In the Light of Marxism

Questioning of an Historical Period

Elif Çağlı

May 1991

VIII. Critique of the Theory of “State Capitalism”

We thought it was necessary to give priority to the thesis of “degenerated worker’s state” in our investigation as Trotsky could not find the chance to complete his analyses which must have been cleared of errors. Therefore, we preferred to begin with the critique of those Trotskyist tendencies, which, in the name of showing loyalty to Trotsky’s ideas, have transformed his living and moving ideas into frozen pictures instead of maintaining and enriching his intellectual legacy. But there are other wrong views as well. Some Trotskyists like Tony Cliff, in the name of transcending the erroneous sides of Trotsky, have thrown themselves into the other extreme and, in pursuit of new analyses, have subscribed themselves to a false theory (“state capitalism”) which, in reality, had already been offered earlier on.

In this chapter we wish to explain in outlines why we do not approve of Cliff’s assessment of the system in the Soviet Union as “state capitalism”.

It was evidently incorrect to characterise an economic system, which does not resemble capitalist economy that operates on the basis of cycles passing through over-production, crisis, bankruptcies and a subsequent revival, as state capitalism. Accordingly, the proponents of this theory explained that instead of the cycle of “over-production and bankruptcies” in capitalism, there was a cycle of “over-investment and extravagance” in those countries under bureaucratic dictatorship. However, what is unintelligible was how such formations could still be accepted as a version of capitalism. At this point, a fitting remark of Trotsky must be remembered:

We often seek salvation from unfamiliar phenomena in familiar terms. An attempt has been made to conceal the enigma of the Soviet regime by calling it "state capitalism." This term has the advantage that nobody knows exactly what it means.[1]

In fact, the details of this matter have occupied a significant place in the literature of different Trotskyist circles. In the polemics between Mandelites and Cliffites a lot of arguments have been raised. However, while one party attempted to demonstrate the existence of state capitalism in the Soviet Union by forced interpretations, the other party, although it raised some correct criticisms in view of this theory, it did not correct its own error insisting on the thesis of “degenerated worker’s state”.

In fact, the process of collapse that has started in Eastern Europe and the Soviet Union has been the concrete answer of history to all of these circles. However, instead of re-examining their views and correcting the errors they obstinately insisted on their old positions. The Cliffites described the dissolution of the Soviet Union and the other bureaucratic regimes in the direction of capitalism as a “sidewards step”.[2] As for Mandelites, they contented themselves with adding some more adjectives to the phrase of “degenerated worker’s state” until the last moment. After that, i.e. post festum, they have begun to write about the existence of capitalism in Russia, of course without any attempt to examine the mistakes of the past.

About a question that was settled by history, we do not intend to dwell on the products of this literary struggle waged by these two tendencies in a manner that fed their mistakes. Thus we will limit ourselves to noting only the main deficiencies of the thesis of “state capitalism”.

What is, and is not, state capitalism?

While criticising Urbahns who treated the Soviet economic system as a variety of “state capitalism”, Trotsky said that “originally Marxists understood by state capitalism only the independent economic enterprises of the state itself.”[3] Likewise, Marxists have always been opposed to the reformists who dreamed of coping with capitalism by means of statising ever-greater portion of transport and industrial enterprises, rightly announcing that “this is not socialism but state capitalism”. Explaining that this concept had acquired a broader meaning and turned wrongly to mean all sorts of state intervention in economy, Trotsky pointed out the difference between “state capitalism” and “etatism”:

During the war, and especially during the experiments in fascist economy, the term "state capitalism" has oftenest been understood to mean a system of state interference and regulation. The French employ a much more suitable term for this etatism.[4]

As for Cliff who employed the term “state capitalism” for Stalin’s Russia, he explains that he has used this term with a different meaning from its usage by Lenin in the period of NEP:

For Lenin state capitalism meant private capitalism under state control (whether the state were a capitalist or a proletarian one). When Stalinist Russia is called state capitalist, this means a regime under which the state is the repository of the means of production, and in which the proletariat is deprived of all political and economic power, while the bureaucracy carries out the functions of capitalism –the extortion of surplus value from the workers and the accumulation of capital. [5]

Yet the term “state capitalism” can only make sense in the context of a social formation in which the capitalist private property exists alongside with the state property over the means of production. In a situation where almost all the social means of production are under state property, there cannot be talk of either capitalism or its indispensable element, i.e. capitals competing with each other, or, the operation of demand and supply mechanism. Consequently the theory of state capitalism is incompatible with the nature of the bureaucratic regimes based on state property over the means of production.

The term state capitalism as used by Lenin in the NEP period was meant for a situation in which the worker’s state allowed individual private enterprise due to certain economic difficulties. It is used in this limited context. The private enterprises were to be under control and regulation of the worker’s state as described in Lenin’s explanations.

As is known, in capitalist economy, what is to be produced, what amount to produce, and at what price the goods are to be exchanged etc. are, in the last analysis, determined as a result of the interaction in the market on the basis of competition. Monopolisation does not abolish the competition and the dominance of the market. The economic hegemony established by big international monopolies over the world market depends essentially not on a non-economic force, but on a competition now between giant monopolies in control of bigger units of capital with respect to the past. Likewise, the dominance of the market cannot be abolished by the kind of planning made on the level of companies under capitalism. In capitalism, the emergence of the state in economic life as a big capitalist boss never rules out the individual private property. On the contrary, it exists alongside with it strengthening its existence at the same time.

In case of war or severe depression or in a situation where the state takes on itself the function of accelerating the accumulation of capital required by the capitalist development, it is possible that the state throws its weight into play as a direct actor in economic life. In some cases, the state, along with the dominance of its economic enterprises, overshadows the role of the market by its interventions like setting official prices etc. This type of conjuncture of capitalist development can also be described as “state capitalism”. Obviously, this would not be a different socio-economic formation from capitalism, but, on the contrary, an economic setting-up based on the fact that the capitalist state being in the service of the requirements of capitalist development undertakes a dominant role in economic life.

But an economic setting-up, in which there exists neither the private property of the means of production nor the market mechanism and which is being directed on a central level, indicates a socio-economic formation different from capitalism. This kind of economy is based on state property. This is a system in which the exchange of products is carried out not by a price mechanism formed in the market in accordance with the law of value, but by centrally determined “prices”, by obligatory regulations etc., that is to say, by non-economic force. This sort of decree economy would, inevitably, require (and it has required) a planning schemed and executed on a central level. We should remind that what is involved here is not despotic agricultural Asian states of ancient times, but the bureaucratic dictatorships that exist in an environment of modern capitalist world and that are obliged to rest themselves upon an industrialisation leap forward.

In the bureaucratic dictatorships, the distribution of economic factors are carried out according to calculations and decisions made by the relevant state organs, central planning commissions etc. There is not a quantitative but an entirely qualitative difference between such an economy and capitalist economy in which economic factors are essentially distributed according to the market mechanism, i.e. prices realised in the market. In the bureaucratic regimes, which are based not on the market mechanism, you would also need a quantitative measure of comparison for the articles produced in order to make calculations on a central level. In a sense, we can call this price; but this is a would-be, a “decided”, price which is entirely different from the prices in the capitalist market which are realised as a result of supply-demand relationship between sellers and buyers being essentially the expression of exchange-value.

In capitalism, just as the other economic factors, the price of labour-power, i.e. wages, is again determined on the basis of the market mechanism. Yet in a command economy, in which the means of production are entirely under state ownership and the social production is commanded by a central bureaucratic plan, the distribution of social labour between various enterprises and the portion of the social product to be allotted to the labour are decided by the relevant state organs. In other words, there is neither free wage-labour peculiar to capitalism nor wages determined as a result of the relationship between sellers and buyers of labour-power in the market. The surplus-labour of the Soviet worker is extracted by the state and it allocates this surplus-labour to the consumption funds of the bureaucracy and to the process of expanded reproduction of various use-values. In such a case, there is no labour/capital relationship peculiar to capitalism, and thus no exploitation of surplus-value and its transformation into profit in the market. But there is surely an exploitation in the form of collective disposing of surplus-labour by the dominant bureaucracy. Also we should not be misled by the fact that in such formations labour-power is paid in the form of money.

The commodity production has been replaced by the production of use-values, and in this case, it is not the price mechanism but the state planning commission that decides to produce what, and what amount. Formally prices and wages still do exist but their functions are not the same. Now they do not determine the process of production; they indicate the share of individuals from the portion of the gross product which is allotted to the use of society by the central bureaucracy. In this case, the prices are no longer the regulating factor in the economy, but are solely symbols of distribution. That is to say, while the form is maintained in appearance, a complete functional transformation has occurred in reality. Thus, it is clear that the arguments of those people who describe the bureaucratic dictatorships as state capitalism are destined to collapse in the face of the inner laws of capitalism analysed by Marx in detail.

On the Theory of State Capitalism In General

Although the terms used by Cliff are different, his theory of state capitalism has similarities with Rizzi’s theory of “bureaucratic collectivism”. Because Rizzi’s analysis rests upon the idea that there is an ongoing transition from individual ownership to collective ownership in capitalist countries as well. This same idea of “transition” appears in the theory of state capitalism as well. The proponents of the theory of state capitalism raise objections to the effect that the Marxist theory has, in fact, analysed the individual private ownership and can, thus, no longer be applied to the period of monopoly capitalism. In his State Capitalism in Russia Cliff says that this “transition” process has now led to a phase of “state capitalism” on a world scale. To him, the term “state capitalism” can signify both a capitalist war economy and a phase in which the capitalist state has become the repository of all of the means of production. Cliff states that, although there is no qualitative difference between the two, he chooses to make a distinction between them in order to avoid confusion, describing the capitalist war economy as “state-monopoly capitalism” and the latter as “state capitalism”.[6]

Here the essential problem lies in the meaning attributed to the terms used. The term “state-monopoly capitalism” was also used by Lenin in the context of describing the imperialist stage of capitalism. Understandably, Cliff refers to Lenin while explaining his own views.[7] But, while Lenin was using that term he based himself upon Marx’s analyses and treated the most important aspect of the matter, i.e. the dialectical relation between monopoly and competition under capitalism, in a manner true to life. As Lenin, too, emphasised, although the course of capitalism causes an enormous centralisation of capital, yet in practice the aggregation of all capital into the hands of a single national trust or nation-state is impossible. Whereas according to Bukharin, “Every one of the capitalistically advanced "national economies" has turned into some kind of a national trust.”[8] Furthermore Bukharin says that finance capital has created an organised capitalism on a national scale: “Finance capital did away with the anarchy in production within the major capitalist countries”[9] Lenin disagreed with this analysis of Bukharin and put a critical marginal note: “not yet”.[10] Likewise, Trotsky’s approach is similar to that of Lenin. For example, he criticises Urbahns who sees the regime of “state capitalism” as a necessary and, moreover, progressive stage in the development of society: “So fundamental an error in appraising capitalist planning is enough to bury any approach whatsoever.”[11]

As indicated by the tendency of capitalist development especially in the second half of the 20th century, the tendency of centralisation of capital has not essentially led to the emergence of “national monopolies”. On the contrary, it has caused the birth of transnational monopolies which represent enormous capitals that have overflowed nation-states and spread into international scale. In fact, did not Marx’s analyses point to these developments long time ago? It is Marx who was right, and not Bukharin or the like, who, in the name of developing Marx’s ideas, misunderstood him, and, as in the example of “national monopoly”, built theories upon their own fallacies.

The fundamental defect of the theory of state capitalism is that it firstly forms an a priori conception of “state capitalism” in general and then attempts to make the reality of the Soviet Union forcibly fit into this mould by bending and twisting it. Cliff’s theory of state capitalism contends that the world as a whole moves in the direction of state capitalism. Again, according to this theory, the Soviet bureaucracy controls the accumulation process and is “the personification of capital in its purest form”.[12] For Cliff, the difference between Western capitalist countries and the Soviet Union is that, while the former have reached state-monopoly capitalism via a gradual evolution, the latter, as a result of the degeneration of a successful proletarian revolution, had come into view without experiencing such an evolution. Thus, the question of whether the capitalist private property exists or not ceases to be a distinction in determining a social formation. He states:

Historical continuity in the case of state capitalism which evolves from monopoly capitalism is shown in the existence of private property (bonds). Historical continuity in the case of state capitalism which evolves from a workers’ state that degenerated and died, is shown in the non-existence of private property.[13]

What an easy business is to set up a theory arbitrarily! Such a theory could be possible by “surpassing” (!) Marx, and cooking a soup of eclecticism by taking a pinch from Hilferding and another pinch from Bukharin, and so on.

The Question of Accumulation

As Marx stated, the motive that sets the capitalist into action is not the pleasure of use-values, but the profit of exchange-value and the desire to increase it. Thus the capitalist transforms the biggest possible part of surplus-value into capital and the law of capitalism is “accumulation for accumulation’s sake, production for production’s sake”.

What is vain on the part of the proponents of the theory of state capitalism is that, despite they admit that there is no generalised commodity economy and capitalist profit in the bureaucratic dictatorships, they seek to demonstrate the existence of the accumulation of capital. In fact, the basis upon which such kind of hollow assertions are rested is completely unsound. The main defect is that they present the accumulation in general and the accumulation of capital which is particular to capitalism as if one and the same thing. Harman, for example, while summarising Cliff’s views on this score, says the following:

Russia is a bureaucratic state capitalism, because the bureaucracy collectively controls the means of production and is thus compelled to use this control in order to exploit the workers all the time and further increase the accumulation of “dead labour” just like a western capitalist.[14]

This approach is, in fact, a product of being unable to grasp the mechanism of the accumulation of capital and the essential operation of capitalism. Because neither the collective control over the means of production nor the accumulation of “dead labour” can be an evidence of the existence of capitalism. It is quite possible to observe these things in other modes of production. For example, in the Asiatic mode of production, which is a pre-capitalist mode of production, the means of production (land) and the accumulation of surplus-product were under the collective control of the state or of a despotic power. But this did not make that economy a capitalist one.

Generally speaking, the accumulation of products and of the means of production have always been part of the history of human communities and a necessary precondition for their leap into the stage of civilisation. Of course there were different modes of production in different geographical conditions that came into being along the course of history. Generally speaking, the mode of the realisation of accumulation and the mode of the extraction of surplus-product from the direct producers led to different types of formations of class societies. Likewise, the exchange of products, the formation of the market, the development of trade, the selling of excess products inside or outside the country, i.e. transformation of these products into commodities, its transformation into money, the accumulation of wealth thereupon etc., all of these are historical facts that had come into existence in pre-capitalist ages.

But the capitalist mode of production could be created only on the basis of historical changes such as the separation of labourers on a massive scale from the objective conditions of production and their transformation into wage labour, (i.e. transformation of labour-power into a commodity), the breaking of provincialism and self-sufficiency in economic life, the growth of production for the sake of selling in the market into tremendous dimensions and the turning of the motive of production into “exchange for the sake of exchange”, that is to say, the leap from the level of simple commodity production to the level of generalised commodity production. And these are the indispensable, fundamental elements of capitalism. As the capitalist mode of production has put an end to the production for the sake of use-values in general and is based on the production of exchange-values in general, the exploitation of surplus-product materialises as the exploitation of surplus-value. The accumulation of wealth in general has been therefore replaced by the accumulation of capital. But such transformations presuppose individual private property of the means of production and the existence of capital and wage-labour. Accordingly, the capitalist relations of production found their conditions of development in the heart of feudal society in which private property and individual accumulation of wealth had existed and in which the premises of wage-labour and capital had come into being. As for the pre-capitalist despotic Asiatic formations based on state ownership and the exploitation of surplus-product, they dissolved not as a result of their internal dynamics, but under the impact of the spread of capital when they came into contact with the external capitalist world, and then they entered into the process of incorporation into the capitalist world.

On the other hand, capital is neither a stationary sum of money nor a stock of means of production, but an economic relation. Competition is the intrinsic nature of capital. Capital can exist only as many capitals. Thus capitalism continues its operation on the basis of the unity of many capitals in competition. The competition between individual capitalists or corporations works as an inner law of economy that determines how much will individual capitalists or corporations get from the accumulation of capital as their shares.

In the third volume of Capital, Marx notes the formation of joint-stock companies while he studies the role of credit mechanism. Necessitating the social concentration of the means of production and labour-power, in the process of its development, capital thus begins directly to take the form of social capital, i.e. the capitals of not mere individuals but of individuals who have directly come together. Marx assesses this fact as “the abolition of capital as private property within the framework of capitalist production itself.”[15] What is meant by this is that the socialisation of productive forces, even under capitalism, is not compatible with the form of capital controlled by single individuals and that this socialisation has been replacing this form of private property with collective private property as in the example of joint-stock companies, big capital corporations. In this way, the road to social ownership, which would become a reality only on condition that capitalism is overthrown, is prepared.

As can be seen easily, neither the thesis that “Marx examined primarily the capitalism of free competition era” has a basis nor the idea that “capitalist system has now risen to a new stage that excludes in effect the private ownership” is true. Those who have no intention of understanding Marx base their theories such as the theory of state capitalism upon the idea that that phase of capitalism based on private ownership has become a thing of the past. Yet the capitalist development does not abolish capitalist private property. The old competition between capitals controlled by single individuals has been leaving its place to capitalist private property on a higher level and to a cut-throat competition between big capital corporations. Marx therefore points to the limits of this trend of “expropriation” on the individual level operating under capitalism:

However, this expropriation appears within the capitalist system in a contradictory form, as appropriation of social property by a few; and credit lends the latter more and more the aspect of pure adventurers. Since property here exists in the form of stock, its movement and transfer become purely a result of gambling on the stock exchange, where the little fish are swallowed by the sharks and the lambs by the stock-exchange wolves, There is antagonism against the old form in the stock companies, in which social means of production appear as private property; but the conversion to the form of stock still remains ensnared in the trammels of capitalism; hence, instead of overcoming the antithesis between the character of wealth as social and as private wealth, the stock companies merely develop it in a new form.[16]

On the other hand, the fact that in the process of concentration of capital the capitalist state possesses a larger amount of capital and productive forces compared to the past, is, as Marx put it, a symptom of the socialisation of productive forces and of their rising to a level that is incompatible with individual private ownership. But this contradiction cannot be solved under capitalism. Even if you may call the tendency of concentration of capital, the development of productive forces in the direction of acquiring social character, “state capitalism”, this will not be something different from capitalism and the result will not change. But on the other hand, this tendency of development in the capitalist system shows us the way, the form, of solving the contradiction, that is the necessity and possibility of the nationalisation of productive forces by the power of the working class. This is the significance of the tendency which Engels noted in Anti-Duhring. Considering the state in a capitalist society based on private property, he says:

The modern state, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers -- proletarians. The capitalist relation is not done away with. It is rather brought to a head. But, brought to a head, it topples over. State ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.[17]

Basing his theory of “state capitalism” upon this idea of Engels, Cliff claimed that the same tendency has been operating in the Soviet Union too and thus the USSR was in the category of “state capitalism”. First, interpret a tendency that exists and operates in the process of capitalist development as a transition from the old individual-ownership-based capitalism to the collective-ownership-based “state capitalism”, then present it as the basis for putting the Soviet Union, where state ownership dominates, in the same category. Yet the situation with the Soviet Union is completely different. In the USSR, the abolition of capitalist relations of production and the state ownership over the means of production mean that the means of production have lost their character of being capital. To sum up, in a mode of production based completely on state ownership, a general accumulation carried out in the form of appropriation of surplus-product by the state is not an accumulation of capital, but of products.

Just like Cliff’s theory of “state capitalism” that is full of arbitrary and forced interpretations, the views of Worall, who was the earlier architect of this theory, too, has similar defects. According to Worall, the Soviet bureaucracy is essentially different from any bourgeoisie, but the function of accumulating capital remains the same. Hilferding criticises this view:

The fact that, despite great structural differences, the function can remain unchanged is, of course, a miracle that cannot occur in nature but seems (according to Worall) possible in human society.

In any case Worall accepts this as evidence that Russia is dominated by a bourgeois class and thus by state capitalism. He clings obstinately to his confusion of capital and the means of production and seems unable to conceive of any form of accumulation other than capitalist accumulation. He fails to understand that accumulation (i.e., the expansion of production) in any economic system is the task of the managers of production; that even in an ideal socialist system this accumulation can result only from the surplus product (which only under capitalism takes the form of surplus value), and that the fact of accumulation in itself does not prove the capitalist nature of an economy.[18]

According to Cliff the year 1928 is the date of the establishment of bureaucratic state capitalism in the USSR. Cliff has exposed many facts regarding the process of overthrow of the workers’ state by a counter-revolution and he is right in regarding the year 1928 as a turning point; but his analysis on the character of the bureaucratic regime is wrong. The central mistake of Cliff’s tendency is that instead of deducing theory from reality, he sets forth his theory as a pre-conceived assumption and then invents some justifications in order to make the reality in the Soviet Union fit his theory.

This tendency proclaims that the USSR has become state capitalist through international competition. According to this argument, international competition became the main determinant of the internal processes of the USSR since 1928:

Once the USSR is viewed in its relation to the world economy, things change. The world system is a system of competing states, whatever the temporary play of blocs and alliances, and the USSR is locked into this competition. The SWP dates the establishment of bureaucratic state capitalism in the USSR from 1928 because it is from that point that international competition became the main determinant of the internal processes.[19]

This is such a weak argument that there is no answer to the question “why”. Moreover, the year 1928 is a turning point which points to the opposite. It is exactly at this turning point that private property was almost completely eliminated by a rapid collectivisation operation and full monopoly over foreign trade was established, i.e. the economy was structured completely on the basis of despotic command.

It is not a scientific way of analysis firstly to enumerate the political and social changes that took place at the turning point of 1928, and then to attempt to explain the internal functioning of the economy with the external pressure of international competition and hence to arrive at the theory of state capitalism. In his explanation Cliff appears as if getting the capitalist elements, which in reality do not exist in the structure of Soviet economy, out of his hat with a magician’s trick. For example he says:

The rate of exploitation, that is, the ratio between surplus value and wages (s/v) does not depend on the arbitrary will of the Stalinist government, but is dictated by world capitalism. ... The same therefore applies to the division of the total labour time of Russian society between production of the means of production and of means of consumption.[20]

If such kind of things told us by Cliff had existed in real life, then we would have been left no choice but to admit that the Soviet economy had a capitalist internal functioning being a direct component of the world capitalist system. But we know that this is not the case. And for this reason Cliff himself was forced to base his theory not upon a non-existent “internal functioning” but upon an arbitrary “external pressure”.

In reality capitalist profitability calculations and the market mechanism did not exist in the Soviet Union. The real situation in the face of capitalist world was this: An economy that has no chance of competition with regard to the level of productive forces and technological innovation; an economy that is big but inefficient, that has succeeded in developing heavy industry, but awkward! That is to say, the bureaucratic regime had surely accomplished an economic development compared to the past, but the general level reached was behind the world capitalism. Thus, the pressure of “foreign competition” did not put the Soviet Union and the like into a formation of “state capitalism”, on the contrary, the existence of capitalist world has been the main cause for the inner decay and the final collapse of these regimes.

The Question of Military Competition

There is no comprehensible reason to relate the industrialisation leap in the USSR under the hegemony of the bureaucracy to the pressure of foreign competition. The rulers of a despotic state which re-appeared in modern, i.e. industrial, times was, of course, to take the level of present world as a criterion, not that of agricultural society of Tsarist Russia in order to keep this state alive and consolidate its economic underpinnings. Moreover, the Stalinist regime had to guard itself and gradually broaden its sphere of influence. The importance attributed to war industry by the Soviet Union was a result of this necessity. Thus it is true that the Soviet Union could not completely isolate himself from the capitalist world that exists outside and from which she, willy-nilly, has been affected. But it would be completely wrong to bracket these facts in a law of “competition” and regard them as an indicator of capitalism in the form of “pressure of foreign competition”, as if there is a capitalist economy.

Since Cliff’s tendency could not find evidence to back their thesis while they insist on the existence of a state capitalism in the Soviet Union due to the pressure of foreign competition, they interpreted arms race as the most important indication of capitalist competition. For example, one of the proponents of the theory of state capitalism, Derek Howl, says:

The inability of the weak USSR to compete with the West economically meant that competition primarily took the form of arms competition. It was this that lead to the absolute priority of heavy industry, steel, railways, and so on. These were necessary to underpin military strength.[21]

With a zealous attempt to prove his theory, Cliff invented an analysis of “state capitalism based on war industry” so as to embrace not only the USSR but also the capitalist world as a whole. According to him, “because international competition takes mainly a military form, the law of value expresses itself in its opposite, viz. a striving after use values.”[22] In other words, when the state buys the products of armament manufacturers, these products cease to be exchange-values and become use-values. Why?

Cliff does not provide an answer to this question. Because the thesis is meaningless. First of all, in capitalism all products in general are exchange-values that contain use-value. The result remains unchanged whether the product is, say, a tomography device used in the health sector or a tank used in “killing” sector. On the other hand, whether the buyers of these products are individuals or private corporations or the state itself makes no difference, which means they are still exchange-values containing use-value. Therefore, Cliff’s argument is artificial and, moreover, amounts to distorting and hollowing Marxist concepts in the name of demonstrating that the capitalist law of value operates in the Soviet Union through the arms industry. Here is an example:

It makes no difference to the individual armament manufacturer whether he invests his capital in the production of guns or butter, provided he makes a profit. But the state to which he belongs is extremely interested in the use value of his products. His relations with the state are those of seller and buyer, the former being interested only in value and the latter in use value. But in fact these relations of exchange are only formal. The state does not offer another commodity in exchange for armaments.[23]

Nevertheless, the fact that seller is interested “only in value” and buyer “in use value”, is the general rule in capitalist transaction of selling and buying. So why are “these relations of exchange only formal”? In so doing, Cliff seeks to prove that the aim of capitalist system is no longer to produce exchange-values and that it has shifted mainly to the production of use-values. And he did not shy away from expressing this view openly:

The slogan ‘guns before butter’ means that competition between capitalist powers has reached the stage where the international division of labour is disrupted, and competition through buying and selling is replaced by direct military competition. Use values have become the aim of capitalist production.[24]

As clearly shown by this thesis advanced by Cliff in order to vindicate the theory of state capitalism, this kind of false views have their roots in Bukharin who had said the following:

Military production has an altogether different significance: a gun is not transformed into an element of a new production cycle: gunpowder is shot into the air and does not appear in a different guise in the next cycle at all. The economic effect of these elements in actu has a purely negative value…[25]

As a matter of fact, capitalist war industry produces a very profitable exchange-value, i.e. arms, whose buyer is, especially in war times, the state itself. General law remains the same in this case as well. That is to say, arms manufacturers produce a very profitable exchange-value that contains a use-value (because, the nature of use-values is not a moral question; even the most lethal weapons are use-values from the point of view of their buyers!). Thus the absurdness of trying to invent a capitalist stage in which the aim of production is not exchange-values but of use-values is self-evident. The incompatibility of such ideas with the realities of capitalism as well as with Marx’s analyses is strikingly obvious. In fact, what concerns Cliff is not to agree with Marx, but, on the contrary, to argue that there is a state capitalism in the USSR at the cost of disagreeing with him. After a lot of talk about the issue of military competition Cliff finally relates the matter to the Soviet Union:

The increasing rate of exploitation, and the increasing subordination of the workers to the means of production in Russia, accompanied as it is by a great production of guns but not butter, leads to an intensification, not a lessening of the oppression of the people.

The law of value is thus seen to be the arbiter of the Russian economic structure as soon as it is seen in the concrete historical situation of today – the anarchic world market.[26]

Once you stop regarding arms production as being production of exchange-values in capitalist countries as well, then you may certainly be able to speak of a law of value operating on the basis of production of use-values! And, in order to make yourself believe in the existence of state capitalism in the Soviet Union, you need also to devote yourself to seeking the evidence of commodity production not on a national scale, but on an international level when the economic relations are organised by the state! In fact, Cliff’s mentor on these issues is Bukharin and understandably he shows Bukharin as his witness. Cliff states that Bukharin had pointed out that “if the national state were to organise the national economy, commodity production would remain ‘in the first place [in] the world market’, and the economy would be, therefore, state capitalist.”[27]

Can we label an economic formation as “state capitalism” just because it exists beside a capitalist external world in a military competition with it? An economic formation in which capitalism was abolished, the generalised commodity production do not exist, the central aim of planning is fixed to achieve heavy industrialisation, and, decisions of investment, contrary to the situation in capitalism, are not determined by the motive for profit? If we do that, this would amount to abandoning all Marxist criteria and opening up a very broad terrain of “freedom” for ourselves. In that case, there would be no obstacle to declare that, for example, the Ottoman Empire in the 16th century was “state capitalist”!

The Question of the Law of Value

If we are to summarise the main characteristics of the law of value, which is unique to capitalism, we can say the following. The exchange-value of goods is determined by the average socially necessary labour time for their production. As a tendency the commodities are exchanged with each other according to this average labour time contained in them. The realisation of this inner law of capitalism in the market means that the price of a commodity is, in the long term, equal to its exchange-value. Of course, the most important point in this context is that in capitalism the labour-power is a commodity that can be sold and bought, and that the exchange-value of this commodity is also determined by the necessary labour time for its reproduction.

Marx’s theory of value explains that, in capitalist society, the total social labour time is distributed between various fields of production not according to a general plan, but in an automatic manner through the market mechanism. The law of value is not a general law of exchange of products which is valid throughout whole human history, but the expression of the relation of exchange which is peculiar to capitalist mode of production.

The main element of the theory of value that the products are exchanged with each other, as a general tendency, according to “socially necessary average labour time” contained in them presupposes a developed capitalist society, a community of producers who are in mutual relationship with each other through commodity exchange. “Socially necessary average labour time” is not a concrete criterion that can be measured by a given amount of labour time being actually spent for the production of a given article by a given number of workers. This criterion is an abstraction, which, as we know, realises in the last analysis through the medium of the capitalist market and presupposes the distribution of total social labour-time into products on the basis of an average skilled labourer given the level of development of productive forces. And this abstraction is realised in the fact that those enterprises that fail to maintain the average will come to stomach the losses as the cost of their “unnecessary” labour-time spending and in that they will submit to the market prices formed in the last analysis according to those averages mentioned. In this way the law of value takes on its concrete expression in the capitalist market by the elimination of the inefficient on the basis of competition between capitalists. It is naturally illogical to speak of the exchange of products according to the average necessary social labour time contained in them under conditions where the productive forces have not become socialised, the producer has not become a proletarian, the capitalist market that put an end to provincialism and isolation has not yet formed, the relations of production are not based on capitalist private ownership and thereof the production of exchange-values has not become generalised. Therefore, the law of value can by no means be related to the exchange of products in the pre-capitalist or non-capitalist formations.

On the other hand, in a national economy, direct distribution of total labour-time into various fields of production on the basis of a central plan is the anti-thesis of distribution in the capitalist market by the law of value. The central plan under a workers’ power firstly takes as its goal the meeting of social needs and bases itself on actual labour-time spent for production as a criterion for calculation. What is aimed at here is the producers to get not only the equivalent of the cost of their labour-power but, after necessary social reductions are done and funds secured, the equivalent of the actual labour time they spend.

But when we deal with a despotic-bureaucratic regime like in the example of the USSR, it is obvious that the logic of central plan is based neither on meeting the social needs of producers nor giving the equivalent of the actual labour-time spent by labourers. But on the other hand, in the bureaucratic regimes such as the USSR and the like, it is impossible to speak of the distribution of social labour-time through the market mechanism, i.e. on the basis of profitability, as in capitalism. Because, in contrast to capitalism, in these countries there is not exchange-value production in general and the law of value does not operate.[28]

Hence the most important distortion introduced by the theory of state capitalism is the reduction of the theory of value, which is, in fact, peculiar to capitalist society, to the exchange of labour products in general. Reducing an inner law of capitalism, the law of value, to the distribution of products in general opens the door for a false conclusion that this law is valid for almost all kinds of social forms. For instance, there is an incorrect approach of this kind in Bukharin’s assessments, which thus provides a basis for the theory of state capitalism. Comparing the operation of capitalist economy with that of the Soviet Union, he said that the relations of value are not particular only to capitalist society and have a material content that can be applied to both formations.

According to such an incorrect interpretation, it makes almost no difference whether the distribution of total labour-power into various fields of economy is based on a market mechanism or on a central plan. Because, this false approach reduces the phenomenon of “exchange-value”, which is particular to capitalism, to a direct measuring of the necessary labour time to produce the products, and hence invents a law of value operating even if capitalism does not exist!

The law of “exchange for exchange’s sake”, a hallmark of capitalism, does not operate in bureaucratic command economies like the USSR in which private ownership and the market do not exist. However, the products exchanged outside the domestic field of the bureaucratic dictatorship (“socialist bloc” countries by and large are also included in this field), i.e. at the capitalist market, turn into commodities, in one sense, not initially but finally. But while it is obvious that this does not signify a generalised commodity production, it is, in the last analysis, a foreign dynamic which causes the dissolution of despotic structures. In other words, the fact that part of the surplus-product, accumulated in the hands of the state, becomes subject of trade on the capitalist world market is just like the case in simple commodity production; i.e. it does not mean that exchange-values are produced inside the country. The point that must be stressed is that although when these products produced as use-values in the bureaucratic regimes are exchanged with other commodities in the world market, they do not lose their character of being use-values in the original place where they have been produced. As long as labour products are produced not as exchange-values but as use-values, the social relations that lay beneath the production of these products are not capitalistic. Therefore, the fact that part of these products become commodities through foreign trade does not transform the workers in the bureaucratic state into free wage-labourers of capitalism.

In response to the criticisms levelled against the theory of state capitalism, Howl, who seems to proceed from more logical arguments, says that:

For 60 years these market mechanisms have not operated inside the USSR. Prices have not been based on the labour value of goods, nor have they moved with supply and demand. Money has not determined the allocation of resources between enterprises (although it is a mechanism whereby consumer goods are allocated between individuals). “Profit”, in the absence of genuine prices, has been an artificial construct without the social content it has in the West. The relationship between different producers is not just through the exchange of their products. The existence of central administration, even if not real planning, means that labour has a relationship to the total social labour prior to the exchange of the products of labour. The allocation of workers to work, the ratio by which goods exchange, the profit to be made–none of these are governed by market signals. Instead they are results of decisions by bureaucrats. How then can the USSR be capitalist?[29]

This is a very appropriate question. But the author’s motive, here, is not to give a correct answer, but to re-state the familiar theory of state capitalism. Arguing that there is a bureaucratic state capitalism in Russia, Cliff has advanced this point on the basis of the relation with foreign capitalist world. He admits that there cannot be talk of the existence of the law of value on the level of the inner mechanisms of that economy:

Hence if one examines the relations within the Russian economy, abstracting them from their relations with the world economy, one is bound to conclude that the source of the law of value, as the motor and regulator of production, is not to be found in it.[30]

The assertion that the law of value operates inside the Soviet Union through foreign competition is based not on the reality but on extremely arbitrary conclusions. The explanation provided by Howl as “ the key to the theory of state capitalism”, an explanation whose scientific worth can be appreciated perhaps only by their own supporters, is as follows:

To pose the operation of the law of value in the USSR in the form of the question, “Is there commodity production in the USSR?” is to pose it in an artificial and static way. Looked at in isolation production in the USSR cannot be the production of exchange values, it is rather production of use-values as the result of concrete labours co-ordinated centrally. Once the analysis is raised to the level of international competitiveness, however, it can be seen that goods in the USSR take on the social role of commodities–of being the embodiment of abstract labour. The Russian bureaucratic ruling class compares the costs of producing goods inside the USSR with the costs of production elsewhere, and this comparison relates concrete labour to abstract labour on a world scale.[31]

The truth of the matter is that all these explanations tell us a fact that is avoided from being expressed: that is, the socio-economic formation in the USSR has a similarity with the Asiatic mode of production mentioned in Grundrisse and Capital by Marx himself. In this ancient mode of production formed under oriental despotism, in Marx’s own words, the products (use-values) produced by direct producers in agricultural communes under the administration of a despotic state, which appears as the owner of land, did not have a function of commodity on a domestic plane. These products could become commodities only after they were appropriated by the state and then become subject of foreign trade via the state. Nevertheless these products as subjects of foreign trade, still did not have the character of commodity in the eyes of the central authority. Because the central authority was exchanging these products not for the sake of exchange and reproduction, but in order to meet its need for use-values (articles of luxury, military needs, etc.).

Yet capitalism is based on the fact that the market mechanism itself, thanks to its inherent forces, distinguishes the efficient from the inefficient and then eliminates the inefficient. This is not a question of a priori calculation but an inner law in operation in the market. Such a law has not operated in the USSR. If the law of value had operated through the world market, then the enterprises that could not compete with the exchange-values formed in the foreign market would have had to go bankrupt. Yet the attempt to prove that the law of value operates through foreign competition, this vain attempt, has propelled the followers of “state capitalism” to caricaturing of the reality with a lack of seriousness. According to them, the Soviet bureaucracy, allegedly, compares the costs of producing goods with that of foreign world! So it was up to the Soviet bureaucrats whether to know or not to what extent they lagged behind the productivity level of world capitalism in these comparisons. But it is a frivolity to say that abstract labour is related to concrete labour by this way. The “reasoning” pursued by the advocators of the theory of state capitalism is the following: even if it is impossible to speak of capitalism in the inner operation of these economies, since there is a calculation and the costs are compared with the standards of advanced capitalist countries, then that means that abstract labour is related to concrete labour! Here you are! A genius explanation of why the bureaucratic regime in Russia is state capitalist!

One of the main arguments advanced in order to answer the criticisms against these unfounded assertions is that: “the issue is the systematic subordination of workers’ consumption to the requirement to accumulate.”[32] The unsoundness of this argument becomes evident when we ask a counter-question: in which class society is the case different? For instance, in ancient despotic oriental states, which have nothing in common with capitalism, was not direct labourers’ consumption subordinated to the requirements of despotic state to accumulate?

Is Labour-power a commodity in the USSR?

In Capital Marx states the condition of labour-power to appear as a commodity as follows:

… labour-power can appear upon the market as a commodity, only if, and so far as, its possessor, the individual whose labour-power it is, offers it for sale, or sells it, as a commodity. In order that he may be able to do this, he must have it at his disposal, must be the untrammelled owner of his capacity for labour, i.e., of his person. He and the owner of money meet in the market, and deal with each other as on the basis of equal rights, with this difference alone, that one is buyer, the other seller; both, therefore, equal in the eyes of the law. The continuance of this relation demands that the owner of the labour-power should sell it only for a definite period, for if he were to sell it rump and stump, once for all, he would be selling himself, converting himself from a free man into a slave, from an owner of a commodity into a commodity.[33]

When we approach the issue from the standpoint of the arguments of the theory of “state capitalism” on whether the labour-power in the bureaucratic regimes is a commodity or not, we encounter similar errors with those mentioned above. That is, to prove that the law of value operates inside the USSR, it is necessary to prove, first of all, that the labour-power is a commodity. But it is impossible to make such an assertion if one looks at solely the inner operation. So what? At this point, once again “the connection with world economy” is introduced and hence the theory of state capitalism is rescued! So we see a similar sequence. The authors who stand for the theory of state capitalism first enumerate Marx’s views on this issue. As Cliff did:

In order to see whether labour power in Russia is really a commodity, as it under traditional capitalism, it is necessary to see what specific conditions are necessary for it to be so. Marx states two conditions for this: first, that the labourer must sell his labour power as he has no other means of subsistence, being ‘free’ of the means of production; secondly, that the labourer can sell his labour power as he is the sole owner of it, that is, he is free to do so.[34]

Then he states that these conditions are not present in Russia under the domination of the bureaucracy:

If there is only one employer, a “change of masters” is impossible, and the “periodic sale of himself” becomes a mere formality. The contract also becomes only a formality when there are many sellers and only one buyer.[35]

Again according to the interpretation of Pete Binns, a member of the same tendency, one cannot speak of a wage-labour in Russia as in the capitalist system: “… it would not make any difference if Russian workers were paid in buttons.”[36]

Howl’s interpretation is more interesting:

Cliff is establishing that the USSR viewed in isolation could not be seen as capitalist. But even when we move to the level of seeing the USSR in its international context there is practically no competition for labour between the USSR and its rivals. If labour is to be real wage-labour there must be a labour market inside Russia.[37]

Well, what about the conclusion? The point reached after a correct introduction is this: if you see that the theory does not fit into reality, then make the reality fit into the theory in order to overhaul the arguments of the theory of state capitalism to make them more acceptable. Hence Howl continues as follows:

The labour market in the USSR has “imperfections”, but this is true of any labour market. The point is that the worker is no slave, and even if not able to choose which master to work for, can still exercise the classic “freedom” Marx talks of – the freedom to exercise some control over the terms of exploitation.[38]

Chris Harman criticise those who do not consider the USSR a state capitalist but still speak of “the working class” without making any explanation. He says, “the working class is the particular product of the capitalist mode of production alone. The theorists of ‘new class’ must use a term like ‘state slaves’ from a logical point of view.”[39] If the whole point was to demonstrate that the workers under the Stalinist regime were not slaves, then a correct analysis should have been made. But even if the point was to criticise solely the views of Bruno Rizzi and the like who argued that the working class in Russia was a “new class”, one would not need such a false argument that a labour market does exist in Russia despite everything. Or do two wrongs make one truth?!

As labour-force is a commodity under capitalism, it has also a market just like all other commodities. Although we use the term “the worker” in the Soviet Union and the like where there is no labour market and “the state worker” has no freedom to sell his labour-power as he wishes, this “worker” is not the one who freely sells his labour-power as in capitalism. But, in contrast to the case in slave society, he is not a slave either. Because the bureaucratic state has a right to dispose merely over the labour-power of worker, not over his/her body. On the other hand, even if under the domination of the bureaucratic state, in an industrialised society, the producer who is deprived of the means of production is not, of course, a peasant but essentially an industrial labourer, and in this sense, a worker. After all, the term worker in general is not peculiar to capitalism and there were workers even in ancient societies as Marx himself said.

Has the Operation of the Law of Value Altered?

To be able to “demonstrate” the existence of state capitalism in the Soviet Union, Cliff needed to state that the law of value no longer operates within the capitalist system in general. And he did so. His writings reflect various examples of this view:

In Capital, Marx took as the norm of capitalism a system of absolutely free competition. The only Marxian economist who discussed in detail the law of value in relation to monopoly capitalism was Rudolf Hilferding in his book, Das Finanz-kapital.[40]

Well, what was the conclusion Hilferding reached? Let us read Hilferding as quoted approvingly by Cliff:

The objective price law is realised only through competition. When the monopolist associations abolish competition, they remove with this the only means by which an objective price law can be realised. Price ceases to be an amount determined objectively, and becomes a problem of calculation for those who determine it with will and consciousness; ... The realisation of the Marxian theory of concentration – the monopolistic merger – seems to lead to the invalidation of the Marxian theory of value.[41]

Hilferding based his theses on the hypothesis that monopolisation abolishes competition. According to this, it was possible to overcome the anarchic nature of the market and arrive at an organised capitalism. In this way, the contradictions on an international scale were also to soften and thus a peaceful epoch would set in. Hilferding’s expectation for a “peaceful epoch” broke into pieces by the world war that broke out owing to the competition between monopolies and the tendency of capital to spread. But he helped reformism with his views such as that in imperialist epoch the economy would be organised by the state and competition would be abolished, the anarchy of production would come to an end. As for Bukharin, he defended the thesis that while capitalist anarchy would be abolished within individual national states, it would continue to exist on an international level, i.e. between states. Thus, with his conception that it is possible to plan an economy on a national level, he laid the basis for both the theory of “socialism in one country” and an incorrect theory of state capitalism. Basing their analyses on this kind of false theses, Cliff and his followers set out to demonstrate that a state capitalism could exist in the Soviet Union as well.

Let us give another example from Howl’s article. He says, “The absence of a fully operational market in the USSR, our critics argue, means that commodities are not being produced, and as capitalism is ‘generalised commodity production’ the USSR cannot be capitalist.”[42] And once again he attempts to justify his view by saying that these critics are making an analogy with the capitalism of 1860’s. The excuse is again the same: The development of capitalism itself has changed the operation of the law of value!

As it is not possible to demonstrate that the law of value operates in the Soviet Union, i.e. as the reality of the bureaucratic regime is not compatible with the law of value, in order to make the law of value fit into this reality, the law itself is moulded and softened. Just as in the argument advanced by Howl: “Under state capitalism and generally under modern capitalism, the operation of the law of value is mediated through the attempt to plan.”[43]

Yet the emergence of certain factors that soften the operation of the law of value, which is particular to capitalism, does not signify that capitalism has changed its nature, that the market mechanism has lost its significance and a fairly planned operation has replaced it, etc. Consequently, the view that the formations called “state capitalism” can be grasped in comparison not with “old” capitalism, but only with “modern” capitalism has no scientific basis.

In an attempt to make the operation in capitalist countries similar to the operation in the Soviet Union, they claim that capitalism is also based on planning in the imperialist epoch. But this is unfounded. Because planning in capitalist system cannot go beyond the bounds of making plans that provide certain guiding for companies through market researches. The necessity to make certain plans on a company level due to the complex operation of modern capitalism is one thing, but a planned economy is a completely different thing. For instance, “… when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness” said Engels.[44] But with these words he was explaining, on the one hand, that the socialisation of the means of production has been forcing a transition to a planned mode of production by overcoming capitalism, and on the other hand, that even under capitalism it has now become inevitable to introduce some sort of planning. “Interpreting” these analyses in the direction of his own theses, Hilferding developed his theory of “organised capitalism”. Chris Harman, on the other hand, defends this theory against its critics and diverts the issue as if the analyses of Lenin and Trotsky are in the same direction with Hilferding.[45]

To rescue the theory of state capitalism some other authors who follow a similar line advanced the idea that the theory is not a specific theory of the Soviet Union but a general theory of global trends in the development of capitalist system. For instance, P. Binns and M. Haynes argued that despite the difference in its emergence the Soviet society constitutes “the most extreme case” of the evolution of capitalist system:

After a while it has been clearly understood that the peculiarity of the Soviet Union was not in its structure and dynamic, but in that, in a very exceptional process, it has emerged as the degeneration of a successful workers’ revolution. Therefore we argue that, in the age of matured, militarised capitals that control the economic and social life, Russia, as part of the world system, represents only one of the most extreme examples of this system.[46]

The unsoundness of this argument becomes evident when we remember that the proponents of the theory of state capitalism have described the dissolution of the bureaucratic regime in the USSR and the beginning of its incorporation into world capitalist system as a “sidewards step”. The question arises then: how could it be that this “extreme” form of capitalism has collapsed in the face of more backward forms and transformed into them? Would not this, say, be something like going from monopolies back to free competition?

It is to play with words to invent a category of “state capitalism” into which different social systems could be squeezed, by depicting capitalist system untruly. When a person insists on his mistakes he/she usually tends to put forward useless evidence at the cost of falling into contradiction with the reality. This is exactly the case with the authors who stand for the theory of “state capitalism”.

In conclusion, the attempt of Cliffites to explain Russia, which has a despotic bureaucratic structure, with the theory of state capitalism does not rest upon sound proofs. Accordingly there is a dilemma in the explanations of Cliff himself. He admits that a bureaucratic dictatorship was founded in Russia in the year 1928 by a bureaucratic counter-revolution. He states clearly that from that time on the state in the Soviet Union cannot be defined as “degenerated workers’ state”. He acknowledges that the fact that the bureaucracy is a ruling class does not signify an opening up of a new age in history, but on the contrary, it is a “historical anomaly”. However, after all these establishments, which are correct in general, an ill-conceived qualification, i.e. “capitalism”, is attached to them when it comes to the description of the reality being analysed.

For example, Cliff says, “Already in its first years as a ruling class the bureaucracy has adopted the totalitarian characteristics of decaying, ageing capitalism; it already proves its nature as a historical anomaly with no future.”[47] This conclusion reveals the speculative nature of the theory of state capitalism. Because, it is obvious that, like every class society, capitalist society is not an eternal order and will be thrown away into the dump of history. But his fact does not enable one to qualify this order as a “historical anomaly”. Such a qualification can describe only a despotic bureaucratic formation that emerged in modern times due to extremely peculiar conditions and that has no future in the face of capitalist system.

Accordingly this is a point where the theory of state capitalism remains quite defenceless. The observations or analogies made by Cliff, in fact, reveal true secret of the bureaucratic regime. Let us give only a few examples. Cliff interpreted the nature of the Stalinist state as follows:

In Russia the state is a weapon in the hands of the bureaucracy for the oppression of the mass of toilers. But this alone does not describe all the functions of the Stalinist state. It answers also to the direct needs of the social division of labour, of the organisation of social production. A similar task was fulfilled, mutatis mutandis, by the states of ancient China, Egypt and Babylonia. There, because big irrigation works which could be organised at all only if done on large scale were so wholly necessary, the state developed not only as a result of the appearance of class divisions, and so indirectly as a result of the social division of labour, but also directly, as part of the process of production.[48]

These words express not only the reality of despotic-bureaucratism in the USSR in an excellent way, but they also reveal the unsoundness of his fabricated “state capitalism”.

Another example is about the division of total labour time through state planning in the bureaucratic regimes, in contrast to the operation of the market mechanism in capitalist system. Cliff explains this issue making an analogy with Egypt in Pharaoh period:

Pharaoh had to calculate how to divide the total labour time – which is the real cost of production in any society – of his slaves among the needs of his society. His method of doing so was direct. A certain number slaves was put to the production of food, a certain number to the production of luxury goods, others to the construction of the irrigation system, yet others to the building of the pyramids, and so on. ... In Russia, too, the state directly makes an almost complete plan of the division of the total labour time...[49]

While referring to the terror applied by the bureaucratic state to its own bureaucrats, he quotes from Ciliga:

This original method of calming the anger of the people [the terrorist purges] reminded me of Marco Polo’s report of the Mongol Emperor who reigned in Pekin at that time. It was customary once every ten or fifteen years to deliver over to the crowd the minister most abhorred by it, which allowed the emperor quietly to oppress his people for the next ten or fifteen years. What I saw in Russia was to bring this Mongol Emperor repeatedly to my mind.[50]

It is as though these references to the ancient states of Egypt, Babylon, China and the examples given from Asiatic despotic Mongol Empire tell the despotic dictatorships of modern times (the USSR and the like) that “De te fabula narratur!”.

There remains a last point that must be noted which is very important from the point of view of the controversial issues. If you make historical analogies to understand the nature of a given social formation, you must, in the first place, correctly analyse and interpret the historical examples involved. For example the Mameluk state in history was of Asiatic despotic nature. A state-based class that rested upon state property was the dominant class. It would be completely wrong to make an analogy between such a social formation in the East and the slave or feudal states of the West. Such an attempt, just like the efforts to put the despotic bureaucratic dictatorships based on state ownership into the same category with capitalist countries based on private ownership, would mean busying himself with trifles. This is exactly the case with Cliff when he refers to the Mamelukes:

Let us examine the main characteristics of Arab feudalism under the Mamelukes. Here the subjugation of the peasants to the strong feudal state was much harsher than in medieval Europe, but the individual member of the ruling class had no individual property rights whatsoever. The Sultan was the only landowner and he used to divide the right to collect the rent in the various regions among the different nobles (called Multazims). While in Europe every feudal lord was the owner of a certain domain which was handed down from father to son, in the Arab East the feudal lord had no permanent domain of his own, but was a member of a class which collectively controlled the land and had the right to appropriate rent.[51]

The references to the different characteristics of the Mameluke state from the feudal states of medieval Europe are correct. However, it is a downright confusion to introduce the concept “feudal”, which is not compatible at all with the fundamental character of the Mameluke state, despite the difference has been mentioned. Putting a feudal state together with an Asiatic state into the same sack is, above all, contrary to the Marxist method which is so sensitive on the distinctions between social formations. Cliff says:

The mode of production, the form of exploitation, the relation of the toilers to the means of production in the Arab East, was the same as in medieval Europe. The source of income of the ruling class was also the same; the only difference was in the mode of appropriation, in the legal expression of the right to exploit.[52]

When we remember Marx’s famous idea that the difference in the mode of appropriation of surplus-product reveals the distinctive lines between different social formations, then Cliff’s fallacy becomes obvious –a fallacy which is made much more evident by himself when he stresses the words “only difference”. It must be said in conclusion that it is quite natural for those, who fall into this mistake when they interpret the earlier periods of history, to exhibit a similar error in their interpretation of the history of 20th century.

[1] Trotsky, The Revolution Betrayed, p.245

[2] C. Harman, for instance, remarks: “… the transition from state capitalism to multi-national capitalism is not a forward or backward step, but a sidewards step within the same plane.” (The Storm Breaks), [our translation]

[3] Trotsky, Writings, 1933-34, pp.108-109

[4] Trotsky, The Revolution Betrayed, p.246

[5] T. Cliff, Lenin: The Revolution Besieged, Bookmarks, April 1987, p.69

[6] T. Cliff, State Capitalism in Russia, p.201

[7] T. Cliff, ibid.

[8] N. I. Bukharin, Imperialism and World Economy, (web version)

[9] N. I. Bukharin, The Politics and Economics of the Transition Period, Routledge & Kegan Paul, 1979, p.60

[10] N. I. Bukharin, ibid

[11] Trotsky, Writings 1933-34, p.109

[12] T. Cliff, State Capitalism in Russia, p.169

[13] T. Cliff, ibid, p.176

[14] C. Harman, Introduction to State Capitalism in Russia, [our translation]

[15] Marx, Capital, Vol. III

[16] Marx, ibid

[17] Engels, Anti-Duhring, pp.330-331

[18] Hilferding, “State Capitalism or Totalitarian State Economy”, Essential Works of Socialism, Holt, Rinehart and Winston, 1970, p.248

[19] D. Howl, “The Law of Value and the USSR”, International Socialism, July 1990, p.94

[20] T. Cliff, State Capitalism in Russia, p.209

[21] D. Howl, ibid, p.95

[22] T. Cliff, ibid, p.210

[23] T. Cliff, ibid, pp.211-212

[24] T. Cliff, ibid, p.212

[25] Bukharin, The Politics and Economics of the Transition Period, Routledge&Kegan Paul, 1979, p.81

[26] T. Cliff, ibid, p.212

[27] T. Cliff, ibid, p.213

[28] Although those people who described the regimes in these countries as socialism and then blended the law of value and socialism did nothing but to bury Marxism by inventing theories like “socialist law of value”, “socialist commodity production”, “socialist market economy”, such inventions were very popular alongside with the myth of “living socialism”. “The great teacher” Stalin had already said, “Sometimes we are asked if we have the law of value in our socialist regime, and if it affects our economy: yes, we have the law of value too and it affects our economy.” (Stalin) But what is bizarre is that, it was impossible even for the despotic-bureaucratic regimes, where the means of production are statised, to speak of the operation of the law of value, let alone socialism. Only after these regimes began to dissolve and insofar as capitalist market relations permeate the organism, the law of value has started to operate. In this process of dissolution, some pedants who still described the existing system as “socialism” have busied themselves with “socialist value” relations or “socialist market” relations.

[29] D. Howl, ibid, p.90

[30] T. Cliff, ibid, p.208

[31] D. Howl, ibid, p.97

[32] D. Howl, ibid, p.98

[33] Marx, Capital, Vol. I, Penguin Books, 1976, p.271

[34] T. Cliff, ibid, pp.206-207

[35] T. Cliff, ibid, p.207

[36] Quoted in D. Howl, ibid, p.101

[37] D. Howl, ibid, p.102

[38] D. Howl, ibid, p.104

[39] C. Harman, The Storm Breaks, [our translation].

[40] T. Cliff, ibid, p.198

[41] Quoted by T. Cliff, ibid, p.198

[42] D. Howl, ibid, p.97

[43] D. Howl, ibid, p.98

[44] Marx and Engels, Selected Works, Vol. 3, p.432

[45] see C. Harman, “Criticism which does not Withstand the Test of Logic”, International Socialism, July 1990, pp.66-7

[46] P. Binns and M. Haynes, “New theories of Eastern European class societies”, International Socialism, Winter 1980, [our translation]

[47] T. Cliff, State Capitalism in Russia, pp.253-254

[48] T. Cliff, ibid, p.178

[49] T. Cliff, ibid, pp.205-206

[50] Quoted by T. Cliff, ibid, p.255

[51] T. Cliff, ibid, p.273

[52] T. Cliff, ibid, p.275