Audio: MHI discusses state-capitalism & the nature of Soviet Union
Marxist-Humanist Initiative (MHI) held a discussion Jan. 23 on state-capitalism, both the theory developed by Raya Dunayevskaya in the 1940s, and its practice in the Soviet Union, in spite of that nation’s claims to have broken with capitalism. Dunayevskaya’s analysis (see articles on our Archives page) was based on her interpretation of Marx’s concept of capitalism, whose hallmark is the “law of value.” When the Soviet Union announced that the “law” still operated there under “socialism,” she saw it as confirmation of her theoretical analysis and a warning to the Russian workers that they should not expect any improvement in their lives to come with the end of World War II.
Andrew Kliman gave a talk at the meeting; a slightly revised text version appears below the audio button.
Click the audio button for the recording of the meeting. The discussion which followed Kliman’s talk starts at 29 minutes in.
We invite readers to add their comments and continue the discussion.
The USSR as a Capitalist Society: Dunayevskaya vs. Füredi
Presented by Andrew Kliman to MHI meeting, Jan. 23, 2016
Lots of people used “state-capitalism” just as a swear word before Raya Dunayevskaya wrote about it, but she––with some assistance from C. L. R. James and a bit from Grace Lee (Boggs)––was the first to provide a factual and theoretical analysis that the USSR was state-capitalist according to Marx’s conception of capitalism. I say factual and theoretical analysis, because this work involved a thorough and, I think, profound re-interpretation of Marx’s Capital that radically diverged from the standard interpretations.
As Dunayevskaya wrote in Marxism and Freedom:
Marxist textbooks, for generations, have repeated [several] truisms, [the upshot of which is that] [i]n order that the society may be looked upon as capitalist, it seems essential to have this process of money in the pocket of the private capitalist; the buying of labor power and means of production; the production of commodities; the selling of the commodities on the market for more money; etc. All this is true, but it is not the whole truth. Marx did not have to spend 40 years to prove that.
Her re-interpretation of Capital wasn’t innocent. It was clearly politically motivated. The motivation was to show that the USSR was capitalist according to Marx’s concepts. It was precisely because of this motivation that she was able to get behind its “forms of appearance” to the essential relations. She got behind both the classical appearance of capitalism as free-market, competitive capitalism, and the standard appearance of Marx’s Capital as a book about Mr. Moneybags and his quest for profit, and about how the distribution of labor is regulated in capitalism by market mechanisms and imperatives. Marx did not have to spend 40 years to prove that.
The point is not that Marx had the USSR in mind when writing Capital. He had no knowledge of it and couldn’t have anticipated it. Rather, he got behind the forms of appearance to the essential relations: as Dunayevskaya put it in “The Nature of the Russian Economy”: “Precisely because Marx analyzed a pure capitalist society which has never historically existed, his analysis holds true for every capitalist society, but only for capitalist society.”
To take just one example, but a crucial one for our discussion, Marx showed that the operation of the law of value––the determination of value by socially necessary labor time—caused units of capital to become bigger and fewer (he called this the concentration and centralization of capital). And thus small-scale, competitive, free-market capitalism was being transformed into monopoly capitalism.
Where would it end? Marx didn’t know. But he knew where it could end: “In a given society this limit would be reached only when the entire social capital was united in the hands of either a single capitalist or single capitalist company.” He didn’t know that the single capitalist would appear in the form of a nation-state, rather than in the form of a company named Stalin & Things, or whatever; he didn’t even know it would appear at all. But he knew that the ultimate limit to the concentration and centralization of capital in a given society was a single capitalist or capitalist company. So the point is that, although he personally couldn’t have anticipated state-capitalism, his analysis anticipated it theoretically, as the end point of an ongoing tendency within capitalism.
Marx’s concern to get behind forms of appearance to the essential relations also had a political motivation. He battled Proudhonism and similar tendencies on the Left throughout his adult life, because he thought that their proposed alternatives to existing society would not work. They would merely be capitalism in a different form, or they would be unviable and lead back to capitalism, because they all try to get rid of capitalism without getting rid of its mode of production. Thus, Marx was concerned to demonstrate both primacy of production and the existence of a specifically capitalist mode of production.
I think the basic defect in standard Marxian economics has been its failure to fully appreciate that there’s a specifically capitalist mode of production. It regards production as trans-historical, and thus it distinguishes between different societies in terms of their different property forms, and/or in terms of the differences in institutional forms through which production is regulated. For instance, the specificity of capitalism is said to be rooted in the fact that the distribution of labor—or, more precisely, the allocation of resources and distribution of products and incomes—is regulated by market mechanisms and imperatives. If that were the primary thing, then it would make perfect sense to try to get rid of capitalism by first changing these institutional forms. But if the institutional forms are themselves governed by the mode of production, and correspond to them, as Marx tried to show, then that strategy puts the cart before the horse.
And if there’s a specifically capitalist mode of production, then it’s possible to distinguish between capitalism and other societies directly in terms of its specific mode of production. And if a given society has institutional forms that differ from classical capitalism, but a specifically capitalist mode of production, then the society can be regarded as capitalist.
This was the core of Dunayevskaya’s argumentative strategy. It’s wholly different from using “state-capitalism” as a swear word or arguing that the USSR was capitalist simply because it was exploitative or a class society. There have been a wide variety of exploitative, class societies. Something else, something distinct, must be present in order to regard the society as capitalist. But if there’s a specifically capitalist mode of production, then that, rather than certain property forms or institutional forms that regulate production, can be the “something else” that’s needed. Dunayevskaya didn’t think state-capitalism was the same as classical capitalism. She argued instead that the two of them were different from all prior social formations, but like one another by virtue of the specific mode of production they had in common.
What, specifically, is this specifically capitalist mode of production? I have time to mention only a few features. In prior societies, production was just production of concrete useful products. In both forms of capitalism, private and state, it is also production of abstract wealth, wealth that exists as a universal, not only in particular concrete forms. It’s this abstract universal quality that allows it to be measured in terms of a universal equivalent––dollars, pounds sterling, rubles, etc. Moreover, the purpose of production isn’t to produce consumer goods for the exploiters, as in prior societies, but to expand this abstract wealth. And while, in prior societies, production was limited because the consumption needs and wants of the exploiters was limited—how many houses can one person live in?, how much food can he eat?—now the production of wealth is potentially unlimited because of its abstract character.
In one case, this drive toward unlimited wealth production appears as the individual’s subjective aim of profit maximization; in the other case, it appeared as the objective social compulsion to catch up with and outdistance the private-capitalist countries. In one case, the effect on the workers of this drive was Taylorism; in the other case, Stakhanovism. So there were differences, and in some contexts, they are important. But in essence, it’s one and the same drive.
Furthermore, because prior economies lacked this drive toward unlimited wealth, they were, more or less, no-growth economies and economies without substantial increases in productivity. Private and state-capitalism have in contrast grown rapidly and increased productivity rapidly. In his 1986 book, The Soviet Union Demystified, Frank Füredi strangely contends that the USSR was “singularly unsuccessful in raising the productivity of labour”; he seems to be confusing lack of efficiency with lack of productivity growth. But these are two different things. Despite the very important inefficiency of the USSR’s economy that Füredi rightly highlights, its command economy—which he describes as a system of “priority allocation”–– was pretty successful in achieving productivity growth. In fact, the USSR’s productivity growth seems to have greatly outpaced that of the US. A pretty good proxy for labor productivity is real gross domestic product per person. Between 1928 and 1989, it rose by about 250% in the US but 420% in the USSR.
The other engine of growth in capitalism, besides productivity growth, is––as Marx’s schemes of reproduction were the first to show––the reallocation of means of production. A smaller share of the means of production go into the production of consumption goods and services. That allows a greater share of the means of production to go into the production of means of production, and thus means of production are reproduced at an expanded level. Investment of the additional means of production is what enables the economy to grow.
Now, this unbalanced growth––an increase in production of means of production that outpaces the increase in production of articles of consumption––was how growth took off in the classic case, the case of Britain. It’s also how growth took off in Japan, and—as Dunayevskaya’s statistical analysis showed—it’s how growth took off in the USSR. As Sir W. Arthur Lewis, the noted development economist, remarked in 1955, “The British, the Japanese and the Russian industrial revolutions all fit into [... the same] pattern. In each case the immediate result is that the benefits of rising productivity do not go to … peasants [and] wage earners––but into further capital formation.”
Today’s meeting came about as a result of a question during Marxist-Humanist Initiative’s annual conference about Dunayevskaya’s theory of state-capitalism in contrast to Hillel Ticktin’s theory of the Soviet Union. I don’t want to say much about Ticktin, but instead focus on the theory put forward in Füredi’s book, partly because it is more familiar to many of the participants in today’s meeting. As Marcel van der Linden notes in his recent book Western Marxism and the Soviet Union, “Füredi[‘s] … analysis of the Soviet Union … was, to a large extent, inspired by the work of Hillel Ticktin. But, while Ticktin’s work remained fragmentary, Füredi offered an ambitious synthesis which tried to integrate Ticktin’s empirical observations (about waste, class, and so forth).”
There are some other differences between them. For instance, I noted at the conference that Ticktin argues that the USSR wasn’t capitalist by pointing to characteristic institutional features of capitalism that were absent in the USSR; and I remarked that this is like arguing that, since human beings are a bipedal animal, someone who has lost one or both legs must not be a human being. Füredi’s theory doesn’t have this problem. In dismissing the idea that the USSR wasn’t capitalist, it doesn’t appeal to a laundry list of features. It focuses pretty exclusively on a single claim, the claim that the Soviet bureaucracy “destroy[ed] the operation of the law of value.”
Note especially that Füredi does not appeal to some other common arguments against the idea that the USSR was state-capitalist. He doesn’t say that nationalization of property makes a society non-capitalist. He notes that “neither Marx nor Lenin regarded nationalisation itself as progressive.” Except insofar as it “enhances socialization of labour and increases productivity,” “nationalised property has no special significance.”
Nor does he argue that the USSR was a planned economy. He and Dunayevskaya are in agreement that it was not. For instance, she argued that “It has … been absolutely impossible for Stalin, Inc. to guide the productive system without sudden stagnation and crises due to the constant necessity of adjusting the individual components of total capital to one another and to the world market” and that what was called planning was merely the statified instead of the spontaneous submission to the laws of motion of capitalist production. Similarly, Füredi contends that what was called planning was “really an administrative response to forces which remain outside the bureaucracy’s control” and often a “pragmatic adaptation to the forces of spontaneity.”
As I said, Füredi’s view that the USSR wasn’t capitalist instead boils down to the claim that the law of value didn’t operate there. What I want to argue now is that this claim actually isn’t empirical; no facts about the USSR are in dispute here. Instead, everything depends on his definitions of the terms. He implicitly defines “capitalism” as a society in which the law of value operates, and he implicitly defines “operation of the law of value” as regulation of the economy through market mechanisms. If one accepts both of these definitions, then the USSR wasn’t capitalist because the law of value didn’t operate there. But if one doesn’t accept both definitions, then all that is left is the commonplace observation, which isn’t in dispute, that the USSR didn’t have a market economy.
I personally have no problem with defining capitalism as a society in which the law of value operates. Nor did Dunayevskaya have a problem with it. Indeed, this is precisely why she regarded the 1943 Russian Stalinists’ article that recognized that the law of value operated in the USSR as a tacit admission that its economy was capitalist, according to a Marxian understanding of capitalism and according to the Stalinists’ own past doctrine.
My problem is with Füredi’s definition of “operation of the law of value” as regulation of the economy through market mechanisms. As Dunayevskaya might have said, “this is true, but it is not the whole truth. Marx did not have to spend 40 years to prove that.” Füredi’s definition evidently derives from two sources. One is the work of Evgeny Preobrazhensky, a Bolshevik and member of the Left Opposition of the 1920s, which he greatly admires. The other is a paragraph in a letter Marx wrote to a friend, Ludwig Kugelmann.
Füredi basically just repeats Preobrazhensky’s understanding of the law of value, according to which it’s essentially the same thing as the so-called law of supply and demand. It operates to the extent that prices, levels of output, and allocation of resources and workers are determined by competition in markets––and only to that extent. As Füredi puts it, “Under capitalism … [p]roducts are … produced for the market … the so-called law of supply and demand … regulates the distribution of labour-time and the products of labour.”
But when “operation of the law of value” is defined in this narrow way, there’s an obvious problem with defining “capitalism” as a society in which law of value operates. The problem is that then “capitalism” no longer really exists anywhere. What we have instead are, at most, “mixed economies.”
As Preobrazhensky recognized, “in the monopolistic period of capitalism the law of value has already been partially abolished,” “…considerably undermined … owing to the powerful development of monopoly tendencies in present-day capitalism.” “When there is trustification or syndication of important branches of production …, prices systematically … deviate from value in the upward direction [and therefore] …economic necessity imposes itself in … a way which is significantly different from what happens under the law of value ….” Indeed, Preobrazhensky even argued that in Germany during World War I, “the working of the law of value in many respects was almost completely replaced by the planning principle of state capitalism.“
The undermining of the “law of value”—as he defined it—didn’t pose a big problem for Preobrazhensky, because he recognized that there could be forms of capitalism in which the law of value was partly or totally inoperative: monopoly capitalism and state capitalism. But it poses a big problem for Füredi, who implicitly defines “capitalism” as a society governed by the law of value. As I said, he has defined it out of existence.
In his letter to Kugelmann, Marx wrote that “[the] necessity of the distribution of social labor in definite proportions cannot possibly be done away with … What can change in historically different circumstances is only the form … And the form in which this proportional distribution of labor asserts itself, in the state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor, is precisely the exchange value of these products.” Füredi takes this as a definition of the law of value, but that’s more than a bit of a stretch. Marx doesn’t even use the term “law of value” or any synonym for it here. So he’s certainly not putting forward a definition of the term.
Füredi ignores the many places in which Marx does use the term “law of value” and synonyms such as “the determination of value by labour-time.” It doesn’t take much work to see that the meaning of these terms, as employed by Marx, can’t be reduced to “the distribution of labour-time … through the mechanism of the market.”. For instance, in chapter 10 of the third volume of Capital, Marx wrote,
In whatever way prices are determined, the following is the result:
(1) The law of value governs their movement …
(2) Since it is the total value of the commodities that governs the total surplus-value, while this in turn governs the level of average profit and hence the general rate of profit … it follows that the law of value regulates the prices of production.
Later in the same volume, he also reiterated that “the law of value [is not] affected” by the precise manner in which prices of particular commodities are determined. The law is not affected by the existence of prices that aren’t determined by market competition—for instance, monopoly prices and state-regulated prices––because such changes in the way in which prices are determined “does not abolish surplus-value itself, nor the total value of commodities as the source of the[ ] various price components.”
Thus, as Marx is using the term “law of value,” the question of whether this law does or doesn’t operate has nothing to do with prices determined in competitive markets. What matters is whether the products are commodities, things that are not only useful but also possess “value,” and whether the total value–of all of the commodities, taken together–is determined by the amount of labor needed to produce them. If so, then the law of value, as Marx is using the term, is operative.
Füredi realizes that his view contradicts Stalin’s own contention that the law of value operated in the USSR. He tries to dismiss Stalin’s claim by arguing that his “equation of the law of value with socialism may be dismissed as no more than an apology for the state of affairs in the Soviet Union. What he called ‘not a bad thing’”—the law of value—“was simply the unconscious and capricious operation of market forces.” Now, in response to the 1943 Russian revision of the law of value, Dunayevskaya also said that it was an apology for the actual state of affairs in the Soviet Union, “a theoretical justification of social distinctions enshrined in the Soviet constitution.” “[T]his departure from “past teaching of political economy” actually mirrors economic reality. … Instead of theory, the article presents an administrative formula for minimum costs and maximum production.”
Yet Dunayevskaya and the Russians both drew the obvious conclusion that Füredi shies away from: that the actual state of affairs in the USSR was the operation of the law of value.
Although Füredi shies away from this conclusion, he concedes that “the unconscious and capricious operation of market forces” compelled managers in the USSR to, in Stalin’s words, “conduct production on rational lines,” “improve methods of production,” “lower production costs,” and “make their enterprises pay,” i.e. generate profit. In other words, it compelled them to act just like the managers we know and love, managers of private companies. Stalin suggested, correctly, that such behavior is a consequence of the operation of the law of value. Füredi also concedes that “unless conscious regulation is established, [then, despite] the elimination of the market [,] the forces of spontaneity will continue to wreak havoc.”
This is rather strange. If there was “unconscious and capricious operation of market forces” despite the elimination of the market, if the forces of spontaneity continued to wreak havoc,” how can one maintain that the law of value didn’t continue to operate? Just what are the “forces of spontaneity”? In chapter 1 of Capital, vol. 1, Marx described the forces of spontaneity in terms of the operation of the law of value: “the labor-time socially necessary to produce [commodities] asserts itself as a regulative law of nature” in the same way that “the law of gravity asserts itself when a person’s house collapses on top of him. The determination of the magnitude of value by labour-time is therefore a secret hidden under the apparent movements in the relative values of commodities.”
Why does Füredi not recognize this? It’s because of the very narrow way he defines “law of value”: it operates only to the extent that distribution and allocation of resources are determined through competitive markets. If the determination of value by socially-necessary labor-time produces its unplanned, spontaneous consequences in a somewhat different way, because of the absence of competitive markets, then on his definition the law of value didn’t operate.
What’s at issue here is whether an economic law, or indeed a physical law, can have only one form of manifestation, or whether it can manifest itself in different ways. If the law of gravity doesn’t assert itself by causing a person’s house to collapse on top of him, but instead, by making the foundation of the house give way, does it fail to operate, or does it merely manifest itself in a somewhat different form?
* * *
I want to end where Füredi begins, on Marx’s conception of the path from capitalism to communism. I was rather shocked by what Füredi wrote about this. I’ve read similar things before, but I’m always shocked. He argues that Marx held that class differences will persist in the lower phase of communism, and that the working class will “ensure its political control over society through the ‘dictatorship of the proletariat.’”
If class differences persist, just what are we fighting for? Not to overcome capitalism. Only for “the steady growth of the productive forces” and the political power that Füredi tells us the proletarian dictatorship must ensure?
Far from holding that class differences persist in the lower phase of communism, Marx wrote explicitly in his Critique of the Gotha Program that there are “no class differences, because everyone is only a worker like everyone else.” Füredi has confused and conflated Marx’s notion of a political transitional period between capitalist and communist societies with the lower phase of communist society. What Marx wrote was, “Between capitalist and communist society lies … a political transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat.” But within communist society itself, including its lower phase, there are no class differences, nor any need for a state in the proper sense, since everyone is only a worker like everyone else.
By conflating the political transitional period between capitalist and communist societies with the lower phase of communist society, Füredi transforms the latter into a non-communist society, a merely transitional society between capitalism and communism. Is this what we’re fighting for, a society in which classes and the state persist, not a classless, stateless society? In Marx’s account, in contrast, there is no transitional society, just a political transition period that accompanies the revolutionary transformation of capitalist society into communist society. In other words, there is no in-between society that’s neither fish nor fowl.
Füredi goes so far as rule out the possibility of equality in the lower phase of communism, on the grounds that “the material foundations for equality” won’t be complete. This clearly departs from Marx’s view. He held explicitly that there will be “equal right” in the lower phase of communism. Yes, those who work more will have more income, but given “equal performance of labour,” one will be entitled to an “equal share in the social consumption fund.” In other words, those who work the same amount will be entitled to the same income.
Underlying these revisions of Marx’s text is Füredi’s belief that we can’t have a communist society in the here and how. A “period of transition,” he writes, is “needed to build up the material prerequisites for communist society.” “Until humanity has overcome want, classes will persist.” In other words, until productivity has increased to the point where the distributive principle is “from each according to his ability, to each according to his needs,” we’re doomed to live under state repression, endure inequality and toil within class society, all for the sake of building up the productive forces.
But Marx envisioned an end to class society––a classless lower phase of communist society––well before the point where technological change (and the overcoming of the many divisions of labor) made it possible to distribute “from each according to his ability, to each according to his needs.” That distributive principle and the higher phase of communist society to which it corresponds are obviously a long way away; but the lower phase need not be. The immediate task today is to overcome capitalism and establish the lower phase.
 Raya Dunayevskaya, Marxism and Freedom: From 1776 to Today. Amherst, NY: Humanity Books, 2000 (1958), pp. 137–8.
 F. Forest (pseudonym for Raya Dunayevskaya), “The Nature of the Russian Economy,” The New International; vol. XII, no. 10, Dec. 1946, pp. 313–17 and The New International, vol. XIII, no. 1, Jan. 1947, pp. 27–30. Both available at https://www.marxists.org/archive/dunayevskaya/works/1946/statecap.htm.
 Karl Marx, Capital: A Critique of Political Economy, vol. 1. London: Penguin Books 1976 (1867), p. 779.
 Frank Füredi, The Soviet Union Demystified: A Materialist Analysis. London: Junius Publications, 1986, p. 104.
 The computations are based on the dataset compiled by the late Angus Maddison, available at http://www.ggdc.net/maddison/maddison-project/home.htm.
 W. A. Lewis, The Theory of Economic Growth. Homewood, IL: Richard D. Irwin, 1955, p. 235.
 Marcel van der Linden, Western Marxism and the Soviet Union: A Survey of Critical Theories and Debates Since 1917. Leiden and Boston: Brill, 2007, p. 288.
 Füredi, op. cit., p. 101.
 Ibid., pp. 12–13.
 Forest (Dunayevskaya), “The Nature of the Russian Economy,” op. cit; vol. XII, no. 10, Dec. 1946, p. 317 and The New International, vol. XIII, no. 1, Jan. 1947, p. 30.
 Füredi, op. cit., p. 113.
 Ibid., p. 88.
 E. Preobrazhensky, The New Economics, translated by Brian Pearce. London: Clarendon Press, 1965, pp. 140, 160, 152, 153.
 Letter of July 11, 1868, available at https://www.marxists.org/archive/marx/works/1868/letters/68_07_11-abs.htm. Emphases in original.
 Füredi, op. cit., p. 88.
 Karl Marx, Capital: A Critique of Political Economy, vol. 3. London: Penguin Books, 1981 (1894), p. 280, emphasis added.
 Ibid., pp. 985.
 Füredi, op. cit., p. 91.
 Raya Dunayevskaya, “A New Revision of Marxian Economics,” American Economic Review, vol. 34, no. 3, Sept. 1944, pp. 534, 537. Available at http://www.marxisthumanistinitiative.org/a-new-revision-of-marxian-economics.
 Füredi, op. cit., p. 91. All quoted material except for the first quotation is Stalin’s text, as quoted by Füredi.
 Ibid., p. 101.
 Marx, Capital, vol. 1, op. cit., p. 168.
 Füredi, op. cit., p. 9.
 Ibid., pp. 9–11.
 Karl Marx, Critique of the Gotha Programme, part 1. Available at https://www.marxists.org/archive/marx/works/1875/gotha/ch01.htm.
 Karl Marx, Critique of the Gotha Programme, part 4. Available at https://www.marxists.org/archive/marx/works/1875/gotha/ch04.htm.
 Füredi, op. cit., p. 9.
 Marx, Critique of the Gotha Programme, part 1, op. cit.
 Füredi, op. cit., pp. 9–10.
 Marx, Critique of the Gotha Programme, part 1, op. cit.