Expropriated! - Part 2

As predicted in Part 1, when markets opened, they fell sharply around the globe, for in Asia, as they opened, then in the US Futures Markets, then in Europe. The Euro fell sharply against all other currencies, whilst, as predicted, the price of gold rose sharply back over $1600 an ounce. The Cypriot Government, has delayed the vote on the expropriation until Tuesday, and it looks like another Bank Holiday is going to be announced, to keep banks closed, and stop ordinary people getting their money out and creating a run on the banks.

In the meantime, Russia has come out vociferously against the move. About 30% of the money in deposits in Cyprus was Russian. Over the last few years, as the number of rich Russians has risen, they, like the Chinese, have begun to buy property and invest money across Europe. The Russian Government itself had previously lent Cyprus €2 billion to help it overcome its economic problems.

As a result of the confiscation of their money, its possible the Russians may now withdraw that loan, creating a new, worse problem for Cyprus. The Cypriot Government is now talking about modifying the terms of the expropriation, but that seems to demonstrate that the politicians and bureaucrats that dreamed this up, are totally incompetent and inept. Whether the confiscation is withdrawn in whole or in part, is now irrelevant. The cat is out of the bag, because we now know that the EU, the IMF etc. are quite prepared to openly steal people's money. On that basis no one can feel that their money is safe in a bank anywhere! The fact that they seem to have arrived at this deal without checking with the Russians what their response might be, seems to just further illustrate that the politicians are completely inept.

So far, the Bonds of peripheral economies have fallen, though not disastrously, and their has been a clear flight to safety, as gold has risen, and the price of safe sovereign bonds in Germany, the US and UK has risen again. Any run on Spanish, Portuguese and Italian banks is not likely to be visible in the way it has been in Cyprus, and was in Greece, with people queuing at ATM's. That is because, with no immanent danger that deposits in banks in those countries is posed, people can take more time to look to where they want to put their money. With large numbers of people across Europe now using Internet banking, the transfers will take place electronically. We will only know how much there has been a run on the banks, when one of them fails, or when we get the figures for deposits in a few weeks time.

Its because of the economic consequences, described in Part 1, that expropriation by the State is generally a bad idea. In Russia in 1917, it was not initially the idea of the Bolsheviks to expropriate all capitalist property. In fact, when some workers did expropriate capitalist property on their own initiative, the Bolsheviks told them to hand it back! The Bolsheviks were forced to introduce large scale expropriation only because of the outbreak of the Civil War, under the policy of “War Communism”. When the Civil War ended, the Bolsheviks, under the New Economic Policy, designed by Lenin, began privatising some of those enterprises, and encouraged the growth of small businesses, and Co-operatives, as well as the return of the market.

In the power struggle between Trotsky and Stalin, Trotsky failed
to win the support of workers inside and out of the Party, because
his stance up to that time, with policies opposing the independence
of Trades Unions, and for the militarisation of labour, had done little
to advance their cause.

Again, there were good reasons for that. In “State and Revolution”, Lenin had expressed the view that the workers would be able quite simply to take over the running of the state administration. But, the reality turned out to be quite different. Within months of taking power, the Bolsheviks found that the running of the State was not so simple, and they lacked people with the expertise to do it. So, former Tsarist state officials were brought back, just as former capitalists were brought back to manage enterprises that had been taken over, and which had fallen into chaos. In order to control the actions of these former tsarist officials, and capitalists, the Bolsheviks then had to introduce Commissars to oversee them. Why was that necessary? For one one obvious reason, they wanted to guard against sabotage, but more significantly, because the workers themselves were unable to undertake that function! That was complicated by other political factors. For example, the most advanced workers in Russia, were the railway workers. They were the most skilled, the most educated, and historically the most politically active. But, the railway workers were also mostly Mensheviks. That was why, the Bolsheviks opposed any independent activity by them, and why they sought to introduce the militarisation of labour in transport under Trotsky.

Particularly after WWII, Fordism was able
to sharply raise living standards as well as
profits because workers were incorporated
via those higher living standards and the
Welfare State.  It unleashed a wave of
innovation and creativity, that helped
raise productivity, and develop a wide range
of products.

But, its fairly obvious why this is economically inefficient, as well as politically dangerous. Its not just that you are having bureaucrats and soldiers being paid to stand over people as they work, its the fact that under those conditions, the people doing the work, even if they are not engaged in sabotage are not going to work very efficiently or productively. In fact, that is one of the problems that Soviet industry had right to the end. One of the reasons that Fordism was able to produce such large increases in productivity, was not just the introduction of mass production, but was the fact that mass production was possible, because of a largely incorporated workforce, and because it was able to generate innovation and creativity. That certainly will not happen where people feel that they are under threat, and where uncertainty abounds.

But, there is another problem too. Anyone who has worked for the Government, or been an elected politician knows the problem. The State is run at national and local level by the permanent bureaucracy, with politicians acting largely as a democratic gloss. The modern state operates pretty much in the way Hobbes had proposed. An originally elected Sovereign – here the top State officials – thereafter appoint their successors. The elected politicians, be they a Committee Chair in Local Government, or a Minister in National Government, then hold a similar position as that of the Commissar, there theoretically to set policy and oversee its execution. But, that never happens. The real power lies with the official who can make things work or not, and can make or break the politician. Inevitably, the politician/commissar “goes native”.

Cabinet Ministers and Committee Chairs strike up a close working arrangement with their top bureaucrat, and see their role as promoting their domain. That happened quickly under Thatcher in the early 1980's when Milton Friedman announced he had given up hope in her Government, because its Ministers were doing just that. Today, Vince Cable has been dubbed shop steward of the National Union of Ministers, as they all seek to defend the budgets of their particular Departments.

Inevitably in Russia, after 1917, a similar process followed spreading bureaucratism from the state and enterprises, into the Party itself.

But, there would have been no need to appoint such Commissars had the Russian workers been able and willing to have run those enterprises, and departments of the State themselves. Indeed, there would have been no need to have brought back the former managers, or tsarist officials, other than in a wholly subservient role to the workers, as Marx described happened with the textile Co-operatives set up by the workers in Lancashire.

This was a problem that Lenin himself had recognised earlier. Lenin in Capitalism In Agriculture had described Kautsky's account of the positive role played by Co-operatives such as that at Ralahine, as well as other Co-operatives in Britain and North America. But, he goes on to elucidate why such a venture would have been unlikely to succeed in Russia.

“All these experiments, says Kautsky, irrefutably prove that it is quite possible for workers to carry on large-scale modern farming collectively, but that for this possibility to become a reality "a number of definite economic, political, and intellectual conditions" are necessary. The transition of the small producer (both artisan and peasant) to collective production is hindered by the extremely low development of solidarity and discipline, the isolation, and the "property-owner fanaticism," noted not only among West-European peasants, but, let us add, also among the Russian "commune" peasants (recall A. N. Engelhardt and G. Uspensky). Kautsky categorically declares, "it is absurd to expect that the peasant in modern society will go over to communal production" (S. 129).”

Lenin struck up a friendship
with Armand Hammer of
Occidental Petroleum, who tried
to attract western capital to invest
in the USSR, in Joint Ventures.

But, it was precisely these “economic, political and intellectual conditions” that were lacking in Russia after 1917, that would have allowed the workers and peasants to have assumed the role of ruling class. That indeed, is one reason Lenin looked to a revolution by European workers to come to their assistance. In the meantime, Lenin recognised the need to draw back and give Capitalist production a bigger role for a longer period of time to effect the transition. That was not just in terms of the NEP, in handing back businesses, and reintroducing the market, but his attempts to encourage large western businesses to invest in Russia in joint ventures. Lenin, for example, struck up a friendship with Armand Hammer of Occidental Petroleum, as part of trying to attract such big business. Unfortunately, he had very little success in doing so, and after Stalin came to power, and instituted the extreme of top down statism, and arbitrariness, any hope of doing so was completely lost.

It is something Lenin also recognised in promoting the development of Co-operatives after the Revolution. In his 1923 speech “On Co-operation” - he said,

“From the point of view of the “enlightened” European there is not much left for us to do to induce absolutely everyone to take not a passive, but an active part in cooperative operations. Strictly speaking, there is “only”one thing we have left to do and that is to make our people so “enlightened” that they understand all the advantages of everybody participating in the work of the cooperatives, and organizes participation.“only” the fact... But to achieve this “only", there must be a veritable revolution—the entire people must go through a period of cultural development... But it will take a whole historical epoch to get the entire population into the work of the cooperatives through NEP. At best we can achieve this in one or two decades. Nevertheless, it will be a distinct historical epoch, and without this historical epoch, without universal literacy, without a proper degree of efficiency, without training the population sufficiently to acquire the habit of book reading, and without the material basis for this, without a certain sufficiency to safeguard against, say, bad harvests, famine, etc.—without this we shall not achieve our object. The thing now is to learn to combine the wide revolutionary range of action, the revolutionary enthusiasm which we have displayed, and displayed abundantly, and crowned with complete success—to learn to combine this with (I'm almost inclined to say) the ability to be an efficient and capable trader, which is quite enough to be a good cooperator. By ability to be a trader I mean the ability to be a cultured trader. Let those Russians, or peasants, who imagine that since they trade they are good traders, get that well into their heads. This does not follow that all. They do trade, but that is far from being cultured traders. They now trade in an Asiatic manner, but to be a good trader one must trade in the European manner. They are a whole epoch behind in that.”

But, it once again emphasises the point that there is a vast difference even when it comes to expropriation, between expropriation done by workers themselves, and expropriation done by a State from the top down. The latter inevitably comes to grief, and results in the former owners continuing to benefit by one means or another, or else, or in addition to, their position being replaced simply by some bureaucrat. The former is more difficult to achieve, because it requires workers themselves to have undergone a change of consciousness, and to achieve it using their own strength, but for that reason it is more stable, and transformative. As Trotsky put it,

“It would of course be a disastrous error, an outright deception, to assert that the road to socialism passes, not through the proletarian revolution, but through nationalization by the bourgeois state of various branches of industry and their transfer into the hands of the workers’ organizations.”

Nationalised Industry and Workers Management

But, what is the proletarian revolution? It is not the seizure of state power, though that is a part of it. The seizure of state power is merely a political revolution. But a political revolution is lost unless it is merely the culmination of a social revolution i.e. the ending of the social dictatorship of one class resting upon its property, and the beginning of that of the revolutionary class. The latter requires that what Marx called the “battle of democracy” has been won, that the workers have seen that a new form of production is possible and superior to the existing one, and that they have committed themselves to transforming society according to that model. In fact, history is scattered with examples of political revolutions that have been carried out prior to the latter transformation, and they have all come to grief, because they have lacked the necessary economic and social base.

Engels described this situation in his pamphlet on the Peasant War in Germany. He wrote,

“The worst thing that can befall a leader of an extreme party is to be compelled to take over a government in an epoch when the movement is not yet ripe for the domination of the class which he represents and for the realisation of the measures which that domination would imply. What he can do depends not upon his will but upon the sharpness of the clash of interests between the various classes, and upon the degree of development of the material means of existence, the relations of production and means of communication upon which the clash of interests of the classes is based every time. What he ought to do, what his party demands of him, again depends not upon him, or upon the degree of development of the class struggle and its conditions. He is bound to his doctrines and the demands hitherto propounded which do not emanate from the interrelations of the social classes at a given moment, or from the more or less accidental level of relations of production and means of communication, but from his more or less penetrating insight into the general result of the social and political movement. Thus he necessarily finds himself in a dilemma. What he can do is in contrast to all his actions as hitherto practised, to all his principles and to the present interests of his party; what he ought to do cannot be achieved. In a word, he is compelled to represent not his party or his class, but the class for whom conditions are ripe for domination. In the interests of the movement itself, he is compelled to defend the interests of an alien class, and to feed his own class with phrases and promises, with the assertion that the interests of that alien class are their own interests. Whoever puts himself in this awkward position is irrevocably lost. We have seen examples of this in recent times. We need only be reminded of the position taken in the last French provisional government by the representatives of the proletariat, though they represented only a very low level of proletarian development. Whoever can still look forward to official positions after having become familiar with the experiences of the February government — not to speak of our own noble German provisional governments and imperial regencies — is either foolish beyond measure, or at best pays only lip service to the extreme revolutionary party”

In part 3, I'll look at how Trotsky dealt with the question of expropriation in respect of Mexico, and how his position was based on the approach of Marx, Engels and Lenin, and had to confront the sectarians and ultra leftists.

Back To Part 1

Forward To Part 3