State Capitalism in the Russian Empire

Probably the greatest obstacle to the acceptance of socialist ideas in the present century has been the belief on the part of millions of workers that socialism - or communism - has been established. Quite understandably, workers look at the tyrannies of Eastern Europe, China, Albania and the other self-proclaimed "socialist countries" and reject what they see. The media in the West are quite happy to accept the myth that these police states are "socialist". Since the 1920s the Communist Parties of the world have been spreading the lie that socialism exists; for example, the Communist Party of Great Britain's official policy document, The British Road to Socialism, asserts that

Today socialism is a reality for all to see. Countries with a population of hundreds of millions are socialist states. (October 1968, p.17)

The constitutions of these countries repeat the lie: article I of the Polish constitution declares that

The Polish People's Republic is a socialist state in which power belongs to the working people . . . .

The first article of the most recent constitution of the USSR (established in 1977) states that

The USSR is a socialist state of the whole people, expressing the will and interests of the workers, peasants and intelligentsia . . .

It is the contention of the World Socialist Movement that these countries are not socialist or communist and must be exposed for what they are: capitalist state dictatorships. It is not our view that the countries of the Russian Empire used to be socialist, but ceased being so on a certain date. (We leave such crackpot theories to the Trotskyists and other assorted confusion-mongers who wish to advocate the Bolshevik recipe while spitting out the Stalinist cake). The Russian Empire - by which term we include the seven members of the Council for Mutual Economic Assurance (Comecon) - is a group of countries which exhibit the features of capitalism.

As scientific socialists, we shall explain what we see as the two main defining characteristics of capitalism and will then proceed to demonstrate that these exist within the Russian Empire. Firstly, capitalism is a system in which wealth takes the form of commodities. i.e. objects produced for sale on the market. Commodity production is not unique to capitalism, but the commodity nature of labour power is. So, capitalism is defined by the fact that the mental and physical energies of most people have to be sold on the market for a price called a wage or a salary. Where there is wage labour there is capitalism. Secondly, capitalism is defined by the law of value. Value is a social relationship which exists in property society where commodities are exchanged. Where there are no commodities, because production and distribution have advanced beyond the stage of buying and selling relationships, there will be no need for the concept of value or for prices and money. As Marx pointed out, "Value is the expression of the specifically characteristic nature of the capitalist process of production" (quoted in T. Cliff, Russia A Marxist Analysis, p.148).

Most early socialists, including Marx and Engels, accepted the logical supposition that the abolition of capitalism would necessitate the ending of commodity production, wage labour and the law of value, including prices and profits. In short, they were under no illusion that socialism - which is to be the antithesis of capitalism - could exhibit the social features of the capitalist system. For example, Engels pointed out that "With the seizing of the means of production by society, production of commodities is done away with. .," (Socialism: Utopian and Scientific). Marx, replying to a German writer called Wagner who thought that the law of value would exist in socialism, rejected explicitly "the presupposition that the theory of value, developed for the explanation of capitalist society, has validity for socialism". This point is explained in greater detail elsewhere in this issue (see pages 34-42).


It is often imagined that the Bolshevik revolution of November 1917 (October according to the old Russian calendar in force at the time) was the most significant event in Russia that year. In fact, this is far from the case. In March (February) 1917 a far more significant revolution took place. This was not led by any party or faction, but resulted from the spontaneous indignation of Russian workers and peasants who were suffering huge losses in the imperialist war, were starving in the towns and deprived of land in the vast peasant areas. The workers of Petrograd and Moscow set up soviets (councils) without any help from the Bolsheviks who later claimed credit for these bodies - in fact, Lenin was living in exile in Switzerland when the revolution broke out and did not return to Russia until April. The workers and peasants of 1917 were not interested in ideas about socialism - their demands were for peace, land and bread. When Lenin turned up in April 1917 he told the Bolshevik party that they should turn the revolution into a socialist revolution - in a country which had only developed capitalism in a few cities and in which three million industrial workers were overshadowed by over a hundred million peasants. Listening to Lenin's unpractical scheme, Bogdanov - a fellow Bolshevik - described such ideas as "the delirium of a madman". Bogdanov had a point. The Bolsheviks won power mainly by offering everything to everyone, even though many of the promises conflicted. Using the anger of the workers and peasants against the provisional government which was set up in March and insisted in pursuing the unpopular war, the Bolsheviks seized power. Having obtained power, the Bolsheviks were forced to act like puppets, dancing to the tune of the existing historical conditions. In short, they were forced to develop capitalism. But, being a party which was led by a number of dogmatic intellectuals, the Bolsheviks maintained the myth that they were creating genuine socialism. For example, in 1919 Bukharin and Preobrazhensky wrote that

Communist society will know nothing of money . . . Thus, from the very outset of the socialist revolution money begins to lose its significance . . . By degrees a moneyless system of accounting will come to prevail. (The ABC of Communism).

In 1920 Zinoviev declared boldly: "We are moving towards the complete abolition of money" (quoted in E.H. Carr, The Bolshevik Revolution, Volume 2, Penguin, p.263). This was pure utopian fantasy.

Lenin and his fellow Bolshevik leaders in Petrograd, who tended to be less taken in by their own rhetoric than were their Moscow comrades, did not take long to realise that their job was to develop state capitalism. Leninists often gasp with horror when it is suggested that Lenin ever had such intentions - they should read the man himself:

. . . state capitalism would be a step forward . . . if in approximately six months' time state capitalism became established in our Republic, this would be a great success . . . ('Left-Wing' Childishness and the Petty- Bourgeois Spirit, May 1918).

By March 1919 the Bolshevik party congress resolved that "in the period of transition from capitalism to communism the abolition of money is an impossibility". The so-called period of transition, which the Bolsheviks called socialism, was a period of state capitalism - a point which Lenin had explicitly made even before the Bolsheviks seized power:

Socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people . . . (The Impending Catastrophe and How to Combat it, September 1917).

So, when the Russian Empire describes itself as socialist it does so in the logically perverse Leninist sense of meaning that it is state capitalist.

In the early days of state capitalism the Bolsheviks claimed that the basic features of their society were different from those which define capitalism in the Marxist definition. By the time of Stalin this had all changed, and in his Economic Problems of Socialism in the USSR, written in 1952, Stalin admitted that commodity production and the law of value existed in Russia:

. . . our commodity production radically differs from commodity production under capitalism . . . It is sometimes asked whether the law of value exists and operates in our country, under the socialist system. Yes, it does exist and does operate.

So, Stalin admitted that he was presiding over a system of buying and selling, wage labour, value and price- all of the features which Marx attributed to capitalism - but kept up the illusion that this was socialism.


According to the Communist Parties the Russian Empire is socialist, despite its capitalist characteristics, because there is a workers' state. According to them, the state in Russia is controlled by the working class. Logically, this must mean that the workers operate a police state to exploit themselves. Other Leninists, who think that Trotsky's analysis was correct, say that Russia is a "degenerate workers' state" (whatever that is), while others disagree vehemently, declaring that it is a "deformed workers' state". Lengthy theoretical arguments between various brands of Trotskyists' typewriters have gone on for years in this heated and utterly silly debate. The simple fact is that the existence of socialism - a classless society - can have no need of a state machine - an instrument for the coercion of one social class by another. Socialism entails the abolition of the state machine. Leninists answer this by saying that the state in socialist society is "withering away". In fact, the coercive state under so-called socialism has grown more powerful, not less.

In the state capitalist countries the function of the state is to act as the functionary of capital in the exploitation of wage labour. The bureaucratic elite who run the state live in comfort and privilege as a result of the exploitation of the working class. Of course, just as the state owns some parts of the means of wealth production in the private capitalist countries, so there is some degree of private capital ownership under state capitalism: 80 per cent of Polish land is owned by individuals, some of whom are very rich, and in Russia there are several millionaires who enjoy lifestyles substantially different from the workers simply because they are living off surplus value. In general, the ruling class of the Russian Empire have less legally established rights of power than their Western counterparts. But the essential point is not to point to individuals and say, Look, there is the capitalist class, but to be able to point to the exploitative social force of capital, which in the Russian Empire is represented by the state machine.


The socialist analysis of capitalism is not based upon the localised investigation of individual nations: under capitalism all nations are involved in, and dictated to by, the world market. It is often claimed the Comecon countries are removed from the capitalist world market. This is not so. In October 1976 the London Times published a supplement headed as follows: " ANGLO-SOVIET TRADE: A SPECIAL REPORT TO MARK THE 60th ANNIVERSARY OF THE BRITISH- SOVIET CHAMBER OF COMMERCE". One does not have to be a mathematical wizard or a searching historian to realise that sixty years before 1976 was 1916, ie one year before the so-called socialist revolution in Russia. In short, the revolution did not interrupt the commercial links between Russia and its capitalist neighbours.

From the middle of the nineteenth century onwards Tsarist Russia attempted to develop capitalism in Russia by trading with the more advanced countries of the West. When the Bolsheviks took power they had no option but to continue that policy if they were to successfully build up state capitalism. In 1918 Radek reported to Sovnarkom, the council for national economy, that:

For Russia . . . it is an indispensable condition of restoration of her national economy to establish economic relations with the central powers as well as to maintain and broaden relations with the Entente countries. (quoted in Carr, p.135)

So Russia set about trading within the world capitalist market. Krasin, who was one of the few Bolsheviks to know much about business, was appointed as President of the Council for Foreign Trade. Such commerce has taken three main forms:
1 .Counter purchase The earliest form of trade between Russia and the West took the form of barter agreements: products of equivalent values would literally be swapped. In modern times barter has developed into counter- purchase agreements whereby Western firms export vitally needed capital to the Comecon states, but, instead of paying for them, the Comecon countries send back cheaply-produced Comecon commodities to the West. For example, Fiat has exported heavy machinery to the Comecon states and has accepted in return Comecon - made car components. These components allow Fiat to produce cars at a lower price than would be the case if they were produced by the relatively more expensive West European labour power.
2. Leasing By leasing capital equipment to the Comecon countries the Western capitalists can receive their share of Comecon surplus value in rent on machinery , while leaving open the option of removing the capital if economic or political conditions so dictate. Companies like ITT and Rank-Xerox receive very lucrative rents on technology rented to the Russian Empire. The political strategists also like the arrangement as it allows the West to place pressure on Comecon: You fit in with our market arrangements or we'll take back our capital. For example, US companies decided in the late 1970s that they would only lease container ships to the Comecon countries if they agreed to join the World Shipping Conference, which is a cartel that regulates world shipping trade.
3. Co-production Western investment in Comecon industry does not end with counter-purchase and leasing agreements. It is now possible for Western investors to buy shares in Comecon enterprises. In other words, capitalists can, without legal restriction, invest in the exploitation of East European wage slaves. According to the most recent statistics - published by Comecon in 1982 - there are currently over 6,000 co-production projects, ie jointly owned capital enterprises, with one share owned by the state and the other by Western investors. In reality, we can assume that there are many more than 6,000 deals of this kind in existence, but both sides have a political interest in hiding them: the state capitalist governments do not want it to be known how much of their industry is co-owned by the multinational companies which the Western Communist Parties claim to be absent from their beloved "socialist states", and the Western capitalists do not want it to be known that they are invested heavily in their professed ideological enemies. In fact, there are now over 100 US multinationals with trading offices in Moscow. (Deals with the Russian Empire used to be carried out through Austrian and Swiss intermediaries, but the traders have these days thrown out the pretence.)

Investment in the Russian Empire is very profitable. Since 1976 Poland and Romania have allowed Western capitalists to buy up to 100 per cent shares in their enterprises. There is no shortage of capital for investment in Comecon capital. Why? Cheap labour power-the best reason in the world for a parasite to invest.


Unlike the unionised workforces in the advanced West (who have the cheek to strike for higher wages and better conditions from time to time) the workforce which investors are exploiting in the Russian Empire is paid little, non-unionised, and disciplined stringently. The Russian Empire is an exploiters' dream - the sort of set-up in which the charlatan, freedom-loving bosses of the West can make money out of the acquiescent wage slavery of an exploited class who are told that they are living in a non-exploitative, classless society.

Trotskyists like to claim that ruthless exploitation was not intended by Lenin and the early Bolsheviks, but was an invention of nasty Joe Stalin. They should study their history: in fact, as early as 1918 Lenin was making it clear that workers would have to be regimented if state capitalism was to be developed:

A condition of economic revival is an improvement in the discipline of the workers, in knowing how to work, in speed and intensity of work, in its efficient organisation . . . (Current Task of the Soviet Power, March-April 1918)

In 1919 Tomsky, the Commissar for Labour, told the All-Russian Trade Union Congress that at that time " . . . no strikes can take place in Soviet Russia. Let us put the dot on this i." (quoted in Carr, p.204) So, Russian trade unions were taken over by the Bolshevik state and used as instruments of labour regimentation. Still today the unions of Eastern Europe are dominated entirely by the state bosses. How many Western workers would be prepared to join a union which is run by the employer? They would be mad if they were - yet that is what the Communist Parties of the West are content with for the workers of the Russian Empire.

1983 witnessed the initiation of a series of newly repressive labour laws in Russia. These were welcomed by the All-Russian Trade Union Congress, according to a report entitled "STEPS TAKEN TO TIGHTEN LABOUR DISCIPLINE" published in Pravda on 7 August 1983:

Loafers, truants and drifters frequently feel free to do as they wish, and in terms of wages . . . they are on a par with conscientious employees. In combating phenomena of this sort, poor use is being made of disciplinary sanctions. In future, while making full use of material and moral incentives for selfless labour, it is necessary to resolutely eradicate instances of conciliatory attitudes towards violators of production discipline . . . Violations of labour discipline should be regarded as a deviation from the fulfilment to work conscientiously, which is established by the USSR constitution.

And that is only what the unions think! The new labour laws are very severe, including penalties of sending workers for up to three months to work in a different area of the country if they are absent from work without leave and the loss of a week's holiday for "loafing or intoxication". We must assume that trade unionists in the Western Communist Parties are fighting to achieve such "socialist" labour conditions?

With workers as well regimented as that, one can appreciate the words of the American capitalist, Cyrus Eaton, in 1974 when his tyre company entered into a joint-ownership agreement with Comecon:

This (deal) enabled the East European countries to earn badly needed hard currency and, because of lower labour costs, the venture can sell tyres much cheaper than Western companies can (quoted in C. Levinson, Vodka-Cola)

Indeed, some Western firms are now objecting to the uncompetitive Comecon - made commodities coming on to the Western market and reducing the sales of the unionised - made products. Examples are Czech and Polish shoes, the Czech-made Fiat 125 and Czech sugar-beet harvesters. Ironically, in Britain the Communist Party, which has a policy of opposing import controls, at the same time is running a campaign to increase imports from the Russian Empire.


Space does not allow us to investigate the important links between the loans made to the Comecon countries by Western banks and the policies of those countries. At the moment Romania is a member of the International Monetary Fund and Poland has recently applied to join. Most of the major Western banks have offices in the main East European capital cities. Russia applied to the Western banks recently for a £600 million loan; if they receive it, then Russian workers will have to work harder than ever in order to produce the surplus value to pay the interest rates.

In 1980 Poland owed 27 billion dollars to the Western banks: 500 million dollars interest had to be paid in that year alone. In order to pay the banks food prices were increased. For the first time in the history of state capitalism millions of workers resisted the state's cut into their already impoverished real wages. Solidarity came into being and, despite our criticisms of the religious and nationalist illusions of many of its members, socialists greeted this great emergence of resistance with sympathy and admiration. In the West there was no shortage of rhetorical support for Solidarity from politicians who were busy bashing their unions at home. But the Western banks, on whose behalf the Polish state was trying to exploit its workers, were not concerned about so-called free trade unions: they wanted their loot, even if that meant dealing with the resistance of the Polish workers by force. As one official of a London bank put it in the London Sunday Times of 13 December:

Speaking only as a banker, it would be a good thing if Russia invaded Poland, because then she would be obliged to honour Poland's debts.

That day martial law was introduced in Poland. The brute force of the state (using Polish troops and police) did the job which the bankers had asked to be done.


Nationalisation or state-run capital is simply another form of capitalism. There are plenty of ways to run exploitation and calling it socialism will only fool those who read the labels without examining the contents of the bottles. Socialism will be a classless, wageless, moneyless, stateless world society. It will in no way resemble the hideous dictatorship over the proletariat of the Leninist police states. As the Solidarity newspaper, Jednosc stated in one of its articles:

State ownership and social ownership of the means of production are two completely different concepts which should never be confused. The means of production may be owned by the state, but this does not mean that they are thereby the social property of the working class.

And until the property of the world does belong to the workers - or rather, until we have abolished both property and class - those who speak of the existence of socialism in the world today are either fools, liars or both.

Steve Coleman