The Meaning of the Russian and Chinese Revolutions and State Capitalism

Written by Kennich Suzuki (1998)
Translated by R.West

Contents

1. The Thing to Ask Now
2. The Character of the Russian Revolution
3. From Military Communism to N.E.P.
4. The Road to State Capitalism
5. The Historical Significance of State Capitalism and its Point of Arrival

1. The Thing to Ask Now

If the Twentieth Century can be summed up as the age of the rule of imperialism and capitalism, then the Russian and Chinese revolutions should be remembered for a long time as the two peaks in the workers and peoples class struggle against this rule; the two greatest historical events of this century.

The October revolution in Russia overthrew the savage rule of Czarism and the bourgeoisie. Socialism, the unfulfilled dream of the workers throughout the world, was felt to be close at hand. Needless to say, this made a deep impression on the workers of the world, and encouraged their struggles. Further, the victory of the Chinese revolution in 1949 swept away the rule of Japanese imperialism and the power of the bourgeois landlords, and heralded the period of "national liberation", having a particularly strong impact on the people living in the colonial and semi-colonial regions of Asia and Africa.

However, now eighty years have passed since the Russian revolution and the "socialist homeland"=USSR has already has ceased to exist, and out of the rubble of the collapsed Soviet Union a Russia has appeared which is unmistakably a bourgeois state. In Russia, which has taken the path of the "market economy", a new capitalist layer has been formed through economic liberalization and the "democratic management" of former state owned industries, and the struggle for leadership among the financial clique centered on the former state owned industries has intensified. This is reflected in Yeltsin's power struggle, as well as the scramble for power shaping up for the post-Yeltsin period.

Even China, which had formerly struggled with the Soviet Union for leadership of the "camp of world socialism", never ceasing to "export revolution" and supporting the national liberation struggles in surrounding countries, has nakedly rushed onto the capitalist road in the name of a "socialist market economy". Coexisting along with the state owned industries are an enormous number of private, individual, and foreign capital-based industries, as well as security markets, stock companies, a large number of urban poor, unemployed and a huge discrepancy in wealth, bureaucratic corruption, rampant crime, and so on. It would not be saying too much to say that there is nothing that exists in the capitalist states now that does not also exist in China. The Chinese Communist Party still professes to Marxism-Leninism-Maoism, and displays the sign board of "socialism", but hardly anyone mistakes the bourgeois nature of this country.

What does the reality of the USSR (Russia) and China teach us exactly-this is precisely the question. Does this signify that socialism in the present day is not possible and the "final victory of capitalism" as the bourgeoisie of the world triumphantly proclaimed when the Soviet Union collapsed in autumn 1991?

Certainly, if the Soviet Union and China had been socialist in the true sense, it would be difficult to refute this argument. Indeed the world's "left-wing" political parties, especially the Japanese Communist and Socialist Parties, which for a long time had depended on the borrowed authority of the Soviet and Chinese Communist Parties to justify themselves, were completely at a loss, and used deceitful excuses while they daily became more purely part of the political establishment.

In this sense, the question of how to evaluate the USSR and China and why these systems "evolved" towards becoming open bourgeois systems is not merely a question of historical or academic judgement, but rather is above all a practical question relating to the possibility of socialism in the present day.

Needless to say, the question of how to judge the nature of the Russian and Chinese revolutions and the post-revolutionary systems has been a significant point of debate since the time of the revolutions-to be more precise, the debate on the character of the revolution dates before the revolutions. Putting aside the claims of Stalinists in defense of the system such as "the final victory of socialism" or "developed socialism", Trotsky's theories of "The Revolution Betrayed" and the "degenerated workers state" are famous, but in the post-war period Tony Cliff and Raya　Dunayevskaya's theories of "bureaucratic state capitalism" appeared from within the Trotskyist school, and had a significant influence in Japan (from the fifties to the sixties Tadayuki Tsushima's theory of state capitalism was also influential).

In the midst of the movement which used the 1960 Security Treaty (Anpo) struggle as an opportunity to create a new workers, we thoroughly criticized the Stalinists theories, while at the same time, beginning with Trotsky, we clarified the limits of Cliff's theory of "bureaucratic state capitalism". Thus, from an independent standpoint we defined the USSR and China as bourgeois systems, a special form of capitalism, bearing no relation to socialism, in other words, state capitalism. We firmly believe that our standpoint is the only one which can rationally explain the subsequent bourgeois process of development in the USSR and China, and we think that the collapse of the Soviet Union and the transition in China to a "market economy" system backs up our theory.

But before discussing the post-revolutionary systems in the Soviet Union and China, we must first discuss the character of these revolutions. Then the necessity of state capitalism and the bourgeois "evolution" will be clear.

2. The Character of the Russian Revolution
-The Meaning and Limitations of the October "Socialist Revolution"

Putting aside the Chinese revolution, for a long time the judgement of the Russian revolution as a "socialist revolution" was firmly fixed. Not only the Soviet Communist Party, but from the bourgeoisie to the "left wing" this was an a priori thesis which no one called into question.

It is a matter of common knowledge that the "experience" of the "leap" from the February bourgeois revolution to the October socialist revolution, was turned into the dogma of the theory of the "extension" of the democratic revolution into a socialist revolution or "two stage theory" by Stalin and his epigones, and foisted on the communist parties of the world. The Stalinists trumpeted this theory as the strategy of Lenin, and the dialectical development of revolution, but in reality this was nothing but a "metaphysical revolution" which caused tremendous confusion and unrest in the class struggles of the workers throughout the world, and led to defeats (remember the miscarriage of the postwar Japanese revolution).

Even today this theory of the "October socialist revolution" is deeply rooted. For example, in the Japanese Communist Party's (JCP) "The Problem of Power in Socialsim", Hiro Kikunami argues that, "…in order to break free from war and extreme poverty, and end nationalistic suppression, Russia could not stop at a bourgeois revolution. Countries of belated capitalist development must progress to a socialist revolution. This was the case for the October Revolution." Kezai ('Economy'-JCP monthly journal) February 1997).

However, by easily declaring the October Revolution to be a 'socialist revolution', Kikunami falls into a pitfall. Why would NEP (New Economic Policy)-in other words the introduction of capitalism-be necessary after a 'socialist revolution' Why did Stalin's despotic power triumph? Further, if this Stalinist system can in some way or another be defined as socialist, how can we explain the subsequent "liberalization" of the economy, in other words the commencement of open bourgeois development. These are the fundamental questions which Kikunami must answer. Naturally, of course, Kikunami can only flounder about without success. At any rate, until just recently (until the collapse of the Soviet Union) he had advanced the theory of "the period of the generation of socialism", and dispersed the de facto apologetic theory which argued that the Soviet Union (despite its negative side) was socialist as a system. Now he is beginning to say that the Soviet Union was not socialist, but he is at a loss when faced with the question why this could happen after a "socialist revolution", and seeks refuge in the theory of "mistaken policies" in which the Soviet Union was led astray from the socialist road through Stalin's mistaken policies.

Of course, however, the point here is not to criticize Kikunami's position. Simply put, his position is merely one example of the blind alley fallen into by people who proclaim the October Revolution to be equivalent to a socialist revolution. The nature of the Russian Revolution cannot be defined simply as a socialist revolution.

When we say this there are certainly some people who feel that we are denying the historical significance along with the socialistic nature of the Russian Revolution.

Of course this is not the case. We acknowledge that the Russian Revolution was a proletariat revolution in a sense-or more precisely that it had this side-and for precisely this reason we judge it highly. The Russian working class, refusing the compromise and cooperation with the bourgeoisie preached by the Mensheviks, rallied behind the consistently proletariat political party of the Bolsheviks and fought the class struggle against the bourgeois and landlord class out to the end. They overthrew the power of the landlords and capitalists, and brought the Bolsheviks to power. Starting with the land, the main means of production were nationalized, and the principles of socialism and thorough democracy were proclaimed. The driving force of the revolution was the working class, and the Bolshevik government which represented them struggled hard to realize the proletarian, socialistic principles. This is precisely why the Russian Revolution captivated the workers of the world, and continues to do so.

However, while acknowledging the proletarian and socialistic nature of the Russian Revolution in terms of (political) power, we must frankly point out the fact that in socio-economic terms the revolution was unable to overcome the limits of a bourgeois revolution. As Lenin said, a proletarian socialist revolution is only an abstraction. During the debates on labor unions after the revolution, Lenin admonished Trotsky in the following way, "Comrade Trotsky speaks of a "workers' state". May I say that this is an abstraction…The whole point is that it is not quite a workers' state…ours is not actually a workers' state but a workers' and peasants' state." Later Lenin added that the state is also "a workers' state with bureaucratic distortions".

What is the significance that this was a workers and peasants state? This means that power was partially possessed by the workers and peasants, and so naturally the state had to consider the interests of the peasants, not only the workers. The workers and peasants both shared the trait of being direct producers. On the other hand, however, the peasants differed from the working class, or "property-less class" (in Japanese the word proletariat can be translated as musan kaikyu which translated directly means "property-less class" or "un-propertied class"), which didn't possess any of the means of production. The peasants had their own (small) means of production, a point they had in common with the bourgeoisie. This duality is the characteristic trait of the petty bourgeois peasants. They fought together with the working class to expropriate the land from the landlords, but once the landlord class had been expropriated, they wanted to keep the land taken from the landlords as their own private property, accumulate profit, and rise into the ranks of the bourgeoisie. How could this state with its "bourgeois advance army" and jointly possessed power, possibly a pure workers state or socialist state? For this reason, Lenin warned that if Soviet power was simply defined as a workers state, a large number of errors would arise (the debate with Trotsky directly concerned the trade union policy, but Trotsky's abstract, idealistic standpoint of "jumping over the peasants" became a turning point in his defeat to Stalin in the power struggle after Lenin's death).

Did Russia possess the objective conditions to create socialism in the first place?-this is the question. Needless to say, Marx viewed socialism as only being possible with the highest development of productive power, in other words, the highest development of capitalism. Recall the famous formula of the materialist viewpoint of history from the first chapter of The Preface to a Critique of Political Economy: "No social formation is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace old ones before the material conditions for their existence have matured within the framework of the old society."

Russia at that time, however, was far from the point at which "all the productive forces had developed to the point where there was no longer room to develop." Even though capitalism was slowly developing, feudalistic relations still remained, more than eighty per cent of the population was made up of the peasantry still groaning under the landlord system united with Czarism, and although the workers concentrated in Petrograd and other large cities showed great power, they still made up no more than ten per cent of the population. Although a proletarian revolution was possible under such conditions, this was not a socialist revolution in the full sense of the word. In Russia, where the material conditions for socialism were lacking, a proletariat revolution was victorious, but it could only clear the path to socialism-here lies the contraction of the Russian Revolution.

Isaac Deutscher describes the "multiple" character of the Russia revolution rather adroitly: In his The Unfinished Revolution, he says that, "It is in this sense that we can characterize the October revolution as a combination of bourgeois and proletarian revolutions." (The Unfinished Revolution, Oxford University Press; p. 22)

"The bourgeois revolution over which they presided created conditions which favoured the growth of bourgeois forms of property. The proletarian revolution they accomplished aimed at the abolition of property. The main act of the former was the sharing out of the aristocracy's land. This created a wide potential base for the growth of a new rural bourgeoisie. The peasants who had been freed from rents and debts and had enlarged their farms were interested in a social system that would offer security to their holdings." (Ibid p. 23) "The peasants, afraid of counter-revolution that might bring back the landlords, thus acquired a stake in the Bolshevik regime. But from the outset the socialist aspects of the revolution aroused their misgivings, fears, or hostility." (Ibid p. 24)

Let's look at his explanation of the contradictions of the two revolutions a little bit further.

"The socialist revolution was supported wholeheartedly by the urban working class. But this was a small minority of the nation. Altogether one-sixth of the population, twenty-odd million people, lived in the towns: and of these only half or so could be described as proletarian. The hard core of the working class consisted at the most of about three million men and women employed in modern industry. Marxists had expected the industrial workers to be the most dynamic force in capitalist society, the main agents of socialist revolution. The Russian workers more than justified this expectation. No class in Russian society, and no working class anywhere in the world, has ever acted with the energy, the political intelligence, the ability for organization, and the heroism with which the Russian workers acted in 1917 (and thereafter in the civil war). The circumstance that Russia's modern industry consisted of a small number of huge factories, concentrated mainly in Petrograd and Moscow, gave the massed workers of the two capitals an extraordinary striking power at the very nerve centers of the ancien regime. Two decades of intensive Marxist propaganda, fresh memories of the struggles of 1905, 1912, and 1914, the tradition of a century of revolutionary endeavor, and Bolshevik singleness of purpose had prepared the workers for their role. They took the socialist aim of the revolution for granted. They were not content with anything less than the abolition of capitalist exploitation, socialization of industry and banking, worker's control over production, and government by Soviets. They turned their backs on the Mensheviks, whom they had followed at first, because the Mensheviks were telling them that Russia was not 'ripe for a socialist revolution.' Their action, like that of the peasants, had its own spontaneous force: they established their control over production at the factory level well before the October insurrection. The Bolsheviks supported them and turned the factory rebellions into socialist revolution.

Yet Petrograd and Moscow, and a few other scattered industrial centers, constituted an extremely narrow base for this undertaking. Not only did people over the whole immensity of rural Russia scramble to acquire property while the workers of the two capitals strove to abolish it; not only was the socialist revolution in implicit conflict with the bourgeois one; in addition, it was fraught with its own inner contradictions. Russia was and was not ripe for socialist revolution. She was better able to cope with its negative than with its positive tasks. Guided by the Bolsheviks, the workers expropriated the capitalists and transferred power to the Soviets; but they could not establish a socialist economy and a socialist way of life; and they were unable to maintain their dominant political position for any length of time." (Ibid pp. 24-25)

We can't agree with Deutscher's opinion that "proletariat revolution" and "bourgeois revolution" progress separately and "together"-this is because the question is the overall nature of the revolution, and it is necessary to recognize that while having the mark (being stamped) of a proletariat revolution it could not overcome bourgeois limitations-however he is justified in pointing out the "internal contradiction" of the Russian Revolution which combined proletariat and bourgeois elements. It is precisely this contraction that is thought to have led to state capitalism.

3. From Military Communism to N.E.P.

The historical process after the October revolution did not progress as Lenin had imagined (it would probably be better to say as he had desired), that is the victorious workers and peasants state was not able to advance towards socialism through the assistance of the international proletariat. In addition to the war with Germany dragging on, the country was almost completely exhausted through civil war and the intervention of the imperialist armies. E.H. Carr describes the situation at the time in the following way:

"These desperate conditions were reflected in the total disarray of the economy. During the war, production had been crippled and distorted by military needs, and by the absence of agricultural and industrial workers at the front. The revolution itself, and the ravages of civil war, completed the picture of economic, social and financial disintegration; hunger and economic, social and financial disintegration; hunger and cold overtook large sectors of the population. Initial Bolshevik remedies for economic ills did not go beyond the proclamation of such general principles as equal distribution, nationalization of industry and of the land, and workers' control. In the first months of the revolution many industrial enterprises were taken over, sometimes by state organs responsible to the Supreme Council of National Economy (Vensenkha), sometimes by the workers themselves. For agriculture the Bolsheviks who still had little power in the countryside, had adopted the programme of the SRs, and proclaimed the 'socialization' of the land and its equal distribution among those who tilled it. What happened in fact was that the peasants seized and distributed among themselves, the estates, large and small, of the land-owning nobility, and the holdings of the well-to-do peasants, commonly dubbed kulaks, who had been enabled to accumulate land by the Stolypin reforms. None of these measures arrested the decline of production. In finance, the banks were nationalized and foreign debt repudiated. But it was impossible to collect regular taxes or to frame a state budget; current needs were met by resort to the printing-press" (The Russian Revolution: From Lenin to Stalin, Macmillan Press p. 21)

Russia had to push ahead with a system of "Military Communism" because of this situation. The most important task was to secure provisions to supply the soldiers fighting in the civil war and the industrial workers in the cities, and to accomplish this strict control was enforced.

The main policies taken during the period of Military Communism from May 1918 were: 1) the nationalization of all industry; 2) state monopoly on grain transactions, and a system for the requisition of an allotment of surplus food (that is, the prevention of private grain transactions); 3)a comprehensive system of compulsory labor, etc. This policy of extreme control in order to provide for war expenditure through the additional issue of paper money, and as the value of the currency dropped wages were paid in kind which and fantasy that the money economy had been abolished spread, and along with the birth of the notion that Russia could "leap" to socialism in one stretch. However, this fantasy was exposed by the March 1921 Kronstadt Uprising (the riot of peasant sailors in uniform against the Bolshevik government).

"In the critical year of the civil war, when the survival of the regime seemed to hang by a thread, and the territory even nominally controlled by it was being constantly contracted by inroads of White armies, the method by which the essential needs of the Red Army, of the factories engaged in war production, and of the urban population were met was the crude method of requisitioning, dictated and justified by military necessity. To keep the Red Army supplied was the over-riding task of economic policy, and little attention could be spared for civilian needs or civilian susceptibilities. It was above all the widespread requisitioning of surpluses of grain which led the peasants, once the danger from the Whites was over, to rebel against the harshnesses of war communism." (Ibid p. 25)

"By the autumn of 1920, when the fighting was over, the whole economy was grinding to a halt. Nothing in the theory or practice of war communism offered any clue how to re-start processes of production and exchange which had come to a standstill. The nodal point, as always in the Russian economy, was grain. The policy of requisitions, which had worked after a fashion during the civil war, was bankrupt. The peasant retreated into a subsistence economy, and had no incentive to produce surpluses which would be seized by the authorities. Widespread peasant disorders occurred in central Russia during the winter of 1920-1921. Gangs of demobilized soldiers roamed the countryside in search of food, and lived by banditry. It was imperative, if the rest of the country was not to starve, to provide the peasant with incentives which were denied to him under a system of requisition." (Ibid p. 31)

Thus, the shift to N.E.P. was inescapable. To put it more concretely this included some of the following policies: The compulsory requisition of food was halted, replaced by a food tax. Peasants were free to dispose of their surplus agricultural products; in other words, free grain transactions were permitted. Minor enterprises released from state ownership were allowed as part of a fixed range of private capitalism. However, this was not only a "policy", but manifested the reality that one kind of capitalism (state capitalism) was inevitable in Russia. Everyone in the left wing of the Communist Party denounced this as the resurrection of capitalism, but if the shift to N.E.P. had not been made the Bolshevik government would probably have collapsed amidst the resistance and rebellion of the peasants. Further, N.E.P. was a return to the roundabout policy that had been interrupted during Military Communism. Lenin proposed N.E.P. at the time of the debate with the left wing of the Communist Party over the Brest Litovosk peace treaty. He argued for the necessity and inevitability of N.E.P. by pointing out that in Russia, where a broad sector of small peasants exists and a dispersed, anarchic petty bourgeois economy is dominant, state capitalism is progressive and the first step toward socialism. In an essay from May of the same year entitled "Left-wing Childishness and the Petty Bourgeois Mentality" Lenin said that "the continuation of the anarchy of small ownership is the greatest, the most serious danger, and it will certainly be our ruin" and that "state capitalism would be a gigantic step forward". We should also recall what he said next:

"…the payment of a heavier tribute to state capitalism not ruin us, it will lead us to socialism by the surest road. When the working class has learned how to defend the state system against the anarchy of small ownership, when it has learned to organize large-scale production on a national scale, along state capitalist lines, it will hold, if I may use the expression, all the trump cards, and the consolidation of socialism will be assured."

Lenin frankly recognized that NEP was the revival of capitalism.

"The New Economic Policy means that food requisitions allotments are replaced by a food tax and to a fair degree signifies a shift to a revival of capitalism. To what degree-of this we are not certain. Vested rights contracts for foreign capital and the leasing of businesses to private capital-these mean the direct revival of capitalism and are directly connected to the base of the New Economic Policy. This is because the end of the allotted requisitions means that the peasant will be able to freely sell the surplus agricultural products that are not collected as tax. Only a small part of the agricultural products are collected as tax. Because the peasant represent the largest part of the overall population and economy, there is no way to avoid the growth of capitalism with this free commerce as the foundation." (translated from Japanese)

Moreover, Lenin recalls the question "who will prevail, the capitalists, or the Soviet state power, and argues that the question is "whether it is possible for proletariat state power with the peasants as a basis to create a system where the capitalists are put under appropriate control and capitalism is brought into the orbit of the state so that capitalism can be subordinate to the state and serve it." (translated from Japanese)

If we look at the actual process of N.E.P., it did not stop, as was first thought, with permitting freedom for the peasants to carry out transactions of surplus products, but had no choice but to advance from the acceptance of business calculations in industry to the acceptance of businesses. In October 1921 at the Seventh Moscow Prefectural Party Meeting, Lenin summarized the process of N.E.P. up to that point: "Throughout the whole state, industrial and agricultural products are exchanged by socialistic means; and through this exchange of commodities a revival of heavy industry, which is the sole foundation for socialistic organization, is expected." But "if the exchange of commodities breaks down and commodity exchange takes the form of trade this breaks down." He describes this in the following way:

"We must recognize that the retreat was insufficient, and further that a retreat is necessary, and that a shift from state capitalism to state regulation of trade and currency circulation is also necessary. The exchange of commodities was not useful. The private market was stronger than us. In place of the birth of commodity exchange, ordinary trade and businesses were born." "We are now in a situation where we must retreat not just to the return of state capitalism, but to the state regulation of business and currency circulation. This has taken longer than we expected. If we don't take this path, we won't be able to revive economic activity. In other words, we won't be able to stand under our own power through the revival of a correct economic system, the small peasant economy and large industry. If we don't do this we probably won't be able to break out of the crisis. This is the only way out." (translated from Japanese)

In this way, N.E.P. shows that capitalism was inevitable in Russia and progressive when contrasted with the petty bourgeois economy; socialism was still something far in the future. This shows again that economically speaking the Russian revolution was unable to overcome the bourgeois limits.

4. The Road to State Capitalism

However, even under N.E.P. Russia was unable to solve its economic difficulties. A certain revival of agricultural productive power was seen under N.E.P., but industry was unable to supply peasants with enough industrial products, and the peasants became reluctant to deliver grain to the state. The disequilibrium between agriculture and industry led to the actualization of the "scissors condition of price differences" (a phenomenon in which the price of industrial products rises while the price of agricultural products falls, and the price curve thus opens up like a pair of scissors.) The contradictions widened, with class differentiation progressing in the villages, rich peasants and 'Nepmen' ruling the markets, rampant speculation, etc. At the end of the Twenties the production equipment inherited from the prewar and wartime had become superannuated, and there was a pressing need for replacement, but the agricultural tempo was slow, it became clear that small agricultural production could not supply industry with its investment capital. Moreover, the rich peasants were strengthening their stance of refusing to sell grain at the official prices. For these reasons, Stalin began forced agricultural collectivization and rapid industrialization (since this process is described in detail in part two of this book we will not touch on it here).

These policies of Stalin were an attempt to forcibly break through the socio-economic contradictions in Russia that had developed to an explosive point under N.E.P. Through collectivization, Stalin attempted to achieve industrialization and a rapid development of the national economy through compulsory labor-and through a despotic political system which is naturally accompanied by the concentration camp-as well as the exploitation of the peasants, completely integrated into and subordinated to the system of state capitalism. To merely put forward the criticism that the policies were mistaken or went too far-in the manner of Kikunami-results in an arbitrary interpretation of history and moralistic blame. In Russia under the objective conditions of the time-imperialist encirclement on top of its own late economic development, almost no economic assistance, as well as the rise of Hitler-the unavoidable development of capitalistic development required that this path of state capitalistic accumulation be taken. People like Kikunami cannot imagine that if the system of state capitalism had not been established in Russia and an ordinary "liberal" state had appeared (bear in mind the case of the India where backwardness has dragged on for a long time under such a state) following the collapse of the "Workers and Peasants State", the Russian workers would have been tied to the yoke of backward capitalism, and further would most likely have suffered under the rule of Hitler.

It is not particularly difficult to understand why for such a long time the Stalinist system (the system of state capitalism) which was established at the beginning of the Thirties was believed to be socialism. This was said to be because the primary means of production had been nationalized (the peasants were 'collectivized') and a 'planned economy' system had been established. The results of the first and second Five Year Plans were triumphantly and widely broadcast, and Russia, with its path of rapid development contrasting the world-wide crisis into which capitalism had fallen, certainly appeared to prove the "superiority" of socialism.

However, the economic "liberalization" begun in the mid-Sixties forcibly exposed the hidden bourgeois nature of this system. The "profit debate" unfolded among Soviet scholars and economic bureaucrats, and it was declared that hereafter the primary task for state run industries would be to secure and increase the rate of profit. Various limits which restricted the economic activity of business were removed (or eased), the "independence" of business was strengthened and competition was said to be introduced. However, first of all businesses which pursue high accumulation through free business activity and competition are precisely capitalistic enterprises. Any person is aware that in the capitalist system, companies as capital pursue profit (surplus value), place the highest priority on gain, and try to overcome intense competition. Nevertheless, Stalin's successors proclaim that companies under the present-day "socialist" system in the Soviet Union place the highest priority on profit and gain. This is a riddle that those who believe the Soviet Union is "socialism" are unable to solve. They either revise their "theories" according to the situation and use sophistry to argue for "socialistic commodities" and the "development of the law of value under socialism"; or they abandon their faith because of their disappointment in socialism.

Since we believe that the Stalinist system has an intrinsic bourgeois nature, there was nothing perplexing about this economic liberalization (bourgeois evolution).

Certainly in the Soviet Union the main means of production were nationalized and formally were commonly owned, but in fact their nature as capital could not be overcome. The fact that generally nationalization does not immediately signify common social ownership (overcoming their character as capital) is made instantly clear when we look at the experience of Europe and the United States. In a number of bourgeois states, referred to as "welfare states", industries such as coal, steel and communications were often nationalized, but this didn't alter one bit the bourgeois essence of these states. Under commodity production, the general foundation of capitalism, nationalism itself does not eliminate the essence of the state owned companies as capital, and does not signify socialism.

Even under the Stalinist system, the nationalization of the means of production did not signify the elimination of their character as capital, but rather the formal transformation from private capital to state capital. This should be made clear by the fact that an economic system of independent calculation of profit ("Hozraschot") for nationalized companies under the Stalinist system was implemented whereby increases in profit were expected, the products of state companies given prices as commodities, and workers were exploited as wage laborers (often under the piecework wage, the most savage form of wages).

Of course, with the creation of capital as state capital, there were limits on the free activity of state companies as capital-the state companies were pressured by state assignments, and had to adapt to the "state objectives" of preferential development of heavy industry. As a result, the losses of companies were covered by the state budget, and bourgeois character of this system was concealed. However, once state capitalism was established and the task became efficient management, the particular limitations and contradictions of state capitalism were revealed, and capital's true character, which had been suppressed, was released, leading to rationalization and increased efficiency. In this way, this system's bourgeois character was actualized. This is precisely the real significance of 'economic liberalization'. This was nothing but the bourgeois evolution resulting from the contradictions of state capitalism.

The "liberalization" of state capitalism and the shift to a "market economy" is the inevitable consequence of the fact that this system originally had an intrinsic bourgeois character. It most certainly does not mean that socialism turned back into capitalism, or the collapse of socialism.

5. The Historical Significance of State Capitalism and its Point of Arrival

a. The Character of the Chinese Revolution

Before proceeding, I must touch on the Chinese Revolution, but this won't take up too much space. Its peasant character should be clear at a glance. The New China stepped forward as a radical peasant state.

The struggles of the peasantry, the subject of the Chinese Revolution, were focused on the power of the landlords who ruled the countryside, and inevitably developed into a struggle to dissolve the landlord system of land ownership, and transform it into their own property.

The Chinese Revolution developed, above all, as a struggle of radical peasants. Using tactics peculiar to peasant struggles such as the "long march", "raiding", surrounding cities, the peasant masses who possessed either no land or very little, overthrew the rule of the landlords and imperialists. This was the revolutions historical meaning.

The character of the revolution as a peasant revolution also determined the nature of the development of the Chinese system after the revolution. The establishment of peasant land ownership was the starting point for the development of commodity production and capitalism. In fact, this later follows the process of development of China's particular capitalism (state capitalism). Mao bourgeois himself at first acknowledged the bourgeois character of the Chinese Revolution with his expression "new democratic revolution", and added that the development of state capitalism was necessary. However, just as the powerful state system created through Stalin's centralization of agriculture began to be called a socialist system, in China also was called socialist following the "introduction" of the "Great Leap Forward" and the Stalinist system of centralization. This was the only way to conceal the essence of China as a state capitalist system.

However, the strength of the elements of the New China as a peasant state, as witnessed in phenomenon such as the long duration of the system based on the "peoples communes", and the explosions of the "Great Leap Forward" and the Cultural Revolution, added original characteristics to China's state capitalist system.

b. The Historical Role of State Capitalism and the Meaning of "Liberalization" and the "Market Economy"

Finally, we must give a summary of the historical significance of the state capitalist systems established after the revolutions in Russia and China.

As I said at the beginning, in both Russia and China the workers and peasants developed their class struggle and swept aside the old system, but because of the historical limitations of underdeveloped capitalism, the jump to socialism could not be made. After the revolutions, these countries had to take the road of state capitalism. Although these were systems which exploited and oppressed the workers and created many difficulties for the people, their historical significance of developing the productive power and forming a broad working class cannot be denied.

On the 50th anniversary of the Russian Revolution, E.H. Carr said the following, which also applies perfectly to the China, and is how the historical significance of both revolutions and state capitalism should be remembered:

"The success of this campaign, which in thirty years, starting from a semi-literate population of primitive peasants, raised the USSR to the position of the second industrial country in the world and the leader in some of the most advanced technological developments, is perhaps the most significant of all the achievements of the Russian revolution. Nor can the achievement be measured purely in material terms. In the time span of half a century, a population almost 60 per cent urban has replaced a population more than 80 per cent peasant; a high standard of general education has replaced near illiteracy; social services have been built up; even in agriculture, which remains the stepchild-or the problem child-of the economy, the tractor has replaced the wooden plough as the characteristic instrument of cultivation. It would be wrong to minimize or condone the sufferings and the horrors inflicted on large sections of the Russian people in the process of transformation. This was a historical tragedy, which has not yet been outlived, or lived down. But it would be idle to deny that the sum of human well-being and human opportunity in Russia today is immeasurably greater than it was fifty years ago. It is this achievement which has most impressed the rest of the world, and has inspired in industrially undeveloped countries the ambition to imitate it." (1917: Before and After, Macmillan Press pp. 7-8)

Isaac Deutscher argued that "the most remarkable change" post-revolutionary Russia was the achievement of a rapid urbanization. According to Deutscher, the urban population was only 26 million residents in 1926, had increased to 125 million by 1966. "Within the lifetime of a generation the percentage of the town dwellers in the total population has risen from 15 to 55 per cent." (The Unfinished Revolution, p. 43) Deutscher says that if we recall that in the United States it took 160 years for the urban population to increase to 100 million and one century for the percentage of urban residents to rise from 16% to 60% we see that "Soviet urbanization, in tempo and scale, is without parallel in history." (Ibid p. 43) Needless to say, the development of cities means the appearance of industrial development, the formation of a working class, and urban concentration. In other words, the process of usurping the peasantry and establishing the foundation for capitalism through original accumulation, which took several centuries for capitalism in Western Europe, was accomplished in the Soviet Union in just half a century.

"Only a small proportion of the expansion was due to natural growth or to the migration of the townspeople. The mass of the new town dwellers were peasants, shifted from the villages, year after year, and directed to industrial labour. Like the old advanced nations of the West, the Soviet Union found the main reserve of industrial manpower in the peasantry. In the early stages the growth of capitalist enterprise in the West was often accompanied by forcible expropriation of farmers-in Britain by the 'enclosures'-and by draconic labour legislation. Later the West relied in the main on the spontaneous work of the labour market, with its laws of supply and demand, to bring the required manpower to industry. This euphemism means that in the course of many decades, if not of centuries, rural overpopulation, and sometimes famine, threw great masses of redundant hands onto the labour market. In the Soviet Union the state secured the supply of labour by means of planning and direction. Its dominant economic position was the decisive factor; without it, it would hardly have been possible to carry out so gigantic a transformation within so short a time." (Ibid pp. 43-44)

Deutscher also hits the mark in pointing out the historical significance of agricultural collectivization.

"The transfer of the rural population began in earnest in the early 1930's, and it was closely connected with the collectivization of farming, which enabled the government's agencies to lay hands on the surplus of manpower on the farms and to move it to industry. The beginnings of the process were extremely difficult and involved the use of much force and violence. The habits of settled industrial life, regulated by the factory siren, which had in other countries been inculcated into the workers, from generation to generation, by economic necessity and legislation, were lacking in Russia. The peasants had been accustomed to work in their fields according to the rhythm of Russia's severe nature, to toil from sunrise to sunset in the summer and to drowse on the tops of their stoves most of the winter. They had now to be forced and conditioned into an entirely new routine of work. They resisted, worked sluggishly, broke or damaged tools, and shifted restlessly from factory to factory and from mine to mine. The government imposed discipline by means of harsh labour codes, threats of deportation, and actual deportation to forced labour camps. Lack of housing and acute shortages of consumer goods, due in large measure to deliberate acts of an anti-consumptionist policy-the government was bent on obtaining the maximum output of producer goods and munitions-aggravated the hardships and turbulence. It was common in the cities, even quite recently, for several families to share a single room and a kitchen; and in the industrial settlements, masses of workers were herded in barracks for many years. Crime was rampant. At the same time, however, many millions of men and women received primary or even secondary education, were trained in industrial skills, and settled down to the new way of life." (Ibid pp. 44-45)

Agricultural collectivization didn't stop with the securing of raw materials for industry and food supplies for urban workers. In addition to being a means of extracting raw materials for industrialization through the thoroughgoing plunder of the peasants, collectivization was also a measure to transform surplus peasants into workers, that is raw material for exploitation. It could be said that because of the international and domestic conditions-international isolation, the threat of fascism, socio-economic backwardness (consider the different course that agricultural collectivization took in China)-this took the form of violent concentration camps and forced collectivization, and that these conditions required a violent and despotic character like Stalin.

It is easy to denounce the cruelty and barbarity of Stalin's forced collectivization, but this not a problem that can be taken care of with moralistic criticism. What made this necessary? What was the objective meaning of this? To elucidate these questions, a person must examine history. In this sense, Deutscher's examination is also suggestive.

"As one who witnessed the collectivization of the early 1930s and severely criticized its forcible methods, I would like to reflect here on the tragic fate of the Russian peasantry. Under the ancien regime the Russian countryside was periodically swept by famine, as China's countryside was and as India's still is. In the intervals between the famines, uncounted (statistically unnoticed) millions of peasants and peasant children died of malnutrition and disease as they still do in so many underdeveloped countries. The old system was hardly less cruel towards the peasantry than Stalin's government, only its cruelty appeared to be part of the natural order of things, which even the moralist's sensitive conscience is inclined to take for granted. This cannot excuse or mitigate the crimes of Stalinist policy; but it may put the problem into proper perspective. Those who argue that all would have been well if only the muzhiks had been left along, the idealizers of the old rural way of life and of the peasantry's individualism, are purveying an idyll which is a figment of their imagination. The old primitive smallholding was, in any case, too archaic to survive the epoch of industrialization. It has not survivied either in the country or in the United States; and even in France, its classical homeland, we have witnessed a dramatic shrinkage of the peasantry in recent years. In Russia the smallholding was a formidable obstacle to the nation's progress: it was unable to provide food for the children of the overpopulated countryside." (Ibid pp. 51-52)

No matter how many peasants were directly victimized by the state capitalist systems in China and the Soviet Union, one must still recognize the following historical significance: the problem of famine was temporarily solved, the dispersed and anarchic peasantry was consolidated into a system, the dissolution of the country was prevented, agricultural nations became industrial nations, and the material conditions for a higher form of society were prepared. We must remind those who talk of the great number of victims in this process that in the original accumulation process of "free" capitalism as well there was a long history of hundreds of thousands of peasants had their land plundered and were driven off the land, shut up in dirty and dangerous factories, and were thoroughly exploited under horrendous conditions. What took these countries one or two hundred years to do, the Soviet Union was able to accomplish half a century, and to this extent the sacrifices were also condensed.

Perhaps the greatest historical significance of the state capitalist system was that through these tremendous sacrifices peasants were turned into workers, that is, it created the mass of the working class, the gravediggers of this system, and the creators of the future system. Without the formation of a large scale working class (in other words, the formation of a large scale industrial base), the formation of a more advanced society is out of the question.

"The industrial workers, the small minority of 1917, now form the largest social class. The State employs about 78 million people in workshops and offices-it employed 27 million after the end of the Second World War. Well over 50 million people work in primary and manufacturing industries, in building, transport, communications, and on State-owned farms. The rest early their livelihood in various services-13 million of them in health, education, and scientific research. It is not easy to distinguish with any precision the numbers of manual workers and technicians from those of office workers, because Soviet statistics lump them together-the sociological significance of this will be discussed later. The number of workers may be put at between 50 and 55 million." (Ibid pp. 45-46)

Of course, when compared to advanced capitalist countries of Europe and North America, it becomes clear that technology in present day Russia industry is backward on the whole (especially in areas of advanced technologies like electronics and information communications), and the welfare and the bourgeois welfare state has yet to emerge. Nevertheless, it is certain that state capitalism rapidly developed the productive power of Russia and China (when compared to the backward pre-Revolutionary conditions), and created a broad working class.

Its later historical development shows that through the contradictions peculiar to state capitalism the advance to "liberalization" could not be stopped and the shift to "free" capitalism had to be made. Only based on the theory of state capitalism can we rationally explain that the "liberalization" of state capitalism couldn't stop at partial "liberalization", and that the inevitable extension and outcome of this "liberalization" was for state capitalism to be replaced by "free" capitalism.

As we mentioned before, state capitalism is very much full of contradictions. It was formed on a foundation of commodity production, and the means of production existed as capital in this system. However, this capital was organized as state run enterprises, in other words it existed as state capital. For this reason, the character of capital's insatiable search for profit was often repressed and subordinated to the objectives of the state. These contradictions, hidden during the course of the establishment of state capitalism, inevitably become a barrier and must be broken through once state capitalism is established and the time has come when a higher stage of productive power must be reached through the efficient use of the limited human and material resources. However, within the framework of state capitalism "liberalization" is must always be incomplete and a zigzagged process (a typical example can be seen in the period from Kruschev to Brezchev.). As the overall contradictions of this system deepen a phase is reached where it is impossible to continue without the negation of the existence of capital as state capital. This is the significance of the shift from state capitalism to a "market economy". This is due to the fact that state capitalism is transitional existence full of contradictions.

The Soviet and Chinese shift to "free" capitalism does not signify the collapse of socialism or a self-criticism, but is just an expression of a particular process of the evolution of capitalism. Furthermore, the fact that the USSR (Russia) and China are now openly recognized as capitalist systems finally buries the once dominant fantasy that these systems were socialist-this point has enormous historical significance. The collapse of Soviet "socialism" and China's bourgeois evolution also marks the definitive end to the idea that the contemporary age is a confrontation between world capitalism and world socialism and that the latter occupies a superior place, as well as the class cooperation fantasy that the shift to socialism can be made "peacefully" without sharp class struggle. Moreover, with Russia and China becoming more firmly a part of the world capitalist system, capitalism is truly and literally becoming global capitalism, and this makes the possibility of world socialism realistic. It could be said that now, for the first time, the ideal of the true liberation of mankind, through the sublation of capitalism worldwide and the victory of world socialism, is a real task. This is where we have arrived before the 21st century. Humanity has not progressed through history for nothing.

Finally, the state of the Soviet Union (Russia) and China, far from sounding the collapse of Marxism, in fact prove the Marxist theory that socialism is only possible on the basis of the highest development of capitalism. Marxism far from collapsing will become increasingly brilliant. We should realize that what has collapsed are the fantasies of pseudo-socialism and the theories of Stalinism which were lies from the outset.