Expropriated - Part 3

On Tuesday evening, the Cypriot Parliament voted against the proposed levy. Even the governing party abstained. Part of the reason seems to be the growing storm that surrounded the expropriation. That had brought thousands of ordinary Cypriots out on to the streets, to show their anger at being expropriated. That anger had forced the government to keep banks shut until at least Thursday, with the prospect that some of them might never open again. It now looks likely that they will stay closed until next Tuesday at least. Even after the vote to reject the EU proposal, it seems clear that when banks do open, many ordinary Cypriots will still remove their savings. Why would you believe that they will not try this again? On Newsnight last night, one Government MP put forward as an alternative proposal that they might nationalise the pension scheme of state workers. In other words, instead of expropriating up to 10% of workers savings, they would instead expropriate 100% of state workers pensions funds!!!

Partly, the reason lies with Russia, and shows why top down state expropriations are usually a bad idea. Russia for decades has had a close relation with Cyprus, a relation that goes back to their shared Orthodox religion, and opposition to the Ottoman Empire. Although, there are now many Russians living and investing across Europe, as well as in the US – the talk about the Russian Mafia laundering money through Cyprus is thoroughly hypocritical, given the amount of Russian money involved in buying multi-million pound houses in London, as well as buying up many British football clubs! - there are, therefore, a greater proportion invested in Cyprus, though they are rapidly buying up places in other Southern European countries, such as Spain.

In addition to the large amount of Russian money deposited in Cypriot banks, by residents, there was also a lot of Russian money invested in Cyprus. The threat to expropriate some of it, instigated by the EU and IMF, was inevitably going to provoke, and may have been intended to provoke, a reaction, given that Russia has already lent Cyprus a lot of money to help it out of previous problems. In part then, the decision seems to have been a recognition by Cypriot MP's, that they might have a better friend in Russia than they have in the EU, and IMF. Russia's Gazprom, not out of any sense of altruism, it has to be said, is reported to have offered to underwrite the money needed by Cyprus, €7 billion (which is peanuts) in return for rights over the newly discovered gas fields off the coat of Cyprus, thought to be worth tens of billions of Euros.

Herein lies the main problem with state expropriations, the problem recognised by Lenin, that is that in the modern world, economies are dependent on foreign capital. They need it both to trade with, but also to provide investment. That is particularly true of smaller economies, but in a globalised economy it is even true of big countries. Today, it is probably only within supra-national states like the EU, that any kind of protection can be obtained. Even then, because EU politicians have failed to take the necessary political decisions to resolve the problems in Europe, by creating a single European State, with a fiscal as well as monetary union, with a single sovereign bond, thereby mutualising debt, and allowing each state to borrow at the same interest rate, even the EU has had to look to Russia, with its massive $500 billion of foreign currency reserves, to help bail out and finance its own proposed debt vehicles.

Some of these problems of expropriation and of collectivisation were understood and explained by Trotsky in his writings on Mexico. For example, referring to the plans of the Mexican Government for collectivisation of agriculture along Soviet lines, Trotsky wrote,

“The results are well known. Agricultural production fell off by half, the peasants revolted, tens of millions died as the result of terrible famines. The bureaucracy was forced to partially re-establish private agriculture. Nationalised industry had to produce hundreds of thousands of tractors and farm machines for the kolkhozes to begin making progress. Imitating these methods in Mexico would mean heading for disaster. It is necessary to complete the democratic revolution by giving the land, all the land to the peasants. On the basis of this established conquest the peasants must be given an unlimited period to reflect, compare, experiment, with different methods of agriculture. They must be aided, technically and financially, but not compelled. In short, it is necessary to finish the work of Emiliano Zapata and not to superimpose on him the methods of Joseph Stalin.”

He goes on in relation to the extending of credit in agriculture.

“The collective enterprises must be kept viable, but the small individual farms must continue to survive and grow as well during the historical period necessary to accomplish “complete collectivisation”; and this period may entail several decades.

If methods of compulsion are used, this will only produce collectives that exist at state expense, while lowering the general level of agriculture and impoverishing the country.”

But, Trotsky is even clearer when it comes to industry and state capitalism. He too points to Lenin's policy of attempting to attract foreign capital.

“It is true that the realisation of the democratic agrarian revolution, i.e., handing over all the arable land to the peasantry, would increase the capacity of the domestic market in a relatively short time; but despite all that, the rate of industrialisation would be very slow. Considerable international capital is seeking areas of investment at the present time, even where only a modest (but sure) return is possible. Turning one’s back on foreign capital and speaking of collectivisation and industrialisation is mere intoxication with words...

The government defends the vital resources of the country, but at the same time it can grant industrial concessions, above all in the form of mixed corporations, i.e. enterprises in which the government participates (holding 10 percent, 25 percent, 51 percent of the stock, according to the circumstances) and writes into the contracts the option of buying out the rest of the stock after a certain period of time. This government participation would have the advantage of educating native technical and administrative personnel in collaboration with the best engineers and organisers of other countries. The period fixed in the contract before the optional buying out of the enterprise would create the necessary confidence among capital investors. The rate of industrialisation would be accelerated...

Lenin accorded great importance to these concessions for the economic development of the country and for the technical and administrative education of Soviet personnel. There has been no socialist revolution in Mexico. The international situation does not even allow for the cancellation of the public debt. The country we repeat is poor. Under such conditions it would be almost suicidal to close the doors to foreign capital. To construct state capitalism, capital is necessary.”

Of course, the main reason that Lenin had been unable to attract foreign capital to Russia, was precisely the fact of the expropriations undertaken under War Communism. Prior to the revolution, the Bolsheviks had actually been provided with large amounts of money from US capitalists, who also financed the Mensheviks, and other democratic forces in Russia. That was not out of any particular attraction to the Bolsheviks, but out of opposition to Tsarism, which they saw as a feudal obstacle in the way of the capitalist development of Russia.

It was on this basis of recognising the need to proceed according to what the economic and social conditions made possible, rather than simply some ultra-left, statist, emotional outburst for immediate expropriation by the State that distinguished Lenin and Trotsky's position from that of the sectarians and ultra-Lefts. They recognised alongside Marx and Engels the need for a period of transition between Capitalism and Socialism, and the need not just for an adequate development of the forces of production but of the most important force of production – the development of the workers themselves. Lenin, for example, believed that the NEP would need to run for at least 25 years, and part of his reason for wanting foreign capitalist investment was to be able to bring about the necessary transformation of the Russian workers, under the whip of competition. Lenin made clear that he thought that the fact that the workers would be exploited by this capital during the transition period would be a price worth paying, indeed a price they had to pay.

In his April 15^th 1938, letter to J.P. Cannon, for example, Trotsky in calling for a reorganisation of the Mexican section, refers to the ultra-left, sectarian Galicia, and his complaint that the Cardenas Government had compensated the expropriated capitalists. Trotsky writes, dismissively,

“Your participation in the meeting here had one 'unexpected' result. Galicia, in the name of the revived League, published a manifesto in which he attacked Cardenas for his policy of compensating the expropriated capitalists, and posted this manifesto principally on the walls of the Casa Del Pueblo. This is the 'policy' of these people.”

The approach of Trotsky, was consistent with the gradualist approach to the transformation of Capitalist property adopted by Marx, Engels and Lenin. Even in their most statist document, The Communist Manifesto, written when they were still young and still separating themselves from radical Liberalism, and the statist heritage of Hegel, Marx and Engels wrote,

“The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class;”

The important point here is that this is a proposal only for the period AFTER the working class has become the ruling class, and established a Workers State (a state, which they argued should immediately begin to whither away!). It is certainly not an argument for calling on the existing state to carry through nationalisation! But, also, its important to note that even having won state power, this wresting of all capital from the bourgeoisie is not something to be done by some process of mass, immediate expropriation but is to be achieved “by degree”. Finally, its important to understand what Marx and Engels mean by centralising the means of production in the hands of the State. Certainly in their later writing it is clear that this is not to be understood in the way that statists understand it, and the way it has been implemented by Stalinists and reformists, in the form of nationalisation.

In arguing for the development of co-operatives, what Marx and Engels elucidated was the problem of these operating as individual enterprises. The solution they advanced was that all co-operatives should belong to a single Co-operative Federation, which would operate like a holding company, receiving a proportion of each individual co-operative's profits. That is the appropriate response under Capitalism, but once the workers have secured state power for themselves, then this Co-operative Federation essentially becomes the Workers State, because for Marx and Engels the role of this State is essentially to act increasingly as merely a means of administration. Engels made clear in several later writings that in the intervening, transitional period between Capitalism and Socialism, when the Co-operatives would play a central role as the transitional form of property, State Ownership meant nothing more than this, than that the State simply held the deeds to the property. The day to day ownership and control of each Co-operative would remain in the hands of its workers. At the same time, the organs that the workers develop on the back of that Co-operative property, such as their own democratic forums, the defence squads and militia, form the other elements of that developing Workers State, its bodies of armed men, in opposition to the existing Capitalist State.

This is clear in their later writings, where they are writing more analytically, rather than in the propagandist terms of the Manifesto. For example, Marx writes in the Grundrisse,

"As the system of bourgeois economy has developed for us only by degrees so too its negation, which is its ultimate result." p712.

Of course, its necessary to distinguish between two different periods. There is the period where Capitalism reigns supreme, and where the development of the Co-operatives, like the develoment of the Trades Unions is essentially a defensive measure adopted by the workers. Both grow as the power of the workers develops alongside the development of Capital. During this period the expansion of the Co-ops is restricted because of the power of the bourgeoisie and its State. But, the Co-operatives can and do expand, and in doing so they demonstrate their supeiority to the workers over capitalist property, including state capitalist property. On the back of that, the workers engage in class struggle to defend and extend this worker owned property, and the co-operative democratic and state forms upon it. They fuse the class struggle on all its fronts via their co-ops, their Trades Unions, and their Party. For example, Lenin in a resolution to the International Socialist Conference in Copenhagen in 1910, proposed,

“It is quite clear that there are two main lines of policy here: one—the line of proletarian class struggle, recognition of the value of the co-operative societies as a weapon in this struggle, as one of its subsidiary means, and a definition of the conditions under which the co-operative societies would really play such a part and not remain simple commercial enterprises...

That these societies can assume great importance for the economic and political mass struggle of the proletariat by supporting the workers during strikes, lock-outs, political persecution, etc. ..”

This struggle of the workers to defend and extend worker owned property, is what transforms the workers, and makes the workers fit both in terms of skill, and in terms of consciousness to be the ruling class, it is the real class struggle. Its culmination is the seizure of state and political power by the workers. From that point on, the state becomes the means by which the workers property and its extension is defended against attack by the bourgeoisie. It is under cover of its protection that the workers then begin to “ wrest, by degree, all capital from the bourgeoisie”, but as Marx makes clear, it is precisely because this process must be undertaken by the workers themselves, and at the pace at which their consciousness and ability to take on the necessary functions allows, which means that this process must be gradual, that "As the system of bourgeois economy has developed for us only by degrees so too its negation, which is its ultimate result."

Otherwise, if this process is conducted by the State from the top down, as Trotsky pointed out, “If methods of compulsion are used, this will only produce collectives that exist at state expense, while lowering the general level of agriculture and impoverishing the country.” Marx and Engels, set out the means by which this would be achieved. In Capital Marx writes,

“The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”

And emphasising that he saw this method as a gradual process he writes of the method by which this expansion of Co-ops was to be accomplished.

“The credit system is not only the principal basis for the gradual transformation of capitalist private enterprises. into capitalist stock companies, but equally offers the means for the gradual extension of co-operative enterprises on a more or less national scale...

The two characteristics immanent in the credit system are, on the one hand, to develop the incentive of capitalist production, enrichment through exploitation of the labour of others, to the purest and most colossal form of gambling and swindling, and to reduce more and more the number of the few who exploit the social wealth; on the other hand, to constitute the form of transition to a new mode of production.”

And now with the State in their hands, the workers would be able to utilise this Credit to develop those Co-operatives, and buy up the Joint Stock Companies, as their own resources increased, and those of the bourgeoisie declined. Today, with £800 billion in the workers pension funds, the ability to mobilise those, if they were under the democratic control of the workers, as they should be would speed up that process massively.

It is this process of the workers themselves developing their own form of co-operative property that is the social revolution. As Marx puts it in the Critique of the Gotha Programme,

“That the workers desire to establish the conditions for co-operative production on a social scale, and first of all on a national scale, in their own country, only means that they are working to revolutionize the present conditions of production, and it has nothing in common with the foundation of co-operative societies with state aid. But as far as the present co-operative societies are concerned, they are of value only insofar as they are the independent creations of the workers and not protégés either of the governments or of the bourgeois.”

Where workers have made that leap in consciousness and either develop Co-operatives from scratch, or else expropriate capitalist property where the existing bosses threaten closure etc. Then Marxists support the workers in that struggle, but advise them that to overcome the resistance of Capital, it will be necessary to join with other co-operators, to gain the support of the Trades Unions, and to support workers in their TU struggles, and ultimately it will be necessary to win political power throughout society. As Engels put it in a letter to Bebel,

“My suggestion requires the entry of the cooperatives into the existing production. One should give them land which otherwise would be exploited by capitalist means: as demanded by the Paris Commune, the workers should operate the factories shut down by the factory-owners on a cooperative basis. That is the great difference. And Marx and I never doubted that in the transition to the full communist economy we will have to use the cooperative system as an intermediate stage on a large scale. It must only be so organised that society, initially the state, retains the ownership of the means of production so that the private interests of the cooperative vis-a-vis society as a whole cannot establish themselves.”

Note that even in terms of a role as aholding company, Engels states that it is only “initially” that the state occupies that role, signifying his and Marx's view of the State withering away.

The workers in Cyprus today should begin a process of expropriation themselves. If the banks are allowed to go bankrupt, the workers should them take them over, taking no responsibility for their previous debts. They should run them themselves as Co-operatives, and link them to the workers Pension Funds, and should begin a process of uniting all the Co-operative banks and financial institutions across Europe, as part of building a Europe wide Federation of Workers Co-operatives.

Back To Part 2