Brexit, Trumpism, Sanders, and the Decrepit State of Capitalism: Against Political Determinism

by Michael Rectenwald

Published simultaneously in With Sober Senses and CLG News.


There’s a basic article of faith in leftist thought, held especially dearly by most among the U.S. left. It is so entrenched and so seldom challenged that it has attained the status of myth, an unquestioned origin story on par with the Book of Genesis, as the latter must have been regarded within Christendom during the Middle Ages.

The myth goes like this: During the 1980s, Ronald Reagan and Margaret Thatcher, two arch right-wing and highly potent politicians, rose to power in their respective nations, the U.S. and the U.K. They thereafter began to institute what was for the vast majority a vile and destructive political and economic scheme: “neoliberalism.” Previous to the instalment of this neoliberal scheme, the working class had experienced relative economic improvement, and capitalists seemed happy too (as if we care). But suddenly, and seemingly without cause (although the failure of Keynesianism was apparent in the unprecedented stagflation of the 1970s), these evil political twins, prompted by wizards who formalized the approach, introduced the nefarious ideology of neoliberalism to the world. As cruel and heartless representatives of the capitalist class (which, indeed, they were), they and their supporters caused the Fall from the supposed Paradise of Keynesian reformism that had preceded them. In this mythological version of reality, neoliberalism is understood merely as a set of essentially unwarranted and unusually brutal policies, an ideological and political formation that was hatched in the brains of evil masterminds conspiring in right-wing think tanks, concocted to dupe and punish the vast majority for the benefit of the rich and powerful.

This narrative sounds cartoonish or religious in character, but only because it is – not because I have made it so. It is a typical leftist personification of world-historical forces in lieu of an actual analysis within political economy. It amounts to what I have elsewhere called “political reductionism,” which is similar to what Andrew Kliman has referred to as “political determinism.” Kliman describes political determinism as such: “They [Keynesians and social democrats] think that the capitalists [and/or their political representatives] control capitalism––not the other way around––so that the system can become something it’s not once different people with different priorities assume control of it.” Thus, if only such people as Reagan and Thatcher had never been elected, or better yet, had never been born …
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Post-Work: Zombie Social Democracy with a Human Face?

by Andrew Kliman, author of The Failure of Capitalist Production: Underlying Causes of the Great Recession (Pluto Books, 2012) and Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency (Lexington Books, 2007).

This article was originally published in New Left Project, on Sept. 13, 2013

The vision of a “post-work” society––one in which the fruits of technological progress take the form of reduced work-time rather than more consumer goods and services––has recently enjoyed a measure of renewed interest and support in parts of the left. There’s the essay by John Quiggin, a social-democratic Keynesian economist and author of Zombie Economics; articles by Peter Frase and Chris Maisano in Jacobin magazine; and, from a somewhat different perspective, David Graeber‘s recent thoughts on “bullshit jobs”.

Post-work is certainly not a novel idea, but it’s a good one… sort of. In 2011, the average consumption of the 80-plus percent of people who live outside of the “high-income” countries was only eight percent of the U.S. average, so the urgent priority for most of the world’s people is more consumption, not less work.[1] And why shouldn’t individuals choose the form––less work or more stuff––in which they personally benefit from technological progress? Different strokes for different folks. Is it really the job of the left to become the shadow nanny state?

That said, reduced work-time is hard to argue against. And I wouldn’t want to argue against it even it if were easy.

But why is post-work catching on at this particular moment, when lack of work is the immediate and intractable problem faced by tens of millions of workers in Europe and the U.S.? Quiggin tells us that the renewed interest is the result of Robert and Edward Skidelsky’s promotion of a 1930 essay in which John Maynard Keynes suggested that a 15-hour workweek would become feasible by about 2030. But the underlying goal is to give social democracy a human face—for even its proponents find it rather desiccated in its received form. Quiggin recognizes that

if Keynesian social democracy is to regain the dominant position it held from the end of Keynes’s own lifetime until the ’70s, it must offer more than a technocratic lever to stabilise the economy. We need a vision of a genuinely better society.

Maisano expresses such a vision quite nicely. In a passage I wish I had written, he says:

The one-sided focus of most Marxists and socialists on distributional questions has obscured the fact that the animating principle of the Left is not so much equality, but rather freedom—freedom from alienating work and freedom to use our time and creativity for our own self-directed ends. Socialism does not equal the roughly equal distribution of stuff; the martyrs of the labour movement didn’t give up their lives so that everyone could have the right to buy an iPhone or a plasma screen TV, or to waste their lives working at crap jobs.

However, the problem is that this vision is being used to entice us to rally round the same old social-democratic technocratic lever-pulling. To make the vision a reality, we supposedly have to start with what Quiggin calls “[t]he first step … the social democratic agenda associated with post-war Keynesianism”––guaranteed minimum income, more social services, allocation of investment funds on the basis of “social need rather than market signals of price and profit,” and so on.

The problem here is that Keynesianism and social democracy don’t work. They failed in the global economic crisis of the 1970s and they failed when Mitterrand’s government tried to implement them in France shortly thereafter. These events killed them off––for good, I thought. But since the latest global crisis can’t easily be blamed on Keynesianism and social democracy, they’ve recently risen from the dead (zombie-like, as Quiggin might say).[2]

Mitterrand’s experiment is particularly important to revisit. It definitely wasn’t your standard post-war social-democracy. I was very excited about it at the time. In coalition with the Communists, Mitterrand’s Socialist Party came to power in the spring of 1981, promising rapid economic growth and reduced unemployment. The new government nationalized a lot of industry and virtually the whole of France’s financial sector became directly government controlled. New laws strengthened the power of the trade unions. The minimum wage was increased several times; by the end of 1982, it had risen by 39%. Rent controls and new taxes were imposed, including a wealth tax and a maximum 75% tax rate on income. Private healthcare was curtailed. Significant capital controls to prevent the outflow of funds from France were already in place and the new government strengthened them further.

And in order to solve the country’s serious unemployment problem, the government engaged in fiscal stimulus, the central bank pursued an easy-money policy, and (proponents of reduced work take note) measures to reduce working time, without cutting pay, were implemented. Specifically, paid holiday time was raised from four weeks a year to five, and the workweek was cut from 40 hours to 39 as the first step in a plan to reduce it to 35 hours by 1985.

These are the sorts of “transitional” measures that folks like Quiggin and Maisano dream about. But they just didn’t work. They turned out to be a transition to nothing but “socialist austerity” and the French Socialist Party’s abrupt turn to free-market economics a couple of years later.

Despite the stimulative policy and the reduction in working time, economic growth remained very weak and the unemployment rate kept rising. Indeed, outside the government sector and those sectors of the economy dominated by state-owned monopolies, employment fell by almost 4% between 1981 and 1984, while the number of hours worked fell by more than 8%. And inflation kept rising even as it was abating in most other industrialized countries, which is something an export-dependent economy like France’s could ill afford.

This debacle had three main sources:

• The new government and its policies spooked businesses and the financial markets. Despite tightened capital controls, there was substantial flight of capital from France. There was also a speculative attack on the currency that began even before Mitterrand was elected, and France’s stock market plummeted by about 20% in May and June 1981 and kept falling. When the government executed its about-face two years later, the market had declined by about 40%.

• The combination of rising inflation, increased domestic spending, and recession abroad caused French exports to fall and import spending to rise, and this imbalance produced a currency crisis that the central bank and capital controls could not contain, even when the government began to back away from its more ambitious reforms. France’s currency was devalued three times; by the end, its value had fallen by 32% against the German mark.

• French companies’ labour costs rose as a result of the lengthening of holiday time, shortening of the work week, and minimum wage increases. This cut into profits, partly for the obvious reason and partly because French exports became less competitive. As a result of the reduction in profitability and, perhaps, the stock-market plunge, productive investment fell. And the declines in investment and demand for French exports erased the temporary stimulative effect that the government’s fiscal and monetary policies would otherwise have had.

This wasn’t supposed to happen. The reduction in working hours was supposed to create more jobs due to “work sharing.” And according to the trickle-up economics underlying government policy, minimum wage increases were supposed to fuel consumption spending and thereby stimulate productive investment, even as they cut into profits.

The Mitterrand government’s policies failed because they were based on a serious misunderstanding of how capitalism operates. Unfortunately, similar misunderstandings underlie recent advocacy of post-work society, which proceeds as if the goal can be achieved within capitalism, by making the latter into something it’s not.

Above all, the new post-work advocates evince a similar failure to appreciate the centrality of profit to the capitalist system. In his piece “Against Jobs, For Full Employment,” Frase quotes and endorses the following bit of wisdom from Michał Kalecki, the co-founder of “Keynesianism”:

under a regime of permanent full employment, the “sack” would cease to play its role as a “disciplinary” measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But ‘discipline in the factories’ and “political stability” are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the “normal” capitalist system.” [emphasis added]

Come again? Profits are going to be higher even as discipline in the factories is eroded and strikes break out all over the place? Kalecki is often identified as a Marxist economist, but he seems to have been clueless about how profit is created.[3] But he then tells us that profits don’t matter much anyway; the goal of business leaders isn’t to maximise their profits, but to maintain their class rule. To what end?

Graeber has almost identical illusions. Why, he asks, are more and more people at work who don’t need to be, “salaried paper-pushers” who spend most of their working hours “organising or attending motivational seminars, updating their facebook profiles or downloading TV box-sets”? Since this isn’t profitable for the companies that employ them, “[t]he answer clearly isn’t economic.” Instead, “the only explanation” for why companies waste money employing a whole class of people to do next to nothing  is that the system operates this way because it’s “perfectly suited to maintaining the power of finance capital.” Again, to what end?

And just because a prosaic economic explanation for the existence of these “bullshit jobs” isn’t immediately apparent, that is no warrant for rushing to the conclusion that the explanation is “clearly” non-economic, any more than the existence of puzzles that haven’t yet been solved by evolutionary theory “clearly” warrants an embrace of creationism. I’m no expert on this matter, but even I can come up with two possible economic explanations that might help account for the existence of “bullshit jobs”––principal-agent problems and the theory of “labour as a quasi-fixed factor.” (I’m resorting to unintelligible jargon because what’s relevant here are not the explanations themselves, but the fact that economists have proposed economic explanations of phenomena that seem rather similar.)

Quiggin begins his essay by telling us that he became an economist “when utopian ideas were everywhere, exemplified by the Situationist slogan of 1968: ‘Be realistic. Demand the impossible.’” He, however, was different. He has always “preferr[ed] to think in terms of the possible.” The problem is that it just ain’t so.

A key plank of his zombie Keynesian agenda is a guaranteed minimum income. He proposes that everyone be guaranteed a level of income “significantly better than poverty[-level],” and that this guarantee be “unconditional.” In other words, everyone will be entitled to adequate income even if they do nothing. They won’t even have to attend motivational seminars, or kill time updating their facebook profiles or downloading TV box-sets!

But what would happen if this proposal were implemented? Given the nature of work in our society––about which the proponents of post-work rightly complain—so many of us would jump at the chance to escape the workplace that profit would disappear, production would grind to a halt, and there would be no minimum income left to guarantee.

Quiggin is aware of this problem. His response is that “the production of market goods and services needs to become pleasant enough that those doing it don’t mind supporting others who choose not to.”

Right. And how is that going to happen under capitalism? Isn’t there an economic motive––a profit motive––behind the persistence of alienated labour, speedup, unsafe working conditions, thankless jobs, meaningless jobs, and all the rest? Or are they just more ruses, of the kinds identified by Kalecki, Frase, and Graeber, that lack any economic rationale but enable a power-crazed ruling class to stay in power?

The basic flaw in the thinking of Kalecki, Graeber, and the zombie social democrats now, and of the Mitterrand government three decades ago, is political determinism. They think that the capitalists control capitalism––not the other way around––so that the system can become something it’s not once different people with different priorities assume control of it.

I on the other hand think that historical experience and a bit of reflection show that the system has a “logic” of its own, so that what must be replaced is the system itself, not just the current personifications of it. Technological possibilities notwithstanding, there isn’t going to be much progress toward a post-work society, or indeed a lot of other good stuff, until we grapple seriously with the fact that capitalism operates as it does because of its autonomous logic, not because of the specific priorities of those who happen to be running the system at any particular moment. If we don’t deal with this problem head-on, the inspiring post-work vision will simply degenerate into a slogan used by wannabe personifications of capitalism to win support for their efforts to replace the current personifications.

[1] Author’s calculations based on World Bank data for population and household final consumption expenditure at purchasing power parity (in constant international dollars of 2005). Source: World Development Indicators, The World Bank.

[2] I’ve discovered that I’m not the first to employ the concept of zombie social democracy. John Passant and Dr­_Tad beat me to it.

[3] It’s created by workers––if and when they do what they’re told, in the way they’re told, and as fast as they’re told, not when they’re ignoring instructions, taking long breaks, sabotaging production, working to rule, and going out on strike. (I haven’t forgotten about demand; there’s no demand for products that don’t exist because workers haven’t produced them.)

Video: The Incoherence of “Transitional Society”

The Incoherence of “Transitional Society” as a Marxian Concept

 by Andrew Kliman


Kliman gave this talk to the Workers’ and Punks’ University May Day School in Llubljana, Slovenia, on April 27, 2013. The text of the talk is published below. The video, which includes the hour-long discussion that followed the talk, is here.

* * * * *

First, a comment on the title of this talk. Titles have to be short, so I’ve used the phrase “Marxian concept,” but that’s ambiguous. What I mean is, “of Marx, in the context of Marx’s thought.” I’m not saying that proponents of the concept of a “transitional society” can’t be Marxists. The question of who is and isn’t a Marxist doesn’t interest me.

I want to thank Workers’ and Punks’ University for inviting me here, and for all of your work to the May Day School possible. And I want to thank you for publishing “Two Peas in a Pod,” a critique of positions on the Eurozone crisis put forward by Costas Lapavitsas and Michel Husson that Anne Jaclard and I wrote. We are pleased that people in Greece, to whom we sent the English version, liked it so much that they immediately translated and published it in Greek. So perhaps it may contribute a bit to the fightback there against the efforts to solve the crisis on the backs of working people.

We’re also pleased that you published “Two Peas in a Pod,” despite the fact that its political implications are controversial among you. You even suggested that, in my talk here this evening, I focus on what might be a related issue, the notion of a so-called transitional society between capitalism and socialism. Such solidarity and respect for conflicting ideas is extremely rare in our experience. We’re accustomed to having our views suppressed, and to lies and personal vilification. So we’re very grateful.

WPU video

Since the theme of this May Day School is accumulation, I want to begin by discussing the concept of “primitive socialist accumulation” put forward by the Bolshevik economic thinker Evgeny Preobrazhensky, in his 1926 book The New Economics. At the time, he was part of the Left Opposition to Stalin. In his view, the economy of the Soviet Union at that moment was partly a commodity-producing economy and partly a socialist economy. He regarded part of it as socialist because it was state-owned and controlled, and because it used planning, rather than “spontaneous” market forces, to determine prices and levels of output, and to allocate resources and workers. The relationship between the two parts of the economy was an antagonistic one in his view; there was a “struggle of the socialist planning principle against the spontaneity of commodity production.”

Hence, a fully socialist economy was conceived of as a totally planned economy with total state ownership and control of the means of production. What was needed to achieve this, Preobrazhensky thought, was a process of transition, in which the state-owned, planned part of the economy became an ever-larger part, crowding out the market-regulated, private part of the economy until it disappeared. The policy of “primitive socialist accumulation” that Preobrazhensky proposed was an effort to speed up this transition. Rapid accumulation of state capital, investment in production, would enlarge the state sector of the economy. Moreover, the private sector would be weakened because Preobrazhensky’s plan called for the “alienati[on of] part of the surplus product of [the] private economy for the benefit of the socialist accumulation fund.” In other words, the expansion of the state sector would take place at the direct expense of the private sector, which would be forced to fund some of that expansion. Originally, Preobrazhensky called this a process of “exploitation.”

Something like this was put into effect by Stalin two years later. Preobrazhensky, and Left Oppositionists generally, regarded Stalin’s new policy as the triumph of their ideas. And in terms of basic theoretical concepts, what Preobrazhensky put forward was even less distinctive than his policy proposals. What I find most troubling and problematic about his ideas are aspects that he doesn’t even argue for. He took these aspects for granted, because they were commonly accepted aspects of the Marxian economic thinking of his time.

In particular, his proposals for the transition from capitalism to socialism are based on the idea that more state planning, ownership, and control is progress toward socialism, which in turn rests on the fundamental equation of socialism with state planning, ownership, and control. These notions were very common. And despite all that we have had to learn by means of experience, they still remain very common.

Everyone is entitled to define socialism however he or she wishes––including Karl Marx. The notion that socialism equals state planning, ownership, and control was alien to Marx’s conception of socialism. More precisely, it was alien to his conception of what he called communist society, both its initial phase and its higher phase.

Let me first address the issue of state ownership and control.

Of course, Marx called for the abolition of private property. But what makes property private, in his view, is not individual ownership, but the separation of the direct producers, workers, from the property they produce. Thus, in the German Ideology, he and Frederick Engels noted that “ancient communal and State ownership … is still accompanied by slavery,” and they referred to the communal ownership of slaves as “communal private property” (emphasis added).

In volume 2 of Capital, Marx wrote, “The social capital is equal to the sum of the individual capitals (including … state capital, in so far as governments employ productive wage-labour in mines, railways, etc. and function as industrial capitalists.” Similarly, in his notes on Adolph Wagner’s critique of Capital, Marx wrote that “[w]here the state itself is a capitalist producer, as in the exploitation of mines, forests, etc., its product is a ‘commodity’ and hence possesses the specific character of every other commodity.”

Most importantly, in volume 1 of Capital, he implicitly addressed the issue of what would happen if the state’s role as capitalist producer expanded to such a point that it completely crowded out other capitalists. He argued that the tendency toward monopoly, the process of centralization of capitals, “would reach its extreme limit … [i]n a given society … only when the entire social capital was united in the hands of either a single capitalist or a single capitalist company.” As Raya Dunayevskaya noted, Marx’s text implies that such a society “would remain capitalist[;] … this extreme development would in no way change the law of motion of that society.” Engels thus seems to have been stating Marx’s view as well as his own when he wrote, in Anti-Dühring,

“state ownership … does not do away with the capitalistic nature of the productive forces. … The more [of them the state takes over], the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with.”

Now let me turn to the issue of planning. Preobrazhensky regarded planning and “the law of value” as opposites. This, too, was a rather common perspective, and it remains so.

As he used the term “law of value,” it was basically the same thing as the so-called law of supply and demand. It operated to the extent that prices, levels of output, and allocation of resources and workers were determined by competition in markets––and only to that extent. However, the equation of planning with socialism and market determination with capitalism didn’t really work. Preobrazhensky, like other thinkers who shared the same theoretical framework, was acutely aware that capitalism itself was becoming more planned, and thus less regulated by “the law of value.” This is how he characterized the German economy during World War I:

“The regulation of the whole of capitalist production by the bourgeois state reached a degree unprecedented in the history of capitalism. Production which formally remained commodity production was transformed de facto into planned production in the most important branches. Free competition was abolished, and the working of the law of value in many respects was almost completely replaced by the planning principle of state capitalism.”

Thus, in Preobrazhensky’s view, the transition from capitalism to socialism involved the further extension of a tendency that was already operating under capitalism, the tendency to replace “the law of value” with planning. So actually, according to this view, it’s not correct, strictly speaking, to distinguish between capitalism and socialism in terms of the law of value vs. planning. Thus the distinction between the two systems reduces to the other distinction, the distinction between private and state ownership and control.

In any case, his very limited conception of the “law of value” is quite different from Marx’s. In volume 3 of Capital, Marx argued that “the law of value [is not] affected” by the precise manner in which prices of particular commodities are determined, because a change in the way in which they 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 how prices of individual commodities are determined. 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.

Marx recognized that socialist production must be planned. But planning by itself was not the central issue. He wrote in vol. 1 of Capital that “[t]he veil is not removed from the … process of material production … until it becomes production by freely associated [people], and stands under their conscious and planned control.” So first, there is the crucial issue of whether the producers are freely associated, an issue that was almost completely absent from Preobrazhensky’s book. But even if we restrict our focus to planning, note that Marx indicates that production must stand under the conscious and planned control of the direct producers. The issue here is whether the contents of the plan are determined by the producers themselves or whether they are determined by economic laws and imperatives over which the producers have no control. When the law of value in Marx’s sense is operative, “the labour-time necessary to produce [the products] 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.”

In 1943, Dunayevskaya challenged the idea that concentration of all capital in the hands of the state makes it possible to raise workers’ standard of living. The problem, she argued, is that the determination of products’ values by the labor-time socially necessary for their production will assert itself, regardless of what the planners want and regardless of what they put into the plan. If the state tries to raise workers’ standard of living, then “the cost of production of a commodity rises above the cost [in] the surrounding world market. Then … [p]roduction ceases because the commodity cannot compete with a cheaper commodity from a value-producing economy, or … the society … will ultimately be defeated by the more efficient capitalist nations in the present form of capitalist competition[,] which is total imperialist war.” To compete effectively in the context of “the world market, governed by the law of value,” planning must be “governed by the necessity to pay the laborer the minimum … and to extract from him the maximum surplus value.” As long as that is the case, “that is how long capitalist relations of production exist, no matter what you name the social order.” [1]

The economic policies that Preobrazhensky proposed 87 years ago, for a country that no longer exists, are of course not of any particular interest to us now. But his ideas regarding the transition from capitalism to socialism do remain of interest, for another reason. They are an example of the view that political changes and/or legal changes are the determining factors in social change. This continues to be a very widely held view, among Marxists, anarchists, autonomists, and so on.

Paresh Chattopadhyay—an important Marx scholar—has argued, I think correctly, that Preobrazhensky’s concept of transition makes legal changes the determining factor. It does so because it equates capitalism with a specific form of ownership, and socialism with a different form of ownership. But forms of ownership are legal relations. In Preobrazhensky’s book, the transition from capitalism to socialism is therefore conceived as the transition from one legal form of ownership to another legal form of ownership. The change in legal form produces a change in the character of the society, and a change in the character of its production relations, and it produces these changes automatically, or more precisely, as a matter of definition.

As Chattopadhyay puts it,

Preobrazhensky conceives the transitional economy purely in terms of changes in property relations (forms).  … capitalism is supposed to change automatically into socialism along with it. … In other words, ownership relations (forms) are taken as an independent variable in the process of social transformation. Preobrazhensky thereby seems to be suffering from what Marx had long ago denounced as ‘metaphysical or juridical illusion’ in his well-known critique of Proudhon. [2]

It is interesting that Preobrazhensky addressed this issue at one point in his book. He posed the question, “Perhaps the replacement of private ownership by social ownership on all the commanding heights is merely a formal juridical act which involves no change in the essence of the system?” But he asked this only rhetorically. Evidently he regarded the question as too preposterous to take seriously.

Nowadays, the idea that state ownership and control of the means of production is sufficient to “change … the essence of the system,” that it constitutes socialism, is much less popular than it was in Preobrazhensky’s time, for obvious reasons. But somewhat similar ideas remain popular.  For instance, in the midst of the global financial crisis, some leftist economists called for state control or nationalization of the financial system.

Rick Wolff called for state control and banks managed by workers.  According to Wolff,  “workers who also served on their own boards of directors would make different decisions … than traditional boards elected by shareholders”; “[w]orkers’ … well-being … would displace individual enterprise profits … as the prevailing objective.” Fred Moseley and John Weeks favored nationalization of finance. Moseley argued that if the state is in charge of the banks, they can be transformed from institutions interested in maximum profit into institutions that pursue public policy objectives. Thus “[t]he nationalization of banks … could be an important step on the road to socialism.”

But there cannot be socialism in one country. What results when you try to have socialism in one country is state-capitalism, a state-run system that is still embedded in the global capitalist economy, and which is still locked into a competitive battle with capitals elsewhere in the world.

A state-run bank is still a bank. It still has to obtain funds before it can lend them out, and to do so, it must provide a decent return to those who supply it with funds. (This is true of a worker-run bank as well.) But this means that its investment decisions cannot be based on what would enhance workers’ well-being or on public policy objectives. If enhancement of workers’ well-being or fulfillment of public policy objectives would significantly reduce its profitability in relationship to the profitability of banks with which it competes—and it is hard to imagine circumstances in which this would not be the case—a bank that would dare to pursue these goals would find that lenders and investors would not supply it with the funds it needs in order to compete successfully, or even to remain solvent. In order to survive, a state-run (or worker-run) bank must pursue the goal of profit maximization, just like every other bank.

The belief that political changes and/or legal changes are the determining factors in social change also takes a number of other forms that are very popular today. It seems that most people want to see another world, but think it can come about, if at all, by voting it in, or by workers becoming their own bosses, or by paying everyone the same amount, or by means of whatever political, legal, and administrative measures they have been led to believe can accomplish the redistribution of power and wealth and really make their lives better.

And, on the anticapitalist left, the typical view of how to transcend capitalism can be summarized as follows. First, you change people’s consciousness, or their consciousness changes through their participation in new forms of organization. The change in consciousness allows us to increase our side’s political power, to the point where we take control, either through elections or by seizing power.  And once our side has political power, we can then change the nature of the economy and the state simply by deciding to put “people before profit” and implementing what we decide. We need the right political forms, forms of organization, to accomplish this—and there’s a whole lot of debate about what are the right forms of organization. But if we do have the right forms of organization, then overcoming capitalism is a simple matter.  We decide, through these forms of organization, what should be produced and what shouldn’t, we decide how to distribute resources and goods fairly, we decide on other social priorities, and then we just put these decisions into effect.

This picture of social change is in the minds of almost the whole of the anticapitalist left, from vanguardists to anarchists.

Unintended consequences

The obvious problem that is overlooked here is the problem of unintended consequences. If you make a decision and implement it, you can’t assume that the result, the consequences, will be what you expected or intended. As the saying goes, the road to hell is paved with good intentions. After all, no one—including Stalin—intended to turn the USSR into the monstrosity it became.

Now, if the unintended consequences are just mistakes, it might be possible to correct them over time simply through experimentation, doing things a bit differently and seeing if that improves matters. But experimentation is no solution if the unintended consequences are the result of the fact that the economic laws of capitalism continue to govern your supposed new society. If “the labour-time necessary to produce [the products continues to assert[ ] itself as a regulative law of nature,” if you have to pay workers the minimum and extract from them the maximum—despite your intentions–in order to compete effectively, there will be a continual stream of unintended consequences that you won’t be able to eliminate through experimentation. A country that tries to improve the standard of living of its workers too much will not be competitive. State-run banks that try to pursue public policy objectives instead of maximizing profit, and worker-run banks that try to enhance the workers’ well-being instead of maximizing profit, will lack the funds to do so. And so on.

The problem here isn’t that you’ve made mistakes. So experimentation, correcting mistakes, won’t solve the problem.  The problem is rather that, despite your good intentions, and despite the new priorities, new forms of organization, new forms of ownership, new laws, and the new name you give your society, it remains capitalist. It remains capitalist because the economic laws that govern capitalism continue to govern your society. And they continue to govern your society because new priorities, new forms of organization, new forms of ownership and so forth are not enough––by themselves––to overcome the economic laws of capitalism.

And this, above all, is why I think we need Marx today.  It is commonly said that he was a theorist of capitalism, not of socialism. But a lot of his work pertains, directly or indirectly, to the concept of a new society. And, to some degree, he worked out what would actually be needed in order to transcend capitalism. We ignore this legacy at our peril.

Specifically, Marx battled Proudhonism and similar tendencies on the Left throughout his adult life. He didn’t disagree with their ultimate goals. He shared those goals. But he fought a never-ending battle against these tendencies because he thought that their 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.  And the reason why they wouldn’t work, he argued, is that these supposed alternatives to capitalism all try to get rid of capitalism without getting rid of its mode of production.

For example, he criticized John Gray’s proposal to eliminate money. Gray wanted there to be  a national bank that would issue certificates denominated in labor-time. Workers would give the products they produced to the bank. In return, the bank would give them certificates, which they could use to obtain other products held by the bank. If you handed over products that took you a week to produce, for instance, you would get certificates that allowed you to withdraw commodities that other workers took a week to produce.

Against this, Marx argued that, to really eliminate money, you have to eliminate exchange-value, which requires that you eliminate commodities, which requires that you eliminate commodity production, which requires that labor be directly social—in contrast to existing society, where private labor becomes social indirectly, through the exchange of its products. If labor were directly social, “exchange-value would not be turned into price; but neither would use-value be turned into exchange-value and the product into a commodity, and thus the very basis of bourgeois production would be abolished.” The problem was that abolition of the bourgeois mode of production isn’t what Gray had in mind. He had in mind a system in which “goods are … produced as commodities but not exchanged as commodities.” In other words, Gray’s proposal wouldn’t work because it tries to change the capitalist system by eliminating its effects, but not the causes of these effects.

When he summarized these and similar criticisms in general terms, Marx typically did so by stating that changes in relations of production are the determining factor; changes in political and legal forms, and changes in consciousness, are the consequences of the changes in the relations of production. For instance, in his Preface to the work in which he criticized Gray, Marx wrote,

“The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness.  …  The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.

He reaffirmed this in the first chapter of Capital (see note 34).


Such statements are often construed as economic determinism, or they are said to deny the importance of subjectivity and human agency. I don’t think that’s the case. After all, it is people who have to change the relations of production, and this is political activity, conscious activity. I think Marx’s point is rather this. First, changes in political and legal forms, and changes in consciousness, are not themselves changes in the relations of production. Second, if only they are changed, not the relations of production, the changes will not succeed in changing the character of the society.

I think Marx’s most important thoughts about this issue are those in his Critique of the Gotha Program. This Critique is important partly because it contains a mature statement of his view, eight years after Capital was published, and one of the more developed expressions of his view. It is also important because it is explicitly about the respective roles played by the mode of production, and by political and legal relations, in the transformation of capitalist society into socialist (“communist”) society. And it is important because it is a political document. Marx was opposing the political program of the new united German Social Democratic Party, and thereby opposing the unification. And the primary basis of his opposition was the Program’s call to eliminate a key effect of capitalism, “unfair” income distribution, without getting rid of its causes.

The core of his whole argument is that a society’s notions of justice, legal relations, and income distribution depend on and correspond to its mode of production. With regard to rights or law (das Recht), he comments that “Right can never be higher than the economic structure of society and its cultural development conditioned thereby.” With regard to legal relations,” he writes, “Are economic relations regulated by legal conceptions, or do not, on the contrary, legal relations arise out of economic ones?” He also criticizes the Gotha Program for not “treating existing society … as the basis of the existing state” and the future society as the basis of the future state, but instead “treat[ing] the state … as an independent entity.”

And with regard to the Gotha Program’s call for “fair distribution” of income, Marx responds that the “treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution” is “[v]ulgar socialism … taken over from the bourgeois economists.” He also writes,

The capitalist mode of production … rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of … labor power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one.

Keep in mind that, for Marx, “co-operative property” is not a matter of legal title. He says here that “legal relations arise out of economic ones,” and he recognized, as I noted earlier, the existence of “communal private property.”

As I understand the Critique of the Gotha Program, Marx argues that, in order for the means of production to be the co-operative property of the workers themselves, exchange of products must be eliminated, which requires the elimination of value and value production, which in turn requires that labor become directly social, in the sense that a hour of one worker’s labor is equal to an hour of every other worker’s labor. And this equality of labors, again, is not the result of a legal decree, but of changes in the economic foundation of society.

I don’t have time to explicate or defend this reading here. If you wish, I can do so in the discussion. What I want to turn to now is something that Marx didn’t say in the Critique of the Gotha Program. Here’s what he did say:

Between capitalist and communist society lies the period of the revolutionary transformation of the one into the other. There corresponds to this also a political transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat. [emphases added]

The political transition is the transition from the capitalist state, which enforces the rule of the minority over the majority, to a workers’ state, which enforces the rule of the majority over the minority, to the situation in which there is no state. Once capitalist society has been transformed into socialist society (i.e., the initial phase of communism), there are no social classes, and thus no need for a state to enforce class rule. The state dies out, withers away.

So Marx does refer to a transition, but not to a transitional society. There is the revolutionary transformation of capitalist society into communist society, and a corresponding political transition period. The myth that he was a proponent of a transitional society is based on confusing “transformation” and “transition.” This confusion may have started with Lenin. In his book The State and Revolution, Lenin quoted what Marx wrote, and then commented,Now the question is put somewhat differently: the transition from capitalist society … to communist society is impossible without a ‘political transition period’” (emphasis added).

But “transformation” and “transition” are different concepts. A transformation is a radical change. One thing becomes another thing. That is all. How that change occurs is not part of the concept of transformation itself. And the change doesn’t necessarily take place by means of a transition. If I flip the light switch, I transform a light room into a dark room.

In any case, I don’t think the idea of a transitional society—an intermediate society in between capitalism and  socialism—makes any sense within the context of Marx’s thought. It does make sense given some other conceptions of capitalism and socialism, but not Marx’s. For instance, the idea of a transitional society makes perfect sense if one thinks, as Preobrazhensky did, that capitalism is private ownership while socialism is state ownership. In that case, there is indeed a third kind of society in between them, in which there’s both private and state ownership. And the move from capitalism to socialism is thus a transition, from less to more to complete state ownership.

And there are other conceptions of social change in which the idea of a transitional society also makes perfect sense. For instance, one idea that has recently been popular is that the new society is the completed process of occupying space and establishing new forms of organization on occupied space. On this conception, there is again a third kind of society in between capitalism and the new society, a society with elements of both of them, and the move from capitalism to the new society is again a process of transition––in this case, the quantitative increase in occupied space and new forms of organization.

But I don’t think the idea of a transitional society in between capitalism and  socialism is coherent as a Marxian concept.  A transitional state in between the capitalist state and socialist non-state makes perfect sense as a Marxian concept. But a transitional society does not.

The difference has to do with the difference I have been emphasizing in this talk––between political and legal forms, on the one hand, and the mode of production, the economic foundation of society, on the other hand. In Marx’s view, changes in political and legal forms are produced by changes in the economic foundation of society, not vice-versa.

Political domination is rooted in class antagonisms. Class antagonisms are in turn rooted in the existence of the division of society into classes.  And the division of society into classes is rooted in the mode of production.  So the transition from the capitalist state to the socialist non-state is intelligible, as a Marxian concept, because this transition is based on and corresponds to the revolutionary transformation of the mode of production. Once the mode of production is transformed, society won’t be divided into classes; so, of course, there won’t be class antagonisms. And that eliminates the need for a state in the proper sense of the term. There is a transition from rule by a minority, to rule by the majority, to rule by all.

So the transformation of the capitalist mode of production into the socialist mode of production produces the transition from capitalist state to socialist non-state. But what transformation of the capitalist mode of production into the socialist mode of production could produce a transition from the capitalist mode of production into the socialist mode of production? The question simply makes no sense.

Thus, there’s no genuine analogy between the political transition and the revolutionary transformation of the mode of production. In the view of Marx and Engels, capitalist relations of production are the basis for the existence of the state. So if the basis changes, this causes the political and legal superstructure to change. But can we say that, if the basis changes, this causes the basis to change? No. This is incoherent drivel.

Capitalism is based on the mode of production; socialism is based on the socialist mode of production. If there is a third kind of society in between them, what is its mode of production? Capitalism is governed by the law of value (in Marx’s sense) and related economic imperatives that are specific to it. Socialism is not. What about the third, distinct kind of society that supposedly lies in between them?  Is it governed by these specifically capitalist laws and imperatives, or is it not?

If the answer is that the transitional society is partly governed by them, let me ask: is a woman carrying a small fetus only partly pregnant? The logic of capital is totalizing. The failures of state capitalism and the welfare states have shown that they they cannot control this logic. It batters down all Chinese walls, creates a world in its own image. So I can certainly imagine an unstable state of flux in the process of transforming capitalism into socialism, a state of flux in which capitalism’s economic laws and imperatives haven’t yet been fully dismantled. But I cannot imagine a third kind of society—as distinct from an unstable state of flux—in which capitalism’s economic laws and imperatives both do and do not operate.

I am not arguing that everything has to change all at once. I am not denying that some changes must be gradual.  My point is rather that “transitional society” is incoherent as a Marxian concept. It does not help, but hurts, efforts to understand and return to the perspective of the revolutionary transformation of society that Marx projected.



[1] Although Dunayevkaya wrote the first draft of this article in 1943, it was not published until late 1946 and early 1947.

[2] Paresh Chattopadhay, “Socialism and Value Categories in Early Soviet Doctrine: Lenin, Trotsky, Bukharin, Preobrazhensky,” in Alan Freeman, Andrew Kliman, and Julian Wells (eds.), The New Value Controversy and the Foundations of Economics. Cheltenham, UK: Edward Elgar, 2004.