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Critique Notes 77

Published: 26 February 2017

The next Critique Conference will be held in May around the theme of the Russian Revolution of October/November 1917. We have issued a call for papers which is in this issue. It was Trotsky who argued that once the German social democrats betrayed the Russian Revolution, we entered a period of a transition to socialism. The conference will try to explore its implications for the present time.

Where are we going?

The victory of Donald Trump in the presidential election has led some to a highly pessimistic view of the future. In the last issue we argued that Fascism in not on the agenda. We may be moving to a more authoritarian form but that is not the same as Fascism, with its corporatism, dictatorial form, wars, anti-Semitism and its overall terrorism in relation to the left. This issue will be discussed after an assessment of other aspects of the new world order, such as the reversal on austerity in favour of a positive fiscal policy for the building of infra-structure, thus reversing the previously more pessimistic global economic outlook maintained by such as the IMF, who nonetheless were calling for infrastructure investment.1

The most spectacular aspect of Trump's policies may be the proposed about-turns on foreign policy to Russia, China. Russia is not in any sense socialist or even state capitalist today. It is based on private enterprise, even if there are importance concerns, like Rosneft which are nationalized. It is subject to the world crisis in a way China is not. More specifically, the form in which each is subject to the world crisis is different.

The background to the change in foreign policy lies in the decline in capitalism and specifically in US global control. Although neither Trump nor Obama, still less their departmental heads talk about it or perhaps even believe it, the fact is that one consequence is that various kinds of nationalist governments are in place, who are demanding their place in the sun. The social democratic wave in Latin America is in retreat but its effects are still there. From the ejection of a Guatamalan government in the fifties by the United Fruit Company through to the Kissinger assisted removal of President Allende and beyond the United States ruled. The same was true in the Middle East. We have therefore to look on Iran, Syria and Egypt as part of that revolt, not by the working class but by the local ruling class. Working class discontent is being funneled into nationalist forms whether they want it or not. Indeed, the governments of Poland and Hungary are reacting to a similar stimulus, where they find that the nuclear umbrella does not give them an entrée into the inner circles of the ruling class. Russia is in the same category, and hence its links with Iran, China, Syria and Hungary etc.

The current US and Nato countries line on Russia is so much against their own interests that stupidity cannot be used here as an epithet. The real reasons behind it are more sophisticated than they seem, even if its proponents do not understand their own policy. The result is to produce a group of enemies, who are really on the same side, against the working class, in favour of limited concessions to particular elites. To understand that sentence, I will outline the background to the evolution of the present social relations in Russia.

The Formation of Post-Soviet Russia

The end of the Soviet Union was simultaneously the end of the Soviet Union as a political, economic, social and territorial entity, and of Stalinism as an ideology with its parties over the globe. The ramifications were considerable and no one was able to forecast the evolution of the successor states or of its legacy. Conservatives saw a triumph for free enterprise and liberals foretold a liberal future. The concept of an alternative capitalist world without the Cold War was not explored.

From 1945 until 1992, the world was effectively bound within the economics and politics of the Cold War. Its global political economy was crucial in keeping capitalist economic contradictions in play as well as ensuring acceptance of US political and military hegemony.

All did not go to plan, however.

When the USSR came to an end, it did not in fact collapse as the usual tale goes. It was consciously brought to an end by the ruling elite. It happened step by step from the passing of the Law on the State Enterprise in 1986, to the attempted coup in August 1991, followed by the counter-coup by Yeltsin and others. This much was obvious at the time. Recently, Mikhael Gorbachev has underlined the point that the end of the single Soviet entity was caused by a coup. It is not clear whether he means the end of the Soviet Union or the end of the de facto unity of the countries involved in the USSR.2 However, the point is that its end was deliberate. The intention was to introduce private property and so an economy based on private enterprise and the making of profit. The new economy was unplanned but foisted on the population from above, with considerable intervention from the West.

Whatever may be thought of this process, it was mishandled to a spectacular degree, with the result that the population turned against the market and against the West, even though they had taken a less critical view in 1991. The question is not what any observer or participant might have favoured but the simple fact that the shift from the Stalinist economy to capitalism failed. This was not because the commodity form did not become dominant but because industry and agriculture shrank to a fraction of their former size and role, and many individuals were without work and income for some time. This applied particularly to women. As I argued at the time, there was no quick or slow way to go to capitalism, which would not be chaotic. It could not have been successful, except in the sense that the Stalinist economy had been overthrown.

By the end of the decade, the Russian economy was in dire straits, with parts threatening to break away, including Chechnya. Productivity was among the lowest in the world, reflecting in part the old Stalinist system and its traditions. The capitalists who had emerged, including the ‘oligarchs’ acted like vultures, in acquiring assets for resale rather than trying to re-establish Russia as an industrialized capitalist economy within the world market. Their ‘get rich quick’ attitude was partly a result of the Soviet elite trying to shift from their previous status as quickly as possible. It was, however, also part of the conditions imposed on them by Western big business. The latter were not prepared to help build up a ruling class in Russia, similar to that in Japan or South Korea. On the contrary, they preferred to turn Russia into an area similar to that in the so-called emerging countries, or former colonies or semi-colonies. It is even now included in the category of emerging countries in international statistics. It is worthwhile comparing the Russian situation to that for China on this point.

China today has found that its attempts to acquire large firms in Western Europe, Japan and North America have met with resistance, most recently in Germany and the USA. The nature of modern capitalism is global and one of its aspects is the small number of firms that control the market in each sector. Hence the title of the book, quoted several times in these notes: Is China Buying the World by Peter Nolan3, where the answer is that it is not able to do so. China is resisting this attempt to exclude it from the world market but the issue is still being fought over.

In the Russian case, its raw material, extractive and mineral based industries like coal, iron, furs, timber, gold etc. have become central to its survival. Its industries outside the military sector are limited. The automobile industry is more of an assembly industry. In short, it is no advertisement for private enterprise, but instead is highly unstable, with a lid on its boiling pot provided by a special elite headed by Putin and his associate former and present members of the state security apparatuses.

The Nature of the Putin Period

The election of Putin was itself a coup of a kind. It is still not clear who effectively backed him in 2000, apart from a section of the secret police. Yeltsin and Berezovsky formally backed him, but were surprised and alarmed by his complete change in policy when elected. Given the political and economic failure in Russia at the time, and the discontent of both the population and the section of the elite which had lost out to the oligarchs, the policy followed from that point was probably the only non-socialist one which could have saved Russia from disintegration and possible insurrection. Putin pulled the country together by establishing an authoritarian regime which imposed unity. He was greatly helped by the rise in price of oil. The standard of living of the majority rose back to the level of the late eighties and the regime adopted a policy of protecting strategic industries, and subordinating the oligarchs. Putin supports the market but tries to ensure the maintenance of ‘strategic industries’. He is a Christian with his own chapel, but he is a Russian nationalist supporter of the Orthodox church, which performs a unifying nationalist function.

While Putin effectively saved Russia from possible dismemberment or annexation, he subjugated the population under a right wing, anti-working class regime. In Russia today, unions are controlled and working class organizers can be beaten up and/or killed.

Russia under Putin is a police state but not of the atomized, all penetrating kind, as with Stalinism. It has a relatively weak economy, largely based on oil and minerals, but with a substantial military industry. It has not been able to transform itself from Stalinism into a developed capitalist economy and it has no obvious future as it is either. Its relationship to its co-inhabitants of the one-time Stalinist form of the Soviet Union were and are crucial to its stability, economically, socially and politically.

It is obviously important that Putin has reformed his administration by placing officials from the FSB in charge of all departments. ‘Yet during his two terms since then, men from the FSB and its sister outfits have indeed grabbed control of the government, economy and security forces. Three out of four senior Russian officials today were once affiliated to the KGB and other security and military organisations.’4 The point is that while he was using former KGB operatives from the beginning of his Presidency, he has recently more than reinforced them to the point where the system itself is defined by it. Capitalism as run by the KGB is a curious entity. The Economist tries to argue that the present day or latter day members of the KGB all go back in ideas, and loyalty to the Cheka.5 It is doing so as part of an argument that Putin and Russia are gearing up for a recrudescence of the Cold War. It is making a distinction between the society itself, which is not ‘Communist’ or ‘Stalinist’, and the considerable body of secret police operatives. Clearly if three quarters of senior bureaucrats are part of the secret police, and they have a Bolshevik type loyalty6 one might argue that a renewed Cold War is on the cards.

If it were really true that the Cheka was being resuscitated, with army officers thrown in, loyal as they were then to Trotsky, it would be a feat to beat all feats. After Stalinism had wiped them all out and replaced them with unprincipled careerists capable of doing anything, it would be a miracle. Clearly, the Economist is either talking nonsense or attributing to the Cheka the founding of a new type of psychology and common loyalty, without ideology, which is equally unlikely.

To be fair to the Economist, they do not think that the present day security apparatus around Putin are Marxists, or Stalinists, but they attribute a peculiar psychology and loyalty which goes back to the Cheka. In effect they are saying that they constitute a kind of secret brotherhood of Russian nationalists, of a kind perhaps comparable to the Knights Templar in the Middle Ages. Ruling class or elite nationalism, however, does not have much of purchase in the contemporary world. Nonetheless, the obverse of the argument that the Russians are re-creating a Cold War is the view that the West is re-creating a Cold War. We can still ask, however, under what banner would an ordinary Russian car worker want to fight the West?

However, that does not detract from the fact that the KGB is critically important in Russia today. It clearly is not Marxist, Leninist or Trotskyist, let alone socialist. If it has an ideology it will be Russian nationalist. It is also true that the Stalinist secret police had a particular loyalty, ruthlessness and lack of scruple combined with an integration into the population which made opposition impossible, to a degree that had never before existed. The regime itself is based on the market, and so profit, but corruption and deceit play crucial roles in the economy.7 That effectively removes much of what dynamic is left in a capitalist economy at the present time. An incorruptible secret police clearly can play an important role, though to what end is not clear. At most they can delay the rise of an opposition, or keep the country going until an alternative presents itself. The logic, however, of the Economist position is different.

Nationalisms at war

The Western policy of drawing away various countries which surround Russia could only be a challenge. Given the failure of the attempts to replace and stabilize countries in the Middle East, one could only wonder at ruling class policy in the United States. The United States is the hegemonic power which demands that tribute be paid, but its subordinates do not want to commit suicide and that is what the United States has been demanding of Putin or the Russian elite. This is because the population has not forgotten its mistrust of the market, productivity remains low, and the nature of the work situation and the market for the consumer do not conform to the classical structure as in the West. The regime, while being pro-market, balances between a pro-market and nationalized economy, with occasional references to the need to privatize, as Putin did recently, and in 2010. In the period since 2008 when the crisis hit Russia, and 2014 when the oil price crashed, the situation has clearly worsened economically, even as the invasion of Ukraine provided a common nationalist ethos.

In other words, it does make sense for Putin to have an external enemy to unify the country, given its inherent instability, in order to keep the present ruling group in power.

Obama's and the EU policy to Eastern Europe and the Ukraine can only be called crazy, looked at from the point of view of US ruling class dominance. The deliberate attempt to get the Ukraine into the EU over time was inevitably going to cause friction. They ought to have tried to work out an economic deal with Putin before taking any action, given their interests. The end result has strengthened nationalism and Putin and his supporters.

The scare that has been drummed up, by the EU and US, over the possible Russian invasion of the Baltic Republics and Poland is overplayed. The reference to a return to the Cold War makes no sense. Russia is a capitalist country and Putin is closer to a right wing Republican politically, so there is no danger of spreading an ideology. On top of that the West is antagonizing ordinary Ukrainians by raising the prices of energy, while failing to provide sufficient economic support for raising their overall low standard of living.

The picture of Russia repeating its role in the Cold War is clearly intended to play the role of uniting populations behind right wing parties, as it did during the genuine Cold War. The fact was that during that period, nuclear bombs notwithstanding, orthodox political theory contended that the Soviet Union was a status quo power, tending to prevent a shift to the left. The Cold War, in other words, was never what it seemed. A reprise of a deception is somewhat absurd, and unlikely to last long. It would make far more sense to find a way of incorporating Russia into the existing global framework, by allowing sections of the Russian elite to have a small piece of the pie. Currently the issues concern Eastern Europe, where its lacklustre shift to capitalism has led to far right regimes. The general noise about a possible Russian invasion into Poland or the Baltic Republics creates a degree of support for those parties. While such an adventure is not impossible, it is highly unlikely, given the clear opposition of the local populations. The cost to Russia would be unsustainable.

Unfortunately, Stalinism appears to have inoculated the local populations against the appeal of socialism, leaving them with governments which are all controlled by varieties of right wing capitalist parties.

Trump's policy in this respect is more sensible from a capitalist point of view, in that he would allow Putin some leeway and receive co-operation where it is worthwhile for Putin.

It is not clear how long it will take for the population to start moving to the left again in Russia and Eastern Europe, but it is the only route left to them. The rise of strong left wing parties in the West, will almost certainly begin to be mirrored in the East.

The Crisis and he Political Situation

Most people on the left are worried by the rise of the far right and its capture of a section of the population, though it is not fully clear what section that is. Generally speaking, it may include the unemployed and less skilled workers, sections of downwardly mobile of the so-called middle class who are sometimes assigned to the base of this phenomenon. In this respect, a comparison with the thirties is apposite, even if is not fascism. The decade long downturn is also comparable to the Great Depression, and it would be better called the Third Great Depression, which I called it somewhat prematurely a year or two earlier than the actual downturn8.

Its effects are not pleasant. In the UK, the Home Office, usually called the Ministry of the Interior, in some other countries, has descended to a depth which even the Far Right could be ashamed of. It has attempted to ensure that teachers make school life as unpleasant as possible for immigrant children who are suspected of being members of illegal immigrant families.9 The same ministry wanted employers to publicly display a list of non-British employees.10 We are only at the beginning of the reaction to the depression, and its effects on income, education and life in general. Social democracy in its various forms will not be able to cope. Some will shift to the right, including the far right and others to the left. Since most of the MPs and various functionaries who owe their jobs to their political line, will be frightened by the abyss opening up before them, we may expect them to jump to the right, in whatever form. Both the old and the young are relatively more independent and we may expect them to shift to the left over time, particularly as pensions will tend to be cut. This is something already being mooted in the UK by both right wing Labour and a section of the Conservatives.

Under these circumstances only direct demands for an end to capitalism make any sense. Full employment, liveable pensions for all, and subsidized and adequate housing for all are necessary demands, which capital will not yield. This is one reason why capital has turned to the far right to provide both an outlet for discontent and a protection from a more powerful incorporation of that discontent into a realistic form. There are by now many articles arguing that Trump's overall programme is unrealizable, even if his fiscal policy may well work in the initial stages of his Presidency.11 Clearly the restoration of coal mining in the USA will be fiercely opposed by the global forces operating to reduce carbon in the atmosphere. The return of industry to the USA from China and elsewhere in Eastern Europe, East Asia, South America etc. would make US industry uncompetitive, and potentially strengthen the left in those countries. A maverick, much bankrupted neophyte politician cannot undo a fundamental policy of global capital, (which is after all headed by US capital itself), without a clear political economic alternative, unless he wants to risk weakening capitalism itself by reducing profits, and increasing confusion. It is more likely that he will find some mode of retreating, and it will be this retreat that will be fought over and politicise the population.

The Constitutional Crisis

The political system in the USA itself has been in trouble since the Clinton years, at least, but the attempted impeachment of Bill Clinton, the Bush Wars, and the deadlock between the parties have shown that the constitution is unworkable. Clearly if one side refuses to allow higher taxation to redistribute income and the other gets its votes from those who need that extra income to survive then the logic leads to civil war. In reality, it is has been more complex, but as the rich have got richer and the poor relatively poorer that logic begins to show itself. Obamacare is an obvious example. The very idea that a proportion of the population cannot afford a full health system in the most powerful and de facto wealthiest country in the world should make any US politician squirm. Whatever the earlier reality in terms of distribution of income, it is the case today in the USA and other developed countries that an extensive redistribution of income of the rich would help more than the poorest in the society. It is this obvious fact that is making the wealthy quake in their shoes, since it is inevitable that they will have to concede or live in an increasingly authoritarian society. The question is not just one in which both sides have compromised, or not used absolutes to exclude the other party from making choices.12

It is a feature of modern capitalism in developed economies or the imperial countries that there are two major parties which have rotated in power since the Second World War. In Europe those parties were generally a party supporting Capital and a nominally Labour/Socialist or Stalinist party. In reality, the latter became very similar to the US Democratic party. In the UK or France until recently the socialist party has ceased even to pretend to be socialist but instead stands more for the welfare state. The differences are so marginal that many, possibly most, people did not bother to vote. In effect the franchise meant little. Since the crisis hit in 2007 onwards, things have begun to change. Effectively the right took over, by funding and building the right and far right. Social Democratic parties could not provide either an alternative reform programme or even a limited series of concessions. The Greek SYRIZA party is the classic and epochal example of the failure of parties which attempt to come to a deal with the right.

Underlying the actual or potential polarisation of political parties lies the transformation of the middle layers into a section of the proletariat. The increasing use of zero hours' contracts in academia is symbolic of this change. Academics are not wage workers operating production lines in a factory, and do not have their power to act. Nor do others of the recently proletarianising sectors have the solidarity to form a labour army fighting the ruling class. On the other hand, they will cease to form a buffer in defence of the ruling class. The class war will be fought out both ideologically and physically. Here it is that it is critical that the left should stand for full civil rights, and the fullest freedom of speech.

The right is in power and feels that concessions could pull the rug from under them. Judging by the actions of the EU in relation to Greece and the deadlock in the USA, the right will remain firm. The intermediate parties between the far left and the right will logically be systematically ground down. It may appear odd that the right, or the rich and powerful, should be so intractable when they are doing so well. So what are they afraid of?

Are the Ruling Class worried?

Are the ruling class worried and perhaps discontented? One can cite wealthy and powerful individuals, who are members or supporters of the far right. There is the case of the Koch brothers, the multi-billionaire supporters of the Tea Party, and those in Trump's camp, such as Peter Thiel among the Silicon Valley industrialists. In the UK, there are wealthy members or supporters of UKIP such as Lord Cowdray, the Earl of Dartmouth, Desmond, owner of the Daily Express etc. and Aarron Banks, frequently quoted on TV as a financial backer of UKIP, are some of the wealthy supporters of UKIP. In the USA they are not shy in putting forward their demands. It is clear that a section does take a hard line and that is reflected in Hayekian economics as apparently practised by the German finance minister, Schauble. Perhaps, however, the only available direct evidence is the fact that Brexit is happening and Trump has been elected. Austerity has been the main line adopted by the right since the onset of the crisis, and practically all right wing Conservative and Social Democratic parties from that time. How then can Trump square the circle of austerity to create a boom based on infrastructure investment and protectionism?

The Unspoken Threat

The ruling class controls the state, and so the military, the police and the bulk of the media, not to speak of the economy. Once the population begins to feel that its rulers are self-appointing, without any recompense for the majority, the society becomes unstable. If there is no democratic mode of change, then disintegration will set in, as those parts of the country which have common grievances act against the social order. A formal democracy is not a real democracy if political control prevents economic control from below.

The owners of enterprises and the controllers of finance capital would have an occupational tendency to want low wages, mass unemployment and limited or no unionization of their workforces. They want low taxes on their earnings or financial incomes and consequently want the smallest possible state consonant with a strong police force and good education for their workers. As capitalism has developed, their needs have tended to contradict their essence. The state apparatus has become increasingly costly. The apparatus of internal control requires an increasingly sophisticated work force as do its international defence operations. Educational establishments employ an increasing number of teachers, academics and researchers. Transport and housing have to be financed and/or owned by the state because of their cost and long term implications. Even when privatised or semi-privatised their long term and universal nature compel government intervention in finance, in rules of operation and in control. The supply of water, food and drink has to be regulated to avoid the population being poisoned or diseased. This the rules of the market, which amount to the making of profits by reducing costs to the minimum, conflict with the needs both of the worker and the consumer. While the wealthier sections can overcome the problems of consumption up to a point, most people cannot. Global warming and pollution threaten the species and massive government expenditure is required. The same is true of medicine where its provision free at the point of use is the only reasonable manner of its operation, but massive government expenditure is necessary. At the present time, private enterprise refuses to finance the large scale replacement of increasingly less successful antibiotic drugs. It is clear that many will die unnecessarily before charities, some governments, philanthropists etc. help university researchers find a solution.

The rich may be richer than ever but they feel threatened because they are objectively threatened by evolutionary social forces. Workers in coal mines want the mines themselves to be safe to work in, free medicine for their lifetime to deal in particular with the pollution effect on their lungs, or alternative work. The only reasonable solution is to re-educate them to do other more skilled safer work at the expense of the society, however long it takes. Trump, of course, promised more work in coal mines, something which is not going to happen. On the other hand, it is true that China has opened and developed a vast array of coal mines, illustrating what is possible when the majority are very poor and there is a ruling class/elite able to use a strong state.

The essential point is that the demands of the population, in the capitalist countries, threaten the ruling class, whether those demands are conscious or unconscious, implicit or immediate or both implicit and immediate. The extreme differences in wealth and income exacerbate that problem.

The rich live considerably longer than the poor today. That was not always so clear-cut but today the rich can afford healthier food, a better climate for part or all the year, a more salubrious apartment and a higher level of medical attention. For the poor a pension is an irrelevance as they often cannot reach the age of retirement, even in parts of developed countries. Then, as implied above, there is the question of the conditions of work.

Death is no longer a simple leveller when the poor die at 60 and the rich at 90. While one can argue that things are not quite so extreme everywhere, the third factor after, social evolution and income differences is the increasing proletarianisation of the so-called ‘middle class’. White collar workers, state employee and professionals are terms which overlap but they encompass both those who are wage-workers in everything but title and others who are both employees and in charge of others as well as those who have command over their own time.

The ruling class itself has changed. When we have ‘aristocrats’ in a party of the extreme right appealing to proletarians to oppose the establishment, there has to be some reason for the phenomenon. Today, the top management of a company controls the company to a large extent, rather than the often nominal owners, the shareholders. Attempts to change this situation in the recent period have generally not succeeded. In the period from the late seventies to the present, finance capital re-established itself and the role of monopoly became more clear cut. This has meant that while a few big financial firms hold dominant positions in firms, they do so in part through share-holdings and in part through their interaction with the controlling managers of the enterprises involved, something which is obviously related to their monetary relations.

These managers receive salaries which may equal the kinds of returns that billionaires may get on their investments.

In short, the nature of both the administration of the society and the form of control are increasingly socialised demanding increasing control from below.

The Current Crisis

It is an irony of history that the right should be taking steps to contain the downturn by building up infrastructure, something that the Republicans resolutely stopped Obama implementing. It is not clear how far he will go. Clearly he will not be able to bring back American investments from abroad. The recent recall of Ford's intended investment of $700 million in Mexico has been shown to be a sham. The question is how much he will allow the state to borrow in order to invest. There is no question but that there are trillions of dollars of idle money lying in the banks, as has been frequently argued in these notes.13 It is also clear that investment in infrastructure will involve payment to workers, and firms who will in turn need to buy goods and services. In other words, the Keynesian multiplier will tend to raise the rate of growth and foster further investment. The tax take will increase. The argument lies over the increase in government debt, and how far the capitalist class is prepared to allow the government a central role in the economy. China has shown that nationalized banks supported by the state can allow the economy to continue even with very high levels of personal and state debt. In fact, the USSR, not a capitalist country, showed the same thing. The issue is political not technical. It seems unlikely that that Trump will either want to go so far or be allowed to do so. The ultimate barrier lies in the possibility that the economy could approach full employment, so raising the spectacle of working class militancy.

The small to vanishing state is the prime principle of modern conservatism. The Republican party is in that mode. For them to move in the opposite direction means taking on the mantle of Franklin Roosevelt. It would destroy the rationale of the party itself. Even a compromise solution with limited fiscal expansion will open the Republicans to a split and to the threat that a half-hearted strategy will fail. In the UK, the new Conservative government has tried to attract ‘working-class’ support, even using that word, as discussed in the last Critique Notes by addressing their grievances.

It seems unlikely that Conservatives in the UK, USA or elsewhere will abandon their fundamental principles. It is far more likely that they will take very limited steps, some of which are ambiguous to the point of being deliberately deceptive. In the meantime, the stock exchanges are going ever higher and interest will be rising. If expectations are not met, the downturn could be deep or even worse. The question is not simple, since a possible denouement would be very dangerous for the capitalist system, something which is foreseeable. The ultimate question is whether the ruling class has the means to avoid a such an outcome.

Notes

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