Date: Sun, 6 Jul 1997 03:14:36 -0400 (EDT)
From: Andrew Wayne Austin <aaustin-AT-utkux.utcc.utk.edu>
Subject: Re: M-I: State capitalism


Comrades,

Yesterday, I posted a lengthy and detailed synopsis of, what I found to
be, a very complete historical comparative analysis of capitalist and
socialist societies demonstrating that those effects we should see if
capitalist laws of motion were operating in, for example, the Soviet
Union, were in fact absent. Tonight, I am going to discuss some of what
was missing in actually existing socialist systems that renders the state
capitalist thesis theoretically and empirically barren. 

One of the primary characteristics of capitalism is the competition
between capitals. Competition with other capitals creates an environment
which in large measure determines the structure of finances and the labor
process. (Note: that competition in capitalism is not only between and
among capitals. It is also competition for markets and loans.) Mandel, in
the introduction to *Capital* I, in a discussion on Marx's labor theory of
value, specifically on the matter of the distribution of labor, i.e.,
"labor inputs," writes that "in a primitive society, or in a fully
developed socialist one, [the] distribution of labour inputs occurs in a
consciously planned way.... But under capitalism, where labour has become
private labour, where products of labour are commodities produced
independently from each other by thousands of independent firms, no
conscious decision pre-establishes such an equilibrium of inputs of labour
and socially recognized needs.... Equilibrium is reached only
accidentally, through the operation of blind market forces." These blind
market forces involve competition. What Engels, in *Socialism: Utopian and
Scientific*, called "anarchy in social production." 

(Note: One way to measure the stability of the equilibrium is price
fluctuation, and therefore prices are a useful indicator of the laws of
motion of capitalism. Marx accepted this matter as relatively
unproblematic; he was concerned with a more important matter. The matter
of price and its relation to the labor theory of value in crucial. Marx
has been criticized, as many of us know, for his labor theory of value
(LTV). Among the critics stood out the Austrians, particularly
Bohm-Bawerk. But, as Mandel points out, Bohm-Bawerk created a strawman of
Marx. Marx was not concerned with explaining short-term price fluctuation
with the LTV. Mandel argues that 99% of the criticism of the LTV is
irrelevant. Marx was asking a different question. For Marx, the "question
was not: *how does* Sammy run..., but *what makes* Sammy run.")

The regulation of supply and demand is the operation of the law of value. 
Price fluctuations, for example, are symptoms of the underlying structure
of the economy and the labor process. These structures underly "the theory
of economic growth, of the 'trade cycle,' of capitalist crises, the theory
of the rate of profit and of its tendency to decline--everything flows in
the last analysis from this operation of the law of value," Mandel writes. 
Then, if the law of value was in operation in actually existing socialist
societies, we should see these effects. People can only have cancer for so
long before they manifest symptoms. According to Mandel's understanding of
Marx, the law of value fulfills a "triple function." (1) It governs
exchange relations between commodities, which is tied to secular
fluctuations in relative commodity prices. (2) "It determines the relative
proportion of total social labour...devoted to the output of different
groups of commodities." In other words, "the anarchy in social product
ion" determines the structure and process of production. (3) "It rules
economic growth, by determining the average rate of profit and directing
investment towards" successful firms. It is important that in discussing
the operation of the law of value that we understand its embeddedness in
the social relations of bourgeois society, which involves the structure of
property relations. 

In arguing that socialist countries did not exhibit the characteristics of
capitalism, I am going to present the argument of Rudolf Hilferding.
Hilferding, for those of you who don't know who he was, defended Marx's
labor theory of value against the Austrians, writing the refutation of
Bohm-Bawerk's critique of Marx. Paul Sweezy has called Hilferding's
destruction of Bohm-Bawerk and the Austrian marginalists as "the best
criticism of subjective economic theory from a Marxist standpoint." It
seems to me, then, that, despite some disputes over the specific points in
his argument, Hilferding is a good source to turn to in order to answer
the question of whether the central capitalist structures and processes
just discussed were at work in "actually existing" socialist economic
systems. We are lucky (I suppose some of us are) that Hilferding wrote
specifically on the matter of state capitalism. (Caveat: I am using
Hilferding's argument to demonstrate the folly of the state capitalist
thesis, not as the final word on Marxian economic theory, nor am I
endorsing other of his positions, as will become clear at the end of this
post.) 

Hilferding, in State Capitalism of Totalitarian State Economy (1947)
writes that

	the concept of 'state capitalism' can scarcely pass the test of
	serious economic analysis. Once the state becomes the exclusive
	owner of all the means of production, the functioning of a
	capitalist economy is rendered impossible by destruction of the
	mechanism which keeps the life-blood of such a system circulating. 
	A capitalist economy is a market economy. Prices which result from
	competition among capitalist owners (it is this competition that
	'in the last instance' gives rise to the law of value), deter mine
	what and how much is produced, what fraction of the profit is
	accumulated, and in what particular branches of production this
	accumulation occurs. They also determine how in an economy, which
	has to overcome crises again and again, proportionate relations
	among the various branches of production are re-established
	whether in the case of simply or expanded reproduction. 

Hilferding argues that "a state economy, however, eliminates precisely the
autonomous of economic laws." This is a very important observation, of
course, because one of the chief characteristics of capitalism, according
to Marx and Engels, is that capitalism  occurs in a context of anarchy, as
Engels writes, "anarchy in social production." It is in reality social
production that is privately controlled and whose products are privately
appropriated, but a key mechanism in the system is the competition between
and among capitals, one of the forces determining the process of capital
accumulation. A centrally planned economy, by definition, and in this case
in reality, is not anarchy. Capitals did not compete in this fashion in
the Soviet Union, for example. 

Hilferding continues:

	It is no longer price but rather a state planning commission that
	now determines what is produced and how. Formally prices and wages
	still exist, but their function is no longer the same; they no
	longer determine the process of production which is now controlled
	by a central power that fixes prices and wages. Prices and wages
	becomes the means of distribution which determine the share that
	the individual received out of the sum total of products that the
	central power places at the disposal of society. They now
	constitute a technical form of distribution which is simpler than
	direct individual allotment of products which no loner can be
	classes as merchandise. Prices have become symbols of distribution
	and no longer comprise a regulating factor in the economy. While
	maintaining the form, a complete transformation of function has
	occurred.

"Both the 'stimulating fire of competition' and the passionate striving
for profit, which provide the basic incentive of capitalist production,
die out," Hilferding argues. "Profit means individual appropriation of
surplus products and therefore possible only on the basis of private
ownership." 

On the question of accumulation, "Marx refers to the accumulation of
*capital*, of an ever-increasing amount of the means of production which
produce profit and the appropriation of which supplies the driving force
to capitalist production. In other words , he refers to the accumulation
of value which creates surplus value, i.e., a specifically *capitalist*
process of expanding economic activity." "On the other hand, the
accumulation of means of production and of products is so far from being a
specific feature of capitalism that it plays a decisive part in all
economic systems." "The mere fact that the Russian state economy
accumulates does not make it a capitalist economy, for it is not capital
that is being accumulated." He notes that this is to confuse value with
use value. "[A]ccumulation (i.e., the expansion of production) in any
economic system is the task of the managers of production; that even in an
ideal socialist system this accumulation can result only from the surplus
product (which only under capitalism takes the form of surplus value), and
that the fact of accumulation it itself does not prove the capitalist
nature of the economy."

However, I want to stress to you that Hilferding did not regard the Soviet
Union as socialist. His argument was over the absurdity that it was state
capitalist. For Hilferding, "socialism is indissolubly linked to
democracy." "According to our concept, socialization of the means of
production implies freeing the economy from the rule of one class and
vesting it in society as a whole--a society which is democratically
self-governed." Of course, if Hilferding defines socialism strictly in the
way that he does, then the Soviet Union cannot possibly be socialist. 
"The controversy as to whether the economic systems of the Soviet Union is
"capitalist" or "socialist" seems to me rather pointless. It is neither. 
It represents a *totalitarian state economy*, i.e., a system to which the
economics of Germany and Italy are drawing closer and closer." Well, as it
might be expected, I part ways with Hilferding on this matter. The Soviet
Union was fundamentally different from fascism. But I should make explicit
that even Hilferding's own argument should tell him that he contradicted
himself on the matter of fascism. If the Soviet Union is not any form of
capitalism (which is obvious to just about everybody), and if fascism is a
form of capitalism (since the capitalist laws of motion operate in a
capitalist society with a fascist state), then Germany and Italy could not
possibly have been moving, or ever have moved, to a similar form and
content as the Soviet Union. I believe it is Hilferding's refusal to
accept the possibility that a socialist economic system might not present
with a democratic polity that forces him into an odd position with regard
to fascism.

Finally, to Lew,

Any good pathologist will tell you that symptoms indicate structures and
and processes of a particular family and range. The question of whether
somebody had this or that disease cannot be only a matter of theory and
definition. The sophists would like to have it this way because empirical
reality makes a mess of their ideologically-laden rhetoric. No, in order
to make a complete argument that makes reference to reality one has to
rely on empirical evidence. Theory allows us to probe beneath the
appearance, but to wish away the appearance as unimportant is to create a
false reality. In science, fact and theory form a unity.

Here is the terrible trouble Lew finds his position in. Resulting from the
laws of capitalist motion, the underlying structure and processes of
capitalism, there should be definite and measurable empirical outcomes. 
This is what makes capitalism a different productive modality than other
modes of production. But with the socialist world system we do not see
empirical evidence of the capitalist laws of motion at work--we in fact
see dramatic evidence against the existence of such laws. 

Peace

Andrew Austin





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