1960s >> 1967 >> no-757-september-1967

Squaring the Circle

Russian state capitalism claims that Marxian economics is its economic theory. The Socialist Party of Great Britain rejects this claim. A comparison of Marxian and Russian state economics will show that in Russia Marx’s theories have been twisted beyond recognition.


In Capital Marx examines the working of capitalism in detail. He takes as the basic unit of the capitalist economy the commodity, an item of wealth produced for sale. Where goods are produced for sale then, and only then, do they have a value. The law of value operates only where there is commodity-production. For thousands of years goods, produced for sale under pre-capitalist conditions, exchanged more or less at their values. Capitalism, which is a system of production for profit as well as for sale, is more complex and commodities only accidentally exchange at their values. Nevertheless the law of value still operates. In fact, under capitalism all the paraphernalia of exchange—money, prices, trade, banks, bills, bonds, credit—are developed to a high degree.


For Marx the classless society that would replace capitalism—which he called either Socialism or Communism— would not be an exchange economy. Wealth would be produced for social use and not for profit or for sale. Hence the law of value would not operate in Socialist society. There would be no commodities, no money, no prices, no trade, no banks and the like.


This was also how all the Social Democratic writers on Marxian economics, people like Kautsky, Luxemburg, Boudin and Untermann, saw it. The standard textbook on Marxian economics used by all sections of Russian Social Democracy, including the Bolsheviks, was A Short Course of Economic Science by A. Bogdanov first published in 1897. Bogdanov was not a Bolshevik (in fact he later came to see Russia as state capitalist) but his book was still used after 1917 and was translated into English in 1923 and distributed by the so-called Communist Party of Great. Britain, from whose edition we quote:


The new society will be based not on exchange but on natural self-sufficing economy. Between production and consumption of products there will not be the market, buying and selling, but consciously and systematically organised distribution (p.389).


After 1917 the Bolsheviks felt a need for a textbook on their party’s theory. Bukharin and Proebrazhensky were commissioned to write one. This work, The A.B.C. of Communism, appeared in Russian in 1919 and was translated into English in 1922. Here is what Bukharin wrote of Socialism (which he, for political reasons, calls Communism):

The communist method of production presupposes in addition that production is not for the market, but for use. Under communism, it is no longer the individual manufacturer or the individual peasant who produces; the work of production is effected by the gigantic co-operative as a whole. In consequence of this change, we no longer have commodities, but only products. These products are not exchanged one for another; they are neither bought nor sold. They are simply stored in the communal warehouses, and are subsequently delivered to those who need them. In such conditions, money will no longer be required (p72).


This, then, was the theory that the Bolshevik rulers inherited and it was in fact the Marxian position. After thinking they were introducing Socialism in Russia immediately, the Bolsheviks were forced to face the facts: the transition from capitalism to Socialism which they saw as their task was going to take a long time. Their experts on Marxian economics argued that in the transition period the law of value, together with money, prices, wages and profits, would continue to operate but would gradually wither away as the transition period drew to an end.


However, when in 1936 Stalin proclaimed that Socialism now existed in Russia, such a radical departure from Bolshevik, let alone Marxian, theory was bound to lead to difficulties. For Marx Socialism was not an exchange economy, yet in supposedly Socialist Russia all the paraphernalia of exchange existed. How was this contradiction to be explained? Stalin’s philosophers erected a false distinction between Socialism and Communism (which Marx used interchangeably to refer to the classless society of the future) saying that Socialism was a stage below “full” Communism, when there would be no exchange. But this was not really adequate for till then the Bolsheviks had not seen even their “lower stage of communism” as an exchange economy. After much mental gymnastics the state economists had no choice; they had to square the circle. An article on “The Teaching of Economics in the Soviet Union” appeared in 1943 (translated into English in the American Economic Review of September 1944); The authors were quite frank:


The mistakes of the former teaching in denying the operation of the law of value in socialist society created insurmountable difficulties in explaining the existence under socialism of such categories as money, banks, credit, etc. The understanding of the role and significance of the law of value under socialism makes it possible correctly to cast light upon all these problems, in a strictly logical interrelation, proceeding from the premise that under socialism too the law of value functions and, furthermore, evaluating the fundamental peculiarities under which it functions in socialism (p.523).

They overcame the difficulties by merely asserting the law of value would still operate under Socialism and had the insolence to add that “the notion that the law of value plays no part in socialism is, in essence, opposed to the whole spirit of Marxist political economy.”


They argued that whereas under capitalism the law of value worked blindly under “socialism” it was controlled by the state in the interests of society. This led them to make some peculiar statements which seem like parodies on the Marxian position:


The labour of the members of socialist society produces commodities.
The value of a commodity in socialist society is determined not by the units of labour actually expended on its production, but by the quantity of labour socially necessary for its production and reproduction.
In socialist society the product of labour is a commodity; it has use value and value.


There was, however, one conclusion they stopped short of; that wages in Russia were the price of labour power. This would have conflicted with the claim that in Russia the exploitation of man by man had been abolished and that work was performed by the free labour of members of a classless community. For if wages existed so would the whole mechanism of exploitation. To this day this remains an inconsistency in Russian state economics. If anyone in Russia is going to point it out it will have to be the workers there, not the state philosophers.


After the war the Great Leader himself stepped in. In his Economic Problems of Socialism in the U.S.S.R., Stalin discusses “commodity production under socialism” and “the law of value under socialism”. The position decreed in 1943 still holds. A popular pamphlet Fundamentals of Marxist Political Economy, brought out by the Novosti Press Agency in 1965, poses the question “How does the law of value operate under socialism?”


Under socialism this law operates as a controlled force but it remains an objective economic law (p.122).


As a matter of fact the Russian state does try to plan capitalism by monkeying about with the law of value. Substitute “state capitalism” for “socialism” and Russian state economics begins to make sense. What is claimed to be Marxian economics is in fact the (mistaken) economic theory of state capitalism. It has nothing in common with what Marx wrote save some of the terminology.


Adam Buick