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September 2001 • Vol 1, No. 4 •

Are the ‘Socialist’ Countries Still Socialist?

by Nat Weinstein

Huge billboard in downtown Beijing urging citizens to be thrifty and invest.

China appears today to be on the verge of being included as an equal partner in the world community of capitalist nations that make up the World Trade Organization. For those of us who think about such matters, the question of whether or not the Chinese Communist Party has succeeded in restoring capitalism in China is more important than it might seem.

This question is, moreover, closely connected with a similar process of capitalist restoration going on in all the former Soviet Bloc countries (with the exception of Cuba).

Therefore, how we answer the question of China applies more generally and with equal force to the question of the social and economic character of the Russian state and the other such post-capitalist states in Asia and Europe.

The Cuban revolution is in a separate category—closer to the model provided by the Russian revolution under the leadership of V. I. Lenin and Leon Trotsky and their Bolshevik comrades. Cuba’s revolutionary leadership is the only one of all Soviet bloc countries not molded in the image of Stalin’s bureaucratized Soviet Union and—no small matter—because they have resolutely rejected the sharp turn by the others toward capitalist restoration.

But before we attempt to answer the important question of whether the socialist revolutions in Russia, China and other workers’ states are dead or alive, it’s necessary to provide some background for those to whom this question is a new one. And for those, it’s necessary to clarify the meaning of the term, “socialist revolution.”

The revolutionary model

The objective model for all these revolutions and the one that came closest to exemplifying the best and truest of them is the first successful socialist revolution, which took place in Czarist Russia in October 1917. All the others, with the exception of Cuba, were deformed revolutions in the sense that, unlike the Soviet Union, they were born with a parasitic bureaucratic dictatorship at the helm of state power.

But even in the Soviet Union of 1917-1924, the characterization of the state created by the October 1917 socialist revolution as socialist, is not equal to the actual establishment of socialism in any of the post-capitalist states—including the Soviet Union and Cuba.

At the time the Russian Revolution took place and for the next seven or eight years—until the Stalinist bureaucracy usurped political power over the Communist Party and the Soviet state—it was generally accepted by the world’s Marxian socialists that “socialism” was the name given to a society based on the socialist principle of production and distribution—that principle is summed up in the slogan: “From each according to his ability and to each according to his needs!”

However, it is not possible to distribute the products of society without regard to how much each gives or takes from the social product without first being able to produce more than enough for everyone.

That’s why Karl Marx and Fredrick Engels called their conception of socialism scientific, as distinct from previous utopian conceptions of a more rational society based on equality envisioned by well-meaning idealist philosophers. The founders of Scientific Socialism went beyond a mere wish for a more humane social order. They viewed human history as an evolutionary process whose progress—that is, its increased ability to produce food, clothing, shelter and all the other needs and comforts of life—depended first and foremost on the development of the forces of production.

Socialism as the means of developing the productive forces of society

They came to the conclusion that capitalism had by the time of the mid-19th century developed the productive forces in the advanced industrial countries to the point that socialist distribution was not only possible but had become necessary. Why? because capitalism could no longer develop the productive forces of society without war and, ultimately, the absolute impoverishment of the great majority of the world’s workers and farmers.

Therefore, it follows that only a socialist revolution in a highly developed industrial country like the United States, Germany or Japan, unlike those in the semi-colonial countries like Czarist Russia, could become socialist in its true sense almost from the outset.

The institution of a planned economy in the already highly productive advanced industrial countries would qualitatively increase its already developed productive forces and would permit a swift shift from the capitalist to the socialist mode of production and distribution according to the principle—from each according to ability and to each according to need.

It should go without saying, moreover, that there is absolutely no justification in the advanced capitalist countries of the world today for the many hundreds of millions of unemployed, hungry and homeless. It’s not only unnecessary, it’s a stupendous crime against humanity.

However, while Russia, China and other former Soviet bloc countries could hardly be called “socialist,” they were institutionally committed to providing the basic necessities of life to all—even in the Soviet Union after the Stalinist bureaucracy corrupted the egalitarian principles of the first workers’ state. (George Orwell, in his famous parody of the degeneration of the Soviet Union, Animal Farm, told it like it had become under Stalin: “All animals are equal but some are more equal than others.”)

Production for use

The workers’ states were, from the first, socialist mainly in the sense that capitalist rule was overthrown, the means of production were expropriated and made national property, and a planned economy based on production for use replaced the market-driven system of production for profit. However, despite their repressive character, the Stalinist regimes were nevertheless compelled to maintain a system of distribution that guaranteed everyone food, clothing, shelter and free or virtually free basic social services like education, healthcare, childcare and transportation.

Even in beleaguered Cuba today, so long as its productive forces are not sufficient to produce more than an adequate supply of goods, a bureaucracy is inevitable. However, because Cuba’s revolutionary government has successfully guarded against its bureaucracy seizing political power over the state, the Cuban masses enjoy a far more egalitarian and adequate distribution of goods and services than even the most productive of the Stalinized workers’ states had been able to provide—not to mention the advanced industrial countries.

Hence, despite a virtual blockade by American imperialism, not a single able-bodied Cuban goes jobless today and not a soul—young or old, able to work or not—goes hungry, homeless or without adequate medical care. That is something that cannot be said for those who live in some of the richest capitalist countries of the world today—including the wealthiest of them all, the United States.

I will conclude this sketch of the background to the current transformations going on in Stalinized Russia, China and the deformed and rapidly degenerating workers’ states and proceed to an analysis of where these states are today and where they are going.

Whither Russia?

The Summer 2001 edition of Science & Society contains a very interesting and carefully thought-through analysis of the social nature of Russia today in a paper by David M. Kotz titled “Is Russia Becoming Capitalist?” The author is an educator affiliated with the Department of Economics, University of Massachusetts—Amherst. His study was funded by one of the University’s research institutes. Although my comments are critical of some of his observations and his main conclusion, I consider his contribution to be a valuable one.

Kotz sums up his thesis in the following paragraph:

Contrary to the common assumption and to the intentions of Russia’s post-Soviet rulers, Russia does not appear to be in transition to capitalism. While some features of a capitalist mode of production have appeared in post-Soviet Russia, the working population is not being transformed into a wage-laboring class generating surplus value for a capitalist class. The new propertied class is not a capitalist class but receives the overwhelming bulk of its revenue from non-capitalist relations. The explanation for this unexpected development is found in the Western-inspired neoliberal transition strategy, which has produced, not a process of primitive accumulation, but the emergence of a non-capitalist predatory/extractive system from the former state socialist system. Russia’s emerging predatory/extractive system promises continuing technological regress, demographic disaster, authoritarian rule, and possible disintegration of the Russian state.

Kotz, an academic Marxist, goes on to buttress his case by presenting a description of social and economic relations between classes in Russia today as its ruling elite struggles to make the transition from what he calls “state socialism” to a capitalist state

Kotz outlines the four parts of his analysis as follows:

First, I will review what a capitalist mode of production is. Second, I will present a case that the developing social formation in Russia is not capitalist but rather a non-capitalist “predatory/extractive system.” Third, I will trace the cause of Russia’s non-capitalist path of development to the particular transition strategy urged on Russia by Western advisers and enthusiastically adopted by the Russian leadership, known as the neo-liberal transition strategy. While this strategy was intended to rapidly build capitalism, even the best of intentions do not guarantee success. Fourth, and last, I will consider the implications of Russia’s predatory/extractive system for the development of Russian society.

Kotz proceeds to confirm the reports by others that Russia has only partly developed a market system with “half or more of transactions in the domestic economy based on barter or money surrogates.” This, he correctly notes, results in a number of consequences “alien to capitalist economy” such as keeping many of Russia’s inefficient and unprofitable state-owned industries operating with its workers producing little and receiving little or nothing in wages. It follows, he says, that if “Russian workers had to rely on their wages to survive, they would have largely died off by now.”

In any case, he notes as have so many others, “Workers’ living standards have sunk below what had been considered the normal level, and even the newly depressed level is not covered by actual wage payments.”

He cites statistics proving that a major source by which Russian workers feed, clothe and otherwise sustain themselves, is by such means as “food grown in their own small plots and after-hours petty production and trade.” Kotz also notes, “In some cases the goods that workers produce are handed back to them as wages in kind.” He correctly, again, concludes from this that, “It appears that enterprises produce and keep their workers on staff at least partly for reasons other than market calculation.”

But since in most cases these workers can’t possibly be the ultimate consumers of all the goods they receive in partial compensation for their labor, he illustrates the extraordinary burden it places on them: “Outside certain metro stations in Moscow, one sees textile workers desperately seeking to sell the goods with which they have been paid.”

He also notes something rarely mentioned by most mass media reporters—i.e., that a major source of workers’ subsistence comes from substantial fringe benefits, such as subsidized housing, schools, daycare centers, health clinics and other services. Other sources have reported that in addition, many state-owned and even some semi-privatized enterprises also supply food and other necessities that enterprises also receive in exchange for its bartered products.

Central to Kotz’s unique thesis, that Russia is neither capitalist nor “state socialist” but something new, is that its “predator/extractors” do not generally appropriate surplus value from wage labor. He writes:

Most significant for our purposes is that the income of Russia’s new wealthy class is not mainly derived directly from capitalist appropriation of surplus value—that is, it does not come from employing wage labor to produce products for sale in the market whose net value exceeds the wage cost. The main sources of high incomes in Russia are the following: 1) export of oil and gas; 2) ownership/control of urban land and buildings; 3) lending money to the state; 4) trade; 5) speculation; 6) skimming revenue from enterprises; 7) theft of public funds; 8) extortion.

Russia a long way from re-establishing capitalism

The author goes on at length to convincingly document his case that while the ruling elite have famously succeeded in turning many billions of dollars in state property into their own personal property, they are a long way from establishing a profit-driven capitalist society and are not likely to get where they want to go.

It is unfortunate, however, that completely absent from his analysis is an examination of the huge collectivised agrarian sector of the Russian economy and what if any progress toward establishing capitalist property relations has occurred there. Since no one to my knowledge has bothered to report any such changes, it must be assumed that no such changes of any real substance have occurred.

This seems to be a glaring omission, since the vast system of state farms producing on a cooperative basis is not consistent with capitalism nor any other previous form of class society. It is consistent only with a workers’ state—even one in the process of transition from “state socialism” to capitalism.

Contrasting China’s “success” with Russia’s failure

Kotz also argues, unconvincingly, that the Chinese Communist Party has already achieved “all the key features of capitalism, including a market economy and a large private sector with a well-developed wage-labor relation forming the basis of appropriation of surplus value by a new capitalist class. He takes no notice, however, of the preservation by the Chinese Communist Party government of a large measure of centralized control of its nationalized economy and a far larger degree of state control over foreign trade than in Russia.

On those grounds, at least, one would have to conclude that China is further from capitalism than is Russia.

And while he allows that the forms of private ownership in China are still ill-defined, Kotz declares that “this has not held back the development of the key outcomes associated with capitalism, including rapid accumulation and innovation.”

However, Kotz doesn’t tell us how much of this “rapid accumulation” [of surplus value] accrues to Chinese “state socialism,” and how much to imperialist and indigenous capitalists. It’s no small point that a far higher proportion of “accumulation” goes to the state in China than in Russia. And this is a direct result of the far greater state control over economic and financial matters in China than is exercised by the state in Russia!

He also claims that unlike Russia’s privatizers who followed the advice of imperialist “economic experts” and thus moved too far too fast toward privatization without providing an adequate internal market to buy the products of Russian industry, China’s privatizers have wisely followed a path indicated by historical experience.

“History shows,” Kotz writes, “that successful transitions to capitalism have been built upon a functioning, pre-existing mode of production. In its original emergence, capitalism depended upon the pre-existing peasant and artisan economy of Britain and northwestern Europe and also upon the slave-based production of key inputs to capitalist development in the Americas.”

He then goes on to make what he seems to think is his clinching argument:

China’s state socialist system supplied manufactured inputs to the new non-state enterprises at low prices, [which] served as a major market for its products, provided cheap credit through its state banking system, maintained a favorable macroeconomic environment through its central planning mechanism (including the retention of price controls through the early 1990s) controlled the international movement of goods and capital in ways that were beneficial for domestic capitalist development, and undertook the large publicly funded infrastructure investments that are a prerequisite for capitalist development.”

Coming as it does from an author who is a Marxist scholar, this is evidently a mental slip. It is one thing to utilize more primitive institutions like peasant, artisan and slave production in the course of introducing a higher mode of production, it is another to utilize a higher mode of production in the course of introducing a lower one—as would indeed be the case in the degenerating workers’ states—China included.

Besides, Kotz’s reference to the Chinese government’s undertaking of “large publicly funded infrastructure investments that are a prerequisite for capitalist development” is strange since he certainly knows that that is also a prerequisite for socialist development as well!

He also overlooks dealing with another important question:

Is it possible, now in the period of world capitalist decay, for world imperialism to successfully reimpose their outmoded and dying economic system in these post-capitalist societies?

The burden of facts suggest an opposite interpretation of the decline of the workers’ states than that these are outmoded social systems that are in the process of attempting to reach a higher stage, as is implied by Kotz. Rather it seems to us, the backwardness of the economy, not the social order, is a result of two other decisive factors. That is, the bureaucratic degeneration and deformation of the workers states of Europe and Asia on the one hand, and the imperialist exclusion of these states from the world division of labor, on the other.

Moreover, there is also the small matter of the imperialist military encirclement and economic isolation of the former Soviet bloc countries (including Cuba to this day) with a ring of steel, spiked with thermonuclear missiles and other weapons of mass destruction.

The double-edged sword of bureaucracy and imperialism are a far better explanation for the decline of the workers’ states than the inferiority of the social institutions created by socialist revolution.

An objective observer must also not forget that all these states started out as more or less backward capitalist countries1 that were compelled by imperialism to virtually lift itself by its bootstraps. And when the added burden of having to devote a huge portion of their industrial capacity to the military defense of their socialist revolutions is taken into account, the resulting decline of their more advanced and potentially more productive social system is demystified.

Why capitalism can’t be restored in Russia and China

The reintroduction of capitalism in the post-capitalist countries, in the sense given by the capitalist mass media—i.e., the raising of its productive forces to the level that exists in the industrially developed countries of the world—can be safely excluded as a possibility for any of the former Soviet bloc countries.

It happens to be an indisputable fact that Japan was the last country in the world (at the very end of the 19th century) that was able to achieve such an advanced capitalist society. The rest of the world—superficial appearances to the contrary notwithstanding—remains largely locked in the underdevelopment that prevailed in the pre-capitalist era.

Even the much ballyhooed “developing” countries such as Taiwan, South Korea, and Thailand that have achieved a relatively high level of industrial development in the cities, is “balanced” by their rural regions lagging behind in their backward pre-capitalist past. Moreover, imperialism holds a stranglehold over their industrial infrastructure which reflects the fact often noted lately, that when imperialism catches cold, these countries come down with pneumonia.

The great majority of the peoples of Africa, Asia, Latin America and Oceania remain, in many cases, in an economic condition closer to that of the 16th century than that of the 21st century. To be sure, it is the peculiarities deriving from the historic laws of combined and uneven development that allows people in regions of the underdeveloped world to wield automatic rifles, carry portable radios and even have access to cell phones in places where there is no clean water for drinking and washing.

Capitalism on the slippery slope to barbarism

In fact, the advanced capitalist countries of the world are themselves swiftly descending into barbarism. But it is not the barbarism of the period of transition from primitive communism to class society—which had many redeeming features but the barbarism of world capitalism in the epoch of imperialist decay—an epoch of war, revolution and rumors of war. And in between periods of capitalist “prosperity” the peoples of the world have suffered cyclical crises of overproduction.

In the words of the Communist Manifesto: “In these crises there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity—the epidemic of overproduction. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce.”

And at this writing, another global crisis of overproduction is showing its classic symptoms in every corner of the capitalist world. Thus, it doesn’t take a particularly vivid imagination to foresee what will happen to the former Soviet bloc countries that have allowed the tentacles of world capitalist imperialism to reach into their economies. Strange as it might appear at first sight, those countries where capitalism has made the furthest inroads will be hardest hit, since they have become most dependent on exports into the world market place.

China, however, which contrary to the thesis that it has made the most progress toward establishing the “key outcomes associated with capitalism,” has preserved much more of its nationalized industry, accompanied by a significantly greater measure of planning than now exists in Russia or Eastern Europe. China has also largely maintained another key characteristic of a society resulting from a socialist revolution, the state monopoly over foreign trade. This last factor, though significantly eroded, still provides China with one of the underdeveloped world’s most potent weapons against imperialist subjection.

Just as every country in the world, including the imperialist powers, seeks to protect its domestic economy from attack by imperialism or rival imperialists, so too does China, Russia and the others. In fact, of all the bureaucratized workers’ states, China has taken the most precautions against being subjugated by imperialist economic penetration.

In other words, the “wisdom” of the Chinese Stalinist bureaucratic dictatorship, as against Soviet Stalinism’s dissolution of its political dictatorship, lies in its determination to keep the rudder of its nationalized economy in the firm grip of its bureaucratic dictatorship—contrary to Kotz’s analysis.

(To be sure, a political system based on workers’ democracy would be an even more effective defense mechanism against imperialist economic assault. But because that would also militate against the bureaucratic dictatorship, it would take a political revolution to overthrow the Stalinist bureaucracy to realize workers’ democracy.)

Dollar democracy

On the other hand, Gorbachev and his successors’ “democratic reforms,” rather than opening up Soviet society to democracy for the masses, opened it up for bourgeois “dollar democracy,” which gave imperialism—with the most dollars—a wide-open door for a takeover of the Soviet political superstructure and, by the same token, much more control over the economy of Russia and Eastern Europe than in China!

However, the ruling elites in the degenerating workers’ states, including China’s, are already facing a rising tide of opposition to both bureaucrats and capitalists. The pro-socialist instincts of the masses of exploited and oppressed will tend to mount to revolutionary proportions when the illusion that capitalist restoration will bring Western European living standards has completely evaporated.

The time is not far away when the more than half-century of global capitalist economic expansion comes to a crashing end. The collapse of world trade will hit all the rapidly degenerating workers’ states equally hard. Even Russia, which exports very little in the way of manufactured commodities for a consumer-based economy2 will be suddenly confronted with a collapse of the foreign exchange that it desperately needs for industrial development.

Think about what this means. The capitalist world throughout the most recent decade-long expansion has suffered an unusually high level of unemployment—something brand new during periods of “prosperity.” Even the workers’ states, which had experienced virtually zero labor redundancies before their leap toward the fantasy of capitalist prosperity, are now plagued with mass joblessness, homelessness, hunger and an explosion of prostitution, from Russia to China to Eastern Europe. But needless to say, the rate of unemployment that will result in the capitalist world when the full effects of the developing crisis hits will be far more catastrophic than in the workers’ states which will be forced to rely more heavily than before on state-owned industry.

If an understanding of the past is any guide to the future, the first global economic crisis since the 1930s will set in motion a resurgence of mass worker militancy in the strongholds of world imperialism. All the world’s countries that in one way or another are victims of capitalist globalization will once again see the power of a fighting working class challenging their own capitalists in the American colossus and elsewhere in the advanced industrial countries.

That development, raising once again the possibility of socialist revolution in the strongholds of world capitalism, will in itself give an irresistible revolutionary impetus to the masses in the workers’ states and in the semi-colonial world as well. They will see the possibility for the first time since the 1930s of a socialist America, Europe and/or Japan providing real material aid to the least developed countries. That, and a mass world revolutionary workers party is what has been for so long the missing ingredient for world socialist revolution.

Permanent Revolution and the Workers’ States

It was widely understood by Marxists in the time of Lenin and Trotsky that Czarist Russia in 1917, was an underdeveloped capitalist country, with considerable remnants of pre-capitalist institutions still existent. Its peasantry, for instance, were virtual serfs, exploited and oppressed in the main by Russia’s large, semi-feudal landlords.

Thus, prior to 1906, all Marxists had presumed that countries like Czarist Russia were not ready for socialist revolution. Most Marxists had a rigidly linear conception of social evolution. That, in this case, meant they believed that nations must first carry through the bourgeois democratic revolution before the economic preconditions for a socialist revolution could be established.

However, after the failed 1905 Russian Revolution in which Trotsky had played a central role as the head of the first all-Russian Soviet Council of Deputies, he came to the conclusion that the bourgeois democratic revolution in Russia could not be completed by the Russian capitalist class because the latter had become intimately interwoven socially and economically with the landlord class and was therefore incapable of leading a revolution to overthrow the semi-feudal Russian state. Trotsky further generalized his view that only a workers’ socialist revolution could complete the tasks of the capitalist democratic revolution in Russia, the most important of the latter being nationalization and distribution of the land among the landless peasants!

Trotsky later extended what he called the theory of Permanent Revolution (3) to all underdeveloped countries in the epoch of imperialism.

Therefore, the peculiar character of the socialist revolution in backward countries made it necessary for revolutionary socialists to follow a strategy oriented toward combining the completion of the bourgeois democratic revolution with the beginning of the proletarian socialist revolution. Consequently, on the first day after the workers soviets took state power on October 26, 1917, the first of two far-reaching acts of the new Soviet government was to nationalize the land and authorize the peasant soviets (committees) to carry out the division of the land among the landless peasants.

Meanwhile, the armed workers’ soviets holding state power in the big cities of the first workers’ state, held the landlord/capitalists in an iron grip while the peasants divided the land among the landless.

And at the very same time, the second revolutionary decree issued on the same day was the establishment of workers’ control of industry as the law of the land and the beginning of the socialist revolution. These revolutionary decrees, reflecting the combined democratic and socialist revolution that was the October Revolution, was itself a consequence of the combined and uneven development of the colonial world in the epoch of imperialist decay.

That is to say, even in the most backward countries of the world, imperialist capitalism has introduced the most advanced forms of capitalist super-exploitation, but at the same time has condemned the great majority of its peoples to living conditions worse than in the time before capitalism arose on the scene of world history. –N.W.

1. East Germany, while an exception, was the least industrialized section of Germany and could not be compared to the powerhouse that was West Germany. Parts of Eastern Europe, like Czechoslovakia were also more developed but hardly comparable to the major strongholds of world imperialism.

2. Russia’s exports are more like those of so-called Third World countries—mostly gas, oil, minerals and other raw materials. But strangely enough, Russia exports some of the world’s most advanced military weapons like jet fighter planes, submarines and high-tech capital exports like passenger aircraft. This is a classic expression of the historic laws of combined and uneven development.

3. See Permanent Revolution, by Leon Trotsky, Pathfinder, New York.





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