 1965-79 produced a much increased dependence on South Africa that Mugabe has been unable to eliminate. Only 9 percent of exports went to South Africa in 1965; it rose to 22 percent in 1979, but has only declined to 18 percent in 1982 three years after independence. (Compare that with the mere 11 percent that now goes to the nine black southern African countries even after the most strenuous efforts to increase it). South Africa currently provides Zimbabwe with a quarter of its imports and trans-ships fully one half of all the rest of its trade. The import-substitution industries built up in 1965–79 are no exception to this situation; as finance minister Bernard Chidzero put it: ‘... many of our import-substitution industries ... depend on imported material or intermediate goods’ and are therefore vulnerable to a squeezing of the South African trade routes in exactly the same way as commodities that are produced by Zimbabwe for the world market. [28]

Mugabe’s government has therefore neither moved significantly against the white landowners nor attempted to do anything that might provoke South Africa into cutting Zimbabwe’s life-line to the outside world. In contrast with Mozambique whose very backwardness made such a policy feasible for a few years, the relative economic strength of Zimbabwe and its greater integration into the world market has, paradoxically, been the very feature that prevented such a policy being possible there. So unlike Mozambique, Zimbabwe has never allowed ANC guerrillas to establish bases on its territory.

Mugabe’s refusal to countenance any positive move against South Africa must also have been influenced by events in Angola. There South African troops have been in occupation in Cunene province in the south for several years. They have also provided finance, fuel, weapons and air support for Jonas Savimbi’s 20,000–30,000 strong Unita guerrilla army, which controls about a third of the country and which has succeeded in disrupting economic life in most of the rest of it, in spite of the presence of 20,000 or more Cuban troops providing garrisons in the major towns. [29] How long the South African or Cuban troops will remain is a matter for speculation. They may well depart if a deal over Namibia can be stitched-up. But whether or not that happens in the medium term there are only two real alternatives for the MPLA government in Angola. Unita forces are deeply entrenched in the country, they can continue to paralyse the actions and policies of the MPLA, progressively weakening its basis of support, or they can be included in a deal to construct a coalition government with the MPLA – one of the options that South Africa is thought to favour. Whichever alternative takes place it cannot include the original MPLA dream of state-owned and state-planned economic growth which will further the welfare of all Angolans.

Therefore in all three of the revolutionary governments that came to power on the back of mass popular movements in southern Africa – Frelimo, MPLA, ZANU-PF – the same thing happened. The original intention to follow the initial ‘national liberation’ stage with a ‘socialist’ stage of state-led economic growth fell flat on its face. The new regimes were just not capable of resisting the much greater economic and military power of the environment in which they found themselves. In the same way as the Sandinistas in Nicaragua, the southern African revolutionary regimes have played a double role. To begin with they deflected the spontaneous movements of peasants and workers away from creating their own organs of struggle and power, arguing that the new state apparatus in creating ‘socialism’ from above had rendered this unnecessary. Then, more recently, when faced with the complete failure of this strategy on the one hand and the demoralisation of the workers and peasants on the other hand, they came more and more to abandon this policy in practice, making greater and greater concessions to private capital at home and western business abroad. The revolutions that became deflected on to the state capitalist path to begin with, soon got deflected yet again. The capitalism remained but the ‘state’ part of it withered on the branch.

It is always possible to attempt to explain these events in Nicaragua and southern Africa in terms of exceptional conditions. Thus Nicaragua is peculiarly vulnerable to American pressure because of its proximity to the United States; Angola, Zimbabwe and Mozambique because of their proximity to South Africa coupled with the terrible effects of three years drought. All this is perfectly valid up to a point; there is no doubt that one reason why the CIA seems to have been more active in Nicaragua than in say South Yemen is its geographical location and much the same can be said for South Africa’s much greater involvement in Mozambique compared with further away Tanzania. But none of these factors adequately explain what has been happening.

Take the southern African drought for instance. Certainly it has been a very important factor in the collapse of the Mozambican economy and the consequent surrender to South Africa at the Nkomati accord, but it has had other effects as well. It affected the South African economy deeply too, driving Botha to peace talks just as surely as Machel. South Africa’s agricultural exports collapsed just at the point where new burdens had to be carried by the apartheid state; Botha’s recently approved strategy of buying off potential areas of opposition in the intermediate strata of the mixed-race and Asian communities require huge sums of money to make it work, sums that just cannot be be squared with a continual military presence in black Africa. [30] The Angolan war alone is costing millions of dollars a day; on top of that there is the huge cost of maintaining a 40,000 strong army in Namibia. [31] No wonder the South African treasury talks of ‘horrifying overruns’ on defence expenditure. With the drought, falling world gold prices, double-digit inflation and interest rates exceeding 20 percent it is no exaggeration for finance minister Owen Horwood to talk about it being the most difficult time for South Africa since the great depression. [32]

The drought therefore weakened both South Africa and the black revolutionary states on its northern borders. It can explain why Mozambique and South Africa were pushed into stitching up a deal with each other, but it cannot explain why that went along with the virtual abandonment of Frelimo’s earlier dreams of a state planned and directed economy within Mozambique itself.

The same applies to the arguments about the closeness of these regimes to centres of imperialist power. As the American invasion of Grenada showed, the military option obviously becomes more attractive the shorter the lines of communication. But one still needs to explain why when the relative economic and military strength of America was much greater than today and when the distances were insignificant – as with Cuba in the early 1960s – such pressure led not at all to the abandonment of the state capitalist road there but to precisely the opposite happening. In short, why did such pressure accelerate the move to state capitalism in Cuba in 1960–62 and at the same time de-accelerate it in Nicaragua twenty years later?

To answer this question it is necessary to turn away from the more recent examples of third world revolution and to look instead at the way in which these state capitalist alternatives worked in the past, at how the prevailing environment of the existing and already developed capitalist nation states affected this process, and finally at how the crises of 1974 and 1980 transformed this whole environment. The experience of the Eastern European countries from the 1930s to the 1970s is therefore crucial and it is to this that we now turn.

The Stalinist alternative: self sufficiency and import substitution

State capitalism in its classic and original form – Stalin’s Russia in the 1930s and 1940s – was based on the following argument: (i) that to remain viable and to defend its economy from Western capital, the state needed to be able to mount an effective military defence of its territory. This implied (ii) that a modern industrialised economy had to be created to produce the tanks, aeroplanes and skilled personnel involved; and (iii) that this could be achieved, but only if the state, cutting itself off from the rest of the world, marshalled the entire resources of the country and directed them towards the massive accumulation needed to complete this task. Whether any alternative path might have accomplished the same goals is an open question [33], but the fact remains that it did succeed and its success depended on certain key features.

First and foremost was Russia’s massive size and wealth, and its huge surplus agricultural population. Concentrating such resources in a country of hundreds of millions was bound to be more successful

than the comparable attempts that have been made since then in Albania, South Yemen etc. Even China, of the countries that have more recently taken the state capitalist road, was an incomparably poorer country in 1949 than Russia was in 1929.

Of crucial importance also was the relatively crude and unsophisticated nature of production in general in the 1930s. There was a far smaller number of different types of commodities included in the final consumption needs of the different classes at that time. Furthermore, to produce these commodities required, very often, far fewer components and subordinate production processes to manufacture them in the first place. [34]

What that meant was that in order to create a viable modern economy in the conditions of the 1930s, it was sufficient to concentrate on a few key areas – coal, steel, an infrastructure of rail transport, some relatively simple engineering plants and a machine tool sector that still operated on 19th century craft principles – all of them well within the capacity of a huge, resource-rich country that was easily able to feed itself even when tens of millions had been driven off the land and into the factories and mines.

If these factors made the autarchic economic policy of Stalin’s state capitalism possible, there were also other factors that precluded any other alternative development strategy from being put in its place. The 1930s were, after all, an epoch of crisis and slump in which production fell and world trade (particularly in manufactures) fell even more sharply. Industrialisation by means of an export-led development strategy would, in these conditions, have foundered on the rapidly-rising tariff walls and other restrictive trade practices that all the major capitalist powers were falling back into during this period. The older industrialised European powers – France, Belgium and above all, Britain – were able to erect tariff walls at the extremities of their own empires, Imperial Preference cushioning them somewhat from the severity of the slump. The newer industrial powers sought to develop their own internal market (America’s ill-fated Isolationism) or, when such opportunities were missing, were more and more forced to centralise economic and military power in the hands of the state and physically force their way into new markets (Japan in Manchuria, Germany throughout central Europe, Italy – quite unsuccessfully – in Abyssinia).

But for Stalin’s Russia neither alternative was a possibility during the first five year plans. The limits of the internal market when the overwhelming bulk of the population were impoverished peasants, and the threat to the continued rule of the bureaucracy if this should ever cease to be the case, were problems well understood in Moscow. [35] Furthermore, external aggression was completely out of the question. Russia was a vast country surrounded by more economically advanced neighbours, the imperialist alternative offered by the example of the fascist countries was an alternative that could be used against Russia by its neighbours, but not vice versa.

Finally, it is important to remember that international finance was much more rudimentary and suffered far deeper shocks in the 1930s than anything we have seen so far in the 1980s. Bankers had far more reason to hold back on foreign lending in general – let alone to a country like Russia. They were not interested in offering the carrot of foreign money to persuade Russia to participate in the world-wide division of labour; with the world economy heading increasingly towards a set of enclaves, each more and more protected behind tariff walls, and with international banking suffering even more acutely – huge banks going broke and so on – nothing could have seemed more remote than extensive development loans to permit Russia to export to the west.

If Russia was the extreme case, it still remains true that many of the factors that pushed Russia towards state capitalism in the 1930s were quite general ones of the period. They could be seen at work in many of the weaker economies of eastern and southern Europe and in Latin America. In Italy in 1933, for instance, a generalised commercial collapse in 1933 forced the state to step in; Mussolini created a giant state capitalist holding company – IRI – and the state capitalist sector of the economy was thereafter dominant, being responsible for more than half of all capital formation. [36] In parts of eastern Europe the tendency was even more marked. [37]

It is important to stress these points because the development of state capitalism in its classic 1930s Stalinist form was not just a product of the needs and aspirations of the bureaucracy in Russia at the time, but also of the economic and strategic position that they found themselves in within the world economy – conditions moreover that were never to repeat themselves after the initial period of post-war reconstruction ended in the 1950s.

Yet the world economy did not thereafter return to the situation of the 1920s or that prior to the 1914–18 war. Indeed in the post-war world, above ail in the 1950s, 1960s and the early 1970s, the use of the state to centralise capital and to push development forward, leapt ahead as never before – above all in the newly emerging third world nations.

National liberation movements in these years succeeded in freeing literally thousands of millions from the direct political yoke of the older imperialist countries. In south east Asia this happened in the world’s largest countries, China and India, as well as in Indonesia, Bangladesh, Pakistan, and other smaller countries. In Africa the whole of the continent to the north of the Zambesi followed suit. In the middle east too, with the important exception of the settler state of Israel, the same thing happened. Overall well over one half of the world’s population successfully ended the direct political rule of the imperialist powers in this period. Colonialism became reduced, with very few exceptions to the odd Puerto Rico, Hong Kong, Ulster etc.: tiny enclaves that remained as outposts of erstwhile colonial empires for unique historical reasons.

The role that the new regimes sought for the state in developing the economy was a very prominent one in virtually all these countries. Most advanced this strategy under the banner of socialism; In Nehru’s India it was secular socialism, in Nkrumah’s Ghana ‘African Socialism’, in Iraq ‘Baathism’ and in China ‘Maoism’. In India for instance, there were five and seven year plans quite consciously modelled on the 1930s Stalinist example, and the creation of large state-owned sectors of the economy – particularly in modern, capital-intensive industry – occurred almost everywhere. By the mid 1970s the state in Bangladesh was holding 85 percent of the assets of what it termed ‘modern industrial enterprise’; in Turkey the state was responsible for 40 percent of value added in industry in 1964; in Algeria the state moved from being the employer of 15 percent of the workers in industry, construction and trade in 1965 to 51 percent in 1972; and in Brazil the state became responsible for more than 60 percent of all investment by the mid 1970s. [38]

In other words the move to statisation was a thoroughgoing one throughout the world economy at the time. Most strongly marked in the newest and weakest economies of the third world, it nonetheless seemed to occur whether or not there had been a revolutionary regime to carry it out and whatever the ideology officially espoused by that regime. In fact it was not just in the third world that these processes were at work independently of the ideas of the governments involved but in the older western capitalist nations as well. As a study published in the mid-1970s concluded: ‘Although the nominally “socialist” nations (Bulgaria, East Germany, Poland, USSR and Yugoslavia) show a greater average degree of public ownership than the nominally “capitalist” nations, the range among nations with the same nominal system is sometimes greater than the difference between the averages for the two systems. Indeed several “capitalist” nations have a higher labor share in the public sector than Yugoslavia ...’ [39] In the third world the same pattern emerged, but the rate of growth of the public sector expanded much more rapidly in the years between the Second World War and the return of the system to crisis in 1974.

Yet these were the years of the post-war boom – the biggest and most sustained leap forward in the whole of capitalism’s history – and this immediately raises a further question. If we need to explain the classic paradigm of state capitalism – Russia in the 1930s – at least in part by referring to the world slump, the massive downturn in international trade, the curtailing of international finance and so on, then quite obviously very different forces must have been at work in creating and developing the state-led economies that were the product of the post-war boom in the third world. In short, if slump led to state capitalism in the 1930s, why then did boom lead to state capitalism in the 1950s and 1960s?

State capitalism, import substitution and the post-war boom

Part of the answer can be found in the nature of the boom of the 1950s and 1960s itself; it differed from earlier ones in capitalism’s history – like that of the 1920s for instance – in a number of important ways, above all in the post-war international order that was imposed after 1945. The massive strength of US capital, with more than 50 per cent of world manufacturing and finance at its disposal, was used to create the World Bank, the IMF, Marshall Aid and so on. These were sufficiently powerful inducements to gain general acceptance among the various national ruling classes for the rules of the General Agreement on Tariffs and Trade and other agencies, through which free trade and the free flow of capital were enforced.

The European ruling classes accepted this situation. Their industries were virtually completely destroyed by the ravages of war. Jettisoning their old empires was, by and large, a small price to pay for regenerating these depleted economies; and that, after all, was what was involved – without being able to use their colonies as cushions behind which domestic capital could be protected they were of little further use. [40]

There was another reason that began to appear more clearly during the 1950s and 1960s. The pattern of international investment and trade changed quite dramatically; before the war around 40 percent of world trade was in primary products – agricultural produce, fuel, raw materials – but by the end of the long boom this figure had fallen by a half. International trade became much less a matter of exchange between primary producers on one hand and manufacturers on the other, and much more a question of the mutual exchange of manufactures between relatively industrialised nations or parts of nations. [41]

This meant that international capital flowed increasingly from one industrialised part of the world economy to another; American capital, for instance, found many more opportunities for profitable investment in advanced Europe than in backward Africa. So too did the older European colonial powers, which, as a result, increasingly came to regard the remains of their imperial past as encumbrances to be got rid of.

The sources of investment changed as well. Instead of regenerating the stock market – which had provided the bulk of funds before the 1929 crash – the post-war boom was founded on ‘self-financing’ principles: new investment was provided out of the profits or assets that the corporation was able to get get together from its operations elsewhere. [42] Naturally enough this acted as an important factor in bringing together conglomerates, mergers etc.; the huge size of modern industrial operations and the difficulties of finding risk-free finance elsewhere pushed capital strongly in this direction.

A final factor was the dynamism and growth of the whole world economy. In the 1950s and 1960s virtually every national economy was growing; high fliers like Japan, Russia and Germany were doing so very rapidly with annual real growth rates of up to 10 percent, but even the dawdlers – Britain, Czechoslovakia, etc. – were managing the odd one or two percent as well. Best of all, these growth rates in many cases (Germany, Japan) were largely the result of higher productivity rather than the employment of more people at the existing level of productivity.

This is the economic context within which the various third world revolutions of the long boom – China, Algeria, Vietnam, Cuba, etc. – took place. It is a context that was shared by many other newly-emerging nations at the time; those that gained their independence without very much in the way of a struggle (like Nigeria and much of the rest of British Africa), those that had independence granted after the decisive defeat of a struggle for national liberation (Kenya, Malaya, Burma, etc.), and even those those that were independent to begin with (as in much of Latin America).

The absence of any significant and genuinely revolutionary socialist current on the international scene had fatal consequences for the development of these countries. The working class became trapped within the all-pervasive and mutually-reinforcing ideas of Stalinism and social democracy, in which ‘socialism’ was only conceivable as being introduced from above by a new set of benign and uncorrupt rulers. Disarmed and subordinated to the new strata of nationalist intellectuals, it was the latter and not the workers who thereafter determined the policies pursued by those regimes. The ‘progressive’ intellectuals would bring ‘socialism’ by extending the power – above all the economic power – of the state, and their initial success seemed at first to reinforce this strategy. In reality it was an illusion. Promoting the economic power of the state was not a socialist blow against capitalism, on the contrary it was cutting with the grain of the whole development of post-war capitalism itself, irrespective of the ideology of the leaders of these third world countries.

So in all of them there was, as we mentioned above, the same move toward statisation in this period, whether presided over by governments of the left (as in Algeria or Egypt) or of the right (as in Brazil or Argentina). This fitted in with the world economy in the long boom in a clear and definite way.

For a start international capital was presented with so many opportunities for profitable investment elsewhere that there was not much inducement to modernise backward rural economies in the third world.

At the same time, presented with the problem of investment, and development, the ruling classes in the newly emerging countries were forced in the direction of mergers and ‘self-financing’ to an even greater degree than in Europe and America. The weaker the local capitalist class, the greater was the pressure to merge and centralise their resources under the aegis of the state itself.

There was nothing qualitatively new about this. Already in the 19th century German capital was only able to emerge strong enough to compete with British capital by a massive centralisation of Capital through the banks and the active intervention of the state. In Japan the state has had to play an even more active role in funnelling resources into key developments throughout the 20th century. So when many third world nations tried to do the same thing through the nationalised sectors of their own economies after the Second World War, it was, in many respects, a continuation of a trend rather than a completely new phenomenon. Indeed it was a phenomenon that could be seen at work in Europe too; automobile production began to be undertaken by nationalised Alfa Romeo in Italy, nationalised British Leyland in Britain and nationalised Renault in France during the post-war boom.

The breakdown in the old colonial system – forcibly or otherwise – both permitted and required the new ruling classes in the third world to take on the task of capital accumulation through the state. Their optimism in their capacity to succeed may seem naive with hindsight, but so long as the boom persisted it looked like a viable option. As we have seen the conditions of the long boom were such that they permitted even archaic and inefficient capitalisms like Britain’s and Czechoslovakia’s to expand. Why then, could they not permit something even better for India, China, Brazil or Egypt?

The alternatives seemed clear enough. Development would come through self-finance or not at all, and the former would require, more often than not, the centralisation of capital in the hands of the state. When warned by some economists that such a process could not work because it contained no built-in processes of cost accounting and no built-in pressures towards the efficient use of resources, the reply seemed obvious enough. Better to have economic development than none at all – ‘efficient’ or ‘inefficient’.

But the question still remained about the precise development strategy that such forms of state capitalism were to be directed toward. The Stalinist model was, after all, one based on expansion of the economy through import substitution; indeed in a period like the 1930s in which world trade was contracting even more rapidly than world production, to have had a strategy of export-led expansion instead would certainly have resulted in disaster. But in the 1950s and 1960s the reverse was the case with world trade offering the prospects for more rapid growth than any single domestic market could possibly provide.

As a result a number of varieties of state capitalism appeared geared to export-led growth. In Brazil this occurred through a partnership between multinational companies and a rapidly expanding nationalised sector that squeezed the domestic private sector into comparative insignificance in the 1970s. [43] In Korea, multinational capital was excluded altogether; individual corporations were welded into a co-ordinated block by tight state planning and state-dominated finance. [44] And in between these two there appeared a number of other variants all more or less geared to production for export or the world market in general.

Nonetheless the very real differences in the future success rate of the ‘import substitution’ state-capitalisms and those geared to expansion through exporting to the world market was not at all apparent during the period of the long boom itself. At the time right wing economists in the west equally condemned both varieties for their use of the state. Both types, it was argued, subverted the laws of the market; both were therefore ‘irrational’, and therefore neither could provide a model for genuine economic development.

The state capitalist countries and the crisis

Under conditions of more or less continual boom, economic growth – and the increased wages and jobs that go with it – can be preserved relatively simply. So long as a mechanism exists to make sure that profits are ploughed back into investment that expands production, the rest is more or less guaranteed. In the boom virtually all units of capital are profitable; keeping them all in operation will therefore serve to expand the capital stock as a whole. In such conditions the sorts of state capitalism that were created in Russia in the 1930s and in Eastern Europe in the 1950s can work quite well. In fact they possess two distinct advantages. Firstly, in the pure Stalinist model, expanded investment is more or less guaranteed; the state administrators decide in advance how much of the economy to devote to the consumption needs of the working class and how much they are able to devote to the expansion of capital. Short of the explosions of working class discontent that have periodically rocked the Eastern European ruling classes in Hungary, Czechoslovakia, East Germany and Poland, the planned limitations on workers’ living standards can be maintained. Secondly, and more importantly, expanded production and economic growth are also more or less guaranteed as profits are directed towards machinery, factories etc. rather than on land speculation, operations on the finance market and so on. Thus the sort of boomlet that took place in America in 1977 – in which virtually all investment went not on expanding the productive base of the economy but rather on property speculation and fast-food ventures [45] – can be avoided.

However under conditions of economic crisis this situation changes. The general rate of profit is slashed right back and many enterprises become loss earners; the greater the level of investment in them the greater is the overall decline in the national economy involved. So in the case of the Eastern European state capitalist economies, in which high levels of growth in the 1950s were only achieved on the basis of much higher levels of investment than was typically the case in the west [46], the effects have been particularly serious. Without having to compete in a properly developed capital market hitherto and being able to count on the investment continuing to flow in more or less irrespective of how effectively it has been used the Eastern European economies have in recent years found it exceptionally difficult to compete on the world market.

In Poland the Gierek regime was pushed on to the world market in the 1970s, for two major reasons. Firstly there was Poland’s chronically low productivity of labour and the widening technology gap compared with West Germany, Japan etc. – the efficiencies implicit in a world division of labour were becoming more and more compelling after 1970. Secondly there was the unwillingness of Polish workers to accept cuts in their living standards; in 1956, 1970–71 and again in 1976 workers’ protests forced the regime to back-track on price rises. Throughout the 1970s Polish workers were able to secure for themselves increases in consumption that were greater than the growth rate for the country as a whole. [47] The government was left with no option; access to Western capital – and the indebtedness that would follow – was now the only way to secure further investment while maintaining social peace. It was to be paid for out of the expected outflow of exports that the newly invested capital would create.

In other words the ruling class were, throughout the 1970s, more and more tying in the Polish economy to the world market and counting upon the continuation of the boom. As is well known, the gamble went disastrously wrong, the crisis of the early 1980s striking Poland particularly hard with production falling by 15 percent and more in 1981, coupled with massive $20 billion plus debts that cost Poland fully 92 percent of its export earnings just to service them. [48] An important point here is that Poland was not just a victim of the crisis of the early 1980s, but an important contributor to it as well. For, in conjunction with a number of other countries (Brazil, Philippines, Mexico, Hungary etc.), its attempts to spend its way out of the 1974 crisis massively increased international indebtedness, forcing up world interest rates, and thereby prolonging, extending, deepening and generalising the world crisis in the early 1980s. In other words the crisis not only hit certain countries like Poland, but was caused by them as well.

If Poland represents an extreme case, the same tendency has been apparent in all the state capitalist countries to a greater or lesser degree. It has important consequences not only for the effect of the state capitalist countries on the world economy, but also – and more crucially – for the effect of the world economy on the state capitalist regimes themselves. The pull of the world economy toward the incorporation of all national economies within a single world division of labour has proved increasingly hard to resist whatever the official ideologies of the governments involved and this has had important repercussions for the ways in which these regimes have operated.

The Polish ruling class, facing disaster, was forced to draw back from the world market; the bill for the massive costs involved being picked up by the Kremlin. But this has not stopped some other East European state capitalist countries continuing along the same road. Hungary’s debts to the Western banks per head of the population have been about the same as those of Poland, but there has been no reversal in its economic policies. Progressive decentralisation of the economy and greater and greater encouragement for small private farmers to produce for the market have both accompanied a continuing drive to promote exports. While state-owned capital predominates, the form of state ownership has significantly changed; the state now acts much more like a large holding company which carefully monitors the performance of its constituent companies, rewarding the best with new investment, rather than subjecting them all to a single overall national plan.

There is nothing wholly novel in this. As we have seen already, the dominant state-capitalist sector of the Italian economy operated in a similar manner after the general economic collapse in 1933, when a massive state holding company, IRI, was created to prop up crucial sections of industry. In Hungary’s case it shows that the ruling class currently feels it has more to gain from an increasing integration into the world market. The small size of the Hungarian economy, the relative efficiency of its agricultural sector, its proximity to European markets and Russia’s unwillingness or inability to continue to subsidise the oil it exports to Hungary in return for central Comecon planning – all these have pushed the Hungarian ruling class into making these moves. Once started, new opportunities and pressures begin to occur for Hungary’s rulers. If their success is now to be measured not in terms of the physical quantities that their own direct planning leads to, but rather in financial terms of profit and loss, then their connection with their own domestic economy becomes much looser. If it seems, for instance, that they can make a faster buck by speculation they will be much more inclined to do so. Hence, rather than investing all their hard currency at home, they have more recently chosen to set up joint ventures with Western companies in the third world where near starvation wages gave better prospects for profits in textiles and footwear. They have also invested hundreds of millions of dollars in off-shore banking; some of these funds getting transformed into venture capital, the bulk however probably ending up funding real estate deals in the United States and elsewhere. [49]

The Hungarian solution to the crisis of the Eastern European state capitalist countries has attractions for other countries as well, particularly East Germany where relatively high productivity, proximity to Western markets and above all billions of dollars from West Germany all act as powerful inducements to continue to tie in the East German economy with its neighbours in the EEC still further.

But for other Eastern European countries the same pressures have produced very different results. The more backward economy of Bulgaria was insufficiently developed in the 1970s to seriously contemplate breaking into the Western markets in the sort of way attempted by Hungary and Poland. As a result it has not had to gear its economy in the 1980s to paying off massive debts to the banks. Central planning has been retained – and in some ways strengthened. [50] In Bulgaria’s case it has been the very sharpening of competition on the world market itself that has perpetuated this trend.

Russia itself has also moved in this direction to an even greater degree. The very crisis, therefore, that has pulled Hungary closer in to Western Europe, has at the same time also pushed Russia farther away from it. It too, in spite of being an industrial power of the first order, is, like Bulgaria, incapable of manufacturing many commodities to world market standards. The huge burden that armaments place on its economy will ensure for the foreseeable future that this situation continues; indeed the gap between international and domestic standards seems likely to increase. At the same time the huge size of the domestic economy and the great wealth of its natural resources continue to make centralised planning feasible. More than that, even within the limits of what is possible with the present centrally administered economy, there is clearly room for significant economic gains. In 1983 official Russian statistics showed industrial output growing by 4 percent – and much more important – productivity increasing by 3½ percent. [51] It seems likely that even on the basis of quite minor adjustments to the organisation of production a growth rate of 2–3 percent could easily be maintained until the 1990s – more than enough to prevent the Kremlin having to drastically reorganise the direction of the economy.

Outside of Europe two countries in particular have followed the Russian path closely – Vietnam and Cuba. Each have received billions of dollars a year from the Kremlin; in Cuba’s case this aid alone has increased the per-capita income by more than the entire income of some countries in central Africa and elsewhere. Neither country would be remotely capable of meeting its import needs without this aid and the fact that much of it comes in the form of – by world market standards – inferior Russian goods, is a cost that they presently find acceptable given the alternatives open to them.

In Vietnam the continuous series of wars following 1945 – against France and the United States until the early 1970s, and against Kampuchea and China thereafter – have devastated the economy.

Since 1975 the economy has not grown at all in real terms while population has increased at 2.4 percent annually, a direct result of the huge size of the military, which absorbs 30 percent of the national income (even according to official figures which understate the true position). Allowing for wear and tear on machinery there has probably been a net disinvestment in the Vietnamese economy since the mid-1970s, a situation which has more or less totally prevented its entry into the world market. Russia provides 80 percent of its imports, in return for which it gets military bases plus the pressure of Vietnam’s one and a quarter million strong army on China’s southern flank (China, having to respond, is thus forced to remove some of its own pressure on Russia’s eastern flank; since a third of the Russian armed forces are situated there, this is a considerable help to them). [52]

The crisis has forced the Vietnamese ruling class to respond in a more complex way than their counterparts either in Russia or in Hungary. On the one hand it has made them rely much more heavily on the Russian connection, which has required greater state direction of the industries receiving and producing the commodities transacted and less reliance on autonomous and localised decision making. But on the other hand the crisis has impoverished the state to such a degree that there is very little in the way of resources for the state actually to be able to direct. This paradoxical situation has produced an acceleration of the centralisation of the resources that are currently there (in Ho Chi Minh City in the South, for instance, the 25 competing firms in the export trade have now been reduced to one), at the same time as giving an added filip to richer sections of the peasantry at the expense of the collectivised sector of agriculture. This is particularly true in the most productive and intensively-farmed areas such as the Mekong delta where 60 percent of the land is privately owned, and where the shelving of earlier collectivisation schemes coupled with incentive schemes for the richer farmers have proved to be the only ways of keeping the cities fed. [53]

In Cuba the continuing need for Russian aid has been a product of the almost total dependence of the economy on one export crop: sugar. Catastrophic falls in the world market price (from around 50 cents a pound at one time to 7 cents at the beginning of this year) – a result of the crisis, of subsidies for EEC producers and the inability of the regime to diversify the economy – has led to Russian support which has been estimated at the incredible sum of $4 billion in 1983. (This amounts to $250 per head per annum; compare this with the $189 total per-capita income of Vietnam in 1982). Even in Cuba however, private production in agriculture has been given qualified encouragement recently, and quite important foreign policy differences with the Russians have emerged too. Strong pressure is bound to mount in the Kremlin at some point in the future either for a better deal for its money or for a significant cut-back in this aid to Cuba. [54]

More money for Cuba means less for East Germany; less for East Germany from the Kremlin means more money and trade from West German banks and industry to take its place. At the end of the day, the prevention of the rise of a unified and Westward-oriented German nation – should that look even remotely possible – is a much more important priority for the Russian bureaucracy than hanging on to Cuba.

The problem for the bloc of state capitalist countries in the present crisis as a whole are exemplified by this. Two central features stand out for them; on the one hand rapidly sharpening international competition in the world market, on the other hand the escalation of the drive toward militarisation and war. The latter has forced them to divert resources towards armaments; by exactly how much it is difficult to assess, but according to most estimates 13 percent of the national product is now the minimum going on armaments in Russia. [55] This prevents the Kremlin subsidising the other state capitalist countries to anything like the same extent that it would otherwise be able to. Faced with insufficient inducements to co-participate in supra-national Comecon central planning as a result, the other state capitalist countries are thus pulled closer to the world market. Gaining access to capital goods and consumption goods of increasing quality and declining cost is enormously attractive to them. But it requires in return the export of equivalently high quality produce also produced to world market standards – and that is something that not all of them are able to achieve. That is why, in response to this, the state capitalist bloc has been riven with contradictions with different countries going in different directions. In theory it might look as though the state capitalist bloc could avoid – or could have avoided – such problems altogether by simply not participating in the world market in the first place. The reality however is the other way about, they would have been in a much worse position. Access to high quality imports from the West is, in fact, quite crucial to the Russian economy. Without them the wealth that purchases Vietnamese troops on China’s southern flank and Cuban troops in Africa would be much diminished. So too would be the ability to devote 13 percent and more of the Russian economy to the armed forces. In a period of heightened military tension therefore, this economic link with the West is needed more than ever – even if at the same time it implies considerable dangers from economic dependence and loss of centralised control.

The folly of trying to ignore this has been revealed on several occasions but nowhere more clearly than in Cambodia in the late 1970s. Between 1975 and 1979 the Khmer Rouge government under Pol Pot set about to create as pure a form of self-sufficient state capitalism as was possible. The country’s borders were sealed, money was abolished and all areas of local autonomy were replaced by the central and total direction of the society by the Communist party. The horrors that followed are well known. The economy collapsed into a less-than-subsistence pre-market society. The 2 million inhabitants of the capital Phnom Penh were turned out into the countryside to feed themselves as best they could. Four years later a sample of 100 families revealed a death rate of 42 percent among them, mainly from starvation, but also as a result of vile atrocities and pogroms inflicted by the army. The rural population too was broken up and shifted around into different encampments. Children were taken from their parents at age 6 and by 10 they were being forced to work a full adult working day – the latter having been increased to 12–16 hours (or even longer). Failure to obey such orders led to a cutting-off of the meagre rations for the first offence and the death penalty for the second. Any display of compassion for the victims of this terrible regime was itself punishable – sometimes by the death penalty itself. National and religious minorities were persecuted; two thirds of both the Vietnamese and the Thai communities were slaughtered along with 90 percent of the country’s 700,000 moslems. Nearly all the country’s priests and other religious leaders were killed and their churches, mosques and temples blown up. All books were burnt, education was abolished and most teachers and other intellectuals were slaughtered (only 207 out of 2,300 secondary teachers survived; the comparable figures for doctors were 60 out of 643 and for university teachers 50 out of 725). Production on the land fell drastically, both in terms of falling productivity and in terms of the area cultivated (which fell from 2.5m hectares to 1.6m hectares). In the country as a whole the 1975 population of 8 million had fallen in four short years to 6 million. A quarter of the country had been massacred or starved to death by the regime before the Vietnamese invasion of April 1979 brought the whole ramshackle structure down. [56]

It is important to understand that these well-documented horror stories were not just the irrational consequences of the demented ravings of a genocidal maniac. While Pol Pot was undoubtedly all these things, what he did fitted in, by and large, with what was rationally required to build as fully an autonomous form of state capitalism as could be achieved in Cambodia. The use of extreme terror was therefore in this sense ‘rational’ – how else could people be persuaded to work for 16 hours a day for no material rewards? The slaughter of a quarter of the country was ‘rational’ too – how else could the rest be fed (indeed the slaughter nowhere nearly kept up with the even more catastrophic falls in production). Withdrawing 100,000 hectares of agricultural production along the Vietnamese border was ‘rational’ as well; it sealed-off the peasantry from the contamination of outside influences (hence too the need to root out the cultural, intellectual and religious influences which connected Kampuchea with the world outside).

But all this only goes to show how impossible was the task that Pol Pot had set himself. The pathetically weakened economy that resulted was quite unable to support an armed force sufficient to defend the regime. Pol Pot was forced to engage in international trade to buy arms, but with the collapse of the economy taking place, all that remained to be traded were the meagre supplies of rice being produced. And even though the starvation of the Cambodian masses was a price that the Khmer Rouge were quite willing to pay, it brought precious little in the way of guns – quite insufficient to stop the quarter of a million well-armed Vietnamese troops who poured across the frontier in April 1979.

In short, the price of attempting to seal-off a country from economic links with the rest of the world, is to render it still more vulnerable to the military and strategic arms of the very countries it is trying to defend itself from. The essential first task for the state in the modern capitalist world economy is therefore to be able to defend its control of its own little patch of territory, and that, in its turn, implies participation in the economies implicit in the world market to a degree that is at least sufficient to make this possible.

Where now for third worldism?

The problems that the older established state capitalist countries have faced in reacting to the crisis in the world economy illustrate the limitations facing the newer third world revolutionaries who have tried to follow in their path over the past ten years or so. The circumstances which so strongly favoured the Stalinist path to state capitalism from the 1930s until the beginning of the 1970s have now changed in quite fundamental ways. It is no longer the case that this path represents a possible road (let alone the best possible road) to real economic growth on the basis of which poverty, backwardness and exploitation can be eliminated.

The third worldist ‘socialist’ vision of utilising the state against capital and the multinationals is, therefore, not only a hopeless dream, but has been made dramatically more so by the sharpening competition and increasing internationalisation of the world capitalist system itself. The economic development of a backward nation can only be achieved, therefore, along one of two possible paths.

The first is the path outlined by Trotsky, the path of Permanent Revolution – of workers’ struggle against the bourgeoisie; the path of the international socialist revolution in which the alliance is between workers in one country and workers in another, in which therefore, the state apparatus and its various hangers-on in the intellectual petty-bourgeoisie are clearly seen as deadly enemies to be mercilessly exposed and defeated. The second and, tragically, the overwhelmingly dominant path however, is to abandon the socialist aspirations altogether, to forget about the poverty, exploitation and suffering of the masses in return for development on behalf of the privileged few. The state, having been built up on the assumption that it can bring socialism from above, instead becomes the vehicle for pulling the economy deeper into the world market.

All the third world ‘socialist’ revolutions that we have looked at in this article – in particular those in Nicaragua, Mozambique and Angola – fall into this latter category. But that does not mean that all of them (or other third world countries in similar situations) will immediately move their own assets to the Cayman Islands and invite in the United Fruit Company, Anglo American, Lonrho etc. to run all the important bits of their economies at home. The situation is much more complex than that.

As we have seen in the case of the Eastern European countries, the very strength of the world economy, and the high standards it sets for making progress within it, can create a formidable barrier to new entrants. While a number of countries have demonstrated spectacular results from successfully overcoming these difficulties, the very success of Japan, South Korea, Hong Kong, Taiwan, Singapore etc., has itself made it that much harder for any other countries to follow suit. The countries that have succeeded, have, in doing so, automatically raised the threshold in terms of quality and low costs for all the others. The price of the success of South Korea in entering the world economy is the failure of a country like Bangladesh to do likewise.

Under the circumstances prevailing in the world today, failure does not automatically mean abandoning the erstwhile role of the state and calling back the Lonrhos and the United Fruit companies to do the job instead. While this alternative would indeed be attractive to some third world regimes, today the problem is rather to induce those companies to be attracted to come in the first place. This can mean that even those third world countries that have obviously failed in their attempt to use state capitalist methods to develop the economy, find no encouragement at all in abandoning them. The developing power of the world economy, having failed to suck them in, now appears as an insurmountable hurdle and reinforces the pressures towards state capitalism within them. Such is the case in a country like Tanzania.

The implications of this are that while there is no longer any purely state capitalist road, outside the world economy, to economic development, there certainly does still remain such a road to economic stagnation. It is a road fraught with great dangers however; the failure to develop the economy makes it open to dissent from within (hence the spectacular success of South African-backed guerrillas in Angola and Mozambique) and vulnerable to military force from without (as with Cambodia). Since the return of the world capitalist economy to the deep crisis that has afflicted it over the past 10 years the situation,

therefore, facing these countries has been a complex one. On the one hand the slide into a torpor of ‘import substitution’ state capitalist non-development with all the economic and military dangers of permitting this to happen are increased; on the other, only a country of Russia’s size and wealth can preserve sufficient economic and military power today without dismantling the bureaucracy’s centralised control of the society.

For revolutionary socialists the consequences are also clear. It will become less and less possible to dress up the politics of third worldism – even revolutionary third worldism – in the language of socialism. Never has the time been more appropriate to stress that socialism is about the workers of the world emancipating themselves from the chains of capital – North or South – and not about acting as cheerleaders for any one of the third world’s ruling classes – however ‘progressive’ their rhetoric has hitherto been.


1. Cf. M. Gonzalez, The Nicaraguan revolution: classes, masses and the Sandinista state, International Socialism 2:17, Autumn 1982, pp. 56–58, 85–86.

2. Cf. P. Binns & M. Gonzalez, Cuba, Castro and socialism, International Socialism 2:8, Spring 1980, pp. 23–30.

3. Ibid., pp. 6–11.

4. Gonzalez, op. cit., p. 86.

5. International Viewpoint, 31 October 1983, p. 15.

6. Keesings Contemporary Archives 1983, p. 32303, Latin American Regional Report 20 January 1984, p. 11.

7. Cf. S. Landau, Inside Nicaragua’s Class War, Socialist Review (the San Francisco publication – not to be confused with our own publication of the same name), No. 71, Sept./Oct. 1973. This reformist publication defends the Sandinista attack on the Nicaraguan working class in the following terms: ‘To declare Nicaragua a one-party socialist state would lead to the exodus of that part of the educated middle class that still remains to run the routine bureaucratic functions of state and industry’ (p. 6). Landau describes in some detail – and celebrates – the freedom of the bourgeoisie to organise against the Nicaraguan working class in ibid., p. 22.

8. Quoted in City Limits, 27 July 1984, p. 8.

9. Keesings Contemporary Archives 1983, p. 32304.

10. International Herald Tribune, 22 April 1984, p. 21.

11. Keesings Contemporary Archives 1983, p. 32304.

12. Economist, 21–27 April 1984.

13. Daily Telegraph, 22 April 1984.

14. Economist, 21–27 April 1984.

15. US News and World Report, 23 April 1984.

16. Daily Telegraph, op. cit.

17. Ibid.

18. Keesings Contemporary Archives 1983, p. 32304.

19. Gonzalez, op. cit., p. 50.

20. Cf. the article of the same name published in International Socialism (first series) 12, Spring 1963, subsequently republished as a pamphlet. See also A. Callinicos, “Permanent Revolution” and the third world today, International Socialism 2:16, Autumn 1982.

21. Cf. Latin American Regional Report, op. cit., p. 11 for details of the kicking out of the Salvadorian FDR/FMLN representatives in Nicaragua at the end of 1983.

22. Cf. A. Callinicos & J. Rogers, Southern Africa after Soweto, London 1977, pp 120–22.

23. Economist, 2 June 1984, p. 35; South, April 1984, p. 26.

24. Economist, 1 January 1984, p. 40.

25. Economist, 11 February 1984, p. 76.

26. Economist, 2 June 1984, p. 35.

27. Socialist Review, June 1984, p. 19.

28. Economist Zimbabwe Survey, 21 April 1984, pp. 13–14.

29. Economist, 26 November 1983, p. 60.

30. South, April 1984, p. 23.

31. Economist, 4 February 1984, p. 50.

32. In purely quantitative terms South Africa suffered worse in some ways than its black neighbours; maize production, for instance, fell from 9.6 million tons in 1981 to 4.9 million tons in 1983; compare this with the fall in the same period for total cereal production in the surrounding black states, which declined from 4.7 million tons to 3.3 million tons.

33. For an article that cites evidence to this effect (drawing Eurocommunist conclusions in the process), Cf. M. Harrison, The Soviet Economy in the 1920s and 1930s, Capital and Class 5, Summer 1978.

34. Cf. M. Kidron, International Capitalism, International Socialism (first series) 20, Spring 1965, pp. 18–20. While some of this article is obviously dated, much – including the material quoted here – still repays a careful reading today.

35. Cf. M. Lewin, Political Undercurrents in Soviet Economic Debates (London 1975), part 1 passim.

36. G. Gualerni, Industria e Fascismo (Milan 1976), p. 255.

37. Cf. J. Sheahan in W. Shepherd (ed.), Public Enterprise (Lexington 1976).

38. P. Binns & M. Haynes, New theories of Eastern European class societies, International Socialism 2:7, Winter 1979/80, p. 34.

39. F.L. Pryor in Shepherd (ed.), op. cit., p. 5.

40. Cf. P. Binns, Understanding the New Cold War, International Socialism 2:19, Spring 1983, pp. 16–22.

41. Cf. N. Harris, Of Bread and Guns (London 1983), chapter 2.

42. B. Tew, Self-Financing, in Tew and Henderson, Studies in Company Finance (London 1959), p. 44.

43. R. Munck, State and Capital in dependent Social Formations: the Brazilian case, Capital and Class 8, Summer 1979.

44. N. Harris, The Asian boom economies and the “impossibility” of national economic development, International Socialism 2:3, Winter 78–79, pp. 5–7.

45. Business Week Special Report, The slow investment economy, 17 October 1977.

46. Cf. Schroder, Problems of Communism, July 1971, p. 36 and Khatchaturov, Voprosy Ekonomiki 3, 1973. See also the general discussion in the Russian press on this question: ABSEES 1974, No. 2, p. 24 and No. 3, p. 24.

47. G. Blazyca, An assessment of Polish economic development in the 1970s, European Economic Review 14, 1980, p. 105.

48. C. Barker & K. Weber, Solidarnosc: from Gdansk to military dictatorship, International Socialism 2:15, Winter 1982, p. 137.

49. B. Caplan, Hungary tests the market, The Banker, June 1979.

50. 75% of Bulgaria’s trade is still with Comecon countries. In spite of that it managed a 4% growth rate in 1983 (Cf. Keesings Contemporary Archives 1984, p. 32755).

51. Economist, 28 April 1984, p. 79.

52. Economist, 14 July 1984, pp. 45–46. This figure is an understatement of the true costs of the Vietnamese army. No funds are allocated by the regime for food (the army grows its own provisions on land allocated to it).

53. Ibid.

54. Cf. Economist, 14 January 1984 (p. 48), 14 July 1984 (p. 45) and Socialist Review, June 1984 (pp. 29–30).

55. Economist, 28 April 1984, p. 79.

56. Keesings Contemporary Archives 1981, pp. 30669–73 and 30676–77.

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