The theory of the USSR as a form of state capitalism within Trotskyism

Introduction

For Trotsky, the Stalinist system in the USSR could only be but a transitory historical phenomena. Lacking a firm legal basis in the ownership of the means of production, the Stalinist bureaucracy was doomed to a mere fleeting appearance in the overall course of history. Indeed, throughout the 1930s, Trotsky had been convinced that the days of the Stalinist bureaucracy were numbered.

For Trotsky, world capitalism was in terminal decline. The economic stagnation that had followed the Wall Street crash in 1929 could only intensify imperialist rivalries among the great capitalist powers which ultimately could only be resolved through the devastation of a Second World War. Yet Trotsky firmly believed that, like the First World War, this Second World War would bring in its wake a renewed revolutionary wave that would sweep the whole of Europe if not the world. In the midst of such a revolutionary wave the Russian working class would be in a position to overthrow the Stalinist bureaucracy in a political revolution which would then, with the aid of revolutions elsewhere, open the way for Russia to complete its transition to socialism. Even if the worst came to the worst, and the postwar revolutionary wave was defeated, then the way would then be open for the restoration of capitalism in Russia. With the defeat of the proletariat, both in Russia and elsewhere, the Stalinist bureaucracy would soon take the opportunity to convert itself into a new bourgeoisie through the privatization of state industry. Either way the Stalinist bureaucracy would soon disappear, along with the entire Stalinist system that had arisen from the degeneration of the Russian Revolution.

As the approach of the Second World War became more and more apparent, Trotsky became more convinced that Stalin’s day of reckoning would not be far off. Yet not all of Trotsky’s followers shared his optimism.

Following his expulsion from Russia in 1929 Trotsky had sought to reestablish the Left Opposition on an international basis seeking to oppose Stalin within the Third International of Communist Parties. However, in the face of Stalin’s resolute hold over the Third International and its constituent Communist Parties Trotsky’s efforts to build the International Left Opposition within the official world Communist movement soon proved to be futile. In 1933 Trotsky decided to break from the Third International and attempt to regroup all those Communists opposed to Stalin in an effort to build a new Fourth International.

With the international upturn in class struggle of the mid-1930s, which culminated in the Spanish Revolution in 1936, increasing numbers of Communists who had become disillusioned with Stalinism were drawn to Trotsky’s project. By 1938 Trotsky had felt that the time had come to establish the Fourth International. Although the various groups across the world who supported the project of a Fourth International were still very small compared with the mass Communists Parties of the Third International, Trotsky believed that it was vital to have the international organization of the Fourth International in place before the onset of the Second World War. Trotsky believed that just as the First World War had thrown the international workers’ movement into confusion, with all the Socialist Parties of the Second International being swept along in patriotic fervor, so the same would happen with the onset of the Second World War. In such circumstances the Fourth International would have to provide a resolute point of reference and clarity in the coming storm which could then provide a rallying point once the patriotic fever had given way to the urge for revolution among the working class across the world.

Yet by 1938 the upturn in class struggle had more or less passed. The Spanish Revolution had been defeated and Franco’s fascists were well on their way to winning the Spanish Civil War. With fascism already triumphant in Italy and Germany and advancing elsewhere in Europe the situation was looking increasing bleak for those on the left that had become disillusioned with Stalinism. Furthermore, few could have been as convinced as Trotsky was that the onset of a Second World War, which promised to be even more terrible than first, would bring in its wake a renewed revolutionary situation in Europe, if not the world.

As a consequence, many, even within the Fourth International, came to draw rather pessimistic conclusions concerning the world situation. Within such a pessimistic perspective it was easy to conclude that the socialist revolution had failed, both in Russia and the rest of Europe, in the early 1920s. From this it was but a short step to argue that capitalism was not being replaced by socialism, as Marx had foreseen, but by a new and unforeseen form of society in which all political and economic life was subsumed by a totalitarian state, which had become evident not only in Mussolini’s Italy and Hitler’s Germany but also in Stalin’s Russia. This new form of society now seemed destined to dominate the world, just as capitalism had done before it. This view found its expression in the various theories of ‘bureaucratic collectivism’ that increasingly gained support among Trotskyists towards the end of the 1930s.

The theory of bureaucratic collectivism was originally put forward by Bruno Rizzi in the early 1930s. Yet it was in 1939 that this theory became central to the first grave crisis in Trotskyism. As we have seen, on the basis of his theory of the USSR as a degenerated workers’ state, Trotsky had argued that, despite all the crimes perpetuated by the Stalin’s regime, it was necessary, in order to defend the proletarian gains of the Russian Revolution, to give critical support to the Soviet Union. As we have also noted, this position became increasingly difficult to defend as true nature of Stalin’s regime became apparent, particularly after the Moscow show trials of the 1930s and the role of the Stalinists in crushing the workers’ revolution in Spain in the May Days of 1937. For many Trotskyists the last straw came when Stalin signed a non-aggression pact with Hitler in August 1939. Here was the USSR openly dealing with a fascist regime!

In September 1939 several leading members of the Socialist Workers’ Party of the USA, which, with several thousand members, was one of the largest sections of the Fourth International, announced the formation of an organized minority faction opposed to the official stance towards the USSR. In their polemics with Trotsky and his supporters in the American SWP the notion central to bureaucratic collectivism — that Stalin’s Russia was little different from that of Hitler’s Germany — proved to be a powerful weapon. Indeed, many of the leading figures in this oppositional faction, which eventually split from the SWP in 1940 to form the Workers’ Party, came to adopt the theory of bureaucratic collectivism as their own. As such the theory of bureaucratic collectivism came to pose the main challenge to orthodox Trotskyism from within Trotskyism itself.

In his interventions in the fierce polemics that preceded the split in the American SWP, Trotsky made it clear that he saw the theory of bureaucratic collectivism as nothing less than a direct attack not merely on his own ideas, but on Marxism itself. The notion that the capitalist mode of production was destined to be surpassed, not by socialism but by a form of society based on bureaucratic collectivism, clearly broke with the fundamental understanding of history that had underpinned Marxism from its very inception. Yet, if this was not bad enough, none of the various versions of the theory of bureaucratic collectivism went as far to provide an adequate materialist and class analysis of what bureaucratic collectivism was and how it had come about. As a result, as Trotsky ceaselessly pointed out, these theories of bureaucratic collectivism were unable to go beyond the level of appearance and as such remained merely descriptive.

Such criticisms were seen to be borne out by the eventual fate of the various theories of bureaucratic collectivism and their leading proponents. Having abandoned Marxism, the theories of bureaucratic collectivism lacked any theoretical grounding of their own. As a consequence they were obliged to look to various strands of bourgeois sociology and ended up joining the growing stream of bourgeois theories that saw the increasing totalitarianism and bureaucratization of modern societies as an inevitable result of the complexities of industrial society. This was perhaps best illustrated by one of the leading figures in the split from the American SWP in 1940, James Burnham. As a university professor, Burnham was recognized as one of the leading intellectuals in the minority that split from the American SWP, but he went on to become one of the originators of the theory of the ‘managerial society’ which was to become popular among bourgeois sociologists in the ‘50s and ‘60s. Yet while the logic of bureaucratic collectivism led Burnham to become a liberal, for Schachtman, who had been one of the prime proponents of the theory of bureaucratic collectivism, it meant eventually ending up as a virulent anti-Communist who openly backed the McCarthy witch hunts of the 1950s. For those who remained loyal to Trotsky the fate of these supporters of the bureaucratic collectivism could only be taken as a stern lesson in the dangers of straying too far from the teachings of Trotsky and Marxist orthodoxy.

Yet it should be noted here that not all those who split from the American SWP at this time were proponents of a theory of bureaucratic collectivism or variants of one. From the very foundation of the Fourth International there had been a significant minority with the Trotskyist movement who had opposed Trotsky’s stance to the USSR by arguing that Russia was not a degenerated workers’ state but was simply state capitalist.[33] It was this theory of the USSR as being state capitalist which was to reemerge with greater force after the Second World War, as we shall now see.

The theory of state capitalism and the second crisis in Trotskyism

Trotsky’s predictions for the end of the Second World War, which had sustained the hopes of those who had remained loyal to him, were soon proved to be false. There was no repeat of the great revolutionary wave that had swept Europe at the end of the First World War; nor was the grip of either Stalinism or social democracy on the workers’ movements weakened. On the contrary, both Stalinism and social democracy emerged from the Second World War far stronger than they had ever been.

As it became increasingly apparent that the realities of the immediate postwar world contradicted the predictions that Trotsky had made before his death in 1940, and with them the basic orientation of the Fourth International, the strains within the Trotskyist movement between those who sought to revise Trotskyism to meet these new realities and those who feared such revisionism reached the point of crisis. In 1953, less that eight years after the end of the war the Fourth International finally split giving rise to the ’57 varieties’ of Trotskyism that we find today. One of the crucial issues at the heart of this crisis within Trotskyism was that of the question of the respective natures of the USSR and Eastern Europe.

The retreat of the German armies during the final stages of the war had prompted popular uprisings across Eastern Europe. For the most part these uprisings had either been contained by the Stalinists, where they provided the popular base on which to build broad-based anti-fascist governments, or, to the extent that they could not be contained, they were either crushed by the advancing Red Army, or else abandoned to the vengeance of the retreating German forces.

At first Stalin did not seek to impose the economic or political model of the Soviet Union on the countries of Eastern Europe. The broad-based anti-fascist governments were elected on traditional bourgeois-democratic lines and in most cases came to include not only Communists and socialists but also liberals and representatives of the peasant and rural classes. Although these governments were encouraged to carry out nationalizations of key industries, and implement various social and agrarian reforms, in many respects this differed little from the policies of nationalization of ailing industry and welfare reforms that were happening elsewhere in Europe. But as the Cold War began to set in, and Europe began to polarize between East and West, Stalin began to impose the Soviet economic and political model on to Eastern Europe. If necessary, the postwar coalitions were pushed aside and the wholesale nationalization of industry was carried out and the market was replaced by centralized planning.

The initial phase of the postwar era in Eastern Europe had presented Trotskyists with few problems. The uprisings at the end of the war could be seen as portents of the coming world revolution, while the repression by the Stalinists could be righteously condemned. Furthermore, the fact that these uprisings had for the most part failed explained why Eastern Europe remained capitalist. However, once the ‘Russification of Eastern Europe’ began to take place, Trotskyist theory began to face a serious dilemma.

Of course, the transformation of property relations that had been brought about by the wholesale nationalization of industry and the introduction of centralized planning could be seen to reaffirm Trotsky’s insistence on the objectively progressive role of the Stalinist bureaucracy. Indeed, it could now be argued that the Stalinist bureaucracy had not only defended the proletarian gains of the Russian Revolution but had now extended them to the rest of Eastern Europe.

Yet, if this was the case, did this not imply that the countries of Eastern Europe had now become degenerated workers’ states like the USSR? But how could you have a degenerated workers’ state when there had been no revolution, and thus no workers’ state, in the first place?! It was now no longer just that a workers’ state was supposed to exist where the workers had no state power, as Trotsky had argued for Stalinist Russia, but workers’ states’ were now supposed to exist where the working class had never been in power! With the question of Eastern Europe the fundamental dichotomy of Trotsky’s theory of a degenerated workers’ state, in which the objective interests of the working class are somehow able to stand apart from and against the working class in the form of the alien power of the bureaucracy, now stood exposed.

But if the countries of Eastern Europe were not admitted as being degenerated workers’ states then what were they? The obvious answer, given that the principle means of production had been simply nationalized by the state without a workers’ revolution, was that they were state capitalist. However, such an answer contained even greater dangers for orthodox Trotskyists than the first. As Eastern Europe became reconstructed in the image of the USSR it became increasingly difficult to avoid the conclusion that if the countries of Eastern Europe were state capitalist then so must the Soviet Union be nothing other than a form of state capitalism.

After numerous attempts to resolve this dilemma the official line which emerged within the leadership of the Fourth International was that the uprising at the end of the war had all been part of a proletarian revolution that had been mutilated and deformed by Stalinism. The countries of Eastern Europe were therefore not degenerated workers’ states as such, but ‘deformed workers’ states’. Yet this attempted solution still implied that the Stalinist bureaucracy was an active agent in creating the objective conditions of socialism. As we have seen, Trotsky had argued that the Stalinist bureaucracy was progressive in that in defending its own basis in state property it was impelled to defend the objective gains of the proletarian revolution, that is the state ownership of the means of production. Now Trotskyism had come to argue that the Stalinist bureaucracy not only defended such proletarian gains but could now actually extend them! With the Stalinist bureaucracy now deemed to be a primary agent in the transition to socialism the importance of the revolutionary role of the working class became diminished. The way was now opened for Trotskyists in the coming decades to support all sorts of nationalist movements regardless of the role within them of the proletariat.[34]

Cliff and the neo-Trotskyist theory of the USSR as state capitalist

Perhaps rather ironically, Tony Cliff was originally sent to Britain by the leadership of the Fourth International in an effort to head off any potential support within the British Section for the theory that Eastern Europe and the USSR were in any way state capitalist. As it turned out, it was not Gerry Healey, Ted Grant or any of the other leading figures of the British Revolutionary Communist Party[35] at that time who came to adopt the theory of state capitalism but none other than Cliff himself.

Yet in coming to the viewpoint that it was not only Eastern Europe that was state capitalist but also the USSR, Tony Cliff was determined not to follow in the footsteps of so many former Trotskyists who, having rejected Trotsky’s theory of Russia as a degenerated workers’ state, had come to reject Trotsky and even Marxism itself. Instead, Cliff was committed to developing a state capitalist theory of the USSR which remained firmly within both the Trotskyist and orthodox Marxist tradition. Against those who argued that the theory of the USSR as a degenerated workers’ state was central to Trotsky’s Marxism, Cliff replied by arguing that not only were there numerous examples in Trotsky’s own writings where he indicated serious doubts concerning his conclusion that the USSR was a degenerated workers’ state but that towards the end of his life Trotsky had shown signs of moving away from such conclusions altogether. Indeed, Cliff sought to claim that had Trotsky lived then he too would have eventually come round to the conclusion that the USSR had become state capitalist, and certainly would not have dogmatically defended a position that flew in the face of all the evidence as his loyal followers in the leadership of the Fourth International had done.

Cliff originally presented his rather heretical ideas in 1948 in the form of a duplicated discussion document entitled The Nature of Stalinist Russia. After several editions and accompanying amendments and additions, this text now takes the form of a book entitled State Capitalism in Russia which provides us with a definitive statement of Cliff’s position.

Cliff devoted much of the first third of State Capitalism in Russia to presenting a mass of evidence with which he sought to show both the exploitative and repressive nature of the USSR. Yet, as powerful an indictment of the Stalinist regime as this may have been, the evidence Cliff presented was far from sufficient to convince his opponents within either the Revolutionary Communist Party or the broader Fourth International. For orthodox Trotskyists such evidence could simply be taken to confirm the extent of the degeneration of the Soviet Union and did little to refute the persistence of Russia as essentially a workers’ state. As Cliff himself recognized, it was necessary to demonstrate that the apparent exploitative and repressive character of the Soviet Union necessarily arose, not from the degeneration of the Soviet Union as a workers’ state but rather from the fact that under Stalin the USSR had ceased to be a workers’ state and had become state capitalist. Yet to do this Cliff had first of all to clarify what he meant by ‘state capitalism’ and how such a conception was not only compatible with, but rooted within the orthodox Marxist tradition.

For orthodox Marxism, capitalism had been defined as a class society dominated by generalized commodity exchange which arises from the private ownership of the means of production. On the basis of such a definition it would appear, at least at first sight, that the notion of state capitalism in the absolute sense was a contradiction in terms. If all of the means of production are nationalized, the capitalist class expropriated and the law of value and the market replaced by state allocation and planning, then it would appear that capitalism must have been, by definition, abolished. If it was accepted that, for the most part, the Russian Revolution had led to the abolition of the private ownership of the means of production, then it would seem clear that, from a Marxist point of view, capitalism in any form could not exist in the USSR. (And of course this is the common objection we find advanced against all theories of state capitalism in the USSR.)

However, as Cliff was keen to point out, it had also been central to orthodox Marxism that the capitalist mode of production was transitory. Capitalism was merely a phase in human history whose very development would eventually undermine its own basis. As capitalism repeatedly revolutionized methods of production it advanced the forces of production to an unprecedented degree. Yet in advancing the forces of production capitalism was obliged to increasingly socialize production as production was carried out on an ever larger and more complex scale. The more social the production process became the more it came into conflict with the private appropriation of the wealth that it produced. As a result capitalism was obliged to negate its very own basis in the private ownership of production and in doing so it prepared the way for socialism.

As we have noted before, already by the end of the nineteenth century most Marxists had come to the view that the classical stage of free competitive capitalism, that had been described and analyzed by Marx in the 1860s, had given way to the final stages of the capitalist era. The growth of huge cartels and monopolies and the increasing economic role of the state was seen as negating the market and the operation of the law of value. At the same time the emergence of joint stock companies and the nationalization of key industries meant the replacement of individual capitalist ownership of the means of production by collective forms of ownership which implied the further negation of private property. Indeed, as Engels argued, the development of both monopoly and state capitalism was leading to the point that the capitalist class was superfluous to the production process itself. Capital no longer needed the capitalist. As Engels himself states:

[T]he conversion of the great organizations for production and communication into joint-stock companies and state property show that for this purpose the bourgeoisie can be dispensed with. All the social functions of the capitalists are now carried out by salaried employes. The capitalist has no longer any social activity save the pocketing of revenues, the clipping of coupons and gambling on the stock exchange, where different capitalists fleece each other of their capital. Just as at first the capitalist mode of production displaced the workers, so now it displaces the capitalists, relegating them, just as it did the workers, to the superfluous population, even if in the first instance not to the industrial reserve army.

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

So for the old orthodoxy of the Second International it was undoubtedly accepted that there was an inherent tendency towards state capitalism. Indeed it was this tendency which was seen as laying the basis for socialism. Yet it had also been central for both Lenin and the new Bolshevik orthodoxy. Not only did the increasing negation of private property and the law of value indicate the ripeness for socialism, but the fusion of the state and capital within state capitalism explained the increasing imperialist rivalries that had led to the First World War. As the competitive struggle between capital and capital became at the same time a struggle between imperialist states, imperialist war became inevitable. As Bukharin remarks in Imperialism and the World Economy, which provided the theoretical basis for Lenin’s theory of imperialism:

When competition has finally reached its highest stage, when it has become competition between state capitalist trusts, then the use of state power, and the possibilities connected with it play a very large part. The state apparatus has always served as a tool in the hands of the ruling classes of its country, and it has always acted as the their “defender and protector” in the world market; at no time, however, did it have the colossal importance that it has in the epoch of finance capital and imperialist politics. With the formation of state capitalist trusts competition is being almost entirely shifted onto foreign countries; obviously the organs of the struggle that is to be waged abroad, primarily state power, must therefore grow tremendously... If state power is generally growing in significance the growth of its military organization, the army and the navy, is particularly striking. The struggle between state capitalist trusts is decided in the first place by the relation between their military forces, for military power of the country is the last resort of the struggling “national” groups of capitalists. (Bukharin, p. 124)

So it could not be doubted that the notion that capitalism was developing towards state capitalism, such that its very basis within both the law of value and private property was increasingly becoming negated, was clearly rooted within orthodox Marxism. The question then was whether state capitalism in an absolute sense was possible. Could it not be the case that after a certain point quantity would be transformed into quality? Was it not the case that once the principle means of production had been nationalized and the last major capitalist expropriated capitalism had necessarily been objectively abolished? And was this not the case for Russia following the October revolution?

To counter this contention, that could all too easily be advanced by his Trotskyist critics, Cliff argued that the qualitative shift from capitalism to the transition to socialism could not be simply calculated from the ‘percentage’ of state ownership of the means of production. It was a transition that was necessarily politically determined. As we have seen, the tendency towards state capitalism was a result of the growing contradiction between the increasingly social forms of production and the private appropriation of wealth. Collective, and ultimately state ownership of the means of production were a means to reconcile this contradiction while at the same time preserving private appropriation of wealth and with it private property. Thus the tendency towards state capitalism involved the partial negation of private property on the basis of private property itself.

So at the limit, state capitalism could be seen as the ‘partial negation of capitalism on the basis of capitalism itself’. So long as the state economy was run to exploit the working class in the interests of an exploitative class then the economy remained state capitalist. However, if the working class seized power and ran the state economy in the interests of the people as whole then state capitalism would give way to a workers’ state and the transition to socialism could begin. Thus state capitalism was a turning point, it was the final swan song of capitalism, but once the working class seized the state it would be the basis for the transition to socialism.

However, it could be objected that many revolutionary Marxists, including Trotsky himself, had explicitly denied that capitalism could reach the limit of state capitalism. Indeed, against the reformists in the Second International, who had argued that capitalism would naturally evolve into state capitalism which could then be simply taken over by democratically capturing the state, revolutionary Marxists had argued that, while there was a tendency towards state capitalism, it could never be fully realized in practice due to the rivalries between capitalists and by the very threat of expropriation of the state by the working class.

Cliff countered this by arguing that such arguments had only applied to the case of the evolution of traditional capitalism into state capitalism. In Russia there had been a revolution, that had expropriated the capitalist class and introduced a workers’ state, and then a counter-revolution, which had restored capitalism in the form of state capitalism run in the interests of a new bureaucratic class. For Cliff, the Russian Revolution had created a workers’ state, but, isolated by the failure of socialist revolutions elsewhere in Europe, the workers’ state had degenerated. With the degeneration of the workers’ state the bureaucracy increasingly became separated from the working class until, with Stalin’s ascendancy, it was able to constitute itself as a new exploitative class and seize state power. With the bureaucracy’s seizure of power the workers’ state was over-turned and state capitalism was restored to Russia.

This periodization of post-revolutionary era in Russia not only allowed Cliff to overcome the objection that Trotsky had denied the possibility of bourgeois society fully realizing the tendency towards state capitalism, but also allowed him to accept most of Trotsky’s analysis of the Russian Revolution and its aftermath. Cliff only had to part ways with Trotsky for the analysis of the ten years following 1928, where Trotsky maintained that the USSR has remained a degenerated workers’ state while Cliff argued that it had become state capitalist. Yet, as we shall see, this periodization, despite all its advantages for Cliff’s credibility as a Trotskyist, was to prove an important weak point in his theory. But before looking at the weak points of Cliff’s theory of state capitalism we must first examine more closely what Cliff saw as the nature of state capitalism in Stalin’s Russia.

As we have seen, although Cliff uncritically defended the orthodox Marxist definition of capitalism, he was able to counter the objections that the USSR could not be in any sense capitalist because there was neither the law of value nor private property, by arguing that state capitalism was the ‘partial negation of capitalism on the basis of capitalism itself’. So what did he mean by ‘the partial negation of capitalism’? Clearly capitalism could not be completely negated otherwise it would not be capitalism; so in what sense is the negation of capitalism partial? With Cliff the meaning of the partial negation of capitalism becomes most evident in terms of the law of value.

Following Marx, Cliff argued that under capitalism there is a two-fold division of labor. First of all there is the division of labor that arises between capitalist enterprises which is regulated by the law of value that operates through the ‘anarchy of the market’. Secondly there is the division of labor that arises within each capitalist enterprise which is directly determined by the rational and conscious dictates of the capitalists or their managers. Of course the second division of labor is subordinated to the law of value insofar as the capitalist enterprise has to compete on the market. However, the law of value appears as external to it.

For Cliff the USSR acted as if it was simply one huge capitalist enterprise. As such the law of value no longer operated within the USSR, it had been negated with the nationalization of production and the introduction of comprehensive state planning. But, insofar as the USSR was obliged to compete both economically and politically within the capitalist world system it became subordinated to the law of value like any capitalist enterprise. In this sense, for Cliff, the law of value was only ‘partially negated on the basis of the law of value itself’.

Yet, if neither market nor the law of value operated within the USSR this implied that products were not really bought and sold within the USSR as commodities, they were simply allocated and transferred in accordance with administrative prices. If this was true then it also implied that labor-power was not really a commodity; a conclusion that Cliff was forced to accept. Indeed, as Cliff argued, if labor-power was to be a commodity then the worker had to be free to sell it periodically to the highest bidder. If the worker could only sell his ability to work once and for all then he was little different from a slave since in effect he sold himself not his labor-power. Yet in the USSR the worker could only sell his labor-power to one employer, the state. Hence the worker was not free to sell to the highest bidder and labor-power was not really a commodity.

The flaws in Cliff’s theory of state capitalism

At first sight Cliff provides a convincing theory of state capitalism in the USSR which not only remains firmly within the broad orthodox Marxist tradition, but also preserves much of Trotsky’s contribution to this tradition. As the postwar era unfolded leaving the Stalinist bureaucracy more firmly entrenched than ever, Cliff’s analysis of the USSR became increasingly attractive. Without the problems facing orthodox Trotskyist groupings following the apparent failure of Trotsky’s predictions of the fall of the Stalinist bureaucracy, Cliff, under the slogan of ‘neither Washington nor Moscow’, was in a perfect position to attract supporters with the revival of interest in Leninism and Trotskyism of the 1960s and 1970s. Indeed, with the International Socialists Group, which then became the Socialist Workers’ Party, Cliff has been able to build one of the largest Leninist groupings in Britain whose most distinctive feature has been its refusal to takes sides in the Cold War.[36]

However, despite the attractiveness of Cliff’s theory of state capitalism in the USSR, on close inspection we find his theory has vital weaknesses which have been seized on by more orthodox Trotskyists. Indeed, these weaknesses are so serious that many have concluded that Cliff’s theory is fatally flawed. This opinion has even been recognized within the SWP itself and has resulted in various attempts to reconstruct Cliff’s original theory.[37] As we shall argue, these flaws in Cliff’s theory arise to a large extent from his determination to avoid critical confrontation with both Trotsky and the broader orthodox Marxist tradition.

There are three main flaws within Cliff’s theory of state capitalism in the USSR. The first concerns Cliff’s insistence that the final ascendancy of Stalin, and with this the introduction of the first five year plan, marked a counter-revolution which overthrew the workers’ state established by the October revolution and turned Russia over to state capitalism. The issue of when the USSR became state capitalist is clearly a sensitive one for Trotskyists since, if Cliff is unable to hold the line at 1928, then what is to stop the date of the defeat of the revolution being pushed right back to 1917? Lenin and Trotsky would then be seen as leading a revolution that simply introduced state capitalism into Russia! Such fears were clear expressed by Ted Grant in his response to Cliff’s original presentation of his theory in The Nature of Stalinist Russia. Then Ted Grant warned:

If comrade Cliff’s thesis is correct, that state capitalism exists in Russia today, then he cannot avoid the conclusion that state capitalism has been in existence since the Russian Revolution and the function of the Revolution itself was to introduce this state capitalist system of society. For despite his tortuous efforts to draw a line between the economic basis of Russian society before the year 1928 and after, the economic basis of Russian society has in fact remained unchanged. (Ted Grant, The Unbroken Thread, p. 199)

The first line of attack that has been taken by orthodox Trotskyists has been to argue that if there had been a counter-revolution against, rather than from within, the revolution itself, which restored Russia to capitalism, then the workers’ state would have to have been violently smashed. Any attempt to argue for a gradual and peaceful restoration of capitalism would, as Trotsky himself had said, simply be ‘running backwards the film of revisionism’.[38] Yet, despite the expulsions of Trotsky and the United and Left Oppositions in 1928, the leadership of the Party and the state remained largely intact. Indeed there seems more of a continuity within the state before 1928 and afterwards rather than any sharp break that would indicate a counter-revolution, let alone any violent coup d’état or violent counter-revolutionary action.

Cliff attempted to counter this line of attack by arguing that while it is necessary for a proletarian revolution to smash the bourgeois state in order to construct a new revolutionary proletarian state, it is not necessarily the case that a counter-revolution has to smash an existing workers’ state.[39] The example Cliff used was that of the army. In order to create a workers’ state the bourgeois standing army has to be transformed into a workers’ militia. But any such transformation inevitably would be resisted by the officer corp. Such resistance would have to be violently crushed. In contrast, the officers of a workers’ militia may become increasingly independent to the point at which they become part of the bureaucracy thereby transforming the workers’ militia into a bourgeois standing army. Such a process, in which a workers’ militia becomes transformed into a standing army, does not necessarily meet any concerted resistance, and as a consequence may occur gradually.

Yet such an argument by itself fails to pin the counter-revolutionary break on 1928. Indeed, Cliff’s example would seem to imply that the counter-revolution was brought about by Trotsky himself when he took charge of re-organizing the Red Army in 1918 on the lines of a conventional standing army! The only overt political indication Cliff is able to present for the bureaucratic counter-revolution is the Moscow show trials and purges, which he claims were:

the civil war of the bureaucracy against the masses, a war in which only one side was armed and organized. They witnessed the consummation of the bureaucracy’s total liberation from popular control. (State Capitalism in Russia, p. 195)

Yet the Moscow show trials occurred in the 1930s, not in 1928.

What was crucial about 1928 was that it was the year that marked the beginning of the first five year plan and the bureaucracy’s commitment to the rapid industrialization of Russia. For Cliff, by adopting the overriding imperative of industrializing Russia, regardless of the human cost this would involve, the Soviet bureaucracy had taken on the historic role of the bourgeoisie. In adopting both the economic and historic functions of the bourgeoisie the bureaucracy had transformed itself into an exploitative class. Whereas before 1928 the bureaucracy had simply been a privileged layer within a degenerated workers’ state that was able to gain more than its fair share of the nation’s wealth, after 1928 the bureaucracy became the state capitalists who collectively exploited the working class.

Of course, it was not difficult for Cliff to show that there had been a sharp decrease in the material conditions of the working class following the introduction of the first five year plan as the bureaucracy sought to make the proletariat pay the huge costs of the policy of rapid industrialization. However, Cliff’s argument that this sharp decrease in material conditions of the working class represented a qualitative shift towards the exploitation of the working class by the bureaucracy was far from convincing. If anything Cliff’s attempts to show a qualitative shift in social relations of production only serve to indicate that bureaucratic exploitation of the working class had existed before 1928.

Yet perhaps more devastating to the credibility of Cliff’s line of argument among Trotskyists was that by suggesting that with the imposition of the policy of rapid industrialization the bureaucracy had finally transformed itself into an exploitative class, and in doing so transformed Russia from a degenerated workers’ state into state capitalism, Cliff was in effect attacking Trotsky! Had it not been the main criticism advanced by Trotsky and the Left Opposition against Stalin that he had not industrialized soon enough?! Was not the central plank of Trotsky’s understanding of the Russian Revolution that the productive forces had to be advanced as fast as possible if there was to be any hope of socialism? If this was so, was not Cliff accusing Trotsky of advocating state capitalism?! Ultimately Cliff is unable to circumvent Trotsky’s intrinsic complicity with Stalin. As a consequence, the failure to break with Trotskyism led to this vital flaw in Cliff’s theory of state capitalism in Russia.

Yet this is not all. Cliff’s failure to critically confront orthodox Marxism opened up another even more important weakness in his theory of state capitalism which has been seized upon by his more orthodox Trotskyist critics. This weakness stemmed from Cliff’s denial of the operation of the law of value within the USSR.

As we have seen, for Cliff the USSR was constituted as if it was one huge capitalist enterprise. As such there could be no operation of the law of value internal to the USSR. However, as Marx pointed out, it is only through the operation of the law of value that any capitalist enterprise is constrained to act as capital. If there was no law of value internal to the state economy of the USSR what made it act as if it was a capitalist enterprise? The answer was the Soviet Union’s relation to world capitalism. It was through the competitive political and economic relation to the rest of the capitalist world that the Soviet Union was subordinated to the law of value, and it was through this subordination to the law of value that the capitalist nature of the USSR became expressed.

However, as Cliff recognized, the Soviet Union, with its huge natural resources, had become largely self-sufficient. Foreign trade with the rest of the world was minimal compared with the amount produced and consumed within Russia itself. As a result Cliff could not argue that the international law of value imposed itself on the Russian economy through the necessity to compete on the world market. Instead, Cliff had to argue that the law of value imposed itself indirectly on the USSR through the necessity to compete politically with the major capitalist and imperialist powers. In order to keep up with the arms race, particularly with the emergence of the Cold War with the USA, the USSR had to accumulate huge amounts of military hardware. This drive for military accumulation led the drive for accumulation elsewhere in the Russian economy. Indeed, this military competition could be seen to spur capital accumulation, and with it the exploitation of the working class, just as much, if not more so, than any economic competition from the world market could have done.[40]

However, as Cliff’s Trotskyist critics point out, for Marx the law of value does not impose itself through ‘competition’ as such, but through the competitive exchange of commodities. Indeed, it is only through the exchange of commodities that value is formed, and hence it is only through such exchange that the law of value can come to impose itself. Military accumulation is not directly an accumulation of values but an accumulation of use-values. In a capitalist economy such an accumulation can become part of the overall process of the accumulation of value, and hence of capital, insofar as it guarantees the accumulation of capital in the future by protecting or else extending foreign markets. However, in itself military accumulation is simply an accumulation of things, not capital. So in capitalist countries military spending suppresses value and the law of value temporarily in order to extend it later. Given that the Soviet Union did not seek to expand value production through the conquest of new markets, military production meant the permanent suppression of value and the law of value in that it was simply the production of use-values required to defend a system based on the production of use-values.

For the more sophisticated Trotskyists, Cliff’s attempt to invoke military competition as the means through which the USSR was subordinated to the law of value exposed the fundamental theoretical weakness of Cliff’s theory of state capitalism in Russia. The argument put forward by Cliff that under state capitalism ‘the accumulation of value turns into its opposite the accumulation of use-values’ is nothing but a sophistry which strips away the specific social forms that are essential to define a particular mode of production such as capitalism. As they correctly point out, capital is not a thing but a social relation that gives rise to specific social forms. The fact that military hardware is accumulated is in no way the same thing as the accumulation of capital. Without the production of commodities there can be no value and without value there can be no accumulation of capital. But Cliff argues there is no production of commodities in the USSR, particularly not in the military industries, since nothing is produced for a market, thus there can be neither value nor capital.

This point can be further pressed home once Cliff’s critics turn to the question of labor-power. For Marx the specific nature of any mode of production was determined by both the manner and forms through which the dominant class are able to extract surplus-labor from the direct producers. Within the capitalist mode of production surplus-labor is extracted from the direct producers by the purchase of the worker’s labor-power as a commodity. As a consequence, surplus-labor is expropriated in the form of surplus-value which is the difference between the value of labor-power (i.e. the costs of reproducing the worker’s ability to work) and the value the worker creates through working. However, for Cliff, labor-power was not a commodity in the USSR and was not therefore really sold. But if labor-power was not a commodity it could not have a value, and hence any surplus-labor extracted could not take the form of surplus-value. If surplus-labor did not take the form of surplus-value how could the USSR be in any sense capitalist in strict Marxist terms?!

The third fatal flaw in Cliff’s theory of state capitalism in Russia, and one that arises from his commitment to orthodox Marxism, is the view that state capitalism is the highest stage of capitalism. As we have seen, it is central for Cliff that state capitalism was the highest stage of capitalism since it was from this premise that he could claim that state capitalism was at the point of transition from capitalism to socialism. But if state capitalism is the highest stage of capitalism, and if it is accepted that the USSR is state capitalist, then this would seem to imply that, in some fundamental sense, the USSR should be in advance of Western capitalism. Of course, this may have seemed reasonable in the late 1940s. After all, under Stalin the USSR had made an unprecedented leap forward with the rapid industrialization of Russia, and it seemed that the Soviet Union was set to out-perform most of capitalist economies in the West in the postwar era. However, in the following decades the economic stagnation and economic waste of the ‘Soviet system’ became increasingly apparent, culminating with the collapse of the USSR in 1990. This, combined with the globalization of capital, which has seriously undermined the efficacy of state intervention in Western capitalism, has meant that the notion that capitalism is tending towards state capitalism is now far less convincing than it was fifty years ago. As we shall see in the next issue, although Cliff did develop a theory to explain the economic stagnation in the Soviet Union it proved insufficient to explain the final crisis and collapse of the USSR. This point has been taken up with relish by Cliff’s more orthodox critics, who now feel vindicated that the Stalinist system has proved ephemeral and, as Trotsky predicted, capitalism has been restored, albeit after some delay.

So, despite its practical appeal during the postwar era, Cliff’s theory of state capitalism in Russia was theoretically, at least for orthodox Trotskyists, fatally flawed. Indeed, for the more sophisticated Trotskyists Cliff’s theory is usually dismissed with little more ado, and then presented as an example of the weakness of all theories of state capitalism. But Cliff’s theory of state capitalism in the USSR is by no means the original or foremost one, although it is perhaps the most well known. In the next issue we shall begin by considering other theories of state capitalism in the USSR that have arisen among the left communists before turning to examine Ticktin’s efforts to go beyond both the theory of Russia as a degenerated workers’ state and state capitalist theories.