On Walter Daum's `The Life and Death of Stalinism':

Competition among Soviet enterprises and ministries, and the collapse of the Soviet Union

by Joseph Green
(from Communist Voice #19, Dec. 8, 1998)


The internal rot in the old Soviet economy
Theories of the nature of the Soviet Union
Trotskyist views
The competition concealed behind Soviet planning--it's important, Daum says
No, Daum says, it isn't important
Competition and state capitalism
Daum's contradictions
The economy of a workers' state
Platonic economics
The life and death of Trotskyism
Trotsky's denial of the possibility of Soviet state capitalism
The state sector as a supposedly proletarian form
The Soviet bureaucracy was supposedly not a new bourgeoisie
The Soviet Union in the 1930s: workers' state or state-capitalist regime?


. Starting this August, the Russian economy has suffered a new disaster, compounding its ongoing decline. Ever since the program of shock therapy and rapid privatization was applied to the Russian economy at the beginning of 1992, a great blight has come across the land. There is mass homelessness, the decline of schools, hospitals and public services in general, millions of workers go without pay, retirees are in a desperate position, etc. Manufacturing and agriculture have declined precipitously, while Russia has turned into a country exporting oil, gas, and unprocessed goods in order to pay for the imports that are flooding the country. One might have thought that the economy had already hit bottom, but the financial crisis of August, and the failure of the wheat and potato crops, has brought the specter of possible mass starvation in the coming winter.

. The collapse of the Russian economy shows the stupidity of the free-market orthodoxy which has guided the economy since rapid privatization began in 1992. It also raises again the question of how viable or successful the previous economic system was. Despite the economic stagnation that preceded its collapse in 1991, the Soviet economy at least provided health care, education, food and a basic standard of living for its citizens. The breakup of the Soviet system and the abandonment of state industry had seemed to spell the final word as to the bankruptcy of the past system. But now, with the tragedy caused by free-market economics, some political trends are claiming that the old Soviet system was an alternative. They do not see any possibility that the working class can build an alternative to both state-capitalism and free-market capitalism, but identify the old state-capitalism with socialism. They do not see that there is a fundamental economic difference between a system where the working masses control the economy, using the state for a time as one of their tools, and state ownership by a bureaucratic elite. So it is important to see whether the old state-capitalist system really is an alternative, or whether the present free-market disaster has grown out of the evolution of the state-capitalist system itself.

The internal rot in the old Soviet economy

. The old system took on all its basic features during the 1930s under Stalin, during the industrialization and collectivization of the Soviet Union. Its basic structure lasted until close to 1991, when the Soviet Union dissolved. Although the old system promoted itself as "socialist" and "communist", in fact the old system was simply state-capitalism. The economy was directed not by the workers, but by a bureaucratic bourgeoisie whose power was based on its control of the state sector.

. Some still dream of the glory days of the old Soviet system, when--whatever its other problems--it industrialized rapidly in the 30s or when it formed the economic base of a world superpower. But the present crisis in the Russian economy builds on a long rot that afflicted the old Soviet system. Like Western market capitalism, the Soviet state-capitalist system went through economic cycles. The periods of rapid industrial growth in the 30s and after the Second World War were followed by the great slowdown during the latter part of Brezhnev's regime, leading to utter stagnation.

. The present reliance of the Russian economy on exports of oil and other resources was foreshadowed by the export of oil being one of the few growth areas in the Soviet economy during the last decades of stagnation. While the Soviet economy retained a large industrial base, many enterprises ran large deficits. When oil prices went up on the world market, the Soviet bourgeoisie looked to energy exports as one of the key ways to subsidize the rest of the system. Meanwhile the sale of vodka on the domestic Soviet market was another important growth area.

. The Soviet social services, although not devastated as in Yeltsin's Russia, were already declining during the period of stagnation. The Soviet universal health system, for example, was impressive on paper, comprising a massive net of clinics and large number of doctors, but Soviet health standards were more in the line with the better Latin American developing countries than the industrialized European countries and, indeed, were lower than those of most Soviet-bloc countries.

. The Soviet economy fell increasingly behind in high technology fields such as computerization despite the existence of a large mass of highly trained professionals and despite a number of theoretical innovations in these fields by Russian scientists. In general, the Soviet Union was increasingly unable to modernize its industrial base.

. The overturn of the Soviet system was not a purely political choice. The political crisis was in large part a result of economic problems that had dragged on and on, and for which the Soviet "Communist" Party could find no solution. When the Soviet Union turned to free-market capitalism, this was not an arbitrary choice, but was based on the evolution of market solutions that the Soviet system had been experimenting with for a long time. The Soviet "Communist" Party had a long history of merging Western capitalist forms into the Soviet economic system. Aside from that, the very logic of Soviet state capitalism led to anarchic competition between different state enterprises, ministries, and economic interests.

. The division of the population into a minority that is profiting and a majority that is suffering is a notable feature of the new Russia. But the division between a relatively small number of privileged and well-off bureaucrats and a large majority of people who had little or no say economically or politically had already solidified decades earlier. Although the old tsarist bourgeoisie had been overthrown, a new Soviet bourgeoisie, based on control of the state sector, had already taken shape by the 1930s.

. Thus the tragedies afflicting Russia now are but the working out of a process set into motion in the days of Soviet state-capitalism. The chrysalis turns into a moth, not by accident, but as the result of its previous development.

Theories of the nature of the Soviet Union

. Yet many current theories of the Soviet Union deny that Russian private capitalism has grown out of the state-capitalism of the past. Not only bourgeois economists, but the dominant theorists on the left deny this connection. These theorists explain away the collapse of the Soviet-bloc regimes, and rationalize that these regimes, whatever their problems, were nevertheless not as bad as what replaced them.

Trotskyist views

. The Trotskyists have a reputation as being among the foremost critics of Stalinism, but it turns out that their analysis is often quite similar to that of the Stalinists. Their views of the Soviet economies fall into one of the following three categories:

The competition concealed behind Soviet planning--it's important, Daum says

. In the introduction to his book, Daum writes that

"A central point of this book is to show that Stalinism's inability to centralize the economy and therefore to plan scientifically marks it as a form of capitalism." (p. 15, emphasis as in the original, as it will always be when passages from Daum's book are cited.)

. Daum groups under the term "decentralization" the various examples of competition and anarchic conditions in the Soviet economy which he refers to at various places throughout his book. This attention to Soviet "decentralization" leads LRP to talk of the internal reasons for the decay of the Soviet economy, which distinguishes the LRP trend from most other Trotskyist trends.

. What does this "decentralization" look like? Daum's book is mainly devoted to his assessment of various theorists and political trends and his particular type of abstract theorizing. Daum mainly refers here and there to the "decentralization" within the Soviet economy, rather than studying it. But there are a few places where Daum describes a number of the ways that competition manifests itself in the Soviet economy. Most of this occurs in a passage about a dozen pages long in chapter 5, which he devotes to a description of the ills of the Soviet economy.(1) As well, scattered throughout the book are additional references to how Soviet economic life differed from what was mandated in the central plan. For example, there are several more remarks about the existence of a labor market in the Soviet Union. On p. 222 Daum points out that various Soviet enterprises bid for labor, often in contradiction to the state plan. This no doubt is related to the fact mentioned earlier by Daum, on p. 174, that a lot of Stalinist legislation mandating repressive conditions at the workplace was eventually ignored or evaded by the enterprise managers. (The reason for this isn't stated there, but was no doubt the competition among the managers to keep sufficient qualified workers at their factory.)

. Daum refers to all these phenomena as "decentralization". This is somewhat unfortunate. The impression is created that genuine socialism would have no room for local initiative or any initiative other than that of the central planning bodies, for fear of decentralization. But nevertheless, Daum not only recognizes the existence of anarchic and competitive features of the Soviet economy, but--and this is key--regards this "decentralization" as having been of theoretical importance for a characterization of the Soviet system. If it were just a question of noting the anarchic features of the Soviet economy, then one might simply note that Daum is by no means the first to do so, nor is his description the most careful or comprehensive by any means.

. For example, the late Trotskyist scholar Ernst Mandel had already described these features a couple of decades earlier in chapter 15, "The Soviet Economy", of his book Marxist Economic Theory. But Mandel regards these features as merely economic defects, caused by the bureaucratic bungling of the Stalinists, that didn't affect the basic economic system. All that had been needed was to replace the leadership: if only Trotskyists had done the planning, everything would have been OK.

No, Daum says, it isn't important

. So what is important is not simply noting various anarchic features in the Soviet economy, but seeing their significance. It turns out, however, that Daum is inconsistent on whether the anarchy of the Soviet economy was important. While stressing the issue of "decentralization", Daum denigrates the importance of competition. The subsection of his book, entitled "The Question of Competition", is devoted to proving that only the petty-bourgeoisie could place much stress on competition.

. In this subsection, Daum is concerned to refute those people who say that a nationalized economy has gone beyond capitalism, because there is no longer competition between separate, privately-owned capitals. In order to refute this argument, he writes that

"Middle-class theorists stress the desires of individual capitalists and their competition in the market, rather than the interest of the bourgeoisie as a whole to resist the class struggle of the workers. The position is most convenient for those who deny the existence of capitalism in the USSR, where market competition between enterprises is limited." (p. 49)

. One might think that Daum would refute those who advocate that nationalization equals socialism by referring to the facts about the competition of different bureaucrats, enterprises, ministries and localities inside the Soviet economy, recognition of which he declared to be one of the "central points" of his book. Indeed, since Daum identifies the competing interests in the Soviet economy as separate "capitals", one might suppose that he would triumphantly answer "the middle-class theorists" by referring again to the competition of these capitals, and remarking that competition on the free market is not the only type of capitalist competition. But Daum, and LRP literature in general, repeatedly denigrate the theoretical significance of competition. Why, he says, competition isn't important in itself, it is merely that

"competition is the appearance of the inner nature of capital", an appearance rather than the underlying reality. (p. 50) It is a surface phenomenon, "the operation of surface pressure to enforce the inner laws on the capitalists: it is capitalism's value-policing agent. But it is not the fundamental drive for accumulation." (p. 51)

. Daum applies this to the Soviet economy, and tries to explain its economic features by ignoring the supposedly secondary features, such as the competition among the bureaucrats, and emphasizing instead the overall interests of the Soviet ruling class as a whole. He calls this "the national capital" approach (p. 210). He writes that

"under Stalinism the primary social aim of production is to preserve and maximize the value of the national capital as a whole--that is, the state-owned capital within the national boundaries" (pp. 198-9).

. The "national capital approach" would seem to be more in line with the theories of Tony Cliff, who regarded the Soviet economy as working as one single enterprise, than with a recognition of the squabbling, competitive, dog-eat-dog nature of the Soviet economy. Daum, who regards refuting Cliff and Mandel as among the key goals of the book (p. 24), nevertheless regards the basic laws of the Soviet economy as stemming from its unified nature as explained by the "national capital approach". What he offers the reader with one hand (recognition of competitive phenomena in the Soviet economy), he takes back with the other (denigration of the theoretical importance of competition).

. Indeed, how is the reader to make sense of the Soviet economy when the same feature is declared important when it is called "decentralization" but is called a secondary, subordinate, surface phenomenon when it is called "competition"? Even the LRP has trouble with this. Sy Landy, National Secretary for the LRP, wrote an introduction to Daum's book where he simply places these two contradictory views side-by-side, and declares:

. "The book destroys a whole series of myths that have encrusted Marxism. For example, it rips apart the now commonplace fallacy that the essence of capitalism is competition. As Marx explained, this was the theory of petty capitalists, not his. The book also systematically decimates the fashionable notion that Stalinism, despite its faults, maintained a centralized planned economy." (p. 4)

Landy can't explain how these contradictory theses of Daum relate to each other; he simply reiterates them. Just in case the reader isn't sufficiently confused about whether the lack of centralization refers to the competitive aspect of the Soviet economy and the market forces within it, Landy immediately goes on to declare that Gorbachev's well-known program of vastly-expanded market reforms was really an attempt to "discipline" (centralize) the economy. By unleashing free-market forces! Landy writes:

"Thus for us Gorbachevism is not an attempt to restore the 'democracy' of the market but [we see it] as a desperate bid to impose discipline and order on an anarchic economy--a bid doomed to failure." (p.4)

. Well, if as Daum says, competition is really simply a surface, subordinate feature of an economy, no doubt Gorbachev's program of increased competition could be said to really be a program of centralization. In the same way, a valley can be declared to be a mountain, an ocean to be dry land. But the result of such verbal gymnastics is to make the LRP's theories well-nigh incomprehensible.(2)

Competition and state capitalism

. Daum to the contrary, the competition and anarchy in the Soviet economy are of immense theoretical significance. For one thing, there are many important features of the Soviet economy which cannot be explained by the overall interests of the Soviet ruling class or by Daum's "national capital approach". There is spectacular waste, inefficiency and stagnation which undermines the overall state-capitalist rule.

. Daum himself notes a number of these features of the Soviet economic life, such as


. Daum acknowledges that these things contradict the overall interest of the Soviet ruling class. He says that

"under Stalinism the primary goal of national capital accumulation has to operate in conjunction--and often at variance--with the narrower goals of local and sectoral bureaucrats: maximizing the value of the firm or sector they are responsible for." (p. 197)

Indeed, these are the factors that explain how the internal rot of Soviet revisionism takes place. Those who look back to the old state-capitalism in the Soviet Union as an alternative to the current Russian disaster forget these factors and others.

. Nevertheless, Daum insists that one must put the "national capital approach" first. He thus turns away from the significance of competition. While swimming in a sea of examples where competition undermines the overall Soviet system, he tries to find an example proving that not competition, but the laws of development of the single "national capital" explain the Soviet economy. Thus he considers the question of why the Soviet economy fails to reach its planned goals with respect to consumer goods. In reality, this is mainly because the various anarchic factors, such as those listed above, result in the failure to fulfill goals in general, including with respect to construction, major industrial goods, and so forth. But Daum writes that the "national capital approach" shows that "the reason for systematic violation of 'planning priorities'" with respect to consumer goods, and precisely consumer goods, is allegedly because the production of consumer goods supposedly has the special property that it does not "increase the value of the state-owned capital", despite its ability to increase the capital of privately-owned enterprises (p.201).

. Daum, with his "national capital approach", also misses a further key point about the significance of the clash of private and small-group interests in the Soviet economy. This anarchy and competition are not only key to explaining the features of the Soviet economy, but provide a powerful theoretical confirmation of Marxism. Marx and Engels analyzed that the only way to overcome capitalism, and its competitive struggle of one private interest against another, was to replace the marketplace with the control of production by society as a whole. They did not identify social control of production simply with nationalization. They held that a revolutionary working class would have to nationalize the economy as a step towards socialism and the abolition of commodity production (and eventually the state itself), but they also held that bourgeois nationalization had nothing to do with socialism. They held that social control of production was not simply a legal matter of having state ownership, and they opposed what they called "state socialism", but required having the working class taking power and step by step putting the economy under the control of all the working people.

. The question arises as to whether the 20th century experience with the state-capitalist countries confirms or denies Marxism. If the state-capitalist countries really had achieved a social control of production, then they would essentially have created a socialist economy in the Marxist sense. In that case, the sad record of state-capitalism in the 20th century, and its oppression of the working masses, would mean the collapse of Marxist socialism, which would stand revealed as simply another repressive society.

. But the state-capitalist countries, despite their state sectors, nationalized industry, and state plans, could not even direct the economies according to the overall interests of the new ruling class (what Daum calls the "national capital"), to say nothing of the interests of society as a whole. Not just the new bourgeoisie as a whole, but individuals and small groups continued to appropriate the results of state industry. The clash of separate interests permeates the state-capitalist economies. This provides a confirmation of the Marxist view that the contradiction between large-scale, social production and the ownership and management of these means of production by competing interests is key to the oppressive nature of capitalism. It confirms Marxism's emphasis on the role of competition in capitalist society; it confirms their views that nationalization itself does not provide social control of production; and it also verifies their denunciation of "state socialism".

. Daum does state that "The primary contradiction of capitalist society is between social production and private appropriation." (p. 35) Indeed, Marx, Engels and Lenin put a good deal of emphasis on this contradiction, which sums up the view of Marxism concerning the need to eliminate private appropriation if the forces of social production are to be used for the benefit of all humanity. But, in Daum's account, nothing much follows from this contradiction, and he forgets about it after a few sentences. In fact, the competition within the process of production in the Soviet system, as well as the frenzied system of private appropriation of the benefits of the state sector, show that the state-capitalist societies really haven't resolved this contradiction. Private appropriation remains; indeed, not just the appropriation by a relatively small section of society which became the new bourgeoisie, but private appropriation by individual exploiters and small groups.

. In the natural sciences, an unexpected confirmation of a theory is regarded as important. It is sometimes too easy to give a plausible explanation of facts that one knows in advance; one can cut and fit the theory to size because one knows the conclusions one wants to reach. But if a theory, based on examining certain facts, turns out to successfully explain or predict facts that weren't yet known at the time, this strongly suggests that this theory, while not a limit beyond which it is impossible to go further, really has uncovered some important aspect of nature. Similarly, the existence of competition and competing private interests within Stalinist state-capitalism, a new form of capitalist society that didn't exist in the days of Marx and Engels, provides an impressive theoretical confirmation of some of the basic principles of Marxism.

Daum's contradictions

. Daum's denigration of the role of competition thus undermines most of the value in his recognition of the "decentralized" features of the Soviet economy. Moreover, it involves him in a series of contradictions.

. Take his analysis of the Soviet Union in the 1930s. Was this centralized or decentralized? Somewhere in his book, Daum gives every possible answer to this question.

. Daum's starts out by declaring that Stalinism cannot centralize an economy, and he ridicules the view that the "decentralization of the Soviet economy and deproletarianization of the state had begun only after Stalin's death." (p.16) He points out later that the Stalinist system of the 1930s aimed to "to build up the national capital by tying each bureaucrat to some specific capital, either locally or further up the hierarchy." (p. 237)

. But at the same time, Daum wants to claim the industrialization in the 1930s as somehow a victory for socialist centralism. He holds that the degeneration of the Soviet Union into statified capitalism did not finish until the 18th Party Congress in March 1939 (p. 184). Prior to that, there is supposedly a basically proletarian, and centralized, economic base which is responsible for this economic growth. He writes that

. "Despite its brutality and counterrevolutionary implications, however, the industrialization drive of the 1930's was an unprecedented achievement. It made possible the Soviet Union's advance from a backward country to the world's second economic power by the end of World War II . . . The key was the centralized state power achieved by the soviet revolution. It enabled the party to mobilize the cadres' devotion to socialism, focus resources on selected heavy industrial projects and utilize the masses of labor thrown into production during the decade." (pp. 159-9)

. Indeed, he goes even further and declares that there was "super-centralization" in the 1930s (p.159) and only "signs of anarchy" appeared. (p. 239)

. However elsewhere he declares that there was only political centralization in the 1930s, and he writes that Stalinism was "as we have seen, . . . de facto decentralization of production despite political dictatorship". (p. 353) He says that Stalinism only had "pseudo-planning" (p. 226) and that "no Stalinist plan ever genuinely planned or predicted the economy" (p. 198), and he cites approvingly someone's else statement that one must question "whether Soviet investment is, or ever has been, planned in any way whatsoever" as "a highly realistic overall conclusion". (p.229)

. In brief, he takes every position conceivable on the question whether the Soviet economy was centralized in the 1930s, from yes to no, through partially yes, and on to indubitably yes, and then absolutely not. On this question, as on a number of other theoretical questions, one finds that what Daum says in one place, he contradicts in another. On the question of the 1930s, his contradictions spring in part from his reduction of economics to simply centralism versus decentralization and his relegation of competition to a minor issue. Instead of discussing whether and in what forms competition and anarchy of production can exist in a nationalized economy, whether and in what forms competition and anarchy can appear in a centralized economy, he sees only centralism versus decentralism.

. Daum uses "decentralism" to refer to competition, anarchy, and everything bad, while "centralism" and "planning" refer only to very good things, to socialist centralism and planning, or at least the revolutionary planning of a workers' state. In fact, centralism and decentralism can't be discussed in this way. There are different types of centralism and decentralism. There is a certain type of planning and centralism that occurs in capitalism, and not just in socialism; while true socialism will unleash the mass initiative of the people in contrast to capitalism, which forces the overwhelmingly majority of the population to walk in lockstep with their bosses, or even with the decisions of a handful of big bankers. Today world capitalism is monopoly capitalism, subject to huge multinational firms as well as various governmental, or even world, institutions; the capitalists divide up the resources of the world among themselves, squabble over setting world rules of behavior, and subordinate whole nations to the command of a handful of executives. It is not just the state-capitalist regimes that go beyond the old model of mid-19th century capitalism, but Western market capitalism itself which has evolved a long way since then. Capitalist planning does not eliminate the anarchy of production, but does dramatically change its forms. It not only coexists with, but helps intensify the fierce clashes among capitalist groupings and the dog-eat-dog competition of capitalism. The East Asian, Russian, and other financial crises, the overproduction crisis that lies at the base of these financial crises, the devastation of the living conditions of whole nations as well as the ruining of the world environment, show the limits of this planning, and how it is constantly being upset by unexpected results. But it is one thing to note what type of centralism and planning occurs under capitalism, and another to regard them as sham phenomena.

. So, with respect to state capitalism, one has to distinguish between the nationalized form and the particular ways in which competition and anarchy manifest themselves. Daum's terminology, which reduces everything to centralism versus decentralism, makes it impossible to consistently discuss state-capitalism. In the Soviet Union of the 1930s, for example, the centralism of the economy wasn't simply a carryover from the 1920s, but increased dramatically. At the same time, there weren't just signs of anarchy and competition, but severe competition among Soviet executives and enterprises. This is an insoluble contradiction if it is discussed as simply centralism versus decentralism: all one can say is that from one point of view, centralism increased dramatically, but from another point of view, it was ripping apart at the seams. But the same history provides a profound economic lesson about 20th century monopoly capitalism if one studies state-capitalism as a distinct form of capitalist economy in itself, not as simply real or sham centralism and planning. Then one can distinguish the question of how far an economy is nationalized and whether government ministries have replaced the stock market and other market forms with government directives, from the question of how these changes affect the competition in the new bourgeoisie. Then it is no longer an absurd contradiction when the extension of government planning coincides with sharp competitive clashes among enterprises, and one no longer has to solve that contradiction by automatically declaring that there is only a sham extensive of government planning (something which may or may not be true in any particular situation); instead one can study the class relations which determine what effect government planning has on an economy. One can examine how market forces grow up under state capitalism without implying that the state-capitalist ("centralized") form is merely a sham.

The economy of a workers' state

. Daum's bare contrast of centralism versus decentralism not only fouls up his description of the 1930s, but also his attempt to describe the features of the transition to socialism and to contrast Stalinist regimes with workers' states. As a result, the only thing that comes through clearly in his account is that there should be a centralized economy, and that Trotskyists would allegedly do much better than Stalinists in running it.

* For example, should the transitional economy accumulate capital, or is it marked by how far it eliminates the character of the means of production as capital? Daum wants it both ways. On one hand, as we have seen, Daum stresses that the guiding principle of state-capitalism is the accumulation of the national capital. This is how he explains the oppressiveness of these regimes, and what he denounces them for. This would suggest that he believes that a workers' state shouldn't do this horrible thing that characterizes Stalinist state-capitalism.

. But on the other hand, oddly enough, he holds firmly that a workers' state should accumulate capital. He writes that:

". . . Stalin's worsening of the material conditions of the workers was not an imperative result of capital accumulation. We argued in Chapter 3 that accumulation is a necessary, bourgeois, task of the workers' state: carrying it out cannot in itself signify the restoration of capitalist rule." (p.160)

. Any system of large-scale production, whether capitalist or socialist, requires factories, means of production, raw materials, etc. But only under capitalism do these things constitute capital. The whole point of a transitional economy is to step-by-step eliminate their status as capital, by having the working masses as a whole own and manage them. But Daum instead identifies economic development of any sort as a bourgeois task, and declares that it is the same thing as capital accumulation.

. Daum takes this so seriously that he declares that a workers' state, in order to help the fraternal workers of other countries, would export capital to them. He writes that:

". . . the export of capital for the purpose of ingesting surplus value is reactionary; but it also reflects the international scale of the modern economy. . . Workers' states in the advanced countries would also send vast amounts of capital abroad--not because of the surplus value it could return but because of the use values that less advanced workers' states need." (p. 279) Indeed, Daum denounces the Soviet Union for allegedly not exporting capital, saying that "The USSR's failure to export capital shows the severe contradiction of a system at once advanced and backward in the extreme."

* Should a transitional economy be run according to the law of value and calculate its plans according to value? Once again, Daum has it both ways. With his red-hot, revolutionary left hand, Daum denounces the Stalinists for the "subordination of the economy to value" (p. 186) He says that value measurement is not a guide to a rational system (p. 33) and that "the fundamental revolutionary task in the economic sphere is combatting the law of value" (p. 135) With respect to the Stalin's eventual declaration that the law of value played some role in the Soviet Union, Daum declares ringingly that it

"was a tacit recognition that capitalist discipline was required, for the work force first of all, but also for the bureaucrats. It meant that production was in the hands of separate, autonomous units which had no alternative but to relate to one another through the exchange of value-embodying products, i.e., commodities." Moreover, it showed that "the system operates under an alternative form of competition, which in any form executes the inner laws of capital to maintain and deepen the exploitation of the proletariat." (p. 231)

But on the other hand, with his conservative, supposedly realistic, right hand, Daum states that it is important for a workers' state to use value. He points out that Trotsky

"called for a market and a monetary regulator--not because he admired capitalist methods but because the reality of backwardness had to be recognized if the crisis was to be overcome; accurate measurement of labor time and resources was critical." (p. 166) Daum even denounces Stalinism for deviating from value, saying that "the statified economy allowed violations of the law of value even greater than under traditional monopoly capitalism" (p. 179) and that "the distortions of value that characterize most of the Stalinist system and hold back the progress of productivity can be understood in the West by anyone familiar with governmental or other large bureaucratic operations." (p. 203)

. Indeed, Daum holds that a workers' state, so long as commodity production exists, would be marked by the precision by which it set its prices according to labor time. Price and labor time would supposedly no longer diverge:

"the proletarian state can accumulate value without the contradictions due to the separate ownership of capitalism--which makes exchange value and the labor time underlying it diverge." (p. 126)

But the determination of prices by labor time, by the labor-hour, is precisely the law of value.

. Will the transitional economy set prices more and more according to the labor-hour as it moves towards socialism? And, when it reaches socialism, will it use the labor-hour as its "natural unit" and basic economic measure in its planning? This is a controversial question among socialist activists. I have expressed my opinion elsewhere, in the course of criticizing the Soviet economist Preobrazhensky, that the labor-hour or labor-content is not the "natural unit" of economic planning nor the overall regulator of production. I gave several examples to show how planning must inevitably diverge from calculations based on the labor-hour, or else duplicate capitalist practices.(3)Of course, how much time it takes to produce something will always be of economic interest, but it is not the sole factor of economic interest. I intend to explain this in more detail in an article for the next issue of Communist Voice; since my view may surprise many activists, I intend to argue in favor of it at greater length. Here I simply wish to point out that Daum takes both side of the issue, being equally vehement no matter which side of the issue he is on at the moment.

*Daum also waffles back and forth on whether the system of financial management in state industry (the so-called khozraschet system) can be used by a workers' state. On one hand, he self-righteously denounces the Stalin constitution of 1936 for putting state industry on the khozraschet system. Daum writes that the problem was Soviet firms were treated as "juridically independent" and "they could sign contracts with one another, sue if these were not fulfilled, and win damages in court." (p. 179) But on the other hand, Daum quietly accepts the khozraschet system. Khozraschet actually was brought into existence by the New Economic Policy of the 1920s, which Daum supports.

, To break out of this contradiction, Daum would have to show what is different about what Stalin did in the 1930s, and what was done in the 1920s. But Daum makes erroneous distinctions. To show what is different in 1936, Daum cites someone saying that the decisive moment in the development of khozraschet "was in 1936, when it was ordered that an end be put to state subsidies of enterprises." (p. 179) So Daum seems to say that Stalinism means that the enterprises are allowed to fail. This is apparently made the dividing line between state-capitalist Stalinism and the proper use of khozraschet by a workers' state. But actually, the NEP already had seen many enterprises fail due to their inability to make a profit and the refusal, under khozraschet, of the state to bail them out. Indeed, much less of this occurred after the 20s. Elsewhere Daum himself writes that "Soviet firms have rarely been forced to liquidate" (p. 205), Soviet managers "have no fear of being forced out of business" (p.204), and that the state-capitalists generally prefer for the unprofitable firms "to stay in production" (p. 206). He also talks of the "overmanning in the factories" (p. 241).

. Moreover, Daum goes on to stress how important it is that a workers' state allow these enterprises to fail. He denounces Stalinism for subsidies to "inefficient plants", saying that they are kept in operation "through surplus value supplied by other firms" (p. 206) and declares that "the failure to shut down obsolete enterprises is not a progressive but a reactionary aspect of the system." (p. 206) Daum stresses that "a genuine workers' state . . . would aim to close outmoded plants as quickly as possible." (p. 209)

* Daum denounces the Stalinist planning of the 1930s for ignoring objective laws, and writes that

. "In the ideological sphere the Stalinists declared the laws of capitalism abolished. The economist Strumilin declared, 'We are bound by no economic laws. There are no fortresses which Bolsheviks cannot conquer by assault. The question of tempo is subject to the will of human beings.'" (p. 158)

. However, Daum denounces Preobrazhensky for claiming that planning is subject to economic law. Daum writes:

"There is no law regulating conscious planning (other than the law of value itself--which holds it back, restricts it and subjects it to the economic scarcities of the existing society.)" (p. 148)

. Thus on the accumulation of capital, the use of value in the economy, the subsidizing of inefficient enterprises, and the belief that state planning is subject to no laws (other than certain restrictions from value), Daum takes both sides of the issue. The very features of Stalinism which Daum denounces, Daum also upholds as the way to build a workers' state, provided it is done by Trotskyists, not Stalinists.

. Daum passes over briefly, or leaves out altogether, key issues with respect to the distinction between state-capitalism and a workers' state in the course of transition to socialism. The key distinction isn't over the technical questions of planning (such as the regime's theories concerning the law of value and the labor-content of goods). Nor can all NEP-like measures such as some form of khozraschet be denounced. Khozraschet always has effects on the class structure of the society, but one has to judge whether a system of capitalist competition and bureaucratic management of the economy is being consolidated, or whether khozraschet is being subordinated to a growing control of the economy by the working masses. The key issue concerns whether the working masses are really gaining control over the economy. To deal with the transitional economy, one has to discuss the methods by which the working class extends and strengthens its class organization, how these forms change over time, how they step-by-step encompass the rest of the working masses, and they develop a real control of the economy. Such working-class economic control includes both the forms of control from below as well as the building of centralized institutions at the top, the forms of local initiative as well as the formulation of bold and accurate plans at the top. Daum can't formulate the issue this way, or else his whole theory concerning the 1930s falls to pieces: after all, Daum wants to claim the 1930s as a triumph of socialist planning on the basis of the state ownership and planning, while admitting that the workers were not in control. This is only possible if his view of a workers' state is actually quite close to that of Stalinism.

. Even the Daum's party, the League for the Revolutionary Party, felt a bit uneasy over the picture of a workers' state in Daum's book. The review of Daum's book in LRP's journal, Proletarian Revolution, states that

"The weakest section is the exposition of the Marxist conception of how the workers' state makes the transformation from capitalism to socialism and an outline of socialist (and communist) society."(4)

But the review had nothing to add to Daum's exposition, which it regarded as having said all that LRP could say on the subject.

Platonic economics

. One of the main weaknesses of Daum's theorizing is that it detaches economic theorizing from the actual operation of the economy. There are some vivid, if short, descriptions of Soviet reality in Daum's book, but Daum regards these descriptions as subordinate to something far more important, his grand theorizing.

. Daum is fond of vague analogies of the Soviet economy to the Western economy, expressed in pseudo-profound talk of the falling rate of profit, the "national capital", the interests of the Soviet bureaucrats as little "capitals", and so forth. For him, these are the "inner laws" of the economy. At best, such analogies might suggest some avenues for study concerning the relation between state-capitalism and Western capitalism. But for Daum, these analogies replace a close study of the economic life in the Soviet Union.

. Take the question of competition among the Soviet bourgeoisie, for example. As we have seen, he regards this as a mere "surface" phenomenon, which only petty-bourgeois theorists could put too much emphasis on. He does briefly give some important examples of Soviet competition, but he does not see the theoretical significance of this.

. In fact, hard work has to be done to trace the evolution of competition and other aspects of the Soviet economy. In an earlier article on the Soviet Union, I discussed the theoretical significance of the existence of anarchy in the Soviet economy. In the CVO articles on Cuba, comrade Mark traced some the broad outlines of historical development of competition and anarchy in post-revolutionary Cuban economy. There has to be further study of how the process works in reality. This is the materialist approach. And it is only through such work that more and more understanding of the economic laws of state-capitalism can be developed.

. Daum, on the other hand, acts as if "capital" and "falling rate of profit" existed in a Platonic world, far more profound and real than the world of human beings and economic transactions. Thus he explains phenomena by appealing to general principles about capital, without ever bothering to investigate the differences in how they apply to state-capitalism and Western capitalism. Indeed, for him the recognition that there is "decentralization" in the Soviet economy, and that planning is only what he calls "pseudo-planning", implies that he can just carry over all the categories that apply to Western capitalism, without bothering to investigate the concrete changes that take place, because it is all merely surface changes. This approach differs tremendous from that of Marx, who was at pains to deal with how the evolution of the capitalism of his day changed the forms in which the basic laws of capitalism expressed themselves.

. For example, Daum's approach leads him to apply the concept of a falling rate of profit to Soviet state-capitalism without looking closely into what changes must be made in defining the rate of profit and seeing how it works concretely with respect to a system where a firm isn't judged by its rate of profit, nor executives paid on that basis, but according to its fulfillment of plan, and where major investment plans and targets are determined by the ministries, not the firms. Thus his analogy remains empty. But for that matter, there is rather little concrete investigation [by Daum] of the falling rate of profit even with respect to market capitalist economies. Yet Daum is proud of his "new interpretation of Marx's law of the falling tendency of the rate of profit." (p.23)

. Marxism, and scientific materialism in general, searches diligently for the general laws underlying what we can see happening in real life. But it insists that these general laws come from a close examination of real life, and that abstractions and generalizations be built up on the basis of a careful study of material reality. Daum lives instead in a world of abstractions and general analogies and metaphors.

The life and death of Trotskyism

. Most of Daum's difficulties stem from the fact that he is trying to fit the analysis of Soviet state-capitalism into a Trotskyist framework. But Trotsky never thought that the Soviet Union was state-capitalist, no matter how dominant Stalinism was, and he never even conceded that it was possible for a new bourgeoisie to arise based on its control of the state sector.

. Trotskyism has promoted itself as the greatest opponent of Stalinism. Yet the irony is that on numerous fundamental issues of political theory, Trotskyism is just the flip side of Stalinism. Both the majority of Trotskyists, as well as the Stalinists, hold that the state sector is inherently socialist (provided only that the old bourgeoisie has been overthrown); both have a similar idea of what the Soviet economy should look like; and both depart from Leninism. Most Trotskyists feel that the Stalinist countries had an essentially socialist or proletarian economy, and their criticism of Stalinism, no matter how strident, is that they can run the system better than the Stalinists can. Thus they called for a "political revolution" (a change in leadership), rather than a "social revolution", in the Soviet Union and other state-capitalist countries; this brings out their agreement with the basic features of the Stalinist economic system, and their view that it simply required better leadership.

. Unlike most Trotskyists, Daum declares that the Soviet Union was "statified capitalism" (state-capitalist). But he is unable to establish a consistent theory about this. At every step, Trotskyist dogma dogs his steps. The irony is that the theoretical bankruptcy of Trotskyism is revealed by the collapse of Stalinism. Trotskyism gained currency only as Stalinism stamped out the theses of living Leninism, and it lived on as a fringe of Stalinism; the death of Stalinism and the eventual revival of anti-revisionist Marxism will prove to be the death of Trotskyism too. The life and death of Trotskyism are but a reflection of the life and death of Stalinism.

Trotsky's denial of the possibility of Soviet state-capitalism

. Daum makes no bones about his zealous adherence to Trotskyism. He declares at the start of his book that he adheres to Trotsky's views on the Soviet Union right up to 1939 (which is the year before Trotsky's death in August 1940) and that everyone must "start with Trotsky's analyses of the degeneration of the Soviet workers' state in the 1930's". (pp.9, 22). This prevents him from seeing the state-capitalist system in the 30s, since Trotsky didn't.

. Daum implies his disagreement with Trotsky with respect to the 1939-1940 is essentially a matter of timing as to when capitalist restoration in the Soviet Union would be completed: Daum sees it as completed in 1939 while Trotsky thought it would still take some more time. But in order to present matters in this way, Daum hides the fact that Trotsky held that the restoration of capitalism could only mean the victory of market capitalism, not the consolidation of state-capitalism.

. Indeed, Trotsky directly denied the possibility of state-capitalism, and said so in his major theoretical work on the Stalinist system, The Revolution Betrayed (1936). This work was written in the mid-30s, when the Stalinist economy was already taking on most of its characteristic features, and Trotsky said no, it cannot be state-capitalism. The LRP, incredibly, takes one of the passages where he specifically argues the impossibility of such a thing as Stalinist state-capitalism and turns it into its opposite--into the recognition that a country with a nationalized economy can be capitalist. Here is how the LRP accomplishes this feat. The LRP's journal Proletarian Revolution writes:

. "It is taken as a commonplace by most Trotskyists (and practically everyone else) that a country in which the economy is nationalized cannot be capitalist. Obvious though that may seem, however, it wasn't accepted by Trotsky:
. "'Theoretically, to be sure, it is possible to conceive a situation in which the bourgeoisie as a whole constitutes itself a stock company which, by means of its state, administers the whole national economy. The economic laws of such a regime would present no mysteries.'(The Revolution Betrayed, p. 245.)
. "It follows that a totally state-owned economy does not have to be non-capitalist. And its economic laws could be fully grasped, despite the absence of a free market. Trotsky doubted that the old bourgeoisie itself could nationalize a whole economy in practice, and he was right: it took the Stalinists to do it. Nevertheless, it is obvious that a statified economy did not mean a workers' state."(5)

. PR is quoting the section of Trotsky's book entitled "State capitalism?", but this section, and the very passage cited by PR, go on to deny that this theoretical possibility can occur in practice. The paragraph ends with the assertion that

"Such a regime never existed, however, and, because of profound contradictions among the proprietors themselves, never will exist--the more so since, in its quality of universal repository of capitalist property, the state would be too tempting an object for social revolution." (underlining added)

This clear and emphatic statement by Trotsky is diplomatically "revised" by PR into the view that Trotsky "doubted" that the old bourgeoisie would nationalize the economy.

. Moreover, Trotsky not only denied that state-capitalism could ever be achieved in practice, but he could only conceive "theoretically" of state-capitalism when the old bourgeoisie rules. The very paragraph by Trotsky cited by PR goes on to describe the "economic laws" of state-capitalism as follows:

"A single capitalist, as is well known, receives in the form of profit, not that part of the surplus value which is directly created by the workers of his own enterprise, but a share of the combined surplus value created throughout the country proportionate to the amount of his own capital. Under an integral 'state capitalism', this law of the equal rate of profit would be realized, not by devious routes--that is, competition among different capitals--but immediately and directly through state bookkeeping." (Trotsky then went on and made the statement I have quoted that this regime has never existed, and will never exist.)

As can be seen, Trotsky was talking about the old bourgeoisie nationalizing the economy.

. Trotsky continued, in the following two paragraphs, to contrast a system where the old bourgeoisie had nationalized part of the economy, to the system of nationalized industry in the Soviet Union. He reached the conclusion that it was ridiculous to think that the system in the Soviet Union could be described as state capitalism; he ended the section on "State capitalism?" with the declaration that "Our brief analysis is sufficient to show how absurd are the attempts to identify capitalist state-ism with the Soviet system. The former is reactionary, the latter progressive." Indeed, the very completeness of the nationalization was, in his mind, an argument against it being regarded as state capitalism. Trotsky believed that state capitalism in the real sense--and in Trotsky's eyes, this meant state ownership on behalf of the old bourgeoisie--always "remains partial in character". That is, Trotsky believed that if the entire economy was nationalized, it was not state-capitalism. State-capitalism must "remain partial", i.e., the state sector could only embrace part of the economy, or else state-capitalism had been transcended and a progressive system had replaced it.

. Trotsky did talk about the possibility of capitalist restoration in the Soviet Union, but it was always in terms of the old bourgeoisie taking power. Indeed, Trotsky was one of the proud fathers of the argument that the bureaucrats couldn't be state-capitalists because they didn't own stocks or bonds. He wrote, in the next section of The Revolution Betrayed, that

. "The attempt to represent the Soviet bureaucracy as a class of 'state capitalists' will obviously not withstand criticism. The bureaucracy has neither stocks nor bonds. It is recruited, supplemented and renewed in the manner of an administrative hierarchy, independently of any special property relations of its own. The individual bureaucrat cannot transmit to his heirs his rights in the exploitation of the state apparatus." He identified capitalist restoration with "the collapse of the planned economy" and "the abolition of state property".

. Thus PR is turning Trotsky on his head when they hold that he recognized that a fully nationalized economy could be capitalist. Daum, in his book, dances around the same passage from The Revolution Betrayed that PR does. (pp. 81,83) He doesn't directly make the absurd assertion that this passage shows Trotsky advocating a theory of state-capitalism, but he implies the same thing. He pretends, like PR, that Trotsky is only denying that the old bourgeoisie will bring state capitalism to life; he says that Trotsky only "discounted the likelihood of the bourgeoisie nationalizing the entirety of capitalist property itself." He hides the fact that Trotsky said that a system of integral state-capitalism is impossible, and has never and will never occur.

The state sector as a supposedly proletarian form

. Far from seeing the rise of state-capitalism in the Soviet Union, Trotsky's idea was the Soviet state sector was socialistic in and of itself, no matter how it was directed and whether the working class had any say in running the state sector or the Soviet government as a whole.(6) This is why Trotsky held that state-capitalism was impossible: he believed that the state sector was inherently socialist. One would think that Daum and the LRP, who hold that the Stalinist regime was "statified capitalism" (from March 1939 at least), would repudiate this thesis. Instead, Daum tries to maintain this thesis by rephrasing it in a vague and elastic way. He argues repeatedly that "nationalized property is a proletarian form of property". (p. 240)

. The revolutionary proletariat will, of course, have to nationalize the economy during the transition to socialism. But this doesn't mean that nationalized property is always proletarian or socialistic just because it is nationalized. The revolutionary proletariat may also have to rise up in arms in order to achieve the socialist revolution, and it will require armed forces to defend the revolution against hostile capitalist countries. It will make use of state power in various ways. Should armed struggle, modern armies, and the state itself be declared "proletarian forms", no matter whose army or whose state it is?

. Well, as a matter of fact, Daum goes to the extent of arguing that giant capitalist monopolies and all "statist" forms in capitalist countries are proletarian forms that threaten the bourgeoisie. He writes that

"the monopolist and statist tendencies imminent in decaying capitalism are not class-neutral forms, adaptable equally well to the bourgeoisie and proletariat. They are anti-capitalist even under bourgeois rule in that they reflect the future proletarian society; they thereby pose a threat to the bourgeoisie". (p. 88)

To follow this logic to its conclusion, GM and the multinational corporations, the IMF and some other world agencies, and even the modern monopoly bourgeoisie itself would have to be declared to be anti-capitalist and proletarian forms that "pose a threat to the bourgeoisie". After all, these are among the forms in which "the monopoly and statist tendencies" of modern capitalism are manifested.

. Daum's logic confuses two separate things: the ground upon which the modern class struggle arises, and the question of what is a proletarian form. Large-scale production has created the modern proletariat (which is the only class which can bring the socialist revolution) as well as the technological basis for socialism, but that doesn't make the capitalist forms of large-scale production into "proletarian forms". The proletariat works for capitalist firms, but these firms are not "proletarian forms"; they are "bourgeois forms".

. Daum's theory of nationalized property as a "proletarian form" involves him in a series of contradictions. Indeed, if nationalized industry is proletarian, then how can the Stalinist state sector in the Soviet Union be state-capitalist? Daum seeks a way out of these contradictions by stating that the form is proletarian, but the content can be anything. He attacks

"the mechanistic belief that the proletarian form of nationalized property implies a dominant proletarian content". He writes that ". . . Marxists must recognize that form reflects content but does not determine it. Form and content continually come into contradiction--which is temporarily resolved at a new level as the content, itself changing, exercises its dominance." (p.242)

Daum wouldn't have to wiggle back and forth this way if he weren't trying to preserve Trotsky's theory of the inherently socialist character of the state sector.

. Moreover, the theory of nationalized property as a "proletarian form" results in practical agitation by the LRP, and its journal PR, that, with respect to nationalized industry, merges with that of those Trotskyists who believe that the Stalinist economy was postcapitalist or essentially socialist. LRP's "Theses on the East European Revolutions and the Transitional Program" (1990) called on the workers to "defend nationalized property and the deformed proletarian gains which it embodies", without any mention of the fact that a revolutionary workers' movement would, if it took power, have to smash the old organization of the nationalized economy and run the state sector in a fundamentally different way.(7) State property on one side versus privatization and decentralization on the other side is the fundamental axis of the statement. It has no discussion of the fact that there are different types of state sectors, other than distinguishing the extent of their centralization. There is no attempt to explain why the old centralized system of Stalinist state-capitalism had exploited the masses and how this exploitation could be avoided in a different type of centralized system.(8) Putting this into practice, the theses opposed some of the formulations of other Trotskyists, such as "defend the Soviet Union" or calling the Soviet Union a "deformed workers' state", but strongly maintained the heart of Trotskyism--the glorification of state property in itself.

. LRP's theses went so far as to ridicule the widespread concern with the oppressive and bureaucratic nature of the old state economy. All that the theses could see in such concern was an "advocacy of 'self-management' feed[ing] into the marketizing decentralization schemes of the bourgeois and bureaucratic forces." LRP's theses put forward no alternative idea for how to build a state sector different from the old one. At most, in a section of "transitional demands", they include two demands which, in their entirety, read "open the books of private and state firms so that workers can themselves determine the profitability and 'efficiency' of their workplaces; workers' control (supervision of production, to keep close tabs on the state and private bosses." These demands assume that the capitalists and the state sector bosses will continue to run industry, and don't even attempt to explain how the workers can themselves run the economy and build up a state sector that differs fundamentally from the old one. Indeed, the traditional sentimental phrase in the theses about the state sector being among the "gains achieved by the proletariat on the basis of the October revolution" is just another way of calling the Soviet economy a "deformed workers' state". What does it matter if the theses disavow the term "deformed workers' state" if they uphold the content of this term? Thus Daum's theorizing collapsed in the heat of practice back into the errors of the old Trotskyism.

The Soviet bureaucracy was supposedly not a new bourgeoisie

. Because Trotsky held that the state sector was inherently socialist, he could not see a new bourgeoisie could arise on the basis of its control of the state sector. In The Revolution Betrayed, he argued that the Soviet bureaucracy did not constitute a ruling class.(9)

. One would think that Daum, who holds that the Stalinist regime was "statified capitalism" or state capitalism, would have discarded Trotsky's idea that there was no ruling class in the Soviet Union. But here again, Daum has maintained the idea, only in a vaguer form. He writes that there was a Soviet ruling class, and it was capitalist, yet it was not a bourgeoisie. He writes that:

. "The Stalinist ruling class is properly called capitalist since it embodies the capitalist relation in opposition to the proletariat; it is the exploiter of labor power, 'personified capital' in Marx's phrase. Since it did not evolve historically like the classical bourgeoisie that grew up under feudalism and does not operate the same way, we do not call it a bourgeoisie. Like Trotsky we label it a bureaucracy." (p. 233)

. But if state capitalism does not have to resemble Western market capitalism in every detail and yet still is capitalism, why should the state-capitalist ruling class have to resemble the Western European bourgeoisie in every detail or else not be a bourgeoisie? Because Trotsky says so!

. So, once again, Daum entangles himself hopelessly in contradictions. On one hand, to explain the difference between a workers' state and state capitalism, he writes that the difference is whether there is a bourgeoisie. In a workers' state, he says

"The proletarians working for the state still produce value and therefore surplus value. But they are not exploited, because there is no exploiting class, no bourgeoisie, to appropriate the surplus value; it goes to the state to be used for the collective good of the workers as determined by the collective working class..." (p. 131)

Here Daum characterizes the bourgeoisie as the class that exploits the working class and appropriates surplus value. But on the other hand, Daum claims that the Soviet ruling class is not a bourgeoisie although it exploits the workers, appropriates their surplus-value, and presides over a capitalist system.

. Daum claims that his approach is superior to all other theories of state-capitalism because he is the only one who sees that "the relation between capital and wage labor determines the entire character of the mode of production". (p. 29) Yet he refuses to call the class that exploited wage labor under the Stalinist system a bourgeoisie.

The Soviet Union in the 1930s: workers' state or state-capitalist regime?

. A number of Daum's contradictions center on his view that the Soviet Union didn't become state-capitalist until the very end of the 1930s. He denounces the Stalinists as oppressing the working class all through the 1930s, denying them any rights, and carrying out a violent counterrevolution. He says that the regime got worse and worse, working its way up to a "fascism-like apex" by the end of the 30s and becoming a "totalitarian" and "fascist-like regime" (pp. 239-240). And yet, he wants to claim the rapid industrialization of the 1930s as the victories of a "workers' state" and the sign of the superiority of such workers' states over capitalism. In this, he follows Trotsky, whose book The Revolution Betrayed opens with the same contradiction. On one hand, Trotsky boasts of the industrialization that has taken place precisely under Stalinism in the 30s and says that "Socialism has demonstrated it right to victory". (Ch. 1, Sec. 1) On the other hand, he tells us that in some fundamental sense "there is not yet . . . a hint of socialism in the Soviet Union" ("Introduction"), and he denigrates in sections 2-3 the economic growth that he eulogized in section 1.

. But Daum's has another reason to deny the capitalist character of the Stalinist system in the 1930s, and to pretend that there is some fundamental difference between it and the Soviet system in the 40s through 80s. Daum writes that if the Soviet Union weren't still a workers' state in the 30s, then this

"credits the great Soviet industrial buildup to a capitalist state. To say that capitalism broke through its own barriers against advancing the productive forces and expanded as rapidly as did the USSR marks capitalism as still progressive and challenges the Marxist assessment of the epoch of decay." (p. 160)

This is another example of Daum's Platonic economics: instead of studying the actual history of capitalist development in the 20th century, Daum once again reasons from abstract generalities. He reasons from what an "epoch of decay" must mean, rather than studying the imperialist epoch on the basis of what actually happens in it.

. On point after point, Daum and the LRP are at pains to ensure that nothing should upset the dogmas of Trotskyism. This is why they cannot deal with the competitive and anarchic forces in the state-capitalist economy without being involved in contradiction after contradiction. It is also why, despite their declarations that Stalinism is "statified capitalism" (state-capitalism), they end up with the same general attitude to the Stalinist state sector as other trends of Trotskyism.


(1) See Chapter 5, Section 1: Pseudo-socialist capitalism", from the subsection "Pseudo-planning" to the subsection "Unemployment", pp. 198-211. (Return to text)

(2) Landy's and other odd statements by LRP at that time about the supposed centralist tendencies of Gorbachevism seem to be an attempt to prove that LRP had correctly foreseen all the developments in the Stalinist economies, their earlier predictions having including the idea that the Stalinist economies, although adopting "the more traditional capitalist forms, like privatization and the market", nevertheless "could go only part way in decentralizing economies, given the dominant centralizing and concentrating tendencies at work in all forms of capitalist society, especially in this epoch." (Sy Landy, "Twenty Years of the LRP", in Proletarian Revolution#53, Winter 1997, p. 20, col. 1) Similarly Daum writes that:

. "Gorbachev and his allies do not wish to restore traditional capitalism or even to decentralize the economy in the interest of local bureaucrats or managers. On the contrary, their purpose is to weaken the ministerial satrapies in the interest of the national ruling class as a whole. Inefficient local managers will be made to modernize or get out of the way. The state will increasingly come to serve the particular interests of the strongest firms as most representative of the general interests of the ruling class. Indeed, the epochal trend toward economic concentration and centralization applies under Stalinist reformism: even though central administration is reduced the monopolies will still grow at the expense of their rivals." (p. 346) Here Daum resorts to the idea that the free-market centralizes the economy via monopolies, whereas elsewhere Daum often stresses that centralization is the opposite of market forces. Moreover, Daum suggests that Gorbachev's program may look like decentralization, but it isn't decentralization in the interest of the local managers! It's simply in the interest of the strongest firms, the strongest local managers! In the same way, one could claim that the U.S. merely seems to have a market economy but it isn't a market economy in the interest of all the capitalists because, after all, only the strongest firms survive, and the state serves their interests. (Text)

(3) See the sections on the labor-hour and labor-content in Part VI of the article Preobrazhensky, Ideologist of State Capitalism, Part 2 in the last issue of Communist Voice, vol. 4, #3, Aug.1998, and particularly see "The labor-content as an irrational measure". [For a further and more detailed elaboration of this, see my subsequent three-part series of articles in Communist Voice on "Labor-money and socialist planning", which repudiate labor-money in even greater detail while upholding the labor theory of value. These articles show that the labor theory of value does not mean that the labor-hour is the natural unit of calculation in a socialist society. See part one, part two, and part three.] (Text)

(4) Dave Franklin, "New Book on Marxist Theory: 'The Life and Death of Stalinism'" in Proletarian Revolution, Fall 1990, No. 37, p. 6, col. 2. (Text)

(5) "Healyism with a Human Face: New Stage Claimed in Budapest", Proletarian Revolution, Fall 1990, No. 37, pp. 9-10, which is the same issue with the review of Daum's book. The same passage by Trotsky is again quoted, with the same commentary on it in almost the same words, in "Death Agony of a Deformed Theory" in PR #38, Winter 1991, p. 4 col. 1. (Text)

(6) See the review of Trotsky's statements about the state sector which is contained in "The Trotskyist Opposition and the Soviet State Sector" in "Preobrazhensky: Ideologist of State Capitalism, Part Two" in CV vol. 4, #3, Aug. 1, 1998. (Text)

(7) See PR, Fall 1990, No. 37, pp. 15-16. The theses were "submitted to the Budapest Conference of the Unity of Workers East and West". (Text)

(8) Indeed, elsewhere the LRP polemicizes that "The notion that workers have nothing to defend under Stalinism is an error as disastrous as the 'workers' state' illusion." ("Death Agony of a Deformed Theory", PR #38, Winter 1991, p. 10, col. 1 and indeed the entire section entitled "Nothing worth defending?", pp. 9-10.) Here the LRP uses a vague formulation that might be understood in different ways. The formula might be taken to mean only that various benefits the workers had in the old system should be defended, or it might mean that the Soviet system was, in its economic basis, socialistic. As usual, the LRP tries to maintain whatever it can of the old Trotskyism by making it more ambiguous. But why would one defend the livelihood and living conditions of the masses under the slogan that there was something to defend in Stalinism? Should workers in the Western market economies defend their livelihood and rights under the slogan that there is something worth defending in Reaganism or in free-market economics?" (Text)

(9) See the section "Is the Bureaucracy a Ruling Class?" (Text)

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