Journal of Socialist Theory

Critique Notes 59

Reaction to the crisis

The last year has witnessed a deepening of the crisis, in the Eurozone in particular. There are, however, no countries outside the global crisis, in spite of the constant media refrain that the third world is overtaking the first world and will implicitly resolve the crisis.

We have also witnessed a series of spontaneous responses to the crisis in the last period, with the so-called Arab Spring, and the Occupy Wall St being the most long- lasting. There have, of course, been many demonstrations, trade union protests, and other forms of action against the austerity policies of the ruling class. In that respect, Greece has seen the most important, though the August riots in the UK have been the most spectacular.

Governments have moved on all fronts against the welfare of the majority of the population. There is no room for compromise. The public sector, pensioners, women, those on welfare benefits and the unemployed youth are the worst affected and have begun to react. Two kinds of people have been proved wrong: the left pessimists, usually former Stalinists, and those social analysts who make a profession out of explaining why capitalism can always find a way out. The fact that the ruling class has acted so rashly also indicates that they think that such repression will have limited consequences. In fact, members of the working class have no choice but to find modes of action, but so far it is not the class as such, it is individual workers and students and groups of workers or students. That is what explains the inchoate nature of the present reaction, with its inevitable denouement.

The Protest against the Apologetic Nature of Orthodox Economics

One example of the varied and spontaneous nature of protest was the walk-out of Economics Students in Professor Mankiw’s introductory course[1] in Economics at Harvard University. It is not the first such protest at the biased nature of modern economics this century. French students did the same a few years ago. The 70 or so students indicated their support of the Occupy Wall Street movement. A number of responses to the article in Businessweek and the attitude of the author of the article were highly critical, from what can only be called a prejudiced viewpoint.

Marxists have long been well aware of the situation. It is not going too far to call orthodox economics the ideology of modern capitalism, in its decline. It is so much an ideology that it is not clear why anyone who has some understanding of social reality would waste their time trying to learn orthodox economics. It emphasizes a rigour that is only possible when reality is screened out. Its restrictive assumptions allow the use of mathematical analysis to the point where the result is both banal and pre-determined. While no-one can sensibly object to the use of mathematics, the need for its use cannot be an excuse for avoiding a critique of the socio-economic system.

In fact, every social science course taught in contemporary universities has its own way of justifying capitalism, but modern economics does the job most efficiently. It assumes that the market is eternal, without attempting any kind of proof. It then argues that interference with its laws and inherent properties is for the worse. The causes of inequality, depressions, inflation, mass unemployment are held to be largely outside the discipline. They are then either necessary for the efficient functioning of the system or a result of interference with the God-given economic form. Competition is worshipped but its real absence, as usually defined, in the modern world is avoided. The real results of so-called oligopoly in influencing the economy and the state are discussed at a rarefied level. The costs and deleterious effects of competition are never mentioned, since it is assumed to be an essential part of the nature of humanity.

The very idea of a society governed by the need to accumulate, by the need to increase profitability, rather than directly, as opposed to indirectly, for the good of all humanity, appears absurd looked at in the abstract. There is, therefore, an implicit assumption, which is sometimes explicit, that humanity is so depraved that it is incapable of rational co-operation. Competition with all its penalties and rewards in profitability is required to act as a spur to raise productivity. The idea of society planned by the society as a whole is brushed aside as utopian, even as society is increasingly controlled by a small number of large firms and a state which is crucial to the economy itself.

Today, the consistent failure of the economy to return to a period of stability and growth has undermined the economics profession. They have yet to change, however. In spite of nominal support for academic freedom, there are few critical economists and still fewer Marxist economists. Indeed, they are regarded, at best, as belonging to another discipline, for which there is no department. Even Keynes, who was a supporter of capitalism, albeit a reformed capitalism, is considered as beyond the pale by the orthodox economists and defenders of finance capital.

When faced by the reality of a capitalism which is patently malfunctioning, the more radical politicians and commentators argue for a better capitalism, arguing that socialism has failed. Such is the view of the leaders of the British Labour Party. Unsurprisingly, its leader is widely regarded as pusillanimous and unelectable.

The walkout is to be welcomed. In the name of academic freedom, universities ought to consider whether their staff selection processes are not biased towards accepting authority. Of all disciplines economics is the most rigid in demanding acceptance of the standard paradigm. Given the closeness of the top economists to both government and Big Business this is to be expected, but academic freedom demands a different attitude, but then academic freedom is, of course, limited under capitalism. The fact that it is even more limited under Stalinism, Fascism or various nationalisms does not justify it. When Marxists are able to teach political economy as a matter of course in Economics Departments, capitalism will either be on its deathbed or over.

The Arab Spring and Occupy Wall Street

The Spring of the mass youth movements is over. In Egypt the army has re-asserted itself, while the old ruling class remains in the other Arab countries. The inevitable failure of the youth revolt does not mean that nothing was achieved. The victory of Islamic movements is no step forwards and the introduction of Sharia law would certainly be reactionary, not least for women. Without a socialist programme nothing else could be expected. As Marx wrote of the 1848 revolutions . the revolution is only permanent once the working class takes power. Until that time the struggles go on, repeating themselves in one form or another and they have taken a series of different forms, none of them expected at the time.

Nonetheless, the very uprising of the youth and other elements of the population provided an indication of the instability of the capitalist system in the third world. One cannot separate the uprisings in parts of the world from the real crisis of capitalism, but each country or series of countries has its own form of the crisis. That arises from the particular way in which the social relations have established themselves in each country and group of countries in the world. The particular imperialist relationship to the countries of the Middle East and the failed nationalist reaction are straining at the demands of the working class and peasantry in these countries, under crisis conditions. ‘We hope for freedom and justice, and the shabab (working-class youth) to finally find jobs’ one youth is quoted. ‘Yet the shabab are yet to find an outlet for their political aspirations’[2] The economic basis of the uprising in unemployment, or the failure of the economy as a whole, and the absence of a clear political goal appear to be the defining marks of the Arab Spring.

The fact that severe repression has not halted these protests has meant that there is no defeat, only a delay until the form adequate to the seizure of power by the majority shows itself. The population has fallen back on religious parties precisely because Stalinist and nationalist parties have disappointed their expectations. After all, the Baathist party or its equivalent was effectively in power in the crucial Arab states and that is what is being overthrown, as a dictatorial party of the ruling class.

Stalinism provided the original basis of so-called ‘national liberation’ consistently selling out to various nationalist parties, both directly and through the USSR itself. For the poor and dispossessed, the religious parties appear to offer salvation in the here and now as well as in the future, given the absence of genuine socialist parties.

The rebuilding of a socialist party is still some distance away but the need for one is manifest. The same problem afflicts the Occupy Wall Street movement. The occupiers have been easily dispersed where authority is minded to do so. However, the Occupy movement has succeeded in changing the mood leftwards[3] The direct challenge to Finance Capital has been widely reported and is wildly popular. It could hardly be otherwise, given the way the press has blamed the bankers for the downturn/depression, preferring to blame the strategy of capital rather than capital itself. The establishment of communes, for that is what they are, in various well known spaces in or close to urban financial centres like Wall Street and St. Paul’s Cathedral in London, is laying the ground work for a new cadre of political activists, who will find their way to the formation of a mass movement and political party or parties.

The emergence of the Indignados in Spain, and the demonstrations in Western European countries were upstaged by the student demonstrations and the youth riots in the UK. The fact that the youth acted in the particular chaotic and seemingly consumerist, and arsonist form reflects the particular British form of control and concession. There are elections with little choice among the parties, the media . overwhelmingly conservative, and an education which does not educate combine with the rich getting richer and the poor relatively and sometimes absolutely poorer. The future for many youth is unemployment, dead-end jobs, and a life attuned to consumerism. For many there is no hope. Despair rules in a way that it often does not in the much poorer third world, where there is still hope of overthrowing the system. Atomised, without the comfort of religion, dependent on welfare and its vagaries, the first world youth seek individual gratification albeit in whatever form is possible. In an earlier period, trade unions, social democratic and communist parties might have filled the gap, but they are all in process of decline or extinction.

Democracy - What Democracy?

The extra-ordinary shift of government in Greece in Italy towards so-called technocratic rule is a new development in the road away from representative government. It has already been clear for some time that formal democracy was breaking down. When the percentage of citizens voting is going down because the

electors see no point in the election process[4] where crucial parts of government are hived off from Parliaments, like the Central Bank, and where the independently wealthy and money managers dictate budgetary conditions to governments, then democracy is even more limited than it has been. Every legislature has its own means of ensuring the dominance of a relatively conservative authority. In the UK it is partly achieved with a unelected second chamber and a monarchy. In some countries the army has a special role, while in others, like the USA, it is more complex. The innovation of a so-called technocratic government heralds a new break in bourgeois democratic institutions in the first world. During the last great depression, formal democracy was still limited in that the full franchise had not yet been achieved in many countries. In the USA many Afro-Americans could not vote, while in some countries all women had not yet been enfranchised. In the UK it was only in 1928 that all adult women got the vote.

The bourgeoisie is finding the full franchise burdensome as it demands economic and social concessions to the working class. That makes it hard to avoid increased taxation on the rich and higher benefits for the majority. They, therefore, emphasize the need for leaders to lead against the interest of the majority, rather than respond to their electorate. Today, they are using the absurd excuse that so-called technocrats are needed to govern, much as Plato’s philosopher-kings. As argued above, economists have, if anything a poorer understanding of reality, but their advantage is that they are heavily biased towards defending the interests of the rich, while declaring themselves neutral. Since they have a lifetime of experience in pretending to be neutral between the classes, by arguing that there are no classes, they can perform the role better than most. In fact, the major political parties have effectively formed a coalition to back the so-called technocrat, so causing the population to further despise the social democrats. It is perhaps a sign of weakness that the army or a strong man has not taken over again in Greece or Italy. This is not the end of the process, however, as the majority will continue to protest and the technocrat’s reputation will be shredded in a relatively short time.

The response of the authorities is getting stronger, as we can see by what is happening in Greece. The report on the August 2011 riots in England is extraordinary in its consideration of direct repression[5] Carefully qualified recommendations for water cannon, plastic bullets and if necessary real bullets to be used in future scenes of unrest or riots, under particular circumstances shows the way policing may go as demonstrations become more intemperate. Police chiefs have opposed the proposals as they realise that the aftermath of such shootings will destabilize first the system of law enforcement and then the political system itself. The newspaper headlines rightly emphasized the discussion of force. Although, the report itself is nuanced and careful to limit the use of firearms to extreme situations, such as arson threatening lives, nonetheless it makes it easier to go further next time. As the report makes clear the law allows the use of the forms of force discussed, so the only issue is whether it is acceptable.

From the time of the Tsarist shootings of the January 1905 demonstrations down to the Bloody Sunday shootings in Northern Ireland in the seventies and to Tahrir Square in Cairo in 2011; open direct repression, outside of Stalinism, has regularly brought mass protest, which when suppressed only leads, and has led, ultimately to direct confrontation with the ruling class or their representatives. Today, they hesitate but the confusion so apparent in the ruling class can only grow and we can expect them to act in ways which are counterproductive to their own interest, once this intermediate period of technocrats is at an end.

What is the Basis of the Crisis Today?

In the last Critique Notes, for Critique 58, I raised the question as to whether the bourgeoisie was suicidal. Interestingly, Lord Robert Skidelsky, the biographer of Keynes, and member of the House of Lords had this to say:

That is the crazy logic of current economic policy in much of Europe (and elsewhere). Of course, it will not be carried through to the bitter end. Too much will crack along the way . the banks, the monetary system, social cohesion, the legitimacy of the political regime. Our leaders may be intellectually challenged, but they are not suicidal. Deficit reduction eventually will be put into cold storage, either openly, as I would prefer, or surreptitiously, as is politicians’ way. In the United Kingdom, there is already talk of Plan A+[6]

Lord Skidelsky is eminently sensible, as with much of what he now writes (as opposed to the time when he was a conservative). The one problem with his argument lies in his remark that ‘our leaders may be intellectually challenged and that is the reason why they have embarked on a suicidal course, which will be abandoned once the true end is in view. One has to assume that he is arguing that the European leaders have been indoctrinated with the orthodox economic doctrine of the time and do not have the ability to see through it, even when it is patently obvious, until a few moments before the world comes to an end. No one can doubt the ideological nature of economics courses throughout the USA and Europe, as discussed above. The anti- Keyneisan fervour, at one time, was unbelievable, even though left students had experienced a similar attitude to Marxist political economy. That, however, cannot be the sole reason why governments are uniformly pursuing policies of austerity with the consequences described by Lord Skidelsky[7] Martin Wolf, Sam Brittain and other establishment figures.

The basis of the present crisis lies in the refusal of the bourgeoisie to invest in private industry and their reluctance to lend to governments, who appear to have a substantial ratio of debt to gross domestic product. The paradox and absurdity of the present lies in the fact that a relatively few people and corporations who hold trillions of dollars, deposited or held by banks, have more than enough money to bail out all the European governments combined. Indeed the sums involved are peanuts compared to their combined holdings. They will not lend the money on the grounds that they may lose all or part of such investments. Clearly, given the relatively small sums involved, if they continued to lend and the governments involved allowed their economies to grow, they could repay their debts or at least hold their debts constant.

The issue of investment, public and private, is declared to be an issue of confidence, a question discussed in the last Critique Notes[8] Interestingly recently one author, Wofgang Streeck has cited Michael Kalecki’s view on the subject during the thirties[9] Given the latter’s role as someone who published on crises and produced a theory not unlike that of Keynes before Keynes, it has its own importance. Streeck has drawn attention to the question of confidence in his own way. He has done so by using Michal Kalecki’s understanding of the word ‘confidence’. He argues that Kalecki is positing a possible negotiated deal between investors and governments.

In fact, Kalecki’s essay[10] puts the point that the capitalist class does not want to invest in government bonds for three related reasons, all of which amount to a refusal to countenance limits to the control of the capitalist class over the capitalist system. It does not want full employment because it is afraid of the political results, and will not finance it. Streeck calls this a form of investment strike. Written as the essay was in 1943, it reads like a prophecy of what came in the seventies and remains today. The capitalist class does not want consumer subsidies because it is afraid of the effect of raising wages. It is afraid of government investment crowding out private enterprise. Kalecki’s first and fundamental point is that ‘The social function of the doctrine of ‘sound finance’ is to make the level of employment dependent on the state of confidence’[11] In other words, capital wants to retain direct control over the system.

Streeck is right to revive interest in the essay, but the world has moved on. It has experienced full employment and the capitalist class has made it clear that it will never reflate to that point again. It does not need to control governments through investing in their bonds in order to avoid full employment. It was the governments themselves, Reagan and Thatcher, which brought full employment to an end. No major Western political party threatens capital.

It is undoubtedly true that the capitalist class is worried about government intervention in the economy but they have learned not only to live with it, but depend on such forms of intervention as subsidies for industry, government sponsored research, government financed and risk bearing for long term risky infra-structure developments, not to speak of a government financed and owned military sector etc. The counter-cyclical role of governments is well accepted. Businessmen are investing in China, even though they know that practically all important firms are ultimately owned by the state.

The essential point is that the confidence of which businessmen, bankers and economists speak today is related to Kalecki’s use of the term but not the same. The enormous pile-up of money[12] which remains uninvested is doing so because there is no place to invest with a reasonable hope of return, whatever the situation. Governments in turn refuse to invest in massive infra-structure projects to raise the level of growth and so employment. Such investment would be self-financing in a very short time. They refuse to do so because they are ideologically opposed to full employment. The capitalist class does not have to persuade them. The politicians have been elected on that ideological platform. The Republican Party in the USA, the Conservative Party in the UK, the Christian Democratic Party in Germany are all bound to a policy of austerity, which goes even further than a policy of a permanent reserve army of labour. The major opposition parties have only marginal differences in that they accept austerity but want to make it less onerous.

Furthermore, we are no longer talking of individual misanthropes like Henry Ford or JP Morgan but of pension funds, large insurance companies, usually owned by shareholders with different strategies, hedge funds etc as well as private equity, which might take a particularly reactionary attitude. The problem of confidence is subtly and not so subtly different today.

As we argued earlier, there is short term confidence and long term confidence. Kalecki is really talking of capitalists looking at their potential profits in the next few years, whereas there is also a longer term issue, which is underlying the contemporary refusal to invest. Nonetheless, Kalecki and Streeck have stated an important feature of contemporary crises . the conscious political-economic dimension. In the present context, the absence of a political-economic strategy for capital is crucial.

Capital has used war, finance capital, imperialism, Stalinism and the welfare state as means of extending the life of capitalism. At the present time, their major strategy, that of finance capital has imploded, while the other forms either do not exist or cannot play the same role. The result appears to be one of real divisions, ideological differences, confusion and indecision. Investors are more divided and more confused than earlier. The small and medium size capitalist wants both loans and low interest via Government policy, but he does not want state investment which would compete. Big industry needs Government orders and backing in competition with other countries’ firms. Pharmaceuticals and engineering needs government research and development, as well as government orders. On the other hand, they do not want Government squeezing their profits by forcing prices lower.

The indecision and the differences reflect a declining capitalism where the capitalist needs to be both private and public. The capitalist is dependent on government but also resents government competition and regulation. Regulation, however, is necessary whether to protect the public, as in the case of food, bridges, roads and banks, or to ensure competition etc. etc. Big capital both accepts the necessity and lobbies against it. Small capital particularly resents regulation, and it is strongly against laws protecting workers. Regulation of the economy is particularly bureaucratic and businessmen find it tedious, even though they recognise the need for controls.

The real result is one of confusion. On the one hand there is the far right, as in the case of the billionaire backers of the Tea Party, while on the other there are multi- billionaire liberals like Warren Buffett. The capitalist class has lost both the unity conditional on a common enemy and a strategy to maintain economic and so class equilibrium. The word ‘confidence’ today means more than it used to in the thirties. It is looking for a decisive way out of the contemporary impasse, and without such a guarantee investors are very afraid of losing their capital. That is why they put money in banks, and invest in gold, the money commodity, or, when, more adventurous, speculate on raw materials or the stock exchange.

The Eurozone crisis is a particular example of the state of the capitalist class, with its division, continual failure in conference after conference and agreement on the need for an austerity which cannot work. It is true that at one level the different countries are moving, willy-nilly, closer together. On the other hand, as the crisis progresses, there is increasing bitterness at the heavy hand of the Northern European Countries in relation to the South. The forces of production, which are beyond the nation-state, make a retreat into nationalism nothing but a dream. The austerity programme which the German Government has forced on the Eurozone can only lead to a low to negative rate of growth and increasing discontent. In a relatively short time, the working class will re-constitute itself as a class, probably a supranational class. While the UK and the United States might not commit suicide when at the final step, the Eurozone gives the superficial appearance of moving rapidly either to the suicide of the capitalist class or to chaos.

The Merkel plan is one of continuous and uniform austerity. Austerity itself is the particular cause of the intractability of the immediate crisis. Martin Wolf[13] points out that the indebted Euro countries are all right on deficits and even percentage of debt to GDP but the issue is external debt i.e. current account. ‘This, then, is a balance of payments crisis’. The essential point here is that a common economy requires that the richer areas subsidize the poorer areas, helping them develop. Martin Wolf[14] and many other commentators have pointed out that Germany cannot expect other areas to buy their goods, without some form of exchange. If it is done on credit, then Germany must expect that part of the Eurozone will be indebted. Punishing them, therefore, is not just crazy but against the interests of both Germany and the rest of the Eurozone.

The German government and German bourgeoisie have effectively decided that only a nineteenth century style capitalism, with a reserve army of labour, can work. In this respect, Kalecki’s point has some merit. It is not that US investors want to establish control over the working class in Greece and Italy, but that the German bourgeoisie wants to return Germany and its subsidiaries to the stability of nineteenth century capitalism, under the banner of austerity. They are taking the opportunity of the crisis to do so, in some style. Wolfgang Munchau in the Financial Times became apocalyptic:

The banking sector, too, is broken. Important parts of the eurozone economy are cut off from credit. The eurozone is now subject to a run by global investors, and a quiet bank run among its citizens[15]

At the same time such a policy is little more than a dream, or utopian yearning, and we have asked above whether they are not insane. We then have to explain how they could take such a path, and we are driven back to the point that they do not have a new strategy and are divided and conflicted. As a result, they have turned back to the basis of capitalist ideology, as the bedrock of their system, regardless of the movement of history. They are not insane but stupefied by their own decline.

Russia and Protest

Some reports speak of up to 100,000 persons present at a protest meeting in Moscow in December 2011 but it is clear that the leaders and the majority of those present, though not all, came from liberal elements in the population, what some columnists have called a ‘middle class’. Leaders interviewed, like Yeltsin era deputy Prime Minister (1997-8), Boris Nemtsov, and the Putin period former finance minister, Kudrin, are of that ilk. Indeed Boris Nemtsov would probably feel very comfortable on the right of a George Bush cabinet. The working class in Russia is subject to more draconian controls than those in better positions, being subject to a daily repression, as opposed to the occasional beating up and murder of critical journalists, bad enough as that is. There is not much point in a worker demonstrating for a Nemtsov type market programme, which they experienced in the period from 1992-2000. Nonetheless, that is very much the programme of many of those who have come out onto the streets. The fact that the demonstrators were largely ‘middle-class’ was underlined by the various Western reporters who seemed to have no trouble finding operators in finance capital.

The real situation in Russia was well described by one of these liberals: Yavlinsky, leader of the Yabloko (Apple) political party, which has long had a liberal platform. ‘‘The 59-year-old Yavlinsky, ...said Russia has neither rule of law nor property rights’’. ‘The judiciary’, he said, ‘is controlled by the ruling elite and money’[16]

He repeated the point in an interview:

we have an economy without property rights, without the rule of law and where there is an enormous gap between rich and poor . three per cent who have a very high standard of living, 20 per cent who have a a western standard of living and 75 per cent of people who have no future, no prospects of a decent job, education or medical care[17]

These two statements provide a partial summing up of the political economy of Russia after two decades of attempts to replace Stalinism with the market. One can call Russian political economy market Stalinism, or an imperfect capitalism as liberals prefer.

In fact, a capitalism without property rights and the rule of law to protect property rights may not be capitalism. Indeed, a capitalism where the state is crucial to the acquisition of private property, where the state apparatus is effectively a kind of bureaucratic machine which encourages its incumbents, and their prote´ge´s, to acquire money and assets for their own purposes, lacks the essential ingredients of capitalism itself. When one adds the fact that the oligarchs export their capital to Western Europe and the USA, while industry has been allowed to decay, where it was not stripped of its valuable assets, it is clear that the situation is not viable, even at this level of discussion.

In other words, the countries of the former Soviet Union, are unstable entities, which have either to go to capitalism or move forward to socialism. Since they can do neither, they remain in a species of Stalinist stasis, modified by their particular situation. At one extreme there are the Baltic Republics which have been heavily subsidized by European Union (EU) countries and the International Monetary Fund (IMF), and have entered the EU, with Estonia even in the Eurozone. Given their very small size, in a capitalist EU, they have effectively been absorbed. At the other end, Byelo-Russia remains closer to its Stalinist origins.

Yavlinsky’s statement that three quarters of the population live in poverty, without any hope, other than emigration, indicate both the failure of the transition to the market and the potential for massive unrest. Paradoxically, the market alternative posed by Yavlinsky and Nemtsov is the reason why there is no way out for the majority. Liberals like Yavlinsky accept that the introduction of the market in the nineties was a failure and he says that: ‘The major problem of the period is the disappointment of the people and that’s why people are leaving’[18] However he regards it as only a question of the way it was done, rather than a malfunction in its essence. Yavlinsky and his section of the elite are, therefore, in agreement with their Western market fundamentalist brothers, who are now complicating matters for Russia by supporting universal austerity. The population is aware that capitalism is in a profound crisis and the solutions being applied in Western Europe and the USA have led to rising unemployment, lower wages and declining pensions, something not unknown in Russia in the last twenty years. Given the already low standard of living, together with increasing doubts about the turn to the market, a programme of further austerity in Russia will hardly commend itself.

It is interesting that some commentators point to a rise in the standard of living in the Putin period to explain his apparent electoral support:

But it’s not just the oligarchs with their Lamborghinis who have got richer. The national GDP has more than tripled to $700bn, while average monthly wages have gone from $80 in 2000 to $200 today: not massive, but enough of a surge to explain why most Russians are happy to keep Putin at the helm[19]

In reality, the standard of living is, at most, at the same level that it had been before Gorbachev began his reforms, while the elite has enriched itself leaving the majority relatively worse off, at best. The intelligentsia, women, and pensioners remain worse off, not to speak of the considerable number of unemployed workers. Since there was no unemployment in the Soviet Union, and many workers will be unemployed for periods of time, it is hard not to conclude that Yavlinsky has described the situation correctly, with 75 per cent in poverty, with no hope of improvement. The explanation of Putin’s support, such as it is, lies much more in the despair of the population in the Yeltsin period and their rejection of the market as a result. Putin did not just raise the standard of living; he removed the spectre of an approaching chaos. His de facto nationalizations and protection for parts of Russian industry, together with his forced unity of Russia limited the disintegrative process which threatened the country.

The failure of the regime is thus masked by Putin’s temporary consolidation of Russia since he took over. This was largely a result of two factors. Firstly, there was, as indicated, a strong militaristic and police-state policy which ensured that the threatened disintegration of the country did not take place. In the second place, the Putin regime was fortunate that the price of oil and raw materials rose by several multiples before 2007 allowing the regime to acquire a creditworthy status. Investment in consumer goods industries and services began to arrive. Even though the industry was largely an assembly industry it provided employment and wages.

According to the review of a work on Russia by Stephen Holmes, the contemporary Russian elite is divided into a dozen different ‘business’ groupings[20] rather than into a series of class factions. The reviewer and the author of the book reviewed appear to see Russia as something of a wasteland in which there is no systematic control, only fragments left over from Stalinism, which have evolved in their own way. So, the secret police, the Federal Security Service (FSB), extort money from rich businessmen while the ordinary police and the ministry of internal affairs take money from small businessmen. The police, secret or otherwise, have no goal, no purpose, or controlling party structure or ideology as under Stalinism. Confusion and theoretical vacuity reign. This description fits the picture of a disintegrating Stalinism, in which the pieces no longer have a central controlling force or ideology. The driving force of capitalism is accumulation but the justification for privatisation was not that accumulation is worthwhile in itself, but that the standard of living would be raised and the repression of Stalinism would no longer function. Hence the parts of the old Soviet Union remained intact, even if their names were changed. The failure of the market meant that industries went to the wall, unemployment soared, and a non- state elite was able to enrich themselves until the instability of the situation forced them to accept the state elite as their masters.

To describe the Kremlin elite as a kleptocracy is to fail to recognise reality. Many African states have also been described in the same way, and it would not be difficult to add a number of other countries in Asia or Latin America. Capitalism is in its decline and it cannot reproduce itself as it could in its rise. Under conditions where free market capitalism only exists in the minds of market fundamentalists, the state or governments play a crucial and necessary role in all economies. Corruption is universal, but the form of corruption can be specific. In the UK, government ministers and civil servants are able to move into high positions in companies after they retire, albeit with some delay. The close connection between police, journalists, businessmen and government that was revealed in the reports and inquiries into the Murdoch press may have been legal but it is certainly unsavoury. It is na¨ive to believe that this was a unique instance. The difference between the earlier and modern productive capitalist class was not that they might or not have been corrupt but that their operations served the interests of productive accumulation. Finance is not productive and the extraction of financial rewards in Russia is predatory and rapacious. The problem is that it leads nowhere other than exile to the centre of capital itself.

‘But Putin’s own media is already failing him. Some of his closest aides are sending out friendly signals to the protesters. They have lost the fear, and that means the whole edifice will come tumbling down’.[21] Such could have been written in the late Gorbachev period. A simple market fundamentalist goal, such as that held by a number of the well-known leaders of the protest movement, has no hope of success. After all, it is only a more utopian version of what the Conservative Government in the UK is practising. The Conservative government cut public expenditure in the expectation that the private sector would take up the slack. The excuse was the need to repay debt, whereas the reality was made clear when the government talked of the private sector being crowded out and the government being necessarily less efficient and productive. Eighteen months later, the government has patently failed in that the private sector has refused to invest or expand, resulting in a further downturn.

It is hard to see why the Russian working-class would vote for the same people who brutally introduced the market in 1992, resulting in mass unemployment and a huge cut in income for the majority. Putin has only to remind the population or better still leave it to the so-called Communist Party to do so. The fact that neither Putin nor Zuganov, the leader of the latter party, is against the market itself does not have to be stated in election manfestoes. In effect, this ‘middle class opposition’ is relying on people wanting change so desperately that they will accept anything.

Without any unity, without any support, without any future, the contemporary Russian elite can only hold together with a strong man at the centre, able to wield a club when necessary. The so-called middle class has no history and cannot see the future. They want a market where they can progress and spend their money and little more. When one compares this grouping with its historical antecedents in the 19th and early twentieth century, one can only regard this grouping with some sadness.

In the past, the stirring of the working class was heralded by youth and student militancy. There is no reason to assume that the situation is any different today, except in the former Stalinist countries.


  1. Louis Lavelle, ‘Harvard Students, Citing Economic Inequality, Stage Walkout’, Bloomberg Businessweek, 8 November 2011, students_citing_economic_inequality_stage_walkout.html
  2. Borzou Daragahi, ‘Revolutionary Arab youths cast about for political voice’, Financial Times, London, 30 December, 2011, p. 8.
  3. Gideon Rachman made this point in his own way in the authoritative Financial Times, Some argued that the fact that occupiers lacked a coherent programme meant that their significance was limited. But the Occupy movement did serve to push inequality to the centre of debate in the US-Its slogan: ‘‘We are the 99 per cent’’became the phrase of the year’. December 29 2011, html#axzz1ifgAJCmv
  4. While this point is clear for the United States where the percentage poll is often around or below 50 per cent for President and Congress, in an interesting development, Katharine Ainger argues that the some 11 million people either did not vote or used their vote in a way which had the same effect as if they did not vote in the Spanish election in November 2011. Katharine Ainger, ‘The Spanish Election is a Mandate for the Indignados’, The Guardian, Monday 21 November 2011 21[59] GMT, 2011/nov/21/spanish-election-mandate-indignados, (accessed 4 January 2012).
  5. HMIC, ‘The Rules of Engagement’, A Review of the August 2011 disorders, a-review-of-the-august-2011-disorders-20111220.pdf (accessed 4 January 2012).
  6. Robert Skidelsky, ‘The Wages of Economic Ignorance’, skidelsky47/English
  7. Ibid.
  8. H. Ticktin, ‘Critique Notes’, Critique 58, 39:4 (2011), pp. 479487.
  9. Wolfgang Streeck, ‘The Crises of Democratic Capitalism’, New Left Review 71, London, SeptemberOctober 2011,, footnote 5. The footnote continues with the following: ‘Kalecki’s perspective makes it possible to model a capitalist economy as an interactive game, distinguished from a natural or machine-like mechanism. In this perspective, the point at which capitalists react adversely to non-market allocation by withdrawing investment need not be seen as fixed and mathematically predictable but may be negotiable. For example, it may be set by a historically changeable level of aspiration or by strategic calculation. This is why predictions based on universalistic, i.e. historically and culturally indifferent, economic models so often fail: they assume fixed parameters where in reality these are socially determined’.
  10. ‘Political Aspects of Full Employment’, Political Quarterly, 14:4 (1943), reproduced by Monthly Review, MRZINE, (accessed January 5 2012).
  11. Ibid.
  12. We cited the figures in the last Critique.
  13. Martin Wolf, ‘Mercozy Failed to Save the Eurozone’, Financial Times, London, 6 December 2011. (Speaking of the Eurozone crisis.) axzz1icumUXI4.
  14. Martin Wolf, op.cit.
  15. Wolfgang Munchau, ‘The Eurozone Really has only Days to Avoid Collapse’, Financial Times, London, November 27, 2011,
  16. Barry Wood, ‘A Sobering look Inside Putin’s Russia’, Market Watch , a-sobering-look-inside-putins-russia-2011-10-18.
  17. Leyla Boulton, Reality of Life after Communism, Financial Times, London, 23 December 2011, p. 6, http://, (accessed 29 December 2011).
  18. Ibid.
  19. Jonathan Freedland, ‘Two Grand Bargains’, Guardian, December 9 2011, theguardian/2005/dec/09/guardianweekly.guardianweekly1?INTCMPSRCH, (accessed 29 December 2011).
  20. ‘Behind the mask of an authoritarian restoration we find the reality of an intra-elite raiderstvo, a lawless feeding frenzy in which the various groups fight to grab their portion of massive cash flows. ...It isn’t a liberal/ siloviki conflict. It’s about money and security and providing security for their money. Nothing more. They are business competitors with same purposes and goals’. Stephen Holmes, Fragments of a Defunct State, London Review of Books, January 5, 2012, p. 24.
  21. Masha Gessen, ‘Vladimir Putin’s world is falling apart’, Guardian, London, December 26 2011, http://