We uphold the position that in the USSR of Lenin and Stalin, and the China of Mao, the working class and its allies made historic strides in creating socialism. Through fierce class struggles, the Soviet and Chinese working classes, led by Marxist-Leninist parties, not only greatly increased the material wealth of their societies, but also revolutionized the relations of production, the social relations, and the political superstructure to make them serve proletarian class interests.
Today, that situation has been reversed. Specifically in the Soviet Union, we can observe the full contours of a state capitalist system whose overriding goal, like any capitalist system, is the maximization of the extraction of surplus value. When we refer to the Soviet Union as state capitalist, we are not using this term in the sense that the state is being called on to more directly intervene in the economy in order to better serve the interests of individual capital in the private sector, as is happening in most of the advanced capitalist countries. Nor are we using the term in the way Lenin did, to describe the use of large-scale private capital investment by the proletarian state to build up the economy.
Under the historical conditions in which capitalism has been restored in countries like the Soviet Union, where the principal means of production have already been nationalized, the state itself has become, as Engels earlier described it, “the ideal personification of the total national capital.” (Socialism: Utopian and Scientific) The nature of capitalism is distorted by those who draw their model of capitalism from its early competitive stage and describe its essence as the competition among individual capitals within a nation-state.
Marx himself did not confine his analysis to a description of the stage of competitive capitalism, but grasped the basic laws of development leading to greater concentration and centralization of capital. Even in speaking of stock companies, he refers to this form of ownership as being “social capital” which represents “the abolition of capital as private property within the framework of capitalist production itself.” (Capital, Vol. 3) In the Soviet Union today the state has become the chief framework within which capitalist production is organized even though capital in the form of individual private property has been abolished.
The ruling class in the Soviet Union can be described as a state bourgeoisie, since it commands the heights of the highly centralized Soviet economy and oppresses and exploits the working class directly through its stranglehold on the state apparatus. This class does not individually own the means of production, but this fact makes it no less a capitalist class. The central question to pose in determining whether the Soviet Union is capitalist or socialist is thus not whether the principal means of production have been nationalized, but which class holds real political and economic power. This power is held by the state bourgeoisie, which controls and disposes of state property and gears the whole economy towards the maximization of surplus-value extraction, towards “accumulation for accumulation’s sake, production for production’s sake.” (Capital, Vol. l)
To understand more clearly the difference between socialism and state capitalism, since the latter’s form may look similar to socialism, we need to start by understanding the difference between use value and value in commodity production. Use value refers to the useful aspects of products which satisfy human wants and needs, while value is the abstract worth given to products for the purposes of exchange and based on the socially necessary labor time that went into creating them. Surplus value is the difference between the value the worker creates with his labor and the value he receives in payment, this difference being pocketed by the capitalist.
Marx pointed out that in the case of slavery the slaves were oppressed and exploited in order to produce use values for the slaveowners. This is distinct and different from the exploitation of the working class by the capitalist class, whose goal, as Marx puts it, is “the production of surplus value as the absolute law.” Under socialism, although the value of products, based on socially necessary labor time, must be taken into account, still commodity production is made subordinate to the goal of producing use values for the working people, such as food, clothing, housing, health care, transportation.
Exploitation under capitalism is achieved through the buying of labor power, based on the exclusion of the workers from the ownership of the means of production. Under socialism workers are not re-united with the means of production in the sense of individually owning them. Private ownership is supplanted by state ownership, so the immediate question has to be, does the working class control the state? If the working class controls the state, then through the national economic plan it is able to ensure that the social surplus does not assume the form of surplus value, but is made to serve its own class needs and interests.
The basic functioning of the Soviet economy reveals, however, that the extraction of surplus value is indeed the guiding principle. (All of the data we will present below come from Soviet publications approved for copyrighting). The Soviet bourgeoisie has been able to maximize capital accumulation because through the national economic plan it has had the power to mandate profit rates of 12-15% taken as the norm – a significantly high rate of return. These profit rates are not the result of voluntary self-sacrifice by the Soviet working class, but of high rates of exploitation.
This fact explains why this profit rate is undergoing a sharp decline. In the whole post-war period, the rate of growth of capital accumulation has been twice the rate of growth of output per worker. It is this relative decline in productivity that is at the root of the crisis facing the Soviet bourgeoisie. Its response must include a drive to intensify labor as well as to hold down the wages of the working class.
For a great proportion of the time during this same post-war period, the rate of growth of wages was way below the rate of growth of output per worker. What this means is that while the standard of living of the Soviet people may have been slowly rising, the Soviet bourgeoisie has had the power to keep the rate of increase depressed relative to the productivity of the working class and the rate of capital accumulation.
Like any industrialized capitalist country, the USSR has had to raise the level of social consumption, such as cn education and health care, in order to develop the kind of knowledgeable, skilled workforce it needs to labor in a mere technologically advanced, capital-intensive economy. But the Soviet bourgeoisie still puts the major emphasis on material incentives to be able to manipulate greater productivity without having to unduly raise the whole wage rate of the working class.
While the money wages of the Soviet working class have been rising, there has been a shortage of consumer goods for them to buy with their higher wages. The national economic plan deliberately short-changes the production of consumer goods, and this is a form of suppressed inflation. Even many of the consumer goods that the Soviet people finally receive are shoddy. This contrasts to the quality military hardware that somehow the same Soviet economy under the same national plan is able to produce.
The above facts and figures clearly point to the existence of a capitalist economy in the Soviet Union which is geared to exploiting the Soviet working people and not to producing use-values for their well-being. On the contrary, attention is paid to the well-being of the Soviet people only insofar as this is seen as a factor in achieving greater extraction of surplus value. One of the chief forms that this surplus value has to assume to advance the over-all interests of such a capitalist economy is the building up of a huge standing army and imperialist military machine.
Clearly, on an international level as well as on a domestic level, Soviet leaders guide their actions primarily by the law of value. As they state, “...there is a world wide universal value just as there is a world market; that this value forms under the influence of countries belonging to different social systems according to their actual participation in world economic relations; and that it is not replaced by another international value in the market of CMEA countries.” (Pg. 82, POE, Dec. 1980) Put precisely, this states that the Soviet practice is to carry out its trade, even within its own bloc, at the average world prices that are generated from the international relations among the imperialist countries and the neo-colonial countries.
These kinds of basic value calculations establish not only the crucial relationship between the state bourgeoisie and the working class, but also the relationships between the state bourgeoisie and the smaller capitalist elements, the entrepreneurs of the illegal “shadow” economy, and the petit-bourgeois producers within agriculture.
The real power of the state bourgeoisie is wielded through its control over the national economic plan, in which it is able to fix the rate of output and the rate of capital accumulation for the Soviet economy as a whole, and determine the utilization of the labor force and the total wages that will go to the working class. Thus, it is misleading to focus on the Liberman reforms as the real beginning of capitalism in the USSR. What these reforms were meant to accomplish was to increase efficiency in the utilization of capital resources at the level of individual enterprises. To provide greater motivation for this goal, the reforms granted more power and material incentives to the enterprise managers.
It is in the sane way that we should understand how the state bourgeoisie allows a large “shadow” economy to flourish in a supposedly socialist country like the Soviet Union. This “shadow” economy, which includes the black market and many other forms of activity outside the direct control of the central plan, provides an outlet for local, small-scale capitalist initiatives but the central plan itself takes this economy into account and makes sure that it ultimately is made to serve the interests of the state bourgeoisie. As the Soviet economists themselves have recognized, ”...the ’shadow’ economy has become rooted in the system of basic economic relations and has merged with it.” (Pg. 19, POE, Dec. 1980)
Despite its high level of organization, it would be misleading to characterize the state bourgeoisie as a monolithic class, since it is composed of a number of different, competing, and conflicting wings. The leading core of the Soviet ruling class is concentrated within the central state apparatus and the Communist Party of the Soviet Union, but the broader boundaries of this class include a number of subordinate elements, such as state functionaries and party officials at the regional level, especially in the non-Great Russian republics, as well as managers of large enterprises, chairmen of large collective farms, and managers of production associations and combines.
In addition, we want to be clear that while the form of state capitalism in the USSR requires a high degree of centralization, it does not require fascism. The Soviet ruling class has no need in the present period to resort to methods of open terror to maintain its rule, although there is considerable evidence that severe forms of repression exist in the USSR. Soviet workers and peasants have certain rights, such as those to free health care, education, and pensions, but many of these rights are in the process of being eroded by the drive to maximize capital accumulation.
Given the basic irrationality of the Soviet system, the Soviet leaders are plagued with a number of severe contradictions. As we have stated before, the rate of profit for the state bourgeoisie is in the process of sharp decline principally because of falling productivity. In the past, the Soviet bourgeoisie has been able to build up large amounts of capital per worker. From 1951-1977, for example, the volume of fixed capital roughly increased at 95 per year. From 1951-1960, the productivity increase was a corresponding 9%, but by 1961-1970 productivity had fallen to 6.1%, and by 1971-1977 it had fallen further to 4.2%. If we take 1976-1979 as the last period, the figure is lower still – 3.4%.
A major reason for these adverse results for the Soviet bourgeoisie is, of course, as Marx notes, that capitalism produces not only surplus value, but also the class relations between exploiters and exploited. It is not in the class interests of the Soviet working class to work hard to produce surplus value for the state bourgeoisie, and working-class resistance is taking a number of different forms. These include demands for higher wages, a constant search for better Jobs, or just simply doing as little work as possible on the job.
The lack of labor discipline has become a common theme in Soviet economic literature. Losses of working time are substantial, and are estimated as much as 20% within shift at some enterprises. Over all, the estimate is that “millions of man-days are lost as a result of the violation of labor discipline and personnel turnover.” (Pg. 25, POE, May 1979)
It is no vender then that we are hearing the following from Soviet economists: “Subjective factors that determine the rate of increase of labor productivity are advancing more and more to the forefront. Untapped reserves include the strengthening of labor discipline and the formation of a proper attitude toward labor.” (pg. 12, POE, Aug. 1981) In addition, these economists are talking about the need to “magnify the negative consequences for workers who frequently change jobs without valid reasons.” (pg. 85, POE, April 1980)
One of the results is an increased drive by the Soviet bourgeoisie to intensify labor in order to raise productivity. The pressures on the Soviet workers are building up while institutions like the trade unions, which are supposed to defend their interests, remain bound hand and foot to the ruling class. Some Soviet publications admit that working conditions have been worsening and health and safety conditions in particular have been rapidly deteriorating.
One of the chief sources of concern, if not panic, for the Soviet bourgeoisie is not just that labor productivity is declining, but that the labor reserve itself is drying up. Not only is the working class not producing, but also it is not even reproducing itself. During the period of 1951-1965, for example, the rate of growth of industrial personnel was 4%, with most of this growth resulting from peasants leaving agriculture. From 1970 to 1977, however, the industrial workforce had stabilized at roughly 3^.5 million. (Pg. 25, POE, May 1979) In the European regions of the Soviet Union where the intensity of capital production has been greatest, the decline in the population has reached an alarming rate.
The fact that this decline in population is seen in crisis terms by the Soviet leaders is another sure sign that we are dealing with a capitalist economy hell-bent on extracting the greatest possible amount of surplus value.
This declining birth rate is related to the large-scale introduction of Soviet women into social production. The Soviet bourgeoisie in the past used material incentives to encourage such a trend because of the problem of a labor shortage, but the need of Soviet women to bring in another wage for the family as well as the reluctance to add new family members are mostly the result of economic necessity.
Clearly, the introduction of Soviet women into social production has a progressive aspect, but this introduction ha3 been turned to the account state capitalism, not to the interests of the working class. If we look at the condition of women in the Soviet Union, we find the following: in low-paying industries women predominate, such as in food and textile where they comprise B0% of the workforce, and in garment where they comprise 90%. In agriculture women primarily carry cut heavy manual labor. In machine building, as another example, 66% of women are classified as low-skilled compared to 19% for men. On the whole, the average earnings of women are still only 63-70% that of men, and this represents a tremendous savings in the national wages fund for the Soviet bourgeoisie.
As is obvious from our previous points, we do not believe that a reserve army of labor exists in the Soviet Union, as it does in other capitalist countries. Put a labor shortage or a labor reserve does not help to prove whether a country is capitalist. In capitalist countries like the United States, the reserve army of labor serves the purpose of meeting the needs of capital accumulation as capital moves from one area of the economy to another, and also it acts to hold down the demands of the working class so that they are not able to interfere with the rate of profit. In the Soviet Union the same purposes are accomplished through the state bourgeoisie’s control over the national plan. The Soviet bourgeoisie has greater ability in the short run to resist the demands from the working class for higher wages because it acts with greater political cohesion through the state apparatus.
In opposing this view, some would argue that the Soviet Union cannot be capitalist because the Soviet elite does not really enjoy great material privileges.
The whole line of argument on material privileges, of course, misses the essence of capitalism, which involves the accumulation of surplus value, not its consumption in the form of luxurious use values by the ruling class. As Marx states about the capitalist, “as far as he is personified in capital, it is not values in use and the enjoyment of them but exchange value and its augmentation, that spur him into action.” (Capital, Vol. l)
The enjoyment of material privileges do not appear to be as great among the Soviet ruling class as among the U.S. bourgeoisie – the Soviet bourgeoisie’s income is roughly seven times greater than the average Soviet income, while the ratio in the U.S. is more like 12 to 1. But evidence is sufficient to demonstrate that there is a qualitative gap between the wealth of the Soviet ruling class and the income of the working people which cannot be justified on any rational basis according to the principle of bourgeois right. Moreover, if these privileges are being justified as a material incentive to create greater loyalty and labor, why is the access to these privileges kept from public view?
The purpose of the socialist state is not to serve as the guarantor of inequality, but to protect the class dictatorship of the proletariat and to assure that whatever bourgeois inequality exists is made to serve the interests of the proletariat. It is for this reason that the argument which tries to state that a revisionist party in power is compelled by a socialist economic base to objectively serve the interests of the proletariat borders on political fantasy.
Lenin himself clearly brought out the class essence of opportunism. As he states, “The point is that at the present time, in the imperialist countries of Europe, you are fawning on the opportunists, who are alien to the proletariat as a class, who are the servants, the agents of the bourgeoisie and the vehicles of its influence...” (“Opportunism and the Collapse of the Second International”)
When a revisionist party effectively wields state power, its revisionist actions are not thereby watered down and objectively turned into their opposite, but only make sense as serving to nurture, consolidate, and develop a new ruling class, a state bourgeoisie – of which the party itself is the leading core. Bureaucracy in the Soviet political superstructure is not an unavoidable evil, but instead is a bourgeois class phenomenon which walls off the Soviet working people from exercizing power over the state, thus helping to transform the dictatorship of the proletariat into a new form of state capitalist dictatorship.
As we have seen, with a declining rate of profit, declining productivity, and a decrease in the rate of reproduction of the working class, the Soviet bourgeoisie is facing a grave crisis. Domestically, there does not appear to be any viable solutions from a capitalist viewpoint to this crisis.
When these contradictions reach a boiling point, and the workers begin to organize their own means of defense against exploitation, as the Polish workers have done with the Solidarity movement, then methods of martial law come to be employed. But while martial law can keep workers on the job, it cannot solve the problem of raising their productivity.
The only real solution for the Soviet ruling class is to displace this domestically-generated crisis onto the international arena. What this strategy means is an intensified drive to export capital beyond Eastern Europe and the growth of imperialist relationships with other countries that will both cut down the demand for labor within the Soviet Union and achieve an over-all higher profit rate by the exploitation of working people in other parts of the world under the guise of a socialist division of labor.