Lenin's State Monopoly Capitalism

_{Meyerhold's production of The Bathhouse by Mayakovsky, March 16 1930}

"The methods of Taylorism may be applied to the work of the actor in the same way as they are to any other form of work with the aim of maximum productivity."

_{Vsevolod Emilevich Meyerhold, 1922}

In my post on Battleship Potemkin I posted about the Kronstadt sailors revolt of 1921. At the 10th Party Congress of the Bolshevik Party Lenin declared; "Enough Opposition", and the Red Army crossed the ice and attacked the revolting sailors.

At the Tenth Congress, as the Kronstadt soviet was being crushed by arms and buried under a barrage of slander, Lenin attacked the radical-left bureaucrats who had formed a “Workers’ Opposition” faction with the following ultimatum, the logic of which Stalin would later extend to an absolute division of the world: “You can stand here with us, or against us out there with a gun in your hand, but not within some opposition. . . . We’ve had enough opposition.”

Ironically their demands were then used by Lenin to create his New Economic Program.

"Our poverty and ruin are so great that we cannot at a single stroke create full socialist production" Lenin

Lenin came before the Congress in March 1921 and proposed the NEP. The NEP was in essence a capitalist free market. The NEP stated that requisitioning of food and agricultural surpluses, a doctrine of War Communism, must be ended. Instead, the government would tax the peasants on a fixed percentage of their production. Trotsky had already proposed a similar policy, but it was rejected by his fellow colleagues, including Lenin. Basically, this promoted a free agricultural market in Russia.

Lenin's N.E.P.

The Bolshevik revolutionary takeover in October 1917 was followed by over two years of civil war in Russia between the new Communist regime (with its Red Army) and its enemies--the conservative military officers commanding the so-called White armies. The struggle saw much brutality and excesses on both sides with the peasants suffering most from extortionate demands of food supplies and recruits by both sides. The repressive and dictatorial methods of the Bolshevik government had so alienated the mass of peasants and industrial working class elements that the erstwhile most loyal supporters of the regime, the sailors at the Kronstadt naval base, rebelled in March 1921 (see ob19.doc) to the great embarrassment of senior Bolsheviks. Though the rebellion was mercilessly crushed, the regime was forced to moderate its ruthless impulses. The New Economic Policy (NEP) was the result, a small concession to the capitalist and free market instincts of peasant and petty bourgeois alike. Moreover, victory in the civil war was assured by this stage, thus allowing a relaxation of the coercive methods symbolized by the War Communism of the previous two to three years.

The New Economic Policy (NEP), introduced by Lenin at the Tenth Party Congress in March 1921, represented a major departure from the party's previous approach to running the country. During the civil war, the Soviet state had assumed responsibility for acquiring and redistributing grain and other foodstuffs from the countryside, administering both small- and large-scale industry, and a myriad of other economic activities. Subsequently dubbed (by Lenin) "War Communism," this approach actually was extended in the course of 1920, even after the defeat of the last of the Whites. Many have claimed that War Communism reflected a "great leap forward" mentality among the Bolsheviks, but desperation to overcome shortages of all kinds, and particularly food, seems a more likely motive. In any case, in the context of continuing urban depopulation, strikes by disgruntled workers, peasant unrest, and open rebellion among the soldiers and sailors stationed on Kronstadt Island, Lenin resolved to reverse direction.

Lenin's economic model was like Trotsky's transitional program. It was the creation of state capitalism to create the conditions for monopoly capitalism to occur in Russia. His socialism as he liked to call it was state capitalism with electrification, and just a dash of Taylorism.

“Communism is the Power of Soviets plus the electrification of the whole country!”

In fact Lenin was a Taylorist and recognized that modern capitalism required fordist production which is what is currently occurring in China. It's failure in the Soviet Union of the seventies and eighties, was due to its use for military production rather than for consumer goods. In other words Reagan did bankrupt the Soviet Union by creating a competition between the U.S. Military Industrial Complex and its Soviet counterpart. The result was not just the collapse of the Soviet Union, but its collapse into a basket case economy. It did not have the production models required for consumer goods required for a market economy.

In terms of its impact on world politics, Lenin's State and Revolution was probably his most important work. This was derived from the theoretical analysis contained in his earlier work, Imperialism, the Highest Stage of Capitalism (1916). Lenin's theory of imperialism demonstrated to his satisfaction that the whole administrative structure of “socialism” had been developed during the epoch of finance or monopoly capitalism. Under the impact of the First World War, so the argument ran, capitalism had been transformed into state-monopoly capitalism. On that basis, Lenin claimed, the democratisation of state-monopoly capitalism was socialism. As Lenin pointed out in The Impending Catastrophe and How to Combat It (1917):

“For socialism is merely the next step forward from state-capitalist monopoly. Or, in other words, socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly” (original emphasis, www.marxists.org/archive/lenin/works/1917/ichtci/11.htm).

Lenin’s perspective may be briefly expressed in the following words: The belated Russian bourgeoisie is incapable of leading its own revolution to the end! The complete victory of the revolution through the medium of the “democratic dictatorship of the proletariat and the peasantry” will purge the country of medievalism, invest the development of Russian capitalism with American tempos, strengthen the proletariat in the city and country, and open up broad possibilities for the struggle for socialism. On the other hand, the victory of the Russian revolution will provide a mighty impulse for the socialist revolution in the West, and the latter will not only shield Russia from the dangers of [feudal-monarchical] restoration but also permit the Russian proletariat to reach the conquest of power in a comparatively short historical interval.

Lenin unambiguously endorsed the view that the proletariat should use markets to prepare underdeveloped countries for socialism. It is common knowledge that his New Economic Policy used market mechanisms to stimulate economic recovery after the devastation of the Russian Civil War, but some do not realize that Lenin saw markets as more than just an expedient. He actually viewed market mechanisms as necessary for moving underdeveloped countries toward socialism. Lenin recognized that the economies of underdeveloped, agrarian countries in transition to socialism combine subsistence farming, small commodity production, private capitalism, state capitalism, and socialism, with small commodity production in the dominant role (1965, 330–31). These societies contain many more peasants than proletarians, and because peasants favor the petty-bourgeois mode of production, they tend to side with the bourgeoisie against the proletariat. It is tempting to argue that this situation calls for an immediate transition to socialism, in order to force the peasantry to cooperate with the proletariat in defeating the bourgeoisie. But Lenin did not believe this. He argued that the attempt to push agrarian countries directly into socialism, that is, to eliminate markets before the build up of the productive forces had converted peasant agriculture and small commodity production into modern, large-scale industries, was a mistake that would actually hamper economic development and thwart socialist construction. The solution he proposed was for the proletarian state to use capitalism, i.e., commodity production, free markets, and concessions with foreign capitalists, to promote the growth of the productive forces, and to eliminate the conflict of interest between peasants and industrial workers by converting agriculture into a large-scale industry and the peasants into proletarians (1965, 330–33, 341–47).

LENIN'S SOCIALISM

The starting point must be Lenin's conception of 'socialism': When a big enterprise assumes gigantic proportions, and, on the basis of an exact computation of mass data, organises according to plan the supply of raw materials to the extent of two-thirds, or three fourths, of all that is necessary for tens of millions of people; when raw materials are transported in a systematic and organised manner to the most suitable places of production, sometimes situated hundreds of thousands of miles from each other; when a single centre directs all the consecutive stages of processing the materials right up to the manufacture of numerous varieties of finished articles; when the products are distributed according to a single plan among tens of millions of customers.

....then it becomes evident that we have socialisation of production, and not mere 'interlocking'; that private economic and private property relations constitute a shell which no longer fits its contents, a shell which must inevitably decay if its removal is artificially delayed, a shell which may remain in a state of decay for a fairly long period ...but which will inevitably be removed Lenin, Collected Works, Vol.22, page 303.

SOCIALISM?

This is an important passage of Lenin's. What he is describing here is the economic set-up which he thought typical of both advanced monopoly capitalism and socialism. Socialism was, for Lenin, planned capitalism with the private ownership removed.

Capitalism has created an accounting apparatus in the shape of the banks, syndicates, postal service, consumers' societies, and office employees unions. Without the big banks socialism would be impossible.

The big banks are the state apparatus which we need to bring about socialism, and which we take ready made from capitalism; our task is merely to lop off what characteristically mutilates this excellent apparatus, to make it even bigger, even more democratic, even more comprehensive. Quantity will be transformed into quality.

A single state bank, the biggest of the big, with branches in every rural district, in every factory, will constitute as much as nine-tenths of the socialist apparatus. This will be country-wide book-keeping, country-wide accounting of the production and distribution of goods, this will be, so to speak, something in the nature of the skeleton of socialist society. Lenin, Ibid, Vol.26 page 106.

HEY PRESTO!

This passage contains some amazing statements. The banks have become nine-tenths of the socialist apparatus. All we need to do is unify them, make this single bank bigger, and Hey Presto, you now have your basic socialist apparatus.

Quantity is to be transformed into quality. In other words, as the bank gets bigger and more powerful it changes from an instrument of oppression into one of liberation. We are further told that the bank will be made even more democratic. Not made democratic as we might expect but made more so. This means that the banks, as they exist under capitalism, are in some way democratic. No doubt this is something that workers in Bank of Ireland and AIB have been unaware of.

For Lenin it was not only the banks which could be transformed into a means for salvation. Socialism is merely the next step forward from state capitalist monopoly. Or, in other words, socialism is merely state capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly Lenin, Ibid, Vol. 25 page 358.

State capitalism is a complete material preparation for socialism, the threshold of socialism, a rung on the ladder of history between which and the rung called socialism there are no immediate rungs. Lenin, Ibid, Vol. 24 page 259.

BUILDING CAPITALISM

This too is important. History is compared to a ladder that has to be climbed. Each step is a preparation for the next one. After state capitalism there was only one way forward - socialism. But it was equally true that until capitalism had created the necessary framework, socialism was impossible. Lenin and the Bolshevik leadership saw their task as the building of a state capitalist apparatus.

...state capitalism would be a step forward as compared with the present state of affairs in our Soviet Republic. If in approximately six months time state capitalism became established in our Republic, this would be a great success and a sure guarantee that within a year socialism will have gained a permanently firm hold and will become invincible in our country Lenin, Ibid, Vol. 27 page 294.

While the revolution in Germany is still slow in coming forth, our task is to study the state capitalism of the Germans, to spare no effort in copying it and not shrink from adopting dictatorial methods to hasten the copying of it Lenin, Ibid, Vol. 27 page 340.

Socialism or State Capitalism?

So what did the Bolsheviks aim to create in Russia? Lenin was clear, state capitalism. He argued this before and after the Bolsheviks seized power. For example, in 1917, he argued that "given a really revolutionary-democratic state, state-monopoly capitalism inevitably and unavoidably implies a step, and more than one step, towards socialism!" He stressed that "socialism is merely the next step forward from state-capitalist monopoly . . . socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly."³

The Bolshevik road to "socialism" ran through the terrain of state capitalism and, in fact, simply built upon its institutionalised means of allocating recourses and structuring industry. As Lenin put it, "the modern state possesses an apparatus which has extremely close connections with the banks and syndicates, an apparatus which performs an enormous amount of accounting and registration work . . . This apparatus must not, and should not, be smashed. It must be wrestled from the control of the capitalists," it "must be subordinated to the proletarian Soviets" and "it must be expanded, made more comprehensive, and nation-wide." This meant that the Bolsheviks would "not invent the organisational form of work, but take it ready-made from capitalism" and "borrow the best models furnished by the advanced countries."⁴

Once in power, Lenin implemented this vision of socialism being built upon the institutions created by monopoly capitalism. This was not gone accidentally or because no alternative existed. As one historian notes: "On three occasions in the first months of Soviet power, the [factory] committees leaders sought to bring their model [of workers' self-management of the economy] into being. At each point the party leadership overruled them. The Bolshevik alternative was to vest both managerial and control powers in organs of the state which were subordinate to the central authorities, and formed by them."⁵

Rather than base socialist reconstruction on working class self-organisation from below, the Bolsheviks started "to build, from the top, its 'unified administration'" based on central bodies created by the Tsarist government in 1915 and 1916.⁶ The institutional framework of capitalism would be utilised as the principal (almost exclusive) instruments of "socialist" transformation. "Without big banks Socialism would be impossible," argued Lenin, as they "are the 'state apparatus' which we need to bring about socialism, and which we take ready made from capitalism; our task here is merely to lop off what capitalistically mutilates this excellent apparatus, to make it even bigger, even more democratic, even more comprehensive. A single State Bank, the biggest of the big . . .will constitute as much as nine-tenths of the socialist apparatus. This will be country-wide book-keeping, country-wide accounting of the production and distribution of goods." While this is "not fully a state apparatus under capitalism," it "will be so with us, under socialism." For Lenin, building socialism was easy. This "nine-tenths of the socialist apparatus" would be created "at one stroke, by a single decree." ⁷

Lenin' State Monopoly Capitalism is the model being used by the former state capitalist regimes in Asia like China and Viet Nam. They are full filing Lenin's dictum. And ironically in China's case they have become a new Imperialist power.

Lenin: 1917/ichtci: Can We Go Forward If We Fear To Advance ...

Everybody talks about imperialism. But imperialism is merely monopoly capitalism.

That capitalism in Russia has also become monopoly capitalism is sufficiently attested by the examples of the Produgol, the Prodamet, the Sugar Syndicate, etc. This Sugar Syndicate is an object-lesson in the way monopoly capitalism develops into state-monopoly capitalism.

And what is the state? It is an organisation of the ruling class — in Germany, for instance, of the Junkers and capitalists. And therefore what the German Plekhanovs (Scheidemann, Lensch, and others) call "war-time socialism" is in fact war-time state-monopoly capitalism, or, to put it more simply and clearly, war-time penal servitude for the workers and war-time protection for capitalist profits.

Now try to substitute for the Junker-capitalist state, for the landowner-capitalist state, a revolutionary-democratic state, i.e., a state which in a revolutionary way abolishes all privileges and does not fear to introduce the fullest democracy in a revolutionary way. You will find that, given a really revolutionary-democratic state, state- monopoly capitalism inevitably and unavoidably implies a step, and more than one step, towards socialism!

For if a huge capitalist undertaking becomes a monopoly, it means that it serves the whole nation. If it has become a state monopoly, it means that the state (i.e., the armed organisation of the population, the workers and peasants above all, provided there is revolutionary democracy) directs the whole undertaking. In whose interest?

Either in the interest of the landowners and capitalists, in which case we have not a revolutionary-democratic, but a reactionary-bureaucratic state, an imperialist republic.

Or in the interest of revolutionary democracy—and then it is a step towards socialism.

For socialism is merely the next step forward from state-capitalist monopoly. Or, in other words, socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly.

To apply the Lenin's theory on state capitalism in the renovation cause of Vietnam 10:18 28-07-2005

Role of the State in applying the theories of State capitalism in Vietnam 16:05 09-05-2005

From a review of Lenin's ideas and concepts of State capitalism and State capitalist economy as seen from Vietnamese perspective, the paper reaffirms an indispensable role of the State in the present development of market economy.

The new Economic Policy of V.I. Lenin with the use of state capitalism in our country nowadays 10:21 28-07-2005

The awareness of the socialist-oriented market economy in Vietnam 12:43 04-07-2006

Realizing the market economy under socialist regulation in Vietnam is a major content in the economic model in the transitional period toward socialism. The article analyzes and elaborates the theorical and practical sides of the socialist regulated market economy, through which to make the following conclusions. 1. In the context of globalization and international economic integration today. The model of the socialist regulated market economy which has been pursued since the IX National Party Congress is a correct policy both theoretically and practically. 2. However if we regarded the model of the socialist regulated market economy as Vietnam's creative policy, it would lead us to fall into subjective thinking. 3. Through theory and practice the author of this article concludes that. a. According to Marxist doctrine the view that socialism emerged after capitalism still remains scientific b. Human elements in socialism contradicts with those in the previous societies; as a result if the criteria that were applied to solve social problems of socialist society to be imposed on the period of market economy being in existence, it would naturally stand in the way of the development of market economy. c. The key for Vietnam at present is how to solve the relations between growth and development, in other words economic growth should go along with social development d. Vietnam's economy should be broken just into two sectors, namely, state run and private run. It should not be divided into 6 sectors as presently applied. e. The role of the private owned sector i!1 the national economy should be appreciated.

Even the right wing occasionally gets it right but for the wrong reasons. In this case another red scare, red baiting, reds under the bed, commies out to get us, article reveals;

In his "Report to the Fourth Congress of the Communist International," Lenin explained the basis for NEP. He said that Russia needed capitalism before it could have socialism. The form of capitalism Lenin advocated was called "state capitalism." As early as 1918 Lenin had stated, "State capitalism would be a step forward as compared with the present state of affairs."

By 1922, when Lenin delivered his report, state capitalism was still the order of the day. "This sounds very strange," admitted Lenin, "and perhaps even absurd." Russia was unready for socialism and lacked the strength to create communism. In his report Lenin said that socialism in Russia had been adopted "perhaps too hastily."

Does this mean Lenin, like the Chinese and Russian leaders after him, had abandoned the ultimate communist goal?

"I repeat," said Lenin in his 1922 report, "it seems very strange to everyone that a nonsocialist element should be ... regarded superior to socialism in a republic which declares itself as socialist republic. But the fact will become clear if you recall that ... the economic system of Russia [is backward]."

This exact formulation could be applied to communist China. In fact, this is the line that the Chinese Communist Party has adopted for itself. And what Mr. Lee Kuan Yew of Singapore has mistaken for China's commercial objectives, are actually communist objectives. Talk of a future war with America is not simply a question of Taiwan. China's leaders look ahead to a day when a socialist civilization will be possible -- thanks to what Lenin called "state capitalism."

The purpose of state capitalism, as it exists in today's China and Lenin's Russia, is to pave the way for socialism. "The state capitalism that we have introduced in our country is of a special kind," noted Lenin. "It does not correspond to the usual conception of state capitalism. We hold all the key positions."

Lenin emphasized that all land in Russia belonged to the state. "This is very important," said Lenin, "although our opponents think it of no importance at all."

This is a revealing statement. Politicians like Lee Kuan Yew seem to be clueless. China is a communist country that practices state capitalism. China is following the Leninist path. "We have already succeeded in making the peasantry content and in reviving both industry and trade," boasted Lenin. Furthermore, the communist form of state capitalism not only owns the land which the peasants use, but "our proletarian state owns ... all the vital branches of industry."

The market economists of all political stripes fail to understand that State Monpoly Capitalism results from the fact that all capital must create monopoly. There is no free market, there is a market and it is dominated by monopolies, or oligopolies. These can be owned privately or by the state it matters little since both are forms of capitalism. The neo-con political scientists, divorcing themselves as they do from economics, decry capitalist models that are not based upon their American model.

In this they fail to understand the historical development political economy of the 20th Century which was Fordism and Capitalist Monopoly. The later requires state intervention as the American Military Industrial Complex and the development of capitalism in South Korea shows. Something that Lenin reading Marx understood.

In practical life we find not only competition, monopoly and the antagonism between them, but also the synthesis of the two, which is not a formula, but a movement. Monopoly produces competition, competition produces monopoly. Monopolists are made from competition; competitors become monopolists. If the monopolists restrict their mutual competition by means of partial associations, competition increases among the workers; and the more the mass of the proletarians grows as against the monopolists of one nation, the more desperate competition becomes between the monopolists of different nations. The synthesis is of such a character that monopoly can only maintain itself by continually entering into the struggle of competition.
Karl Marx
The Poverty of Philosophy
Chapter Two: The Metaphysics of Political Economy

See:

40 Years Later; The Society of the Spectacle

China: The Truimph of State Capitalism

State Capitalism By Any Other Name

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Lenin, Bolsheviks,
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USSR,
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taylorism,fordism, NEP, state capitalism, state monopoly capitalism, monopoly capitalism,

Corporatism

"Fascism should more properly be called corporatism because it is the merger of state and corporate power." - Benito Mussolini

Corporatism is a form of class collaboration put forward as an alternative to class conflict, and was first proposed in Pope Leo XIII's 1891 encyclical Rerum Novarum, which influenced Catholic trade unions that organised in the early twentieth century to counter the influence of trade unions founded on a socialist ideology. Theoretical underpinnings came from the medieval traditions of guilds and craft-based economics; and later, syndicalism. Corporatism was encouraged by Pope Pius XI in his 1931 encyclical Quadragesimo Anno.

Gabriele D'Annunzio and anarcho-syndicalist Alceste de Ambris incorporated principles of corporative philosophy in their Charter of Carnaro.

One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin "dangers" of the egalitarianism of the French Revolution and the laissez-faire economics of Adam Smith. In Germany and elsewhere there was a distinct aversion among rulers to allow unrestricted capitalism^{[citation needed]}, owing to the feudalist and aristocratic tradition of giving state privileges to the wealthy and powerful^{[citation needed]}.

Under fascism in Italy, business owners, employees, trades-people, professionals, and other economic classes were organized into 22 guilds, or associations, known as "corporations" according to their industries, and these groups were given representation in a legislative body known as the Camera dei Fasci e delle Corporazioni. See Mussolini's essay discussing the corporatist state, Doctrine of Fascism.

Similar ideas were also ventilated in other European countries at the time. For instance, Austria under the Dollfuß dictatorship had a constitution modelled on that of Italy; but there were also conservative philosophers and/or economists advocating the corporate state, for example Othmar Spann. In Portugal, a similar ideal, but based on bottom-up individual moral renewal, inspired Salazar to work towards corporatism. He wrote the Portuguese Constitution of 1933, which is credited as the first corporatist constitution in the world.

When you get rid of the paramilitary uniforms, the swaggering macho bravado, fascism is merely corporatism. And like its economic predecessor Distributism it shares a Catholic origin, a fetish for private property, and being a Third Way between Capitalism and Socialism. After WWI Corporatism, Distributism, and Social Credit, evolved as economic ideologies opposed to Communism and Capitalism.

Corporatism is sometimes identified as State Capitalism which it is a form of. However State Capitalism is a historic epoch in Capitalism that developed as a response to the Workers rebellions world wide between 1905-1921, in particular the Bolshevik Revolution. The epoch of State Capitalism begins with Keynes rescue of capitalism by using the State to prime the pump and to provide social reforms in response to the revolutionary workers movement.

Key features of the theory of state-capitalism.

1. A new stage of world capitalism
Dunayevskaya wrote that: “Each generation of Marxists must restate Marxism for itself, and the proof of its Marxism lies not so much in its “originality” as in its “actuality”; that is, whether it meets the challenge of the new times” The theory of state-capitalism met the challenge of the day in its universality, it was not narrowed to a response to the transformation of the Russian Revolution into its opposite, but of a new stage of world capitalism. She argued that: “Because the law of value dominates not only on the home front of class exploitation, but also in the world market where big capital of the most technologically advanced land rules, the theory of state-capitalism was not confined to the Russian Question, as was the case when the nomenclature was used by others.”

Whilst later theoreticians such as Tony Cliff, turned to the writings of Bukharin on imperialism and state-capitalism, adopting his linear analysis of the continuous development from competitive capitalism to state capitalism, Dunayevskaya explicitly rejected such an approach:

“The State-capitalism at issue is not the one theoretically envisaged by Karl Marx in 1867-1883 as the logical conclusion to the development of English competitive capitalism. It is true that “the law of motion” of capitalist society was discerned and profoundly analysed by Marx. Of necessity, however, the actual results of the projected ultimate development of concentration and centralization of capital differed sweepingly from the abstract concept of the centralization of capital “in the hands of a single capitalist or in those of one single corporation”. Where Marx’s own study cannot substitute for an analysis of existing state-capitalism, the debates around the question by his adherents can hardly do so, even where these have been updated to the end of the 1920’s”

Dunayevskaya went so far as to argue that to turn to these disputes other than for “methodological purposes” was altogether futile; and it is with regard to the dialectical method that Dunayevskaya stands apart from other approaches to this question. The state-capitalism in question is not just a continuous development of capitalism but the development of capitalism through the transformation into opposite. In the Marxian concept of history as that of class struggles, there is no greater clash of opposites than “the presence of the working class and the capitalist class within the same modern society”. This society of free competition had developed into the monopoly capitalism and imperialism analysed by Lenin in 1915, simultaneously transforming a section of the working class itself and calling forth new forces of revolt, making the Russian Revolution a reality. The state-capitalism Dunayevskaya faced emerged as the counter-revolution, which grew from within that revolution, gained pace. With the onset of the Great Depression following the 1929 crash, argued Dunayevskaya the “whole world of private capitalism had collapsed”:

“The Depression had so undermined the foundations of “private enterprise”, thrown so many millions into the unemployed army, that workers, employed and unemployed, threatened the very existence of capitalism. Capitalism, as it had existed – anarchic, competitive, exploitative, and a failure – had to give way to state planning to save itself from proletarian revolution”.

This state ownership and state planning was not a “war measure”, but rapidly emerged across the industrially advanced and the underdeveloped countries. State intervention characterised both Hitler’s Germany, with its Three Year Plans, as a prelude to a war to centralize all European capital, and the USA where Roosevelt launched his ‘New Deal’. This tendency did not decline after the war but accelerated such as under the Labour Government in Britain. Dunayevskaya argued that the “true index of the present stage of capitalism is the role of the State in the economy. War or peace, the State does not diminish monopolies and trusts, nor does it diminish its own interference. Rather, it develops, hothouse fashion, that characteristic mode of behaviour of capitalism: centralization of capital, on the one hand, and socialization of labour on the other.”

This was a world-wide phenomenon and whilst it was true that Russian state-capitalism, “wasn’t like the American, and the American New Deal wasn’t like the British Labour Party type of capital, nor the British like the German Nazi autarchic structure”. It found expression not only in the countries subjugated by Russian imperialism in Eastern Europe and in Communist China but also in the newly independent states following the anti-colonial revolutions.

Despite the varied extent of state control over sectors of these economies taken as whole all revealed we had entered a new epoch in history, differing from the period of Lenin’s analyses, as his was from that of Marx’s own lifetime. What Marx had posed in theory of the centralization of capital “into the hands of a single capitalist or a single capitalist corporation” had become the concrete of the new epoch.

While references to State Capitalism began in an attempt to define the post revolution Russia, and later in response to the rise of Fascism and the American New Deal, what was overlooked by traditional political Marxists was that State Capitalism was not just a feature of a particular kind of Capitalism but was a historic shift in capitalism. It was a shift that Left Wing Communists identified as the period of decline of capitalism, rather than its ascendency. A period of capitalist decadence. During the boom times of the fifties, sixties this seemed to be an outrageous assumption. Capitalism was booming, wages were increasing, a consumer society was being created that the world had never seen before. And yet by 1968 that was all to fall apart as the world under went a revolution not seen since 1919. And while that revolution failed to challenge capitalism it showed that it was rotten to the core.

The Seventies and on saw capitalism lurch from crisis to crisis, starting with the Oil Crisis of 1974. Massive inflation, wage and price controls, the decline of the world economy ending in the Wall Street crash of 1984. Truly those who said that capitalism was in a period of decadance were now having the last laugh.

State capitalism

On the economic level this tendency towards state capitalism, though never fully realised, is expressed by the state taking over the key points of the productive apparatus. This does not mean the disappearance of the law of value, or competition, or the anarchy of production, which are the fundamental characteristics of the capitalist economy. These characteristics continue to apply on a world scale where the laws of the market still reign and still determine the conditions of production within each national economy however statified it may be. If the laws of value and of competition seem to be ‘violated’, it is only so that they may have a more powerful effect on a global scale. If the anarchy of production seems to subside in the face of state planning, it reappears more brutally on a world scale, particularly during the acute crises of the system which state capitalism is incapable of preventing. Far from representing a ‘rationalisation’ of capitalism, state capitalism is nothing but an expression of its decay.

The statification of capital takes place either in a gradual manner through the fusion of ‘private’ and state capital as is generally the case in the most developed countries, or through sudden leaps in the form of massive and total nationalisations, in general in places where private capital is at its weakest.

In practice, although the tendency towards state capitalism manifests itself in all countries in the world, it is more rapid and more obvious when and where the effects of decadence make themselves felt in the most brutal manner; historically during periods of open crisis or of war, geographically in the weakest economies. But state capitalism is not a specific phenomenon of backward countries. On the contrary, although the degree of formal state control is often higher in the backward capitals, the state’s real control over economic life is generally much more effective in the more developed countries owing to the high level of capital concentration in these nations.

On the political and social level, whether in its most extreme totalitarian forms such as fascism or Stalinism or in forms which hide behind the mask of democracy, the tendency towards state capitalism expresses itself in the increasingly powerful, omnipresent, and systematic control over the whole of social life exerted by the state apparatus, and in particular the executive. On a much greater scale than in the decadence of Rome or feudalism, the state under decadent capitalism has become a monstrous, cold, impersonal machine which has devoured the very substance of civil society.

The epoch of State Capitalism as the historical reflection of the decline of capitalsim, its decadence, continues to this day. Called many things, globalization, post-fordism, post-modernism, it is all the same, the decline of capitalism. Global warming, the gap between rich and poor, nations and peoples, shows that capitalisms rapid post war expansion has reached its apogee and is now desperately scrambling to run on the spot.

Despite the so called neo-liberal restoration of the Reagan,Thatcher era. They simply reveresed the Keynesian model, by using the state not to prime the pump through social programs or public services but through tax cuts and increasing militarization/military spending. In fact one of the often overlooked aspects of the success of post WWII Keynesianism was what Michael Kidron called the Permanent War Economy.

Corporatism is the capitalist economy of the U.S. Empire, as seen in its continual permanent war economy that has existed since the end of WWII and continued with wars and occupations to enforce its Imperial hegemony across the globe. America is Friendly Fascism.

The Explosion of Debt and Speculation

Government spending on physical and human infrastructure, as Keynes pointed out can also fuel the economy: the interstate highway system, for instance, bolstered the economy directly by creating jobs and indirectly by making production and sales more efficient. However, spending on the military has a special stimulating effect. As Harry Magdoff put it,

A sustainable expanding market economy needs active investment as well as plenty of consumer demand. Now the beauty part of militarism for the vested interests is that it stimulates and supports investment in capital goods as well as research and development of products to create new industries. Military orders made significant and sometimes decisive difference in the shipbuilding, machine tools and other machinery industries, communication equipment, and much more....The explosion of war material orders gave aid and comfort to the investment goods industries. (As late as 1985, the military bought 66 percent of aircraft manufactures, 93 percent of shipbuilding, and 50 percent of communication equipment.) Spending for the Korean War was a major lever in the rise of Germany and Japan from the rubble. Further boosts to their economies came from U.S. spending abroad for the Vietnamese War. (“A Letter to a Contributor: The Same Old State,” Monthly Review, January, 1998)

The rise of the silicon-based industries and the Internet are two relatively recent examples of how military projects “create new industries.” Additionally, actual warfare such as the U.S. wars against Iraq and Afghanistan (and the supplying of Israel to carry out its most recent war in Lebanon) stimulates the economy by requiring the replacement of equipment that wears out rapidly under battle conditions as well as the spent missiles, bullets, bombs, etc.

To get an idea of how important military expenditures are to the United States economy, let’s look at how they stack up against expenditures for investment purposes. The category gross private investment includes all investment in business structures (factories, stores, power stations, etc.), business equipment and software, and home/apartment construction. This investment creates both current and future growth in the economy as structures and machinery can be used for many years. Also stimulating the economy: people purchasing or renting new residences frequently purchase new appliances and furniture.

During five years just prior to the wars in Afghanistan and Iraq (through 2000), military expenditures relative to investment were at their lowest point in the last quarter century, but were still equal to approximately one-quarter of gross private investment and one-third of business investment (calculated from National Income and Product Accounts, table 1.1.5). During the last five years, with the wars in full force, there was a significant growth in the military expenditures. The housing boom during the same period meant that official military expenditures for 2001–05 averaged 28 percent of gross private investment—not that different from the previous period. However, when residential construction is omitted, official military expenditures during the last five years were equivalent to 42 percent of gross non-residential private investment.*

The rate of annual increases in consumer expenditures fall somewhat with recessions and rise as the economy recovers—but still increases from year to year. However, the swings in private investment are what drive the business cycle—periods of relatively high growth alternating with periods of very slow or negative growth. In the absence of the enormous military budget, a huge increase in private investment would be needed to keep the economy from falling into a deep recession. Even with the recent sharp increases in the military spending and the growth of private housing construction, the lack of rapid growth in business investment has led to a sluggish economy.

See

State Capitalism




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FDR and the origins of State Capitalism

As I have written before state capitalism is a historic epoch. It saved capitalism from self destruction and from workers revolution. A revolution which was aborted and beccae a model for historic shift in the thirties to State Capitalism. It resulted from the shift from post WWI production to finance capital. The roaring twenties was a period of both Fordist expansion and expansion of finance capital. And that led to the crash of 1929.

It follows, therefore, that during a crisis the decline in commodity prices is always accompanied by a contraction in the volume of credit money. Since credit money consists of obligations assumed during a period of higher prices, this contraction is tantamount to a depreciation of credit money. As prices fall sales become increasingly difficult, and the obligations fall due at a time when the commodities remain unsold. Their payment becomes doubtful. The decline in prices and the stagnation of the market mean a reduction in the value of the credit money drawn against these commodities. This depreciation of credit instruments is always the essential element of the credit crisis which accompanies every business crisis.
Rudolf Hilferding, Finance Capital. A Study of the Latest Phase of Capitalist Development


In response to the crash of '29 Keyenes suggested that since the State creates capital in the form of money that it should intervene as the producer of credit and save the market. Just as it is now saving International Financial Capitalism from itself;

“The government intervention is not a government takeover,” Mr. Bush said. “Its purpose is not to weaken the free market. It is to preserve the free market.”

Which is exactly what FDR did after three years of Depression in the U.S. And which Republicans have spent the last sixty years denouncing, mistakenly, as Socialism. George W. Bush has ended his romance with Ronald Reagan to embrace the real politicks of FDR.

As Rosa Luxemburg pointed out;This new type of capitalism--properly called state-capitalism--persists to the present day in the ideological dress of 'socialism."


In fact it was a historic moment in Capitalism, when the financial exuberance of the market collapsed internationally, and the capitalist State came to the rescue, changing the nature of capitalism forever.

To sum up: the development of the productive forces of world capitalism has made gigantic strides in the last decades. The upper hand in the competitive struggle has everywhere been gained by large-scale production; it has consolidated the "magnates of capital" into an ironclad organisation, which has taken possession of the entire economic life. State power has become the domain of a financial oligarchy; the latter manages production which is tied up by the banks into one knot. This process of the organisation of production has proceeded from below; it has fortified itself within the framework of modern states, which have become an exact expression of the interests of finance capital. Every one of the capitalistically advanced "national economies" has turned into some kind of a "national" trust.N.I. Bukharin: Imperialism and World Economy Chapter VIII


State Capitalism in the thirties took on various forms, including Fascism, which itself is a form of nationalized corpratist state. Which once again right wing American politicos deliberatly confuse with Socialism. Whether it was FDR, or the populist movements of Prairie Socialism or Social Credit, state capitalism originated as a form of Distributionism, and is not socialism.At best it is about 'sharing the wealth', but not changing the fundametal nature of capitalism.

With the end of WWII the modern form of State Capitalism was born. It was internationalist and imperialist, reliant upon the Cold War to continue the prosperity of War Production. Both East and West were mutating into new forms of State Monopoly Capitalism; Stalinism in the East and the Military Industrial Complex in the West.

Contrary to pundits on the right, it is the historic mission of the capitalist state to save capitalism from itself, from its excesses. A lesson learned in the thirties. Socialism is not merely the state nationalizing or owning private assets, it is workers owning the means of production, not as taxpayers or consumers, but as producers. Anything less is merely another face of capitalism.

And capitalism is not a 'free' market, but the historic movement towards global expansion and the increasing development of large monopolies, whether they are private corportations or state controled ones. Thus China's development as evolving from State Capitalism into a form of Monopoly Capitalism can be explained in light of both Schumpter and Hilferding .

Lenin and Bukharin influenced by Hilferding saw Capitalism of their day evolving as a new form of Imperialism, which today we call Globalization. They also saw the beginings of a new form of Capitalism; Fordist rproduction financed by Banks which we call Monopoly Capitalism. However their view that socialism was public ownership of Monopoly Capitialism was coloured by their view of the State.

As Social Democrats they viewed control of the State as the essence of Socialism. When in reality, as the Russian Revolution, and later Revolutionary periods of workers uprisings; Spaing 1936-39, post WWII revolts in Poland/East Germany and Hungary, France in 1968 and Italy in 1973 would show, workers recolution was about direct workers control of production, workers self management, not state ownership or state management.

Which is why stripped of the rhetoric, the so called Socialism of China is simply another face of Monopoly capitalism. And the current financial crisis is a crisis of competing capitals, which may result in rebalancing the Imperialist powers globally. America is in debt to the Asian Tigers and the current economic crisis harkens us back to the crisis and reshaping of the world after 1914.

And like that period the elephant in the room is actually not the fiscal crisis at all but the solution to this crisis which is either Inter-Imperialist War or workers revolution. Already the sabre rattling and small wars and war like crisises are part of the background noise we read and hear everyday, despite the rollercoaster that is Wall Street.

Around the world food production is down, costs are up and last year there were thirty major revolts world wide around food. In China and around the developing capitalist economies the proletariat are revolting, each new product failure, collapsing mine, or major capitalist disaster is met with increasing distrust of the 'system', the 'estalishment'. The falling rate of profit that so called Marxist myth, has once again reared its ugly head.

And if the pending crash and recession are serious and deep enough even American Idol besotted American Consumers may suddenly realize they are actually proletarians, facing the imminant collapse of not only their Empire, but of their very livlihoods, and revolution will be on the agenda once again.

It was exactly this threat of world revolution that spurned FDR and the American capitalist establisment to try and stablize capitalism last time around. And for sixty years it succeeded, until the predictable happened again; capitalism melted down.

--------------------The Origins of State Capitalism-------------------------

"H.G. Wells was one of the few socialists who claimed to see big business, and multinational corporations, in particular, as the forerunners of a World Socialist State"

John Maynard Keynes wanted a global system of fair trade and fair development free of debt bondage and unemployment. His greatest ideas came up against a USA determined to rule the world, to hold off trade competitors at any cost, and to wring from the Third and Fourth worlds every ounce of wealth it could squeeze at whatever cost in human suffering.

Keynes was an enlightened capitalist. His life’s work is adequate proof of that. He was also an anti-Communist, quite openly. Nonetheless, his total defeat on international trade and monetary policy by the US demonstrates the fate of the enlightened, even of enlightened capitalists – even ones of outstanding genius up against corporate capitalist imperialism.

He was a member of the justly famous Bloomsbury group: Virginia and Leonard Woolf, Lytton Strachey, Clive and Vanessa Bell, Duncan Grant, and a host of other luminous, talented, gifted people. Keynes connected as well with W.H. Auden, Rupert Brooke, Serge Diagilev, Nijinsky, Ottoline Morrell, G.B. Shaw, Ludwig Wittgenstein, Sidney and Beatrice Webb, as well as every major economist and many of the most powerful politicians of his time.

Franklin Roosevelt Studied in Post-Soviet Russia

Primakov, now functioning as a senior figure in Russian policy circles, and an informal advisor to Putin, made a high-profile television appearance on an NTV Sunday evening program, Jan. 28. He said that Russia is being criticized today more sharply than at any time since the end of the Cold War, because of "subjective factors on the other side": expectations that Russia would be a towel boy for Western institutions, beginning in the early 1990s.

Primakov recalled how, when he was Prime Minister, "a representative of the International Monetary Fund came over and tried to impose certain models of development on us. They were trying to impose on us a system whereby the state was not to be involved in anything, everything was to be left at the mercy of the market, and the market was supposed to take care of everything."

As against the fallacies of the IMF, Primakov cited Franklin Roosevelt, saying: "No country has ever managed to extricate itself from an economic crisis situation without decisive interference of the state. This is what Roosevelt said, and this is what [Ludwig] Erhard in West Germany after the Second World War said, and he acted accordingly.... We have seen a turning point; at long last we have rejected the views of the people I would describe as dogmatic liberals who thought that the market would provide all the answers.... At present the state is increasingly involved in the economy. It does not mean that the state will revert to [the Soviet central planning agency] Gosplan, to issuing directives. But indicative planning and even industrial policy as such were also denied. Now, thank God, we have abandoned this, and this is not liked."

The current Russian deliberations about Roosevelt go far beyond any opportunistic considerations that might be involved, having to do with Putin's team seeking a third term for him. They bring to the front of the agenda, where they should be, three things.

First, a reminder of what a difference for the world, the quality of leadership in the United States of America makes.

Second, an understanding of how the collaboration of the United States and Russia, as two of the world's great nations, has shifted the course of history for the better, in the past, and could do so again. MGIMO, the venue for the Feb. 8 "New Deal" conference, recently issued an in-depth study of what a multipolar world could look like, and it by no means excluded the U.S.A. (See "Moscow Discussion: Can U.S.-Russian Relations Improve?" in EIR, Dec. 8, 2006.) And when his NTV interviewer asked if Russia should form a bloc with countries that have been ostracized, e.g., for seeking nuclear weapons, Yevgeni Primakov strongly condemned any notion of turning anti-American: "To form a bloc against America? I am against it.... There should be no anti-Americanism in our policy. We should look for ways to uphold our national interests without confrontation. This is Putin's course and I support him on that to the hilt."

Lastly, the American System economics of the Roosevelt period in the U.S.A., with all it implies for basing relations among nations on their mutual interest in the improvement of life for their populations, is exactly what needs to be brought into action in Russia, in the United States itself, and throughout the world.

'A new deal'

In his Presidential acceptance speech in 1932, Roosevelt promised "a new deal for the American people." The term was taken from a 1932 book by the same name, "A New Deal," written by Stuart Chase. That book rapidly disappeared from the shelves after Roosevelt's election. Its contents were the currency of White House economic policy discussion by Tugwell and other central planners around the new President.

Chase, along with Tugwell and Robert Williams Dunn, had jointly written a report, "Soviet Russia in the Second Decade," following their 1927 travel to Stalin's Russia.

In his 1932 book, "A New Deal," Chase argued that the earlier transition out of feudalism into what he called laissez-faire capitalism, was essentially over. The era of Trusts, monopolies, capital concentration by large banks, must now give way to central or collective planning. Chase wrote, "modern industrialism, because of its delicate specialization and interdependence, increasingly demands the collectivism of social control to keep its several parts from jamming. We find a government meeting that demand by continually widening the collective sector through direct ownership, operation and regulation of economic functions." He adds, "Competition is perhaps a good thing—in its proper place. Where is its proper place? Collectivism is beyond peradventure on the march."

Much of Chase's book was filled with fulsome praise for Stalin’s Russian model of central planning and its achievements, reflecting the fascination of numerous younger American intellectuals in the early 1930's.

In his "A New Deal," intended as a kind of blueprint for the Roosevelt campaign, Chase advocated what he called, "The Third Road, a road which runs neither to red dictatorship nor to black (business)." Chase proclaimed that under the Third Road, "private profit will not furnish the happy hunting ground it used to. State trusts, investment control, the curbing of speculation, will choke the muzzle of the more devastating forms." He also proposed drastic economic controls, an eerie harbinger of what would come to pass under the Federal Reserve of Alan Greenspan: "The Federal Reserve will take over the control of currency, the stock exchanges, banks and domestic investment... A new Foreign Trade Corporation will supervise exports, imports and foreign loans. Public works will undoubtedly be centralized in one department..."

Leaving no doubt that his sentiments were not market-oriented in any way, Chase concluded his tract by stating, "We can go on, however...without violent revolution...if we are willing to halt expansion, and organize industry on the basis of using to the full the equipment we now possess. This is the program of the third road. It is not an attempt to bolster up capitalism, it is frankly aimed at the destruction of capitalism, specifically in its most evil sense of ruthless expansion. The redistribution of national income, the sequestration of excess profits, and the control of new investment are all designed to that end." Little wonder that Chase was given a very discreet background policy role in FDR's inner circle. This was explosive stuff for the American public, even in an economic depression.

After leaving Harvard in 1910, Chase had joined the Boston Fabian Club and went to Chicago to work in Jane Addams' Hull House. As a young bureaucrat with the Federal Trade Commission in 1917, Chase investigated charges against Armour & Co. meatpackers. This all shaped his social outlook, and the Soviet model gave it justification in terms of national planning. Chase first met Roosevelt in 1932, but his role was more as a writer than as a policy administrator in the New Deal. He held several official consulting posts in the New Deal, but was mainly influential through his good friend, Rexford Tugwell, and through his writings.

Rexford Guy Tugwell, the Columbia University economics professor who traveled with Chase in 1927 to the Soviet Union, was the central person of this collectivist group around FDR. Indeed, when it emerged that Tugwell was one of the inner circle of the new President, business leaders and newspapers began to research Tugwell's economic writings, and came away shocked, leading some to nickname him, "Rexford the Red."

As newspaper journalists began digging into Tugwell's published writings for clues as to what policies the new President Roosevelt was being given by his top advisers, they became alarmed.

In a paper in the American Economic Review March 1932, Tugwell wrote, that the quest for profit no longer motivated business, but that instead it produced "insecurity" because profits were, "used for creating over-capacity in every profitable line; they are injected into money market operations in such ways as to contribute to inflation; they are used, most absurdly of all, as investments in the securities of other industries." Tugwell proceeded further in his frontal assault on the core of the market private enterprise system which had created such extraordinary wealth and improvement of general living standards over the previous decade: "Industry is thought of as rather a field for adventure...The truth is profits persuade us to speculate." When such comments were widely reported in the Nation's media, they did little to bolster businessmen's confidence in the new Administration.

In discussing a proposal to introduce national economic planning, Tugwell wrote in 1932, "it seems altogether likely that we shall set up, and soon, such a consultative body...The day on which it comes into existence will be a dangerous one for business...There may be a long and lingering death (of the private profit enterprise—w.e.), but it must be regarded as inevitable." Private business, Tugwell added, "would logically be required to disappear. This is not an overstatement for the sake of emphasis; it is literally meant."

In October 1932, that is, one month before FDR's election, Rexford Guy Tugwell went on to formulate a six-point program for dealing with the depression crisis. Tugwell opposed wage cuts, then a common method of corporate cost cutting. He insisted, however, on reducing retail prices, and called for "drastic income and inheritance taxes," as well as "avoidance of budgetary deficits and monetary inflation." Obviously businesses could not possibly simultaneously maintain wage levels, reduce prices, and pay increased taxes, without risking bankruptcy in such crisis times. To this, Tugwell advocated, "the taking over by the government of any necessary enterprises which refuse to function when their profits are absorbed by taxation."

In brief, Tugwell's program, and this was planed, would first make it impossible for business to function, then bring those failed businesses under nationalization or state ownership. Tugwell concluded his 1932 program, "So long as prices, profits and individual production programs are at the disposal of independent business executives, our system will continue to show much the same faults as it displays at present." Tugwell endorsed Norman Thomas' League for Industrial Democracy program which called for a, "new social order based on production for use, not for profit."

Tugwell was strategically placed in 1933 as Deputy Secretary of Agriculture, just under his recommended choice of Secretary of Agriculture, Iowa farm editor, Henry A. Wallace. Tugwell continued in the early months to have regular access to his old friend, FDR as well.

Rudolf Hilferding and the total state.

Before World War I, Hilferding followed the traditional Marxist view that identified the executive branch of the modern state as a "committee for managing the common affairs of the whole bourgeoisie." He regarded the state as the "conscious organ of [a] commodity producing society" which reached the height of its power in the era of finance capital. For Hilferding the most important features of "modern capitalism" were "those processes of concentration which, on the one hand eliminate free competition' through the formation of cartels and trust, and on the other bring bank and industrial capital into an ever more intimate relationship." Through this relationship, he argued, capital assumed the form of finance capital which, "in its maturity, is the highest stage of concentration of economic and political power in the hands of the capitalist oligarchy."(3) Hilferding also thought that the development of finance capital created the economic preconditions for socialism, which could be achieved only through the seizure of political power. Workers, organized in trade unions and in the SPD, could use the state to wrest large-scale industry from the control of finance capital and transform it into public property. He thought that it was possible for the working class to win state power through electoral means, but that capitalist suppression of workers' rights or a major war between rival capitalist powers could lead to violent revolution. Nevertheless, he did not argue that the SPD itself should "make" the workers' revolution.(4) World War I and its aftermath forced Hilferding to revise his views on the relationship between Social Democracy and the state. In 1918 he joined the anti-war Independent Social Democratic Party (USPD), in which he supported the socialization of key industrial sectors, the dismantling of the army and bureaucracy, and the democratization of German politics. By 1921, however, he was convinced that the socialist revolution had failed. The splintering of the workers' parties, the SPDs counterrevolutionary actions, and the political "immaturity" of the working class combined to halt Germany's social and economic tranformation. For Hilferding defending whatever democratic gains the revolution had made against the growing strength of Germany's reactionary right wing became the socialist movement's main task and he strongly supported the USPD's reunification with the SPD in 1922.(5) Hilferding steadfastly advocated the parliamentary road to socialism after 1922, and he justified this strategy with an analysis of contemporary changes in the economic and political situation both at home and abroad. He asserted that the war had accelerated the economic processes he had identified prior to 1914. The expansion and further concentration of capital, the formation of cartels and trusts, the increasing influence of finance capital, and the state's intervention in the economy were bringing the era of capital competition to a close. A new system, characterized by economic regulation and planned production, was developing. If left undisturbed, this process would result in a hierarchical social order in which the economy was organized, but the ownership of the means of production remained in private hands. Hilferding called this system "organized capitalism." He saw in its stability and its enhanced use of planning the potential for a socialist planned economy.(6) Social Democracy's task, Hilferding believed, was to educate workers and to fight for the democratization of production. In his view, the republic gave the working class real access to political power because its institutions were subject to the will of the voters.

Permanent Revolution 08 Revolutionary theory and imperialism

In his 1910 book, Finance Capital,4 Hilferding examined the latest developments in the capitalist mode of production. He explained how the process of concentration and centralisation of capital, which Marx outlined, had grown apace in the last quarter of the nineteenth century. This had given rise to the domination of the economy by huge cartels or trusts rather than small scale enterprises so typical of the era of “free competition capitalism”. This he called monopoly capitalism, a new stage in the development of capitalism.The reason that the banks had come to dominate in this way was due in the first instance to changes within capitalist production itself. The rise in the organic composition of capital had lengthened turnover time (i.e. the length of time it takes for machinery and plant to wear out and transfer its value completely through several cycles of production) and so reduced the adaptability of firms to short-run cyclical ups and downs. To get over the effects of short term fluctuations in demand the firms turned more and more to the banks and the provision of credit; they also needed credit to finance the ever larger sums necessary for new investment in machinery. As a result of this development the banks themselves began to commit huge sums to industry for ever longer periods of time. As a consequence they could not move capital about freely to take advantage of every short term fluctuation in the rate of profit between sectors. This meant, in turn, that the banks had an interest in the formation of cartels and trusts so as to prevent as far as possible fluctuations in output and demand putting their huge credits at risk. Hilferding summarised the process thus:“The most characteristic features of ‘modern’ capitalism are those processes of concentration which, on the one hand, ‘eliminate free competition’ through the formation of cartels and trusts, and on the other, bring bank and industrial capital into an ever more intimate relationship. Through this relationship . . . capital assumes the form of finance capital, its supreme and most abstract expression.” 5Thus a central feature of this new stage was the growth of banking monopolies which in the course of their development had come to dominate, and even fuse with, the key sectors of industrial capitalism to form “finance capitalism”.A natural consequence of the concentration of capital in this way was that huge amounts of machinery and plant (constant capital) more and more outweighed the growth of variable capital (i.e. the amount advanced to buy wages). This growth in the “organic composition of capital” led inexorably to the tendency of the rate of profit to fall (TRPF), as Marx had explained in Capital.On the basis of this law he explained how finance capital uses its power to offset this law. The huge monopolies can cut output within certain limits in order to maintain prices and profits; they can influence the national governments to erect tariffs preventing foreign monopoly capital entering their markets to compete with and undercut them; they can even keep prices in the internal market high and practise “dumping” at lower prices in colonial or semi-colonial markets.But for Hilferding the key factor which explained the relatively crisis-free expansion of monopoly capital which marked the last years of the nineteenth century and the early years of the twentieth was the export of capital to foreign countries. This, for Hilferding, was the root of the explanation of the long boom of 1895-1913. Following Marx in Capital he illustrated the way in which the export of capital to countries with a lower organic composition of capital and higher rate of profit overcomes the effect of crises due to the operation of the law of the TRPF:“The precondition for the export of capital is the variation in the rate of profit, and the export of capital is the means of equalising regional rates of profit. The level of profit depends upon the organic composition of capital, that is to say upon the degree of capitalist development.” 6Hilferding explained that the policy of finance capital which it pursues to secure external markets for sales, capital investment, access to raw materials and so on is the policy of imperialism. Moreover, on the basis of the recent developments in the growth of monopoly capital and faced with the internal contradictions of this growth, “capital can pursue no other policy than that of imperialism”

.7Rudolf Hilferding and 'the stability of capitalism' --

The real danger comes from WITHIN scientific socialism--Rudolf Hilferding the orthodox [Marxist], not Eduard Bernstein(4), the revisionist. Hilferding sees the new stage of capitalism in its financial razzle-dazzle appearance and becomes enamored of its capacity to “unify” commercial, industrial, and financial interests [instead of being] concretely aware of the greater contradictions and antagonisms of the new monopoly stage of capitalism.
I wish to stress the seeming orthodoxy of Hilferding. No one, absolutely no one--not the firebrand Rosa Luxemburg, nor the strict realist V.I. Lenin, and I dare say not Hilferding himself--knew that what he was doing with his theory of finance capitalism was bringing in the first theory of retrogressionism [into Marxism]....Even with over four decades of hindsight, and much, hard thinking on the subject, I have first now realized that what Hilferding was SEEING and analyzing (and it took Nikolai Bukharin’s theory of the transition period to bring it home to me)(5) was the STABILITY OF CAPITALISM.
Watch the orthodoxy though: Hilferding is proposing no revisionism. The automatic fall of capitalism is still expected and the inevitability of socialism in a mechanistic sort of way is also held to tightly. BUT rather than seeing monopoly as a transition into opposite of a previous stage, monopoly is treated more like simple large-scale production. THAT IS THE KEY. For if it is not a transition into opposite of a fundamental attribute of capitalism, then CAPITALISM’S ORGANIZATION and centralization, monopolization’s appearance as the “emergence of SOCIAL control”...is in fact superseded socialism. Or more precisely, [Hilferding] retrogresses back to home base: the equilibrium of capitalist production.
By viewing the whole development of trusts and cartels not from within the factory, but from “society,” that is, the market, Marx’s general law of capitalist accumulation--the DEGRADATION of the proletariat along with capitalist accumulation--has no meaning for Hilferding. Neither does Marx’s postulate “private production without the control of private property” make any imprint on Hilferding.(6) And of course labor remains a unity; there is not any inkling of an aristocracy of labor arising out of the monopolization and degradation and imperialism.
You must remember that even with the outbreak of World War I, but before Lenin did his own analysis [of imperialism in 1915], he introduced Bukharin’s WORLD ECONOMY AND IMPERIALISM which said pretty much the same thing as Hilferding. All this I want to repeat again and again in order to emphasize the orthodoxy, in order to show that [even when] all the formulae are adhered to the loss of revolutionary perspective not yet in a positive way but in the negative of awe before the EXISTENT, continued capitalism can be very, very deceiving. If it was [deceiving] to Lenin we better watch it all the time.
What in truth emerges from a close study of Hilferding...is that the new generation of Marxists following Engels’ death [in 1895], placed within growing, centralized production, SAW MONOPOLY NOT AS A FETER BUT RATHER AS AN ORGANIZING FORCE OF PRODUCTION. So that the Second International, which had openly rejected Bernsteinism and gradualness, accepted Hilferdingism. That meant tacit acceptance of the capacity of capital to gain a certain “stability,” to modify its anarchism as a “constant” feature. They saw in [this] new stage not a TRANSITION to a higher form, but something in itself already higher, although “bad.”
Now the person who made this all clear to me was Bukharin, that logical extension of Hilferding, blown into the THEORY of counter-revolution right within the first workers’ state. It is to him that we must turn. Here too for our generation it is correct to view him with hindsight, precisely because his is “only” theory that will become full-blown actual counter-revolution with Stalin supplying it an objective base.
Keep in mind therefore the three actual stages of capitalist production for the three decades since the publication of Bukharin’s ECONOMICS OF THE TRANSITIONAL PERIOD:
l) 1920-30: Taylorism plus Fordism, that is, the discovery of the [assembly] belt line and with it the necessity for a fascistic order in the factory. It may be “vulgar” to call gangsters part of the intelligentsia, but that is the genuine face of “social control” when the masses themselves do not control [production]. Marx’s view of the planned despotism plus the industrial ARMY of managers, foreman, etc. has moved from theory to such EVERYDAY practice that every worker knows it in his bones; he needs no ghost come from the grave to tell him THAT....
2) 1930-40: General crisis; New Dealism where “everybody” allegedly administers, and fascism where openly only the elite do, both in mortal combat with the CIO and the general sit-down strikes (which made a true joke of private property) for “social control.” Plan, plan, plans: National Five-Year Plans in Russia, Germany, Japan; John Maynard Keynes, the New Deal, technocracy, the Tennessee Valley Authority, public works.
3) 1940-50: Monopolization has been transformed into its opposite, statification. (What greater scope for a modern Moliere, to take those weighty volumes of the Temporary National Economic Committee (TNEC)(7) proving monopolization and how strangling it is, and then on the eve of World War II they are finally published in full, prefaced by a call for full mobilization which shows that monopolization plus Hitlerism is child’s play as compared to American statification.)
End of World War II, “end” of fascism and state-private-monopoly rule. Complete state-capitalism reaching its tentacles from Russia into Eastern Europe, engulfing Britain, seeping into Western Europe and peering out of the U.S. TOTAL, GLOBAL PLANS: Marshall, Molotov, Monnet, Schumann, Truman’s Point 4.(8) Keynes is dead; long live the state plan. The intelligentsia in Russia, the Social Democratic labor bureaucracy elsewhere, all in mortal combat with the Resistance, with the Warsaw [uprising](9), with general strikes and colonial revolutions. One strangles the revolution “for” the masses’ own good, and the other for “democracy’s” shadow.

Did Hilferding Influence Schumpeter?

The thesis regarding the limited ability of free competition to promote
technological progress is supposed, for both theoreticians, to be a conclusion drawn
from past historical experience. More precisely, Schumpeter argued that the
capitalist era could be divided into two distinct periods (Screpanti and Zamagni
1993, pp. 243ff.): (a) The era of ‘competitive capitalism’ when small enterprises
dominated, an era which declines in the 1880s and (b), the era of monopolistic or
‘big-business capitalism’, during which large enterprises, trusts and cartels
dominated, starting roughly from the 1880s and having consolidated its fully
fledged form by the time Schumpeter’s book was written.
For Hilferding, too, the elimination of free competition and monopolies
came, historically, in a similar way: ‘Finance capital signifies the unification of
capital. The previously separate spheres of industrial, commercial and bank capital
are brought under the common direction of high finance, in which the masters of
industry and of the banks are united in a close personal association’, and
consequently: ‘The basis of this association is the elimination of free competition
among individual capitalists by the large monopolistic combines’ (Hilferding 1910,
p. 301, emphasis added). Thus, ‘it is also clear that monopolistic combines will
control the market’ (ibid., p. 193).
We have seen, so far, that for both theoreticians the real incentive for
innovation was the ability of monopolistic formations – deriving from their noncompetitive
nature – to create extra profits. Also, the elimination of free
competition was regarded, by both economists, as the main characteristic of an era
during which large enterprises, trusts and cartels dominated, and which attained its
typical characteristics around 1900.

As far as the other aspect of the Schumpeterian hypothesis is concerned,
namely that perfect competition is an unstable market structure where only large
enterprises can push technological progress forward, the views of both theoreticians
are strikingly similar. For Schumpeter, once big corporations are formed, the
imperfectly competitive market structure becomes stable, as large firms become
increasingly conducive to technological progress and change:9 ‘There are superior
methods available to the monopolist which either are not available at all to a crowd
of competitors or are not available to them so readily’ (Schumpeter 1942, p. 101).
‘The perfectly bureaucratized giant industrial unit .… ousts the small or mediumsized
firm’ (ibid., p. 134). On the same line of argument, the large firm is
considered to possess the ability to attract superior ‘brains’, to secure a high
financial standing (ibid., p. 110), and to deploy an array of practices to protect its
risk-bearing investments.
In his Finance Capital, Hilferding had developed a similar approach:
The expansion of the capitalist enterprise which has been converted into
a corporation .… can now conform simply with the demands of
technology. The introduction of new machinery, the assimilation of
related branches of production, the exploitation of patents, now takes
place …. from the standpoint of their technical and economic suitability
.… Business opportunities can be exploited more effectively, more
thoroughly, and more quickly .… A corporation .… is able, therefore,
to organize its plant according to purely technical considerations,
whereas the individual entrepreneur is always restricted .… The
corporation can thus be equipped in a technically superior fashion, and
what is just as important, can maintain this technical superiority. This
also means that the corporation can install new technology and labour
saving processes before they come into general use, and hence produce
on a large scale, and with improved, modern techniques, thus gaining
an extra profit, as compared with the individually owned enterprise.
(ibid., pp.123-4)
Consequently, ‘The introduction of improved techniques .… [benefits] the
tightly organized cartels and trusts. [T]he largest concerns introduce the
improvements and expand their production’ (ibid., p. 233).
Hilferding repeatedly affirmed the position that the big corporation is able
to create the conditions which may assure its market supremacy as well as its extra
profits for a long period: ‘An industrial enterprise which enjoys technical and
economic superiority can count upon dominating the market after a successful
competitive struggle, can increase its sales, and after eliminating its competitors,
rake in extra profits over a long period’ (ibid., p. 191).
Thus Hilferding expressed what we could codify as ‘Hilferding’s
hypothesis’, namely the thesis that ‘the size and technical equipment of the
monopolistic combination ensure its superiority’ (ibid., p. 201), which is, in general
terms, very similar to ‘Schumpeter’s hypothesis’, written thirty-two years after
Hilferding: ‘large firms with considerable market power, rather than perfectly
competitive firms were the “most powerful engine of technological progress”’
(Schumpeter 1942, p. 106). The obvious similarity of ideas of both theoreticians on
this specific issue needs no further comment.
Further to the above, Hilferding introduced, in his Finance Capital, the
notion of a ‘latest phase’ of capitalism, which is characterised by the following
main features: the formation of monopolistic enterprises, which put aside capitalist

competition; the fusion of bank and industrial capital, leading to the formation of
finance capital, which is considered to be the ultimate form of capital; the
subordination of the state to monopolies and to finance capital; and, finally, the
formation of an expansionist policy of colonial annexations and war.10
Hilferding regarded capital exports as an inherent characteristic of
capitalism in its ‘latest’, monopolistic, stage, rooted in the ‘cartelisation and
trustification’ of the economy and the need ‘to annex neutral foreign markets ....
above all overseas colonial territories’ (Hilferding 1910, pp. 326, 328).
Finance capital, as Hilferding defined it, is advanced to industrial
capitalists who use it. This ‘new’ concept is also seen as the linking between
capitalism’s ‘latest’ stage and imperialism (Winslow 1931, p. 727). The colonies
were regarded as the outlets for the export of finance capital. In this sense, finance
capital was considered to be helpless without political and military support: ‘capital
export works for an imperialistic policy’ (Hilferding 1910, p. 406) since it ‘does not
want freedom, but domination’ (ibid., p. 426). Imperialism is, thus, a tendency to
expansion of a developed capitalist power, a tendency created, in the last instance,
by economic processes, but also supported by political processes. It is argued,
therefore, that imperialism, which is capitalist rivalry at its highest level, leads to
war and mutual destruction of the capitalist powers.

SEE:

No Austrians In Foxholes

State Capitalism in the USSR

China: The Truimph of State Capitalism

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