Ted Grant

Against the Theory of State Capitalism

Reply to Comrade Cliff

Written: 1949

Source: The Unbroken Thread

Transcription/Markup: Emil 1998

Proofread: Emil 1998

The document of Comrade Cliff entitled The Nature of Stalinist Russia[source] at first sight gives the impression of erudition and scientific analysis. However, upon careful examination, it will be observed that not one of the chapters contains a worked-out thesis. The method is a series of parallels based on quotations, and its basic weakness is shown by the fact that conclusions are not rooted in the analysis. From his thesis it is not possible to conclude whether Stalinist Russia remains a progressive system (despite its deformations), or whether for Cliff it has now assumed the same reactionary role as ‘individual’ capitalism or fascism. The weakness is sharply brought out by the fact that no practical conclusions emerge. Is Russia to be defended, or is the revolutionary party to be defeatist? Instead of the answer being rooted in and flowing from the analysis, it has to be worked out a posteriori.

Despite the fact that Comrade Cliff asserts that the Stalinist bureaucracy is a new class, nowhere in his thesis is a real analysis made or evidence adduced as to why and how such a class constitutes a capitalist class and is not a new type of class.

And this is not accidental. It flows from the method. Starting off with the preconceived idea of state capitalism, everything is artificially fitted into that conception. Instead of applying the theoretical method of the Marxist teachers to Russian society in its process of motion and development, he has scoured the works to gather quotations and attempted to compress them into a theory.

Nowhere in the document does Cliff pose the main criterion for Marxists in analysing social systems: Does the new formation lead to the development of the productive forces? The theory of Marxism is based on the material development of the forces of production as the moving force of historical progress. The transition from one system to another is not decided subjectively, but is rooted in the needs of production itself. It is on this basis and this basis only that the superstructure is erected: of state, ideology, art, science. It is true that the superstructure has an important secondary effect on production and even within certain limits, as Engels explained, develops its own independent movement. But in the last analysis, the development of production is decisive.

Marx explained the historical justification for capitalism, depite the horrors of the industrial revolution, despite the slavery of the blacks in Africa, despite child labour in the factories, the wars of conquest throughout the globe - by the fact that it was a necessary stage in the development of the forces of production. Marx showed that without slavery, not only ancient slavery, but slavery in the epoch of the early development of capitalism, the modern development of production would have been impossible. Without that the material basis for communism could never have been prepared. In Poverty of Philosophy Marx wrote:

"Direct slavery is just as much the pivot of bourgeois industry as machinery, credits, etc. Without slavery you have no cotton; without cotton you have no modern industry. It is slavery that has given the colonies their value; it is the colonies that have created world trade, and it is world trade that is the precondition of large-scale industry. Thus slavery is an economic category of the greatest importance.

"Without slavery North America, the most progressive of countries, would be transformed into a patriarchal country. Wipe out North America from the map of the world, and you will have anarchy - the complete decay of modern commerce and civilisation." [source]

Of course, the attitude of Marx towards the horrors of slavery and the industrial revolution is well known. It would be a gross distortion of Marx’s position to argue that because he wrote the above, therefore he was in favour of slavery and child labour. No more can it be argued against the Marxists of today that because they support state ownership in the USSR that they therefore justify the slave camps and other crimes of the Stalin regime.

Marx’s support of Bismarck(1) in the Franco-Prussian war was dictated by similar considerations. In spite of Bismarck’s ‘blood and iron’ policy and the reactionary nature of his regime, because the development of the productive forces would be facilitated by the national unification of Germany, Marx gave critical support for the war of Prussia against France. The basic criterion was the development of the productive forces. In the long run, all else flows from this.

Any analysis of Russian society must start from that basis. Once Cliff admits that while capitalism is declining and decaying on a world scale, yet preserving a progressive role in Russia in relation to the development of the productive forces, then logically he would have to say that state capitalism is the next stage forward for society, or at least for the backward countries. Contradictorily, he shows that the Russian bourgeoisie was not capable of carrying through the role which was fulfilled by the bourgeoisie in the West and consequently the proletarian revolution took place.

If we have state capitalism in Russia (ushered in by a proletarian revolution), then it is clear that the crisis of capitalism on which we have based ourselves for the past decades was not insoluble but purely the birth pangs of a new and higher stage of capitalism. The quotation he himself gives from Marx - that no society passes from the scene till all the possibilities in it have been exhausted would indicate that if his argument is correct, a new epoch, the epoch of state capitalism, opens up before us. This would shatter the entire theoretical basis of the Leninist-Trotskyist movement. Cliff says, without explaining why, that if we hold on to the theory of the degenerated revolution, we must abandon the theory of the permanent revolution. Yet he fails to see that to accept the theory of state capitalism, the theory of the permanent revolution, which is based on the idea that capitalism has so exhausted itself on a world scale that it is incapable of even carrying out the tasks of the bourgeois democratic revolution in backward countries, would have to be abandoned. For in Eastern Europe, the ‘state capitalists’ would have carried out the tasks of the bourgeois revolution on the land etc. Cliff skirts around this question of the agrarian revolution, which in the backward countries, Trotsky argued, only the proletariat could carry through. If the ‘state capitalist’ parties of the Stalinists can perform this task, not only is the theory of the permanent revolution thrown out of the window, but the viability of the new state capitalism in a historical sense must be clear to all.

If Comrade Cliff’s thesis is correct, that state capitalism exists in Russia today, then he cannot avoid the conclusion that state capitalism has been in existence since the Russian Revolution and the function of the revolution itself was to introduce this state capitalist system of society. For despite his tortuous efforts to draw a line between the economic basis of Russian society before the year 1928 and after, the economic basis of Russian society has in fact remained unchanged.

Incorrect Usage of Quotations

Comrade Cliff seeks to prove that Trotsky was moving to the position that the bureaucracy was a new ruling class. For this purpose he gives quotations from the book Stalin, and then from Living Thoughts of Karl Marx.

Cliff writes:

"A clear step in the direction of a new evaluation of the bureaucracy as a ruling class finds expression in Trotsky’s last book, Stalin. He writes:

"’The substance of Thermidor was, is and could not fail to be social in character. It stood for the crystallisation of a new privileged stratum, the creation of a new substratum for the economically dominant class. There were two pretenders to this role: the petty bourgeoisie and the bureaucracy itself. They fought shoulder to shoulder (in the battle to break) the resistance of the proletarian vanguard. When that task was accomplished a savage struggle broke out between them. The bureaucracy became frightened of its isolation, its divorce from the proletariat. Alone it could not crush the kulak (2) nor the petty bourgeoisie that had grown and continued to grow on the basis of the NEP; it had to have the aid of the proletariat. Hence its concerted effort to present its struggle against the petty bourgeoisie for the surplus products and for power as the struggle of the proletariat against attempts at capitalistic restoration’." (The Nature of Stalinist Russia, Tony Cliff, June 1948, page 10) [source]

And Comrade Cliff comments:

"The bureaucracy, Trotsky says, while pretending to fight against the capitalistic restoration, in reality used the proletariat only to crush the kulaks for ‘the crystallisation of a new privileged stratum, the creation of a new substratum for the economically dominant class’. One of the pretenders to the role of the economically dominant class, he says, is the bureaucracy. Great emphasis is lent to this formulation when we connect this analysis with the fight between the bureaucracy and the kulaks with Trotsky’s definition of the class struggle. He says: ‘The class struggle is nothing else than the struggle for surplus produce. He who owns surplus-produce is master of the situation - owns wealth, owns the state, has the key to the Church, to the courts, to the sciences and to the arts’." (Cliff, page 10)

And Cliff concludes:

"The fight between the bureaucracy and the kulaks was, according to Trotsky’s last conclusion, the ‘struggle...for the surplus products’."

To illustrate the way in which Comrade Cliff has constructed his case, let us examine these quotations in context and we will see that the conclusion that flows is precisely the opposite to what he argues:

"The kulak, jointly with the petty industrialists, worked for the complete restoration of capitalism. Thus opened the irreconcilable struggle over the surplus product of national labour. Who will dispose of it in the nearest future - the new bourgeoisie or the Soviet bureaucracy? - that became the next issue. He who disposed of the surplus product has the power of the state at his disposal. It was all this that opened the struggle between the petty bourgeoisie, which had helped the bureaucracy to crush the resistance of the labouring masses and of their spokesmen the Left Opposition, and the Thermidorean bureaucracy itself, which had helped the petty bourgeoisie to lord it over the agrarian masses. It was a direct struggle for power and income.

"Obviously the bureaucracy did not rout the proletarian vanguard, pull from the complications of the international revolution, and legitimise the philosophy of inequality in order to capitulate before the bourgeoisie, become the latter’s servant, and be eventually itself pulled away from the state feed-bag." (Stalin by Leon Trotsky, Harper, London 1941, page 397, our emphasis)

Cliff makes Trotsky look foolish by appearing to contradict himself by juxtaposing the two quotations and adducing therefrom that Trotsky was changing his position on the class character of the bureaucracy. A few pages further on, Trotsky explains his idea. He shows the organic tendency of the decay of capitalism everywhere. It is only on this basis that the nationalised productive forces have been maintained in Russia. The whole tendency of the economy in the last 50 years on a world scale has been towards the statification of the productive forces. The capitalists themselves have in part been compelled to ‘the recognition of the productive forces as social forces’ (Engels). In fact, this is the key to the explanation of why Russia survived the war. The disorientation of the movement which is expressed in Cliff’s document, is largely due to the failure to appreciate the implications of this tendency. In his book on Stalin, Trotsky raises the theoretical possibility of the bureaucracy continuing to rule for some decades.

A few pages after the quotations given by Cliff, Trotsky says:

"The counter-revolution sets in when the spool of progressive social conquests begins to unwind. There seems no end to this unwinding. Yet some portion of the conquests of the revolution is always preserved. Thus, in spite of monstrous bureaucratic distortions, the class basis of the USSR remains proletarian. But let us bear in mind that the unwinding process has not yet been completed, and the future of Europe and the world during the next few decades has not yet been decided. The Russian Thermidor would undoubtedly have opened a new era of bourgeois rule, if that rule had not proved obsolete throughout the world. At any rate the struggle against equality and the establishment of very deep social differentiation has so far been unable to eliminate the socialist consciousness of the masses or the nationalisation of the means of production and the land, which were the basic socialist conquests of the revolution..." (Stalin, page 405)

We believe this sufficiently demonstrates that Cliff has taken a quotation from Trotsky’s Stalin out of context and read something into it which is not there. In his last work, as in all others on the Russian question, Trotsky had a consistent theme in his characterisation of the Soviet Union. It is not possible to draw the conclusion from any of his writings that he was altering his fundamental position.

Can there be a Struggle between Two Sections of the Same Class? French Revolution - Russian Revolution

To understand the Russian Revolution we can take the analogy of the French Revolution which is striking in its similarity and course although obviously on a different economic basis. As is known, the rule of the bourgeoisie was ushered in in France in the revolution of 1789. Marx explains the progressive rule of the revolutionary Jacobins: this revolutionary dictatorship of the sans culottes went further than the bourgeois regime. Because of that they made a clean sweep of all feudal rubbish, and did in months what the bourgeoisie would have required decades to achieve. This was followed by the Thermidorian reaction and the Bonapartist counter-revolution.

Anyone who compared the Bonapartist counter-revolution with the revolution - at least in its superstructure - would have found as great a difference as between the regime of Lenin and Trotsky in Russia and that of Stalin in latter years. To superficial observers the difference between the two regimes was fundamental. In fact, insofar as the superstructure was concerned, the difference was glaring. Napoleon had reintroduced many of the orders, decorations and ranks similar to those of feudalism; he had restored the Church; he even had himself crowned Emperor. Yet despite this counter-revolution, it is clear that it had nothing in common with the old regime. It was counter-revolution on the basis of the new form of property introduced by the revolution itself. Bourgeois forms of property or property relations remained the basis of the economy.

When we study the further history of France, we see the variety of forms of government and of the superstructure which developed in the course of the class struggle. The restoration of the monarchy after the defeat of Napoleon, the revolutions of 1830 and of 1848 - what was the class struggle there? There was a different division of the income, but after all these revolutions the economy remained bourgeois.

The subsequent history of France saw the dictatorship of Louis Bonaparte, the restoration of bourgeois democracy and the Republic and, in recent days, the regime of Petain. Under all these regimes there were differences in the division of the national income between the classes and between different strata of the ruling class itself. Yet we call all these regimes bourgeois. Why? It can only be because of the form of property.

Given the backwardness of the Soviet Union, which is very well explained by Cliff, and the isolation of the revolution, why should not a similar process take place? In fact it did. Let us return to Trotsky’s book Stalin. The Old Man was clear. After the quotation where Trotsky shows that the substance of the Thermidor could not but be social in character and was the struggle for the surplus product, he went on to explain what was meant. Let us continue where Cliff stopped:

"Here the analogy with French Thermidor ceases. The new social basis of the Soviet Union became paramount. To guard the nationalisation of the means of production and of the land, is the bureaucracy’s law of life and death, for these are the social sources of its dominant position. That was the reason for its struggle against the kulak. The bureaucracy could wage this struggle, and wage it to the end, only with the support of the proletariat. The best proof of the fact that it had mustered this support was the avalanche of capitulations by representatives of the new Opposition.

"The fight against the kulak, the fight against the right wing, the fight against opportunism - the official slogans of that period - seemed to the workers and to many representatives of the Left Opposition like a renaissance of the dictatorship of the proletariat and the socialist revolution. We warned them at the time: it is not only a question of what is being done, but also of who does it. Under conditions of Soviet democracy, ie, self-rule of the toilers, the struggle against the kulaks might not have assumed such a convulsive, panicky and bestial form and might have led to a general rise of the economic and cultural level of the masses on the basis of industrialisation. But the bureaucracy’s fight against the kulak was single combat (fought) on the backs of the toilers; and since neither of the embattled gladiators trusted the masses, since both feared the masses, the struggle assumed an extremely convulsive and sanguinary character. Thanks to the support of the proletariat, it ended with victory for the bureaucracy. But it did not lead to a gain in the specific weight of the proletariat in the country’s political life." (Stalin page 408, our emphasis)

When Trotsky speaks here of ‘the creation of a new substratum for the economically dominant class’ what is clearly meant is the proletariat, which dominates through the form of property. Cliff says: ‘One of the pretenders to the role of the economically dominant class, he says, is the bureaucracy. Great emphasis is lent to this formulation...’ Here we see the dangers in the method of working on the basis of preconceived ideas and the attempt to select quotations to fit into these ideas.

In this same chapter, Trotsky shows the similarity and the differences with the French revolution and why the reaction took a different form in France to that which it took in Russia:

"The privileges of the bureaucacy have a different source of origin. The bureaucracy took for itself that part of the national income which it could secure either by the exercise of force or of its authority or by direct intervention in economic relations. In the matter of the national surplus product the bureaucracy and the petty bourgeoisie quickly changed from alliance to enmity. The control of the surplus product opened the bureaucracy’s road to power." (Stalin, page 40)

The theme of Trotsky is sufficiently clear. The struggle for the surplus product can be waged not only between different classes, but between different strata and different groupings representing the same class.

Does the law of Value Operate within the Russian Economy?

The whole of the section of Cliff’s document on the law of value is unsound from a Marxist point of view. In the most involved and peculiar manner he argues that the law of value does not apply within the Russian economy, but only in its relations to world capitalism. He finds the basis of the law of value, not in Russian society, but in the world capitalist environment.

"Let us now find out what importance the internal relations in Russia has when abstracted from the influence of world economy.

"The abstraction has solved one fundamental question: that the source of the activity of the law of value is not to be found in the internal relations of Russian economy itself. In other words it has brought us so far nearer solving the problem of whether the Russian economy is subordinated to the law of value by showing us where not to look for its source." (Cliff, page 98. Emphasis in original)

According to the Marxist view, it is in exchange that the law of value manifests itself. And this holds true for all forms of society. For example, the way in which the break-up of primitive communism took place was through the exchange and barter between different primitive communities. This led to the development of private property. In slave society, in the same way, the products of the slave became commodities when they were exchanged. Through this development, the ‘commodity of commodities’ appeared: money. It was thus that the product enslaved the producer and in the end the contradiction caused by the money economy resulted in the destruction of the old slave society. Under feudalism, the exchange of the surplus produced by the self-sufficient lords and barons in their ‘natural economy’ became commodities, and in fact, was the starting point of capitalist development through the rise of merchant capital.

Therefore, if it was in exchange only between Russia and the outside world that the law of value manifested itself, all that this would mean is that the Russian surplus was exchanged on the basis of the law of value. What consequences that would have for the internal economy is a different question which would have to be worked out.

However, because of the small degree of participation of the Soviet Union on the world market, in comparison with the total production of Russia, Cliff unavoidably realises the weakness of this point. Thus, amazingly, Cliff finds the law of value manifesting itself not in exchange, but in competition. Even this would not be so bad if he argued that this was competition on the world market on classical capitalist lines for markets. But he cannot argue this because it is at variance with the facts. So he introduces a new conception. He finds his ‘competition’ and his ‘law of value’ in the production of armaments!

The pressure of world capitalism forces Russia to devote an enormous proportion of the national income on armaments production and defence on the one hand, and the greatest capital construction in history in proportion to the national income for the needs of defence, on the other. Here Cliff finds his law of value. The law of value manifests itself in the armaments competition between two social systems! This can only be described as a concession to Shachtman’s theory of bureaucratic collectivism. If this theory is correct, the theory of an entirely new economy, never before seen in history or foreseen by the Marxists, would apply.

Here again we would point out the dangers of indiscriminate use of quotations and amalgamations of ideas to form a ‘thesis’. In reality this document is not a state capitalist document; it is a hybrid in the union of bureaucratic collectivism and state capitalism. If this section of Cliff’s document means anything at all, it leads straight to the road of Schachtman’s bureaucratic collectivism.

This idea is partially borrowed from Hilferding(3) who consistently argued that in Russia and in nazi Germany the law of value did not apply and that these were entirely new social formations. It is also based on a misunderstanding of some passages in Bukharin’s Imperialism and the World Economy, where he argued on the basis of ‘state capitalism’ - the organic union of trusts with finance capital - and in which he, together with Lenin, brilliantly prophesied a form of dictatorship which was later realised in Italian fascism and nazism. Not state ownership of the means of production, but the fusion of finance capital with the state. In fact Bukharin chose as one of his classic examples of such a state...America.

The argument on armaments partakes of a mystical and not an economic category. At best, even if we accepted it as correct, it would only explain why Russian produces armaments, but not how or on what economic basis the armaments are produced. Even if Russia were a healthy workers’ state, in imperialist encirclement, there would be the absolute necessity to produce armaments and compete with the arms technique and production of the rival capitalist systems. But this argument about armaments is entirely false. The greater part of production in Russia is not armaments but means of production. Again, this would explain why the bureaucracy is attempting to accumulate the means of production at a frantic speed, but it explains nothing of the economic system of production itself. It is probably true that in a healthy workers’ state accumulation of arms would be smaller for social reasons (internationalist and revolutionary policy towards workers in other lands), but it would nevertheless take place under the pressure of world imperialism.

A quicker or slower tempo in the development of the means of production does not necessarily tell us the method by which these are produced. Cliff says that the bureaucracy is developing the means of production under the pressure of world imperialism. Good. But all this tells us again is why the pace is fast. From the point of view of even classical bourgeois political economy, Cliff’s argument is a pure evasion. It merely poses what has to be proved.

Not for nothing did Trotsky point out in Revolution Betrayed that the whole progressive content of the activity of the Stalinist bureaucracy and its preoccupation, was the raising of the productivity of labour and the defence of the country.

We have seen that if the law of value only applies because of the existence of capitalism in world economy, then it would only apply to those products exchanged on the world market. But Cliff argues two contradictory theses in relation to the Russian economy. On the one hand he says:

"This does not mean that the price system in Russia is arbitrary, dependent on the whim of the bureaucracy. The basis of price here too is the costs of production. If price is to be used as a transmission belt through which the bureaucracy directs production as a whole, it must fit its purpose, and as nearly as possible reflect the real costs, that is, the socially necessary Labour absorbed in the different products..." (Cliff, page 94, our emphasis)

Two pages later, Cliff describes as the central point he intends to prove:

"...that in the economic relations within Russia itself one cannot find the autonomy of economic activity, the source of the law of value, acting." (Cliff, page 96, emphasis in original)

In the first quotation, Cliff shows precisely the way in which the law of value manifests itset internally in Russian society. Even if one abstracts from the world market, leaving aside the interacting effect which it undoubtedly has - when Cliff says that ‘the real costs, that is the socially necessary labour absorbed in the different products’ must reflect the real prices, he is saying that the same law applies in Russian society as in capitalist society. The difference is that whereas in capitalist society it manifests itself blindly by the laws of the markets, in Russia conscious activity plays an important role. In this connection the second quotation crushingly refutes Cliff’s argument that it is capitalism which exists in Russia under these given conditions because the law of value does not operate blindly, but is consciously harnessed. In capitalist society, the law of value, as he says, manifests itself through the ‘autonomy of economic activity’, ie, it is the market which dominates. The first quotation shows clearly that the market - and this is the point - is within given limits controlled consciously and therefore it is not capitalism as understood by Marxists.

Previously Cliff said that the law of value did not operate in Russia. Here he is showing precisely how it does operate: not on the lines of classical capitalism, but of a transitional society between capitalism and socialism.

We see therefore, that Cliff claims that Russia is a capitalist society - yet he finds the source of the basic law of capitalist production outside of Russia. Now, in any capitalist society in which the reserve fund is in the hands of the capitalist class, as Engels explained:

"... if this production and reserve fund does in fact exist in the hands of the capitalist class, if it has in fact arisen through the accumulation of profit...then it necessarily consists of the accumulated surplus of the product of labour handed over to the capitalist class by the working class, over and above the sum of wages paid to the working class by the capitalist class. In this case, however, it is not wages that determine value, but the quantity of labour; in this case the working class hands over to the capitalist class in the product of labour a greater quantity of value than it receives from it in the shape of wages; and then the profit on capital like all other forms of appropriation without payment of the labour product of others, is explained as a simple component part of the surplus value discovered by Marx." (Anti-Dühring, Progress Publishers, Moscow 1969, page 233) [source]

This indicates that where there is wage labour, where there is the accumulation of capital, the law of value must apply, no matter in how complicated a form it may manifest itself. Further on Engels explains in answer to Dühring’s(4) five kinds of value, and the ‘natural costs of production’, that in Capital Marx is dealing with the value of commodities and ‘in the whole section of Capital which deals with value there is not even the slightest indication of whether or to what extent Marx considers the theory of value of commodities applicable to other forms of society’. In this sense it is clear that in the transitional society also: ‘Value itself is nothing more than the expression of the socially necessary labour materialised in an object.’ Here it is only necessary to ask: what determines the value of machines, consumer goods, etc, produced in Russia? Is it arbitrary? What determines the calculations of the bureaucracy? What is it that they measure in price? What determines wages? Are wages payments for labour power? What determines ‘money’? What determines profits of enterprises? Is there capital? Is the division of labour abolished?

Cliff gives two contradictory answers to these questions. On the one hand he agrees that it is the law of value on which all calculations and the movement of Russian society develops. On the other, he finds the law of value only operating as the result of pressure from the outside world although how he does not explain in any serious way.

The Role of Money in Russia

The surprising thing is that Cliff himself points out that the bureaucracy does not and cannot determine prices arbitrarily. That it does not and cannot determine the amount of money in circulation arbitrarily either. And this has been so in every society where money (let us remember, the commodity of commodities) has played a role. Engels, dealing with this problem, pertinently asked Dühring:

"If the sword (no matter who wields it - bureaucrat, capitalist, or government - EG) has the magic economic power ascribed to it by Herr Dühring, why is it that no government has been able to succeed in permanently compelling bad money to have the ‘distribution value’ of good money, or assignats to have the ‘distribution value’ of gold? (Anti-Dühring, page 228) [source]

In Revolution Betrayed, Trotsky explains this problem very clearly. He shows that the economic categories peculiar to capitalism still remain in the transitional society between capitalism and communism, the dictatorship of the proletariat. Here is the key: the laws remain, but are modified. Some of the laws of capitalism apply and some are abrogated. For example, Trotsky argues:

"The role of money in Soviet economy is not only unfinished but, as we have said, still has a long growth ahead. The transitional epoch between capitalism and socialism taken as a whole does not mean a cutting down of trade but, on the contrary, its extraordinary extension. All branches of industry transform themselves and grow. New ones continually arise, and all are compelled to define their relations to one another both quantitatively and qualitatively. The liquidation of the consummatory peasant economy, and at the same time of the shut-in family life, means a transfer to the sphere of social interchange, and ipso facto money circulation, of all the labour energy which was formerly expended within the limits of the peasant’s yard, or within the walls of his private dwelling. All products and services begin for the first time in history to be exchanged for one another." (Revolution Betrayed, NY, 1972, page 67, our emphasis) [source]

What is the key to this enigma? It can only be found in the fact that we have here a transitional society. The state can now regulate, but not arbitrarily, only within the confines of the law of value. Any attempt to violate and pass beyond the strict limits set by the development of the productive forces themselves, immediately results in the re-assertion of the domination of production over producer. This is what Stalin had to discover in relation to price and money when the Russian economy was inflicted with a crisis of inflation which completely distorted and disrupted the plan. The law of value is not abolished, but is modified. This is what Trotsky meant when he said:

"The nationalisation of the means of production and credit, the co-operativising or state-ising of internal trade, the monopoly of foreign trade, the collectivisation of agriculture, the law of inheritance - set strict limits upon the personal accumulation of money and hinder its conversion into private capital (usurious, commercial and industrial). These functions of money, however, bound up as they are with exploitation, are not liquidated at the beginning of a proletarian revolution, but in a modified form are transferred to the state, the universal merchant, creditor and industrialist. At the same time the more elementary functions of money as measure of value, means of exchange and medium of payment, are not only preserved, but acquire a broader field of action than they had under capitalism." (Revolution Betrayed, page 66, emphasis in original)[source]

One has only to pose the problem in this way to see that an economic analysis must lead one to conclude that we have here a transitional society in which some of the laws peculiar to socialism apply and some peculiar to capitalism. That is after all, the meaning of transition.

Although Cliff does not recognise this, in fact he admits it, because when he says that the bureaucracy can consciously regulate (though within limits) the rate of investment, the proportions between means of production and means of consumption, the price of articles of consumption, etc, he is proving that certain of the basic laws of capitalism do not apply.

Is there a transformation of money into capital in Russia? In polemicising against Stalin, Trotsky answers this by showing that the investments are made on the basis of a plan, but nevertheless, what is invested is the surplus value produced by the workers. Here Trotsky shows the basic fallacy in Stalin’s idea that the state could decide and regulate without reference to the economy. We might add that Stalin never denied that there was commodity production in Russia.

In spite of the fact that there is only one ‘employer’ in Russia, nevertheless, the state buys labour power. It is true that because of the full employment which would normally place the seller of the commodity labour power in a strong position, the state has imposed various restrictions on the free sale of labour power, just as in a period of full employment under fascism. Or even in Labour Britain, where the same situation exists, by means of regulations and devices the employers have the state intervene to offset the advantages which accrue from this situation for the sale of labour power. But only one who argued in abstractions, could argue that this negated labour power.

It is true that in the classical capitalist economy there was free sale of labour power. However, in Marx’s Capital itself there was a whole section devoted to showing the ferocious laws which were introduced against the nascent proletariat after the Black Death in England had so reduced the population that the proletarians were in a favourable position to demand higher wages. Did this mean that the basic Marxian laws did not apply? On the contrary, Marx was dealing with a ‘pure’ capitalism which never did exist, from which he extracted the fundamental laws. The distortion of this or that element will not alter the basic laws. That is why in nazi Germany, despite many perversions, it remained fundamentally a system of capitalist economy, because the economy was dominated by production on the basis of private property.

One has only to compare the slave labourer in Siberia with the proletariat in the Russian cities to see the difference. The one is a slave based on slave labour, the other is a wage slave. The one sells his labour power, the other is purely an instrument of labour himself. There is the fundamental distinction.

It is not at all accidental that the ‘money’ used by the state must necessarily have the same basis as money in capitalist society. Not accidentally, as Trotsky explained, the only real money in Russia (or in any transitional economy - even an ideal workers’ state) must be based on gold. The recent rouble devaluation in Russia was in itself a striking confirmation of the fact that the law of money circulation, and thus of the circulation of commodities, maintains its validity in Russia. In a transitional economy the economic categories of money, value, surplus value, etc, must necessarily continue as elements of the old society within the new society.

Cliff argues that ‘the most important source of state income is the turn-over tax, which is an indirect tax.’ He introduced interesting material showing the tremendous burden which the turn-over tax imposes upon the masses.

However, the turn-over tax to which he refers in connection with the exploitation of the masses, in an indirect way, proves that the law of value applies in Russian society. Cliff shows how the turn-over tax applies in Russia. But he does not see that this tax must be based on something. No matter how much the state might add to the price by placing an additional tax, the price must be based on something: what else can this be but the value of the product, the socially necessary labour time contained in it?

Engels ridiculed Dühring’s tax by the sword, out of which the surplus is developed, when he said:

"Or, on the other hand, the alleged tax surcharges represent a real sum of value, namely that produced by the labouring, value-producing class but appropriated by the monopolist class, and then this sum of value consists merely of unpaid labour; in this event, in spite of the man with the sword in his hand, in spite of the alleged tax surcharges, we come once again to the Marxian theory of surplus value." (Anti-Dühring, page 226) [source]

The turn-over tax in Russia and the other manipulations of the bureaucracy do not in any way invalidate the law of value. What is the essence of the law of value? That the value of the product is determined by the average amount of socially necessary labour time. That must be the point of departure. It necessarily manifests itself through exchange. Marx devoted a great part of his first volume of Capital to explaining the historical development of the commodity form from accidental exchange among savages through its transitions, till we arrive at commodity production par excellence, capitalist production.

Even in a classical capitalist economy the law of value does not reveal itself directly. As is known, commodities are sold above or below their value. Only accidentally would a commodity be sold at its actual value. In the third volume of Capital Marx explains the price of production of commodities. That is to say, that the capitalist only gets the cost of production of his commodity plus the average rate of profit. Thus some capitalists will be paid below the actual rate, others above. Because of the different organic composition of different capitals, only in this complicated fashion does the law of value reveal itself. This is effected, of course, through competition. Monopoly is merely a more complicated development of the law of value in society. Because of the controlling position held by some monopolies, they can extort a price above the value of the commodities, but only by other commodities being sold below their value. The total values produced by society would still amount to the same.

Was there Surplus Value before 1928? Cliff’s Arbitrary Division

In this connection, Cliff is not at all consistent. Shachtman, in his endeavour to deny that Russia is a transitional society in which capitalist laws continue to operate, as well as the laws of the future society, at least argues consistently. He says that the law of value does not operate, therefore all the laws flowing from it do not operate. It is not surplus value which is produced, but surplus product; it is not labour power that the workers sell, since they are slaves, etc, etc. Cliff, however, admits that commodity production continues, labour power and surplus value remain. But once these Marxian categories are accepted as valid for Russian society, then clearly the law of value must operate internally, or the whole position becomes nonsensical.

The whole contradiction, a contradiction within the society itself and not imposed abitrarily - is in the very concept of the dictatorship of the proletariat. If one considers the problem in the abstract, one can see that this is a contradictory phenomenon: the abolition of capitalism yet the continuation of classes. The proletariat does not disappear. It raises itself to the position of ruling class and abolishes the capitalist class. But in the intervening period it remains the working class. Therefore, surplus product in the form of surplus value is produced. It is the case today as it was under Lenin and Trotsky. We have only to pose the problem: what was the surplus value produced when Russia was still a workers’ state - though even then with bureaucratic deformations? What was the process by means of which surplus product before 1928 mysteriously became surplus value after 1928? What was this curious unexplained process? We would like to ask the question here: Did the existence of capitalism outside Russia before 1928 have a similar effect on Russia’s economy? Of course it did. In fact a far greater effect because of the weakness of the Russian economy. Why was there not capitalism in Russia then?

Or further: leave aside the period from 1917 to 1923 - what was the situation from 1923 to 1928 when the Stalinist bureaucracy was consolidating itself? There were far more actual individual capitalist elements in the economy of the country then than there are today. The pressure of world capitalism from an economic point of view was indisputably far greater. Merely to pose the problem is to show the arbitrary method.

The abuse of power and the legal and illegal consumption of surplus value by the bureaucracy, necessarily took place even in the early stages of bureaucratic control. Comrade Cliff has to construct a lifeless scheme which bears no relation to reality in order to create a distinction between the two periods: the period when the bureaucracy represented a degenerated workers’ state, and the period when the bureaucracy became a capitalist class. What, according to Cliff, is the difference? Incredible as it may seem, the bureaucracy really earned its income and only from 1928 onwards did they consume surplus value. Cliff writes:

"The statistics we have at our disposal conclusively show that although the bureaucracy had a privileged position in the period preceding the Five-Year Plan, it can on no account be said that it received surplus value from the labour of others. It can just as conclusively be said that with the introduction of the Five-Year Plans, the bureaucracy’s income consisted to a large extent of surplus value." (page 45)

This is at variance with the analysis made not only by Trotsky but by the other Marxists of the time in relation to this problem. First of all, even in the most ideal workers’ state, in the transitional period there will unavoidably be a certain consumption of the surplus value by the specialists and bureaucrats. Otherwise, we would have the immediate introduction of communism, without any inequalities or the continuance of the division between mental and manual labour. It is only necessary to refer here to the Left Opposition on this very problem. As early as 1927, the Left Opposition commented on the enormous part of the surplus value being consumed by the bureaucratic apparatus. They protested that the ‘swollen and privileged administrative apparatus is devouring a very considerable part of the surplus value’. [source] (See Revolution Betrayed, page 141)

It is clear that from 1920 onwards, the bureaucracy consumed a great part of the surplus value, legitimately and illegitimately. As Marx explained in any case, in a workers’ state in the transitional period, the surplus value will be used for the speedy building up of industry and so prepare the way for the quickest possible transition to equality and then complete communism.

What else was Lenin speaking of in 1920 and 1921 when he stressed the step backward the Bolsheviks had been forced to make, when they paid the specialists according to bourgeois standards and in the old ‘bourgeois way’?

The Economics of the Transition from Capitalism to Socialism

The most significant thing about all tendencies who seek to revise Trotsky’s position on the Russian question is that they always deal with the problem in the abstract and never concretely explain the laws of the transitional society between capitalism and socialism and how such a society would operate. This is not accidental. A concrete consideration would impel them to the conclusion that the fundamental economy in Russia is the same as it was under Lenin and that it could not be otherwise.

The germ of the capitalist mode of production, which began under feudalism through the development of commodity production, lies in the function of the independent craftsmen and merchants. When it reaches a certain stage we have capitalist relations with a feudal superstructure. These are burst asunder by the revolution and the possibilities latent in capitalist production then have the free possibility of fruition unhampered by feudal restrictions.

The whole essence of the revolution (capitalist and proletarian) consists of the fact that the old relationships and the old forms do not correspond with the new ripened method or mode of production. In order to free itself from these restrictions, the productive forces have to be organised on a different basis and the whole of human history and movement of history consists in the development of this antagonism at its various stages in different societies.

However, the bourgeois revolution does not immediately destroy feudalism at one blow. Powerful feudal elements still remain, and to this day the remnants of feudalism exist even in the most highly developed capitalist countries.

One can speak of the feudal mode of production in the sense of the superstructure, despite the capitalist basis which has developed beneath. Or one can even speak of the feudal mode of production at its inception where the germs of capitalism and the possibility of the development of capitalism could be faintly discerned.

The fundamental error of this ‘state capitalist’ theory and its abstractions relating to the transitional period, lies in the failure to distinguish between the mode of production and the mode of appropriation. In every class society there is exploitation and a surplus which is utilised by the exploiting class. But in itself this tells us nothing about the mode of production.

For example, the mode of production under capitalism is social in contradiction to the individual form of appropriation. As Engels explained:

"The separation between the means of production concentrated in the hands of the capitalists on the one side, and the producers now possessing nothing but their labour power, on the other, was made complete. The contradiction between social production and capitalist [read individual or private, as Engels had already explained - EG] appropriation became manifest as the antagonism between proletariat and bourgeoisie." (Anti-Dühring, page 321) [source]

The transitional economy which, as Lenin pointed out, can and will vary enormously in different countries at different times, and even in the same country at different times, also has a social mode of production, but with state appropriation, and not individual appropriation as under capitalism. This is a form which combines both socialist and capitalist features.

Under capitalism, the system of commodity production par excellence, the product completely dominates the producer. This flows from the form of appropriation, and the contradiction between the form of appropriation and the mode of production; both factors flow from the private ownership of the means of production. Once state ownership takes its place, whatever the resulting system may be, it cannot be capitalism because this basic contradiction will have been abolished. The anarchic character of social production with private appropriation disappears.

Under socialism also, there will be a social mode of production but there will also be a social mode of distribution. For the first time production and distribution will be in harmony.

Therefore, merely to point out the capitalist features in Russia today (wage labour, commodity production, that the bureaucracy consumes an enormous part of the surplus value) is not sufficient to tell us the nature of the social system. Here too, an all-sided view is necessary. One can only understand social relationships in the Soviet Union by taking the totality of the relationships. From the very beginning of the revolution various sectarian schools have produced the most untenable ideas as a result of their failure to make such an analysis. Lenin summed up the problem thus:

"But what does the word ‘transition’ mean? Does it mean, as applied to economics, that the present order contains elements, particles, pieces of both capitalism and socialism? Everyone will admit that it does. But not all who admit this take the trouble to consider the precise nature of the elements that constitute the various social-economic forms which exist in Russia at the present time. And this is the crux of the question." (Left wing childishness and the petty-bourgeois mentality, Collected Works, Volume 27, page 335) [source]

To abstract one side must lead to error. What is puzzling about the Russian phenomenon is precisely the contradictory character of the economy. This has been further aggravated by the backwardness and isolation of the Soviet Union. This culminates in the totalitarian Stalinist regime and results in the worst features of capitalism coming to the fore - the relations between managers and men, piece-work, etc. Instead of analysing these contradictions Comrade Cliff endeavours as far as possible to try and fit them into the pattern of the ‘normal’ laws of capitalist production.

In addition, the tendency under capitalism for the productive forces not only to become centralised but even for measures of statification to be introduced can result in a wrong conclusion. To prove that ‘state capitalism’ in Russia is in the last analysis the same as individual capitalism with the same laws, Cliff cites the following passage from Anti-Dühring:

"The more productive forces it [the state - TC] takes over, the more it becomes the real collective body of all the capitalists, the more citizens it exploits. The workers remain wage-earners, proletarians. The capitalist relationship is not abolished; it is rather pushed to an extreme. But at this extreme it changes into its opposite. State ownership of the productive forces is not the solution of the conflict, but it contains within itself the formal means, the key to the solution." (Anti-Dühring, page 330) [source]

In point of fact, Engels is arguing precisely the opposite. Let us re-examine the passages and see how we draw different conclusions:

"If the crisis revealed the incapacity of the bourgeoisie any longer to control the modern productive forces, the conversion of the great organisations for production and communication into joint-stock companies and state property shows that for this purpose the bourgeoisie can he dispensed with. All the social functions of the capitalists are now carried out by salaried employees. The capitalist has no longer any social activity save the pocketing of revenues, the clippng of coupons and gambling on the stock exchange, where the different capitalists fleece each other of their capital. Just as at first the capitalist mode of production displaced the workers, so now it displaces the capitalists, relegating them, just as it did the workers, to the superfluous population, even if in the first instance not to the industrial reserve army.

"But neither the conversion into joint-stock companies nor into state property deprives the productive forces of their character as capital. In the case of joint-stock companies this is obvious. And the modern state, too, is only the organisation with which bourgeois society provides itself in order to maintain the general external conditions of the capitalist mode of production against encroachments either by the workers or by individual capitalists. The modern state, whatever its form, is an essentially capitalist machine; it is the state of the capitalists, the ideal collective body of all capitalists. The more productive forces it takes over as its property, the more it becomes the real collective body of all the capitalists, the more citizens it exploits. The workers remain wage earners, proletarians. The capitalist relationship is not abolished; it is rather pushed to an extreme. But at this extreme it is transformed into its opposite. State ownership of the productive forces is not the solution of the conflict, but it contains within itself the formal means, the key to the solution." (Anti-Dühring, page 330, our emphasis) [source]

Surely the idea in the foregoing is clear. Insofar as the forces of production have now developed beyond the framework of capitalist relations (that is, the germ of the contradiction has now grown into a malignant disease of the social system, reflecting itself through the crises) the capitalists are compelled to ‘socialise’ huge means of production - first, through joint-stock companies and then later, even to ‘statify’ sections of the productive forces. This particular idea was brought out sharply by Lenin in Imperialism, where he showed that the development of monopolies and socialisation of labour were in fact elements of the new social system within the old.

Once the productive forces had reached this stage, capitalism had already accomplished its historic mission, and because of this the bourgeoisie becomes more and more superfluous. From being a necessity for the development of the forces of production, they now become ‘superfluous’, ‘parasites’, ‘coupon-clippers’. In this they are transformed into parasites in the same way and for the same reason as the feudal lords also became ‘parasites’ once their mission had been fulfilled.

This is merely an indication of the ripeness of capitalism for the social revolution. Writing in Capital Marx had shown that credit and joint-stock companies were already an indication that the productive forces had outgrown private ownership. Engels had shown that the social productive forces even compel the capitalists to recognise their character as social and not as individual productive forces.

Wherever the capitalist state is constrained to take over this or that sector of the economy, it is true the productive forces do not lose their character as capital. But the whole essence of the problem is that where we have complete statification, quantity changes into quality, capitalism changes into its opposite.

How otherwise explain the statement of Engels: ‘But at this extreme it [the capitalist relationship] is transformed into its opposite. State ownership of the productive forces is not the solution of the conflict, but it contains within itself the formal means, the key to the solution’?

If one takes into account the fact that this follows the previously quoted passage in the same section where Engels defines capitalist mode of production (as social production, individual appropriation), we must conclude that Engels hopelessly contradicts himself, if we accept Cliff’s conclusions. But from the context, Engels’ meaning is clear. He explains that the solution to the contradictions of capitalism lies in the recognition of the social nature of the modern productive forces: ‘In bringing, therefore, the mode of production, appropriation and exchange into accord with the social character of the means of production. ‘But he shows that this ‘recognition’ precisely consists in asserting conscious organisation and planning, in place of the blind play of forces of the market on the basis of individual ownership. This, however, cannot be done at one stroke. Only ‘gradually’ can social control be fully asserted. The transitional form to this is state ownership. But complete state ownership does not abolish all the features of capitalism immediately, otherwise there would be social ownership, ie socialism would be introduced immediately.

But in the same way as we have the new within the old system in the development of society, so in the transitional society we still have the old within the new. Complete statification marks the extreme limit of capital. The capitalist relation is transformed into its opposite. The elements of the new society which were growing up within the old, now become dominant.

What causes the conflict within capitalism is the fact that the laws manifest themselves blindly. But once the whole of industry is nationalised, for the first time control and planning can be consciously asserted by the producers. Control and planning will, however, in the first stages, take place within given limits. These limits will be determined by the level of technique when the new social order takes over.

Society cannot step from the realm of necessity into the realm of freedom overnight. Only on the basis of a limitless development of the productive forces will freedom, in its fullest sense, become a reality. The stage will be reached which will witness the ‘administration of things’.

Before such a stage is reached, society must pass through the transitional period. But in so far as immediately after private ownership has been abolished, control and planning become a possibility for the first time, then for the first time also the realm of necessity is left behind. But while it is now possible to speak of ‘freedom’, this is only so in the sense that necessity has become consciously recognised. At this stage (the transitional period), Engels pointed out:

"The social character of the means of production and of the products...is quite consciously asserted by the producers, and is transformed from a cause of disorder and periodic collapse into the most powerful level of production itself.

"The forces operating in society work exactly like the forces operating in nature; blindly, violently, destructively, so long as we do not understand them and fail to take them into account. But when once we have recognised them and understand how they work, their direction and their effects, the gradual subjection of them to our will and the use of them for the attainment of our aims depends entirely upon ourselves. And this is quite especially true of the mighty productive forces of the present day." (Anti-Dühring, page 331, our emphasis) [source (translation differs)]

Engels, quoting Hegel, further summed up the relationships between freedom, necessity and the transitional period, thus:

"Freedom is the realisation of necessity. ‘Necessity is blind only insofar as it is not understood." (Anti-Dühring, page 136) [source (translation differs)]

Marx and Engels only touched on the contradictory character of the transitional period. They left its elaboration to succeeding generations, laying down only the general laws. But clearly they showed the need for state ownership as the necessary transitional state for the development of the productive forces. Engels explained the need for the state during this stage for two reasons:

To take measures against the old ruling class. Because the transitional society cannot immediately guarantee enough for all.

The logic of Cliff’s thesis is that in the transitional society there are no vestiges of capitalism in the internal economy. While Comrade Cliff may argue vehemently that he agrees with the need for the state in the transitional period, it is evident that he has not thought out the economic reasons which make the state necessary and what character the economy assumes in this period. Before socialism can be introduced there must necessarily be a tremendous development of the forces of production, far beyond those reached under capitalism.

As Trotsky explained, even in America there is still not enough production to guarantee the immediate introduction of socialism. Therefore, there will still have to be an intervening period in which capitalist laws will operate in modified form. Of course, in America, this would be of short duration. But it will not be possible to skip this stage entirely. What are the capitalist laws which will remain? Comrade Cliff not only fails to answer this; he falls into the trap of bureaucratic collectivism by failing to recognise that money, labour power, the existence of the working class, surplus value, etc, are all survivals of the old capitalist system which were carried over even under the regime of Lenin. It is impossible to introduce immediately direct social production and distribution. Particularly was this the case in backward Russia.

Writing to Conrad Schmidt in 1890, Engels gave a magnificent example of the thoroughly materialist approach to the problem of the economics of the transition from capitalism to socialism. He wrote:

"There has been a discussion in the Volkstribune about the division of products in the future society, whether this will take place according to the amount of work done or otherwise. The question has been approached very ‘materialistically’, in opposition to certain idealistic forms of phraseology about justice. But strangely enough it has never struck anyone that, after all, the method of division essentially depends on how much there is to divide, and this must surely change with progress of production and social organisation, so that the method of division may also change. But to everyone who took part in the discussion ‘socialist society’ appeared not as involved in continuous change and progress but as a stable affair fixed once and for all which must, therefore, have its method of division fixed once and for all. All one can reasonably do, however, is (1) to try and discover the method of division to be used at the beginning, and (2) to try and find the general tendency in which the further development will proceed. But about this I do not find a single word in the whole debate." (Marx, Engels, Selected Correspondence, Progress, Moscow, 1975, page 393)[source]

Writing in Anti-Dühring, Engels pointed out:

"Direct social production and direct distribution exclude all exchange of commodities, therefore also the transformation of the product into commodities (at any rate within the community) and consequently also their transformation into values." (Anti-Dühring, page 366, our emphasis) [source]

But only socialism could realise this. In the transitional period, distribution still remains indirect - only gradually does society gain complete control over the product - and therefore the production of commodities and of exchange between the different sectors of production must necessarily take place. The law of value applies and must apply until there is direct access to the product by the producers. This can only take place on the basis of complete control of social production and thus direct social distribution, namely, each individual taking whatever he requires. Marx deals with this problem in passing in Volume III of Capital (Chapter 49), where he is discussing the problem of capitalist production as a whole:

"Accordingly a portion of the profit, of surplus value and of the surplus product, in which only newly added labour is represented, so far as its value is concerned, serves as an insurance fund...This is also the only portion of the surplus-value and surplus product and thus of surplus-labour, which would continue to exist, outside of that portion which serves for accumulation and for expansion of the process of reproduction, even after the abolition of the capitalist system...and the fact that all new capital arises out of profit, rent, or other forms of revenue, that is, out of surplus labour..." (Capital, Volume III, Progress, Moscow, 1971, page 847-8, our emphasis) [source]

In this chapter Marx is dealing, in an analysis of the process of production, in his own words, with ‘the value of the total annual product of labour (which) is under discussion, in other words, the value of the product of the total social capital.’

Repeating this in the same chapter, in answer to Storch, one of the bourgeois economists, he declared:

"In the first place, it is a false abstraction to regard a nation, whose mode of production is based upon value or otherwise capitalistically organised, as an aggregate body working merely for the satisfaction of the national wants.

"In the second place, after the abolition of the capitalist mode of production, but with social production still in vogue, the detemination of value continues to prevail in such a way that the regulation of the labour time and the distribution of the social labour among the various groups of production also the keeping of accounts in connection with this, becomes more essential than ever." (Capital, Volume III, page 851, our emphasis) [source]

This is in line with the scattered remarks of Marx and Engels at various times in dealing with the transitional period: where Engels explains that under capitalism joint-stock companies and state ownership are beyond the framework, properly speaking, of capitalist production; where Marx already pointed out that credit also extended production beyond its framework even before the transition to the dictatorship of the proletariat. After that, as shown in the above passages and also in the Critique of the Gotha Programme, Marx considered that bourgeois law, bourgeois distribution and in that sense a bourgeois state still remain.

Discussing the role of money and the state in the transitional period, Trotsky developed this idea even further:

"...These two problems, state and money, have a number of traits in common, for they both reduce themselves in the last analysis to the problem of problems: productivity of labour. State compulsion like money compulsion is an inheritance from the class society, which is incapable of defining the relations of man to man except in the form of fetishes, churchly or secular, after appointing to defend them the most alarming of all fetishes, the state, with a great knife between its teeth. In a communist society, the state and money will disappear. Their gradual dying away ought consequently to begin under socialism only at that historical moment when the state turns into a semi-state, and money begins to lose its magic power. This will mean that socialism, having freed itself from capitalist fetishes, is beginning to create a more lucid, free and worthy relation among men. Such characteristically anarchist demands as the ‘abolition’ of money, ‘abolition’ of wages, or ‘liquidation’ of the state and family possess interest merely as models of mechanical thinking. Money cannot be arbitrarily ‘abolished’, nor the state and the old family ‘liquidated’. They have to exhaust their historic mission, evaporate, and fall away. The death-blow to money fetishism will be struck only upon that stage when the steady growth of social wealth has made us bipeds forget our miserly attitude toward every excess minute of labour, and our humiliating fear about the size of our ration. Having lost its ability to bring happiness or trample men in the dust, money will turn into mere book-keeping receipts for the conveniences of statisticians and for planning purposes. In the still more distant future, probably these receipts will not be needed. But we can leave this question entirely to posterity, who will be more intelligent than we are.

"The nationalisation of the means of production and credit, the co-operativising or state-ising of internal trade, the monopoly of foreign trade, the collectivisation of agriculture, the law on inheritance - set strict limits upon the personal accumulation of money and hinder its conversion into private capital (usurious, commercial and industrial). These functions of money, however, bound up as they are with exploitation, are not liquidated at the beginning of a proletarian revolution, but in a modified form are transferred to the state, the universal merchant, creditor and industrialist. At the same time the more elementary functions of money, as measure of value, means of exchange and medium of payment, are not only preserved, but acquire a broader field of action than they had under capitalism." (Revolution Betrayed, page 65-6, emphasis in original)[source]

To sum up. Whereas before private ownership of the means of production is abolished, the market is dominant over man who is helpless before the laws of the economy he himself has created, after its abolition, he begins for the first time to consciously assert control. But consciousness here merely means the recognition of law, not the abolition of law. That is the peculiarity of the transitional period, that because man now understands the nature of the productive forces, to that extent he can exercise control over them. But he cannot transcend the limits of the given development of the productive forces. However, now that the productive forces have been released from the fetters of individual capitalist production, they can be developed at such a pace and with such expansion that very rapidly they can be transformed from state ownership as an intermediate form, into social ownership by society. Once this stage has been reached (socialism), there is real social production and distribution for the first time. Money withers away, the law of value withers away, the state withers away. In other words, all the forces of constraint which are a necessary reflection of the limits of technique and the development of production at any given stage, now disappear with the disappearance of the division of labour. Until such time, all the features referred to above, capitalist features carried over from the old capitalist society, will linger on in the transitional period.

The position of Comrade Cliff, as with Shachtman and all others who have revised Trotsky’s position on Russia, remains, on the transitional period, a blank. And for a very good reason. If one considers the theory of the transitional stage in the light of the Russian experience, there are only one of two conclusions: either Russia today is still in a transitional stage, which has taken on horrible distortions, or Russia was never a workers’ state from the very beginning. There are no other alternatives.

The Marxian Theory of the State. Two Classes One State - Cliff’s Contradiction

In the first chapter of his work, Comrade Cliff endeavours to prove that Trotsky’s analysis of the Russian state contradicts the theory of the state as developed by Marx and elaborated by Lenin.

The first chapter contains an elaborate scheme which sets out to prove that two classes cannot use one state machine. Here Cliff believes he has found a fundamental error in Trotsky. Taking the ideas developed by the Old Man at different times and in differing circumstances, he counterposes them to each other. He counterposes, for example, a quotation from Trotsky in the early stages of the degeneration of the bureaucracy and the expulsion of the Left Opposition, when he argued for the reform of the soviet state, and incidentally, also for the reform of the Bolshevik Party which controlled the state. (It was at this stage that Trotsky wrote the letter to the CC of the CPSU demanding that Stalin be removed.) Who can deny that had the international events developed differently it was theoretically possible that the Bolshevik Party could have spewed forth the bureaucracy and re-established a healthy workers’ state?

Cliff counterposes to this the quotation from Revolution Betrayed, in which Trotsky says that if the Russian workers come to power they will purge the state apparatus; and if the bourgeoisie come to power ‘a purgation of the state apparatus would, of course, be necessary in this case too. But a bourgeois restoration would probably have to clean fewer people than a revolutionary party’. Cliff’s answer to this is:

"Whether we assume that the proletariat must smash the existing state machine on coming to power while the bourgeoisie can use it, or whether we assume that neither the proletariat nor the bourgeoisie can use the existing state apparatus (the ‘purgation of the state apparatus’ necessarily involving such a deep change as would transform quantity into quality) - on both assumptions we must come to the conclusion that Russia is not a workers’ state. To assume that the proletariat and the bourgeoisie can use the same state machine as the instrument of their supremacy is tantamount to a vindication of the theoretical basis of social democracy and a repudiation of the revolutionary concept of the state expressed by Marx, Engels, Lenin and Trotsky. To assume that different layers, groups or parties of one and the same class cannot base themselves on the same state machine is equally a repudiation of the Marxist concept of the state." (Cliff, page 4)

This whole formalistic method is the fatal weakness of Cliff’s case. It would have been impossible for Trotsky in the early stages to deal with the problem in the abstract. He had to deal with the concrete situation and give a concrete answer. But the further degeneration posed the problem in an entirely different way. Once it had been established that it was impossible to reform the Stalinist party, that it was impossible to reform the Soviet state (we assume that Cliff also believes this was the task since up to 1928 since he says Russia was a degenerated workers’ state), then the question had to be viewed in a somewhat different light. It is foreign to the Marxist method to search for isolated contradictions, real or apparent. What is required is an examination of a theory in its broad general development, in its movement, and its contradictions.

But let us examine Cliff’s own thought processes on this subject. He too cannot avoid the very trap which he tries to lay for Trotsky. Chapter 1 (no less than eighteen pages) is devoted to proving the impossibility of two classes using the one state. But lo and behold, Chapter 4 accomplishes the miracle! The impossible gulf is bridged! Both the capitalist class and the proletariat of Russia have used precisely the same state machine. Why? Because more surplus value was produced! Realising this dilemma, Cliff is compelled to advance something truly new and unique in the movement: that the bureaucracy did not consume surplus value before 1928 but by the introduction of the Five Year Plan, the state was changed from a workers’ state into a capitalist state. (Any enemy of the Fourth International could immediately retort that the state of Stalin on this basis is purely an extension and deepening of the state of Lenin. For in the economic sense nothing fundamentally was changed. We have dealt with this in preceding chapters. Significantly it is only on the economic argument - and this is astonishing - that Cliff advances his theory. Despite the title of his first Chapter ‘An Examination of the Definition of Russia as a Degenerated Workers’ State’, he does not deal with the political question at all here or in any other chapter. Here is how Cliff sees the transformation from a workers’ state into a capitalist state:

"The statistics we have at our disposal conclusively show that although the bureaucracy had a privileged position in the period preceding the Five-Year Plan, it can on no account be said that it received surplus value from the labour of others. It can just as conclusively be said that with the introduction of the Five-Year Plans, the bureaucracy’s income consisted to a large extent of surplus value." (Cliff, page 45)

In other words, Cliff sees the transition from one system to the other not by smashing of the state machine. How does this fit into his scheme in Chapter 1?

Cliff’s attempt to manufacture an artificial bridge between the workers’ state and the capitalist state, because he has not been able to find the smashing of the workers’ state machine, has led him to seek economic differences between the two periods - pre-1928 and post-1928. In this he falls into the most formalistic and abstract conceptions of the workers’ state prior to 1928. As we have shown in the previous chapters, even in the healthiest of workers’ states, according to Marx, surplus value must necessarily be produced in order to develop industry to the point where the state, money, and the proletariat itself and all the other survivals of capitalism will have disappeared. So long as the working class exists as a class, surplus value will be produced.

A statement of the Left Opposition in 1927 pointed out that the bureaucracy was consuming an enormous part of the surplus value. Cliff’s method of introducing this subject is totally incorrect. Instead of setting himself the task of proving a thesis, he blandly makes assertions and takes them as proven. That Chapter 4 contradicts everything in Chapter 1 is another matter! Just examine the way in which Comrade Cliff sums up this Chapter 4, in which he openly claims that a transition has been achieved without a revolution and without smashing the state machine.

He begins:

"In this chapter we shall describe the transformation of the class character of the Russian state from a workers’ to a capitalist state. We shall do this by dealing with the following points..." (Cliff, page 33)

He thereupon proceeds to detail a number of economic changes which have nothing to do with the structure of or the transformation of state power, and ends up with the subsection: ‘Why the Five Year Plan Signifies the Transformation of the Bureaucracy into a Ruling Class.’ All the economic arguments in this chapter have nothing to do with the state or its overthrow.

Cliff deals at length with the differentiation in the army, the introduction of privileges for the officers, military discipline, etc. He here merely repeats what Trotsky said a thousand times on the transformation of the bureaucracy into an uncontrolled caste. But let us see his conclusions. He writes:

"Again the Five-Year Plan marks the turning point. Then the organisation and the structure of the army began to change fundamentally. From a workers’ army with bureaucratic deformations it became the armed body of the bureaucracy as the ruling class..." (page 59)

Let us see now whether what excludes a gradual social revolution excludes a gradual counter-revolution.

"If the soldiers in an hierarchically built army strive for decisive control over the army, they immediately meet with the opposition of the officer caste. There is no way of removing such a caste except by revolutionary violence. As against this, if the officers of a people’s militia become less and less dependent on the will of the soldiers, which they may do as they meet with no institutional bureaucracy, their transformation into an officers’ caste independent of the soldiers can be accomplished gradually. The transition from a standing army to a militia cannot but be accompanied by a tremendous outbreak of revolutionary violence: on the other hand, the transition from a militia to a standing army, to the extent that it is the result of the tendencies inside the militia itself, can and must be gradual. The opposition of the soldiers to the rising bureaucracy may lead the latter to use violence against the soldiers. But this does not exclude the possibility of a gradual transition from a militia to a standing army. What applies to the army applies equally to the state. A state without a bureaucracy, or with a weak bureaucracy dependent on the pressure of the masses may gradually be transformed into a state in which the bureaucracy is free of workers’ control." (Cliff, page 82, our emphasis)

Cliff now sets out to prove that there can be a gradual transition from a workers’ state to a capitalist state, and clinches his chapter by producing a quotation from none other than Trotsky...whom he has so sternly discredited as an authority on this subject in his Chapter 1.

Cliff writes:

"The Moscow Trials(5) were the civil war of the bureaucracy against the masses, a war in which only one side was armed and organised. They witnessed the consummation of the bureaucracy’s total liberation from popular control. Trotsky, who thought that the Moscow trials and the ‘Constitution’ were steps towards the restoration of individual capitalism by legal means, then withdrew the argument that a gradual change from a proletarian to a bourgeois state is ‘running backwards the film of reformism’. He wrote:

"’In reality, the new constitution...opens up for the bureaucracy "legal" roads for the economic counter-revolution, ie, the restoration of capitalism by means of a "Cold stroke".’ (Fourth International and the Soviet Union, Thesis adopted by the First International Conference for the Fourth International, Geneva, July 1936.)" (Cliff, page 82)

Here we see the full light on Cliff’s thesis and his bad method. Starting off with the thesis that Trotsky is no Marxist because he says two classes can use one state machine, Cliff ends up saying precisely the same thing and using as his authority the same Trotsky.

Nationalisation and the Workers’ State

On page 2 of his work, Cliff gives a quotation from Revolution Betrayed:

"The nationalisation of the land, the means of industrial production, transport and exchange, together with the monopoly of foreign trade, constitutes the basis of the Soviet social structure. Through these relations, established by the proletarian revolution, the nature of the Soviet Union as a proletarian state is for us basically defined." (Revolution Betrayed, page 248) [source]

One of Cliff’s conclusions is that, in this case, ‘neither the Paris Commune nor the Bolshevik dictatorship were workers’ states as the former did not statify the means of production at all, and the latter did not do so for some time.’ Here we see that Cliff bases his case on whether or not the working class has control over the state machine. We will deal with the question of workers’ control in a later chapter. But here let us examine Cliff’s method of separating the economic basis of a workers’ state from the question of workers’ control of the state machine. For a temporary period, for shorter or longer duration, it would be possible for the proletariat to take power politically while not proceeding economically to transform society. This was the position in Russia where the proletariat took power in October 1917, but did not undertake major nationalisation until it was forced upon them in 1918. But if the proletariat did not proceed to carry through the economic transformation, then inevitably the proletarian regime would be doomed to collapse. The laws of the economy will always break through in the end. Either the proletariat would proceed to nationalise the entire economy, or inevitably the capitalist system would emerge predominant. Cliff fails to show how the basic forms of Russian economy would differ under a healthy workers’ state. He has taken refuge in the surplus value consumed by the bureaucracy, but this evades the fundamental issue.

No better is Cliff’s case based upon the experience of the Paris Commune and the first stage of the Russian Revolution. The same would apply to them as aforementioned. These regimes were a transition to the complete economic rule of the proletariat. Such transitions are more or less inevitable in the change over from one society to another. Both in the case of the Commune and in the case of the Russian Revolution, they could not be long lasting if the proletariat did not proceed to nationalise industry. Has Cliff forgotten that one of the main lessons taught by Marx and assiduously learned by the Bolsheviks, was the failure of the French proletariat to nationalise the Bank of France? So we see a state can be a proletarian state on the basis of political power, or it can be a proletarian state on the basis of the economy; or it can be a transition to both of these as we will show.

The same laws would apply to the counter-revolution on the part of the bourgeoisie. The Old Man correctly argued that in the event of a bourgeois counter-revolution in Russia, the bourgeoisie might, for a time, even retain state ownership before breaking it up and handing it to private ownership. To a scholar it would appear then that you can have a workers’ state and a bourgeois state on the basis of state ownership, or you can have a workers’ state or a bourgeois state on the basis of private ownership.

However, it is obvious that one could only arrive at this mode of reasoning if one failed to take into consideration the movement of society in one direction or another.

Not only that, but all sorts of unforeseen relationships can develop because of the class structure of society and the state. To take the example of Russia. In 1917 up to the capture of control of the soviets by the Bolsheviks, we had the situation as sketched by Trotsky in the History of the Russian Revolution, where, because of the Menshevik majority, in a certain sense the bourgeoisie ruled through the soviets - the organs of workers’ rule par excellence! According to Cliff’s schema, how could this possibly happen? Of course, had the Bolsheviks not taken power, the bourgeoisie, having used the Mensheviks and through them, the soviets in the transitional period, would have abolished the soviets as they did in Germany after 1918.

In the transition from one society to another, it is clear that there is not an unbridgeable gulf. It is not a dialectical method to think in finished categories; workers’ state or capitalist state and the devil take any transition or motion between the two. It is clear that when Marx spoke of the smashing of the old state form in relation to the Commune, he took it for granted that the economy would be transformed at a greater or lesser pace and would come into consonance with the political forms. We will see later in relation to Eastern Europe that Cliff adopts the same formalistic method.

The Dialectical Conception of the State

It may be well to deal here with the nature of the state. According to Marxists, the state arises as the necessary instrument for the oppression of one class by another class. The state in the last analysis, as explained by Marx and Lenin, consists of armed bodies of men and their appendages. That is the essence of the Marxist definition. However, one must be careful in using their broad Marxist generalisations, which are undoubtedly correct, in an absolute sense. Truth is always concrete but if one does not analyse the particular ramifications and concrete circumstances, one must inevitably fall into abstractions and errors. Look at the cautious way in which Engels deals with the question, even when generalising. In Origins of the Family, Engels wrote:

"But in order that these antagonisms, classes with conflicting economic interests, shall not consume themselves and society in fruitless struggle, a power, apparently standing above society, has become necessary to moderate the conflict and keep it within the bounds of ‘order’, and this power, arisen out of society, but placing itself above it and increasingly alienating itself from it, is the state." (The Origin of the Family, Lawrence & Wishart, London, 1946, page 194) [source]

On the next page he goes on to show that:

"...it is enough to look at Europe today, where class struggle and rivalry in conquest have brought the public power to a pitch where it threatens to devour the whole of society and even the state itself."

Engels goes on to show that once having arisen, the state within certain limits, develops an independent movement of its own and must necessarily do so under given conditions: "In possession of the public power and the right of taxation, the officials now present themselves as organs of society standing above society." (Emphasis in original) [source]

Contrary to Cliff’s conception that the state plays a direct role, one can see the meticulous care with which Engels treats the question of the independent role of the state, relative of course, to society. In the whole of Cliff’s material, the fact that the state under given conditions can and does play a relatively independent role in the struggle between the classes is forgotten. His is a ‘logical’ scheme: either it is a state of workers, directly controlled by the workers, or it must be a capitalist state. There is no room for the interplay of forces in Cliff’s method. Again, contrast this with Engels:

"As the state arose from the need to keep class antagonisms in check, but also arose in the thick of the fight between the classes, it is normally the state of the most powerful, economically ruling class, which by its means becomes also the political ruling class, and so acquires new means of holding down and exploiting the oppressed class...Exceptional periods, however, occur when the warring classes are so nearly equal in forces that the state power, as apparent mediator, acquires for the moment a certain independence in relation to both..." (page 196, our emphasis) [source]

Again, on page 201, Engels wrote:

"The central link in civilised society is the state, which in all typical periods (our emphasis) is without exception the state of the ruling class, and in all cases continues to be essentially a machine for holding down the oppressed, exploited class..." [source]

Note the difference between Cliff’s black and white formulae and Engels’ careful formulations...’it is normally’, in ‘typical periods’, etc.

Why is it that the proletariat cannot take over the ready made state machine? Not for mystical reasons but because of certain very concrete facts. In the modern state all the key positions are in the hands of those people who are under the control of the ruling class: they have been specially selected by education, outlook, and conditions of life, to serve the interests of the bourgeoisie. The army officers, particularly the higher ranks, the civil servants, and in the nationalised industries today the key technicians, are moulded in their ideas and outlook to serve the interests of the capitalist class. All the commanding positions in society are placed in the hands of people whom the bourgeoisie can trust. That is the reason the state machine is a tool in the hands of the bourgeoisie which cannot be used by the proletariat and must be smashed by them. Now, what does the smashing of the state machine mean? To say the least, Cliff’s ideas on this question appear to be very nebulous.

It is possible that many, perhaps even the majority of the officials of the bourgeois state, will be used by the proletariat once they take power. But they will be subordinate to the workers’ committees and organisations. For example in the Soviet Union, in the early days after the Czarist army had been dissolved, the Red Army was led by ex-Czarist officers. Likewise in the state apparatus where a proportion of the officials were the same ex-Czarist officials. Because of unfavourable historical factors this was later to play an important role in the degeneration of the Russian regime. Not for nothing did Lenin say that the Soviet state is ‘a bourgeois Czarist machine...barely varnished with socialism’. (Incidentally this honest characterisation is very far from the idealised and false picture of the state under Lenin and Trotsky which is drawn by Cliff. How the process of degeneration could have taken place with the idyllic picture painted by Cliff would be difficult to understand. However, this will be dealt with in the later sections.)

The proletariat, according to the classical concept, smashes the old state machine and proceeds to create a semi-state. Nevertheless, it is forced to utilise the old technicians. But the state, even under the best conditions, say in an advanced country with an educated proletariat, remains a bourgeois instrument, and because of this the possibility of degeneration is implicit in it. For that reason Marxists insist on the control of the masses, to ensure that the state should not be allowed to develop into an independent force. As speedily as possible, it should be dissolved into society.

It is for the very reasons given above that, under certain conditions, the state gains a certain independence from the base which it originally represented. Engels explained that though the superstructure is dependent on the economic base, it nevertheless has an independent movement of its own. For quite a lengthy period, there can be a conflict between the state and the class which that state represents. That is why Engels speaks of the state ‘normally’ or in ‘typical periods’ directly representing the ruling class. The great Marxist teachers have analysed the phenomenon of Bonapartism to which Engels refers above. In the Eighteenth Brumaire Marx pointed out how the drunken soldiery of Louis Napoleon, in the name of ‘the law, order and the family’, shot down the bourgeoisie whom they presumably represented. [source]

Thus, one can only understand class society if one takes into account the many-sided dialectical inter-dependence and antagonisms of all the factors within it. Formalists usually get lost in one or other side of the problem. For example, Cliff can write:

"...It needs just as high a degree of mental acrobatics to think that Mikolajcik(6) and his ilk who flee abroad or waste away in prisons are the rulers of Poland as to consider that the rulers of Russia are the slave labourers in Siberia." (Cliff, page 13)

Were the bourgeoisie under Louis Napoleon the ruling class? It needs no high degree of mental acrobatics to answer this.

When considering the development of society, economics must be considered the dominant factor. The super-structure which develops on this economic base separates itself from the base and becomes antagonistic to it. After all, the essence of the Marxist theory of revolution is that with the gradual changes in production under the embryo of the old form, ie, super-structure in both property and state, a contradiction develops which can only be resolved by abolishing the super-structure and re-organising society on the base of the new mode of production which has developed within the old.

Economy in the long run is decisive. Because of this, as all the Marxist teachers were at pains to explain, in the long run the superstructure must come into correspondence with it. Once having abandoned the criterion of the basic economic structure of society, all sorts of superficial and arbitrary constructions are possible. One would inevitably be lost in the maze of history, like Perseus in the mythology of ancient Greece who was lost in the Palace of mines, but without a thread to lead one out. The thread of history is the basic economic structure of society, or the property form, its legal reflection.

Let us take as a case extremely rich in examples, the history of France. The bourgeois revolution took place in 1789. In 1793 the Jacobins(7) seized complete power. As Marx and Engels pointed out, they went beyond the framework of bourgeois relations and performed a salutary historical task because of that, accomplishing in a few months what would have taken the bourgeoisie decades or generations to accomplish; the complete cleansing from France of all traces of feudalism. Yet this regime remained rooted in the basis of bourgeois forms of property. It was followed by the French Thermidor and the rule of the Directory, to be followed by the classic dictatorship of Napoleon Bonaparte. Napoleon re-introduced many feudal forms, had himself crowned Emperor and concentrated the supreme power in his hands. But we still call this regime bourgeois. With the restoration of Louis XVIII the regime still remained capitalist...and then we had not one but two revolutions - 1830 and 1848. These revolutions had important social consequences. They resulted in significant changes even in the personnel of the state itself. Yet we characterise them both as bourgeois revolutions in which there was no change in the class which held power.

Let us proceed further. After the Paris Commune of 1871 and the shake-up of the relations which this involved, we had the organisation of the Third Republic with bourgeois democracy which lasted for decades. This was followed by Petain, then the De Gaulle-Stalinist regime(8), and now the Quielle Government. Examine for a moment the amazing diversity of these regimes. To a non-Marxist it would seem absurd to define in the same category, shall we say, the regime of Robespierre and that of Petain. Yet Marxists do define them as fundamentally the same - bourgeois regimes. What is the criterion? Only the one thing: the form of property, the private ownership of the means of production.

Take, similarly, the diversity of regimes in more modern times to see the extreme differences in super-structures which are on the same economic base. For instance, compare the regime of nazi Germany with that of British social democracy. They are so fundamentally different in super-structure that many theorists of the non-Marxist or ex-Marxist school have found new class structure and a new system of society entirely. Why do we say that they represent the same class and the same regime? Despite the difference in super-structure, the economic base of the given societies remained the same.

If we take the history of modern society, we get many examples where the bourgeoisie is exprop