Back in the USSR: State Capitalism Theory, Its Problems, and Its Context (DWS Series Part III)

In my previous blog post in this series, I distinguished between deformed and degenerated workers’ states presiding over planned economies and bonapartist third-world dictatorships that used sweeping nationalizations to accelerate bourgeois development and accumulate capital through a combination of black markets, bribery, and rent-seeking. Some ostensible Trotskyist groups, like those descended from Ted Grant’s Militant tendency, make no such distinction and refer to many of these bonapartist bourgeois states as workers’ states. Making the opposite mistake are those who refuse to recognize the planned nature of the Soviet economy and those modeled after it.

In this tradition are a motley collection of groupings ranging from “anti-revisionist” Maoists, to left communists, to ostensible Trotskyists. The “state capitalism” theories of most of these groups contain little in the way of intellectual substance, and appear to be flimsily constructed pretexts to refuse to defend the Soviet Union. There is one exception to this general trend, though, and that is the theory advocated by a small ostensibly Trotskyist group based in New York City, the League for the Revolutionary Party (LRP). Their theory of “statified capitalism” represents by far the most nuanced and concerted effort to apply the concepts and principles of Marxist economic theory to the Eastern Bloc countries from a state capitalism theoretical perspective. So it is to this theory that this post will be devoted to elaborating, dissecting and then analyzing first from a theoretical perspective, then from a historical one. If their theory cannot withstand scrutiny, neither can other, far less rigorous theories hope to.

The LRP’s Theory of Statified Capitalism

The theory of state capitalism advanced by the LRP was laid out in a series of articles spanning the group’s first fifteen years of existence, and culminating in the publication of their 1990 book The Life & Death of Stalinism by Walter Daum. The book contains a “new interpretation of the tendency of the rate of profit to fall,” and attempts to harness the value categories laid out in Marx’s critique of capitalism in order explain the crises of decelerating growth rates that racked the Eastern Bloc in the 1970s and early 1980s.

The Life & Death of Stalinism was published by the LRP in 1990.

This interpretation distinguishes between the tendency of the rate of profit to fall and the shorter-term boom-bust cycles, when accelerating consumer demand and production stimulate the proliferation of technical innovation that result in the over-saturation of the market, causing the failure of less efficient producers and the cheapening of their capital stocks, which are then purchased at bargain prices by the remaining firms. It is through the destruction of the less efficient producers, and the survival of those with greater productivity, higher profit margins, and more advanced fixed capital, that the cratering rate of profit in the bust phase can be checked. Over time the rising organic composition of capital (the rising mechanization and automation of capitalist production), characteristic of the boom phase of the industrial cycle, persists. But with the centralization of fewer surviving firms obstructing more and more the operation of countervailing “bust” tendencies across the economy, the rate of profit struggles more and more to resurrect itself.

The driving explanatory concept of this model, then, is what Daum called “the value dilemma” (p. 65 — all page numbers cited correspond to the printed edition of the book). As Daum described it:

“If there were such a thing as a universal capitalist ruling body determining the interests of the system as a whole, it would be torn between the horns of the dilemma implied by Marx. To accumulate intensively by revolutionizing production through new forms of capital means devaluing the old existing capital; but to hold back accumulation means retreating in the battle for power against the working class [by extracting ever greater amounts of surplus value using fewer workers]” (p.66).

In other words, because of monopolization, capitalists are forced to confront squarely the contradiction between the social nature of the production they oversee, and the anti-social competitive system through which it takes place. They can proceed with competition against the workers for ever-greater profits—and here it is important to note that, for Daum, the essence of capitalist competition is capital versus worker, with the horizontal competition between firms functioning as an expression or manifestation of that inner essence (pp. 52-53). But such competition through continued technical innovation can occur only at the expense of out-competing and harming certain sections of their own enterprises—previously independent of themselves before being centralized—whose existing stocks of capital might be devalued by innovation in other areas of their company. As a result, fictitious capital proliferates, as existing capital stock maintains an artificially inflated value through the extended suppression of innovation. When combined with the monopoly firms’ ability to use their sheer size to capture a disproportionate share of surplus value produced across the market (pp. 75-78), these tendencies of monopoly capitalism clearly reveal it to be a brake on economic development. Monopoly capitalists have become too big to succeed, if also too big to fail.

The value dilemma was, according to the LRP, at work throughout the Soviet economy following the Great Purges of 1936-39. In their view, the Soviet state functioned as a “national capital,” the value of which the Stalinists sought to maximize through the fragmented and competitive economic ministries that were functionally analogous to Western monopoly firms (pp. 196-197). The capitalist essence of Stalinist production was evident in the competitive hoarding, the back-channel acquisition of resources, the constant need to revise the plans in view of how they were being chaotically executed, and in the focus on producing what Marx called Department I goods (capital stock) so as not to commit too many resources on unproductive consumption (Department II goods) that did not enhance capital growth (pp. 198-202). It was also evident in the crises faced by the Soviet economy, where the sectoral interests of bureaucrats largely prevented the closing of underperforming factories with obsolete equipment, resulting in declining accumulation rates and the proliferation of “fictitious capital” (pp. 202-206). Contrary to the claims of Marxists such as Ernest Mandel, the LRP even claim that the Soviet economy was subject to over-production, in the form of unsold consumer goods and abandoned construction projects that required too much investment (pp. 206-209). The Soviet economy, with its supply bottlenecks, wasted resources, and monetarily marked exchanges of producer goods, seem to Daum and the LRP to bear all the marks of a highly monopolized capitalist economy governed by the law of value.

The problems that plagued the USSR in its last decades were not manifest in the 1920s and the early 1930s, claimed Daum. Throughout that time the USSR remained a workers’ state, albeit one that was rapidly degenerating from the high point of Soviet democracy. And as a workers’ state, it was not subject to the disproportionate power of monopoly capitalist firms. It was able to pursue the remaining accumulative tasks of capitalism effectively free from the value dilemma, without concern for profit or for the devaluation of constant capital (pp. 125-127). But all this changed with the Great Purges of 1936-1939, which coincided with a codification of capitalist-style competition in how economic ministries operated, a decisive break from the liberal cultural climate and legal regime of the early Bolshevik government, and most importantly of all, the mass slaughter of the Old Bolsheviks who carried great prestige and memory of revolutionary Bolshevism (pp. 177-183). In so doing the purges “cemented the decentralized [economic] structures and social relations established in the mid-1930s,” and gave rise to “the bureaucratic capitalist class and the statified capitalist system that defines Stalinism today” (p. 180). Once again a society under capitalist state power, Russia and its union of republics were once more fully (and visibly) subject to the value dilemma and its accompanying tendential law of the falling rate of profit (p. 202).

Scene of one of the Show Trials, the culmination of the massive purges identified by the LRP as marking the restoration of capitalist class rule

Because the LRP claim that the Soviet Union experienced a capitalist counter-revolution in the late 1930s, they argue that its highly monopolized and capitalist economy constituted the USSR as an imperialist power. While conceding that the Soviet Union generally did not invest capital abroad in search of monetary returns, Daum nevertheless maintained that this feature was not essential to Lenin’s understanding, but rather was simply a description of how imperialism tended to operate at the turn of the 20th century. As evidence Daum pointed to Lenin’s characterization of Tsarist Russia in the early 1900s as “imperialist,” claiming that it was not a significant exporter of capital at that time, either (p. 275). The purpose of Soviet imperialism, in contrast to Western imperialism, was a pac-man-style gobbling up of use values outside of its own borders in order to plug the holes in resources and supplies obstructing the functioning of its own economy. In that way, it could maximize its own national capital, even if its foreign ventures proved costlier in monetary terms than resources being imported (pp. 271-273). At times the USSR was even willing to subsidize foreign governments with an eye toward maintaining the supply chain. In the LRP’s assessment the USSR was imperialist because imperialism is, at root, the internally generated drive to dominate foreign countries stemming from the contradictions of its own monopoly capitalism.

Flaws with the Theory

There are some positive things to note about the LRP’s theory of statified capitalism. It was rigorous in trying to apply the basic concepts of capitalism to how the Stalinist economies functioned. Unlike the theory of “bureaucratic state capitalism” developed by Tony Cliff in the 1950s, it discussed at length the functioning of the law of value in the Soviet economy, the existence of wage labor, and the empirical realities of how planning mechanisms functioned. It also took seriously the remaining capitalist accumulative tasks that workers’ states might have to undertake in conditions of scarcity or imperialist encirclement. Even so, the theory is plagued with gaps, inconsistencies with evidence about the Stalinist economies, and misunderstandings of the Marxist canon.

The clearest issue is the attempt to date the formation of a new “regent” capitalist class in the USSR to the late 1930s. The LRP’s theory cannot identify any new economic functions assumed by planners in the ministries, or the top-level bureaucrats, because of the massive and violent purges in the 1930s. While it points out that horizontal competition was “rationalized” in Soviet law in 1936, this competition was by no means a new phenomenon. If anything, the cut-throat nature of competition to fulfill and exceed plan targets during the First Five Year Plan had spiraled so far out of control that, as Daum noted, the break-neck industrialization drive was beset with chaos and waste. And the bureaucracy in general by the early 1930s had become so badly degenerated that, as historian J. Arch Getty has conclusively demonstrated, it was riddled from top to bottom with rival patronage networks. How did legal reforms to reduce waste and temper competition constitute the creation of a new class? Did the New Deal, which largely rationalized competition among monopoly firms in the United Sates in the 1930s, similarly transform the underlying economic role being performed by Owen Young (who chaired General Electric) or by Cyrus McCormick, Jr. (president of International Harvester)? This oversight is not a minor one, for classes are defined by their roles in the relations of production. If Stalin was a capitalist by 1939, whereas he had not been in 1934, he was certainly unaware of it, as were those beneath him in the oppressive apparatus he had helped to birth, as were all Trotskyists over the next several decades. And for good reason.

The importance Daum placed on the systematization of horizontal competition in the late 1930s raises another problem: it directly contradicts his earlier downplaying of the importance of horizontal market competition as a constitutive and essential dynamic of capitalism. In chapter one of his book (p. 50), Daum quoted a passage from Marx’s Grundrisse:

“In competition this [accumulative] inner tendency of capital appears as a compulsion exercised over it by alien capital, which drives it forward beyond the correct proportion with a constant March, March! …Conceptually, competition is nothing other than the inner nature of capital, its essential character, appearing in and realized as the reciprocal interaction of many capitals with one another, the inner tendency as external necessity. Capital exists and can only exist as many capitals, and its self-determination therefore appears as their reciprocal interaction with one another” (pp. 413-414, Fowkes translation).

In Daum’s view, this excerpt is persuasive evidence that horizontal competition between separate capitals was a “subordinate aspect of reality” in terms of how the capitalist mode of production operates, in contrast to the “essence” of capitalism—which he purported to be the distinct competition between capital and labor. In so doing, Daum hoped to strike a blow against critics like Ernest Mandel who pointed to the lack of market competition in the Soviet economy as evidence that it could not possibly have been capitalist.

But Daum’s interpretation is flawed. It implies that essence, and the form in which an “essence” manifests itself, are necessarily external to one another. A more dialectical reading in keeping with Marx’s methodology would suggest that a “form” or “appearance” is, for Marx, often the concrete manifestation of an underlying essence, that the two are internally related, and that “essence” can refer to a quality or aspect of concrete reality (arrived at through abstraction) that explains why that concrete reality appears or behaves as it does in its totality. And when Marx claims, as he does in the excerpt quoted, that a specific “form” is necessary for a specific essence to manifest itself, that should warn any reader away from the notion that the appearance is somehow “subordinate” in analytic importance. It would make as much sense to claim, since the oxygen molecule is an essential component of the air we breathe (O2) and the water we drink (H2O)—the “forms” in which we ingest oxygen—that these forms are “subordinate” to the oxygen molecule in terms of what the human body requires to continue to function as a system.

Despite his problematic gloss of Marx, Daum nevertheless seemed keenly aware of the vital importance Marx placed on horizontal competition between capitals; hence, his reference to the Soviet legal changes regarding “competition” in 1936. But here it is important to remember that for Daum, these were not “capitals” in the sense that Marx understood them. Rather, the actual “capital” that the new “regent class” was striving to maximize, at least at the highest levels, was the “national capital” of the USSR as a whole. As Daum framed it, “the primary social aim of production” in Stalinist capitalism, “is to preserve and maximize the value of the national capital as a whole” (p. 196, emphasis in original). Yet if we take this goal to be the primary aim of Soviet “statified capitalism,” then what are we to make of the quote adduced above, which suggests that horizontal competition between competing capitals is an “external necessity” for truly capitalist production to take place? Where were the USSR’s horizontal “national capitalist” competitors? Were the United States and Great Britain seeking to maximize their national capitals, too, with the systemic compulsion of bankrupting the USSR on the great stock market of global capitalism in order to snap up its constant capital at a reduced rate, perhaps in a way that might help revive the rate of profit among nation-states? The reality is that no such competition existed, and that the USSR therefore could not legitimately be considered a “national capital” in the sense that Daum used the concept – as demarcating an entity analogous to a monopoly firm not wishing to devalue certain of its business sectors for the benefit of preserving others. Confronted with the absence of capitals engaged in market competition inside the planned sectors of the Soviet economy, Daum was ultimately forced to let in through the backdoor the very same “single-factory model” that he justifiably criticized in Tony Cliff’s writings.

Unlike Cliff, though, Daum maintained that the law of value governed (and was generated inside) the Soviet economy. However, his treatment of the law of value in general, and specifically of how it functioned inside the Soviet economy, is no less problematic than his handling of the competition question. Daum’s understanding of the law of value is historically narrow:

“Hence the fundamental link between wage labor and the law of value. On the one hand, capitalist production — the operation of the law of value — makes labor power a commodity; labor is necessarily wage labor. On the other hand, under pre-capitalist commodity production, exchange value existed but could only be based on concrete labor, not on a true underlying value. Only capitalist production, which employs labor measured according to time, creates the genuine value category of embodied abstract labor. Thus the existence of a proletariat and the validity of the law of value are equivalent conditions. Marxists who deny that the law of value applies to Stalinism but nevertheless acknowledge the existence of a Soviet proletariat make a fundamental error. To deny one is to deny the other” (pp. 38-39).

Defined this way, the law of value is synonymous with the rule of value over social reproduction in an economy consisting of atomized producers, where commodity production and exchange govern the distribution of social labor to different branches of the economy. But this flies in the face of the broader understanding that Frederick Engels had of the law:

“In a word: the Marxian law of value holds generally, as far as economic laws are valid at all, for the whole period of simple commodity production — that is, up to the time when the latter suffers a modification through the appearance of the capitalist form of production. Up to that time, prices gravitate towards the values fixed according to the Marxian law and oscillate around those values, so that the more fully simple commodity production develops, the more the average prices over long periods uninterrupted by external violent disturbances coincide with values within a negligible margin. Thus, the Marxian law of value has general economic validity for a period lasting from the beginning of exchange, which transforms products into commodities, down to the 15th century of the present era” (Engels, Supplement to Capital Vol. 3 ).

According to Engels, then, the law of value was not at all coextensive with the dominance of value production in a given economy. It was the tendency for commodities to exchange only with other commodities containing equal labor expenditure, even in social contexts where most production may have been for immediate subsistence or geared toward pre-capitalist exploitation. As Engels noted, “People in the Middle Ages were … able to check up with considerable accuracy on each other’s production costs for raw material, auxiliary material, and labor-time — at least in respect of articles of daily general use” (Ibid.). In keeping with Engels’ point, it is certainly true that the growing prevalence of commodity production has transformed how the law of value functions in terms of overall social labor. But only if one takes a longer-rage understanding of how the law of value has functioned throughout history, as well as in different kinds of societies, can one make proper sense of Daum’s contention about the supposed “fundamental error” of “Marxists who deny that the law of value applies to Stalinism.”

The law of value certainly applied to the Soviet economy, but not in the way Daum suggested. To understand how, it is important to emphasize Engels’ tying that law to commodities. A commodity, in the Marxist understanding, is an object or service that was produced to be exchanged, but not just in any kind of exchange. For example, feudal serfs harvested surplus agricultural yields to satisfy the demands of feudal lords who offered military protection in “exchange.” Similarly, under the first stage of communism, producers will “exchange” their labor contribution for vouchers entitling them to some portion of goods and services. But in neither of these two examples is the exchange one of commodities. Commodities require a market exchange, an exchange dictated by the law of value even if in its primordial form—that is, an exchange between economically interdependent but proprietorially autonomous producers. If two parties are instructed to transfer items they had earlier been told to produce by a third person who owns those items and the resources that went into making them, the exchange is not a “commodity” exchange. Because the items were not produced or exchanged “behind the backs” of the controlling party, their creation was a form of consciously coordinated and planned production and exchange.

The implications for how to understand the Soviet economy are clear. Commodity production and exchange (and the attendant law of value) persisted throughout the history of the Soviet Union. After the First Five Year Plan, though, commodity production was restricted primarily to the consumer goods sector. Since the working class had been deprived of any substantial voice in the planning process, their consumption needs, much less wants, could hardly have been planned. The Soviet bureaucracy did “plan” the production of what it thought consumers wanted or needed, but that form of planning was no different than any other form of commodity production, wherein a proprietor “plans” how much and what to produce based on what she expects to occur in the market. There, unlike in the Department I sector of the economy, production did take place behind the backs of those participating in the (hoped-for) procuring of these consumer commodities. In the Department I sector, by contrast, objects were produced and distributed in accordance with the over-arching plan; with rare exceptions, they could not be bought and sold with banknotes—but were instead exchanged according to a representative “price” assigned in advance and used purely for accounting purposes. Such exchanges, even when they involved direct contracts between enterprises and were not foreseen by the plan, lacked the character of a commodity exchange, as the raw materials and equipment being exchanged were themselves made in conjunction with the plan and not for autonomous producers. Prices were determined administratively by the center, and exchanges were geared toward meeting planned targets rather than producing commodities.

A Soviet munitions factory in the 1970s

This understanding of the distinction in how the two departments of the Soviet economy functioned was the subject of critique in The Life & Death of Stalinism. The specific target was an excerpt where Ernest Mandel pointed to the widespread phenomenon of unsold Soviet consumer goods – perhaps resulting from high prices for those goods – as an indicator of the commodity nature of consumer goods production. Such high prices, Daum countered, would have been the result of expensive equipment, so if piles of consumer goods went unsold (their underlying value unrealized in exchange), then so too did the “value” that went into manufacturing the capital goods used to make the consumer goods. Daum contended that, when understood in this way, the distinction between commodity goods in the consumer sector and non-commodity goods in the producer sector was entirely permeable: a chain of production links all consumer goods with a network of producer goods, so if the latter went to a waste, so too did the former – proving that they were effectively commodities as well (pp. 215-217).

The Chernobyl nuclear plant, soon after exploding

If one interprets Mandel’s argument as being that wasted labor (or “unrealized value”) was the sole determinative factor in assessing the commodity nature of a good or service being produced, Daum’s critique would be spot on. However, what Mandel’s reference to stocks of unsold consumer goods demonstrated was the inability of the bureaucracy to extend their plan to encompass Soviet citizens’ consumption choices. And that, not whether “value” or labor had been wasted, is the decisive point. Even if we set aside the large number of producer goods that never went into the manufacture of consumer goods (weapons manufacturing and space technology being the two most closely associated with the Soviet Union), it is obvious that there are cases where labor—or as Daum would call it, “value”—was wasted, but where waste per se did not change the non-commodity nature of the wasted item’s production. When the Chernobyl plant exploded in 1986, causing untold death and suffering throughout the surrounding region for decades to come, would Daum have suggested that the premature destruction of the producer goods that went into constructing the plant had suddenly transformed them into “commodities” whose production occurred under the primacy of the law of value? The reality is that even producer goods that were channeled into Department II production, and were “wasted” as a result of producing unsold consumer goods, were nevertheless still not produced or exchanged as commodities. They were produced and exchanged in accordance with the plan, even if the commodity nature of the production to which they were subsequently put to use meant that they may have been prematurely retired, retooled, or scrapped. Or to put it more succinctly, their production and distribution was planned, even if their use afterward was not and could not have been.

The larger payoff of Daum’s argument is that he hoped to use the ways in which Soviet plans failed or broke down as evidence that it was governed by the law of value just as much as any other capitalist economy was. Having given a definition of the law of value that is unduly restricted to how it operates under capitalism, Daum could then point to the ways in which the law of value affected how the plan operated as evidence that there was no real planning of a non-capitalist nature. The law, after all, always shaped how the economy functioned. If Daum’s argument had been that the Soviet economy, even its planned sectors, was never able to elude the law of value, he would have been right and even applauded by the Trotskyists he set out to criticize. After all, no Trotskyist with any familiarity with the question would suggest otherwise, because to do so would imply the Stalinist doctrine that the mode of production operative throughout the Eastern Bloc was full-on socialism (in one country or, more accurately, in certain sectors of several countries). But Daum conflates denying the primacy of the law of value in how these economies operated with the argument that the law did not function at all, and that the Soviet economy was therefore socialist – as he mistakenly accused Mandel of suggesting (p. 127).

The Soviet economy was not socialist. The ways in which the law of value affected the plan were visible and serious. Bureaucrats used value calculations in setting prices that enterprises were responsible for in exchanges made or resources used in fulfilling their production quotas. Scarcity of consumer goods and the primacy of the law of value in determining how they were distributed generated skimming and corruption in the bureaucracy, which resulted not just in black markets in Department I goods (through what was known as “блат” or “blat”), but also in bureaucratic competition to achieve higher levels of office corresponding to ever greater privileges. The net effect were all the dysfunctions in the planning apparatus (the hoarding, the bottlenecks, etc.) that Daum enumerated. But that is not the entirety of the story. Unlike in capitalism, the law of value never predominated over the economy as a whole. Planning, not commodity production for markets, assigned resources to different sectors of the economy, whether they were used with optimal efficiency or not. In keeping with this reality, the means of production throughout most of the economy were not convertible to money capital. The circuit of capital had been broken, even if socialism had not matured to supplant it fully. As Ernest Mandel said in one of his more orthodox moments, “In capitalist society the law of value is refracted through the prism of profit…. In the economy of the transition period the law of value is refracted through the prism of the plan” (Marxist Economic Theory, Vol. 2, p. 569).

Daum’s theory that the law of value was supreme in the Soviet economy translated into a definite understanding of the laws of motion of that economy. In his view, from the late 1930s onward, except for the early post-WWII years, the USSR “statified capitalist” economy suffered from declining rates of accumulation just the same as one would expect to find any other capitalist economy in the epoch of decay (p. 202). Here the problem with Daum’s theory is that the Soviet economy consistently exhibited a growing rate of accumulation from the 1930s to the 1950s. Vladimir Popov, a professor of economics in Moscow, has observed, “The highest rates of growth of labor productivity in the Soviet Union were observed not in the 1930s (3% annually), but in the 1950s (6%)” – a statistic which flies in the face of the notion that the USSR was doomed to tendentially declining “profit” because of its transformation into a capitalist economy in the 1930s.

Growth rates of the Soviet economy

The stagnation of the Soviet economy was not the product of the progressive replacement of living labor with dead – the rising organic composition of capital – but rather with the fact that dead labor (constant, fixed capital like plants) was almost never replaced because of the fragmented interests of bureaucrats presiding over different sectors of the economy. As Popov has elaborated, “the highest productivity was achieved after the period equal to the average service life of fixed capital stock (about 20 years) – before there emerged a need for the massive investment into replacing retirement. Afterwards, the capital stock started to age rapidly reducing sharply capital productivity and lowering labor productivity and TFP growth rates.” Unlike under capitalism, this prolonging of the life of constant capital did not spring from fear of devaluing assets. Just the opposite: it resulted from the way in which the “value” of constant capital did not affect the way the economy functioned. Managers were rewarded not for technological innovation, or for the monetary worth of the equipment they presided over, but for fulfilling plan targets set based on prior years’ output. The LRP’s theory quite cleverly showed how social production conflicted with competitive tendencies within both the USSR and within Western monopoly firms. But that is as far as the similarity extended. Slowing growth rates had decidedly different causes in the USSR because it was a qualitatively different type of economy where competition assumed a qualitatively different form and growth rates traced a different curve.

The papering over of qualitative distinctions also plagues Daum’s discussion of Stalinist “imperialism.” Among all their theoretical errors and inconsistencies, the LRP’s argument for the existence of such “use value” imperialism is perhaps the most egregious of all. As explained earlier, for the LRP, the fact that Lenin identified Russia as an imperialist power despite not being a net exporter of capital opens the door to a “Soviet imperialism” similarly decoupled from the export of capital. But Lenin was clear that the imperialism of Russia was not the imperialism about which he wrote in his pamphlet on monopoly-capitalist imperialism. For instance, in a 1916 piece on the right of nations to self-determination, Lenin described WWI as featuring an “alliance of tsarist imperialism and advanced capitalist, European, imperialism.” This tsarist imperialism, he explained, was “much more crude, medieval, Economically backward and militarily bureaucratic” (Ibid.).

In a context of heightened contradictions and combined development stemming from Russia’s late development, tsarist imperialism came to develop what Leon Trotsky, in his History of the Russian Revolution, called a “twofold nature.” Russian capitalists who had lost faith in the Tsar’s plans for domestic economic development turned outward to China, Persia, and Mongolia, exporting capital to the tune of roughly 33 billion dollars between 1886 and 1914. But this amount was a fraction of the amount of capital being imported into the country, often in the form of loans to the Tsar’s government from imperialist states. What this meant in practical terms was that Tsarist imperialism was made to act in the interests of, as a kind of gendarme for, its more powerful Western backers, even as domestic capitalists sought to bend the Tsar’s monopoly of military power to the interests of deepening their penetration into the Eastern near abroad in an incipient form of monopoly-capitalist imperialism. Or as Trotsky said, the fusing together of tsarist expansionism backed by Western financial interests gave the Russian bourgeoisie “the character of an agency for other mightier world powers.” That, not the highest stage of Russian capitalism, is what Lenin and Trotsky meant when they invoked “Russian imperialism” and why they called for its defeat in the First World War. The LRP’s theory of Stalinist imperialism ignores how the capitalist dynamic of imperialism, while embryonic in the Russian economy (see, e.g., this work by Lenin) was determined primarily by relations from the outside. That is what explained the net flow inward of capital, rather than its export.

Hamhung, N. Korea (11/6/50) — Some of the first Chinese Communist troops captured in the North Korea fighting

The USSR inherited tsarist Russia’s need for a strong military, not least of all because of imperialist encirclement. At times it did not hesitate to use that power, usually (but not always) for anti-revolutionary nationalist purposes, sometimes extracting resources along the way. In trying to explain the systematic basis of this extractive behavior, the only internal dynamic to which Daum and the LRP could point was the impossibility of Soviet autarky. Yet Stalinist bureaucracies adhering to the autarkic doctrine of “socialism in one country” exercised power throughout Eastern Europe and in parts of Asia as well. With some notable exceptions, they modeled their economies closely off the Soviet planning system. If a statified capitalist economy generates the need for militarized extraction of use values in other territories, where is Albanian imperialism? Or Chinese imperialism? The latter question is particularly important, since the LRP does not take a line of revolutionary defeatism on all sides in the Korean War, when Chinese boots on the ground were decisive in fending off imperialist invasion. That not even Daum has tried to argue that the internal contradictions of these other “statified capitalist” societies drove them to military expansion suggests the ad hoc nature of their assessment of Soviet “imperialism” and its purported causes.

The LRP and Its Theory in Context

Problems and all, the LRP’s theory of statified capitalism did not spring full-blown one day out of heads of LRP members. It issued from a much older political tradition pioneered by Max Shachtman—a tradition known as the third camp—which experienced something of a resurgence in the 1960s and early 1970s. For young people who had been radicalized during that time frame, and who were looking for political answers beyond the confluence of radical liberalism and lifestylist anarchism prevalent throughout the student movement and other sectors of the New Left, Marxist groups provided an appealing home. Facilitating this search was the destruction of the largest left student organization in the United States, Students for a Democratic Society (SDS), at its national convention in June of 1969. Leninist groups were waiting in the wings to pick up the pieces.

The most popular destination was Maoism, capturing as it did the formula so essential to the New Left’s civil rights and anti-war shock troops: opposition to imperialism combined with a stress on third world peoples and people of color to human liberation. (On this subject, see The East Is Black). Encapsulating the resonance that Maoism had with many radicalizing youth was the surging prominence of the Black Panther Party, a quasi-Maoist outfit that pushed Mao’s Little Red Book, called on people of color to arm themselves in self-defense, and in the process cast a strikingly powerful spell over student activists around the world. Another major contributing factor to Maoists’ rising fortunes was their extensive penetration into SDS. By 1969 they had become so influential that they had even managed to inspire a “Revolutionary Youth Movement” (RYM) wing. When the Beatles invoked the image of devoted revolutionaries toting pictures of “Chairman Mao” in public, they were tapping into a pop-cultural image that was not as outlandish as it might seem to radical youths today.

For those who perceived Maoism as insufficiently critical of the Chinese or Vietnamese governments, there were a plethora of Trotskyist groups also hoping to recruit from ex-SDSers and others who had come of political age in the trenches of the radical movements of the day. Groups like the Spartacist League (SL), known for their angular slogans and unapologetically in-your-face approach to revolutionary politics enjoyed a bump in membership, partially as a result of their own, more modest interventions into the youth movement and SDS.

But the SL’s growth was nothing compared to that of the groups more closely aligned with some of the New Left’s basic political assumptions. The Socialist Workers Party (SWP) in the United States, with its popular front approach to the anti-Vietnam-War movement, coincided nicely with the belief that revolutionary organizations are built predominantly through progressive social action as a transparently educative experience—a message that surely resonated with the New Left’s energetic student base. Extolling a kind of latter-day spontaneism that pointed implicitly in the direction of the Second International’s model of a “party of the whole class,” the SWP sought vindication for its line in extolling or harboring illusions in decidedly non-communist mass movements like Cuba’s petty-bourgeois 26th of July guerilla movement or, later, the identity-based sectoralist elements within the women’s liberation, gay liberation, and black power campaigns that peaked in the late 1960s and early 1970s. The SWP’s numbers grew from 399 members in 1959 to 1,140 members in 1974 (Trotskyism in the United States, p. 72).

Taking a similar approach to on-the-ground politics, “third camp” Trotskyism also found explosive growth. Its adherents repudiated Western capitalist states and Stalinist states as similarly imperialist and equally rooted in class exploitation; thus it sought to turn to the international working class as an independent “third camp” to overcome them both. A major reason for their view that the Stalinist societies did not enshrine revolutionary working-class gains was the absence of proletarian democracy. It made little sense, in their view, to suggest that the workers were the ruling class in a society where they had even less visible control over the affairs of government than workers in the United States or France. This strong identification of workers’ self-emancipation in the form of mass worker participation also translated into a distinct political practice. At times called “movementist,” it was an approach not too dissimilar from that of the 1970s-era SWP or the popular-front-era Communist Party of the 1930s. The emphasis was on building and growing grassroots movements of broad left elements, inside and outside of trade unions, in the hopes of gradually coalescing a leadership capable of fighting for socialist revolution. One result of this orientation to the masses was a tendency to downplay theory at the expense of action (which, as with the SWP, was implicitly understood to be an unproblematic conduit of higher-order knowledge). Another, related result was a tendency to focus on growth in numbers, on quantity of recruits and participants rather than quality. After all, if working-class experience in struggle pushed one-sidedly in the direction of socialist revolution, why do anything to detract from having the largest number of workers possible engaging in struggle? Stringent requirements for membership (like command over Marxist theory), or principled refusals to attend “progressive” demonstrations organized by bourgeois or petty bourgeois organizations, was tantamount to an unnecessary and sectarian splitting of the movement.

The early leaders of SDS

The third camp’s distinguishing position on the USSR and similar states was almost identical to the position espoused by the non-Marxist New Left of the early 1960s. Indeed, it was a formative principle of the Port Huron Statement, the 1960s student movement’s founding document in the U.S. According to Tom Hayden (the document’s primary author):

“As democrats we are in basic opposition to the communist system. The Soviet Union, as a system, rests on the total suppression of organized opposition, as well as on a vision of the future in the name of which much human life has been sacrificed, and numerous small and large denials of human dignity rationalized. The Communist Party has equated falsely the ‘triumph of true socialism’ with centralized bureaucracy. The Soviet state lacks independent labor organizations and other liberties we consider basic. And despite certain reforms, the system remains almost totally divorced from the image officially promulgated by the Party. Communist parties throughout the rest of the world are generally undemocratic in internal structure and mode of action” (emphasis added).

In espousing this argument Tom Hayden and the early SDS leadership were echoing an increasingly prevalent view at mid-century. It received its clearest expression on the left in James Burnham’s The Managerial Revolution (1941), which tied together the post-New-Deal United States, Hitler’s Nazi regime, and the Soviet Union under Stalin as harbingers of a new bureaucratic society led by a bureaucratic-managerial class. Not coincidentally, Burnham used to be in the Trotskyist SWP before leaving with Max Shachtman in 1939 due to their rejection of Soviet defensism. So it should not be surprising to see a leader of the largest Shachtmanite group in the United States in the late 1960s write that the official Communist Parties and the movements supporting them “have placed in power, not the working class, but a self-perpetuating bureaucratic class” (qtd. in International Trotskyism, p. 900).

It is therefore easy to understand how third-camp Trotskyist groups were able to capitalize as successfully as they did off the disintegration of multi-tendency student activist organizations in the 1970s. Since an animating principle of the 1960s student movement was opposition to the competing “camps” of Western capitalism and the bureaucratized apparatuses of the Stalinist bloc, it made sense for at least some veterans of that movement to view with suspicion the idea that the Stalinists could act as even just a transmission belt for progressive changes, not to mention on the order of an overturn in capitalist property relations.

For those radical youths in the United States who refused to break from the earlier New Left’s take on Stalinism, there awaited International Socialist (IS). The organization was founded in September of 1969 by drawing together the autonomous Independent Socialist Clubs that had been springing up on college campuses across the country. As such, it “was made up overwhelmingly of young people radicalized in the 1960s” (Revolution in the Air, p. 123). During the year after the SDS splintered at its June 1969 convention, IS experienced a surge of membership, growing from roughly 150 members to 300 members.

Sy Landy, who co-founded the LRP in 1976

Before long, however, their upward trajectory not only slowed but was reversed. About one third of the membership perceived the IS as having drifted too far from Trotskyism, as evidenced in its opportunism in trade union work as well as its alleged abandonment of the transitional program. In 1973 this left faction, led by Sy Landy, was expelled and formed the Revolutionary Socialist League (International Trotskyism, pp. 903-904). The RSL brandished more impressive Trotskyist credentials, but nevertheless maintained a “third camp” approach to the Russian question. It, too, within a matter of several years, faced a series of splits. One of them, centered on the use of the labor party tactic, resulted in the expulsion of a group around Sy Landy. That is how the League for the Revolutionary Party formed in 1976.

The LRP was, in a sense, a goldilocks group situated between the blatant opportunism of other third-camp organizations, and the politics of Leon Trotsky himself. On the one hand, Landy’s new group were seeking to abandon the worst excesses of third-campism, e.g., by placing a greater emphasis on delineating between united and popular fronts, and on the need for consciously constructing revolutionary theory in addition to participating in grassroots movements. That emphasis, after all, is what prompted Walter Daum and others in the group to construct a new theory of state capitalism, and to construct detailed arguments about how previous theories of state capitalism were tied to the opportunism of other third-camp groups. On the other hand, their refusal to break from the New Left’s impressionistic equating of Stalinist bureaucracy with Western capitalism as twin evils enabled to group to cling to its most deeply embedded assumption: the tight identification between workers empirically exercising agency at any given time, and the existence of (or even winning of) working-class gains at that same time. As a left variant of Shachtmanism, the LRP sanded off the rougher edges associated with orthodox Trotskyism so that it seemed just right.

The significance of the latter move is comprehensible only in the context of the 1970s, when the Cold War was still the defining international political issue of the day. At that time, the third-camp position on the Soviet Union and other Stalinist countries provided breathing room for radicals who wanted to do extensive work in, or even assimilate into, the dwindling but still significant mass movements of the decade. To claim solidarity, even in a highly limited or qualified form, with the Soviet Union meant having to broach a position on the Soviet Union’s progressive class nature that might, at best, seem exotic or, at worst, touch off a virulently anti-communist and potentially violent liberal response. At the very least it pointed to the continued marginalization of a Marxist program within mass movements of the working class or specially oppressed. Among those who cut their teeth in 1960s politics, community building with fellow activists, solidarity with the downtrodden, and an unbounded revolutionary optimism had all been formative experiences. Yet they were also experiences that militated in the opposite direction of clearly delineating one’s self in opposition to most others on the basis of a controversial but nevertheless fundamentally important political view. Moreover, in a media and cultural environment characterized, with minor exceptions, by an unrelenting diet of Cold War anti-communist propaganda about the USSR and its satellites, it was perhaps the most difficult task of all to accept that these societies had anything to do with the progress of the international working class.

To acknowledge these realities is not to suggest that third-camp Trotskyists were consciously trying to duck from hard questions or were disingenuous in their arguments about the Soviet Union. Far from it. In keeping with the way ideological illusions generally function in society, the notion that the USSR was an exploitative class society both emanated from and nurtured a set of experiences and political practices that were widespread throughout the student movement and the activist left in the 1960s and 1970s. As Barbara Fields has explained in her overlooked and incredibly insightful writings on antebellum racism, “Ideologies offer a ready-made interpretation of the world, a sort of hand-me-down vocabulary with which to name the elements of every new experience. But their prime function is to make coherent – if never scientifically accurate – sense of the social world” (“Ideology and Race in American History,” pp. 152-153). The most insidious aspect of ideology is its ability to hide behind experiences, masquerading as transparent and natural, never daring to speak its own name.

In recent years, though, the ideological underpinnings that informed third campism are finding expression in other ways besides neutrality on the Russia question. Third-camp politics, as it is traditionally defined, has been on the wane as an identifiable tendency. Most third-camp groups in the United States, like IS or the RSL, have long since been consigned to the dustbin of history. The one remaining stalwart is the International Socialist Tendency, descended from the politics of the late British Marxist Tony Cliff. Its fraternal (but technically unaffiliated) organization in the US, the International Socialist Organization (ISO), was formed by members expelled from IS in the late 1970s and currently has a paper membership in excess of 700 members (though a far more limited number of dedicated cadre). But even here, what is noteworthy about the ISO is their decision largely to abandon their adherence to third-camp analyses of the Soviet Union as a salient component of their political identity. As described by a member of the ISO in 2014, recounting the role—or rather, lack of a role—played by state capitalism theory in attempting to form a faction within the organization:

“I still think the theory was correct, but belief in the theory no longer indicates anything about politics. This is why we have, for example, an ‘orthodox Trotskyist’ [on the Russian question] in our faction (Paul H); a bureaucratic collectivist who shouts about our disloyalty (Joel G); and a Cliffite who threatens us at every opportunity (Ahmed S). The idea that Ahmed is more ‘libertarian’ than Paul H because of what he thinks about Stalin or Cuba or something is really very dense.”

To the list of ISO members who reject state capitalism theory can be added Paul Le Blanc, a prominent author who was once a member of the SWP and Solidarity, and who still adheres to the 1970s SWP’s position on workers’ states. Other examples can be adduced, prompting the question of why the ISO turned from rigid adherence to state capitalism theory.

As previously mentioned, for third-camp Trotskyist groups that emphasized growth of numbers and working-class activity, the Cold War era gave their line on the Russian question a profound salience—removing the obstacle of a relatively exotic and unintuitive Soviet-defensist position. Now that the Cold War has been over for more than 25 years, activist circles tend to be populated more and more by young people with no experience of living in a Cold War political culture, and whose impressions of Soviet “actual existing socialism” are often nothing more than the pliable product of snippets gleaned from textbooks or casual conversation with older relatives. The class nature of Stalinist societies simply does not command the importance it once played on the far left in terms of either appealing to or repelling workers or students one might encounter at demonstrations.

The strategy employed by the ISO in this new context is clear. In maintaining its fundamental orientation to mass recruitment in an era where Soviet defensism is no longer the hot-button political issue it was once was, they have simply thrown the doors of their organization open to Soviet defensists and non-defensists alike. That way, it can attract cadre from other moribund Trotskyist groups while it can also, in the off chance a member is ever asked by a non-member at a demonstration, continue to point to the group’s formal but toothless third-camp position. In a world where the remaining workers’ states are quickly running back to full-blown capitalist restoration (with the potential exception of North Korea), the theory behind degenerated or deformed workers’ states is not likely to find immediate traction in the day-to-day reform-oriented work that drives groups like the ISO. So, as far as they are concerned, best to sweep it under the rug.

Where does this leave the LRP? Since it sought to demarcate itself from the opportunist excesses accompanying the mass orientation of other third-camp groups, it is unable to pull off what the ISO has, at least not without renouncing its entire organizational raison d’etre. The LRP find themselves caught in an intractable dilemma. Those young people who are deeply committed to revolution, are serious about studying revolutionary theory, but who have not developed their political consciousness in a context where Soviet defensism is taboo will likely to find appeal in other, larger groups who maintain something closer to an orthodox position on workers’ states. Conversely, among young people who are looking for a movementist group relatively unconcerned with the ins and outs of revolutionary theory, the far larger, more outwardly professional, influential and active ISO is likely to be the group of choice. Squeezed from both ends through the development of factors outside their control, the LRP faces dwindling constituencies from which to recruit. The result is that the LRP, the one third-camp group over all others that raised its position on Russia to a matter of paramount theoretical concern, find their numbers shrinking and are unable to regenerate their aging cadre. Their publications have become less frequent, years ago shifting from an annual or bi-annual magazine format to a sporadically issued and far briefer “bulletin.” The prospects are dim.

Though the group (like third campism itself) is withering away, the animating assumptions of their politics continue to find expression in other, growing groups who practice what I and others have termed “movementism.” The relationship between this phenomenon and the question of deformed workers’ states will be the subject of the next installment.

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