Are Marx and Keynes Compatible? Pt 6

In its December 2010 edition, Monthly Review published two letters by Paul Baran and Paul Sweezy to one another. One, dated May 2, 1960, by Baran deals with “the economic surplus” and its relationship to Marx’s surplus value. The other letter is by Sweezy to Baran dated September 25, 1962. In his letter to Baran, Sweezy has some very interesting things to say about the work of John Maynard Keynes and about monopoly and economic stagnation. This week, I will examine Baran’s letter to Sweezy, and next week I will deal with Sweezy’s letter to Baran.

Baran’s surplus

In “Monopoly Capital,” Marx’s category of surplus value was replaced by what Baran and Sweezy called the “the economic surplus.” Ever since “Monopoly Capital” was first published in 1966, there has been much confusion over whether “the surplus” is simply another term for surplus value or something else. If “the surplus” is simply another term for surplus value, what is gained by renaming the most important economic category in all of economics? If “the surplus” is something other than surplus value, what exactly is its relationship to surplus value?

Baran’s 1960 letter to Sweezy sheds some light on the question of “the surplus” and how it relates to surplus value. In his letter to Sweezy, Baran writes that the “surplus” was indeed something more than simply another name for surplus value, though he admitted he was having difficulty defining exactly what “the surplus” actually is. “We want to show,” Baran wrote, “that the sum total of profits, interest, rents + (and this is crucial!) swollen costs of distribution + advertising expenses + PR + legal departments + fins and chrome + faux frais [incidental operating expenditures] of product variation and model changes = economic surplus, and that this economic surplus increases both in absolute and relative terms under monopoly capitalism.”

But Baran then admits that he was having trouble defining “the economic surplus” in a precise way. “What it does hinge on, however,” Baran wrote to Sweezy, “is what you have called ‘vision’ combined with conceptual clarity. I think we have the former but I am having a dog’s time now with the latter [emphasis added—SW].”

The problem is, in my view, that Baran was mixing up different ideas under the catch-all concept of the “the economic surplus.” The result was “vision” without “conceptual clarity.”

One of the beauties of Marx’s concept of surplus value is the very specific definition that Marx provided. Surplus value is the (abstract) labor that the  working class performs free of charge for the capitalists and other exploiters that becomes embodied in commodities and therefore forms part of their value. Marx showed that even if commodities sell at their values—direct prices—including the commodity labor power, or what comes to exactly the same thing, if there is no violation of the principle of the exchange of equal quantities of labor for equal quantities of labor, the workers are still forced to perform unpaid labor for the capitalists. It is this unpaid labor that the working class performs that enables one sector of society—the capitalists—to not only live without working but to grow continuously richer.

Paul Baran

Baran was born in 1910—100 years ago as of last year and the same year as Paul Sweezy was born—in the Ukraine to a middle-class family of Polish Jews. His father was a medical doctor who was a supporter of the moderate wing of the Russian Social Democracy—the Mensheviks. When Baran was born, the Ukraine was part of the vast empire of the Czars, but it would not be for much longer. After the upheavals of World War I and the Russian Revolution, the family settled in Germany, though later during the 1920s they moved back to what was by then the Soviet Union.

Baran grew up and was educated largely in Germany. However, between 1926 and 1928 Baran studied at the Plekhanov Institute in the Soviet Union. These were the years of an increasingly bitter—and increasingly vicious—struggle that was going on within the ruling Communist Party between the supporters of Stalin on one side and Trotsky on the other.

During this factional intra-party struggle, some very important questions for Marxist theory that had been raised by the Russian Revolution and its unexpected outcome were debated. (1) Among them was, what were the prospects for constructing a socialist economy and society within the Soviet Union as long as it remained an isolated socialist state? (2) In the 1920s, the Soviet Union combined a low level of industrial development and consequently a relatively small industrial working class, a large peasantry—the overwhelming majority of the people who lived in the multinational Soviet Union—along with a huge geographical area and considerable natural resources.

During his years in the Soviet Union, Baran was influenced by the Soviet economist Eygenii Preobrazhensky (1886-1937). In the factional struggle that was then raging within the ruling Communist Party of the Soviet Union, Preobrazhensky supported Trotsky. However, Preobrazhensky became fascinated by the possibilities of carrying out what he called “primitive socialist accumulation” within the Soviet Union. By primitive socialist accumulation, Preobrazhensky was making an analogy with the development of early capitalism, before capitalist production proper based on “free wage labor” was consolidated.

The period of primitive capitalist accumulation extended from the 16th to the 18th centuries. During its formative period, the emerging capitalist class relied on force that sometimes reached the level of full-scale genocide to establish the capitalist mode of production. This force was used to accomplish two tasks, both vital to the creation of capitalist production: One of these was to separate the producers—mostly peasants but also urban artisans—from their means of production. Contrary to capitalist mythology, this was far from a peaceful process.

Intertwined with this process was the mass kidnapping and enslavement of people from Africa. (3) In the long run, as capitalism became consolidated the descendants of the enslaved Africans who were separated from their means of production in Africa by the most extreme force possible became “free” wage laborers. However, the conversion of the African slaves into “free” wage laborers was not accomplished by peaceful means either. In the U.S., for example, the conversion of enslaved Africans into wage laborers required in addition to repeated slave revolts, a bloody civil war in which more than 600,000 Americans were killed.

The other major task of primitive capitalist accumulation was to carry out an initial accumulation of money. Today, an aspiring capitalist has to accumulate by whatever means—save, steal or borrow—an initial sum of money—often called seed money—before he or she can launch a business.

What is true of an individual aspiring capitalist today was true of the capitalist system as a whole during the phase of primitive capitalist accumulation. Not only did considerable sums of money capital have to be concentrated in the hands of the first capitalist entrepreneurs, but a vast expansion of the market was needed if large-scale capitalist enterprises were to be profitable.

The necessary expansion in the quantity of money necessary to launch the capitalist system and establish the beginnings of the world market involved first the destruction of the societies of the native peoples of the Americas, accompanied by their enslavement and entombment as Marx put in “Capital” in the gold and silver mines. It was these mines—using mostly slave labor, not “free” wage labor—that produced the “seed money” that was necessary to launch the capitalist system.

By way of analogy, Preobrazhensky described “primitive socialist accumulation” as the initial phase of socialist construction that is carried out in an isolated socialist state—the Soviet Union—whose industrial development lagged far behind the most advanced capitalist countries. Preobrazhensky held that the Soviet state would have to “exploit” the peasantry if it were to successfully carry through the process of “primitive socialist accumulation.”

By exploitation, Preobrazhensky meant that the peasantry would have to perform a greater quantity of labor than it would receive in return in the form of the products produced by the socialist enterprises of the Soviet Union. Since the peasantry formed the overwhelming majority of the Soviet population at this time, Preobrazhensky’s use of the phrase “the exploitation of the peasantry” was extremely unpopular and was used by his—and Trotsky’s—opponents to achieve the defeat of Trotsky and the victory of the Stalin forces.

Preobrazhensky contrasted primitive socialist accumulation with socialist accumulation proper, which would take as its starting point the level of productive forces reached by the most advanced capitalism. Therefore, while Preobrazhensky supported Trotsky against Stalin (and Bukharin), he did so from his own special viewpoint.

Preobrazhensky emphasized the possibilities of primitive socialist accumulation in the Soviet Union, while Trotsky saw no possible way out of the contradictions of building a socialist society in the Soviet Union except through the victory of worldwide socialist revolution. If the world working class was not victorious in the coming historical period, Trotsky warned, the restoration of capitalism in the Soviet Union was inevitable.

When, starting in 1928, the Stalin leadership moved dramatically toward vastly accelerated socialist industrialization by launching the first five-year plan, Preobrazhensky broke with Trotsky and attempted to work with Stalin and his supporters to build up a socialist economy in the Soviet Union. It ended badly for Preobrazhensky, who was eventually arrested and finally executed on trumped up charges during the Stalin-led purges in 1937. However, unlike many other “old Bolsheviks” Preobrazhensky refused to confess to his nonexistent crimes.

Preobrazhensky on the plan versus the market

In his book “The New Economics,” Preobrazhensky explained that the 1920s-era Soviet Union had a mixed economy. The economy included large state-owned socialist enterprises; small-scale peasant simple commodity production, with the strongest peasants tending to become capitalist farmers (4); some concessions owned by foreign capitalist corporations; and small-scale urban capitalist production.

Therefore, the Soviet Union in the 1920s combined elements of both a planned and a market economy. Preobrazhensky pointed out that to the extent the planning principle replaced the market, commodity production and its specific economic laws—in particular, the law of value—would be abolished.

Remember, Marx described commodity production as a phase in the history of production where the producers work for their own private account independently of one another. The only way the producers can validate their individual private labors as a fraction of the total social labor is through exchange. Or, what comes to exactly the same thing, by selling their products as commodities on the market.

According to Preobrazhensky, the Soviet Union had to mobilize its “economic surplus” in order to achieve industrialization. But since Soviet industrialization took place in the context of a planned economy where the workers collectively owned the means of production through their state, the “surplus” here did not represent the same relationship of production as the “surplus product” of a society that is ruled by a ruling class of non-workers. (5)

In contrast, in all class societies, including capitalism, the direct producers, whether through direct slavery, serfdom and other forms of peonage, or as “free” wage laborers, are forced to work part of the working day free of charge for an exploiting ruling class of non-workers. This surplus labor that produces the surplus product enables the members of the ruling class to live without working.

Under capitalism, unlike earlier forms of class society where only some products took the form of commodities, virtually all products take the form of commodities, and consequently surplus product takes the form of surplus value. However, as long as we are dealing with a capitalist economy, whether the capitalist economies of the imperialist countries or the capitalist economies of the nationally oppressed capitalist countries, not only does the “economic surplus” remain a surplus product, the surplus product takes the specific form of surplus value.

In 1928, aware of the deteriorating political climate in the USSR, Baran left the Soviet Union and returned to Germany. (6) Unlike many other intellectuals who had supported socialism and the Russian Revolution in their youth but then turned against the Soviet Union and often repudiated socialist ideas altogether in reaction to the political terror that peaked in the Soviet Union during the 1930s, Baran did not reject either socialist ideas, the Russian Revolution, or the Soviet Union.

However, in the years that followed, Baran was obliged to observe Soviet industrialization mostly from afar—though he briefly returned to the Soviet Union in the early 1930s after he was forced to leave Germany following Hitler’s coming to power in January 1933. By then, however, the political climate in the USSR had worsened considerably compared to even 1928, so Baran moved to Poland and then in 1939 to the United States. If he had stayed in Poland, Baran due to his Jewish ancestry would have faced virtually certain death at the hands of the Nazis.

In 1951, Baran managed to obtain a tenured economic professorship at Stanford University in California. Until his death in 1964, Baran was the only tenured Marxist professor of economics in the entire United States. Stanford’s willingness to hire Baran stands in contrast to Harvard’s—considered America’s leading university—refusal to give Paul Sweezy a tenured position in its economics department despite the urgings of none other than Joseph Schumpeter. The refusal of U.S. universities to hire Marxists before the 1960s, with the sole exception of Baran, helps to explain the desert that passes for professional economics in the U.S. today.

Because of his tenure, Baran was able to hang on to his academic post through the worst of the McCarthyite witch hunt, until his premature death of a heart attack in 1964, two years before “Monopoly Capital” was published.

Perhaps because of his experiences in the Soviet Union, Baran was fascinated with the possibilities of development, or lack thereof, of the capitalist countries of the “Third World.” In 1957, he published the “Political Economy of Growth.” He noted that the oppressed capitalist countries—or countries that were struggling to emerge from pre-capitalist relationships—had huge potential “surpluses” that could be used for economic development if the “surpluses” were utilized in a rational way. However, under capitalist neocolonial regimes, the economic surplus was being squandered.

This partially took the form of unused capacity—plant that was lying idle due to a lack of effective monetary demand, or in Marxist terms, because the increased surplus value that would be produced if the productive capacity that already existed was fully utilized could not be realized in money form—that is, as profit.

But that was not the whole story. The part of the surplus value that was realized was largely squandered thorough the wasteful consumption of the capitalists, the landowners and their “middle-class hangers-on.” The labor of the working class could have been used in producing new means of production, which could have been utilized to overcome “underdevelopment.” Instead it was largely wasted in producing luxuries for the ruling classes and their middle-class allies.

Applying the concept of ‘the economic surplus’ to U.S. monopoly capitalism

In the late 1950s and early 1960s as Baran worked on “Monopoly Capital” with Paul Sweezy, both Baran and Sweezy came to believe that the concept of the “economic surplus” could be applied to the very different society of the United States and its powerful highly industrialized—deindustrialization still lay in the future—but already decaying monopoly capitalist economy. Baran raised the question of the production of consumer goods and the vast advertising expenditures and other methods that the monopoly capitalist corporations use to create demand for the often harmful commodities that they produce.

Adam Smith had explained how “the invisible hand”—the law of value—distributes the total quantity of labor available to society among the various branches of industry in such a way that society produces what it needs and wants even though every producer is working only for his own private account. Neoclassical marginalist economics has vulgarized Smith’s insights to the extreme. Today’s (bourgeois) economists talk about “consumer sovereignty,” ignoring the fact that the monopoly capitalist producers employ their vast financial resources to create demand for the particular products they produce.

Among these vulgarizers was John Maynard Keynes of the “General Theory.” “I see,” Keynes wrote in Chapter 24 of the “General Theory,” “no reason to suppose that the existing system seriously misemploys the factors of production which are in use.” In “Monopoly Capital,” Baran and Sweezy demonstrated that this is far from the truth, even if we ignore the problem of vast squandering of society’s labor on militarism. Powerful monopolist corporations create demand for the products they produce through massive advertising. Whether on billboards, in newspapers, on radio and TV or now on the Internet, a significant total of society’s labor is spent on advertisements explaining the alleged virtues of the products produced—or sold—by the monopolists.

The “neoclassical” economists build complex mathematical models that assume each economic “agent”—consumer—has “perfect information.” But this is, of course, nonsense. Some advertisements brazenly boast about “our secret recipe.” Since the recipe is secret, how are consumers supposed to have the “perfect information” necessary to objectively judge the product as a material use value? Already in his day, Marx observed that the (bourgeois) economists were assuming that all consumers have an encyclopedic knowledge of the world of commodities.

This was not true in Marx’s day and is far less true in our day or even when Baran and Sweezy wrote “Monopoly Capital” a half a century ago. How many of us can really objectively judge the quality of different smart phones, tablet computers or computerized automobiles, for example. If we have sufficient money or credit, we tend to buy “brand names” that have built up a reputation for being of high quality. This reputation enables the corporations that market these products to sell them at prices that are above the price of production—at monopoly prices.

If we are unusually knowledgeable about a particular type of commodity—but more likely because we lack money and credit to buy “brand name” products—we sometimes buy so-called “no-name products” that often sell for far less than the brand names. Sometimes we find out that the no-name products are as good or even on occasion better than brand-named products sold at much higher prices. But at other times, the cheap product falls apart almost at once. You never know. You as a “sovereign consumer” lack the information to exercise your alleged “sovereignty.”

The case of the automobile

The manipulation of consumer demand does not stop at advertising. Fifty years ago when Baran and Sweezy were working on what would become “Monopoly Capital,” automobile technology was on a plateau. The automobile centered on the internal combustion engine had been developed during the first half of the 20th century and had reached a certain perfection. Real improvements such as the application of computer technology to automobiles and in recent years the increasingly urgent need to replace the internal combustion engine with the electric motor still lay well in the future.

Yet in those days, the automobile manufactures every year—as they still do—with great fanfare announced the new models—the new 1957 Chevy, Ford or Buick that you just had to buy. Most notoriously in the late 1950s the automobile monopolists built cars with huge tail fins—attempting to invoke in the minds of the buyers space rockets or jet planes—you occasionally see them on antique cars today. Then a few years later the tail fins disappeared never to return. Still, Detroit continued to announce its yearly “new models” with little more change than slight changes in the chrome trim. Auto buyers were then urged to replace their “out of date” cars with the new cars that were “improved” only because they had fins—or the fins had been removed—or the chrome designs on the car were slightly different than last year’s “must have” model. This phenomena was even given a name—”planned obsolescence.”

Not free to choose

But the automobile companies didn’t stop with their massive and often deceptive advertising campaigns and their minor style changes. Automobile companies and the oil companies (7) that stand behind them used their vast political power to force working-class and middle-class consumers to buy their products. The oil-automobile complex virtually destroyed public transportation in the U.S., while great amounts of the taxpayers’ money were poured into the construction of highways. With little public transportation available but an increasing network of freeways, many people in the U.S. were—and are—forced to buy automobiles simply to get to work.

Therefore, neoclassical economists notwithstanding, a good deal more than the choices of the “sovereign consumer” was involved in the rise of the American automobile industry. When it comes to the need to buy a car, the American consumer is most certainly not free to choose.

Today we are learning that cars built around the internal combustion engine are among the most harmful material use values ever produced by human labor. Not only have untold thousands been killed and many more maimed in auto accidents over the years, but the internal combustion engines were and are pumping huge amounts of carbon dioxide into the atmosphere leading to today’s global warming crisis.

This blog has only dealt with these questions in a passing way. The reason is that I am not attempting to put forward a rounded critique of political economy but rather focus on the question of the periodic crises of overproduction that affect capitalism.

This, however, in no way diminishes the importance of the questions raised by Baran and Sweezy a half century ago in “Monopoly Capital” and other writings. Their urgency has only increased over the decades in ways that could not have been foreseen by Baran and Sweezy back in the 1950s and 1960s.

However, I believe that in analyzing these extremely important phenomena that have now reached such monstrous proportions that the continued existence of life on this planet could be brought into question, we should not abandon Marx’s concept of surplus value as the central category of the economics of capitalist society. True, we have to be careful to respect the historical limits of the concept of surplus value. It must not be used in a supra-historical way.

If we are dealing with other problems such as socialist construction, we should not use the term “surplus value” to refer to the part of the product that is appropriated by the ruling working class collectively rather than individually. Especially in socialist states that are building socialism under unfavorable conditions, the opponents of socialist construction have often attempted to appeal to the working class by claiming that the workers are being “exploited” or even that more “surplus value” is being extracted from them than under capitalism.

Even a situation where a large percentage of the product produced by the working class goes into their collective consumption in the form of socialist industrialization is not the same thing as the appropriation of a large part of the product produced by the working class by a class of non-workers. (8)

However, when we are analyzing capitalism in all its stages, including the phase of monopoly capitalism, the category of surplus value in my opinion remains central. Baran mixed different things together. He consequently achieved vision, as he himself put it, but not clarity. To complete Baran’s work, we must add clarity to his vision.

Baran mixed together (1) the exploitation of the working class by the capitalist class—surplus value—with (2) the production of commodities with trivial or harmful use values, advertising, minor changes in design that represent no real gain in use value of a particular type of commodity for the sole purpose of selling greater quantities of commodities, and salesmanship, and (3) the difference between what is produced under capitalism and the possibilities that are offered if capitalist exploitation was replaced by socialist construction. All these are important questions worth examining in their own right, but they should not be lumped under the catch-all term “economic surplus.”

There is another problem with the Baran and Sweezy analysis of “the surplus.” That is their belief that “the surplus”—which Sweezy at least used more or less synonymously with surplus value despite Baran’s attempts to give it a broader meaning—is increased under monopoly capitalism by the monopolies’ alleged ability to charge prices that are more and more above the labor values of commodities, creating profits—or economic surplus—upon alienation.

“Out of…surplus value,” Baran wrote in his 1960 letter to Sweezy, referring to competitive capitalism, “the capitalist gets his profits, the banker his percentage, the landlords their rents, and the merchants (part of) their commercial gains. (The other part constituting productive services comes out of the costs proper and still another part based on milking v [variable capital or wage] recipients is ‘profit by alienation‘ [emphasis added—SW] and constitutes a net addendum to surplus value.)”

Here Baran is defining the economic surplus not as another name for surplus value but as surplus value plus an additional “profit by alienation.” Baran apparently believed that the industrial capitalists sold their commodities more or less at their values to the merchants, who then added an additional profit upon alienation to the prices of the commodities when they sold them to the ultimate consumers. While Baran saw this as a minor phenomena under “competitive capitalism,” he believed it expanded greatly under monopoly capitalism, justifying the replacement of Marx’s “surplus value” with the new category of the “economic surplus.”

This brings us to the whole question of the relationship between value and price. I will continue this next week when I examine Sweezy’s 1962 letter to Baran.

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1 Before 1917, all Russian Social Democrats, whether Bolsheviks or Mensheviks—with the exception of Trotsky—believed that the approaching revolution in Russia would not immediately bring the working class to power. Lenin believed that under the most favorable conditions—that the Russian revolution was accompanied by the victory of the workers in Western Europe—the revolution would bring to power a coalition of the working class and the revolutionary peasantry—the dictatorship of the proletariat and the peasantry—which would be dominated by the peasantry.

As used by Lenin, the term dictatorship of the proletariat and the peasantry was not another name for the dictatorship of the proletariat. The peasantry as a whole, according to Lenin, was revolutionary relative to the the feudal landlords, but its upper layers were part of the developing capitalist class. Consequently, a revolutionary dictatorship of the proletariat and the peasantry would ultimately be dominated by the capitalist upper layers of the peasantry, which Lenin believed could, unlike the liberal financial, industrial and commercial capitalists, play a consistent revolutionary role in the struggle against the political absolutism of Czarism and feudal landownership. It was therefore the most democratic possible form of bourgeois rule and would create the most favorable conditions for the future struggles of the working class against the entire capitalist class, including the capitalist farmers who were developing out of the upper layers of the peasantry.

According to Lenin, only the poorest peasants who were losing their means of production and becoming proletarians could be expected to be allies of the working class in a future socialist revolution. Under a democratic capitalist republic in Russia, which Lenin hoped would replace the absolute monarchy of the Czars, a shrinking layer of middle peasants would waver between supporting the workers and the capitalists as the class struggle between the capitalist class and the working class developed within the framework of a (bourgeois) democratic republic. Lenin sometimes used the term “the dictatorship of the proletariat and the poorest peasantry” to popularize the socialist dictatorship of the proletariat in a peasant country.

But the Russian Revolution, contrary to the expectations of the Bolsheviks, did bring the working class to power in the form of the Soviet republic led by the Bolsheviks, while the capitalists continued to rule in the rest of Europe and the world. Therefore, the ruling Bolshevik Party—now renamed the Communist Party—faced the entirely unexpected problems of leading an isolated socialist state embedded in what was still a thoroughly capitalist world economy.

2 Before 1924, all Soviet Communists believed that a complete socialist society could be built in Soviet Russia and the other nations of the former Russian empire only after the working class came to power in the most advanced industrial countries. Stalin specifically reaffirmed this position immediately after Lenin’s death in 1924 but famously changed his stand later that same year.

Stalin’s new position was that given the Soviet Union’s tremendous size and natural resources there was no reason why the Soviet working class armed with state power could not build a “full and complete” socialist society in the Soviet Union alone even if the rest of the world remained capitalist.

Stalin granted one reservation—that the Soviet Union could not be fully guaranteed against the danger of a capitalist restoration brought on by a foreign military conquest by capitalist nations until capitalism was finally overthrown by the workers in all advanced capitalist nations. The danger of a foreign military invasion of the Soviet Union was very real as Germany’s invasion of the Soviet Union in 1941 showed.

Trotsky strongly disagreed with Stalin’s new position. Unlike many modern “Trotskyists,” Trotsky did not claim that it was impossible to build socialism in a single country—the Soviet Union. Trotsky’s actual position was that it was possible and indeed necessary to engage in socialist construction within the Soviet Union as long as it remained an isolated socialist state, but it would not be possible to build a full and complete socialist society within the Soviet Union before the working class came to power in the most advanced capitalist countries, because the more the Soviet economy developed the more it would become dependent on the world economy.

Trotsky further warned that if the new doctrine of socialism in one country became entrenched in the Communist, or Third, International, the policies of the International—and its branches the national Communist parties—would become subordinated to the needs of Soviet foreign policy and diplomacy.

3 Ancient slavery such as prevailed in Greece and Rome had not been based on race. People of all races were enslaved. Modern slavery that arose during the rise of capitalism, however, was overwhelmingly the enslavement of African people. This had the advantage for the slaveholders that escaped slaves could be identified by their skin color. Therefore, modern much more than ancient slavery led to racism, the idea that people with dark skin are not fully human and are therefore fit by nature—or God—only for performing slave labor for the people with white skin.

4 Agricultural capitalists are industrial capitalists who carry out their industrial business in agriculture. The upper levels of the Russian peasantry were often called kulaks—fists—in Russian. They were not full-scale capitalist farmers for the most part but were employing more and more wage labor and thus evolving toward becoming capitalist farmers.

Preobrazhensky saw these aspiring capitalist farmers, driven by elemental economic forces towards the accumulation of industrial capital, as competing for control of the economic surplus—or surplus product as Preobrazhensky called it—with the socialist sector of the economy. While the interest of the workers demanded the development of the socialist sector of the economy, the aspiring capitalist farmers were pushing the Soviet economy in a capitalist direction where the “economic surplus” would again take the form of surplus value.

5 The extent to which the working class is willing to tolerate a very high rate of “primitive socialist accumulation”—high levels of production of means of production relative to means of personal consumption—depends in large part on the political consciousness of the working class. There are, of course, limits to how far even the most class-conscious workers can sacrifice their immediate consumption interests in order to carry out a rapid rate of “primitive socialist accumulation.” Experience has shown that attempts to push the workers to sacrifice more than they are prepared to tolerate by Communist Party leaders eager to rapidly industrialize their countries opens the door to counterrevolutionary political forces who pretend to champion the workers in a struggle against “Communist exploitation.”

6 Behind the deteriorating political climate in the USSR that climaxed in the terror and purges of the 1930s was the growing conflict between the upper layers of the peasantry, who were being driven by economic forces into becoming industrial capitalist farmers and carrying large sections of the middle peasants behind them, on one side, and the working class, which found consistent allies only among the poorest peasants who were losing their means of production to rich peasants, on the other.

There was therefore a growing class split among the victorious people who had been united against the Czar, the large urban capitalists and the feudal landlords—Russia’s old ruling class. This class struggle within the victorious people was inevitably reflected in the increasingly vicious factional struggle within the ruling Communist Party, which ended with a massive bloodbath whose victims included many members of the Communist Party itself, including most of the surviving leaders of the Russian Revolution.

7 Since a transportation system centered on the private automobile is far less efficient in the use of fuel than a public transportation system would be, the oil companies have an interest in seeing to it that the inefficient system of private automobiles prevails over the more efficient system of public transportation. The more inefficiently petroleum is used, all other things remaining equal, the greater the demand for the commodity petroleum will be.

Therefore, in the view of the capitalists that own the oil industry, the fact that the supply of petroleum is not unlimited and that burning it up in internal combustion engines unleashes dangerous global warming cannot be allowed to get in the way of their profits. And since oil companies are among the most politically powerful, if not the most powerful corporate monopolies in the U.S., it is not surprising that they have used and are still using their vast political power to sabotage proposals to expand public transportation in the U.S. And even worse, they are now doing everything possible to promote denial of the growing danger of global warming.

8 Late in his life after the death Paul Baran in 1964, Sweezy came over to the view under the influence of Maoism that the Soviet Union was not a socialist state but rather a new form of exploitative class society. From about 1968, the Chinese Communist Party started to claim that the Soviet Union had become a capitalist state due to “Khrushchevite revisionism,” a reference to the former Soviet leader Nikita Khrushchev (1894-1971), who had dominated Soviet politics between Stalin’s death in 1953 and his own dismissal from office by the Soviet Communist Party in 1964.

Sweezy was far too intelligent an economist to believe that the capitalist laws of motion prevailed in the Soviet Union under either Stalin, Khrushchev or Khrushchev’s successor, Leonid Brezhnev (1906-1982). But it was true that the members of the bureaucracy whose influence was growing within the Soviet Communist Party and the Soviet state were increasingly abusing their positions to obtain ever greater privileges in the sphere of consumption.

Bureaucrats are workers of a sort; nobody who was capable of work and was of working age could legally get by in the Soviet Union without holding a job of some kind. But working in an office is a far cry from toiling in a steel factory or in a coal mine or in the fields of a state farm. Therefore, weren’t these bureaucrats in their own way squandering the “economic surplus” produced by the labor of the Soviet working class in just the kind of wasteful way that Baran described in the “Political Economy of Growth”?

Within certain limits, the answer is yes. Indeed, the Brezhnev leadership that replaced Khrushchev in 1964 increased the production of consumer goods—as Khrushchev himself had done relative to the economic policies of Stalin—at the expense of new investment in the means of production, causing Soviet economic growth to slow to a crawl by the time of Brezhnev’s death in office in 1982.

However, Brezhnev’s increasing emphasis on consumer goods at the expense of “primitive socialist accumulation” did not really satisfy the increasingly not-so-“Soviet,” bourgeoisified bureaucracy and its allies among the middle-class “intelligentsia.” These bourgeois bureaucrats and their allies, which included a growing layer of more or less illegal traders operating in what came to be called the “second economy,” as well as bourgeois intellectuals, wanted nothing less than the full-scale restoration of capitalism with its right to private property in the means of production.

After Gorbachev came to power in 1985, these groupings described the Brezhnev years as the “period of stagnation.” However, these pro-capitalist forces were not really referring to economic stagnation but rather to the fact that, despite his concessions to the bureaucrats, the Brezhnev leadership like its predecessors upheld the basic gains of the October Revolution, state ownership of the means of production, a planned economy and state monopoly of foreign trade. From the viewpoint of the pro-capitalist “reformers,” under Brezhnev Soviet society’s evolution backward toward capitalist restoration had bogged down—hence the “stagnation.”

Mikhail Gorbachev, who became the CPSU chief in 1985, based himself on these bourgeois bureaucratic elements. He launched his “radical reforms” that targeted the state-owned socialist economy, the planning principle and the monopoly of foreign trade, though at first these attacks were disguised as mere “reforms.”

What Gorbachev began his successor Boris Yeltsin finished in the early 1990s. Soon after Yeltsin came to power in 1991, he announced that his government would sell the state-owned Soviet enterprises to the workers in the form of shares. This, Yeltsin claimed, would make the workers the “real owners” of the means of production. The increasingly impoverished workers, however, had no choice but to quickly sell their shares in what had been socialist state enterprises to people who had managed to accumulate vast sums of money through illegal—though under Gorbachev increasingly legalized—trade, theft and corruption. These moneyed elements quickly bought up the shares and emerged as a full-scale capitalist class while the workers were expropriated.

This shows, in my opinion, why though there were indeed strong tendencies for the bureaucracy in the Soviet Union to become a ruling class, it could only complete this process by becoming a full-scale capitalist ruling class. The tragic Russian counterrevolution therefore demonstrates that there indeed is no possibility for a new non-capitalist exploitative ruling class to replace the capitalists as the ruling class in modern society. Either the capitalists rule and ultimately bring modern society to ruin, or the workers rule and build a socialist society.

If the workers’ rule becomes bureaucratized and the process of bureaucratization is not checked in good time, the result is not a new type of class society but only the restoration of the “old” capitalism. Near the end of his life, Paul Sweezy expressed some regret that he had been carried as far as he had towards anti-Soviet positions under the influence of Maoism.

One Response to “Are Marx and Keynes Compatible? Pt 6”

  1. Ian J. Seda-Irizarry Says:

    I found this post very interesting and I wondered what was your opinion on the book of Resnick and Wolff, “Class Theory and History in the USSR” (2002) given that they use a “surplus” approach to define the Soviet Union as “state capitalist” (of course, others did before them, like CLR James)

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