MIA: History: ETOL: Document: Workers Party/Independent Socialist League: Neither Capitalism nor Socialism
Neither Capitalism nor Socialism, pp. 60–87.
Partisan Review, May–June 1941.
The aim of this article is to show that the present German economy cannot be called ‘capitalistic,’ that it is a new and different kind of system (which I call, for lack of a better term, ‘bureaucratic collectivism’). This view is, at present, rejected by most Marxists. It is more than a quarrel over terminology. For if the Nazi economy is still basically capitalistic, then we may expect it to be weakened in the future by the classic ‘contradictions’ of capitalism, then we may look for future revolutionary movements against fascism to assume the traditional proletariat vs. bourgeois form, then this war is essentially a repetition of the last war and the issue is merely whether Germany this time will be able to challenge successfully the Anglo-American domination of the world market. If, however, Germany is not capitalist, then all these future developments may be expected to take on quite different forms. I should add that, as I wrote in National Defense: the Case for Socialism (Partisan Review, July–August 1940), the non-capitalist nature of German economy, far from being a reason for supporting the present British and American governments in this war, seems to me to make more imperative than ever the establishment first of a democratic socialist government through the revolutionary action of the working class.
Let me begin with a very brief statement of just what I conceive ‘capitalism’ to be. (For a more detailed treatment, see my article, What is the Fascist State? in The New International for February 1941.) In his introduction to The Living Thoughts of Karl Marx, Trotsky writes:
In contemporary society, man’s cardinal tie is exchange. Any product of labor that enters into the process of exchange becomes a commodity. Marx began his investigation with the commodity and deduced from that fundamental cell of capitalist society those social relations that have objectively shaped themselves on the basis of exchange, independently of man’s will. Only by pursuing this course is it possible to solve the fundamental puzzle – how, in capitalist society, in which each man thinks for himself and no one thinks for all, are created the relative proportions of the various branches of economy indispensable to life ...
This means that, after all, chaos is not chaos at all, that in some way it is regulated automatically, if not consciously ... By accepting and rejecting commodities, the market, as the arena of exchange, decides whether they do or do not contain within themselves socially necessary labor, and thereby determines the ratios of the various kinds of commodities necessary for society.
Marx’s Capital begins: “The wealth of those societies in which the capitalist mode of production prevails presents itself as an ‘immense accumulation of commodities’.” A commodity Marx describes as “a very queer thing, abounding in metaphysical subtleties and theological niceties.” This is because commodities are “both objects of utility and, at the same time, depositories of value,” that is, they exist as both “use values” and “exchange values.” Since they obviously posses use value under slavery, feudalism or any non-capitalist form of economy, it is their exchange value which gives them their specifically capitalist character.
This seems to me a reasonably accurate description of how capitalism works. There are two main elements: production is regulated by exchange, that is, by the prospect of the individual and corporate property owners making a profit by selling their goods on the market; this market regulates “not consciously” but as an impersonal, autonomous mechanism working “independently of man’s will.”
In Germany today the market still exists, but it has lost its autonomy: it does not determine production, but is used merely as a means of measuring and expressing in economic terms the production which is planned and controlled by the Nazi bureaucracy. The old capitalist forms exist, but they express an entirely new content. Since 1936, production in Germany has not been determined by the market but by the needs of Wehrwirtschaft: guns, tanks, shoes, steel, cement are produced in greater or lesser quantities not because there is more or less prospect of making profits on this or that commodity, but because this or that is considered more or less useful for making war. Economically, this is production for use, the use being, of course, a highly undesirable one from the social point of view. Nor is this production controlled by a market mechanism working “independent of man’s will” but by a bureaucratic apparatus which plans production (as against the well-known “anarchy “ of capitalist production) and which consciously and willfully works out the best solution to the particular problem. No individual producer “thinks for himself”; on the contrary, if not one man, at least a small group of top bureaucrats, “think for all”. Trotsky speaks of each individual producer having “his own private plan,” but Dr. Ley of the Labor Front says: “There are no longer any private people. All and everyone are Adolph Hitler’s soldiers, and a soldier is never a private person.”
For many years now, capitalism in every advanced country has faced two great problems: how to overcome the increasingly deep contradiction between the forms of private property and the socialized nature of large-scale industrial production, enough to at least permit the survival of organized society; how to prepare adequately for war, the only way that these internal economic contradictions can obtain even a temporary solution.
The two problems are closely connected: war is the supreme test of any modern nation, for in war its very existence is staked; and war is a social undertaking, demanding far more centralized control and planning, far more subordination of private property interests to national interests than peacetime production does; the disorganization of the economy characteristic of advanced capitalism makes impossible the effective prosecution of modern war. The only power which can control, if not solve, these contradictions, whether in peace or in war, is the State power. The economic crisis which began in 1929 gave a tremendous impulsion to State control of economy throughout the world. Our own New Deal, for example, was forced to take measures which a few years earlier would have been denounced as socialistic -but which even Wall Street (as witness the Wilkie campaign) today recognizes as permanent and necessary. But if economic crisis stimulates large-scale State intervention into the economy, war gives an enormously greater stimulus. To prepare for a modern war, which demands that production not only be raised to maximum capacity but also that it be directed into new channels and coordinated on a national scale – to do this, the State power must intervene decisively to free the objectively ‘socialized’ instruments of production from the fetters of archaic property forms. This in turn means that both the bourgeoisie as a class and also bourgeois property relations increasingly lose their validity, an a new ruling class, the State bureaucracy, capable of controlling production on a national scale, arises. In Germany, where for various well-known historical reasons, the problems both of economic crisis and of war economy facing modern capitalism presented themselves in a far more intense form than in any other advanced capitalist nation, in Germany the solution has taken on a correspondingly acute form. But in all capitalist nations, the bourgeoisie face the same dilemma faced by the German bourgeoisie: they cannot survive without war, but in order to make war, they must allow the State to destroy the basic forms of capitalism. There is only one historical alternative to this development: socialism. The fate of our civilization depends on whether the working class is able to turn history into this channel in the next period.
This process is going on in all advanced capitalist nations, and it will continue throughout the next historical period, until and unless socialist revolution intervenes. This is not a matter of ‘just a war economy’ or of a ‘long-term investment by the bourgeoisie’ – what a ridiculous shop-keeper’s mentality to think in such terms in a period when the very bases of post-1800 society are dissolving before our eyes! For the great fact of the epoch we are now entering on is that war is no longer as interruption of the ‘normal’ peacetime development of capitalism, but has become, as Trotsky came to recognize in the last months of his life, the normal mode of existence of our society. As he wrote in his last article:
We should understand that the life of this society, politics, everything will be based upon war ... In this epoch, every great question, national or international, will be resolved with arms.
The new ‘military’ program he proposed, in taking the army as well as the factory, as a normal arena of class struggle henceforth, recognizes pragmatically – however reluctant Trotsky was to make any explicit revisions of basic theory – that the old concepts of class struggle must be reshaped.
We should read again, with the Nazi economy in mind, Marx’s description of the death agony of capitalism:
The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with it and under it. Centralization of the means of production and socialization of labor at last reach a point where they become incompatible with their capitalist integument. The integument is burst asunder. The knell of capitalist private property sounds. The expropriator are expropriated.
Marx expected the working-class to break the shell. It is one of the bitterest ironies of history that the working class proved incapable of doing so, and that this economically progressive and historically necessary task has been accomplished by a political movement reactionary to the point of barbarism, and working in the interest of a more effective prosecution of war. It is unpleasant and disheartening to have to recognize that the Nazis and not the proletariat have shattered the structure of capitalism, and that the result has not been the social progress anticipated by Marxists but instead war and reaction in their most hideous forms. Yet how can one read such a passage and not see that the totalitarian State has done, economically, just what Marx and Lenin looked to the proletariat to do, namely, created new economic forms which correspond more closely to the ‘socialization of production’ than do the old private property forms?
No one denies that there have been profound economic changes in Germany since 1933; no one denies that there has been considerable friction between the German big bourgeoisie and the Nazi bureaucracy. The historical problem is whether these changes, these conflicts involve issues fundamental to the continuance of capitalism itself, or whether – as in the case of our own New Deal era – they have taken place within the general framework of capitalism. It is my belief that, in both internal and foreign policy, the struggle of the last five years between the German business community and the Nazis involved basic issues, that the very existence of capitalism is at stake, and that the Nazis have by now decisively won the battle. In this section I want to sketch the main outlines of this historical development.
Three main periods may be defined: March, 1933 to June, 1934: struggle between the petty-bourgeois ‘plebeians’ or ‘radicals’ in the Nazi ranks and the big bourgeoisie, ending in the crushing of the former, once and for all [1], by the top Nazi leadership in the June 1934 ‘blood purge;’ July 1934 to September,1936: supremacy of the big bourgeoisie, expressed in the ‘economic dictatorship’ exercised by Dr. Schacht as Minister of Economics and head of the Reichsbank; this domination challenged by the Nazi bureaucracy with increasing strength all through the period. October 1936 to the present: inauguration of the Second Four Year Plan; elimination, by the beginning of 1938, from key posts of the representatives of the big bourgeoisie, the Junkers, and the traditional army leaders [2]; concentration of all power – economic, political, military – into the hands of the bureaucracy; creation of a non-capitalist, planned, totalitarian, production-for-use economy.
Of the first period (1933–1934), I need only say here that I agree in general with the analysis of such Marxists as Dutt and Guerin: that big business put the Nazis into power, that the petty-bourgeois masses who followed Hitler were dupes, and that, in the first year of State power, the Nazi top leadership was primarily the tool of finance capital.
The second period began with the appointment, a month after the ‘blood purge,’ of Dr. Schacht as Minister of Economics. (He retained his presidency of the Reichsbank, thus controlling the two key posts in the economy.) For the next two years Schacht, in closest collaboration with the Army, heavy industry and finance capital, directed and reshaped the German economy. The “New Plan” he evolved represented the kind of economic policy these conservative groups wanted. Its most radical departures were in the field of foreign trade, where Schacht was forced to take the first giant step towards a totalitarian economy: the creation of what was, in effect, a State monopoly of foreign trade. Inside Germany, the ‘New Plan’ was much less drastic. It resembled the contemporaneous New Deal recovery program in many ways: vast sums were spent on roads and public buildings; jobs were ‘made’ by using as much hand labor as possible; the decisive control was in the hands not of the politicians but of Schacht and the still powerful trade associations. The conservative nature of the Plan is indicated in Fortune’s comment on it: “Hitler only took longer steps where his predecessor had taken shorter ones.” Thus much of the public works program had been planned by the preceding governments of Bruning, Schleicher and Papen, and the crucial sector of price control was left to the same official who had been Bruning’s Price Commissar – which is to say prices were not effectively controlled.
Schacht’s “New Plan” failed to solve Germany’s economic problems precisely because it was conservative. Writing in 1935 in Palme Dutt’s Labour Monthly, a Marxist economist, R. Brown, predicted the Plan’s collapse because: (1) “The State planning of foreign trade is impossible under a system based on anarchic private capitalist production.” (2) “The Fascist State is endeavoring to control prices but is actually powerless even to carry out a real system of rationing war materials and foodstuffs.”Brown’s prediction was accurate: the “New Plan” did collapse, and for the reasons he gave. He was also correct when he noted: “Finance capital is completely opposed to any State control of production or markets.” As he pointed out, the Nazis faced a dilemma: a great deal more State intervention was necessary, and yet their big bourgeois ‘masters’ were insisting on less. Hence, Brown concluded, logically enough in his terms, that the “New Plan” would not be extended but curtailed, and that economic breakdown would follow. He was, of course, unable to foresee that the dilemma would be resolved by the dethronement of the ‘masters’ by the ‘puppets,’ and that the relatively mild ‘New Plan’ would be succeeded by the totalitarian Second Four Year Plan.
When the New Deal’s economic program collapsed, also because it was a conservative capitalist measure where much sterner remedies were needed, the only effect was the severe depression of 1937–38. In Germany, however, the failure of Schacht’s program had more serious results, for three reasons: the economic crisis in Germany was so severe as to make it politically impossible to permit a depression; both the politicians and the big bourgeoisie, for reasons of foreign policy which did not then obtain here, agreed that an extensive rearming program was immediately necessary; political power was held not by a reformist government of the traditional democratic-capitalist type but by a totalitarian party with a large mass base, a “radical” (demagogically) program, and a ruthless and opportunist leadership which was not particularly interested in preserving capitalism, or indeed in any general principles. This party was able to take the drastic social and economic measures necessary to meet the situation.
These measures received their formal expression in the Second Four Year Plan, a turning-point in the German economy comparable to the Moscow Trials in the political evolution of Stalinism. Hitler proclaimed the Plan in an appropriate setting: at the annual Party Congress in Nuremberg. In his speech of September 9, 1936 Hitler outlined the objectives of the Plan: to organize the nation at once on a war footing, to produce arms in huge quantities, above all, to make Germany independent of the world market for foodstuffs and industrial raw materials.
The magnitude of the last task – making Germany self-sufficient in raw materials – may be indicated by the fact that, in 1936, Germany produced no rubber, nickel or sulphur; practically no oil or tin; and much less iron ore, copper lead and timber than she needed. The only important industrial raw materials she produced in sufficient quantities for her (peacetime) needs were coal, zinc, manganese and potash. The Four Year Planners proposed that, instead of continuing to depend on the world market for these materials, ersatz materials be synthetically produced top replace them. This has meant fantastic expense – buna rubber costs four to six times what the natural product costs on the world market – but this expense was more than outweighed, in totalitarian economics, by the political advantages. So in the last four years Germany has developed quantity production of oil by hydrogenation from coal, of ‘cell’ wool from wood, of buna rubber from coal and limestone, and of a hundred lesser synthetic products, not to mention the exploitation by the State-owned Hermann Goering Iron Works of large deposits of low-grade iron ore (which private business had refused to work on the grounds of unprofitability). These technological miracles have been achieved in expensive plants for which the State has forced private business to put up most of the capital.
The Four Year Plan Authority became the supreme dictator of German economy. Its six major branches were concerned with:increasing the production of raw materials; distributing all raw materials on the basis of military utility; distributing the nation’s labor power in the same way; increasing agricultural production; keeping prices and wages stable; controlling foreign exchange and foreign trade.
The only comparable system, in scope and completeness of control, was the Five Year Plan inaugurated in Russia in 1929. No capitalist ‘war economy’ – not even Britain’s today after eighteen months of war – is of the same order.
The business community protested violently against the Second Four Year Plan because it clearly meant: greatly increased State control of business; enormous ‘unproductive’ and ‘uneconomic’ expenses for an even bigger bureaucracy and the creation of whole new ersatz industries; cutting off Germany once for all from the world market and international capitalism, rejecting all compromise and preparing for war.
Their protest, however, could take no very formidable shape: they had their chance to solve Germany’s problems their way, under Schacht, and had failed. A new power, largely of their creation, had now arisen and was soon to demonstrate the economic superiority of its non-capitalist methods.
Neither Schacht nor the business community he represented was consulted in the matter of creating the new Plan. Schacht’s program – “economy in government, retardation of the Four Year Plan, and concentration on export trade” – speedily became only a memory as the Nazis drove ahead on the road of autarchy and rearmament.
There is no space to detail the history of the next four years. The main trend may be suggested:
The orthodox Marxist view of the relationship between big business and the State is well formulated in Hilferding’s Das Finanzkapital: “Economic power is also political power ... The rule over the economy means control over the means of power of the State ... Finance capital in its perfection is the highest stage of economic and political power in the hands of a capitalist oligarchy. It completes the dictatorship of the capitalist magnates.” [This quotation, from the 1920 edition (p. 510), is taken from a forthcoming book by Guenter Reimann, The Myth of the Total State, the manuscript of which the author very kindly allowed me to read.] As things have actually worked out in Germany, this formulation needs to be stood on its head: political power is also economic power; control over the State means rule over the economy. The German big bourgeoisie no longer ‘use’ the Nazi bureaucracy, the relationship is reversed. Schacht, the responsible representative of heavy industry and finance capital, has been deprived even of his control of the Reichsbank. His policies have been reversed. The National Economic Chamber and the other once powerful business associations have been stripped of the policy making powers they held up to 1936, and have been reduced to the role of administrative agencies through which the policies decided upon by the bureaucracy are transmitted to the business community. The various bodies set up since 1936 to decide national economic policy have included few, if any, representatives of the business community. [Three such bodies may be noted. First, the Second Four Year Plan Board, composed exclusively of Nazi bureaucrats and Army officers, with not even Schacht on it. Second, the Privy Council Hitler set up after the February 1938, ‘purge’, whose eight members included not a single business spokesman. Third, the Economic General Staff set up by Goering, after the war began, to run the national war effort. Of its thirteen members, one was an Army officer, three were Nazi politicians, and nine were State secretaries in various ministries. There were jokes in business circles about the ‘dictatorship of the secretariat’ – and not only jokes.] In a word, the bourgeoisie have been displaced by a new ruling class, the bureaucracy; capitalism has yielded to bureaucratic collectivism.
So much for the historical evolution of the present German economy. It has been shown that there was a basic policy conflict between the Nazis and the business community, that the policies of the former have triumphed, and that the groups and individuals representing the big bourgeoisie have been removed from the key economic controls since 1936. The question must still be answered, however: why isn’t this simply the transition to ‘State Capitalism,’ the logical last stage of monopoly-capitalistic development? First there was the monopolization of individual branches of production – steel, coal, etc. – by powerful finance-capital groups. Now these monopolistic powers have united to form a ‘super-trust’ embracing the entire national economy, with the Nazis in political control as the famous ‘executive committee of the bourgeoisie.’ The rise of monopolies, the argument continues, has neither destroyed capitalism nor moderated the economic contradictions of capitalism, but on the contrary has intensified these contradictions. So why cannot we look for the development of the ‘State-capitalist trust’ to work the same way?
Such, in fact, has been the expectation of most Marxists during the last quarter-century. The early congresses of the Third International were well aware of the trend towards ‘State Capitalism’ which set in during the last war, and Lenin correctly predicted the future rise of “vast State-capitalist and military trusts.” The crucial error of Marxist thought on this subject, however, was that it was expected that this historical trend would intensify the social and economic contradictions of capitalism – whereas it has actually resulted in the destruction of capitalism itself and, consequently, in the transposing of these contradictions into quite different terms. (To say that fascism is not threatened by the contradictions of capitalism is not to say that it hasn’t its own contradictions, in some ways more serious than the capitalist ones.)
Consider, for example, Bukharin’s Imperialism and World Economy. First published in 1915, this book is more to the point today than Lenin’s better known Imperialism, since it deals mostly with the question which is so crucial today: State intervention into the capitalist economy. Bukharin’s is an extraordinarily prescient book in some ways, and an extraordinarily short-sighted one in others. Both in its vision and in its blindness it is typical of the twentieth century Marxist tradition. Bukharin predicts in detail the rise of the ‘State-capitalist trust’:
Competition reaches the highest, the last conceivable state of development. It is now the competition of State-capitalist trusts in the world market ... The remnants of the old laissez-faire ideology disappear, the epoch of the new ‘mercantilism’, of imperialism begins ... With the growth of the importance of State power, its inner structure also changes. The State becomes more than ever before an ‘executive committee’ of the ruling class ... Thus the government is de facto transformed into a ‘committee’ elected by the representatives of entrepreneurs’ organizations ...
A remarkable passage to be written in 1915! Yet the really amazing thing is that Bukharin, like the other great Marxists, could have seen so clearly the line of development world capitalism was to take after the war without apparently recognizing, even as a theoretical possibility, the rise of ‘State capitalism’ might seriously affect and even destroy the capitalist system itself. It seems not to have occurred to either Lenin or Bukharin, even as a subject for speculation, that there might be profound differences between the economic monopolistic control, by private capitalist groups, of branches of production and the political (“totalitarian”) monopoly exercised by politicians over the entire national economy. In his entire book, Bukharin touches on this theme only once, in a footnote:
Were the commodity character of production to disappear – for instance through the organization of all world economy into one gigantic State trust, the impossibility of which we tried to prove in our chapter on ultra-imperialism – we would have an entirely new economic form. This would be capitalism no more, for the production of commodities would have disappeared; still less would it be socialism, for the power of one class over the other would have remained (and even grown stronger). Such an economic structure would, most of all, resemble a slave-owning economy where the slave market is absent.
This is such an interesting adumbration of what actually has come about in Germany that one regrets all the more keenly that Bukharin did not carry it further. It is worth noting, in passing, that Bukharin can conceive of production losing its commodity character and hence ceasing to be capitalist if a single world trust should arise – the reason being, of course, that in that case international competition would cease and the world market would have no meaning. But he fails to see that likewise, once a national monopoly has been established within a single nation, those same market-commodity relations are also destroyed and for the same reasons as would be the case on the world market.
The defects of the traditional Marxist conception of the coming ‘State capitalist trust’ as merely a mechanical extension of private monopolism may be seen if we compare the economic effects of the two developments. It is now generally agreed that, while monopolistic (or, more accurately, in most cases, ‘oligopolistic’) trusts establish a more orderly and ‘planned’ kind of economy within their own particular sectors of production, the effect on capitalistic economy as a whole is to intensify its contradictions. Far from moderating the swings of boom and depression, as Bernstein and the pre-1914 ‘revisionists’ thought would be the case, the rise of finance-capital monopolies has had the effect that Lenin and Luxemburg predicted it would have: greatly intensified crises.
The effect of the State-controlled national monopoly in Germany, however, has been the reverse: it has weakened, if not eliminated, the economic contradictions of capitalism. For a long time now, bourgeois and Marxist observers have been predicting imminent catastrophe in Germany, and yet the economy seems stronger today than ever: there is one-hundred percent production and employment, the State experiences little difficulty in maintaining its huge expenditures, inflation seems more remote today than in the early years of the Nazi regime.
[It would be interesting to compile a register of prophecies of disaster, from 1933 to 1939, made by economists outside Germany. Even, Dr. Schacht, Reichsbank head and Economics Minister, became convinced that financial disaster lay ahead if spending were not reduced and finally came into such sharp opposition on the point that he had to be stripped of all his powers. His prophecies have not come true. Schacht’s case is a particularly striking example of the ‘cultural lag’ observable in thinking on this subject both in Marxists and in bankers, and for the same basic reason, that both think in terms of a capitalistic economy. Although Schacht himself created much of the ingenious economic machinery by which the Nazi State controlled the contradictions of capitalism, he was, after all, by training a banker and this proved more decisive than his recent experiences as a bureaucrat.]
Why this difference in the economic effects of private as against State monopoly? The chief economic advantage enjoyed by private trusts is that they exist in a predominantly market economy and hence are able to levy tribute with the iron hand of monopoly on the relatively weak and unorganized non-monopoly sections of the economy.“Monopoly organizations,” writes Bukharin, “can overcome the tendency towards lowering the rate of profit by receiving monopoly super-profits at the expense of non-trustified industries.” Private monopolies thus throw the national economy still further out of balance and bring on ever more severe crises because their whole strategy, their raison d’etre in fact, lies in taking advantage of and intensifying the disproportion between the monopolized and non-monopolized parts of the whole economy. As Lenin describes it in Imperialism: “At the same time monopoly, which has grown out of free competition, does not abolish the latter but exists alongside it and hovers over it, as it were, and, as a result, gives rise to a number of very acute antagonisms, friction and conflicts.”
In the case of a ‘State capitalist trust,’ however, the whole economy is controlled by the State, and there exists no longer any free-market sector. Hence the kind of unbalances created by the growth of private monopolies do not arise. Furthermore, the State controls not only all branches of the national economy, but also all the main economic factors: prices, wages, production, investment, profits, consumption, foreign trade, bank rates. These are thus robbed of their primary character as the determinants of economic development and become secondary instruments manipulated by a new ‘prime mover,’ the State bureaucracy. And they therefore lose their power to determine decisively the course of the economy. Private monopolism perverts the capitalist market economy, State monopolism negates it.
“When a government has complete control over the man power and the material resources of a country,” writes Stolper in his recent German Economy, “the only limit to the expansion of production is precisely this man power and these national resources.” In such an economy, Marx’s famous “laws of motion of capitalism” are of little practical importance. The State can solve its economic difficulties – so far as these are caused by the workings of capitalist factors – by almost any means it chooses, including, if necessary, a proclamation by the Fuhrer that the moon is made of green cheese, followed by a decree by the Four Year Plan Authority that all banks and corporations must subscribe a certain percentage of their capital to finance the Hermann Goering Cheese Works to exploit lunar food resources.
The well-known Social-Democratic economist, Rudolf Hilferding, author of the classic Das Finanzkapital, has formulated the problem of ‘State capitalism’ in a masterly way. [In an article published over here last year in Proletarian Outlook, a mimeographed political paper, and originally printed in the Russian Social-Democratic organ, the Sotsialistichesky Vestnik of Paris. It may be noted that the press recently reported that Hilferding has been turned over to the Nazis by the Vichy government.] The essential passages of his argument are as follows:
The concept of ‘State capitalism’ does not stand any analysis from the economic point of view. Once the State has become the sole owner of all the means of production, it renders impossible the functioning of capitalist economy, it abolishes the very mechanism which keeps going the process of economic circulation. The capitalist economy is a market economy. The price which is determined by competition between property owners – ‘in the last analysis’ if only as a result of this competition that the law of value operates – in turn determines what is produced, the part of profit which is accumulated, the branches of industry in which all of this takes place, and how finally, in the continual process of overcoming of crises, there is established a certain balance between the various branches of industry.
The capitalist economic system is governed by the laws of the market whose analysis was given by Marx, and the autonomy of those laws constitutes the determining characteristic of the capitalist system of production.
However, what a government economy does is precisely to abolish the autonomy of the economic laws; it is not a market economy, but an economy for use. What is produced, and how it is produced, is no longer determined by the price but by the State planning commission which fixes the character and extent of production. To outward appearance, prices and wages still exist, but their function has changed entirely. They no longer determine the march of production. That is directed by the central government, which alone fixes both prices and wage scales. Prices and wages are now only instruments of distribution determining for every one his share in the sum total of what the central government allots to the population. They have now become the technical means of distribution, a method which is simpler than would be a direct order stipulating the amounts of various products (which have ceased to be ‘commodities’) to be received by each individual. The prices have become symbols of distribution, but they are no longer the regulators of the nation’s economy. While the form has been maintained, the function has been completely changed.
Now it is true that in this passage Hilferding is concerned mainly with the Soviet economy, which he believes to be ‘totalitarian’ and not ‘State capitalist.’ (Hilferding, in fact, denies the theoretical possibility of the existence of State capitalism.) It is also true that in Germany you still have private property, at least in form, whereas in the Soviet Union you have instead collectivized property (again, however, I must insist, ‘at least in form’). This difference, however, is not very important because: private ownership of the means of production is not an exclusive feature of the capitalist system (since in the slave states of antiquity you also had private ownership, to name only one example), but rather, as Marx, Trotsky and Hilferding all agree, production for the market is the distinguishing feature; and in any case, in Germany private property exists in form only, not in reality, since the State determines what use the ‘owner’ shall make of his ‘property’ – as must be the case once the State has brought under its totalitarian control the very foundation-stone of capitalist property relations, namely, the market.
In any case, Hilferding later on explicitly links up the above analysis with the present German and Italian economies:
One of the essential characteristics of the totalitarian government is the fact that it subordinates the economy to its aims. Economy no longer has its own laws, for it is now subject to direction from above. In proportion as this subjection is being carried out, market economy is transformed into an economy for use, the character and the extent of the needs being determined by the State administration. The example of German and Italian economy shows how in a totalitarian state such a management of economy, once it has been started, assumes greater and greater proportions and endeavors to become all-embracing, as was the case in Russia from the very beginning. Notwithstanding the great differences in the points of departure, the economic systems of the totalitarian regimes present an increasing similarity to each other. In Germany, too, the government, intent upon maintaining and strengthening its power, determines the character of production and accumulation; the prices lose their regulating function, become a means of distribution. Like the economy itself, those who are engaged in the management of the economic activities are more or less subordinated to the State; they become its assistants. Economy loses the priority which it possessed under a bourgeois system.
This does not mean, of course, that the economic spheres do not exert a considerable influence upon the government both in Germany and Russia. But they do not determine the contents of politics. The general policy is determined by a small circle of those who hold power. Their interests, their ideas about what is needed for the preservation, application and strengthening of their ownpower are the determining factors of their policy which they impose, as a law, upon the economic life that is subordinated to them. Hence the importance which the subjective element, the element of the ‘unforseen’ of the ‘irrational’ in political development has acquired in politics.
The believer knows only of heaven and hell. The Marxist sectarian knows only Capitalism and Socialism, he knows only of classes – the bourgeoisie and the proletariat – as determining forces. He cannot conceive the idea that modern State power, having become independent, develops its enormous strength according to its own laws, that it subjects the social forces and compels them to serve it.
In this remarkable analysis. Hilferding not only demonstrates the non-capitalist nature of a ‘Statified’ economy, but also suggests the general political conclusion to be drawn from this: that the decisive controls today are political and not economic. The world crisis of capitalism has reached such proportions that economics has become ‘politicized’, so to speak. Politics dominates economy, rafter than, as in the last century, the opposite. The great, perhaps the fatal, error made by Marxists in the post 1918 period was to attach too much significance to economic forms, whether capitalist or socialist, and too little to new methods of political control which have arisen and which have been used to manipulate these forms in such a way as to negate their content.
The internal policies of the Nazis flowed logically from their conception of the relationship of Germany to world capitalism. It was on the field of foreign policy that the decisive struggle took place between the Nazi bureaucracy and the German business community. As in the conflict over internal economic policy, the Nazis won because their conceptions were closer to the realities of modern power politics than were those of the bourgeoisie. And the Nazi economic policies have had the same destructive effect on the world market and the world capitalist system as they have had on the capitalist structure of Germany itself.
By the year 1936, it was clear that Germany would have to choose between two possible foreign policies: to try to fit Germany into the world market, obtaining from the ‘have’ powers concessions of colonies and access to raw materials, coming to some agreement with them on tariffs and trading areas, and generally attempting to gain enough of an outlet in the world market for profitable use of Germany’s tremendous productive capacity; to turn away from the world market and international collaboration, concentrating the entire national energies on building up a war machine powerful enough to smash the rival imperialisms so as to take by force what Germany needed and, above all, to establish a political dominance over Germany’s beaten enemies that would guarantee her future.
The first course meant, in essence, to attempt to reconstruct the depression-damaged world market and to create, through coming to a peaceful agreement with the other great imperialisms, a stable new world capitalist order in which Germany would have a position truly reflecting her economic power. This policy was favored by practically the entire business community, which saw clearly the dangers of revolution and economic ruin even a victorious Germany would run in a second world war, and which also realized the kind of internal economy which the alternative course would mean. There were appeasers inside as well as outside of Germany, and, as was also the case in other countries, they represented primarily the big business forces. In the years of his power, Schacht was the leading proponent of colonies, trading concessions, and international collaboration as the key to Germany’s economic problem. The sad case of Dr. Rudolf Brinkmann, Schacht’s successor at the Reichsbank, may also be cited. Dr. Brinkmann summed up the businessman’s objections to autarchy thus: “A well-planned internal economy depends on exports ... Let us beware of arrogance. It is wrong to proclaim to the rest of the world: “You want us, you are dependent on us.” We should rather say: “We are all mutually interdependent.” It may be relevant to note that, within a few weeks of his taking over the presidency of the Reichsbank, Dr. Brinkmann went into retirement, suffering from “a nervous breakdown with loss of memory.”
The second course, that of autarchy, meant, internally, more State intervention than ever, enormous State expenditures, and, as Schacht well knew, the replacement of the old capitalist profit economy by a bureaucratic production-for-use planned economy; externally, it meant abandonment of the perspective of a peaceful collaboration of world capitalism, war as soon as the economy was ready for it, and, in the event of a German victory, the extension of this new kind of economy to – in the first instance – the whole European continent. The worst fears of the German business community have been realized.
Inside Germany, the Nazis’ policies won out over those favored by the business community because they were better adapted to gearing a highly industrialized society for a supreme social effort, namely, war. So too in the field of foreign policy, the Nazi policies also triumphed over those of the conservatives because they were based on a more realistic and profound understanding of the condition of world capitalism in the thirties than the German big bourgeoisie had. The Nazis realized that the perspective of international cooperation, of a reconstitution of the world market and some kind of a ‘deal’ between the major capitalist powers (perhaps at the expense of Russia) – that this was a bourgeois Utopia. They saw clearly that world capitalism was in desperate straits, that the great ‘have’ imperialisms could not afford the concessions that would have integrated Germany once more into the world economy, that the world market had been wrecked by the 1929 depression, and that international competition in a dwindling market – whatever pious hopes the bankers and rentiers of London and Paris might have of a peaceful settlement – was bound to become more and more cut-throat. For Germany, therefore, the only course of safety lay in autarchy, rearming, and territorial expansion as rapidly as her armed strength – and the weakness of her enemies – permitted. The German bourgeoisie underestimated the decadence of world capitalism in general, of the great ‘have’ capitalist powers in particular. The Nazis made neither mistake.
Now it is true that the fact that the Nazis’ war program was better realpolitik than the bourgeoisie’s appeasement program does not prove its non-capitalist character. It would be quite possible that the war aims of the Nazi bureaucracy were the traditional ones of capitalist imperialism, and that it was simply a case of the Nazis understanding better than their own bourgeoisie how to achieve these aims. This is not the case, however. The war aims of Germany – and the kind of economic and political order that will be created if she wins the war – are radically different from those of all the great powers in the last war and from those of America and England in this war.
[Perhaps I should make it clear that, in my opinion, these aims are primarily economic and not an expression of the German soul (Rauschnig) or the expansive force of the German ego (Mumford). But to say that the Nazis are fighting for economic reasons is by no means to say that they are fighting for capitalistic reasons. The whole question is whether they will exploit their war gains within a capitalist or a non-capitalist framework.] In Imperialism and World Economy, Bukharin defines “three fundamental motives for the conquest policies of modern capitalist states: increased competition in the sales markets, in the markets of raw material, and for the spheres of capital investment.” Imperialist war he sees as an effort to use force against competitors in these three fields. I think we can take this as a fair summary of the orthodox Marxist definition of capitalist war aims today. These aims presume the existence of a capitalist world market – international exchange of commodities, settlement of trade balances in gold, an international price structure, the international division of labor, etc.
Bukharin, by the way, admitted that possibly ‘State capitalist trusts’ would establish national monopolies, but not that the world market itself might be destroyed. Thus he deduced that, just as the effect of the establishment within a single industry of a stable, non-market economy by private monopolies was merely to increase the contradictions and anarchy of the national economy as a whole, so these national State monopolies would merely aggravate the chaos of the world market. His calculation, however, went astray for the same basic reason as his predictions as to the nature of the ‘State capitalist trust’ went astray: because when monopoly reached national proportions, the decisive factor in the economy changed from the capitalist market to the State bureaucracy – that is, political controls arose which displaced capitalist market laws as the primary determinants of economy, both national and world.
Nazi trade methods on the world market have had the effect of destroying that market itself (instead of merely gaining for one nation a larger share at the expense of other nations). As we have seen, the Nazi bureaucracy in 1936 decided to cut German economy loose from the world market. Autarchy flew in the face of the international division of labor. The international price structure also lost much of its meaning as far as Germany was concerned , since the State, controlling foreign trade completely, was able to use Germany’s buying and selling on the world market as a political weapon; the Nazis preferred to pay more for Bulgarian wheat than they would have had to pay for, say Canadian wheat, since it was politically desirable to draw Bulgaria closer to Germany. Finally, the whole complex apparatus of the capitalist world market – internationally determined prices, settlement of unfavorable trade balances in gold, three- or four-cornered trade – was short-circuited by the introduction by the Nazis of State barter deals.
These non-capitalist trading methods were evolved precisely because the disintegration of the world market – expressed in rising tariff walls, ever-increasing concentration of the world’s gold in the United States, drastic cuts in imports by all nations – made it impossible for Germany, financially weakest of all major nations, to get via the world market the raw materials she needed. Is there any reason to believe that after this war the world market will be in a better state? How can it be reconstructed as long as eighty percent of the world’s gold supply is held by the United States? In point of fact, the evolution is all the other way: Nazi trade methods have forced other nations to adopt them, as in the proposed Inter-American Cartel, whereby the United States government would extend its control over Latin America by the same kind of barter and subsidy deals Germany for years has been using in Central Europe. World trade has become a political, rather than an economic matter.
Thus two of Bukharin’s three “fundamental motives for the conquest policies of modern capitalist states” – “increased competition in the sales markets” and “in the markets of raw materials” – are ruled out. His third “fundamental motive” Is “competition for the spheres of capital investment.” Both Lenin and Bukharin saw the export of capital (i.e., investments by the bourgeoisie of an imperialist nation in mills, factories, railroads, utilities of colonial and backward nations) as characteristic features of 20th century imperialism. “Under the old type of capitalism, when free competition prevailed, the export of goods was the most typical feature,” wrote Lenin. “Under modern capitalism, when monopolies prevail, the export of capital has become the typical feature.” Unhappily – or happily, depending on your point of view – the fatal basic contradiction of capitalist imperialism – that the market itself, the mechanism through which the more advanced imperialist nations must exploit the backward and colonial nations, works so as to bring the backward nations up to the level of the advanced ones – this appears in its most extreme form in the typical form of 20th century imperialism: the export of capital. For to export capital means no more and no less than to put into the hands of the ‘subjugated’ nation not merely the products of modern industry but the very machines and factories and capital goods that produce these products. In a word to give them the instruments, in an era of war, to challenge ultimately their imperialist masters. (Thus, for example, the rebuilding and rationalizing of German industry in the twenties, the economic foundation of the Nazi war machine, was financed chiefly by huge loans – i.e., ‘capital exports ‘ – from the United States.
And so we find the export of capital figuring not at all in Germany’s postwar calculations. Even in the Balkans, a comparatively primitive region with plenty of openings for capital export, Germany is trying to lower, not raise, the level of production. Thus the first provision in an economic treaty forced on Yugoslavia in October and designed to integrate that country with the Nazis’ “New European Order,” was summarized by the N.Y. Times (October 15): “Yugoslavia must concentrate almost exclusively on increasing her agricultural production at the expense of any industrial development.” And in the more advanced European nations Germany has conquered, where there is little room for capital export anyway, there have been many indications that in the “New European Order” Germany will try to create if she wins the war, the rest of Europe will be de-industrialized (i.e., there will be an export of capital to – not from – Germany!) as much as possible to permit the concentration of the more advanced types of industry within the borders of Germany. This is the long term perspective.
In the next few years – again if Germany wins – her economic relations with the conquered nations of Europe will have a different – but also a non-market – basis: the systematic stripping of the rest of Europe of the food, gold, raw materials and other property urgently needed by Germany for the continuance of her war effort. This is what Marx called ‘primitive accumulation’ – acquiring property not by exchange but by force. But was not this also practiced by the Allies on Germany after the last war? Not in the terms that Germany is now practicing it. It is significant that
Germany never paid most of the reparations bill, and most of what she did pay was paid with money borrowed from American bankers.
That is, the Allies did not have the political control to force payment (the Ruhr occupation was a fiasco), and the conquered nation was actually able to borrow from one of the victors the means to pay the indemnity. In a word, the whole transaction took place not in the sphere of armed force but within the framework of peacetime capitalist market relations. This time, however, the victorious armies are in physical occupation of the conquered nations. And this time it is not a question of “indemnities” or “reparations” – conceptions of an exchange economy, so much gold and coal and ships being paid for so much destruction of enemy property, after which the payer is free from all obligation – but of a permanent adjustment of the political and economic structures of the occupied nations to fit the needs of the victor. And this time Germany, if she emerges victorious, is in a position not only to strip the defeated nations far more thoroughly
than the Allies (not being in armed control of Germany;) could do in 1918, but also to reorganize the entire continent into an economic hinterland of Germany – as against the Balkanized status quo attempted by the Allies at Versailles.
1. This is overstated. For a discussion of the continuing conflict among Nazi hierarchs, the Officer corps, remnants of the Imperial and Weimar bureaucracies, the representatives of industrial and finance capital and the plebeian rank-and-file of the Nazi movement see Guerin, Fascism and Big Business.
2. For a discussion of the officer corps’ resistance to the Nazi attempts to eliminate all independent control over the army see Gordon A. Craig, The Politics of the Prussian Army 1640–1945 (Oxford University Press, New York), 1964. Craig himself bemoans the pusillanimity of the officer corps. However, since the standard he uses to measure their behavior is that of the army reformers at the time of the Napoleonic wars who for a while acted as a kind of ersatz opposition his criticism cannot be taken too seriously. Nothing like Stalin’s purge of the officer corps took place in Germany.
Last updated on 8 November 2020