A Characterisation of Economic Romanticism, Chapter 1 - Part 29

The distinction amounts to this. Mill, Say and Ricardo see no possibility of a generalised overproduction of commodities, because they continued to see production as being only a production of products for the purpose of consumption, either directly or via exchange. As Marx says, this corresponds not only to a condition before capitalism, but prior to money economy, i.e. to the conditions of barter. Setting out this belief Ricardo makes the comment cited earlier that Marx quotes in Theories of Surplus Value, Chapter 17. But, as Marx says, as soon as money economy intervenes, the fact that A produces and sells commodities to B, does not mean that A will use that money to buy commodities from B, or anyone else. Production does not create demand for the output, or may create demand only at a lower price and so on. 

“The value supplied (but not yet realised) and the quantity of iron which is realised, do not correspond to each other. No grounds exist therefore for assuming that the possibility of selling a commodity at its value corresponds in any way to the quantity of the commodity I bring to market. For the buyer, my commodity exists, above all, as use-value. He buys it as such. But what he needs is a definite quantity of iron. His need for iron is just as little determined by the quantity produced by me as the value of my iron is commensurate with this quantity. 

It is true that the man who buys has in his possession merely the converted form of a commodity—money—i.e., the commodity in the form of exchange-value, and he can act as a buyer only because he or others have earlier acted as sellers of commodities which now exist in the form of money. This, however, is no reason why he should reconvert his money into my commodity or why his need for my commodity should be determined by the quantity of it that I have produced. Insofar as he wants to buy my commodity, he may want either a smaller quantity than I supply, or the entire quantity, but below its value. His demand does not have to correspond to my supply any more than the quantity I supply and the value at which I supply it are identical.” 

(Theories of Surplus Value, Chapter 20) 

Whilst Ricardo, then, rejects the idea of generalised overproduction of commodities, on the basis of Say's Law, on the basis of Malthus' population theory, he arrives at a theory of overproduction of capital. Smith's explanation of the falling rate of profit is that profit exists because labour is plentiful and capital scarce. Labour produces surplus value, which under capitalism appears as profit, because its distribution between labour and capital is determined by the competition between them. Capital's price is higher than its value, because its scarce, and vice versa. However, capital accumulates faster than the growth of labour supply, and so its price falls as wages rise, and so profits continually decline. 

Ricardo rejects Smith's argument. He says that labour supply expands to meet the needs of capital. But, following Malthus, he says, the consequence is that, to meet the rising demand for food and agricultural products, less fertile land has to be brought into cultivation. That means that there is diminishing returns, and so higher prices for food and agricultural products, which also means higher rents. Ricardo saw industrial productivity causing the prices of manufactured products falling, which reduces the value of labour-power, but not by enough to offset the rise in food prices. The consequence is that whilst wages rise, living standards still fall. But, rising wages squeeze profits, rising agricultural product prices also cause the rate of profit to fall, whilst rising rents also squeeze profits. He sees profits, therefore, being continually squeezed until they disappear. This is the terror that grips Ricardo.

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Permanent Revolution - Part 4 of 8

The Stages Theory

The old idea that the revolution could somehow be stopped in its tracks once it had reached the bourgeois-democratic stage had been disproved by history. In fact, it had been disproved as far back as the revolutions of 1848. The defeat of the workers, at that time, had not resulted in some benign period of bourgeois-democracy, but, everywhere, by reaction, and the imposition of Bonapartist regimes. A further example was given by the defeat of the Paris Commune in 1871. The idea that the workers could, somehow, subordinate themselves to the interests of the peasants and petty-bourgeois democracy was now absurd, as large sections of that peasantry and petty-bourgeoisie were being drawn in behind the bourgeoisie itself. Meanwhile, the representatives of the bourgeoisie in the Provisional Government were already preparing a clampdown on the workers, and an alliance with those very forces of reaction, such as Kornilov, not to mention a large number of imperialist powers waiting for the chance to carve up Russia, in the same way they had done with China, and other parts of the globe.

The proponents of the stages theory based their argument on the “possibility” that the peasantry would become detached from the bourgeoisie, as the interests of these two classes diverged.

“A Marxist who, in view of the possibility of such a future stage, were to forget his duties in the present, when the peasantry is in agreement with the bourgeoisie, would turn petty bourgeois. For he would in practice be preaching to the proletariat confidence in the petty bourgeoisie (“this petty bourgeoisie, this peasantry, must separate from the bourgeoisie while the bourgeois-democratic revolution is still on”). Because of the “possibility” of so pleasing and sweet a future, in which the peasantry would not be the tail of the bourgeoisie, in which the Socialist-Revolutionaries, the Chkheidzes, Tseretelis, and Steklovs would not be an appendage of the bourgeois government—because of the “possibility” of so pleasing a future, he would be forgetting the unpleasant present, in which the peasantry still forms the tail of the bourgeoisie, and in which the Socialist- Revolutionaries and Social-Democrats have not yet given up their role as an appendage of the bourgeois government, as “His Majesty” Lvov’s Opposition.”

“A new and different task now faces us: to effect a split within this dictatorship between the proletarian elements (the anti-defencist, internationalist, “Communist” elements, who stand for a transition to the commune) and the small-proprietor or petty-bourgeois elements (Chkheidze, Tsereteli, Steklov, the Socialist-Revolutionaries and the other revolutionary defencists, who are opposed to moving towards the commune and are in favour of “supporting” the bourgeoisie and the bourgeois government).

The person who now speaks only of a “revolutionary democratic dictatorship of the proletariat and the peasantry” is behind the times, consequently, he has in effect gone over to the petty bourgeoisie against the proletarian class struggle; that person should be consigned to the archive of “Bolshevik” pre-revolutionary antiques (it may be called the archive of “old Bolsheviks”).

(Lenin– Letters On Tactics)

This concept, criticised by Lenin, here, is also what lies behind the tactic of the Popular Front. It bases itself on a hope that such petty-bourgeois, liberal forces will align with the proletariat, and split from their attachment to the bourgeoisie. All such hopes have been shown, by history, to be in vain, precisely because these petty-bourgeois, liberal forces' interests ultimately align more closely with those of the bourgeoisie than with those of the workers, for whom they retain a great deal of fear. The petty-bourgeoisie see themselves as future bourgeois, not future proletarians.

But, this was also the position of supporting the Provisional Government that Stalin, Kamenev and Zinoviev were putting forward in February 1917, on the basis of the stages theory. Its most manifest consequence was the support for the defencist position of the Provisional Government in relation to the continuing imperialist war. Trotsky notes Lenin's alarm at that position,

"On March 6 he telegraphed through Stockholm to Petrograd: “Our tactic; absolute lack of confidence; no support to the new government; suspect Kerensky especially; arming of proletariat the sole guarantee; immediate elections to the Petrograd Duma; no rapprochement with other parties. In this directive, only the suggestion about elections to the Duma instead of the Soviet, had an episodic character and soon dropped out of sight...

On the 17th of March, through friends in Stockholm, he wrote a letter filled with alarm. “Our party would disgrace itself for ever, kill itself politically, if it took part in such deceit ... I would choose an immediate split with no matter whom in our party rather than surrender to social patriotism ...” After this apparently impersonal threat – having definite people in mind however – Lenin adjures: “Kamenev must understand that a world historic responsibility rests upon him.” Kamenev is named here because it is a question of political principle. If Lenin had had a practical militant problem in mind, he would have been more likely to mention Stalin. But in just those hours Lenin was striving to communicate the intensity of his will to Petrograd across smoking Europe, Kamenev with the co-operation of Stalin was turning sharply toward social patriotism."

(Trotsky - History of The Russian Revolution, Chapter 15)

In fact, Kamenev, Zinoviev and Stalin never moved away from this position of the stages theory, and the slogan of the Democratic Dictatorship of the Proletariat and Peasantry. Unlike Kamenev, who continued to argue with Lenin over the formulation, Stalin slunk into the background on the issue, but, after Lenin's death, it was to re-emerge, centre stage, in Stalin's adoption of a Popular Front strategy in China, interrupted briefly by the ultra-Left idiocy of the Third Period, but once again pursued with the same disastrous effects in France, and in Spain, in the 1930's. Alongside, the national socialist theory of building Socialism In One Country, it formed the bedrock of Stalinist strategy and tactics in the subsequent period. It can be seen in the reactionary populist movements based upon “anti-imperialist”, and “anti-monopoly” alliances, for example. It was the foundation of the Stalinist strategy of Maoism, and used with the same disastrous consequences in a range of national struggles across the globe led by these Stalinist forces.

It was the decision to use Permanent Revolution as the basis of Stalin's attack on Trotsky that led him into the lunacy of the theory of building Socialism In One Country. As late as Spring 1924, Stalin rejected the notion, and stated the correct position.

“In April 1924, three months after the death of Lenin, Stalin wrote, his brochure of compilations called The Foundations of Leninism:

'For the overthrow of the bourgeoisie, the efforts of one country are enough – to this the history of our own revolution testifies. For the final victory of socialism, for the organization of socialist production, the efforts of one country, especially a peasant country like ours, are not enough – for this we must have the efforts of the proletarians of several advanced countries.'

These lines need no comment. The edition in which they were printed, however, has been withdrawn from circulation.”

(Trotsky – The Revolution Betrayed)

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A Characterisation of Economic Romanticism, Chapter 1 - Part 28

As Marx says, denying Say's Law, and this idea that production creates its own market. 

“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.” 

(Theories of Surplus Value 2, p 505) 

Marx notes, for example, that when spinning wheels were introduced this increased production most certainly did not create a market for itself, but led to overproduction. 

“When spinning-machines were invented, there was over-production of yarn in relation to weaving. This disproportion disappeared when mechanical looms were introduced into weaving.” 

(Theories of Surplus Value 2, Note p 521) 

It is, of course, true that, in the long-term, capital accumulation and production leads to an expansion of the market, but that does not at all mean that this happens automatically or smoothly, in the short-term. On the contrary, it only develops on the basis of repeated crises. In noting that Sismondi was correct as against Ricardo, who never witnessed any such crisis of overproduction, Lenin says, 

“Hence, “consumption” develops after “accumulation,” or after “production”; strange though it may seem, it cannot be otherwise in capitalist society.” (p 155) 

But, again, here, Lenin is one-sided, viewing capitalist production in value terms, and ignoring the question of use-value, which is the problem Marx noted in relation to Ricardo and his followers. Its true, as Marx says in Capital III, Chapter 39, that all producers expand production – other than in a period of crisis or stagnation – on the basis that the market increases each year, as a result of population growth, if nothing else. As each producer expands their production, employing additional workers, they indeed create the revenues that enables consumption to rise, thereby, increasing/creating a market for their production. However, what is it that prompts them to engage in this additional production – production of either consumption or production goods? It is precisely the belief that the market for them is expanding. That is why, when the market is stagnant, they do not engage in such accumulation. As Marx says on this point, made against Ricardo, if, in fact, the market does not expand, or does not expand as fast as production, the inevitable consequence is overproduction and crisis. 

In fact, Lenin's argument is rather facile. Suppose that the demand for cotton clothing is expanding rapidly. In response, however, producers of means of production accumulate capital in sheep production, and production of woollen yarn. Would this increased production of woollen cloth result in a market for woollen goods to be produced? Of course not. It would result in an overproduction of wool and woollen cloth, with the prices of those commodities collapsing, and producers being ruined. Meanwhile, cotton producers would make surplus profits as the misallocation of capital would result in a shortage of supply of cotton and cotton yarn, causing their market prices to rise sharply above the price of production. 

In accepting Ricardo's position, and, thereby, Say's Law, Lenin prevents himself from recognising the possibility of any overproduction of commodities. But, this reality of overproduction of commodities, as production expands faster than the market, is set out time and again, by Marx and Engels. 

“We have seen that the ever increasing perfectibility of modern machinery is, by the anarchy of social production, turned into a compulsory law that forces the individual industrial capitalist always to improve his machinery, always to increase its productive force. The bare possibility of extending the field of production is transformed for him into a similar compulsory law. The enormous expansive force of modern industry, compared with which that of gases is mere child’s play, appears to us now as a necessity for expansion, both qualitative and quantitative, that laughs at all resistance. Such resistance is offered by consumption, by sales, by the markets for the products of modern industry. But the capacity for extension, extensive and intensive, of the markets is primarily governed by quite different laws that work much less energetically. The extension of the markets cannot keep pace with the extension of production. The collision becomes inevitable, and as this cannot produce any real solution so long as it does not break in pieces the capitalist mode of production, the collisions become periodic. Capitalist production has begotten another “vicious circle”.” 

(Anti-Duhring, p 355)

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Permanent Revolution - Part 3 of 8

Lenin's Adoption of Permanent Revolution

Lenin's position, adopted by the Bolsheviks, was also that, in the specific conditions of Russia, it was possible that the workers and peasants could come to power, before the workers of the advanced countries. The workers would have to ally themselves with the peasants, given the huge social weight of the peasantry. Lenin describes this situation as The Democratic Dictatorship of the Proletariat and Peasantry. What is not set out in this formulation, quite deliberately, by Lenin, is the actual balance of forces, within this dictatorship, between the workers and the peasants. It is quite deliberate, because Lenin, as an historical materialist, argues that it is not possible to know a priori, what that balance will actually be, which can only be determined by history. This formula is described, therefore, as being “algebraic”, leaving the actual quantities blank, until they are filled out by events.

However, what Lenin, like Kautsky and Trotsky, says, in 1905, is that, the dialectics of class struggle means that the representatives of the proletariat, in this social dictatorship, will inevitably have to advance the interests of that proletariat, and that means that they will increasingly come into contradiction with the bourgeois elements of the peasantry, within that same social dictatorship. It will mean that the proletariat will increasingly have to align with the sections of the peasantry that are themselves being pushed into the ranks of the proletariat, and, thereby, to drive a wedge between them, and those sections of the peasantry that are becoming bourgeois. For a start, the representatives of the workers would have to advance the interests of those peasants who had already been turned into agricultural day labourers, by that process of differentiation. That section of the peasantry that was still imbued with the individualist ideas that characterises the peasantry and petty-bourgeoisie were limited in their ambitions simply for land reform, and a division of the land in its entirety, but the interests of the agricultural proletariat resided in the development of collectivism, of the creation of large agricultural cooperatives, and so on.

From the 1890's, Lenin had analysed the arguments of the Narodniks – See Lenin on Economic Romanticism – who represented the peasantry and petty-bourgeoisie. The whole point of this analysis, was to show, not only that capitalism was already implanted in Russia, and was bringing about a progressive transformation of society, but that the Narodnik representatives of the peasantry were reactionary. They represented the views of that element of the peasantry and petty-bourgeoisie that wanted to deny the process of differentiation that was taking place. They attempted to defend small scale private property, which could be nothing other than small-scale, capitalist private property. The Narodniks could be nothing more than advocates of bourgeois liberalism, whilst this would increasingly fail to meet the needs of the proletarianised peasants. The question would be to what extent the peasants could create their own political party to represent them in this government of workers and peasants.

Trotsky's argument merely preceded Lenin's answer to that question, in the light of the events of February 1917.

“the Revolution, having begun as a bourgeois revolution as regards its first tasks, will soon call forth powerful class conflicts and will gain final victory only by transferring power to the only class capable of standing at the head of the oppressed masses, namely, to the proletariat. Once in power, the proletariat not only will not want, but will not be able to limit itself to a bourgeois democratic programme. It will be able to carry through the Revolution to the end only in the event of the Russian Revolution being converted into a Revolution of the European proletariat. The bourgeois-democratic programme of the Revolution will then be superseded, together with its national limitations, and the temporary political domination of the Russian working class will develop into a prolonged Socialist dictatorship. But should Europe remain inert the bourgeois counter-revolution will not tolerate the government of the toiling masses in Russia and will throw the country back – far back from a democratic workers’ and peasants’ republic. Therefore, once having won power, the proletariat cannot keep within the limits of bourgeois democracy. It must adopt the tactics of permanent revolution, i.e., must destroy the barriers between the minimum and maximum programme of Social Democracy, go over to more and more radical social reforms and seek direct and immediate support in revolution in Western Europe. This position is developed and argued in the work now reissued, which was originally written in 1904 - 1906.”

(Trotsky – Introduction To The 1919 Reissue of Results and Prospects)

This is the position that Lenin adopts in the April Theses of 1917, and as set out in his “Letters On Tactics”, which support the conclusions arrived at in the Theses. The Narodniks themselves evolved into the Social Revolutionary party, which itself split, reflecting the process of differentiation of the peasantry described by Lenin and Trotsky. One section aligned with the bourgeois Cadet Party, whilst the Left SR's aligned with the Bolsheviks.

In 1917, Lenin writes that the old idea that there would be a bourgeois-democratic revolution, as one stage in social evolution, following on from feudalism, representing a previous stage of social evolution, and that, only after having gone through the stage of bourgeois democracy, would it become possible for the next stage of the dictatorship of the proletariat and peasantry to be considered, was now superseded by real events. The democratic dictatorship, Lenin says, does not describe any specific form of government, but is only an algebraic formula describing a social relation between classes. The reality of February 1917, had, in fact, already created this democratic dictatorship of the proletariat and peasantry, alongside the dictatorship of the bourgeoisie. In other words, a condition of dual power had already arisen in society.

“A new and different task now faces us: to effect a split within this dictatorship between the proletarian elements (the anti-defencist, internationalist, “Communist” elements, who stand for a transition to the commune) and the small-proprietor or petty-bourgeois elements (Chkheidze, Tsereteli, Steklov, the Socialist-Revolutionaries and the other revolutionary defencists, who are opposed to moving towards the commune and are in favour of “supporting” the bourgeoisie and the bourgeois government).

The person who now speaks only of a “revolutionary democratic dictatorship of the proletariat and the peasantry” is behind the times, consequently, he has in effect gone over to the petty bourgeoisie against the proletarian class struggle; that person should be consigned to the archive of “Bolshevik” pre-revolutionary antiques (it may be called the archive of “old Bolsheviks”).

(Lenin – Letters On Tactics)

In other words, there was the dictatorship of the bourgeoisie, represented by the Provisional Government of Prince Lvov that would go through several changes of personnel before becoming led by Kerensky, and, on the other hand, there was the democratic dictatorship of the proletariat and peasantry, represented by the soviets of workers and soldiers (who represented the peasants from whom they were mostly drawn, as the largest social class). The Provisional Government was itself a Popular Front government. It represented the parties of the bourgeoisie such as the Cadets and Constitutional Monarchists, as well as of the peasants in the form of the Populist parties, and also the reformist workers parties such as the Mensheviks. The peasant and workers parties, themselves rested upon the social dictatorship of the workers and peasants as manifest in the soviets.

The bourgeoisie rested upon the economic and social power of capital, and upon the capitalist state apparatus, in the shape of the military, the police, the courts and so on. But, this bourgeois state power was neutralised by the condition of dual power.

“For it must not be forgotten that actually, in Petrograd, the power is in the hands of the workers and soldiers; the new government is not using and cannot use violence against them, because there is no police, no army standing apart from the people, no officialdom standing all-powerful above the people. This is a fact, the kind of fact that is characteristic of a state of the Paris Commune type. This fact does not fit into the old schemes. One must know how to adapt schemes to facts, instead of reiterating the now meaningless words about a “dictatorship of the proletariat and the peasantry” in general.”

(ibid)

The consequence of the old ideas, however, was that the representatives of the peasantry, and of the reformist workers parties, within the soviets, were voluntarily ceding power to the bourgeoisie, and its representatives within the Provisional Government. But, Lenin's attack, here, is aimed not at those representatives of other parties, but at those within the Bolsheviks themselves that continued to advocate this stages theory of social development. In February 1917, the leaders of the Bolsheviks in Russia, Kamenev, Zinoviev and Stalin, had themselves continued to argue the line of the Democratic Dictatorship of the Proletariat and Peasantry, and on the basis of the stages theory subordinated the workers to the bourgeoisie and the bourgeois-democratic revolution. It was against them that the April Theses is directed.

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A Characterisation of Economic Romanticism, Chapter 1 - Part 27

The contradiction at the heart of the commodity is manifest in the fact that, as productivity rises, real social wealth increases, as more use values are produced, but the exchange value of each commodity simultaneously falls. The bourgeois economists, like Ricardo, could not comprehend the potential for crisis, of an overproduction of commodities, which this contradiction represents, because they did not comprehend the true nature of the commodity as a unity of these two contradictory factors. 

“Here, therefore, firstly commodity, in which the contradiction between exchange-value and use-value exists, becomes mere product (use-value) and therefore the exchange of commodities is transformed into mere barter of products, of simple use-values. This is a return not only to the time before capitalist production, but even to the time before there was simple commodity production; and the most complicated phenomenon of capitalist production—the world market crisis—is flatly denied, by denying the first condition of capitalist production, namely, that the product must be a commodity and therefore express itself as money and undergo the process of metamorphosis.” 

(Theories of Surplus Value 2, p 501) 

In order to maximise their profit, in order to maximise their accumulation, each producer is led to minimise the individual value of their commodity, to reduce it below its social value, as much as possible. But, as each producer does this, so its social value falls too. The main basis of reducing its individual value is to expand production. But, then production expands faster than the ability of the market to absorb it. 

“But the whole process of accumulation in the first place resolves itself into production on an expanding scale, which on the one hand corresponds to the natural growth of the population, and on the other hand, forms an inherent basis for the phenomena which appear during crises. The criterion of this expansion of production is capital itself, the existing level of the conditions of production and the unlimited desire of the capitalists to enrich themselves and to enlarge their capital, but by no means consumption, which from the outset is inhibited, since the majority of the population, the working people, can only expand their consumption within very narrow limits, whereas the demand for labour, although it grows absolutely, decreases relatively, to the same extent as capitalism develops. Moreover, all equalisations are accidental and although the proportion of capital employed in individual spheres is equalised by a continuous process, the continuity of this process itself equally presupposes the constant disproportion which it has continuously, often violently, to even out.” 

(Theories of Surplus Value 2, p 492) 

The whole point is that contrary to Say's Law, the capitalist does not sell in order to buy, to consume, C – M – C. At any point, the money flowing back from the sale of commodities may not be thrown back immediately into the market, which means other commodities thrown into the market find no buyer. In fact, that may be the case with the petty commodity producer too in a money economy as opposed to a barter economy. As soon as commodities appear in the market, that find no buyer, market prices fall, possibly even below cost prices. The potential for crisis is revealed. 

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Permanent Revolution - Part 2 of 8

Trotsky's Theory of Permanent Revolution

The Theory of Permanent Revolution is most closely associated with Trotsky. Basing himself on Marx's writings and analysis of the revolutions of 1848, and subsequent socio-economic developments, Trotsky sets out that it is possible for workers, in more backward countries, to come to power, before those in more advanced countries. That is because the proletariat, in these countries, is larger and more advanced than was the proletariat in 1848. The later economic development means that it is concentrated in larger enterprises, and in cities and large towns. The development of transport and communications speeds up the transmission of ideas. Workers now have the advantage of the experience of workers in the more advanced economies to draw on, as well as the ideas of large Marxist parties. But, this coming to power is not the same as the creation of Socialism.

An inevitable contradiction arises. The workers may come to power in such places, more easily, because the bourgeoisie is relatively smaller and weaker, and the still sizeable peasantry and petty-bourgeoisie may fall in behind the proletariat to achieve the aims of the bourgeois-democratic national revolution, but, having come to power, the workers' and peasants' government must soon begin to pursue the needs of the working-class, which brings it into conflict with the bourgeoisie, and sections of the petty-bourgeoisie and peasantry, in process of becoming bourgeois themselves. It must encourage the differentiation, and draw over those sections of the peasantry and petty-bourgeoisie in the process of becoming proletarianised by that process.

“The abolition of feudalism will meet with support from the entire peasantry, as the burden-bearing estate. A progressive income-tax will also be supported by the great majority of the peasantry. But any legislation carried through for the purpose of protecting the agricultural proletariat will not only not receive the active sympathy of the majority, but will even meet with the active opposition of a minority of the peasantry.

The proletariat will find itself compelled to carry the class struggle into the villages and in this manner destroy that community of interest which is undoubtedly to be found among all peasants, although within comparatively narrow limits. From the very first moment after its taking power, the proletariat will have to find support in the antagonisms between the village poor and village rich, between the agricultural proletariat and the agricultural bourgeoisie. While the heterogeneity of the peasantry creates difficulties and narrows the basis for a proletarian policy, the insufficient degree of class differentiation will create obstacles to the introduction among the peasantry of developed class struggle, upon which the urban proletariat could rely. The primitiveness of the peasantry turns its hostile face towards the proletariat.”

(Trotsky – Results and Prospects, VI The Proletarian Regime)

But, the backwardness of the economy makes it impossible to move forward towards socialism within the confines of the nation state. The workers in power are faced with the same dilemma as that described by Engels, in The Peasant War in Germany.

 

“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.”

The revolution must then fail, because it is either overthrown from without, or else degenerates from within. The only alternative, as Trotsky describes, is that the concept of permanence takes on a further meaning, which is that, in the age of imperialism, of the dominance of the world economy, when capitalism has burst asunder the constraints of the nation state, the revolution, which begins in one country, must rapidly become internationalised, and continue until the whole world is encompassed by it. It is this concept, accepted also by Kautsky, and by Lenin, which establishes the difference between the Marxist theory of Permanent Revolution, and the bourgeois-nationalist stages theory of the Mensheviks and Stalinists, and its manifestation, also, in the Stalinist theory of building Socialism In One Country.

In 1924, the faction fight inside the Bolshevik Party opened up, following the death of Lenin. The initial line up was between the Centre (Stalin), and Right (Bukharin), against the Left, represented by Trotsky, but which also, initially, included Zinoviev and Kamenev, as part of the United Opposition. Stalin required a basis upon which to frame his opposition to Trotsky, and to claim his own heredity from Lenin. He chose Trotsky's theory of Permanent Revolution. It created the framework in which the battle between Stalinism and Trotskyism was to be fought out – a battle between Permanent Revolution and the newly formulated Stalinist theory of building Socialism In One Country, which Stalin was driven into, as a result of his attack on Permanent Revolution.

Stalin was facilitated, in his line of attack against Trotsky, by the fact that, for much of the period prior to 1917, Trotsky was outside the ranks of the Bolsheviks. He led a group of “conciliators”, who thought that it was necessary to unite the Bolsheviks and Mensheviks. There was no shortage of material in which Lenin criticised Trotsky for this conciliationist position, criticisms, which Trotsky, later, accepted as being wholly correct, as he had overestimated the chances of the Mensheviks being won over to the Bolshevik positions, as a result of practical joint activity. Trotsky had formulated the ideas contained in his theory of Permanent Revolution, prior to the 1905 Revolution, in which he played a central role, as President of the Petersburg Soviet.

The established position of Marxists had been that socialism could only first be established in developed capitalist economies. In 1905, Russia, though it had seen rapid capitalist development, since 1861, was still a largely backward economy. But, in the revolutions of 1848, Marx and Engels had noted that, although these were bourgeois national revolutions, a leading role within them had been played by the working-class, and, unlike the initial bourgeois revolutions, such as the Great French Revolution of 1789, this was inevitably going to be the case, because of the rapid development of the proletariat in the intervening period. Combined and uneven development meant that there were now many countries, like Russia, which were still largely backward and undeveloped, with a large peasantry, but which also had a large, and organised proletariat, resulting from the rapid development of large scale industries in the towns and cities. Taken as a whole, the productive and social relations created by capitalism/imperialism, as a global system, made the transition to socialism possible, but that was not the case in each individual country.

Because, of its later development, in Russia, capitalism had skipped some stages, because it was able to go quickly to these large-scale, machine industries, whereas, in Britain, a long period of development of handicraft based capitalism had had to transpire, before large scale use of machinery was introduced. These large machine industries required fewer capitalists for any given level of output, again skipping over stages of concentration and centralisation of capital that had taken place in Britain etc. In fact, many of the large enterprises were foreign owned. This meant that the Russian bourgeoisie was relatively small, compared to the size of the proletariat. The peasantry and petty-bourgeoisie was large, but as Marx had set out, in his analysis of these classes, they are amorphous and unable to take a lead in revolutionary situations, always acting as support for some other class. They seek the completion of the bourgeois democratic revolution, freeing them from the binds of feudalism via agrarian reform, as well as the achievement of bourgeois political rights and freedoms, but this remains within the bounds of bourgeois individualism.

Indeed, the peasantry and petty-bourgeoisie could not be viewed as homogeneous classes, because they divided into those elements that were in the process of becoming bourgeois, and those that were in the process of becoming proletarianised, as a result of the process of differentiation, driven by competition. The latter could be drawn behind the proletariat in any revolutionary situation, and a revolutionary strategy had to be geared to that end. The Workers Party would have to advocate the completion of the bourgeois-democratic revolution in order to draw the peasantry and petty-bourgeoisie behind it, but having come to power on this basis, the workers' party would inevitably be driven beyond it, to meet the specific needs of the workers.

In 1905, Trotsky's predictions in relation to Permanent Revolution were borne out. The revolution, which is a bourgeois revolution, sees the working-class, inevitably, take a leading role, and it draws behind it these elements of the peasantry and petty-bourgeoisie. But, this creates an inevitable dialectical contradiction. On the one hand, this is a bourgeois revolution, not a proletarian revolution, yet the leading role is taken by the proletariat. Moreover, the material conditions, in Russia, at this time, are not yet developed enough to be able to create socialism. The revolution must become international, drawing in the advanced economies, to be able to support the workers in these less advanced economies.

It is, in fact, a good example of the contradictions caused by combined and uneven development. Capitalism/imperialism, as a global economy, has achieved the required development to make socialism possible, but, this development is by no means even, so that, in many countries, that required level of development has not been achieved. Yet, it is in those countries that the bourgeoisie is weakest and proletariat, consequently, relatively stronger. Its here, where the potential for socialism does not exist, where the potential for workers coming to power, with the support of the peasantry and petty-bourgeoisie, in order to carry through he bourgeois-democratic revolution, is greatest. It was on this basis, in 1917, that Lenin came over to the Trotskyist conception of Permanent Revolution, and argued the need to break the capitalist chain at its weakest link, in the belief that the world revolution would follow quickly behind.

In fact, Trotsky was not the only one to have considered the possibility that, in these circumstances, it might be possible for the Russian working-class to come to power before the working-class of Britain, Germany, France or other developed capitalist economies. The same possibility had been considered, and even thought likely by Kautsky, as well as by Lenin, much earlier.

“At that time Kautsky (true, not without the beneficial influence of Rosa Luxemburg) fully understood and acknowledged that the Russian Revolution could not terminate in a bourgeois-democratic republic but must inevitably lead to the proletarian dictatorship, because of the level attained by the class struggle in the country itself and because of the entire international situation of capitalism. Kautsky then frankly wrote about a workers’ government with a social-democratic majority. He did not even think of making the real course of the class struggle depend on the changing and superficial combinations of political democracy.

... Kautsky understood that to call the Russian Revolution a bourgeois revolution and thereby to limit its tasks would mean not to understand anything of what was going on in the world. Together with the Russian and Polish revolutionary Marxists, he rightly acknowledged that, should the Russian proletariat conquer power before the European proletariat, it would have to use its situation as the ruling class not for the rapid surrender of its positions to the bourgeoisie but for rendering powerful assistance to the proletarian revolution in Europe and throughout the world. All these world-wide prospects, imbued with the spirit of Marxian doctrine, were not made dependent either by Kautsky or by us upon how and for whom the peasants would vote at the elections to the so-called Constituent Assembly in November and December 1917.”

(Trotsky – Introduction To The 1919 Reissue of Results and Prospects)

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Forward To Part 3

A Characterisation of Economic Romanticism, Chapter 1 - Part 26

V - Accumulation in Capitalist Society 

Lenin now turns to how Sismondi's errors, in relation to his adoption of Smith's absurd dogma, results in his failure to understand the nature of accumulation, and the repetition of his errors by the Narodniks. Unfortunately, Lenin's own argument is also wrong. It could be a case of Lenin “bending the stick”, in order to polemicise against his opponents, but it appears to be more a genuine theoretical error arising from not having access to Marx's writings in Theories of Surplus Value, in which these arguments are developed. 

So, Lenin says, 

“Sismondi did not in the least understand capitalist accumulation, and in his heated controversy on this subject with Ricardo truth was really on the side of the latter. Ricardo asserted that production creates a market for itself, whereas Sismondi denied this, and based his theory of crises on this denial.” (p 154-5) 

But, as Marx sets out in Theories of Surplus Value, Chapter 17, truth most certainly was not absolutely on the side of Ricardo, who, as against Sismondi, fell into the trap of Say's Law. Ricardo's argument is an acceptance and repetition of Say's Law, actually developed by James Mill that supply creates its own demand, or in Lenin's terminology production creates its own market. Marx flatly denies this assertion, which was the basis of Mill, Say and Ricardo's assertion that a generalised overproduction of commodities was impossible. 

“... No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. It is not to be supposed that he should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and, therefore, it is not probable that he will continually” (the point in question here is not eternal life) “produce a commodity for which there is no demand.” ([David Ricardo, On the Principles of Political Economy, and Taxation, London, 1821,] pp. 339-40.)” 

(Theories of Surplus Value 2, p 493-4) 

and, 

““Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected” (l.c., p. 341).” 

(Theories of Surplus Value 2, p 501) 

But, of course, the whole point of commodity production is that it is production not for consumption, but for the production of exchange value, and in particular surplus exchange value. The capitalist producer does not produce millions of units of some commodity either for their own consumption or anyone else's. The only reason they produce a commodity that meets someone else's needs, is because that is the only way it can be sold, and the exchange value realised. Moreover, in realising that exchange value, their purpose is not, thereby, to satisfy their own consumption needs by using the exchange value to buy other commodities. It is to buy additional elements of productive capital, and, thereby, to produce even more commodities, which realise even more exchange value, which they use to accumulate more capital and so on. Moreover, the nature of competition, within commodity production, drives each producer to produce in the most efficient manner, which increasingly means on an ever larger scale.

Back To Part 25

Forward To Part 27

When Will Asset Prices Crash? - Part 3

All of these speculative bubbles burst, without being directly connected to the real economy, or having any necessary significant impact upon it. They amount to some gamblers in the casino losing their shirts, and others enjoying the gains.

“As regards the fall in the purely nominal capital, State bonds, shares etc.—in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalists who hold such securities—it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.”

(Theories of Surplus Value 2, p 496)

An example, of that was seen in 1847. From 1843, a new long wave uptrend had started. The global economy, centred on Britain, was booming. Following the Opium War, Chinese markets had been opened up, and masses of production was being sold into it. Huge profits ensued. But, it was also a time of crop failures, notably the crop failures in Ireland. Britain had to import food from Europe, and paid for it with gold. At the same time, large amounts of railway construction was taking place across Britain, and, from the start, the huge size of the companies involved required them to take the form of socialised capital, of joint stock companies that borrowed money, by selling shares on the Stock Exchange. The shares themselves, as assets, then became traded, and as with every stock market bubble seen since, the prices of those shares were driven higher and higher, increasingly unrelated to any possible earnings the companies were likely to make. Speculators, instead simply gambled that the prices of the shares would rise and rise to the moon. Until they didn't.

And, this was also an example of what Marx stated above. Many of those who gambled on these shares, were themselves private capitalists, the owners of private industrial capital. They diverted some of their own profits into this gambling on the stock market, rather than in investing those profits back into their business, despite the huge profits that could be made from their own production. The lure of massive capital gains from financial gambling, even outweighed the huge profits they could make from real productive investment. Worse, as with many of the financial crashes of today, they bought shares by borrowing, what is called buying on margin. To buy the railway shares, when they were issued, payment was made in stages. Seeing the potential for massive capital gains, much in the same way that today the buyers of meme stocks are lured into such gambling, they bought as many shares as they could, borrowing to do so. That was facilitated by low interest rates, which were themselves a product of the huge money profits that were being made, which created a large supply of available money-capital.

“At the close of 1842 the pressure which English industry suffered almost uninterruptedly since 1837, began to lift. During the following two years foreign demand for English manufactured goods increased still more; 1845 and 1846 marked a period of greatest prosperity. In 1843 the Opium War had opened China to English commerce. The new market gave a new impetus to the further expansion of an expanding industry, particularly the cotton industry... But all the newly erected factory buildings, steam-engines, and spinning and weaving machines did not suffice to absorb the surplus-value pouring in from Lancashire. With the same zeal as was shown in expanding production, people engaged in building railways. The thirst for speculation of manufacturers and merchants at first found gratification in this field...

The enticingly high profits had led to far more extensive operations than justified by the available liquid resources. Yet there was credit-easy to obtain and cheap. The bank discount rate stood low: 1¾ to 2¾% in 1844, less than 3% until October 1845, rising to 5% for a while (February 1846), then dropping again to 3¼% in December 1846. The Bank of England had an unheard-of supply of gold in its vaults. All inland quotations were higher than ever before.”

(Capital III, Chapter 25)

But, in 1844, basing itself on the fallacious Ricardian theory of money and interest-rates, the Bank of England had pressed for and secured the passing of the Bank Act. It linked the supply of currency to the amount of gold in the country. So, when a large outflow of gold took place, to pay for the import of food, the Bank of England reduced the supply of currency. That meant that there was a credit crunch. Businesses that previously gave their customers commercial credit, now needed cash themselves, as their suppliers reduced the provision of credit. As commercial credit dried up, businesses had to rely on discounting bills of exchange, and so the discount rate rose sharply. The discount houses, obtained money to discount bills, by themselves borrowing from the larger merchant banks, and ultimately from the Bank of England, but as this borrowing increased, so interest rates spiked. So, now all of the easy money that had fuelled the stock market bubble disappeared. Higher interest rates meant that the capitalised value of assets crashed, the inability to borrow meant that those that had bought on margin, and were now facing calls for payment on the shares they had bought, could not borrow.

“The rapid and easy flow of payments was obstructed, first here and there, then generally. The banking discount rate, still 3 to 3½% in January 1847, rose to 7% in April, when the first panic broke out. The situation eased somewhat in the summer (6½%, 6%), but when the new crop failed as well panic broke out afresh and even more violently. The official minimum bank discount rose in October to 7 and in November to 10%; i.e., the overwhelming mass of bills of exchange was discountable only at outrageous rates of interest, or no longer discountable at all. The general cessation of payments caused the failure of several leading and very many medium-sized and small firms. The Bank itself was in danger due to the limitations imposed by the artful Bank Act of 1844.”

(ibid)

The real basis of this crisis, as a financial crisis, of the type described by Marx above, was the Bank Act itself. By failing to understand money, currency and interest rates, it created an artificial credit crunch, which took interest rates to over 10%. The proof of that was that, eventually, the government was led to suspend the Bank Act, and as soon as it did, that alone was enough to end the credit crunch, even without a significant increase in liquidity.

“The government yielded to the general clamour and suspended the Bank Act on October 25, thereby eliminating the absurd legal fetters imposed on the Bank. Now it could throw its supply of bank-notes into circulation without hindrance. The credit of these bank-notes being in practice guaranteed by the credit of the nation, and thus unimpaired, the money stringency was thus instantly and decisively relieved. Naturally, quite a number of hopelessly enmeshed large and small firms failed nevertheless, but the peak of the crisis was overcome, the banking discount dropped to 5% in December, and in the course of 1848 a new wave of business activity began which took the edge off the revolutionary movements on the continent in 1849, and which inaugurated in the fifties an unprecedented industrial prosperity, but then ended again — in the crash of 1857. — F. E.]”

(ibid)

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Permanent Revolution - Part 1 of 8

Marx and Permanent Revolution

The term Permanent Revolution is first used, by Marx, in an Address to the Central Committee of the Communist League in 1850.

Marx says,

“While the democratic petty bourgeois want to bring the revolution to an end as quickly as possible, achieving at most the aims already mentioned, it is our interest and our task to make the revolution permanent until all the more or less propertied classes have been driven from their ruling positions, until the proletariat has conquered state power and until the association of the proletarians has progressed sufficiently far – not only in one country but in all the leading countries of the world – that competition between the proletarians of these countries ceases and at least the decisive forces of production are concentrated in the hands of the workers.”

(Address of the Central Committee to the Communist League, London, March 1850 )

When the first bourgeois-democratic, national revolutions took place – American Revolution 1776, Great French Revolution 1789, Second Reform Act 1832 in Britain – the working-class was an insignificant factor. These revolutions are carried through by the bourgeoisie supported by the petty-bourgeoisie, the peasantry and those sections of the landed aristocracy that had themselves become bourgeois. The only place, where the working-class constituted any sizeable influence was in Britain, but, even there, it was a minority, with the petty-bourgeoisie of small producers still constituting a larger social influence. The bourgeoisie and petty-bourgeoisie had no interest in extending full democratic and political rights to the working-class, and, in 1832, that is manifest in the fact that, it is still only male property owners that get the vote.

In 1848, the industrial proletariat, across Europe, rose up behind the industrial bourgeoisie to demand political democracy, and bourgeois rights and freedoms. In other words, to overthrow the old feudal, aristocratic political regime. In Britain, this movement had begun at the start of the century, manifest, for example, in the events of Peterloo where the bourgeoisie, supported by large numbers of the petty-bourgeoisie, such as the self-employed hand-loom weavers, and assorted artisans, rose up, supported by the small, nascent working-class, to demand bourgeois-democratic reforms. In 1832, eventually, the bourgeoisie won those reforms, but, again, the working-class were not included. The workers continued their demands through the Chartist movement, reflecting the growth of the working-class, as industrial capital expanded. It too is defeated, but the workers again throw their weight behind the industrial bourgeoisie, in a struggle against the landed aristocracy. It results in The Repeal of the Corn Laws, which represents the victory of the industrial bourgeoisie not only over the landed aristocracy, but also over the other sections of capital, such as merchant capital and financial capital that had been in a symbiotic alliance with the aristocracy. Marx in his address discusses the situation in Germany.

“At the moment, while the democratic petty bourgeois are everywhere oppressed, they preach to the proletariat general unity and reconciliation; they extend the hand of friendship, and seek to found a great opposition party which will embrace all shades of democratic opinion; that is, they seek to ensnare the workers in a party organization in which general social-democratic phrases prevail while their particular interests are kept hidden behind, and in which, for the sake of preserving the peace, the specific demands of the proletariat may not be presented. Such a unity would be to their advantage alone and to the complete disadvantage of the proletariat. The proletariat would lose all its hard-won independent position and be reduced once more to a mere appendage of official bourgeois democracy. This unity must therefore be resisted in the most decisive manner. Instead of lowering themselves to the level of an applauding chorus, the workers, and above all the League, must work for the creation of an independent organization of the workers’ party, both secret and open, and alongside the official democrats, and the League must aim to make every one of its communes a centre and nucleus of workers’ associations in which the position and interests of the proletariat can be discussed free from bourgeois influence. How serious the bourgeois democrats are about an alliance in which the proletariat has equal power and equal rights is demonstrated by the Breslau democrats, who are conducting a furious campaign in their organ, the Neue Oder Zeitung, against independently organized workers, whom they call ‘socialists’. In the event of a struggle against a common enemy a special alliance is unnecessary. As soon as such an enemy has to be fought directly, the interests of both parties will coincide for the moment and an association of momentary expedience will arise spontaneously in the future, as it has in the past.”

In fact, as Engels was to describe later, the potential was overstated by him and Marx in 1848, because it was still only in Britain that the working-class constituted a sizeable social class. Noting the class nature of The Communist League, Engels notes,

“However, the social doctrine of the League, indefinite as it was, contained a very great defect, but one that had its roots in the conditions themselves. The members, in so far as they were workers at all, were almost exclusively artisans. Even in the big metropolises, the man who exploited them was usually only a small master. The exploitation of tailoring on a large scale, what is now called the manufacture of ready-made clothes, by the conversion of handicraft tailoring into a domestic industry working for a big capitalist, was at that time even in London only just making its appearance. On the one hand, the exploiters of these artisans was a small master; on the other hand, they all hoped ultimately to become small masters themselves. In addition, a mass of inherited guild notions still clung to the German artisan at that time.”

(History of the Communist League)

“At that time Germany was a country of handicraft and of domestic industry based on hand labour; now it is a big industrial country still undergoing continual industrial transformation. At that time one had to seek out one by one the workers who had an understanding of their position as workers and of their historico-economic antagonism to capital, because this antagonism itself was only just beginning to develop. Today the entire German proletariat has to be placed under exceptional laws, merely in order to slow down a little the process of its development to full consciousness of its position as an oppressed class.”

(ibid)

In 1848, Marx and Engels, and the other German socialists, in order to gain the ear of these workers, joined the German Democrats, an openly bourgeois party, but they did so whilst retaining their own political and organisational independence. As Engels put it,

“When we returned to Germany, in spring 1848, we joined the Democratic Party as the only possible means of getting the ear of the working class; we were the most advanced wing of that party, but still a wing of it.”

(Engels to Florence Kelley Wischnewetsky)

A similar development could be seen in France. The Great French Revolution of 1789, much like the English Civil War, was a bourgeois-democratic revolution, but undertaken by a bourgeoisie that was still not strong enough to rule in its own name. Just as the English Civil War ended with the dictatorship of Cromwell, so the Great French Revolution ends with the dictatorship of Napoleon Bonaparte. The underlying development of the productive forces, the dominance of capitalism as the mode of production, necessitates a capitalist state to protect and develop that form of property, irrespective of the form of political regime.

When Cromwell is replaced by Charles II, this does not change the class nature of the British state as, now, a capitalist state, and that is emphasised by the Glorious Revolution of 1688. The fact that the political regime, i.e. the composition of parliament, and of the government, remains itself in the hands of the landed aristocracy does not change this fact. As Lenin points out in relation to Russia, its state became a capitalist state by the 1870's, as capitalism became the dominant mode of production, following the 1861 Emancipation, and subsequent rapid development of commodity production and exchange. That state is forced to pursue capitalistic policies, in order to advance the interests of the state itself, a process which Russia's defeat in the Crimean War, made inevitable. Yet, as Lenin says, the political regime in Russia remained that of Tsarist absolutism. This demonstrates the difference between the class nature of the state, and the political regime. The latter is merely a superficial appearance, erected upon the material reality. Similarly, Trotsky noted that fascism and bourgeois-democracy are merely masks that disguise the underlying reality of the imperialist-capitalist state. As Marx says,

“Nevertheless, the different states of the different civilized countries, in spite or their motley diversity of form, all have this in common: that they are based on modern bourgeois society, only one more or less capitalistically developed.”

(Critique of the Gotha Programme)

When Napoleon is replaced by the Monarchy of Louis Philippe, this again does not change the underlying nature of the French state as a capitalist state, it simply represents a change in the political regime. As Marx comments,

“ All revolutions perfected this machine instead of breaking it. The parties, which alternately contended for domination, regarded the possession of this huge state structure as the chief spoils of the victor.

But under the absolute monarchy, during the first Revolution, and under Napoleon the bureaucracy was only the means of preparing the class rule of the bourgeoisie. Under the Restoration, under Louis Philippe, under the parliamentary republic, it was the instrument of the ruling class, however much it strove for power of its own.”

(The 18th Brumaire of Louis Bonaparte, Chapter 7)

Similarly, in Germany, the defeat of the bourgeois-democratic revolution does not change the class nature of the state, which is determined objectively by the dominant form of property – capitalist property. Just as in Russia, where Tsarism is forced, on pain of extinction, after the defeat in the Crimean War, to rapidly develop capitalist production, so too Germany was forced to rapidly develop capitalist production, as it competes with the capitalist economy in Britain, and in France, and with a rapidly developing industrial capitalism in the US. It does that under the Bonapartism of Bismark, just as France does it under Louis Bonaparte.

The reason that the political regime assumes these forms in France and Germany, is that, unlike the earlier period of bourgeois-democratic revolutions, the working-class, by 1848, has become a more significant force, but not a dominating force. The bourgeoisie and petty-bourgeoisie cannot implement the bourgeois-democratic revolution without the support of the working-class, but now it fears that working-class will want to go beyond the limits of the bourgeois-democratic revolution, and demand political power for itself. The bourgeoisie once it has state power, can live without the bourgeois-democratic political regime, which is merely its most favoured form, by which it exercises direct control over society and the state. Increasingly, the old ruling classes are merged into it. It does not need the state against them, but against those below it. But, the petty-bourgeoisie and peasantry, which remains an oppressed class cannot. It requires the bourgeois democratic revolution to address its political and economic demands.

The peasantry and petty-bourgeoisie still represent a sizeable force, but they are not homogeneous, and are unable to rule in their own name. Capitalism causes an intensification of their differentiation, so that the elements sinking towards the proletariat are pulled in its direction, whilst those becoming bourgeois line up with the bourgeoisie. Bonapartism is always based on this amorphous social layer, from which it draws its foot soldiers, but, once in power, such Bonapartism is always forced to defend and extend the interests of capital, and, in particular, large-scale capital. The bourgeois-democratic, national revolution can now only be completed by the working-class itself coming to power. As Lenin points out, such political power does not equate to Socialism, but it does put in place the kind of transitional state, and political regime that can implement the measures that take society in the direction of Socialism.

“I am deeply convinced that the Soviets will make the independent activity of the masses a reality more quickly and effectively than will a parliamentary republic (I shall compare the two types of states in greater detail in another letter). They will more effectively, more practically and more correctly decide what steps can be taken towards socialism and how these steps should be taken. Control over a bank, the merging of all banks into one, is not yet socialism, but it is a step towards socialism. Today such steps are being taken in Germany by the Junkers and the bourgeoisie against the people. Tomorrow the Soviet will be able to take these steps more effectively for the benefit of the people if the whole state power is in its hands.”

(Lenin – Letters On Tactics)

What is more The Democratic Dictatorship of the Proletariat leading the peasantry, would be forced down this road.

“Take the question of the eight-hour day. As is known, this by no means contradicts capitalist relations, and therefore it forms an item in the minimum programme of Social Democracy. But let us imagine the actual introduction of this measure during a period of revolution, in a period of intensified class passions; there is no question but that this measure would then meet the organized and determined resistance of the capitalists in the form, let us say, of lockouts and the closing down of factories.

Hundreds of thousands of workers would find themselves thrown on the streets. What should the government do? A bourgeois government, however radical it might be, would never allow affairs to reach this stage because, confronted with the closing-down of factories, it would be left powerless. It would be compelled to retreat, the eight-hour day would not be introduced and the indignant workers would be suppressed.

Under the political domination of the proletariat, the introduction of an eight-hour day should lead to altogether different consequences. For a government that desires to rely upon the proletariat, and not on capital, as liberalism does, and which does not desire to play the role of an ‘impartial’ intermediary of bourgeois democracy, the closing down of factories would not of course be an excuse for increasing the working day. For a workers’ government there would be only one way out: expropriation of the closed factories and the organization of production in them on a socialized basis.”

(Trotsky – Results and Prospects, VI The Proletarian Regime)

After 1848, the bourgeoisie is faced with a dilemma that, in order to carry through a bourgeois-democratic revolution, to establish the parliamentary republic, which is the form of political regime best suited to its interests, and which enables it to exercise direct control over the state, it requires the support of the working-class, but that working-class is now increasingly powerful, and, in mobilising it, the bourgeoisie risks it going beyond the bounds of social-democracy it wishes to constrain it within.

“The bourgeoisie, in truth, is bound to fear the stupidity of the masses so long as they remain conservative, and the insight of the masses as soon as they become revolutionary.”

(The 18th Brumaire, Chapter 7)

The consequence in France was the regime of Louis Bonaparte, which organised its coup utilising the petty-bourgeois and lumpen elements of French society, much as later, Mussolini and Hitler were to do.

“The French bourgeoisie balked at the domination of the working proletariat; it has brought the lumpen proletariat to domination, with the Chief of the Society of December 10 at the head.”

(ibid)

In Germany, the role is taken by the Bonapartist regime of Bismark. In both cases, however, the state remains a capitalist state, and the function of these Bonapartist regimes is to pursue that capitalist development, and, thereby, creates the conditions under which the bourgeoisie's social weight becomes dominant. It absorbs large sections of the old ruling class, whilst also creating a social-democratic, professional, middle-class on which to rest, acting as conduit, through which it draws in the support of the proletariat. It is the development of this large middle-class layer, whose function is to mediate between capital and labour, which enables the imperial-bourgeois-landlord ruling class to eventually cede the vote to the workers, as it is socialised and constrained within the limits of the bourgeois social-democratic state. The land question is resolved as large-scale capital itself takes over agriculture.

Each of these countries, as they go through this process of industrialisation, reach the same point as that which Britain had achieved, described by Engels.

“Chartism was dying out. The revival of commercial prosperity, natural after the revulsion of 1847 had spent itself, was put down altogether to the credit of Free Trade. Both these circumstances had turned the English working class, politically, into the tail of the ‘great Liberal Party’, the party led by the manufacturers. This advantage, once gained, had to be perpetuated. And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class. Thus a gradual change came over the relations between both classes.”

(Preface To The Second German Edition of “The Condition Of The Working Class”)

In other words, once the industrial bourgeoisie has established its rule, and large-scale socialised capital dominates the economy, the old concerns for holding down wages by banning trades unions no longer applied. The normal operation of the economy can be left to achieve that function, with the trades unions and reformist workers parties left to simply bargain within the system, on behalf of workers for merely an amelioration, based upon what the economy is considered able to provide at any time. Workers appear as just another commodity owner, trying to get the best price for their commodity within the market. In essence, social-democracy was established. A social-democratic state arose on the basis of the socialised capital that now dominated, as what Marx defines as a transitional form of property between capitalism and socialism. Within this context, workers can be given the vote, with the bourgeoisie confident that they will only vote to put in government these social-democratic parties that, in fact, represent the medium to long term interests of large scale capital itself, as against the interests of the former ruling class, and antediluvian forms of capital. And, indeed, when the Labour Party replaces the Liberals as the party of the workers, it simply carries over this same social-democratic ideology. In Europe, the workers' parties that start off, nominally, as socialist parties, even Marxist parties, are, in fact, as Draper illustrates, mostly guided by the same statist, Lassallean/Fabian, social-democratic ideology as the Labour Party, and that becomes even more apparent, when those parties split, with the formation of the Third International.

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