In this post, I had hoped to concentrate on the COVID aftermath boom, inflation, the Federal Reserve System monetary policy, and the growing threat of a deep recession.
But events in Ukraine do not permit this. Even if the Russo-Ukrainian conflict doesn’t spiral into a world war, the U.S. world empire has launched an economic war that is already having a major impact on the development of the global economy.
The most extensive propaganda campaign against any nation occurring within recent memory is blaring out of every media outlet — printed, digital, radio, and TV. Some examples of the propaganda tricks employed include glaring headlines declaring as fact what a close reading of the article reveals as claims of the government or Pentagon.
An example taken at random: An article by Helene Cooper, March 3, The New York Times, from Stuttgart, Germany, a city far removed from the Ukrainian war front. The headline: “Ukrainian Forces Are Using Their Home-Turf Knowledge to Stymie Russia, Top U.S. General Says.” The impression is the Ukrainian forces are doing quite well holding back Russian forces. Only at the end of the headline do we learn the source is a top U.S. general — not exactly an unbiased source.
If it read “Top U.S. General says Ukrainian Forces Are Using Their Home-Turf Knowledge to Stymie Russia,” it would be clear the information comes from an unnamed top U.S. general. Ms. Cooper has no independent information on actual battlefield events.
The opening lines of the article, “The Ukrainian military is conducting a hugely [notice the use of superlative -SW] effective and ‘mobile’ defense, using its innate knowledge of its home turf to stymie Russian forces on multiple fronts, Gen. Mark Milley, the top military adviser to President Joe Biden, said early Thursday.”
Ms. Cooper’s information comes not from the war front but from inside the Biden administration. You have to read further into the article to learn that General Mark Milley is chairman of the Joints Chief of Staff, the top uniformed official inside the Pentagon.
Another trick: images of frightened civilians fleeing from the war. The viewer cannot help but empathize with these innocent victims. This propaganda seeks not to educate people on the real cause of the war and those responsible for the human suffering. This kind of propaganda aims to increase hatred of the people who the propagandist claims are responsible.
Earlier wars in Afghanistan, Iraq, Yugoslavia, Vietnam and Korea involved U.S troops brazenly attacking small countries incapable of attacking the United States. The wave of war propaganda after the 9/11 attacks at first did not involve any enemy country but only international terrorism. The chief villain was not a head of state but the former ally in the U.S.-sponsored war against the Afghan revolution, Osama bin Laden. The Taliban government of Afghanistan was then charged with providing refugee status to bin Laden, making it seem that somehow Afghanistan had attacked the United States.
A year later, Iraq’s President Saddam Hussein was vilified as supporting 9/11, suggesting that Iraq had attacked the United States.
The current war crisis involves Russia, geographically the world’s largest country, invading a smaller one, though Ukraine is the geographically second-largest country in Europe. And Russia does have the ability to launch a nuclear attack that could destroy the United States, making war propaganda easier.
Another propaganda trick is to demonize the target country’s leader, easier in some cases than in others. Adolf Hitler hardly needed to be demonized at all. Though not remotely a Hitler, Russian President Vladimir Putin is easier to demonize than Ho Chi Minh or Fidel Castro.
Public opinion shaped by mass media will initially be on the side of U.S.-NATO in the imperialist world. But at moments like these Marxists have to ask: What are the class forces behind the events? Who are the real war-makers and what are their aims?
The immediate cause of the Russo-Ukrainian war: The Ukrainian government marshaled a force of 50,000 to 100,000 men, spearheaded by neo-Nazis of the Azov Brigade and others to crush the ethnically Russian Peoples Republics of Donetsk and Lugansk. The current war began in 2014, not February 2022, when the Euromaidan regime came to power in a U.S.-supported coup. Kiev has waged this war at the cost of 14,000 lives. The media completely conceals this fact.
The current propaganda blitz is all the more revolting because while Russia has indeed invaded the Ukraine, in the past the U.S. repeatedly invaded its neighbors: Haiti, the Dominican Republic, Panama, and Grenada were invaded by the U.S. within my memory. This is not to mention the wars of aggression fought by the U.S. against countries nowhere near its borders: Korea, Vietnam, Iraq, and Afghanistan.
Today, the United States maintains troops in Iraq and northeast Syria despite requests by their governments that these troops be withdrawn. Aren’t these invasions?
And let’s not forget the Guantanamo Naval Base maintained in Cuba and used as a prison camp for people from predominately Muslim countries far from U.S. borders. This base and prison camp is maintained against the will of the Cuban government and is guarded by U.S. soldiers — representing an ongoing invasion of Cuban territory. These are just a few examples where the United States has invaded or maintained military bases against the will of the governments and peoples of these countries. Military operations have also been carried out for years by the Pentagon against Somalia as well as Yemen. The United States has zero moral authority to criticize any country for invading another country.
Attempts to settle the war by diplomacy
Starting in 2015 a series of accords were negotiated in Minsk, Belarus — Ukraine’s northern neighbor— to end the war. These accords provided the ethnic Russian population of the two people’s republics with autonomy within the framework of the Ukrainian state. The problem? Kiev’s Euromaidan government, with Washington’s support, failed to carry out its part of the bargain. After the first wave of fighting in 2014-15, there were several years of uneasy peace. In recent weeks Ukrainian forces stepped up their shelling of the people’s republics. They were poised to launch a massive attack as the warmer weather of Spring, now beginning in the Northern hemisphere, creates better fighting conditions.
I admit I had believed the Russian government of President Vladimir Putin would back down before imperialist pressure and throw the ethnically Russian Peoples Republics of Donetsk and Lugansk under the bus in an attempt to maintain its relations with its partners in Washington. Though these republics were proclaimed in 2014, the Putin government refused to recognize them. The protracted failure to extend diplomatic recognition to the Donbas republics convinced Kiev’s Euromaidan government that it could attack without risk. This was despite Moscow’s massing a large army near the Ukrainian border.
In the former Soviet Union, the Donbas was a crucial center of heavy industry. It had a powerful industrial working class with strong revolutionary traditions forged in the civil wars after the Russian Revolution and reinforced by the war against German Nazi invaders. Today in the two people’s republics, the Soviet red hammer and sickle flag (1) is displayed side by side with the czarist double eagle of the Russian nationalists. The czarist double eagle was restored as the symbol of the Russian nation under Boris Yeltsin and continues to be used under Vladimir Putin. The double eagle and the red hammer and sickle represent different classes. The tradition of the Great Patriot War in the former Soviet Union against Nazi Germany is particularly strong in the Donbas — it was occupied by Nazi Germany and saw heavy fighting during that war. The people of the Donbas have no tolerance for neo-Nazis, as reflected in Putin’s promise to de-Nazify the Ukraine.
If Putin had allowed the people’s republics to be lost, the Russian Crimea and the strategic Russian port of Sevastopol would have been next, as Ukraine’s Euromaidan regime never accepted the loss of Russian Crimea. Since coming into power in 2014, Kiev’s Euromaidan government has been begging to be admitted to NATO. If admitted into NATO, it would fall under NATO’s Article 5: if a NATO member finds itself in a shooting war with Russia, all NATO members — including the United States — are to be at war with Russia. If Ukraine had been part of NATO, Russia would have had the choice of standing by while the Russian population is left to the not-so-tender mercy of the Ukrainian nationalists. Russia would also have to accept the loss of Crimea and its port of Sevastopol or face World War III. President Putin concluded he had to act now.
The logic of war
Putin might have limited himself to sending the Russian army into the people’s republics. This would have respected Ukrainian national sovereignty. But militarily there was a big problem. The Ukrainian nationalist army, spearheaded by neo-Nazis, would have been able to bleed the Russians virtually indefinitely. Whenever the Ukrainian army suffered a defeat it could withdraw westward into Ukrainian territory and regroup. The NATO countries could transform Russia’s limited invasion into a protracted war between Russia and Ukraine. If Russia had limited its action to the territory of the people’s republic, U.S.-NATO would have been willing to finance the Ukrainian army and supply it with a steady flow of arms, as it is now doing. The result would have been a steady flow of body bags back to Russia. Such a war would have been an unaffordable Kremlin quagmire.
From a military point of view, the Ukrainian nationalist-led army is an unofficial extension of the armed forces of the U.S.-NATO. To defeat it, it has to be encircled. This is what the Russians are now doing. To do that, they need to go far enough so that the encircled troops cannot withdraw west and regroup.
As of early March, it seems the Russians do not want to take Kiev but to negotiate an agreement with the Ukrainians, on Russia’s terms. The terms involve dismantling the Ukrainian army that has been besieging the Donbas since 2014 and suppressing the neo-Nazi militias spearheading the attacks. In addition, Russia might want adjustments to the borders of Ukraine and Russian Crimea to secure Crimea and Sevastopol for Russia. I suspect Russia also wants to dismantle the Ukrainian nuclear power plants capable of producing weapons-grade fissionable materials that can be used to build nuclear bombs. If Ukraine continues to listen to its Washington masters and refuses to come to terms, Putin has been hinting that Russia will move to overthrow Ukraine by force and make it part of Russia.
It cannot be denied that these actions and demands of the Putin government are a violation of Ukrainian national sovereignty. But so was the U.S.-organized 2014 Euromaidan coup — U.S. diplomats were recorded discussing the composition of the first Euromaidan government. Capitalist Russia would like to dominate Ukraine economically, so rich in minerals and agricultural black-earth land. The Russian ruling capitalist class Putin represents is not a benign force. If capitalist Russia could succeed in re-establishing Russian rule over Ukraine, the national oppression of Great Russians over the Ukrainian people, as marked czarist Russia, would be reestablished. (2) But it is dubious that capitalist Russia is strong enough to establish domination. Russia is waging a defensive war to keep U.S.-NATO forces, missiles and nuclear weapons out of Ukraine while safeguarding Crimea and the strategic port of Sevastopol.
Since Euromaidan came to power, U.S. capitalists, not Russian, have bought up land and natural resources and established their own national oppression over the Ukrainian people. If Washington had stayed out of Ukraine, it’s unlikely Russian armed forces would have entered. But could the United States have restrained itself considering its status as the world’s leading imperialist power? It is easy for a U.S. progressive or Trotskyist to denounce Great Russian oppression of Ukrainians (and quote Lenin to that effect) while ignoring the national oppression U.S. imperialism has been establishing over Ukraine.
The real aggressors are the U.S.-NATO world empire and their Ukrainian nationalist auxiliaries. They launched a war against the Donbas people in 2014. Hemmed in by a NATO that is armed to teeth in both conventional and nuclear weapons, even if the Russians were to get the Ukraine fully under their control, they will be unable to use this control to seize territories further west.
The historical background to the current crisis
Since the 1985-91 Russian political and social counterrevolution (3) restored capitalist rule, most Eastern European countries, including the three former Soviet Republics of Estonia, Latvia and Lithuania, have been made part of NATO. In 1989, Mikhail Gorbachev agreed to abandon the German Democratic Republic to West Germany. In return, U.S. leaders promised him NATO would not be extended an inch further east.
This promise was never put in writing. (4) As should have been expected from anybody who knows anything about imperialism, or has any experience with schoolyard bullies, U.S.-NATO imperialism completely ignored those promises. After 35 years of retreat in Europe, Putin has drawn the line at Ukraine. Why now? Because Ukraine is the traditional gateway for invading Russia itself: Hitler’s invasion begun June 22, 1941, proceeded through Ukraine and Belarus. (5)
On the question of Putin’s demands for Ukraine’s de-Nazification, the U.S. media has outdone itself. The pro-war media points to the fact that Ukraine’s president Volodymyr Zelensky is Jewish as all the proof required that Nazi’s cannot be influential in the Ukraine state – when the contrary is abundantly true. The U.S., of course, has never had a Jewish president and was happy to recruit hundreds of right-wing fascist-minded East Europeans after World War Two to begin their anti-Soviet crusade. Serious U.S. policymakers know that their strongest supporters in the Ukraine today are neo-Nazi Ukrainian nationalists who have been armed and trained by U.S. advisers. U.S. imperialists know the American people would be outraged to know their government was supporting and relying on neo-Nazis to dominate Ukraine. The overwhelming majority of people throughout the world despise Nazis. Millions of Ukrainian people gave their lives fighting Nazi Germany and its Ukrainian nationalist collaborators.
In the 2019 Ukraine presidential election, the left was suppressed. Zelensky, a comedian by profession, ran as a peace candidate against the Russian-baiting bellicose incumbent billionaire oligarch Petro Poroshenko. (6) Zelensky won with 73.2% of the votes by promising to negotiate an end to the war with the people’s republics. Zelensky was almost like a Bernie Sanders of the Euromaidan era, a peace candidate. But unlike Sanders, Zelensky became president. Zelensky’s election showed the overwhelming majority wanted peace with Russia. The voters rejected the antisemitic neo-Nazi Ukrainian nationalists who have worked tirelessly to force a war with Russia in the interests of the U.S.-NATO world empire.
Once in office, Zelensky followed the same basic Euromaidan policies as his predecessor. The Zelensky government continued anti-Russian demagoguery and refused to make peace with the Donetsk’s and Lugansk’s people’s republics while begging for NATO membership. He also supported a highly unpopular land reform bill, enabling U.S. agribusiness corporations to buy up Ukrainian farmland.
While Zelensky himself is no Nazi, neo-Nazi militias remain integrated into the Ukrainian armed forces. These militias continue to be the shock troops in the war Kiev has been waging. Zelensky as a professional showman is the ideal figurehead, hiding the real nature of the U.S.-imposed Euromaidan regime that came to power in the 2014 coup.
But now that war has come, shouldn’t we support the struggle of the Ukrainian people against Russia? All nations have the right to self-determination. There are many cases where Marxists have supported nationalist movements of oppressed nations against oppressor colonist and imperialist nations even when they have bourgeois or even clerical leadership. Marx and Engels strongly supported the Irish independence movement against Great Britain as well as the Polish independence movement against Czarist Russia. Neither movement had a socialist leadership. Similarly any Marxist worthy of the name supported China under the leadership of Chiang Kai-Shek against imperialist Japan. Marxists supported the Afghani struggle against U.S. occupation, led by the clerical Taliban. And Marxists support the struggle of Iran against the U.S.-NATO world empire led by a clerical anti-Communist leadership.
Since the time of the Russian Revolution, Ukrainian nationalism has represented bourgeois opposition to socialist revolutions. The Ukrainian nationalist movement put itself at the service of first German and then U.S.-NATO imperialism. The movement preaches national hatred of Russians and has been marked by extreme antisemitism. They’ve also preached hatred of Polish people. After the civil war following the October 1917 socialist revolution, Ukrainian nationalists killed all the Jews that they could get their hands on and many Poles as well, foreshadowing the holocaust that was to come, which was repeated during the actual holocaust and Nazi occupation. During the 2014 Euromaidan movement, alongside the neo-Nazi symbols, the Confederate Stars and Bars — the flag of slavery itself — appeared. The one thing Ukrainian nationalists have never done is fight against imperialism.
The Ukrainian nationalists’ nature is explained in Leon Trotsky’s 1939 article where he put forward a slogan of an independent Soviet Ukraine. Trotsky is a controversial figure in the history of the Russian Revolution and the international worker’s movement. Many modern Trotskyists who now support the U.S.-Ukrainian war against Russia probably have Trotsky’s article in the back of their minds when supporting the current war against Russia. What they ignore, however, is that the current Ukrainian army is a proxy for the U.S.-NATO world empire. So the following quote from Trotsky is, I believe, relevant in the light of today’s events:
“At the beginning of the last imperialist war [World War I -SW] the Ukrainians, Melenevski (‘Basok’) and Skoropis-Yeltukahovski, attempted to place the Ukrainian liberation movement under the wing of the Hohenzollern general, Ludendorff. They covered themselves in so doing with left phrases. With one kick the revolutionary Marxists booted these people out. That is how revolutionists must continue to behave in the future. The impending war [World War II -SW] will create a favorable atmosphere for all sorts of adventurers, miracle hunters and seekers of the golden fleece. These gentlemen, who especially love to warm their hands in the vicinity of the national question, must not be allowed within artillery range of the labor movement. Not the slightest compromise with imperialism, either fascist or democratic! Not the slightest concession to the Ukrainian nationalists, either clerical-reactionary or liberal-pacifist! No ‘People’s Fronts’! The complete independence of the proletarian party as the vanguard of the toilers!”
Vladimir Putin vs. Vladimir Lenin
Any leftists imagining Putin was moving toward resumption of socialist construction have been disillusioned by his speech announcing the launch of the special military operation in Ukraine. Putin claimed it was Lenin and the Bolsheviks who laid the base of the 1991 USSR break up. He described Lenin as Ukraine’s founder, an exaggeration with a kernel of truth: Lenin insisted on the right of self-determination for all nations.
Under Lenin’s leadership, the Russian Revolution had an impact on all the world’s oppressed nations and peoples, which after decades of reaction is hard to imagine today. Lenin is Ukraine’s founder in the same sense that he is the founder of the modern Chinese nation, the modern nations of India, Vietnam, Korea, Cuba, Nicaragua, Venezuela, and the rest of Latin America, the Arab nation and the emerging nations of the African continent.
At the time of the Russian Revolution, the Soviet Communist Party had a prolonged discussion about whether the Ukrainian people were a nation separate from the Great Russians or whether the Ukrainian nation was a product of some intellectuals. Many Marxists of the time supported this position. After prolonged discussion and examination of the problem, the conclusion was that Ukrainians were indeed a nation distinct from Great Russians and therefore had the right to self-determination.
Once Ukrainian workers and their poor peasant allies defeated the counterrevolution in Ukraine, the independent socialist nation signed a treaty with the other Soviet nations establishing the USSR. Ukraine retained the right of secession under all successive constitutions.
Unlike bourgeois revolutions that seek to form ethnically and linguistically homogeneous nation states, the Russian socialist revolution attempted to find a political form to unite all nations and peoples of the entire world. In this spirit, U.S. Communist leader William Z. Foster published a book, “Towards a Soviet America,” in 1932. It later caused embarrassment for the U.S. Communist Party.
The idea Foster and other Communists of that time advocated was not that Russia would take over and rule the United States but rather that the USA would eventually join a global union of socialist republics uniting all nations in a global socialist federation. The word Soviet is Russian for council. At the time of Foster’s book, it was understood this referred to elected councils of workers, soldiers, and peasant (poor farmer) delegates. Soviet was understood in this sense until the Seventh, and final, Congress of the Communist International in 1935, when the term in the original sense fell out of use. After that, though the USSR retained the language in the constitution of a federation of different nationalities with the right to secede, increasingly the USSR came to be viewed as simply a country that happened to have a socialist government, rather then as a first step toward uniting all humankind in a global socialist federation. (7)
Since 1999, when he succeeded Boris Yeltsin as president of Russia, Putin has attempted to consolidate an ethnically homogeneous Russian-speaking bourgeois nation state. He views Ukrainians as Russian-speaking ethnic Russians misled by the Bolshevik Revolution into believing they are a separate nation. Putin believes that in the future, Ukrainians will realize they are Russians and will return to the state they never should have left in the first place.
Who is Vladimir Putin?
After decades of political backsliding going back to the 1920s, in 1985 quantity turned into quality with Mikhail Gorbachev’s election to General Secretary of the Central Committee of the Communist Party in the Soviet Union. His election represented the transformation of political reaction within the socialist revolution into full-scale political and social counterrevolution. This was not apparent at the time, at least in the West.
It became clear as Gorbachev moved to progressively dismantle central economic planning, abolish the monopoly of foreign trade, remove restrictions on private enterprise and the exploitation of wage labor, and finally agreed to the legalization of bourgeois political parties. Gorbachev and his supporters advocated “new thinking” and “universal human values” going beyond earlier peaceful coexistence, to complete surrender to the U.S.-NATO imperialist world empire.
They justified their policies of surrender to world imperialism by claiming this policy of surrender would eliminate the danger of a universal nuclear holocaust that has hung over the world since the end of World War II. Today it’s clear that far from removing the danger of a global nuclear war, emboldening U.S.-NATO only increases that danger.
As full-scale political and social counterrevolution advanced, relations between the different nations of the Soviet Union deteriorated, while long-brewing factional warfare within the Soviet Communist Party broke into the open. (8)
Before the 1985 counterrevolution began, Vladimir Putin (1952-) was a member of the Soviet Communist Party and a career KGB officer. As the Soviet CP broke apart, the KGB likewise began to split into factions mirroring the factional warfare in the CP. While one faction in the CP and the KGB attempted to slow the pace of Gorbachev’s reforms to save the basics of the Soviet system, another grouping around Moscow CP’s first secretary Boris Yeltsin pushed to make the reforms even more radical. At first, the radicals and Gorbachev claimed they wanted to reform socialism by making it more democratic and economically efficient. These radicals soon emerged as open champions of capitalism.
The radicals’ program reflected the material interests of the bureaucrats, managers, and organized-crime godfathers wanting to transform the USSR’s industrial and agricultural enterprises into their own private property. Their program reflected the views of Soviet economists representing the material interests of layers within Soviet society striving to restore capitalism. Over the preceding two decades, these “radical” economists came to dominate Soviet academia, supporting neoclassical marginalist economics under the guise of the mathematical school.
These “radical” economists, authors of perestroika, advocated a market economy. They claimed it would make Soviet socialism more efficient and responsive to consumer demands. By 1990 they dropped all socialist pretensions and openly advocated the restoration of private ownership of the means of production as necessary for the functioning of a market economy. (9)
Putin was a career KGB officer stationed in the German Democratic Republic during the early 1985-91 counterrevolution. In 1990, Putin moved to Leningrad (St. Petersburg). He became an aide to Leningrad’s “radical” pro-Yeltsin Mayor Anatole Sobchak. The bourgeois media in the West took favorable notice of him as a Yeltsin supporter.
Putin as a Yeltsin man
In 1996 Putin moved from Leningrad to Moscow to join the Yeltsin government. In 1998 he was named head of the Russian secret police, the Federal Security Service (FSB). The return to a capitalist economy, far from bringing the prosperity to the masses Yeltsin’s radical economists had promised, instead wiped out savings and brought runaway inflation, and an economic depression far worse than the 1930s U.S. Depression. In Russia today, though concealed by the U.S. media, the 1990s are remembered as a nightmarish period when industrial and agricultural enterprises were shut down if they were unable to profit some rich capitalist. The duration and degree of decline of industrial production was so great it was described as demodernization by Soviet and Russian historian Stephen Cohen. Crime was rampant as gangsters, engaged in the primitive accumulation of capital, waged open warfare with one another in the streets.
The Russian Depression bottomed out in 1999. By then Boris Yeltsin, as well as Mikhail Gorbachev, were hated figures. As the new capitalist ruling class moved to consolidate its position, Yeltsin was forced to resign. He was replaced by Vladimir Putin, who has dominated Russian politics ever since. Economic conditions improved after 1999 as the deindustrialized country emerged as an exporter of raw materials, especially oil and natural gas, as well as metals like aluminum, nickel and copper, and grains, particularly wheat, exchanged on the world market for consumer goods.
Russia now has a classic colonial relationship with the world economy, making it part of the Global South in the economic, not geographical sense. Since economic conditions were better than they’d had been in the 1990s, Putin has gained a degree of popularity. He is defended by the new Russian capitalist class (called oligarchs in the West) that specialize in raw materials production and offer competition to U.S. capitalists, mostly in the extractive industries. This is competition U.S. capitalists want to eliminate or take over. This is the root of the current crisis now threatening the entire world with a nuclear holocaust.
U.S. world empire declares economic war against Russia
The U.S. world empire has political, propaganda, military, and financial aspects. Imperialism is the domination of finance capital. Biden, head of the world empire, has declared economic war on Russia. The fronts in this global war are commodity gold, currency, and stock markets. The war’s bombs and shells are dropping in grocery stores and gas stations around the world. In imperialist countries, this means higher food and gas prices, reduced purchasing power and hunger. In poor countries of the Global South, higher food prices threaten starvation. This at a time when the COVID pandemic has not run its course. Over the next several years the war’s bombs will be felt on the unemployment lines as well.
Can a Russian victory in the Russo-Ukrainian war solve the Ukrainian problem?
If Russia can hold out against the economic war and wins its defensive war against NATO and the Ukrainian nationalist-led proxies, the U.S.-NATO backed war against the Donbas that has already taken 15,000 lives will end. Russian Crimea and Sevastopol will be safe. U.S. influence will decline. But it won’t solve the Ukrainian problem.
Ukraine’s right to self-determination will still have been violated and Russia will be held responsible. Ukrainians will again see Russia as an oppressor nation. A lot depends on the extent and duration of the presence of Russian troops on Ukrainian territory. It will be worse if Putin is defeated, forced to withdraw due to Ukrainian resistance and economic pressure. Then Ukraine would be integrated into the U.S. world empire, join the European Union and NATO. Russia would be forced to give up Crimea and Sevastopol, which would fall into NATO hands. The empire would be strengthened politically, militarily, and economically and its grip on the natural resources will be ensured. Eventually, Ukrainians will realize they’ve been had by U.S. imperialism and their nationalist lieutenants.
Putin does not offer anything positive to the Ukrainian people beyond the prospect of coming to realize their alleged Great Russian nationality and returning to Mother Russia. The likely result is Ukrainians will cling even more to their nationality, making it harder to reunite the Russian and Ukrainian working classes in the future.
Last month I said in a footnote that the only solution to this problem is the restoration of the USSR. I will elaborate. The 1985 counterrevolution, that started when Gorbachev became the Soviet CP’s General Secretary, brought only misery to the Russian, Ukrainian, and other peoples. The restoration can only be done by the working class returning to power. It doesn’t have to begin in Russia — it could happen in another former Soviet nation, even Ukraine. When this happens in several former Soviet nations, they may choose to federate or choose to retain their independence. The choice can’t be forced. This is the only way restoration of the USSR can lead to a lasting solution to the Ukrainian problem.
A new USSR might not consist of the same nations. The old was the first attempt in history to work out how nations of the world, the former oppressor and as well as the former oppressed, can unite and create a global socialist society. A new one, learning from the successes and failures of the old one, will go beyond it to build a socialist society, uniting the working class and its allies, and create a global communist society to replace the decaying capitalist empire. This is necessary if humanity is to survive.
The prospects for world and U.S. economies in light of U.S.-NATO war on Russia
The March 1 article by Ernest Werlin included this: “The United States and European allies agreed to remove Russia from the interbank messaging system, SWIFT. SWIFT allows quick international transactions and is used by 11,000 financial institutions in 200 countries.” Werlin is a former bond salesman and partner in charge of corporate bond trading at the Wall Street investment bank, MorganStanley. SWIFT is a crucial part of the international dollar standard that forms the financial foundation of the U.S. world empire.
Werlin notes: “The biggest concern is over disruption to supplies of oil and gas. Because of Europe’s dependence on Russian oil and gas, we have not blocked Russian oil and gas exports. … Germany is particularly vulnerable, as it has shut down nearly all of its nuclear power stations and aims to eliminate coal by 2030.” Germany won’t be unscathed from the global economic war. The German government capitulated to pressure to suspend the Nord Stream 2 pipeline. This forces Germany to purchase energy- containing raw materials from U.S.-NATO-controlled sources, raising German companies’ price of production, making them less competitive against their U.S. competitors. While the economic war may push the Russian economy into hyperinflation and depression, imperialist satellite countries like Germany suffer.
What about the U.S. itself? Werlin writes, “A perfect storm of energy shortages and supply chain disruptions could cause our economy to go into a serious tailspin. The Atlanta Fed estimated U.S. growth to downshift to 1.3% for the first quarter 2022.” That might only be the beginning. Werlin notes: “Ukraine belligerency with possible spillover effects could make it harder for the Federal Reserve to raise rates aggressively.” The dollar price of gold rose sharply the week following the Biden administration’s declaration of economic war against Russia. The dollar price of gold, as readers know, measures the gold value of the U.S. dollar. While the ruble collapsed in value, the dollar also, though to a lesser extent, fell against gold. And so did most other paper currencies.
If this trend continues the Federal Reserve System will, under pain of preventing hyper-inflation, be unable to hold down interest rates. The shock of the economic war adds to that caused by the COVID pandemic and shutdowns and followed by the inflationary COVID aftermath boom. The bottom line: After a period of global inflation there’s an increased chance of a severe global recession within a few years. But that’s not the worst.
On March 1 Reuters reported, “French Finance Minister Bruno Le Maire declared an ‘all-out economic and financial war’ against Russia to bring down its economy as punishment for invading Ukraine.” In response, Russian leader Dmitry Medvedev said, “Watch your tongue, gentlemen! And don’t forget that in human history, economic wars quite often turned into real ones.” Medvedev is correct.
More on this next month. For now, let’s return to our critical examination of the work of the Marxist economist Anwar Shaikh.
The neoclassical system versus the Marxist system
Shaikh points out that if you criticize the neoclassical analysis by assuming competition as opposed to perfect competition you’re accepting the neoclassical system as the starting point. Imperfect competition is imperfect relative to perfect competition. A Marxist critique of modern capitalism based on imperfect competition is only possible if the neoclassical and the Marxist systems come to the same conclusions.
Last month we saw that neoclassical marginal cost differs from the Marxist price of production because marginal cost includes interest but not the profit of enterprise. In contrast to the classical school and Marxism, in neoclassical economics profit beyond interest arises either due to the monopoly or a disequilibrium.
In the classical and Marxist systems, no matter how free, competition will not tend to eliminate profit of enterprise. It’s true that a temporary situation — a partial or general crisis of overproduction — might temporarily eliminate profit of enterprise. But this wouldn’t be a stable situation. Competition would create a a new distribution of capital in the economy such that capitals of equal sizes earn equal profits in equal periods of time. As a result, the profit of enterprise causes profit to reemerge.
If the disappearance of profit of enterprise in one branch of production is caused by too much capital invested, a partial overproduction crisis, that branch’s capital flows out of that industry into more profitable ones. Commodities’ market prices produced by that industry then rise until the profit of enterprise reappears.
A general crisis of overproduction means too much capital is invested in all or most branches engaged in the production of non-money commodities. In this case, a fall in investment, a recession, in the industries producing those commodities, combined with a rise in money-commodity investment, will cause the profit of enterprise to reappear in the branches of industry producing non-money commodities.
The biggest difference between the Marxist and neoclassical analysis of capitalism
Now let’s examine the biggest difference between the neoclassical and the Marxist systems. This involves the origin and production of surplus value. The neoclassical system claims, other things remaining equal, any rise in wages no matter how modest results in the discharge of the workers receiving the wage hike. Marxist analysis disagrees.
First, a review of the Marxist theory of wages and surplus value. According to Marx, workers sell their labor power, not their labor, to the capitalists. For simplicity, Marx assumes all commodities are sold at their value. In Shaikh’s terminology Marx assumes all commodities, including labor power, sell at their direct price. These assumptions Marx explains in “Capital, Volume III” are necessary in order to understanding the nature of both wage labor and surplus value, the central question of all economics.
Marx assumes the industrial capitalist buys labor power at its value. The worker then spends the money received in exchange for labor power to purchase commodities which Marx assumes are also purchases at their values (direct prices). The worker must consume these commodities to reproduce labor power, which includes renewing personal labor power as well as bearing and raising the next generation of workers.
Once workers sell their ability to work — labor power — they then spend part of the workday replacing the value of the labor power or, to look at it from the industrial capitalist’s perspective, replacing the variable capital advanced by the industrial capitalist.
The part of the workday the worker is producing the value replacing the value of their labor power is called necessary labor. But the worker cannot stop working once the value of labor power has been reproduced. To do so would produce no surplus value and the worker’s labor power would lose its use value for its capitalist buyer. The worker continues working to produce an additional value, Marx’s surplus value.
In the sphere of exchange Marx showed the Ricardian principle of equal exchange is not violated. But in the sphere of production, the division is the same between labor necessary to preserve the lives of direct producers, and the surplus labor needed to support a class of non-workers as under slavery and serfdom. The difference under slavery it appears that the labor of the slave is performed for the master, the slave owner, and none for the slave. This is an illusion because the slave owner must provide the slave with some means of subsistence under the pain of losing the investment in the slave.
Under capitalism, it appears the worker is paid for all their labor. But Marx’s theory of surplus value reveals this to be an illusion. Under serfdom and feudalism reality is revealed: the worker worked part of the day on their own strip of land and part of the day on the lord’s land.
Now let’s contrast the Marxist with the neoclassical analysis of wages and wage labor. To simplify, we assume that perfect competition prevails and the economy is in general equilibrium.
In the neoclassical analysis, the worker sells labor, not labor power, to the employer. The worker receives in wages a value equal to the value of the marginal product of labor. Or the worker receives in wages the value their labor creates. Marx shows the worker performing unpaid labor for consumers of surplus value. Neoclassical analysis claims all labor is paid, and by this logic, workers are not exploited. Assuming perfect competition and general equilibrium, all production factors including labor are rewarded according to the value they contribute to the final product.
Could this disagreement be just a matter of definition? If so we might use the neoclassical system’s mathematical analysis to reach the same conclusions as the Marxist. But if they make different predictions we have two different theories not merely two terminologies. Both theories cannot both be true.
To explore further, let’s hold all conditions unchanged except one. The one we change is we raise wages. The increase can be caused by a rise in minimum wage or perhaps a successful strike.
In the Marxist system, the rise in wages lowers the rate of surplus value. To calculate the rate of surplus value we divide the unpaid surplus labor, measured in some unit of time, by the necessary or paid labor, measured by the same unit of time. For example, during a typical eight-hour workday, say that four hours are for the worker and four hours for the industrial capitalist. Divide four by four. This is 1.00, or 100%.
Is there a limit on how far wages can be raised?
Wages cannot be raised to the point where surplus labor falls to zero. If it does, a worker’s labor power loses use value to the capitalists. Labor power is the only commodity capitalists can buy that produces surplus value. If there is no surplus value there is no profit. Profit is nothing but the money form of surplus value. What about a wage increase reducing surplus labor but not to zero?
For example, before a general wage increase, the workers may work six hours for the capitalists and only two hours for themselves. Then the rate of surplus value equals 6/2or 300%. After the wage increase, the workers work four hours for themselves and four hours for the boss, 4/4 or 100%. If the rate of surplus value falls — all other things remaining unchanged — the rate of profit will fall. But after the wage increase, it is still profitable for the capitalists to purchase the worker’s labor power even if the rate of profit is lower than before.
Is this true in the neoclassical analysis? Assuming perfect competition and general equilibrium, the worker does not perform any unpaid labor according to the neoclassical analysis. The worker’s labor produces a value replacing the value of wages. In the neoclassical system, surplus value, not including
ground rent, consists of the interest on capital, not the profit of enterprise. This analysis, denying
unpaid labor, finds surplus value only in interest produced by (constant) capital itself. According to the neoclassical, and Austrian, analysis, interest arises from the fact that the capitalist chooses to defer current personal consumption so more can be consumed later. If wages rise slightly, all other things remaining equal, the worker will be paid more than the value created. The capitalists will no longer be willing to purchase the worker’s labor as they will lose money on the transaction. So, they’ll discharge the workers rather than purchase workers’ labor at a loss.
According to the neoclassical analysis, workers may celebrate a rise in the minimum wage or a strike providing a wage increase, but they will soon be on the unemployment line. According to Marx, trade union activity can improve the conditions of the workers. A neoclassical analysis indicates trade union activity or political activity to raise the minimum wage only results in a rise in unemployment and poverty.
The Marxist and neoclassical analyses are sharply counterposed whenever a rise in the minimum wage is proposed. Neoclassical economists tend to assume the actual capitalist economy is close to general equilibrium. Therefore the wages the workers are receiving for their labor are the value labor produces before the increase. If they are being paid less, the assumption is that the demand for labor will rise causing wages to rise to the point where the worker will be paid for the full value their labor creates. This will occur without strikes, collective bargaining or minimum wage increases.
The Marxist explains the worker is obliged by the capitalist class’s monopoly of the means of production to work part of the day free for the industrial and non-industrial capitalists, and landowners, as under slavery and serfdom. However, how much of the day the workers work for themselves and how much for free of charge for the capitalists is influenced by the class struggle between the workers and the capitalist class.
As long as the wage doesn’t rise so much the surplus value falls to zero, the workers’ labor power retains its use value for the capitalist. Wages can’t for long fall below the level where the working class dies out. And they can’t rise to the where surplus vanishes. Between these points, wages can fluctuate.
Assuming all things remain equal, the higher the wages, the lower the profit rate. It’s in capitalists’ interests to pay the lowest wage they can. Capital drives toward reducing wages to the point the working class can barely reproduce itself. If the worst paid workers’ wages are raised, as happens when the minimum wage is increased, the rate of profit falls. Distribution of the net national product then shifts in favor of the worst paid of the working class at the expense of capitalists and other non-workers. But the worst paid don’t necessarily lose their jobs.
The neoclassical analysis assumes all workers are paid exactly the value their labor creates. Any increase in the minimum wage, will be followed by a rise in involuntary unemployment. Every increase in the minimum wage is an empirical experiment testing the two theories. The neoclassical theory predicts even a modest rise in the minimum wage leads to mass unemployment among low-paid workers. The Marxist theory predicts a rise in the living standard of the low-paid, combined with a fall in the rate of profit on capital. In practice this is what happens, proving Marxist theory correct.
The difference between the neoclassical and the Marxist (and classical) theories isn’t perfect versus real competition. It lies in very different theories of value and surplus value. The Marxist — like the classical analyses — sees a commodity’s value as determined by the amount of labor socially necessary to produce a commodity of a given use value and quality under prevailing production conditions. Neoclassical theory assumes the value of a good, produced by human labor or by nature, arises from the scarcity of that good relative to subjective human needs.
For Marxists, surplus value represents the unpaid labor the working class must perform even when they get the full value of their labor power. Neoclassical theory denies surplus value arises from unpaid labor. It claims interest arises due to scarcities of consumer goods and the means of production producing these scarce goods, that consumers subjectively value goods that can be consumed in the present at a higher value than those that can only be consumed at some future date.
If consumer goods are not scarce, and the means of producing them are not scarce, interest falls to zero. As we saw last month neoclassical economists assume that if the economy is in general equilibrium there is no profit of enterprise. If there is no scarcity of consumer goods and the means of production needed to produce them — capital — the rate of interest falls to zero. The only part of surplus value remaining then is rent. Assuming land is not in short supply, rent falls to zero. According to neoclassical analysis, value and surplus value arise from scarcity.
To explain the capitalist economy in the real world we cannot simply take the neoclassical analysis of perfect equilibrium and general equilibrium (by assuming imperfect competition relative to perfect competition and assuming a situation of disequilibrium relative to perfect equilibrium) any more than we can master calculus without mastering lower mathematics. We cannot build our analysis of the capitalist economy by simply replacing neoclassical perfect competition or imperfect competition and have any hope of arriving at a correct analysis of how capitalism and competition work in the real world. This is Anwar Shaikh’s great insight.
To be continued
(1) The hammer and sickle represent the alliance between the proletariat and the peasants which formed the foundation of the Russian Revolution. (back)
(2) Many leftists, particularly those from the Trotskyist tradition or influenced by it, raise the question of the national oppression of Ukraine under the rule of the Stalinist bureaucracy. To go into this question would take us beyond the purpose of this blog which examines the laws of motion of the capitalist mode of production and its crises, not Soviet history. The problem with much of the material produced by Trotskyists is that the authors often know little of Soviet history and often simply repeat claims of bourgeois historians and Ukrainian nationalists to better denounce Stalin — dead these 69 years — and the Stalinist bureaucracy.
Lenin and Stalin did have different approaches. Lenin emphasized the rights of nations formerly oppressed under czarism. Lenin was aware of the Soviet bureaucracy’s Great Russian chauvinist tendencies and the problems it was causing in the relations with nations oppressed under czarism.
Also, the Soviet Union endured an intense class struggle between the upper layer of the peasantry with its strong capitalist tendencies and the proletariat within the Soviet nations that led to massive famines in some areas including the Ukraine in 1932-33. Ukraine was hit harder than any other because it was the breadbasket of the Soviet Union. This crisis led to the death of many people. However, the famine had many actors including not only Stalin and his policies, but the rich peasants trying to hold onto their grain surpluses, and the super-crisis that was its worse in 1932, the year the famine hit the Ukraine.
The famine was caused by bad weather combined with the 1929-33 global capitalist super-crisis which lowered the price of grain the Soviet Union was exporting to the capitalist world considerably more than it lowered the price of machinery the USSR was importing to carry out the industrialization of the country. What is untrue is the claim of Ukrainian nationalists that the famine was a Holodomor deliberately caused by Stalin and the Communist Party — many of the Ukrainian nationalists say the Jews — to exterminate the Ukraine nation much like the holocaust under Adolf Hitler was designed to physically exterminate European Jews. Also overlooked by “Trotskyists” and other “anti-Stalinists” is that after Stalin died a largely Ukrainian-centered grouping around Nikita Khrushchev rose to power in the CPSU and the Soviet Union. This grouping retained power after Khrushchev was removed from office in 1964 and Leonid Brezhnev, a Ukrainian and long-time supporter of Khrushchev, succeeded him. How this affected the relations between Great Russians and Ukrainians is ignored by bourgeois and “anti-Stalinist” left historians who echo them. (back)
(3) The 1985-91 events were a political and social counterrevolution in the classic sense. In the political sense, it reestablished the class rule of the capitalist class that had been overthrown in the October 1917 revolution. In the social sense, the events reestablished domination of the capitalist mode of production that had been replaced by a process of socialist construction as a result of the October proletarian revolution. However, the counterrevolution did not reestablish feudal property relations that had dominated Russia even after the reform of 1861 under Czar Alexander II had abolished formal legal serfdom. Nor did the counterrevolution reestablish czarism that had rested on feudal relations. Today’s capitalist Russia is not the Soviet Union. Neither is it Czarist Russia. (back)
(4) It’s easy to see Gorbachev as either stupid or vile. But the truth is more complex. Many Soviet people, especially middle-class intellectuals, looked for a third way between the 1985 USSR system and monopoly capitalism dominated by big banks and corporations existing in the West. They believed the introduction of a market economy would ensure maximum economic efficiency and consumer satisfaction, as the majority of Soviet economic professionals were predicting mathematically while avoiding monopoly bank and corporation domination. They believed not only would a genuine democracy be achieved in place of Communist Party dictatorship, but the danger of a nuclear holocaust would be eliminated.
While the pressure of imperialism on the Soviet Union and its Eastern European allies was the chief cause of the counterrevolution, the ideological failure of the old Communist movement to develop a powerful critique of neoclassical (and Austrian school) marginalism played a role in the collapse of the will to resist imperialist pressure that appeared after 1985. This is why Anwar Shaikh’s critique of neoclassical marginalism and the need to critique his work where it does not go far enough is so important. The truth is the tragic events unfolding since 1985 are a powerful, if negative, confirmation of Marxism and refutation of neoclassical marginalism and the Austrian school. (back)
(5) Belarus, the former Soviet Socialist Republic lying directly north of Ukraine, was the target of an attempt to install a Euromaidan-type regime in 2021. This attempt failed, but the next attempt might succeed. Last year’s events in Belarus may have been an important factor in Putin’s decision to order troops into Ukraine. (back)
(6) It is interesting how Russian and Ukrainian capitalists are called oligarchs while the far richer and more powerful U.S. capitalists are never described this way. Biden’s and other imperialists’ denunciation of Russian oligarchs contains truths. These imperialists sound like Marxists denouncing the 1985-91 counterrevolution that brought the oligarchs to power. You wouldn’t know that the imperialists worked for 70 years to bring down the Soviet Union. Or that they hailed the 1991 victory of “democracy” over “communism” when Yeltsin and the oligarchs seized power. Nor would you know that Washington helped rig the 1996 Russian presidential election keeping Yeltsin and the oligarchs in power. (back)
(7) Trotskyists today say you can’t build socialism in a single country. Many will be surprised to learn that Trotsky never said that. Stalin, starting in late 1924, claimed a complete socialist society (the first stage of communism where classes have been abolished and people are paid in proportion to their work – as opposed to their need) could be built within the borders of the USSR even in an otherwise capitalist world. In 1939 Stalin went further and said the highest stage of communism could be built in the USSR with the qualification that the state could not wither away until the victory of the world socialist revolution.
Trotsky, while acknowledging that socialist construction was occurring in the USSR, predicted that the construction of a socialist society in the sense of the first stage of communism could not be completed within the borders of the USSR. He further predicted that if global capitalism was not overthrown in time, the restoration of capitalism in the USSR would not only be possible, but inevitable. It is hard to fault Trotsky today for these forecasts despite his political errors. While socialist construction carried out within the USSR had many successes, it was never able to abolish classes and therefore the class struggle within the USSR.
If Soviet society had reached the first stage of communism, a counterrevolution as occurred between 1985 and 1991 would have been impossible because there would have been no bourgeois class to carry it out. The slogan of “socialism in a single country,” the Seventh Congress of the Comintern, the dissolution of the Comintern in 1943, Nikita Khrushchev’s “peaceful coexistence” with a party and state of the “entire people,” and finally Mikhail Gorbachev’s “New Thinking” and “Universal Human Values” represent successive stages in a decades-long retreat of the Russian Revolution that finally led to the tragic situation we have in the former USSR today. (back)
(8) The deterioration of the relationship between the nations of the Soviet Union under perestroika is described in American Marxist Sam Marcy’s (1911-1998) book “Perestroika,” a series of articles written in the heat of the events. I strongly recommend it for people seeking to understand the events that made the Russo-Ukrainian war possible. (back)
(9) On this last point they were right. You cannot have a market economy where the producers confront each other independently working for their own account without the private ownership of the means of production. (back)
A Critique of Crisis Theory 