The May-Corbyn Pact

Yesterday, I described Jeremy Corbyn's alliance with Theresa May, to push through some form of Brexit deal, “in the national interest”, as having an historical precedent in the actions of J. Ramsay MacDonald, in 1931, when he split the Labour Party, to push through conservative measures, and formed a National Government with the Tories, who were the main beneficiaries of his treachery. But, there is another relevant historical analogy. It is that of the Hitler-Stalin Pact of 1939. 

For Stalinists across the globe, including those of the British Communist Party, who had continued to profess the nature of the USSR, as a revolutionary, communist, and therefore, also anti-fascist state, the pact forced a sharp about face to justify the alliance between the USSR and Nazi Germany. In reality, there had been close connections between the Stalinists and the Nazis and their supporters across the globe for many years. The USSR had been enabling Nazi Germany to break the terms of The Treaty of Versailles for much of the 1930's, by facilitating its rearmament, provision of necessary materials etc. The Stalinist GPU cooperated across the globe with the Gestapo and other Nazi agents in assassinating their common opponents amongst the Trotskyists, or, as in Spain, the POUMists. The GPU cooperated with Nazi agents in Norway, as Trotsky sets out in his writings, to be able to ransack his archives. Indeed, as Trotsky himself wrote, the only difference between the regime of Stalin, and that of Hitler, was that the former was more brutal. 

On the face of it, there should have been no basis for a pact between a supposedly communist state (USSR) and Nazi Germany. The Nazis had spit fire and fury in proclaiming their hatred of the USSR, just as the Stalinists had spit back their opposition to fascism. In the same way, May and the Tories have launched into venomous attacks against the “Marxist” Corbyn and the Labour Party he leads, whilst Corbyn has vociferously criticised the anti-working-class measures and austerity policies of the Tories. Yet, here they are, in the second week of “constructive” talks between them, as Corbyn attempts to enable May to get her reactionary Brexit agenda approved in parliament. 

Looking back to the Hitler-Stalin Pact, it was, in fact, not that surprising that it came about, and nor, for similar reasons, is it surprising that Corbyn is now trying to assist May in pushing through her reactionary Brexit agenda. But, as Marx said, in The Eighteenth Brumaire, quoting Hegel, history repeats itself, but the second time as farce. 

Nazi Germany and the USSR were two different types of class state, but they shared a similar economic basis. The USSR, as a result of the October Revolution, and subsequent civil war, had torn up the old social relations. The landlords had been liquidated as a class, the bourgeoisie, which had, like the working-class, been still relatively small and weak, had never had control of the political regime, except for a few months after February, when the Tsarist regime collapsed. The political regime passed almost directly into the hands of the Bolsheviks, as the political representatives of the workers. The social foundations of landlordism and capitalism no longer existed, leaving the working-class as the ruling class, and the state, therefore, as a workers state. 

However, precisely because this working-class was a minority in society, the peasantry forming, by far, the largest single class, and being so weak, and undeveloped, could not exercise political power in its own name. It was a similar situation as that which existed in Britain following the Civil War, when the infant bourgeoisie was able to overthrow the power of the King, but proved incapable of ruling in its own name, leading to the dictatorship of Cromwell. A similar situation arose in France, with the rise of Napoleon, and then a succession of effectively Bonapartist and Monarchist regimes that sought to bring about the industrialisation of the economy, until such time as the industrial bourgeoisie, and industrial proletariat was strong enough to create a social-democratic state, with the creation of the Third Republic in 1870. 

From the beginning, therefore, this workers' state was a deformed workers' state, with political power being exercised on behalf of the working-class by a Bonapartist regime, based upon the Bolshevik Party, and a state bureaucracy with which it was increasingly fused. The Russian economy, whilst it had undergone rapid change, in the latter part of the 19th century, and early twentieth century, was still massively undeveloped, with 80% of the population still employed on the land. It needed, to industrialise fast. That was why Lenin had placed so much emphasis on the need to attract large amounts of foreign capital, in the shape of foreign industrial companies, who could establish production in Russia, providing the latest equipment and techniques, as well as being able to provide the necessary training for Russian managers and technicians in these modern techniques. Lenin, like Trotsky, was a strong advocate of the kind of Taylorist, scientific management techniques that were being applied by large capitalist enterprises in the US. 

Engels, in Anti-Duhring had described the way that the same process of concentration and centralisation of capital that had resulted in the replacement of the monopoly of private capital by the domination of socialised capital – joint stock companies, cooperatives, corporations, trusts etc. - if taken to its logical conclusion, would mean that all capital would become “state capital”. That is that the state would slowly have to nationalise all of these large corporations, and operate them according to some central plan, allocating capital to them in order to maximise profits. This would not mean the abolition of capitalism, only that the state had become the capitalist par excellence. The capitalist class itself, which had already largely removed itself from its role in production, and had become a class of coupon clippers, living off the interest/dividends on their bonds and shares, would simply continue in this role, by now just lending money-capital to this state-capitalist, and drawing their revenues from these government bonds. 

Lenin described the state in Russia as being a workers state with bureaucratic deformations, but he described the economic foundations of that state as being those of such a state capitalism, as described by Engels. Arguing against, a group of Russian left-wing communists, Lenin described their opposition to his policy of the New Economic Policy, which reintroduced the market, and allowed a return of some capitalist enterprises, along with the drive to get large foreign capitalist enterprises to invest in Russia, as ultra-leftism. As Trotsky was to write later, in relation to Mexico's Second Six Year Plan, if you are to build state capitalism, you first need capital. And, as Lenin and Trotsky also realised, following Marx and Engels, you cannot build Socialism, unless you first have accumulated large amounts of capital, so as to industrialise your economy, and thereby create the conditions in which the working-class can become the ruling-class, i.e. that is no longer pressed, everyday, by basic economic considerations of survival, and can then devote an increasing amount of time to educating itself, and to participating in the day to day matters of management of production and society, so that the state itself can wither away. 

In Russia, in the years after the revolution, the working-class was in no position to achieve that. The task of modernising the economy, which could now only be achieved on the basis of furthering the interests of the large-scale industrial production that now dominated the economies of the world's leading countries, could only be carried forward by the state itself, and the bureaucracy that dominated it. It had to do that on the basis of the property relations that the revolution had established, and the liquidation of the existing exploiting classes that meant that the working-class had become, by default, the ruling social class. 

Germany, by contrast, was a capitalist state. The German revolution had failed in 1923. But, like all other major economies, by that time, it was dominated by large-scale socialised industrial capital. As Engels pointed out in his later Prefaces to The Condition of The Working Class in England, this condition also meant that the middle class “functioning capitalists”, the professional, day to managers, technicians and administrators, who did not own capital, but whose relation to it was now purely functional, as Marx describes it, in Capital III, Chapter 27, could only exercise political power with the support of the industrial working-class, and this was the material foundation upon which social-democracy arises. The state has to pursue policies that ensure its own basis, and survival. Tsarism was based upon the political regime of the landed aristocracy, yet, as Lenin describes in his polemics against the Narodniks, the Russian state was a capitalist state that had to pursue capitalist policies, such as Stolypin's reforms. After the defeat of the 1848 revolution, the Junkers exercised political power in Germany, but Bismark was forced to follow through policies of rapid capitalist industrialisation, because otherwise, Germany would not have survived against the competition of Britain. The same was true of Louis Napoleon in France, and across the globe, the same process was being undertaken in Japan. 

Objectively, the class nature of the state is determined by the nature of the productive relations that underpin the economy, and the dominant property relations that arise upon them. That can, and frequently does, differ from the nature of the political regime, with the two only being brought into alignment via a subsequent political revolution. As the contradiction between the two results in a crisis. 

Social-democracy is a transitional form of state that arises where the monopoly of private capital has been burst asunder, and has given way to the dominance of large-scale socialised industrial capital. In itself, as Marx himself describes in Capital III, it represents a fundamental contradiction, between the interests of this real capital, and the interests of the money-capitalists (shareholders, bondholders, coupon clippers). The former needs to accumulate capital so as to expand production and profits, the latter seeks to maximise its revenues from interest, which is a deduction from profits, and so limits accumulation. The former needs conditions of long-term stability within a framework of regulation and planning, which requires greater industrial democracy, the latter seeks to prevent any such extension, which threatens its existing exercise of control, via its shareholdings, and the executives it puts in place to look after its interests. 

In a sense, as I have said elsewhere, both Nazi Germany and Stalinist Russia represented a form of social-democracy, but without the democracy. In the 1920's, as with the 1970's, the crisis phase of the long wave cycle meant that capital accumulation had reached an impasse. Progressive social-democracy had a way out of that impasse. It meant that the interests of real capital accumulation had to be put above the interests of the owners of loanable money-capital (shareholders and bondholders). The economic solution suggested by Keynes was one part of that, not just of the state supplementing aggregate demand, via deficit spending, but of the need to extend the role of the state in terms of creating the overall macro-economic framework of planning, and regulation, and inevitably, as Keynes and others promoted, after WWII, that would involve extending that planning and regulation over a wider geographic basis, via the creation of global para state bodies, like the IMF, World Bank, GATT/WTO etc. 

The real basis of the crisis that capital faced in the 1920's, as in the 1970's, and as it faces in every such crisis phase of the long wave is that described by Marx, in Capital III, Chapter 15, and in Theories of Surplus Value, Chapter 17 et al, as I described yesterday. It is that, in the period of long wave uptrend, capital accumulates initially by introducing more new machines and technologies to replace older machines (intensive accumulation), but increasingly, as the older machines have been replaced, it means installing more and more of the new machines, and technologies (extensive accumulation). That means that the former increase in productivity slows down, and more labour is employed. Although, at first, workers can work overtime, additional workers can be employed from reserves, eventually the limits of increasing the length of the social working day are reached, so that absolute surplus value cannot be raised. With the rise in productivity slowing, it becomes harder to also increase relative surplus value, by cheapening wage goods. So, the demand for labour rises faster than supply, pushing up wages, and so squeezing profits. 

The answer to this, as Marx describes, is that capital has to engage in a process of technical innovation. That creates new labour-saving machines, creating a relative surplus population. That reduces the pressure on wages, and so increases the rate of surplus value. In economies of the sort that Marx was analysing, based upon large scale manufacturing production, it means that each unit of labour then processes more material. Ironically, therefore, this solution to the crisis of overproduction of capital, and the squeeze on profits, means that relatively less of the surplus value creating substance – labour – is employed compared to the amount of raw material processed, so that the rate of profit/profit margin (s/(c + v)) or p/k falls. This is the basis of Marx's Law of The Tendency For the Rate of Profit To Fall. It means that whilst the rate of surplus value rises, as productivity increases, and the value of labour-power and wages falls, and the mass of surplus value, also rises, as capital expands, it rises at a slower rate than the rise in the cost of production, due to the faster increase in the consumption of raw material. 

The other part of the solution relates to the other factor discussed, yesterday, which is that as wages expand, causing workers to satisfy more of their basic consumption needs, so it becomes harder to get them to consume more of those commodities without the prices of them falling by larger proportions – the price elasticity of demand. That goes along with the fact that although the workers then consume more of the luxuries that the capitalists previously consumed, they still can't afford to consume many of them, and not enough to compensate for the fall in consumption by the capitalists and others resulting from the fall in their profits, rents, interest part of which went to finance their personal consumption. So, as part of this technological innovation, not only must it reduce the cost of these luxuries, so that more of the population can buy them, increasingly as necessaries, but it requires whole new ranges of new types of commodities to be created which can act as objects of workers consumption, so that profits can be realised. 

On the basis of socialised capitals that assume astronomical proportions compared to the private capitalist enterprises of the early 19th century, the vast levels of capital investment required can only take place within the kinds of framework that a social-democratic state provides. So, although Nazi Germany was a capitalist state, not a deformed workers state like Russia, it found itself in a similar situation. It needed to engage in large scale investment in real productive-capital, so as to raise productivity, reduce the value of labour-power, create a relative surplus population, increase the mass of profits, and be able to create whole new industries that would expand its market, so that profits could be realised. 

The German working-class, having failed in the 1923 Revolution was thrown back, and could not push through a solution based upon an extension of industrial democracy. The large money lending capitalists themselves had no interest in allowing such a thing to occur. The Nazis provided the solution, just as the Mosely Manifesto had provided a Keynesian solution in Britain, and Roosevelt's New Deal proposed in the US. The Nazis created a National Economic Council made up of the leading industrialists to create a macro-economic planning framework within which large-scale investment could be undertaken, and directed by the state, in a similar way to which the Stalinist state in Russia attempted to achieve the same result. It used Keynesian deficit spending to build autobahns, and other such infrastructure, which itself acted to raise the level of social productivity, and which also provided a basis for an expansion of those new new industries upon which the new expansion would be based, such as car production. 

What the economic policies of the Stalinists, and the Nazis, as well as their co-thinkers such as Mosely had in common, however, was that they were based upon economic nationalism. They were based upon creating this framework of economic expansion, and of capital accumulation, whilst remaining within the confines of a reliance on the nation state, and thereby in the interests of the domestic ruling-class, at the expense of others. 

Objectively, therefore, the convergence of interests between Nazi Germany and Stalinist Russia, was based upon a common economic foundation. It was a recognition that the fortunes of the state depends upon the dominant, large-scale socialised capital. In Russia that socialised capital was in the hands of the state itself; in Germany its control rested still in the hands of large shareholders, or the Nazi state, which acted on their behalf. It is actually wrong, therefore, to describe Nazism as reactionary, in the true sense of the term. It is more correct to describe it as conservative. It recognises the objective reality that the future of the state depends on large-scale socialised capital, but prevents the necessary further development of that reality, in the form of industrial democracy, and an extension of it across national borders. 

It is more correct to describe the policies of the Brexiteers as reactionary. Their aim is not to conserve the current reality, and simply prevent any further development of it. It is rather to turn the clock backwards. They want to unwind the social progress that has been achieved by going beyond the nation state, and establishing the EU; they want to turn the clock back from the age of the dominance of the economy by large-scale socialised capital, and return it to its early 19th, or even 18th century character of small-scale private capitals, each competing on the basis of red in tooth and claw free market competition, which, in turn, entails the destruction of any kind of planning and regulation, or any kinds of minimum rights for workers, consumers or the environment. 

In other words, the true nature of the May-Corbyn pact is not just history repeating itself of the Hitler-Stalin Pact, but its repetition as farce. The latter was, for all its grotesque consequences a pact between forces seeking to base themselves on the recognition of and development of the progressive nature of the large-scale productive-relations existing within society. The former is based upon a reactionary desire to turn back the existing productive relations to a less mature stage of development, confined within national borders. 

As with MacDonald who was repaid for his treachery by seeing his National Labour Party reduced to just 13 MP's, whilst the Tories won 473, so too with the Hitler-Stalin Pact. The pact enabled Hitler to focus on attacking his most immediate opponents in Europe. Had Hitler pursued his attack at Dunkirk, Britain would have been finished. As it was, Britain was essentially defeated anyway, by 1940, until it was rescued by the USSR, and by the US, when it joined the war at the end of 1941. Stalin continually refused to believe the advice he was being given about Hitler preparing to attack Russia in 1941. In a similar way today, there are no shortage of supporters of Corbyn, who tell him to ignore the fact that his pro-Brexit stance is losing him support amongst the tens of thousands of Labour activists, and voters for whom Brexit is anathema. They try to proclaim that such suggestions are all propaganda from his Blair-right opponents, just as Stalin believed that the stories of Germany's military preparations for Operation Barbarossa were all being spread by western imperialism in league with Trotskyists. 

The result was that when Germany did strike Russia hard, it was wholly unprepared. Russia in short order lost 25% of its territory, including important agricultural and raw material production, as well as having to physically uproot factories and move them thousands of miles away out of reach of German troops. Stalin himself collapsed into a desperate depression, locking himself away for days on end. 

We have to be prepared for the treachery that will result from the May-Corbyn Pact, and learn the lesson of the need to build a strong grass roots democracy inside the Labour Party, and the labour movement as a whole.