A Textbook issued by the Economics Institute of the Academy of Sciences of the U.S.S.R




The Second World War and the Second Stage of the General Crisis of Capitalism

Lenin foresaw that the first world war would be followed by other wars, called forth by imperialist contradictions. “Everyone can see", he said, after the end of the 1914-18 war, “that another war of the same kind is inevitable if the imperialists and the bourgeoisie remain in power." (Lenin, “Speech at Celebration Meeting of the Moscow Soviet in Honour of the Anniversary of the Third International", Works, Russian edition, vol. xxx, p. 398.)

The distribution of spheres of influence among the imperialist countries which resulted from the first world war proved still less lasting than that which had prevailed before the war. The role of Britain and France in world industrial production markedly declined, and their positions in the world capitalist market deteriorated. The American monopolies, which greatly enriched themselves during the war, expanded their production capacity and advanced to first place in the capitalist world in respect of export of capital. Germany, after suffering defeat in the first world war, rapidly restored its heavy industry with the help of American and also British loans, and began to demand a re-division of spheres of influence. Japan took the road of aggression against China. Italy began a struggle to seize a number of colonial possessions belonging to other Powers. Thus, the operation during the first world war of the law of uneven development of capitalist countries led to another sharp break-up of the equilibrium within the world system of capitalism. The formation in the capitalist world of two hostile camps led to the second world war.

The second world war, which was prepared by the forces of international imperialist reaction, was begun by the bloc of fascist States—Germany, Japan and Italy. In the period preceding the war the ruling circles of the U.S.A., Britain and France tried to turn the aggression of German fascism and Japanese imperialism against the Soviet Union, conniving in every possible way at the actions of the aggressors and giving them the utmost encouragement to start a war. However, German imperialism began the war first against France, Britain and the U.S.A., and only later attacked the Soviet Union. The second world war was a war of conquest and plunder on the part of Germany and its allies in robbery, fascist Italy and militarist Japan. It was a just war of liberation on the part of the Soviet Union and the other peoples who were subjected to the fascist onslaught.

In the scale of military operations, the numbers of the armed forces involved and the amount of armaments employed, the size of the human sacrifices and the volume of destruction of material wealth, the second world war far outstripped the first. Many countries of Europe and Asia suffered gigantic human losses and unprecedented material damage.

The direct war expenditure of the States taking part in the war came to about a thousand milliard dollars, which does not include losses from destruction caused by military operations, The economy and culture of many peoples of Europe and Asia suffered tremendous damage from the robber rule of the German-fascist and Japanese occupying forces.

The war brought about a further development of State-monopoly capitalism. A whole series of measures connected with the war which were taken by the bourgeois States, were directed to ensuring maximum profits to the magnates of finance capital. These purposes were served by such measures as giving to the biggest monopolies war contracts worth milliards on extraordinarily advantageous terms; handing over State enterprises to the monopolies at trivial prices; distribution of raw material and labour—power in short supply in the interests of the leading companies; compulsory closing-down of hundreds and thousands of small and medium enterprises or their subjection to a few arms-industry firms.

The war expenditure of the belligerent capitalist Powers was met by means of taxation, loans and the issuing of paper money. In 1943-4, in the principal capitalist countries (U.S.A., Britain, Germany) taxes absorbed about 35 per cent of the national income. Inflation brought about a tremendous price-rise. The lengthening of the working day, the militarisation of labour, the increase in the burden of taxation and of the high cost of living, the fall in the level of consumption-all this meant a still greater intensification of the exploitation of the working class and the bulk of the peasantry.

The monopolies amassed fabulous profits during the war. The profits of the American monopolies grew from 3.3 milliard dollars in 1938 to 17 milliard in 1941, 20.9 milliard in 1942, 24’6 milliard in 1943 and 23.3 milliard in 1944. The monopolies of Britain and France and of fascist Germany, Italy and Japan also made huge profits during the war.

During the war and after the war the economic and political tyranny of the monopolies and the weight of their yoke in the capitalist countries increased still more. A particular expansion took place in the scale of operations of the American monopolies such as United States Steel, the Dupont chemical concern, the General Motors and Chrysler automobile firms, General Electric and others. The General Motors concern, for example, now owns 102 factories in the U.S.A. and 33 in 20 other countries; about half a million workers are employed in these enterprises.

Each of the two capitalist coalitions which grappled with each other during the first period of the war hoped to smash the other and both German and American imperialism strove to achieve world domination. It was thus that they sought their way out of the general crisis. At the same time, both of the capitalist groupings reckoned on the Soviet Union perishing or being substantially weakened in the course of the war, and also on strangling the working-class movement in the metropolitan countries and the national liberation movement in the colonies.

Thanks to the heroic struggle waged by the Soviet people and the economic and military might of the U.S.S.R., and thanks to the upsurge of the anti-imperialist national liberation movement in Europe and Asia, these calculations of the imperialists were frustrated. The second world war ended in the complete rout of the fascist States by the armed forces of the anti-Hitler coalition. The decisive part in this rout was played by the Soviet Union, which saved from the fascist enslavers the civilisation, freedom, independence and very existence of the peoples of Europe, Contrary to the calculations of the imperialists, who had expected it to be destroyed or weakened, the Soviet State emerged from the war stronger than before and with enhanced international prestige. The great Patriotic War of the Soviet Union showed the strength and might of the first socialist Power in the world and the enormous advantage of socialist society and the socialist form of State. The rout of the fascist aggressors unloosed the forces of the national-liberation movement in Europe and Asia.

The law of social development in the present epoch, discovered by Lenin, by virtue of which the revolutionary supersession of the capitalist system of economy by the socialist takes place through a gradual falling away of country after count. from the world system of capitalism, was fully confirmed.

Contrary to the imperialists’ calculations that the revolutionary movement would be weakened and routed, the war led to more countries leaving the capitalist system. The peoples of a number of countries of Central and South-eastern Europe—Poland, Czechoslovakia, Yugoslavia, Rumania, Hungary, Bulgaria, Albania—threw off the yoke of the reactionary regimes which oppressed them and took power into their own hands. People’s democratic republics carried out fundamental social and economic changes and took the road of building the foundations of socialism. The formation of the German Democratic Republic constituted a grave setback to world imperialism and a noteworthy success for the camp of peace and democracy; it is a stronghold of the democratic forces of the German people in their struggle to form a united, democratic and peace-loving Germany.

Contrary to the imperialists’ calculations of a further enslavement of the peoples of the colonies and dependent countries, a mighty upsurge of the national liberation struggle took place in these countries. Very great historic changes occurred in Asia, where live more than half of the population of the entire world. The first place among those changes belongs to the victory of the great Chinese people, headed by the Chinese Communist Party, over the combined forces of imperialism and the internal feudal reaction. The people’s revolution in China put an end to the rule of the feudal exploiters and foreign imperialists in the largest semi-colonial country in the world, liberating from the power of imperialism a people numbering six hundred millions. The formation of the Chinese People’s Republic was the most powerful blow to the entire system of imperialism since the great October Socialist Revolution in Russia and the victory of the Soviet Union in the second world war. People’s republics arose in Korea and Vietnam.

All this led to a further substantial change in the relation of forces between socialism and capitalism in favour of socialism and to the disadvantage of capitalism. As a result of the falling away from capitalism of a number of countries of Europe and Asia, more than a third of mankind have already been freed from the capitalist yoke.

The period of the second world war witnessed, especially after the breakaway of the people’s democratic countries, both in Europe and in Asia, from the capitalist system, the development of the second stage of the general crisis of capitalism, which is marked by the further deepening and sharpening of this crisis.

The Formation of Two Camps in the International Arena and
the Break-up of the Single World Market

A very important result of the second world war was the formation of the world camp of socialism and democracy, uniting the countries of Europe and Asia which have left the capitalist system, and headed by the Soviet Union and the Chinese People’s Republic. Hundreds of millions of working people in the capitalist world and all progressive forces in the world of today sympathise with the ideas of peace, democracy and socialism. The camp of socialism and democracy is confronted by the camp of capitalism, headed by the U.S.A

The second world war and the formation of two camps in the international arena has had as its most important economic consequence the break-up of the single, all-embracing world market.

“The economic consequence of the existence of two opposite camps was that the single, all-embracing world market disintegrated, so that now we have two parallel world markets, also confronting one another." (Stalin, Economic Problems of Socialism in the U.S.S.R., F.L.P.H. Edition, 1952, p. 35.)

This has caused a further aggravation of the general crisis of capitalism. In the post-war period, the countries of the socialist camp have dosed their ranks economically and arranged for close collaboration and mutual aid among themselves. Economic collaboration between the countries of the socialist camp is based upon a sincere desire to help one another and bring about a common economic advance. The principal capitalist countries—the U.S.A., Britain and France—have tried to subject the Soviet Union, China and the European countries of people’s democracy to an economic blockade, expecting to be able to stifle them. But by doing this they have contributed, contrary to their intention, to forming and consolidating anew, parallel world market. Thanks to the crisis-free of the economies of the countries of the socialist camp, the new world market does not experience any difficulty in finding outlets for its goods: its capacity grows continually.

As a result of the falling-away of a number of countries in Europe and Asia from the system of imperialism, the sphere in which the forces of the principal capitalist countries (the U.S.A., Britain, France) have access to world resources is considerably reduced. This affects the United States with particular sharpness, as the productive capacity of American industry grew considerably during the war.

The narrowing of the sphere of access by the forces of the principal capitalist countries to world resources has brought about an intensification of the conflict between the countries which make up the imperialist camp, for outlets for their goods, for sources of raw material and for spheres of capital investment. The imperialists, and in the first place those of the U.S.A., are trying to overcome the difficulties arising from their loss of huge markets, through intensified expansion at the expense of their competitors, acts of aggression, arms drives and militarisation of the economy. But all these measures lead to a still greater aggravation of the contradictions of capitalism.

The two camps—the socialist one and the capitalist one—embody two lines of economic development. One line is a line of rapid development of the productive forces, continuous advance of peaceful economic activity and steady increase in the well-being of the working masses of the Soviet Union and the People’s Democracies. The other line is the line of capitalist economy, holding back the development of the productive forces, a line of militarising the economy and reducing the standard of living of the working people, in conditions of the continually deepening general crisis of the world capitalist system.

The two camps—socialist and capitalist—embody two opposite trends in international politics. The aggressive circles of the U.S.A. and other imperialist States are following the road of preparing another war and intensifying reaction in the internal life of their own countries. The socialist camp is conducting a struggle against the threat of new wars and imperialist expansion, for the development of economic and cultural collaboration among the peoples, to strengthen peace and democracy.

The Crisis of the Colonial System of Imperialism Becomes More Acute

The second stage of the general crisis of capitalism is marked by a notable sharpening of the crisis of the colonial system. The attempts made by the imperialist Powers to pile on to the backs of the peoples of the dependent countries the burden resulting from the war and its aftermath have led to a considerable lowering of the standard of living of the working populations of the colonial world. The American monopolies are penetrating and striking root in the colonies and spheres of influence of the Western European countries, under the guise of “aid" to underdeveloped countries, which leads to still greater plundering of the enslaved peoples and to aggravation of the contradictions between the imperialist Powers. Meanwhile the development of industry in a number of colonial and semi-colonial countries, brought about by the war, has resulted in a growth of the proletariat, which is more and more actively opposing imperialism. As a result of all this the contradictions between the colonies and the metropolitan countries have become more and more acute, and the struggle of the peoples of the colonial world for national liberation has become more intense. The rout of the armed forces of German and Japanese imperialism created new and favourable circumstances for the success of this struggle. As a result of the second world war and the new upsurge of the national liberation struggle, in the colonial and dependent countries there has taken place, in fact, a breakdown of the colonial system of imperialism.

The breakdown of the colonial system of imperialism is signalised first and foremost by the breaching of the imperialist front in a number of colonial and semi-colonial countries which have detached themselves from the world system of imperialism and established the system of people’s democracy.

As mentioned already, the world front of imperialism has been breached in China and also in Korea and Vietnam. The great victory of the people’s revolution in China has had an enormous influence on the whole colonial rear of imperialism. From an object of imperialist exploitation and of rivalry between groups of capitalist powers China has been transformed into an independent great Power, possessed of complete national sovereignty and conducting an independent policy in the international arena. The Chinese People’s Republic, linked by close ties of friendship and co-operation to the Soviet Union and all the other countries of the socialist camp, functions a powerful factor for peace and democracy in the Far East an throughout the world.

The break-up of the colonial system of imperialism is further characterised by the fact that the peoples of a number of other colonial and dependent countries have won liberation from the colonial regime and taken the road of independent, sovereign development. Under the pressure of the national liberation movement in India, a country with a population exceeding 440 millions, British imperialism was obliged to withdraw its colonial administrative machine from that country. India was divided into two dominions—India and Pakistan. India became an independent republic, carrying on an independent policy in the international arena. Freed from colonial oppression, the Indian people are fighting to consolidate their independence, industrialise their country and introduce agrarian’ reforms. Besides India, Indonesia, Burma and Ceylon have also got rid of the colonial regime. The imperialist Powers, Britain and the U.S.A. first and foremost, are making all possible efforts to retain and extend their economic positions in these countries and deprive them of independence. This policy, however, is encountering a growing resistance on the part of the peoples of the countries concerned, who are fighting resolutely for their independence.

The sharpening of the crisis of the colonial system of imperialism is characterised by an upsurge of the national liberation movement of the oppressed peoples, which has taken on fresh distinctive features. In a number of colonial countries the leading role of the proletariat and the Communist Parties has grown and become stronger, which is an important condition for the success of the struggle of the enslaved peoples directed towards the expulsion of the imperialists and the introduction of democratic changes. Under the leadership of the working class a united national democratic front is being created and the alliance of the working class with the peasantry in the anti-imperialist and anti-feudal struggle is growing stronger. In certain enslaved countries the development of the national liberation movement has led to a prolonged armed struggle of the masses against the colonialists (Malaya, the Philippines). The peoples of Africa (Madagascar, Gold Coast, Kenya, Union of South Africa), more ground down than any by imperialist oppression, have joined the national liberation struggle. Resistance to the imperialists is growing in the Middle East (Persia, Egypt) and in North Africa (Algeria, Tunisia, Morocco). In Latin America the struggle against economic overlordship and political oppression by the finance oligarchy of the United States is growing more intense.

The reactionary attempts of the imperialists, headed by the imperialist circles of the U.S.A., to frustrate the national and social rebirth of the peoples of Asia on anti-imperialist and anti-feudal foundations is inescapably suffering defeat. The failure of American armed intervention in Korea, the collapse of the plans of French and American imperialism in Indochina have vividly demonstrated that the days have passed, never to return, when the imperialists could impose their will by force of arms on the peoples of Asia and put down any endeavour on their part to win freedom and independence.

The break-up of the colonial system of imperialism which has begun is leading to a situation in which the sphere of colonial exploitation is becoming narrower and narrower. This inevitably intensifies the economic and political difficulties of the capitalist countries and shakes the foundations of the imperialist system as a whole.

The Intensification of the Unevenness of Development of Capitalism.
The Expansion of American Imperialism

The second world war, which was born of the uneven development of the capitalist countries itself led to a further accentuation of this unevenness. Three imperialist Powers—Germany, Japan and Italy—were defeated in the field. France suffered severe damage and Britain was very seriously weakened. At the same time, the U.S. monopolies, profiting by the war, strengthened their economic and political position in the capitalist world.

In the period between 1929 and 1939, American industry, which possessed considerable reserves of productive capacity, essentially marked time. Enterprises worked a great deal below capacity owing to the narrowness of markets. During the second world war the territory of the U.S.A. was not affected by military operations, and its economy suffered no military damage. At the same time the market for the American monopolies enormously expanded. The war brought with it a gigantic demand for arms and war materials. Also, the American monopolies were able to seize the former markets of the West European countries and their overseas colonies and spheres of influence. In these circumstances the monopolies of the U.S.A. could rapidly expand the volume of production and carry through on a considerable scale a renewal of the productive apparatus of industry.

American industrial production in 1943 was 2.2 times the level of 1939. In the principal capitalist countries of Western Europe, however, which had suffered severely in the war, industrial production was considerably reduced by the end of the war. As a result, the relative weight of the U.S.A. in the to amount of industrial production of countries of the capitalist camp grew from 41 per cent in 1937 to 56.4 per cent in 1948.

Monopoly circles in the U.S.A., having proclaimed a programme of establishing world domination, undertook extensive economic and political expansion into the capitalist countries and colonies. Taking advantage of the weakening of their competitors, the American monopolies, in their hunt for maximum profits, seized in the first years after the war an important share of the capitalist world market. They resorted on a large scale to State-monopoly forms of the export of capital in order to enslave other countries.

The calculations of the American finance oligarchy about establishing domination of the capitalist world market were, however, not fulfilled. The capitalist countries of Western Europe found themselves at the end of the war having to face great losses. The war had taken heavy toll of the economy of the principal countries of Western Europe, on whose territory military operations had taken place (Germany, France, Italy), or whose territory had been subjected to attacks from the air (Britain). After the end of the war the bourgeoisie of these countries restored the productive apparatus of industry and to a considerable extent renewed it at the expense of intensified exploitation of the working people and lowering of their standard of living.

Owing to the narrowness of the internal market these countries began to make their way again into their foreign markets, which during the war years had been seized by the American monopolies. Soon after the war the United States came into collision in the capitalist world market with increasing competition on the part of the West-European countries, and in the first place of Britain. The fight for markets became still sharper when, five or six years after the end of the war, the monopolies of Western Germany and Japan joined in this fight.

The expansion of American imperialism showed itself first in the guise of “aid for the post-war restoration of Europe". The “Marshall Plan" which operated in 1948-52 had for its aim to make the West-European countries dependent on the American monopolies, draw them into the orbit of aggressive American policy and force the pace of the militarisation of their economies. The “Marshall Plan" paved the way for the North Atlantic Pact—the aggressive alliance formed in 1949 by American imperialism (with the active support of the ruling circles of Britain) for the purpose of establishing its domination over the world. When the period of the Marshall Plan’s operation came to an end it was succeeded by a programme alleged to be for “ensuring mutual security", under which American aid is given only for arms drives, only for preparations for another war. By the terms of this programme, American imperialism finally threw off the mask of “restorer" of the economies of the capitalist countries.

During the war American exports were growing markedly at the expense of those of the European countries and especially those of Britain, which fell sharply. In 1945 the share of the U.S.A.’s exports in the total export of the capitalist countries amounted to 40.1 per cent as against 12.6 per cent in 1937, while that of Britain’s exports fell from 9’9 per cent in 1937 to 7.4 per cent in 1945. After the war, however, as a result of the more acute struggle on the world market and the growth of the exports of the European countries, the share of the U.S.A. in the exports of the capitalist countries declined, amounting in 1954 to 19.5 per cent, while Britain’s exports in the same year were 10.1 per cent of the total.

The American monopolies are trying by all possible means to push up their exports of goods to the other countries of the capitalist camp, employing to this end both the enslaving terms of the loans which they make to these countries and also barefaced dumping. At the same time the U.S.A. fences off its home market in every possible way from the import of foreign goods, imposing exceptionally high customs duties on these goods. This one-sided nature of American external trade has brought about a chronic dollar gap in other countries, i.e., a shortage of dollars with which to pay for goods imported from the United States.

The economic expansion of the monopolies of the United States leads to the breaking of historically formed, multilateral economic ties between various countries. American imperialism deprives Western Europe of the possibility of obtaining food-stuffs and raw materials from the countries of Eastern Europe, which could supply these goods in exchange for West European industrial products. One of the factors in the aggravation of difficulties of capitalist economy, since the war, is the circumstance that the imperialists have themselves cut off their access to the world market of the democratic camp, having reduced to almost nothing their trade with the Soviet Union, the Chinese People’s Republic and the European People’s Democracies.

In the years since the second world war (1946-54) exports from the U.S.A. have amounted, on the average, to 13.5 milliards a year, while U.S. imports have been only 8.2 milliards; the U.S.A. imported 1.3 milliard dollars’ worth of goods a year from the countries of Western Europe, on the average, but exported about 4 milliards worth to these countries. Over the eight years the gap between the U.S.A.’s exports to the countries of Western Europe and its imports from these countries amounted to 21.6 milliard dollars.

The exchange of goods between the U.S.A. and those countries which now form the democratic camp was in 1951 only one-tenth of what it had been in 1937; Britain’s trade with them was down to one-sixth, and France’s to less than a quarter.

The expansion of the American monopolies deals a painful blow at the interests of the other capitalist countries. The American monopolies, under the pretext of “aid" and through advancing credits to these countries, are striking root in their economies and conquering important positions in the colonies of the West European Powers. Britain and France, for which cheap raw materials and guaranteed markets are of first-class importance, cannot put up indefinitely with the situation which has been created. The conquered countries —Western Germany, Japan, Italy—which are under the yoke of American finance capital, also cannot remain satisfied with their lot.

After the second world war the unevenness of development within the contracted camp of imperialism became still more marked, and this inevitably led to a further growth of contradictions among the capitalist countries. The most important of these are the contradictions between the U.S.A. and Great Britain. These contradictions show themselves in the open struggle being waged between the American and British monopolies for markets for their goods, especially in the countries making up the British Empire-Australia, Canada, India, etc. — and for spheres of influence generally—in Western Europe, in the Near and Far East, in Latin America.

The aggressive blocs of imperialist States, scraped together by the United States and directed against the countries of the Socialist camp, cannot eliminate the antagonisms and conflicts between the partners in these blocs, which have as their foundation the struggle to obtain high, monopoly profits in conditions in which the territory under the sway of capital has contracted. Thus, Lenin’s proposition that the operation of the law of the uneven development of the capitalist countries in the epoch of imperialism is fraught with conflicts and armed clashes between these countries remains valid in the present period.

The aggressive ruling circles of the imperialist Powers, and of the U.S.A. above all, began immediately after the close of the second world war to carry out a policy of preparing for a third. Hirelings of the monopolies try to mislead the peoples by asserting that the inevitability of war is due to the existence in the world today of two opposed systems—capitalism and socialism. The facts of history refute this fabrication. The first world war was caused by the sharpening of imperialist contradictions in a world in which the capitalist system still held undivided sway. The second world war began as a war between two coalitions of capitalist countries. In the period since the second world war the countries of the socialist camp are firmly arid consistently upholding the cause of preserving. and strengthening peace between the peoples, taking as their starting-point that the capitalist and socialist systems are perfectly able to co-exist in peace, emulating each other economically. The policy of the Soviet Union and the People’s Democracies, which is directed towards the development of peaceful co-operation between States regardless of their social structure, enjoys the support of the working masses and the sympathy of champions of peace throughout the world.

The peace movement unites hundreds of millions of people in all countries, including many millions in the capitalist countries. People belonging to a variety of social groups and holding different political and religious views have come together on the common ground of the defence of peace and of the security of the peoples. The plans for another world war which aggressive imperialist circles are maturing will be doomed to frustration if the peoples take the cause of peace into their hands and defend it to the end. “The democratic forces of the world are now strong enough to prevent war, if only they will act in unity and make impotent the capitalist war profiteers and would-be world conquerors." (William Z. Foster, Outline Political History of the Americas, 1953, p. 590.),

The Militarisation of the Economy of the Capitalist Countries.
Changes in the Capitalist Cycle

In conditions of the break-up of the single world market and contraction of the sphere of exploitation of the world’s resources by the chief capitalist countries, the dominant monopolies are resorting more and more to militarisation of the economy as a means of bringing about a growth of production and securing very high profits. In the State Budgets the relative share taken by expenditure arising directly or indirectly from the arms of drive is continually rising. The increase in the State Budgets, absorbing an ever larger slice of the national income, is accompanied by an increase in the gap between receipts and expenditure, a growth in the public debt, and the clogging of the channels of monetary circulation with paper money, the purchasing power of which is falling. Militarisation of the economy inevitably leads to still greater sharpening of the insoluble contradictions of capitalist economy.

According to official, certainly underestimated figures, the profits of the American monopolies grew from 3.3 milliard dollars in 1938 to 34.8 milliard dollars in 1954, i.e., they were multiplied by ten. During the nine years immediately following the war, the profits of American monopolies amounted to 304 milliard dollars. In Britain the profits of joint-stock companies amounted in 1953 to £3,500,000,000, as against £1,000,000,000 in 1938.

In the post-war years (1946-54) the total war expenditure of the U.S.A., including expenditure on arming the States-members of the North Atlantic alliance (N.A.T.O.) and on producing atomic bombs, exceeded 258 milliard dollars. Direct military expenditure in the U.S.A. during the last three years (1952-4) came to 47 milliard dollars per year, or over two-thirds of the entire Budget, as compared with 953 million dollars, or 12 per cent of the entire Budget, in the three years before the second world war. In Britain military expenditure has grown correspondingly, from £173 million to £1,429 million, and from T8per cent to one-third of the total Budget. In France, war expenditure has during the last three years amounted on the average to a third of the total Budget.

The purchasing power of the U.S. dollar was in 1954 only 34.6 per cent of what it had been in 1939, that of the British pound sterling was 31.2 per cent, that of the French franc 2.8 per cent and that of the Italian lira 1.8 per cent.

The militarisation of the economy of the capitalist countries furnishes one of the most vivid demonstrations of the increasing parasitism and decay of capitalism.

Even at the time of the first world war, Lenin, noting the rapid economic development of the U.S.A., stressed that, “for this very reason, the parasitic features of modern American capitalism have stood out with particular prominence." (Lenin, “Imperialism", Selected Works, 1950 edition, vol. I, Pt. 2, p. 565.) In the period since the second world war, these parasitic features of American capitalism have intensified still further. This is especially graphically shown in the growth of the State’s unproductive expenditure, caused by the arms drive and the all-round militarisation of the national economy.

The parasitism and decay of capitalism does not mean in the least that technical progress ceases and complete stagnation of technique sets in. The characteristic tendency of monopoly to technical stagnation operates alongside an opposite tendency, for technique to advance under the influence of competition and the hunt for high monopoly profits. The arms drive brings about an advance of technique in the branches concerned with armaments production and the sections of heavy industry connected therewith. As a result technique does not stand still in the capitalist countries but goes forward. But the decay of capitalism shows itself in the fact that technical progress takes place extremely unevenly and lags considerably behind the vast possibilities opened up by the present level of development of science and technique.

The economic essence of militarisation of the economy consists in the fact that, first, an ever-greater share of the finished products and raw materials is absorbed by unproductive consumption connected with war preparations or locked up in the form of huge strategic stocks; second, the expansion of war production is carried out at the cost of a further lowering of workers’ wages, ruin of the peasantry, increase in the tax burden and plundering of the peoples of the colonial and dependent countries. All this substantially reduces the purchasing power of the population, cuts down the demand for the products of industry and agriculture, and leads to a sharp contraction in civilian production. Thus, the militarisation of the economy of the capitalist countries, aggravating the disproportion between the production potentialities and the reduced effective demand of the population, leads inevitably to the growth of the pre-requisites of a crisis of overproduction.

In connection with the aggravation of the general crisis of the world capitalist system, further changes take place in the capitalist cycle. These changes ensue from the break-up of the uniform world market and the intensification of the uneven development of the capitalist countries. They are connected with the inevitable consequences of the second world war and the militarisation of the economy. War-inflation factors, i.e., the militarisation of the economy and the inflation which accompanies it, temporarily hold back the outbreak of crisis but cannot eliminate, or restrict the operation of the general laws of capitalist reproduction which make crises unavoidable.

Since the U.S.A. on the one hand, and the main West European countries on the other, came out of the war having suffered quite different economic effects from it, the course of the capitalist cycle could not be the same through the capitalist world. After the second world war ended, the volume industrial production in the U.S.A., which had been inflated by war demand, fell sharply, so that in 1946 it was 29 per cent less than in 1943. Later, in 1948-9, an economic crisis occurred. It is significant that, on the eve of the crisis, in 1948, American industry had not yet attained the highest peak of production during the war period, the level of 1943. The crisis of 1948-9 affected to some extent also a number of countries of Western Europe. From October 1948 to October 1949 the volume of American industrial production fell by 10 per cent. Industrial production in the U.S.A. in 1949 amounted to only 35 per cent of what it had been at the highest point in 1943 (engineering only 50 per cent). This shrinking of production was accompanied by crisis phenomena in the fields of commodity circulation, credit and foreign trade. These include piling up of vast stocks of unrealisable commodities the decline in commercial transactions, a sharp falling-off railway freights, some stock exchange failures, a fall in the value of shares amounting to milliards of dollars, an increase in the number of bankruptcies, and a reduction in the volume of America’s exports..

The war inflicted considerable damage upon the economies of the principal capitalist countries of Western Europe and the restoration of this damage held back for a definite period the growth of the prerequisites for an overproduction crisis, so that the post-war years saw an increase in industrial production in these countries. The crisis of 1948-9 in the U.S.A. did not lead to a. general falling-off of production in Western Europe and, consequently, did not develop into a world economic crisis.

The rapid increase of war expenditure in the United States and other capitalist countries, especially after the outbreak of the war in Korea in 1950, served as a temporary stimulus to the expansion of production, and first and foremost to the production of armaments and other war material. However, the one-sided character of this recovery made it unstable and short-lived. A fresh falling-off of production, signifying a crisis, began as early as the middle of 1953. Within less than a year—from August 1953 to April 1954—the volume of industrial production in the U.S.A. declined by 10 per cent. The shrinkage of production led to the doubling of the number of completely unemployed, to a wave of bankruptcies and the swallowing up. of many smaller firms by the big monopolies. Between April and November 1954 industrial production remained at the same level, and only in November 1954 did it begin slowly to mount.

Thus, the course of reproduction in the second stage of the general crisis of capitalism is marked by sharply-increasing unevenness of development as between different countries, which brings special instability to the entire economic system of capitalism. The prerequisites for a world economic crisis continue to accumulate in all the capitalist countries.

Intensified Impoverishment of the Working Class in the Capitalist Countries

The aggravation of the general crisis of capitalism which took place after the second world war led to a further impoverishment of the proletariat. Seeking maximum profits, the monopolies are increasing the exploitation of the working people. Monopoly capital is transferring on to the backs of the working people the ruinous consequences of the war and of militarisation of the economy.

The monopolies supported, by the reactionary trade union leaders seek to lower the workers’ real wages through “freezing" nominal wages, i.e., preventing them from rising in conditions in which inflation prevails and the burden of taxation is growing. Inflation produces an increase in the cost of living and a rapid rise in the prices of consumer goods, a widening of the gap between nominal and real wages. External expansion and the militarisation of the economy of the capitalist countries take place at the price of a burden of taxation which weighs upon the working people. One of the factors in the reduction of the standard of living of the working class is the rapid rise in rents. The decline in real wages leads to a worsening of the nutrition of the working population.

The position of the working intelligentsia in the capitalist countries is deteriorating; unemployment is increasing amongst them, and their incomes are falling as a result of the rise in the cost of living, the growth of taxation, and inflation.

Real wages in the U.S.A. and Britain and especially in France and Italy have markedly declined as compared with pre-war. Thus, for example, in France the purchasing power of the average hourly wages was in 1955 about half what it had been before the war.

Along with the sharp fall in the purchasing power of money the cost of living grew considerably in the capitalist countries in relation to the pre-war figures. In 1954 in the U.S.A. it was 2.9 times pre-war, in France more than 30 times and in Italy more than 60 times.

In 1952, in spite of the increase in war production, there were reckoned to be in the U.S.A. not less than 3 million wholly unemployed and 10 million partly, and in Western Germany nearly 3 million wholly and partly unemployed. Italy had more than 2 million wholly unemployed and an even larger number partly unemployed. In Japan there were about 10 million wholly and partly unemployed. In the U.S.A. at the beginning of 1954 the number of wholly unemployed reached 3.7 millions, and that of partly unemployed 13.4 millions.

In the U,S.A. direct taxes in the 1953-4 budget year were nearly twelve times as great as in the 1937-8 budget year, even if the fall in the purchasing power of money be taken into account. In the Western European countries, where, too, the tax-burden was very heavy even before the war, taxes likewise grew in this period; in Britain they were doubled, in France multiplied by 2.5 and in Italy one and a half times. At the beginning of 1955 the rent paid by a U.S. worker’s family was more than double what it had been in 1939.

According to figures issued by the Bureau of the Census, in 1949 in the U.S.A. 72.2 per cent of all American families had incomes below the extremely meagre official subsistence minimum; 34.3 per cent had incomes which were less than half of this minimum, 18.5 per cent less than a quarter, and 9.4 per cent less than an eighth.

The worsening of the material situation of wide sections of the population of the capitalist countries leads to a growth of unrest and discontent among the masses, who react more and more actively against the oppression of monopoly capital. This is expressed in an upsurge of the strike movement in the capitalist countries, in a strengthening of the progressive trade unions which are united in the World Federation of Trade Unions set up in 1945, in the growth of the Communist Parties and extension of their mass influence, in the strengthening of the political activity of the working class. The Communist Parties and progressive trade unions, firmly rebuffing the splitting activity of the right-wing Socialists and reactionary trade union leaders, are educating the working class in the spirit of proletarian solidarity, in the spirit of struggle for liberation from imperialist oppression.

Intensified Oppression by the Monopolies in the Agriculture
of the Capitalist Countries, and Impoverishment of the Peasantry

The aggravation of the general crisis of capitalism after the second world war is marked by enhanced domination by the monopolies and finance-capital in agriculture, the growth of differentiation among the peasantry and of impoverishment of the bulk of them.

Finance capital takes possession of agriculture ever more widely and deeply. The mortgage banks, which advance credit on the security of land, become the de facto owners of the holdings of the ruined peasantry, together with their implements and other chattels. The short-time credit banks and insurance companies entangle the peasants in a net of indebtedness.

The monopolies make money for themselves out of the products of agriculture at every stage of their passage from the producer to the consumer. By fixing low prices for the produce which they buy from the small peasants and screwing up retail prices to a high level, the monopolies appropriate a substantial part of the peasants’ incomes. Huge profits are received at the expense of the bulk of the peasants by the monopolies engaged in the processing of agricultural produce (in the flour-milling, meat, tinned food and sugar industries). The measures taken by the State-tax policy, wholesale buying operations and other forms of so-called “aid" to agriculture—result in ever greater enrichment of the monopolies and impoverishment of the bulk of the peasantry. The exploitation of the peasants by the monopolies is combined with very numerous survivals of the serf-owning type of exploitation and above all with share-cropping, under which the tenant is obliged to hand over to the landowner a considerable share of his crop as rent for land and implements.

In the U.S.A, the proportion of the total land occupied by large and very large farms, over 500 acres in extent (which amounted in 1950 to less than 6 per cent of all the farms), grew from 44.9 per cent in 1940 to 53.5 per cent in 1950, while the share occupied by latifundia with an extent greater than 1,000 acres grew from 34.3 per cent to 42.6 per cent. According to the data of the 1950 census, 44 per cent of all the farms (in value of marketable produce accounting for less than 1,200 dollars each) produced less than 5 per cent, of all the marketable produce, i.e., they were primitive, poorly-productive, subsistence farms, while 103,000 large farms (25,000 dollars’ worth, or more, of marketable produce each), which made up only 2 per cent of the total, contributed 26 per cent of the marketable produce of U.S. agriculture. In France in 1950 small farms, twenty-five acres or less in extent, which made up 56.7 per cent of all the farms, comprised only 16.1 per cent of all the agricultural land, while large farms, numbering 4.4 per cent of the total, made up 29.9 per cent of it. In Western Germany small farms with an area not exceeding 12.5 acres, which in 1949 made up 55.8 per cent of all the farms, had only 11 per cent of all the land, while 0.7 per cent of the large farms accounted for 27.7 per cent of it. In Italy there are 2.5 million landless peasants and 1.7 million who have little land. During the decade 1940 to 1950 over 700,000 farm households were ruined.

The total amount of ground-rent in the U.S.A. grew from 760 million dollars in 1937 to 2.1 milliard dollars in 1952. In Italy a few hundred landlords drew every year 450 milliard lire in ground-rent, whereas the wages of 2.5 million agricultural labourers amounted only to 250 milliard lire. The total indebtedness of American farmers to the banks and other credit institutions more than doubled in 1946-54, reaching the figure of 18 milliard dollars by January 1, 1955. The property tax on the farm population was in 1953 2.3 times as high as in 1942.

Since the second world war the increase in the impoverishment of the working class and the peasantry in the capitalist countries and the vast expenditures which these countries are making on armaments have brought about a decline in effective demand and in the market for agricultural produce. In connection with this, stocks and “surpluses" of agricultural goods for which no outlet can be found are increasing in the capitalist countries, cultivated areas are shrinking, the earnings of the bulk of the peasantry from the sale of their produce are sharply declining, a mass-scale ruination of petty producers is taking place, and a vast quantity of foodstuffs is being destroyed—at the same time as the consumption of foodstuffs by the working masses is falling and they are actually going without essential food. All this is preparing the way for the onset of a fresh agrarian crisis.

Transient stocks of wheat in the U.S.A. in 1954 were 2.4 times the highest level of stocks during the crisis of 1929-33 and were more than 7 times as great as the average annual stocks of 1946-8. In order to keep prices of foodstuffs at their inflated level, State agencies in the U.S.A. buy up huge quantities of gram, cotton, potatoes and livestock products and systematically destroy part of these stocks.

In 1954 the net income of U.S.A. farmers was 4.6 milliard dollars, or 36 per cent less than their average annual income in 1946-8.

*      *

The further aggravation of the general crisis of capitalism since the second world war is marked by a sharpening of the antagonisms of capitalist society. The contradiction between society’s productive forces and the capitalist relations of production, which has reached its farthest limits, shows graphically that history has doomed the bourgeois system, which has outlived itself.

The second stage of the general crisis of capitalism has brought with it an aggravation of the crisis of bourgeois democracy. The anti-popular and anti-national character of bourgeois rule is showing itself with increasing frankness. The reactionary circles of the bourgeoisie are seeking their way out from the general crisis of capitalism by the path of war and the fascisation of political life.

The masses of the people in the capitalist countries, marching under the banner of proletarian internationalism, are seeking their way out of the situation through active and resolute struggle against the entire system of imperialist slavery and for national and social liberation.

“Proletarian, socialist internationalism is the basis of the solidarity of the working people and of co-operation between the peoples in the cause of defending their independence from the attempts made upon it by imperialism, in the defence of peace. It teaches the workers to unite their forces in every country in order to fight against the rule of capital, to bring about a transition to socialist economy. It teaches the working class and the peoples to develop mutual of links of international solidarity, in order the better to carry forward the fight for peace, to isolate and render harmless those who are fomenting another war." (P. Togliatti, “The Unity of Working Class and the Tasks of the Communist and Work Parties", For a Lasting Peace, for People’s Democracy, December 2, 1949.)

After the first world war Russia broke away from the capitalist system; after the second world war a whole series of countries in Europe and Asia broke away; and a third world war, should the imperialists manage to start one, would inevitably result in the downfall of the entire world capitalist system. In such a war the imperialist aggressors would not only clash with the invincible might of the States of the socialist camp. They would find themselves confronted with an explosion of all the sharpest contradictions inherent in present-day capitalism—between labour and capital, between the imperialist Powers, between the metropolitan countries and the colonies.

The progressive, democratic forces of the peoples, headed by the working class and its vanguard, the Communist Parties, are uniting in active opposition to imperialist reaction, the fascist danger and the plans for fresh wars. The peace-loving policy of the Soviet Union, the Chinese People’s Republic and the other countries of the socialist camp, directed towards the easing of international tension, has led to the ending of the war in Korea, the restoration of peace in Indochina and the conclusion of the State treaty with Austria. At the Geneva meeting of the heads of government of the four Powers —the Soviet Union, the U.S.A., Britain and France—held in June 1955, definite successes were achieved in the direction of improving the international situation and establishing co-operation between States with different economic and social systems. The camp of peace, democracy and socialism, headed by the Soviet Union and the Chinese People’s Republic, unites the 900 million inhabitants of the countries which have broken away from the capitalist system. This camp constitutes a powerful force which exercises a decisive influence on the entire course of current history.


(1) In the period of the second world war, especially after the falling away from the capitalist system of the People’s Democracies of Europe and Asia, the general crisis of capitalism developed to its second stage. As a result of the formation of two opposing camps in the international arena, a split took place in the single, all-embracing world market and two parallel markets were formed: the market of the countries of the socialist camp and the market of the countries of the capitalist camp. The sphere of access by the forces of the chief capitalist countries—U.S.A., Britain, France—to the world’s resources was notably reduced.

(2) One of the principal results of the second world war has been the sharp aggravation of the crisis of the colonial system of imperialism. An upsurge of the national liberation struggle in the colonial and dependent countries has led to the beginning of the break-up of the colonial system, to the breaking away of China and a number of other countries from the world system of imperialism.

(3) The further intensification of the unevenness of the development of the capitalist countries inevitably produces an aggravation of. the internal contradictions in the camp of imperialism. The militarisation of the economy

(1) causes the gap to widen between the production potentialities of industry in the capitalist countries and the possibilities for disposing of their goods, and by so doing prepares the way for the onset of a fresh economic crisis.

(4) The second stage of the general crisis of capitalism is marked by a further deterioration in the material position of the broad masses of the working people. This is expressed in the decline in the real wages of the working class, the increase in the permanent army of unemployed, the extensive introduction of sweating systems, inflation and rise in the cost of living, increase in the burden of taxation, the worsening of the position of the bulk of the peasantry in the capitalist countries and intensified exploitation of the colonies. The strengthening of the camp of peace, democracy and socialism, the weakening of the imperialist camp of reaction and war, the upsurge in the struggle of the working class, the peasantry and the colonial peoples for freedom testify that the present epoch is the historic epoch of the downfall of capitalism, of the victory of communism.


With the development of capitalism and the growth of its contradictions various trends of economic thought were formed and developed, expressing the interests of different classes.

Bourgeois Classical Political Economy

In the struggle against feudalism and for the establishment of the capitalist order the bourgeoisie created its own political economy, which discredited the economic views of the ideologues of feudalism and for a certain period played a progressive role.

The capitalist mode of production was established first of all in Britain. Here also was born bourgeois classical political economy whose representatives tried to discover the internal connections between economic phenomena. Already the founder of bourgeois classical political economy, WILLIAM PETTY (1623-87), who was active in the period when mercantilism was breaking down, essentially defined the value of commodities by the comparative amount of labour contained in them, though , much inconsistency was shown regarding this question.

An important role in the formation of bourgeois political economy was played by the physiocrats. This trend was headed by FRANCOIS QUESNAY (1694-1774). The physiocrats arose in France in the second half of the eighteenth century, in the period when the bourgeois revolution was being prepared in the world of ideas. Like the French philosophers of the Enlightenment in the same period, the physiocrats laid it down that natural laws of human society exist, established by Nature. France was at that time an agricultural country. In contrast to the mercantilists, ‘who saw wealth only in money, the physiocrats declared the sole source of wealth to be Nature, and consequently agriculture, which supplies man with the fruits of Nature. Hence also the name of the school—"physiocrats", formed from two Greek words meaning “Nature" and “rule".

The central place in the physiocrats’ theory was occupied by the doctrine of the produit net. This was what the physiocrats called the entire surplus of production over and above the expenditure incurred in production—that part of the production in which, under capitalism, the surplus-value finds embodiment. The physiocrats understood wealth as a definite mass of products in their real, material form, as a definite mass of use-values. They declared that the produit net, as a “gift of nature", arises exclusively on the basis of the use of wage­labour in agriculture and stock-breeding, i.e., in those branches of production where the natural processes of growth of plants and animals take place, while all other branches merely change the form of the products supplied by agriculture.

The most noteworthy work of the physiocratic school was Quesnay’s Tableau economique. The service rendered by Quesnay consisted in the fact that he made a remarkable attempt to depict the process of capitalist reproduction as a whole even though he could not furnish a scientific theory of reproduction.

Proceeding from the idea that the produit net is created only in agriculture, the physiocrats demanded that all taxes be imposed on landowners, while manufacturers should be freed from tax burdens. This demand of the physiocrats showed clearly their class character as ideologues of the bourgeoisie. The physicrats were supporters of the unlimited domination of private property. Affirming that only free competition corresponds to the natural laws of economy and to human nature they counterposed to the policy of protectionism the policy of free trade, and fought resolutely against guild restrictions and against social interference by the State in the country’s economic life.

Bourgeois classical political economy attained the peak of its development in the works of A. Smith and D. Ricardo.

ADAM SMITH (1723-90) took a notable step forward compared with the physiocrats, in the scientific analysis of the capitalist mode of production. His fundamental work was An Inquiry into the Nature and Causes of the Wealth of Nations (1776). In Smith’s opinion, a country’s wealth consists in the entire mass of commodities produced in it. He rejected the one-sided and therefore incorrect conception of the physiocrats that the produit net is created only by agricultural labour and was the first to proclaim as the source of value all labour, in no matter which branch of production it might be expended. Smith was an economist of the period of manufacture in the development of capitalism, and for this reason he saw the basis of the increase in the productivity of labour in the division of labour.

Characteristic of Smith was the interweaving of two different approaches to economic phenomena. On the one hand, Smith inquired into the internal connections of phenomena, trying to penetrate with his analysis into the hidden structure or, to use Marx’s expression, the physiology of the bourgeois economic system. On the other hand, Smith gave a description of phenomena in the form in which they made their appearance on the surface of capitalist society and, consequently, as they seemed to the practical capitalist. The first of these ways of understanding reality is scientific, the second is unscientific.

Investigating the internal connections of the phenomena of capitalism, Smith defined the value of a commodity by the amount of labour expended on producing it; in so doing he looked upon the wages of the wage-worker as part of the product of his labour, determined by the value of his means of livelihood, and profit and rent as deductions from the product created by the worker’s labour. However, Smith did not maintain this point of view consistently. Smith continually confused the determination of the value of commodities by the labour included in them with the determination of the value of commodities by “the value of labour". He asserted that the determination of value by labour belongs only to the “primitive state of society", by which he meant the simple commodity production of petty producers. Under capitalist conditions the value of a commodity is made up of incomes: wages, profit and rent. An assertion such as this reflected the misleading appearance assumed by phenomena in capitalist economy. Smith considered that the value of the social product as a whole also consisted only of incomes—wages, profit and rent; i.e., he made the mistake of leaving out the value of the constant capital which is used up in producing a commodity. This “Smith dogma" made it quite impossible to understand the process of social reproduction.

Smith was the first to describe the class structure of capitalist society. He showed that it is divided into three classes: (1) workers, (2) capitalists and (3) landowners. But Smith was limited by his bourgeois world-outlook and his views reflected the undeveloped class struggle of the epoch: he claimed that in a capitalist society a community of interests prevails, inasmuch as each pursues his own advantage, and from the clash between all these separate strivings the common benefit arises. Resolutely combating both the theoretical views and the policies of the mercantilists, Smith warmly supported free competition.

In the works of DAVID RICARDO (1772-1823) bourgeois classical political economy reached its perfection. Ricardo lived in the period of the industrial revolution in Britain. His principal work, On the Principles of Political Economy and Taxation, came out in 1817. Ricardo worked out the labour theory of value with the maximum consistency possible within the framework of a bourgeois outlook. Rejecting Smith’s thesis that value is determined by labour only in “the primitive state of society", he showed that the value created by the workers’ labour is the source from which’ arise wages, rent and profit alike.

Proceeding from the idea that value is determined by labour, Ricardo showed the antagonism of class interests in bourgeois society, as it manifests itself in the sphere of distribution. Ricardo regarded the existence of classes as an eternal feature of the life of society. In Marx’s words, Ricardo “consciously makes the antagonism of class interests, of wages and profits, of profits and rent, the starting-point of his investigations, naively taking this antagonism for a law of nature". (Marx, Capital, Kerr edition, vol. I, pp. 17-18.) Ricardo formulated an important economic law: the higher the worker’s wages the lower the capitalist’s profit, and vice versa. Ricardo also showed the antagonism between profit and rent; but he went wrong in acknowledging the existence only of differential rent, which he linked with the imaginary “law of diminishing returns from the soil".

Ricardo played a great role in the development of political economy. His doctrine that value is determined by labour alone was of outstanding historical importance. Observing the growth of capitalist contradictions, some of his followers began to draw the conclusion: since value is created by labour alone, it is necessary and just that the worker, creator of all wealth, should also be the master of all wealth, of all the products of labour. A demand like this was put forward in Britain in the first half of the nineteenth century by the early Socialists, who were followers of Ricardo.

At the same time, Ricardo’s doctrines contained elements of bourgeois limitedness. The capitalist system with its antagonistic class interests seemed to Ricardo, as to Smith, a natural and eternal system. Ricardo did not even raise the question of the historical origin of such economic categories as the commodity, money, capital, profit, etc. He understood capital unhistorically, identifying it with means of production.

The Rise of Vulgar Political Economy

With the development of capitalism and the sharpening of the class struggle, classical bourgeois political economy gave place to vulgar political economy. Marx called it vulgar because its spokesmen substituted for the scientific cognition of economic phenomena mere description of the outward appearance of these phenomena, having as their. aim the embellishment of capitalism and the slurring-over of its. contradictions. The vulgar economists threw out everything that was scientific, while snatching at everything that was unscientific in the views of earlier economists (especially A. Smith)—everything which had been determined by the class limitations of their outlook.

“It was thenceforth no longer a question whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested inquiries there were hired prizefighters; in place of genuine scientific research, the bad conscience and the evil intent of apologetic; Marx, Capital, Kerr edition, vol. I, p. 19.)

In the sphere of the theory of value, vulgar economy put forward, in opposition to the determination of value by labour time, a number of propositions which had already been refuted by the bourgeois classical school. Amongst these were: the theory of supply and demand, which ignores the value underlying prices and for the explanation of the very basis of prices substitutes a description of the fluctuations of these prices; the theory of costs of production, which explains thee prices of some commodities by means of the prices of others, i.e., in fact turns round in a vicious circle; the theory of utility, which, trying to explain the value of commodities from their use-value, ignores the fact that the use-values of different commodities are qualitatively different and therefore cannot be compared quantitatively.

The English vulgar economist T.R. MALTHUS (1766-1834) put forward the fabrication that the poverty of the masses of the working people which is inherent in capitalism is due to the fact that people multiply faster than the amount of means of life provided by nature can be increased. According to Malthus, the necessary correspondence between the numbers of the population and the quantity of means of life supplied by Nature is brought about through famine, poverty, epidemics and wars. Malthus’s man-hating theory was formed for the purpose of justifying the social order under which the parasitism and luxury of the exploiting classes exist side by side with the exhausting labour and increasing want of the broad masses of the working people.

The French vulgar economist J.B. SAY (1767-1832) declared the source of value to be the “three factors of production"—labour, capital and land, and drew the conclusion therefrom that the owners of each of these three factors of production receive the incomes “due" to them: the worker his wages, the capitalist his profit (or interest), the landowner his rent. The “three factors" theory, which became widespread in bourgeois political economy, had the function of concealing the decisive circumstance that it is only in certain social conditions that labour is transformed into wage-labour, that the means of production become capital, and that property in land becomes a source of rent. Capital and land provide revenue for their owners, of course, only by virtue of the fact that the worker creates surplus-value by his unpaid labour, and this is the real source of all unearned incomes in capital society. Affirming that under capitalism there is no contradiction between production and consumption, Say denied that general crises of overproduction were possible. Say’s theory was a crude distortion of reality to please the exploiting classes. Fantasies about the harmony of class interests under capitalism were zealously propagated by the French economist F. BASTIAT (1801-50) and the American CH. CAREY (1793­1879). Under the pretext of defending bourgeois “freedom of labour" vulgar political economy carried on a fierce struggle against trade unions, collective agreements and strikes. From the second quarter of the nineteenth century onward, vulgar political economy became predominant in bourgeois economic science.

Petty-bourgeois Political Economy

At the beginning of the nineteenth century there arose a petty-bourgeois trend in political economy, which reflected the contradictory position of the petty-bourgeoisie as the intermediate class of capitalist society. Petty-bourgeois political economy begins with the Swiss economist S. SISMONDI (1773-1842). Unlike Smith and Ricardo, who regarded the capitalist system as the natural state of society, Sismondi undertook a critique of capitalism, which he condemned from the standpoint of the petty-bourgeoisie. Sismondi idealised the petty commodity production of peasants and handicraftsmen and, failing to see the inevitable growth of the capitalist relations inherent in petty commodity production, put forward utopian projects for perpetuating small property. From the fact that the incomes of the workers and petty producers decline Sismondi drew the erroneous conclusion that the market inevitably shrinks as capitalism develops. He wrongly claimed that accumulation of capital was possible only given the existence of petty producers and foreign markets.

The ideas of petty-bourgeois political economy were developed in France by P.J. PROUOHON (1809-1865). He upheld the reactionary idea that all the social evils of capitalism could be eliminated by setting up a special bank, which would carry out the exchange of goods between petty producers without using money and would grant free credit to the workers. Proudhon sowed reformist illusions among the working-class masses and deflected them from the class struggle.

In Russia at the end of the nineteenth century the reactionary ideas of petty-bourgeois political economy were propagated by the liberal Narodniks.

The Utopian Socialists

With the rise and development of large-scale machine industry at the end of the eighteenth and beginning of the nineteenth centuries the contradictions of capitalism and the miseries which it brings to the working masses became increasingly apparent. But the working class was still not conscious of its historical role as capitalism’s grave-digger. It was in this period that the great Utopian Socialists emerged: HENRI SAINT-SIMON (I760-1825) and CHARLES FOURIER (1772-1837) in France and ROBERT OWEN (1771-1858) in Britain, who played a big part in the history of the development of socialist ideas.

In their explanation of economic phenomena the Utopian Socialists did not depart from the basis of the eighteenth century philosophers of the Enlightenment, which had been that of the spokesmen of bourgeois classical political economy. But whereas the latter regarded the capitalist system as corresponding to human nature, the Utopian Socialists looked upon it as contradicting human nature.

The historical importance of the Utopian Socialists is that they subjected bourgeois society to vigorous criticism, ruthlessly castigating such ulcers upon it as the poverty and privations of the mass of the people condemned to heavy and exhausting labour, the venality and degeneration of the rich upper strata of society, the vast squandering of productive forces as a result of competition, crises and so on. They made a number of guesses about the nature of the socialist system, which they counterposed to capitalism. But the Utopian Socialists were far from understanding the actual ways leading to the realisation of socialism. Being ignorant of the laws of social development, the laws of the class struggle, they thought that the possessing classes themselves would introduce socialism when they had succeeded in convincing them of the reasonableness, justice and expediency of this new system. Understanding of the historical role of the proletariat was completely alien to the Utopian Socialists. Utopian Socialism

“could not explain the essence of wage-slavery under capitalism, nor discover the laws of the latter’s development, nor point to the social force which is capable of becoming the creator of a new society". (Lenin, “The Three Sources and Three Component Parts of Marxism", Selected Works, 1950 edition, vol. I, Pt. I, p. 80.)

The Revolutionary Democrats in Russia

In the middle of the nineteenth century there appeared in Russia, which was then in the throes of the crisis of serfdom, a brilliant constellation of thinkers who made a great contribution to the development of economic science.

A. I. HERZEN (1812-70) denounced Tsarism and serfdom in Russia and summoned the people to revolutionary struggle against it. He also sharply criticised the capitalist system of exploitation which had been established in the West. Herzen was the initiator of Utopian “peasant Socialism". He saw “socialism" in the emancipation of the peasants with land, in communal ownership of land and in the peasant idea of “the right to the land". There was actually nothing socialist in these views of Herzen’s, but they expressed the revolutionary strivings of Russia’s peasantry, who were fighting to overthrow the rule of the landlords and to abolish landlord ownership of land.

Very great services to the development of economic science were rendered by the great Russian revolutionary and scholar N. G. CHERNYSHEVSKY (1828-89). Chernyshevsky headed the struggle of the revolutionary democrats against serfdom and Tsarist autocracy in Russia. He produced a brilliant critique not only of serfdom but also of the capitalist system, which had become consolidated by then in Western Europe and North America. Chernyshevsky thoroughly exposed the class nature and limitedness of bourgeois classical political economy and subjected to annihilating criticism the vulgar economists, John Stuart Mill, Say, Malthus and others. In Marx’s estimation, N. G. Chernyshevsky elucidated the bankruptcy of bourgeois political economy in masterly fashion.

To bourgeois political economy, which serves the mercenary interest of the capitalists, Chernyshevsky counterposed “the political economy of the working people", the central place in which should be taken by labour and the interests of the working people. Being a representative of Utopian “peasant socialism", Chernyshevsky did not see, owing to the undeveloped state of capitalist relations in the Russia of his day, that the development of capitalism and of the proletariat creates the material conditions and the social force for the realisation of socialism. But in his understanding of the nature of capitalist society and its class structure, the character of its economic development, Chernyshevsky went much further than the West-European Utopian Socialists and took a long stride along the path to scientific socialism. Unlike the Utopian Socialists of the West, Chernyshevsky ascribed decisive significance to the revolutionary activity of the working masses, their fight for their own liberation, and called for a people’s revolution against the exploiters. Chernyshevsky was a consistent, militant revolutionary democrat Lenin wrote that the spirit of the class struggle breathes from the pages of his works.

The economic teaching of Chernyshevsky was the culmination of the whole development of political economy before Marx. In his philosophical views, Chernyshevsky was a militant materialist. Like Herzen, he came close to dialectical materialism.

The revolutionary democrats Herzen, Chernyshevsky and those who shared their views were the forerunners of Russian Social-Democracy.

The Revolutionary Transformation in Political Economy effected by K. Marx and F. Engels

By the middle of the nineteenth century the capitalist system of economy had become predominant in the principal countries of Western Europe and in the U.S.A. The proletariat had taken shape and had begun to advance to battle against the bourgeoisie. The conditions had arisen for the formation of an advanced proletarian world outlook—Scientific Socialism.

KARL MARX (1818-83) and FRIEDRICH ENGELS (1820-95) transformed socialism from utopia into science. The teachings elaborated by Marx and Engels express the fundamental interests of the working class and are the battle-flag of the proletarian masses for the revolutionary overthrow of capitalism and the triumph of socialism.

Marx’s teaching “arose as the direct immediate continuation of the teaching .of the greatest representatives of philosophy, political economy and socialism." (Lenin, “The Three Sources and Three Component Parts of Marxism", Selected Works, 1950 edition, vol. I, Pt. I, p. 75.)

Marx’s genius consists, as Lenin showed, precisely in his having given the answers to questions which the advanced thinkers of mankind had already asked. His teaching is the rightful heir of the best that had been created by man’s’ thought in the field of the science of human society. At the same time the rise of Marxism was a fundamental revolutionary transformation in philosophy, in political economy and in all the social sciences. Marx and Engels equipped the working class with an integrated and systematic world-outlook — dialectical materialism, which is the theoretical foundation of scientific communism. Extending dialectical materialism to the of field of social phenomena, they created historical materialism, which is the greatest triumph of scientific thought. To the non-historical approach to human society, they counterposed the historical approach, based on a profound study of the actual course of development. The previously dominant notion of society as unchanging and static they replaced by a systematic teaching which laid bare the objective laws of social development—the laws of the replacement of some forms of society by others.

Marx and Engels were the founders of genuinely scientific political economy. In applying the method of dialectical materialism to the investigation of economic relations, Marx effected a thorough-going revolution in political economy. Approaching political economy as the ideologist of the working class Marx conclusively exposed the contradictions of capitalism and created proletarian political economy. Marx formed his economic doctrine in the course of irreconcilable struggle against bourgeois apologists for capitalism and petty-bourgeois criticism of it. While utilising and developing a number of propositions of the classical bourgeois economists, Smith and Ricardo, Marx resolutely overcame the anti-scientific views and contradictions which were contained in their teachings. In his economic teaching Marx summed up and generalised an enormous amount of material on the history of human society and especially on the history of the rise and development of capitalism. To Marx is due the discovery of the historically transient character of the capitalist mode of production and the investigation of the laws of the rise, development and fall of capitalism. On the basis of a profound economic analysis of the capitalist system Marx established the historical mission of the proletariat as the grave-digger of capitalism and the builder of a new, socialist society.

The foundations of the Marxist world-outlook were proclaimed already in the first programme document of scientific Communism—the Manifesto of the Communist Party, written by Marx and Engels in 1848. Marx published the results of his further economic investigations in his work A Contribution to the Critique of Political Economy (1859), devoted to an analysis of commodities and money; in the foreword to this book he gave a classical exposition of the principles of historical materialism. Marx’s principal work, which with perfect justification he called his life work, is Capital. The first volume of Capital (“The Process of Capitalist Production") was published by Marx in 1867; the second volume (“The Process of Capitalist Circulation") was published by Engels after Marx’s death, in 1885, and the third volume (“The Process of Capitalist Production as a Whole") in 1894. When working on Capital, Marx planned to write a fourth volume, devoted to a critical review of the history of political economy. The preparatory drafts which he left when he died were published after the death of Marx and Engels under the title of Theories of Surplus Value (in three volumes).

A number of classical works by Engels were also devoted to the working-out of the theory of scientific Communism. Amongst these are: The Condition of the Working Class in England (1845); Anti-Duhring (1878), in which are reviewed the most important questions in the fields of philosophy, natural science and the social sciences; The Origin of the Family, Private Property and the State (1884) and, others.

In founding proletarian political economy, Marx first and foremost substantiated and consistently developed the labour theory of value. Investigating the commodity and the contradiction between its use-value and its value, Marx revealed that the labour incorporated in a commodity is twofold in character. On the one hand ids concrete labour, creating the use-value of the commodity, and on the other it is abstract labour, creating the commodity’s value. His discovery of the twofold character of labour served Marx as the key to the scientific explanation of all the phenomena of the capitalist mode of production on the basis of the labour theory of value. By showing that value is not a thing but a production-relationship between people, concealed under the appearance of a thing, Marx revealed the secret of commodity fetishism. He analysed the form taken by value and investigated its historical development from the first rudimentary forms of exchange down to the complete dominance of commodity production, and this enabled him to discover the true nature of money.

The labour theory of value furnished Marx with the basis for his teaching on surplus-value. Marx was the first to show that under capitalism it is not labour that is a commodity, but labour-power. He investigated the value and use-value of this particular commodity and elucidated the nature of capitalist exploitation. Mark’s theory of surplus-value completely reveals the essence of the basic production relationship of capitalism—the relation between capitalists and workers, and lays bare the very foundations of class antithesis and class struggle between proletariat and bourgeoisie.

Marx did not only reveal the origin and source of surplus-value, he also showed how capitalist exploitation is disguised and concealed. He inquired into the essential nature of wages as the price of labour-power, appearing in transmuted form as the price of labour.

Marx analysed in profoundly scientific fashion the various forms which surplus-value assumes. He showed how surplus-value appears in transmuted form—in the form of profit, and how it then further takes the form of ground-rent and interest. Moreover, the deceptive appearance is created that wages are the price of labour, that profit is begotten by capital itself, ground-rent by land and interest by money.

In his teaching on the price of production and average profit Marx resolved the contradiction which exists in the circumstance that under capitalism market prices diverge from values. At the same time he revealed the objective basis of the class solidarity of the capitalists as regards the exploitation of the workers inasmuch as the average, profit received by each capitalist is determined by the level of exploitation not in the particular enterprise but in capitalist society as a whole.

Marx worked out the theory of differential rent and was the first to give a scientific foundation to the theory of absolute rent. He showed the reactionary, parasitic role of large-scale landownership and the essence and forms of the exploitation of the peasants by the landlords and bourgeoisie.

Marx was the first to discover the laws of the accumulation of capital, establishing that the development of capitalism, with the concentration and centralisation of capital, inevitably leads to deepening and sharpening of the contradictions characteristic of this system, at the basis of which lies the contradiction between the social character of production and the private, capitalist form of appropriation. Marx revealed the general law of capitalist accumulation, which causes the growth of wealth and luxury at one pole of society and the growth of poverty, oppression and exhausting labour at the other pole. He showed that with the development of capitalism there takes place a relative and an absolute impoverishment of the proletariat, which results in the gulf between proletariat and bourgeoisie deepening and the class struggle between them becoming sharper. Of the very greatest importance was the analysis which Marx provided of the reproduction of the entire social capital. Eliminating Smith’s error of ignoring the constant capital used up in the production of a commodity, and establishing the division of the social product, so far as its value is concerned, into three parts (c+v+s), and, as regards its material form, into means, of production and consumer goods, Marx discovered the general economic law by which the development of the productive forces. takes place in any form of society, by way of a more rapid growth. of the production of means of production as compared with that of Consumer goods. Marx analysed the conditions for simple and extended capitalist reproduction and the deep-going contradictions of capitalist realisation which lead inevitably to crises of overproduction. He examined the nature of economic crises and showed scientifically that they are inevitable under capitalism.

The economic teaching of Marx and Engels provides a thorough and comprehensive proof of the inevitability of the downfall of capitalism and the triumph of the proletarian revolution, which sets up the dictatorship of the working class and opens a new era, the era of the building of socialist society. As early as the 1870’s and 1880’s, Marxism began to be ever more widely accepted among the working class and the advanced intelligentsia of the capitalist countries. A great part in spreading the ideas of Marxism was played in those years by PAUL (LAFARGUE (1842-1911) in France, WILHELM LIEBKNECHT (1826-1900) and AUGUST BEBEL (1840-1913) in Germany, G.V. PLEKHANOV (1856-1918) in Russia, DMITRI BLAGOEV (1855-1924) in Bulgaria and other outstanding figures of the working-class movement in other countries.

In Russia the Marxist workers’ party and its world-outlook were formed in uncompromising struggle against opponents of Marxism, such as Narodism. The Narodniks denied the leading role of the proletariat in the revolutionary movement, they declared that it was impossible for capitalism to develop in Russia. The Narodniks were opposed by Plekhanov and the “Liberation of Labour" group which he organised. Plekhanov was the first to give a Marxist critique of the Narodniks’ mistaken ideas and at the same time he set forth a brilliant defence of Marxist views. Plekhanov’s activity in the 1880’s and 1890’s was of great importance for the ideological training of Russia’s proletarian revolutionaries. Plekhanov produced a number. of outstanding works on the philosophy of Marxism. He successfully popularised in a number of works particular aspects of Marx’s economic teaching, and defended this teaching against bourgeois criticism and reformist distortions. Plekhanov’s writings effectively undermined the foundations of the Narodniks’ position. But the ideological rout of Narodism was not completed. Even in the early period of his activity, Plekhanov had an incorrect understanding of a number of questions, which was the embryo of his later Menshevik views: he did not allow for the prqletariat’s need to draw the peasantry behind it in the course of the revolution, he looked upon the liberal bourgeoisie as a force which would support the revolution, etc. The task of finishing off Narodism as the enemy of Marxism and uniting Marxism with the working-class movement in Russia was carried out by Lenin.

The Further Degeneration of Bourgeois Economic Science.
Present-day Bourgeois Political Economy

From the time that Marxism first appeared in the historical arena, the fundamental and decisive task before bourgeois economists has been the “refutation" of Marxism. All sorts of idealistic philosophies and subjective sociologies have provided the logical basis of the various schools and tendencies in bourgeois political economy.

There arose in Germany in the middle of the nineteenth century the so-called historical school of political economy (W. ROSCHER, B. HILDEBRANDT, etc.). The spokesmen of this school openly denied that any economic laws of social development exist and substituted for scientific inquiry the description of separate historical facts. Their denial of economic laws provided these economists with the justification for each and every arbitrary act on the part of reaction; and for their own grovelling before. the military-bureaucratic State, which they extolled in every way. Later representatives of the historical school, headed by G. SCHMOLLER, formed the so-called historico-ethical or historico-legal trend. The characteristic feature of this trend was the replacement of economic investigation by reactionary, idealist dissertations about moral purposes, legal norms, etc. Certain economists of the historical school such as Hildebrand, together with other bourgeois economist; (ADOLF WAGNER, L. BRENTANO, W. SOMBART) formed in 1872 the so called “Social Policy League" for the purpose of preaching social reforms from their professorial chairs, with the aim of preventing the downfall of the capitalist system. Continuing the traditions of their predecessors, the representatives of this tendency, which was ironically called “Kathedersozialismus" (literally, “socialism of the professorial chair"), functioned as lackeys of the militarist German State. Some of them interpreted every measure taken by this State as a “piece of socialism". The “socialists of the professorial chair" glorified the reactionary policy followed by Bismarck and helped him to deceive the working class.

In the last decades of the nineteenth century, as Marxist ideas continued to spread, the bourgeoisie needed new ideological means of struggle against them. The so-called Austrian School then made its bow. The name of this school is connected with the fact that its principal spokesmen, K. MENGER, E. WIESER and E. BOHM-BAWERK, were professors at Austrian universities. Unlike the historical trend, the spokesmen of the Austrian school gave formal acknowledgement to the need to investigate economic laws, but in order to embellish and defend the capitalist order they transferred the search for these laws from the sphere of social relations to the field of subjective psychology, i.e., they took the road of idealism.

In the field of the theory of value the Austrian school put forward the so-called principle of “marginal utility". According to this principle the value of a commodity is determined not simply by its utility, as certain vulgar economists had previously asserted, but by its marginal utility, i.e., by the least urgent of the needs of the individual which the given commodity unit satisfies. In fact, this theory explains nothing. It is quite obvious, for example, that the subjective evaluation of a kilogramme of bread is utterly different as between a sated bourgeois and a hungry unemployed man, yet they both pay the same price for this bread. To Marx’s theory of surplus-value the economists of the Austrian school counterposed one form or another of the “theory of the productivity of capital", which is merely a refurbished form of the vulgar theory of “the three factors of production".

The transition to imperialism and the extreme sharpening of social contradictions and class struggle connected with this led to a further degradation of bourgeois political economy. After the victory of the socialist revolution in Russia, which refuted in practice the assertions of the bourgeois ideologues about the eternity of the capitalist system, many bourgeois economists began to see as one of their main tasks the concealment from the working people of the capitalist countries, by means of slanders against the Soviet Union, distorting the essential nature of the Soviet system, of the truth about the world-historic achievements of the land of socialism. Modern bourgeois political economy is an ideological weapon of the finance oligarchy, and most of its representatives function openly and without concealment as defenders of imperialist reaction and aggression.

In their explanation of such categories of capitalism as value, price, wages, profit and rent, modern bourgeois economists usually adopt the standpoint of the subjective-psychological trend, one of the varieties of which is the Austrian school described above, and rehash in various ways the old vulgar theory of the three factors of production. The British economist ALFRED MARSHALL (1842-1924) tried eclectically to reconcile three different vulgar theories of value: supply and demand, marginal utility and costs of production. The American economist JOHN BATES CLARK (1847-1938) propagating the false notion of the “harmony of interests" between the different classes of bourgeois society, put forward the theory of “marginal productivity", which was’ in fact merely a peculiar attempt to combine the old vulgar theory of “productivity of capital" with the vulgar theory of “marginal utility" propounded by the Austrian school. Profit, according to Clark, is a sort of recompense for the work of the employer. The working people create only a small part of the world’s wealth and receive it back in full.

Unlike the bourgeois economists of the epoch of pre-monopoly capitalism, who extolled freedom of competition as the basic condition for society’s development, modern bourgeois economists usually stress the need for all-round interference by the State in economic life. They extol the imperialist State as a force which stands above classes and is capable of subjecting the economy of the capitalist countries to the principle of planning. In reality, however, the intervention of the bourgeois State in economic life has nothing in common with the planning of the national economy, and intensifies the anarchy of production still further. The apologists of monopoly hypocritically describe as “organised capitalism" the subordination of the imperialist State to the finance oligarchy and their extensive utilisation of the State machine in their selfish interests, so as to increase the profits of the monopolies.

The first decades of the twentieth century in Germany saw the spread in Germany of the so-called social trend, or social organic school of political economy (A. AMMON, R. STOLZMANN, O. SPANN, etc.). Unlike the Austrian school with its subjective psychological approach to economic phenomena, the spokesmen of the social trend dealt with social relations between men, but they looked on these relations idealistically as legal forms, lacking any material content. The economists of the social trend declared that social life is governed by legal and ethical norms. They covered up their zealous service to the capitalist monopolies with demagogic arguments about “the common welfare" and the need to subordinate the “part", i.e., the working masses, to the “whole", i.e., the imperialist State. They praised the activity of the capitalists, declaring it to be service to society. The reactionary fabrications of this school furnished an ideological weapon to fascism in Germany and in other bourgeois countries.

German fascism made use of the most reactionary elements of German vulgar political economy, its extreme chauvinism, its worship of the bourgeois State, its preaching of conquest of other peoples’ lands together with “class peace" within Germany. The German fascists, who were the bitterest foes of socialism and of all progressive mankind, resorted in anti-capitalist demagogy and hypocritically styled themselves National-Socialists. The Italian and German fascists preached the reactionary theory of the “corporative State", according to which capitalism, classes and class contradictions had been abolished in the fascist countries. The fascist economists justified the robber conduct of Hitlerite Germany in seizing the lands of other peoples by means of the so-called “race theory" and the “theory of living-space". According to these theories the Germans are a “higher race" and all the other nations are “inferior"; the “master race" has the right to seize by force the lands of the other, “inferior" races and to extend its rule throughout the world. The experience of history has shown graphically the foolishness and impracticability of Hitler’s crazy plans to conquer world power.

In the period of the general crisis of capitalism, when the market problem has assumed unprecedented acuteness, economic crises have become both more frequent and more profound, and permanent mass unemployment is a regular feature of life, sundry theories have appeared which suggest that it is possible to secure “full employment" and to eliminate anarchy of production and crises while preserving the capitalist system. The theory of the British economist J.M. KEYNES (1883- 1946) which he set forth in his book A General Theory of Employment, Interest and Money (1936) became widespread among bourgeois economists.

Concealing the true causes of permanent mass unemployment and crises under capitalism, Keynes tries to show that these “flaws" of bourgeois society arise not from the nature of capitalism but from the psychology of individuals. According to Keynes, unemployment results from insufficient demand for articles of personal and productive use. The inadequacy of consumer demand is caused by the inherent tendency which people have to save part of their income, and the inadequacy of demand for articles of productive use is due to the capitalists’ loss of interest in investing their capital in the various branches of the economy because of the general fall in the “profitability of capital". In order to increase employment, Keynes declares, it is necessary to increase the investment of capital, and to this end the State must, on the one hand, ensure a growth in the profitability of capital by reducing the real wages of the workers through inflation and reduction of the bank rate, and, on the other hand, carry out large-scale capital investment at public expense. The extension of consumer demand, according to Keynes, may come from a further growth in the parasitic consumption and extravagance of the ruling classes and an increase in expenditure for war purposes and other unproductive outlays by the State.

Keynes’ theory is unsound. The inadequacy of consumer demand is due not to any mythical “inclination of people to save" but to the impoverishment of the working people. The measures proposed by Keynes allegedly in the interests of securing full employment—inflation, increase in unproductive, expenditure on preparing and carrying on wars—lead in reality to a further reduction in the standard of living of the working people, to shrinkage of the market and increase in unemployment. The theory of Keynes in one variety or another is widely made use of nowadays by bourgeois economists and also by right-wing Socialists in a number of capitalist countries.

Characteristic of present-day bourgeois political economy in the U.S.A. is the theory which urges an increase in the State Budget and the public debt as a means of overcoming capitalism’s defects. The American economist A. HANSEN, whir considers that the possibilities of further development of capitalism through the operation of elemental economic forces alone have been substantially narrowed, declares that it is necessary for the State to “regulate" capitalist economy through artificially stimulating capital investment by means of extensive State purchases. According to the theory of Hansen and a number of other American bourgeois economists, State expenditure should serve as the “regulator, of employment": during crises and depressions the Government must increase its expenditure and during inflation it must reduce it. Starting from this idea they call for an extension of the practice of State orders, the establishment of enterprises at State expense, the purchase of strategic material on a large scale, the expansion of the army and of the Government apparatus. In fact, all these forms of State expenditure, connected with the militarising of the economy and the arms drive, play a very great role in ensuring maximum profits to the monopolies.

After the second world war American bourgeois economists made extensive propaganda in favour of militarising the economy as a way of preserving it from economic crises of overproduction. According to these economists, a large demand for war purposes will guarantee an unbroken growth in production. This apologetic theory is refuted by reality, for the militarising of the economy can only hold back for a short time the onset of an overproduction crises, and in the last analysis inevitably aggravates the contradiction between the growth of the productive potentialities and the narrowing of the effective demand of the population, which leads to economic crises.

Certain bourgeois economists in the U.S.A. and Britain call for “free play of economic forces", by which in fact they understand the unrestricted freedom of the monopolies to exploit the workers and fleece the consumers. These economists hypocritically declare the activities of the trade unions in defence of the workers to be a violation of “economic freedom", and eulogize the reactionary, anti-labour legislation of the imperialist States. Both the champions of “regulation" of the economy by the bourgeois State and the upholders of the “free play of economic forces" express the interests of the finance oligarchy, which tries to assure itself of maximum profits through further intensifying exploitation of the working masses inside the country and through imperialist aggression in the international arena.

Some bourgeois economists try to justify the aggressive policy of seizure of other peoples’ lands by the imperialist Powers, and their enslavement and plundering of other peoples, by anti-scientific fabrications about the “inequality" of the various races and nations about the civilising mission of the “higher" races and nations in relation to the “lower" ones, etc. Especially zealous in this direction are the most reactionary American economists who, following in the footsteps of the German fascists, are propagating the man-hating idea of the “superiority" of the English-speaking nations over all other peoples, and trying to justify by all possible means the crazy plans for establishing domination of the world by the U.S.A. In this connection they diligently extol the “American way of life", putting forward, in fact, the theory, long since refuted, of “American exceptionalism", which was current in the 1920’s and asserted that American capitalism differed in principle from European, that it was free from such “evils" as class contradiction and class struggle, the domination of monopoly, colonialism, and so on. American capitalism was defined as “people’s", “democratic", “labour" capitalism. In reality, nowhere is the domination of capital over labour, the despotism of monopoly in all fields of economic and political life and the subordination of the State apparatus to the financial oligarchy so clearly apparent as in the U.S.A.

Many apologists, of American imperialism express themselves against the independence of peoples and national sovereignty and declare that the existence of national States is the fundamental cause of all the social calamities of present-day bourgeois society—militarism, war, unemployment, poverty, etc. To the principle of national sovereignty they oppose the cosmopolitan idea of a “world State" in which the leading role would be played, of course, by the U.S.A. The preaching of cosmopolitanism has as its task to disarm the peoples ideologically, to break their will to resist the encroachments of American imperialism.

Many bourgeois economists in the U.S.A., are putting out direct propaganda for another world war. They depict war as a natural and eternal feature of social life, and they declare that peaceful co-existence between the countries of the capitalist camp and those of the socialist camp is impossible.

For the purpose of the preparation of another world war there is widespread propaganda in bourgeois writings for the long-since discredited theory of Malthus. Characteristic of modern Malthusianism is the combination of Malthus’s reactionary ideas with the race theory. Malthusian economists claim that the world is overpopulated owing to the “excessive multiplication" of man, which is also the basic cause of food-shortage and of all other woes suffered by the working masses. They demand a sharp reduction in the numbers of the population, especially in the colonial and dependent countries, the people of which are carrying on a fight for liberation against imperialism. The Malthusians of today call for the waging of devastating wars and the use of atomic bombs and other means of mass annihilation.

Life shows the utter untenability of the theoretical constructions of present-day bourgeois political economy, its menial role in relation to monopoly capital, its inability to give a scientific analysis and positive solution of the economic problems of the present epoch.

The petty-bourgeois criticism of imperialism. In contrast to Sismondi, who regarded the system of free competition as the primary source of all the evils of capitalism, a considerable section of the petty-bourgeois economists of the imperialist epoch extol the capitalism of the epoch of free competition, depicting it as the best of economic systems. They turn the edge of their criticism not against capitalism in general but only against the unrestricted rule of the, capitalist monopolies, seeing in their arbitrary power the fundamental threat to “economic freedom", “individual initiative", etc.

The works of the petty-bourgeois critics of capitalism contain a wealth of factual information exposing the predatory behaviour of the monopolies. But the petty-bourgeois economists criticise the monopolies from a reactionary-utopian stand-point, calling for a return to the capitalism of free competition. They deny the need to go forward to socialism, without which the elimination of the rule of the monopolies is unthinkable. The petty-bourgeois criticism of imperialism sows illusions about the possibility of doing away with the “abuses" of monopoly and strengthening the position of small and medium concerns by means of “anti-trust legislation" and all manner of measures to encourage small businesses and combat the speculative machinations of the financial sharks, while preserving capitalism. The petty-bourgeois economists sow illusions by affirming that, in capitalist conditions, it is possible to save the small commodity producers—the peasants and handicraftsmen—from ruin, and fundamentally to improve, the position of the workers through developing consumer, agricultural and artisan co-operatives.

In present-day circumstances many representatives of petty-bourgeois political economy function as exponents of the discontent among the petty-bourgeois strata of the population against the arbitrary power of the monopolies, the despotism of the State, the unbearable burden of taxes and the growing danger of war. In the Western European countries, and also especially, in the underdeveloped countries, the representatives of this trend take an active part in the democratic movement against encroachment by America’s imperialism upon the national sovereignty of other countries, against the arms drive and against the policy of preparing another world war.

The Economic Theories of the Opportunists of the
Second International and the Right-wing Socialists of Today

The countless attempts made by bourgeois science to “destroy" Marxism in no way shook its position. Then the struggle against Marxism began to be wage under the flag of effecting the “improvement" or “interpretation" of Marx’s theory. “The dialectics of history were such that the theoretical victory of Marxism obliged its enemies to disguise. themselves as Marxists." (Lenin, “The Historical Fate of Marx’s Teaching", Selected Works, 1950 edition, vol. I, Pt. I, p. 84.) The revisionists tried to adapt proletarian political economy to the interests of the bourgeoisie..

In the 1890’s, revisionism came on the scene, with the German Social-Democrat E. BERNSTEIN as its chief spokesman. The revisionists took the field against Marx and Engels’ teaching on the inevitability of the revolutionary downfall of capitalism and the setting-up of the dictatorship of the proletariat. They subjected all sections of Marx’s revolutionary economic teaching to thorough revision. The revisionists proposed to Marx’s labour theory of value with the theory of marginal utility, and, in essentials, to replace it by the latter. Marx’s teaching on surplus-value they interpreted in the sense of “moral condemnation" of capitalist exploitation. Sheltering behind alleged “new data" on the development of capitalism, the revisionists described as “out of date" Marx’s teaching on the victory of large-scale production over small, on the impoverishment of the proletariat in capitalist society, on the irreconcilability and increasing acuteness of class contradictions, on the inevitability of economic crises of overproduction under capitalism. They called on the workers to refrain from revolutionary struggle to overthrow the capitalist system and to limit their struggle to current economic interests. In Russia the views of revisionism were upheld by the so-called “legal Marxists", who were in fact ideologists of the bourgeoisie (P. STRUVE, M. TUGAN-BARANOVSKY, etc.) and by the spokesmen of the opportunist group of “Economists" and by the Mensheviks. A more subtle form of distortion of Marxism was undertaken by the opportunists of the Second International K. KAUTSKY (1854-1938), R. HILFERDING (1877-1941) and others. At the beginning of their activity they were Marxists and contributed to the spread of Marx’s teachings. In this connection should be mentioned such works of K. Kautsky’s as The Economic Doctrine of Karl Marx, The Agrarian Question and others, and also Hilferding’s work Finance Capital (1910), which, in spite of the, mistakes which it contained, played a definite positive role in the scientific study of the. modern phase of capitalist development. Later, however, Kautsky and Hilferding passed over in effect to the position of opponents pf revolutionary Marxism, though continuing for the time being to appear in the guise of “orthodox" pupils of Marx and Engels. Objecting in words—and that inconsistently—to certain theses of the revisionists, these opportunists nevertheless emasculated Marxism of its revolutionary essence and tried to transform it into a dead dogma. They threw out the doctrine of the dictatorship of the proletariat, which is the heart of Marxism, denied the absolute impoverishment of the working class, and affirmed that crises were disappearing under capitalism.

Slurring over the profound contradictions of monopoly capitalism in every way, K. Kautsky treated imperialism as merely a particular kind of policy, viz., as the striving of highly-developed industrial countries to subject agrarian countries to themselves. This theory sowed the illusion that a predatory policy did not result from the essential nature of monopoly capitalism. During the first world war Kautsky put forward the anti-Marxist theory of ultra-imperialism (super-imperialism), asserting that it might be possible under imperialism by agreement between the capitalists of the different countries to create an organised world economy and thereby eliminate anarchy of production and war. Characteristic of this reactionary theory was the separation of economics from politics and the ignoring of the law of uneven development of the capitalist countries in the epoch of imperialism. The theory of “ultra-imperialism" whitewashed imperialism and disarmed the working class to the advantage of the bourgeoisie, by giving rise to illusions about peaceful and crisisless development of capitalism. These same purposes were served by the vulgar theory of the productive forces which Kautsky also propagated; according to this theory socialism is a mechanical outcome of the development of the productive forces of society, without class struggle or revolution. After the great October Socialist Revolution in Russia Kautsky took the road of open struggle against the first dictatorship of the proletariat to be established in the world, and called for intervention against the Soviet Republic.

R. Hilferding, in his work Finance Capital, slurred over the decisive role played by monopoly in modern capitalism and the sharpening of its contradictions, and ignored very important features of imperialism—the parasitism and decay of capitalism, the partition of the world and the struggle to re-divide it. During the years of temporary and partial stabilisation of capitalism after the first world war, Hilferding followed the bourgeois economists in affirming that the era of “organised capitalism" had arrived, when thanks to the activity of the monopolies competition, anarchy of production and crises were disappearing and planned, conscious organisation had begun to prevail. From this the reactionary leaders of the Social-Democratic parties drew the conclusion that the trusts and cartels were peacefully “growing" into planned socialist economy; all that remained for the working class to do was to help the trust magnates and bankers to adjust their economy, and then present-day capitalism would gradually, without any conflict or revolution, “grow" peacefully into socialism.

Thus the whitewashing of imperialism by Kautsky, Hilferding and other reformist theoreticians of Social-Democracy was inseparably linked with their preaching of a “peaceful growth of capitalism into socialism", aimed at deflecting the working class from the tasks of the revolutionary struggle for socialism, at subordinating the workers’ movement to the interests of the imperialist bourgeoisie. This purpose was served, especially, by the spreading by certain right-wing socialist leaders in, the between the two world wars period of the apologetic theory of “economic democracy". According to this theory the workers who as representatives of trade unions appear before factory managements and other administrative bodies are. sharing equally in the management of the economy, and are gradually becoming masters of industry. By their policy of betraying the interests of the working class the Social-Democrats of the Second International cleared the way for fascism in Germany and several other countries.

A variety of the reformist theory of the peaceful growth of capitalism into socialism is the theory of “co-operative socialism", which is based on the illusion that the spread of forms of co-operation alongside preservation of the rule of capital will bring about socialism.

In Russia anti-Marxist, Kautskyist views on questions of the theory of imperialism were spread by the enemies of socialism—the Mensheviks, Trotskyists, Bukharinists and others. Preaching apologetic theories of “pure imperialism", “organised capitalism", etc., they endeavoured to slur over the sharpening contradictions of monopoly capitalism. Denying the law of uneven development of capitalism in the epoch of imperialism, they tried to poison the workers’ minds with disbelief in the possibility of the victory of socialism in a single country.

In the period following the second world war the right-wing reformist leaders of the British Labour Party and the right-wing socialist leaders in France, Italy, Western Germany, Austria and other countries (L. BLUM, K. RENNER, etc.) have come forward as defenders of capitalism. The leaders of the right-wing socialists defend the monopolies, preach class peace between the workers and the bourgeoisie, and often actively support the reactionary internal and’ aggressive foreign policies of imperialism. Endeavouring to reconcile the working people to imperialism, and to inspire in the working class faith in the possibility of improving its poverty-stricken lot while preserving the capital system, the right-wing socialist theoreticians have composed the theory of “democratic socialism", which is a variant of the theory of peaceful growth of capitalism into socialism.

The theory of “democratic socialism" affirms that in Britain, France, the U.S.A. and other capitalist countries exploitation and antagonism of class interests between the proletariat and the bourgeoisie now no longer exist; the imperialist State is proclaimed an organisation above classes and every enterprise belonging to this State a “socialist" enterprise. The Labour leaders have claimed the nationalisation of the Bank of England, of the railways and of certain branches of industry which they carried out when they were in power after the second world war as triumphs of “democratic socialism". In reality, Labour Party nationalisation was. a bourgeois measure, which in no way modified the economic nature of the nationalised enterprises as capitalist enterprises. The actual rulers of Britain continued to be the monopolist bourgeoisie. The owners of the nationalised enterprises, which had formerly been unprofitable, received generous compensation and a high, guaranteed income, while the workers employed in the nationalised branches of industry were obliged to work still more intensively at a low level of wages. The theory of “democratic socialism" serves as a screen concealing the growing oppression of the working masses by State-monopoly capitalism, which constitutes the highest degree of domination by the finance oligarchy.

While preaching “class peace" in capitalist society, the leaders of the right-wing socialist parties at the same time actively help the bourgeoisie to carry out. an offensive on a wide front against the standard of living of the working masses, and to suppress the labour movement in the metropolitan countries and the national-liberation movement in the colonies and dependent countries. In their interpretation and evaluation of all the most important economic phenomena of the present epoch they usually followed in the footsteps of the bourgeois economists.

A consistent fight against the “theories" of the bourgeois economists and right-wing socialist leaders is carried on by the Communist and Workers’ Parties, which are guided in their activity by the theory of Marxism-Leninism.

The ideas of advanced Marxist-Leninist theory are finding ever-wider acceptance among the progressive sections of the intelligentsia in the capitalist, colonial and semi-colonial countries, including the economists. The objective course of social development, the facts of real life, are to an increasing extent convincing economic scientists in the capitalist countries of the historical correctness of the theory of Marxism-Leninism. In the works of these economists, who support the materialist world outlook and are attracted towards Marxism, there is often to be found valuable material exposing the contradictions and defects of capitalism today and advocating the idea of peaceful co-existence between different social systems and economic co­operation between the peoples. An army of progressive scholars and scientists and public men of various views and trends is growing and multiplying, taking an active part in the fight for the national independence of their peoples, for peace, for the development of economic and cultural links between all countries regardless of differences in their social systems.

The Development of the Marxist Political Economy of Capitalism by V.I. Lenin.
The Working-out of a Number of New Propositions in the
Political Economy of Capitalism by J. V. Stalin

The economic teaching of Marx and Engels was given creative development in the works of V.I. LENIN (1870-1924). Marx, Engels and Lenin are the creators of genuinely scientific political economy. As a true follower and continuer of the teachings of Marx and Engels, Lenin carried on an irreconcilable struggle against both open and concealed enemies of Marxism. Lenin stood up for the revolutionary teaching of Marx and Engels against the attacks of bourgeois pseudo-science and against distortions by the revisionists and opportunists of every brand. Basing himself on the generalisation of new historical experience of the class struggle of the proletariat, he raised the teaching of Marxism to a new and higher level.

Lenin entered the political battlefield in the 1890’s, when the transition from pre-monopoly capitalism to imperialism was being completed, when the centre of the world revolutionary movement was passing to Russia—a country in which a mighty people’s revolution was coming to maturity.

In his works of the 1890’s— On the So-Called uestion of Markets (1893), What the “Friends of the People" are and how they fight the Social-Democrats (1894), The Economic Content of Narodism and the Criticism of it in Mr. Struve’s Book (1894), A Characterisation of Economic Romanticism (1897) —Lenin waged a consistent fight both against the Narodniks, who declared that capitalism would not develop in Russia, and against the “Legal Marxists", who extolled capitalism, slurred over its deep-going contradictions and endeavoured to subordinate the growing movement of the working class to the interests of the bourgeoisie. The ideological rout of Narodism was completed by Lenin’s classical work The Development of Capitalism in Russia (1899), which was the most considerable work of Marxist writing since Marx’s Capital. In this work, and’ in his other writings of the 1890’s, Lenin thoroughly analysed the economy of Russia and showed the economic foundations of class contradictions and class struggle and the prospect before the revolutionary movement. Generalising the experience of the economic and political development of Russia and other countries in the last decades of the nineteenth century, Lenin upheld and developed the propositions of Marxism about the “laws governing the rise and development of the capitalist mode of production, about its insoluble contradictions and inevitable doom. Refuting the Narodniks’ fabrications concerning the “artificiality". of Russian capitalism, Lenin showed the special features of the economy and social system of Russia, connected with the peculiarities of its historical development, in particular the combination of methods of capitalist exploitation with numerous survivals of the yoke of serfdom, which gave a special sharpness to social relations in Russia.

In his fight against the contemptuous attitude of the Narodniks towards the proletariat, Lenin showed that the development of capitalism inevitably leads to a growth in the numbers, degree of organisation and consciousness of the working class, which is the advance-guard of the entire mass of the working and exploited people. He gave a comprehensive justification of the leading role of the proletariat in the revolution.

Lenin ascertained the essence of the differentiation among the peasantry of Russia in the period since the Reform, 1and the close interweaving of survivals of serf bondage with the oppression of capitalist relations, refuting the Narodnik conception of the peasantry as a homogeneous mass. He showed the economic basis for the possibility and necessity of a revolutionary alliance between the working class and the working and exploited masses of the peasantry.

Lenin revealed the economic foundation of those peculiarities of the Russian revolution which made it a revolution of a new type — a bourgeois-democratic revolution led by the proletariat and having the prospect of growing into a socialist revolution.

The Development of Capitalism in Russia sums up a number of works of Lenin’s on the theory of capitalist reproduction. In these works he refuted the Sismondian statements of the Narodniks about the impossibility of realising surplus-value in the absence of petty producers and foreign markets, and gave a comprehensive substantiation of the Marxist thesis that the market for capitalism is created by the very development of capitalism itself. Lenin developed further the theses of Marxism about the law of preferential growth of the production of means of production under extended reproduction, about the contradictions of capitalist realisation, about the growth in the organic composition of capital as a factor in the impoverishment of the proletariat and about the inevitability under capitalism of periodical crises of overproduction.

Lenin’s works on the agrarian question made a most valuable contribution to Marxist political economy in these he scientifically generalised a great deal of information, on the development of capitalism in the agriculture of Russia and of a number of other countries (France, Germany, Denmark, U.S.A., etc.). In his works The Agrarian Question and the “Critics of Marx" (1901-7), The Agrarian Programme of Social-Democracy in the First Russian Revolution of 1905-7 (1907), New Data on the Laws of Development of Capitalism in Agriculture (I914-15) and others, Lenin investigated deeply and comprehensively the laws of capitalist development in agriculture, which’ had been Indicated by Marx only in general outline.

In his struggle against West European and Russian revisionism which described agriculture as a branch of the economy to which the laws of the concentration and centralisation of capital did not apply, Lenin gave a scientific analysis of the special features of the development of capitalism in the countryside. He showed the profound contradictoriness of the economic position of the bulk of the peasantry and the inevitability of their being ruined in bourgeois society. Lenin upheld and developed the Marxist theory of differential and absolute ground-rent. Demonstrating the significance of absolute rent as one of the most important factors hindering the development of the productive forces in agriculture, Lenin worked out comprehensively the question of the possibility, conditions and economic consequences of nationalising the land in the bourgeois-democratic and socialist revolutions. He exposed the bourgeois economists who propagated the pseudo-scientific “law of diminishing returns from the soil". Combating the opportunist line of the West European parties of the Second International and of the Russian Mensheviks, including the Trotskyists, in relation to the peasantry, Lenin showed the need for the working class to follow a policy calculated to transform the bulk of the peasantry into an ally of the revolutionary proletariat. Lenin’s theory of the agrarian question was a profound economic justification of the policy of the Communist Party of Russia in the sphere of relations between the proletariat and the peasantry, and in particular of the demand for nationalisation of the land, included in its programme. Lenin’s works on the agrarian question constitute the theoretical basis for the agrarian programme and agrarian policy of the Communist Parties in other countries.

Of very great importance for the development of Marxist theory was the struggle which Lenin waged in defence of dialectical and historical materialism, in his notable work Materialism and Empirio-criticism. This book dealt a crushing blow at the very foundations of the revisionists’ “theories"—their idealist philosophy.

Lenin exposed the utter unsoundness of the revisionist criticism of Marxist political economy. He showed the bankruptcy of revisionism on all the principal questions of the political economy of capitalism-the theory of value, the theory of surplus-value, the theory of the concentration of capital, the theory of crises, etc.

Marx and Engels, living as they did, in the epoch, of pre-monopoly capitalism, naturally, could not furnish an analysis of imperialism. The great merit of having carried out the Marxist investigation of, the monopoly stage of capitalism, is Lenin’s.

Basing himself on the’ fundamental propositions of Capital and generalising the new phenomena in the economy of the capitalist countries, Lenin, first among Marxists, gave an all round analysis of imperialism as the last phase of capitalism, as the eve of the social revolution of the proletariat. This analysis is contained in his classical work Imperialism, the Highest Stage of Capitalism (1916) and in other works of the first world war period: Socialism and War, The United States of Europe Slogan, A Caricature of Marxism and “Imperialist Economism", Imperialism and the Split in Socialism, and The Military Programme of the Proletarian Revolution.

Lenin’s theory of imperialism starts from the fact that the most profound basis of imperialism, its economic essence" is the domination of monopoly: that imperialism is monopoly capitalism. Lenin subjected the main! economic features of imperialism and the concrete forms of monopoly domination to comprehensive examination. Lenin’s teaching on imperialism, on the replacement of free competition by the domination of monopolies which draw high monopoly profits, and on the sources and methods of ensuring these high monopoly profits, provided the initial propositions for the. basic economic law of monopoly capitalism. Describing imperialism as a new and higher stage of capitalism, he defined the place of imperialism in history and showed that imperialism is capitalism in its monopolistic, parasitic or decaying ,and moribund, stage. Lenin’s theory of imperialism reveals the contradictions of capitalism in the monopoly stage of its development—the contradictions between labour and capital, between the metropolitan countries and the colonies, and between the imperialist countries. It explains the profound causes which render inevitable imperialist wars for a new repartition of the world. The aggravation and deepening of all these contradictions reaches extreme limits, beyond which the revolution begins. Lenin demonstrated the just character of the struggle for liberation waged by the peoples against imperialist oppression and enslavement.

Lenin worked out the question of State-monopoly capitalism, of the subjection of the bourgeois State machine to the monopolies. He showed that State-monopoly capitalism means the highest form of capitalist socialisation of production and the material preparation for socialism, on the one hand, and, on the other, means exploitation of the working class and all the working masses in every possible way.

Lenin discovered the law of uneven economic and political development of capitalist countries in the imperialist period. Taking this law as his starting-point, he made the great scientific discovery that it was possible to break the chain of world imperialism at its weakest link, the deduction that the victory of socialism could occur first of all in a few countries or even in a single country, and that a simultaneous victory of socialism in all countries was not possible. Lenin proved the tremendous role of the peasantry as the proletariat’s ally in the revolution. Lenin worked out the theory of the national and colonial question and indicated the lines along which it should be solved. He showed the possibility and necessity of linking up the proletarian movement in the developed countries with the national liberation movement in the colonies in a united front of struggle against the common enemy—imperialism. Lenin’s theory of imperialism showed the necessity of socialist revolution and of the dictatorship of the working class in the conditions of the new epoch of history, the epoch of direct and decisive battle by the proletariat for socialism. Thus, Lenin created a new, finished theory of socialist revolution.

Lenin worked out the principles of the doctrine of the general crisis of capitalism—the historical period of the downfall of the capitalist system and the victory of the new, higher, socialist system. Already in the period of the first world war he drew the conclusion that the epoch of comparatively, peaceful development of capitalism was over, and that the imperialist war, which was a tremendous historical crisis, was opening the era of socialist revolution. The war created such a boundless crisis, said Lenin on the eve, of the great October Socialist Revolution, that mankind found itself confronted with the choice: either to perish or to entrust its fate to its most revolutionary class, in order to bring about as rapid as possible a transition to a higher mode of production—socialism. From the fact established by Lenin of the uneven ripening of socialist revolution in the different links of the world capitalist system, it follows that the downfall of capitalism and, the victory of socialism take place by way of the falling-away from the capitalist system of separate countries, in which victory has been won by the working class, advancing to power in close and unbreakable alliance with the basic working masses of the peasantry, and gathering around itself the overwhelming majority of the people. Lenin showed that peaceful co-existence of the two systems, capitalist and socialist, over a long period of history was both possible and necessary.

Lenin worked out the theory of imperialism and of the general crisis of capitalism in irreconcilable struggle against the bourgeois economists and opportunists of the Second International. He exposed the complete theoretical unsoundness and political harmfulness of Kautsky’s anti-Marxist theory of “ultra-imperialism", and of the variants of this theory put forward by Trotsky and Bukharin. In his struggle against Bukharin’s distortions of Marxism, Lenin stressed more than once that “pure imperialism", without a foundation of capitalism, never existed, exists nowhere, and cannot exist. Characteristic of imperialism is precisely the union of monopoly with exchange, the market, competition. Rising above the old capitalism like a sort of superstructure upon it and direct prolongation of it, imperialism accentuates still further all the contradictions of bourgeois society. Lenin showed the profound connection between opportunism and ‘imperialism and exposed the political role of the opportunists as agents of the bourgeoisie in the workers’ movement. Lenin laid bare the roots of the opportunist trends in the labour movement, showing that these trends arise on the basis of the bribing and corruption by the bourgeoisie of the uppermost strata of the working class. Lenin dealt a crushing blow to the apologetic treatment of State-monopoly capitalism by the opportunists, who tried to present it as “socialism". Lenin’s woks directed against opportunism are very important for the revolutionary movement, since without exposing the ideological and political content of opportunism and its treacherous role in the workers’ movement there can be no real struggle against capitalism.

Problems of Marxist-Leninist political economy were further developed, and made more concrete, in the resolutions and documents of the Communist Party of the Soviet Union and in the works of J.V. STALIN (1879-1953) and other companions-in-arms and pupils of Lenin’s.

Basing himself on the works of Marx, Engels and Lenin, Stalin put forward and developed a number of new propositions in the field of economic science, founded on generalisations of new experience of historical development, new practice in the struggle of the working class and its Communist Party. At the same time Stalin’s works consistently defended Marxist political economy against the enemies of revolutionary Marxism and popularised its basic problems and propositions.

Exposing the falsity of the claims made by bourgeois economists and by the reformists that the contradictions of capitalism become mitigated in the course of its historical development, Stalin showed the inevitability of a further aggravation and accentuation of these contradictions, testifying to the inevitable doom of capitalism. A number of important propositions in the field of the agrarian question were developed in Stalin’s works. In conflict with revisionism, Stalin, basing himself on new arguments, showed the utter unsoundness of the theory of the “stability" of small peasant economy. Only abolition of the system of capitalist slavery can save the peasantry from ruin and beggary. The peasant question is a question of transforming the exploited majority of the peasantry from a reserve of the bourgeoisie into a direct reserve of the revolution, into an ally of the working class, fighting to abolish the capitalist system. In his work Marxism and the National Question (1913) and in other works Stalin further elaborated the national question. He showed the significance of the economic conditions of social life in the formation of nations and national States. Community of economic life is one of the distinguishing marks of a nation. The process of the abolition of feudalism and the development of capitalism is at the same time a process of forming people into nations. Stalin elucidated the importance of the national market in the process of creating national States in Western Europe, and described the special features of the historical process of formation of States in the East.

The Communist Party of the Soviet Union, led by its Central Committee headed by J.V. Stalin, upheld Marxist-Leninist theory as a whole, and Marxist-Leninist economic teachings in particular, against the attacks of the enemies of Leninismthe Trotskyists, Bukharinists and bourgeois nationalists. Of particular importance for the destinies of socialism in the U.S.S.R. and throughout the world was their defence and further development of Lenin’s teaching on the possibility of the victory of socialism in ‘one country, Lenin’s theory of socialist revolution.

In a number of Stalin’s works Foundations of Leninism, Problems of Leninism, Economic Problems of Socialism in the U.S.S.R., reports to congresses and conferences of the C.P.S.U., Lenin’s propositions on the economic and political essence of imperialism and of the general crisis of capitalism, and on tee laws of development of monopoly capitalism, were further developed. Basing himself on Lenin’s classical statements concerning the economic essence of imperialism, which consists in the domination of monopoly and high monopoly profits, Stalin formulated the basic economic law of modern capitalism. He gave a detailed analysis of the general crisis of capitalism and of its two stages: the first beginning in the period of the first world war, and the second which developed in the period of the second world war, especially after the breaking away from the capitalist system of the People’s Democracies of Europe and Asia.

Exposing the hirelings of the bourgeoisie who sing the praises of the capitalist system of economy, he gave a comprehensive description of the general crisis of capitalism, which involves both economics and politics. The most vivid expression of the general crisis of capitalism is the world-historic victory of the great October Socialist Revolution in the U.S.S.R. and the splitting of the world into two systems—capitalist and socialist. A component part of the general crisis of capitalism is the crisis of the colonial system of imperialism.

In Stalin’s works there are elucidated the nature and importance of such features of the general crisis of capitalism as the extreme aggravation of the problem of markets, the chronic under-capacity working of enterprises, and constant mass unemployment. Giving an analysis of the changes in the character of the capitalist cycle and of the economic crises in the present epoch, Stalin showed the fruitlessness of attempts by the bourgeois State to cope with crises and the unsoundness of claims that planned management of the economy is possible under capitalism. In Stalin’s works are exposed the deeply reactionary and aggressive nature of fascism and the treacherous role of the right-wing socialists of the present day.

Marxist-Leninist political economy serves as a guide to action for the Communist and Workers’ Parties of all countries. It illuminates the working people’s path to liberation from the yoke of capital.


1.i.e., since the abolition of serfdom in 1861—Editor, English edition