This diary series is a slightly edited version of Contradictions of Capitalism, a book that I wrote in the early 90's which is still available now on Amazon. I have updated some parts of it to reflect the very important changes in the corporate economy since the mid-1990s with the appearance of a global economy rather than a national, which has important effects which much of the socialist movement has still not fully grasped.
Previous entries in this series can be found here:
Part One: http://www.dailykos.com/...
Part Two: http://www.dailykos.com/...
Part Three: http://www.dailykos.com/...
Part Four: http://www.dailykos.com/...
Part Five: http://www.dailykos.com/...
Part Six: http://www.dailykos.com/...
Part Seven: http://www.dailykos.com/...
EIGHT: Leninist Contradictions
The inherent expansionism of the Leninist system drives it to overrun and conquer colonies abroad, just as the expansionistic pressures of the monopoly capitalists force them to do the same. The result is increased international conflicts and tensions over the exploitation of neo-colonies.
The Soviet Union, the only Leninist state so far to reach this expansionistic phase, dominated the neo-colonies of Eastern Europe, Southeast Asia, parts of Africa and Cuba. These neo-colonies served as sources of investable surplus for the Soviet industrialization program.
This political, economic and military domination by the Soviets, however, naturally produced in the neo-colonies a desire to be rid of the foreigners. This was true not only in neo-colonies such as Poland, Czechoslovakia and East Germany, but also in the “internal colonies”, the non-Russian Federated Republics of Georgia, Latvia, Uzbekistan, Kazakhstan and Lithuania. A constant struggle rages between the Soviet Union, which needs the economic colonies for its economic development, and the neo-colonies, who desire to be free of foreign domination and to control their own economic resources. This struggle is held in check by the Soviet military.
A handful of these nations may possess sufficient resources to gain economic as well as political independence from Soviet domination. Nations such as Poland or Czechoslovakia, which have withdrawn from the Soviet orbit, may be able, if they do not fall under the domination of the industrialized monopolists, to apply the same principles of planned economic growth and emerge as fully independent industrial economies. This, in essence, would be a “Leninist” neo-colonial revolt directed against a Leninist imperialist power. This is what happened in China during the Sino-Soviet split in the 1960’s.
Within the framework of the Leninist system itself, however, there are internal contradictions and stresses which will weaken and eventually destroy it. One of these contradictions may be termed the tendency towards the overproduction of production-goods.
The aim of the Leninist state is to expand the production-goods and heavy-industrial sector to the most rapid extent possible. In the early stages of the system, this is carried out by transferring surplus which is extracted from the agrarian sector. Once the maximum amount of resources have been siphoned from the agricultural sector, however, new sources of investment and labor must be found. Therefore, the tendency is for the extraction of surplus through the sale of state-produced commodities to play an increasingly more prominent role in the Soviet economy.
One method of doing this would be to simply sell production goods themselves at a profit, to produce a surplus for more capital investment. This is done to a certain extent by the sale of equipment and machinery abroad by the Soviet Union. It is in the interests of the Soviet government, however, to have as much productive ability as possible remain inside the country, in order to avoid economic dependence on foreign-made commodities.
Soviet arms sales to client states and would-be client states also generate huge profits and sources of investment, and have the additional benefit of reinforcing the Soviet grip on their neo-colonies. However, the market for military products cannot be expanded to indefinite levels, and cannot provide a steady source of investable income.
The final alternative is to produce and sell consumer commodities at a profit. Profits on consumer goods flow to the state in the form of turnover taxes and provide a steady source of funds for the industrialization effort. However, the priority which is given to the production sector over the consumer sector reduces the amount of commodities which are available, and the low wages paid to Leninist consumers tends to limit this option as well.
The lopsided Leninist investment program produces disproportion between the production sector and the consumer sector. The equilibrium relationship between these sectors is the same as that in a monopoly capitalist economy, that is:
Vp + (Spl + Sp3) = Ck + Sk2
In other words, the consumptive ability of the productive sector must be matched by the productive ability of the consumer sector.
In the Leninist system, however, economic realities demand that investments be maximized in the productive sector at the expense of the consumer sector. These investments in the value of P tend to increase the values of Vp (wages paid to workers in the production sector), Sp3 (surplus which is invested in production employee wages) and Sp1 (surplus from the production sector which goes towards consumption by the state bureaucrats) at rates which are higher than increases in Ck (investment in consumer sector constant capital) and Sk2 (surplus invested in consumer constant capital). This, in effect, tends to produce the inequality:
Vp + (Sp1 + Sp3) > Ck + Sk2
In other words, consumptive ability (demand) in the production sector grows faster than it can be fulfilled by the productive ability (supply) of the consumer sector. One could say that production capacity is being overproduced, or that consumer capacity is being underproduced.
In either case, the productive capacity produced by the capital-goods sector is not absorbed by the consumer sector rapidly enough to offset the increased demand for consumer goods which its expansion creates. Since this productive capacity is not effectively utilized, it is in effect idled. Underdevelopment of the Leninist consumer sector thus has the effect of saddling the economy with sluggishness and loss of growth.
The solution for the problem is fairly obvious; the Leninist state must expand consumer production in order to produce an outlet for its productive capacity. It is in this requirement, however, that another problem arises—the Leninist system is not well-suited for the production of consumer commodities.
The development of “basic industry” poses no problem for the Leninist centralized command system. Indeed, this system has proven to be the most rapid way to develop and expand heavy industries and productive capacity. However, the needs of a consumer economy are not integrated well into the Leninist command structure.
The ponderous central planning commission (GOSPLAN) is at a considerable distance from the eventual consumption of its commodities. Any problems or possibilities which arise must penetrate several layers of bureaucracy before reaching the central planners who have the authority to respond to these changes. In an expanding economy, no central apparatus has the ability to receive and process the countless bits of information which must be taken into account in economic decisions. It becomes an impossible task for the central planning body, once a basic level of industrialization is reached, to keep in touch with all of the changing needs of the economy.
The only solution to this problem is to decentralize economic control by making the lower levels of the economic structure more autonomous and flexible, allowing them to quickly respond to local circumstances without waiting for instructions from the ponderous economic bureaucracy. Within the confines of the Soviet system, this can only take place in the form of expanding the portion of surplus which is made available to the enterprise managers for reinvestment, and giving the managers more latitude in economic decisions.
This process has been introduced several times in Soviet history, beginning with the Liberman economic reforms of the 1960’s. Its most recent incarnation was Gorbachev’s plans for perestroika, or “restructuring”. Perestroika had as its aim an increased ability for enterprise managers to utilize their resources to make and carry out economic decisions at a local level, which the central planning apparatus was unable to do effectively.
Perestroika thus had the intended effect of placing more and more of the Soviet enterprise’s surplus value under the direct control of the managers, who were responsible for reinvesting it in such a way as to expand the surplus it generated. In other words, the enterprise manager takes on the role of a controller of capital—of a capitalist—with the goal of maximizing the surplus value created by his investments. This has the effect of creating a neo-bourgeois class among the managers, whose economic interests grow to be more and more opposed to those of the Leninist state.
This tendency is reinforced by the growing need, under perestroika, to use profit as a criteria in planning and investment. In the beginning of the Leninist mode of production, the sole objective of the planning apparatus is simply to expand output as rapidly as possible. Early Leninist planning is concerned solely with putting together the nation’s meager natural resources of land, labor and available raw materials to produce maximum output, with no regard for how these resources could be used efficiently. Absolute production output was the determining bottom line.
As the economy grows, however, these resources (particularly labor) become more limited. The lack of investment in agricultural productivity means that the Leninist state has run out of surplus agrarian workers to transfer to the industrial sector, and the Leninist nations experience a severe labor shortage.
In the light of these realities, Leninist planners must now seek to increase growth with the most efficient use possible of scarce resources. In other words. the state must maximize output with the minimum use of capital and resources. Thus, surplus must be considered in proportion to the capital which is used to generate it, or:
S / V+C
This proportion is nothing more than P, the capitalist rate of profit.
The position of the Soviet factory manager thus grows closer to M-C-M’, in which the manager takes the surplus which the state allows him to keep, invests it in commodity production, and receives a larger surplus, a portion of which he is allowed to keep and reinvest.
In order to perform this task effectively, the enterprise manager must seek the ability to set wages, prices and other factors in order to respond to local conditions and maximize surplus value. These powers are, however, the prerogative of the state planning apparatus, which uses them to appropriate surplus value for the Leninist bureaucrats. Thus, the inherent trends within the Leninist system produce growing class conflict between the petty bourgeois ruling class and the growing neo-capitalist enterprise managers.
Another problem within the central planning apparatus is that of disproportionality. The centralized planning system lacks the resources to expand every sphere of the economy at once. As a result, it concentrates what resources it has into a few areas which are important for economic or political reasons—the expansion of heavy industry, increased consumer production, the space program, or military production.
Within each particular Five Year Plan, a particular industry or economic sector is emphasized and pushed while the others are allowed to lag for lack of resources. Eventually, however, these lagging sectors produce shortages and bottlenecks which interrupt growth, and these must be dealt with in subsequent Five Year Plans—at the expense of still other sectors. The Leninist planning system degenerates into a constant attempt to patch up weak links and eliminate bottlenecks.
The only solution to this problem lies in the simultaneous development of all sectors of the economy, so that no one sector is able to outrun the others. This simultaneous development can only take place through the constant interaction of the differing sectors, so that the development of any one is dependent on the development of the rest.
As these economic sectors interact, however, their increasing autonomy is at odds with the central planning apparatus, which finds itself increasingly useless. The rudiments of a market-oriented exchange system begin to rise as individual enterprises deal with each other to produce the resources, materials and capital necessary to fulfill their individual economic goals.
The inexorable decentralization of the Leninist economy finds itself in conflict with the centralized petty bourgeois state in every sphere. The rising neo-capitalist enterprise managers will begin to assert their economic autonomy, and will come to view the appropriation of portions of their surplus by the state as an intolerable burden. In the agrarian sector, capitalist relations assert themselves in the form of a class conflict between rural workers and the semi-feudal state relations. The Leninist state’s repressive apparatus is less and less able to contain the growing class conflicts, and the neo-capitalist classes come to view the Leninist system as a naked mechanism for extracting surplus for the benefit of the state bureaucrats. Subjective and objective conditions combine to weaken the Leninist state and destroy it from within.
At this point, the reader may note that at no time in our analysis of the Leninist system did we introduce the influence of the state’s “Marxist” or “Communist” ideology, which economists in the West have assumed to play a vital role in the structure and operation of the Soviet Union. The reason for this omission is clear—the Leninist state’s ideological claims have no relation to its structures and actions, any more than the monopoly capitalist’s actions have anything to do with the “democracy” and “freedom” which he so loudly declares. The theory and practice of the Leninist states do not have their source in Marxism or in Communism; they are inevitable consequences of the neo-colony’s economic conditions and historical legacy. It is in the economics of the Leninist state that we find the reasons for its downfall, not in its politics or ideology.